Contracts Outline Green= vocab Orange=Rule Purple= Flints comments Red= Restatement Underlined cases= really important Blue=

UCC Pink=Texas *
Remedies for Breach of Contract * The only assumption of contract law is that you are not required to follow through with your promise/contract but they are you are required to pay damages. * NO obligation to follow through with contracts, only an obligation to pay damages. Amoral approach to contract law. * The Goals of Contract Damages * The rules of liability are all dependent on what the remedies are. * Expectancy damages- General rule with respect to contracts. It is the award of a sum of money intended to give the injured party compensation. * Expectancy damages are suppose to put the person into the same place he would have been had the contract been performed. Sometimes it is hard to determine the value of certain things. The judge and jury try to value the loss work. * Assumpsit- An express or implied promise, not under seal, by which one person undertakes to do some act or pay something to another. OR a common-law action for breach of such a promise or for breach of contract. A common law form of action. General remedy used in contract litigation. Bringing a lawsuit for breach of contract. * Remit- Pardon or forgive. * In both the cases (Hawkins and Sullivan) the remedies are different. * Hawkins v. McGee * Deformed hand case. * Doctor promised plaintiff that his hand would be 100% perfect and he would only spend a few days in the hospital. The doctors promise was considered a warranty. The hand was non-functional and he spent much longer in the hospital than had been promised. * If the defendant spoke the words attributed to him, he did so with the intention that they should be accepted at their face value, as an inducement for the granting of consent * Trying to give the defendant a hand that he EXPECTED. The jury had to figure out what his hand was before- have to evaluate what it was before and what it was expected. The hand was never fixed properlyso how did they know what it was expected. * Damages- is intended compensation for a breach, measured in terms of the contract. They equal actual damages minus the value (gains prevented, losses sustained.) * Compared the hand to a machine which Flint thinks is an awful analogy. It is easy to be able to tell which machine is 100% perfect, not so easy with a hand. * Sullivan v. OConnor * Nose surgery case to make an actresses face look better. She was not happy with results because she was no longer photogenic.

Contracts of this nature are difficult to determine the expectancy because of the uncertainty in medicine. * Hard to put value on what might have happened. * Promises of this nature are strongest in a business context. * Adopts a different damage rule than Hawkins. Reliance damages. * Different state * Beauty=subjective * No concrete measure of damages. * When it comes to expectancy damages and aesthetics- the doctor is trying to make you look better which is a very subject thing. * Compensatory- The main purpose is to supply an award of money to an aggrieved party to compensate for any loss or injury. * Tort- To make the plaintiff whole by awarding monies to indemnify him for his loss. * Contract- To compensate for the loss and to protect an expectation of the benefits of a completed contract. * Nominal- These damages are awarded when the plaintiffs rights are violated but no measurable or actual loss is sustained. This is merely a declaration that rights have been wrongfully infringed. * Punitive- A punishment for intentional, willful, wanton, or malicious conduct. The public policy is to deter such conduct by the defendant and others. * Restitution- A restoration to the plaintiff of any benefit the defendant may have gained from his misconduct. The measure of recovery is the amount of the unjust gain or enrichment. This is usually given by monetary award and includes quasi-contract, constructive trust, equitable lien, and subrogation. * Controls over jury verdicts * Veredictum- true statement * The judges have developed three powers: * Controls over the admission and exclusion of evidence. * Instructions to the jury. * The order for a new trial. Groves v. John Wunder Co. * Groves and Wunder had property next to each other. There was a 7 year lease to Wunder and Wunder was suppose to keep the property in good condition. Paid Groves money and essentially got rid of Groves as a competitor. At the end, Wunder took the best gravel and left the land all shitty. Groves won in the lower courts but wanted more money to fix his property. * Key point- there is no personal value to this property. * It was a willful breach of contract. The willful transgressor must accept the penalty of his transgression. * Groves was entitled to win the money it would cost to fix his property. * The value of land does not pay a part in this determination. Instead they used the hypothetical peak of accomplishment over the value of the land. Owner should be compensated for what he has lost. * Rule- The proper measure of damages associated with contracts about land does not include DIV if there is a willful and fraudulent breach of contract. * When a party willfully fails to perform under a contract, the other party will be

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entitled to damages equal to the reasonable cost of having performance carried out, and not the difference in value resulting from non-performance. Dissent: * Manifestly, not what it would cost to the work, for, if the work had been done, plaintiff would not have received the cost of the work, but would have been benefited only to the extent that the work increased the market value of his land. * Cost of repair is disproportionate to the amount of money he would have gotten had Wunder followed through with the contract. * This was an economic waste. * Wanted the rule to be- Land is unique but damages to property should be governed by market value. * The trouble with the prevailing opinion is that here plaintiffs loss is not made on the basis for the amount of his recovery but rather what it would cost the defendant. Groves screwed over Wunder because he got $55,000 in a cash settlement and then did not make any changes to his land. Later he sold it anyway. More than one way to measure expectancy damages. Both sides were protecting the same expectancy damages, just measuring it differently. Willful- justification for using a higher measure of standard. Peevyhouse v. Garland Coal & Mining Co. * Farmland leased to a coal company so they could extract coal for the land. The coal company promised to clean up after themselves but did not. It would cost 29,000 dollars to increase the price of the property to only 300. * No person can recover a greater amount in damages for breach of an obligation than he would have gained by the full performance thereof on both sides. * The measure of damages in an action by a lessor against a lessee for breach of contract is ordinarily the reasonable cost of performance of the work; however, if the breached provision is merely incidental to the main purpose of the contract, and the economic benefit to be gained by the lessor from full performance is grossly disproportionate to the cost of performance, then the damages which may be recovered are limited to the diminution in value to the property caused by non-performance. * They only get 300 bucks. * Diminution in value- A way of calculating damages for breach of contract based on a reduction in market value that is caused by the breach. Comment: Cost or value in general contract law * Restatement of Contracts, First 346(1) * Both opinions in Groves relied on this. In the case of Groves, the majority narrows it to when there are physical structures. * Provides that for defective and unfinished construction the aggrieved party can get judgment for either: * The reasonable cost of construction and completion in accordance with the contract, if this is possible and does not involve unreasonable economic waste; or * The difference between the value that the product contracted for would have had and the value of

performance that has been received by the plaintiff, if construction and completion in accordance with the contract would involve unreasonable economics waste. * Several illustrations that were considered in the case of Groves. * Albert contracts with Bertha to sink an oil well on Alberts land adjacent to the land of Bertha, for development and exploration purposes. Other exploration wells prove that there is no oil in that region; and Albert breaks his promise to sink the well. Bertha can get judgment for only nominal damages, not for the cost of sinking that well. * Albert contracts to construct a monumental fountain in Berthas yard for $5,000, but abandons the work after the foundation has been laid and $2800 has been paid by Bertha. The contemplated fountain is so ugly that it would decrease the number of possible buyers in the place. The cost of completing the fountain would be $4000. Bertha can get judgment for $1800, the cost of completion less the part of the price unpaid. * The general principles stated in 346 of the first restatement are preserved in Restatement, Second 347, 348 which abandon the talk of economic waste. Thus, 348(2) which replaces former 346 on breaches resulting in defective or unfinished injured partys loss in value, but in those terms: Diminution in the market price of the property or the reasonable cost of completing performance or of remedying the defects if that cost is not clearly disproportionate to the probable loss in value to him. Advanced, Inc. v. Wilks * Homeowner dissatisfied with the a contractors work. The court invoked the reasoning of Restatement, Second 348 to sustain a jurys award of a cost-repair figure that appeared to be far higher than the probable diminution in market value of the defectively-constructed home. * An owners recovery is not necessarily limited to diminution in value whenever that figure is less than the cost of repair. * The guy could pocket the award and then sell the defective structure. Or he could actually use the money for the intended purpose. * The fact finder needs to figure out what he thinks the guy will do. * Where the property is held solely for investment, the court may conclude as a matter of law that the damage award can not exceed the DIV. Restatement of Torts, Second 901 (General Principle-Damages), Official Comment * While the law of contracts gives to a party to a contract as damages for its breach an amount equal to the benefit he would have received had the contract been performed the law of torts attempts primarily to put an injured person in a position as nearly as possible equivalent to his

position prior to the tort. The law of torts, which was on scarcely separable from the criminal law, has within it elements of punishment or deterrence. Punitive damages can be awarded. Acme Mills & Elevator Co. v. Johnson * Bushells of wheat. * Johnson sold wheat to AM&E, but he did not deliver on time and had $80 worth of bags. The wheat was worth $240. Wasnt selling any or making any particular kind of wheat. The lower courts gave AM&E , $80 for the bags. * Estop- to bar or prevent by estoppel * Estoppel- A bar that prevents one from asserting a claim of right that contradicts what one has said or done before or what has been legally established as true. Misrepresenting something about the past or something in the future. * Estoppel by deed- A party to a deed cannot contradict or disprove a statement contained in the deed, especially if that party is a grantor seeking to diminish or destroy the language of the grat. * Estoppel in pais or Equitable estoppel- Operates similarily to prevent a litigant from repudiating a representation that has reasonably induced reliance by the person to whom it was made. Defense. Misrepresent some past and present fact that the plaintiff relied on to his detriment. What is a present fact? What is a past fact? * The price of wheat began to fall and by the time AM&E had bought wheat to replace Johnsons wheat, they saved money. * The court decided that this was an efficient breach of contract. AM&E benefited and profited from a breach. If it had gone the other way then Johnson would have been liable for damages. * Laurin v. DeCarolis Constr. Co., Inc. * Plaintiffs bought land. Defendants removed gravel without the approval of the plaintiffs and before they moved in. Plaintiffs sought recovery of the price of gravel. * Defendant should not wrongfully profit but the damages award should not include the cost of his labor. * Conversion- The wrongful disposition or possession of anothers property as it were ones own; an act or series of willful interference without lawful justification, with an item of property in a manner inconsistent with anothers right, whereby that other person is deprived of the use and possession of the property. * Comment: Damages as Punishment for Contract Breach * Torts tend to have punitive damages. The award is not determined by the extent of the victims injury but by the desire to punish. * Punitive damages are available only in limited circumstances. If the contract breached was done in a particularly objectionable nature. * Awarded when there is a combination of breach of contracts and another tort action. * People are now moving toward tort lawsuits because they can get punitive damages and a greater award. * Why not reliance? * Reliance- Damages awarded for losses incurred by the plaintiff in reliance on the contract.

The laws preferences is on expectation interest. Reliance is often more difficult to prove and difficult to measure. * Comment: Reliance Damages for Purchasers of Land * Flureau Rule- Good faith breach by vendor restricts vendees damage recovery. * This rule is only applied in Anglo American law to land contracts. * Comment: The economics of contract remedies * The expectation remedy is the only remedy that creates efficient incentives with respect to breaches of contract because it forces the breaching party to pay in damages the value of the [promised performance] to the breached-against party. * Even if the breach is deliberate, it is not necessarily blameworthy (AM&E v. Johnson) If so, efficiency is promoted by allowing him to break his promise. * Oliver Wendell Holmes, The Path of the Law * The law is the witness and external deposit of our moral life. Its history is the history of the moral development of the race. The practice of it, in spite of popular jests, tends to make good citizens. * If you want to know the law and nothing else, you must look at it as a bad man, who cares only for the material consequences which such knowledge enables him to predict, not as a good one, who finds his reason for conduct, whether inside the law or outside of it, in the vaguer sanctions of conscience. * But if we take the view of our friend the bad man we shall find that he does not care two straws for the axioms or deductions, but that he does want to know what the MA or English courts are likely to do in fact. Louise Caroline Nursing Home, inc. v. Dix Constr. Corp. * Dix doesnt finish construction of a nursing home. An auditor said that the nursing home suffered no compensable damages as a result of the breach by Dix. * Auditor said that the cost of completing with another contractor plus what had already been paid to Dix was within the contract price at less than what been paid to D. So no damages should be awarded. * Nursing home wanted to do the value had the contract been performed minus what Dix did to equal the compensable damages. * The court said the cost of completing equals compensation. * Nursing home does not win motion. * Rule- The benefit of a bargain (the amount the nursing home would have saved had they won) is not a proper measure of contract damages for a breach of construction contract if the cost of completion is less than the contract price. * What would have happened, had the nursing home not completed the project and sued Dix right away? Wouldnt they have gotten what they wanted? * Illinois Central R.R. Co. v. Crail * Plaintiff, a coal dealer, sued a carrier for an unexplained shortage of 5,500 pounds in an 88,000 pound carload of coal. He had purchased the coal intending to add it to its inventory. No resale contract was affected by the shortage. * The plaintiff wanted compensation at retail value, not wholesale value. The wholesale price was 5.50 a ton and the retail was 9.70. Plaintiff did not purchase any additional coal and kept making wholesale

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purchases. We think the wholesale market price is to be preferred as a test [of actual loss] when in circumstance like the present. * They should afford only compensation for the injury suffered. * So would it have been different if he had bought the coal at retail value? * Watt v. Nevada Central R.R. Co. * Hay gets burned. The hay that was burned was sold in Austin between $10 and $12 a ton. The cost of baling was $2 and the cost of transportation was $6.50. Lower court gave the plaintiff $10 a ton. Defendant appealed and the hay was given to the plaintiff for $3.50 a ton. The price of $12 minus $8.50 for baling and transportation. * The $12 would have given recovery to the plaintiff a sum far in excess of his loss and the fire would be a source of great profit. * Plaintiff can also recover the price of the hay press plus transportation costs. Limitations on Expectation Damages * Rockingham County v. Luten Bridge Co. * Rockingham county contracted with Luten Bridge to build a bridge in NC on Jan 7. On Feb 21st, the county decided to cancel the contract and Luten bridge was informed of this. On march 3, the county decided that any additional work done would be done at Luten bridges own peril. He finished the bridge and sued for the amount of work he had completed. Luten bridge won by a direct verdict. The county appealed because evidence that they had cancelled the contract and informed Luten Bridge of this was excluded. * The rule from this case is that after a party has received notice of a contract breach, the party must do nothing to increase the damages flowing from that breach. * A plaintiff must, so far as he or she can without loss to himself or herself, mitigate the damages caused by a defendants wrongful act; a plaintiff cannot hold a defendant liable for damages which need not to have been incurred. * A party cannot sue for losses that could have been avoided under a broken contract. A party must take reasonable steps to mitigate losses. * If they had not continued with the construction of the bridge would they have received the amount of profit lost from the contract? * Leingang v. City of Mandan Weed Board * Leingang signed a contract to cut large plots of weeds. Another contractor was hired to cut small plots of weeds. Leingang sued for breach of contract and the city agreed to the breach. Leingang wanted the contract price for the work minus variable expenses. City Mandan Weed Board tried to get fixed costs subtracted from the expenses. * The court sided with Leingang. * A plaintiff ordinarily proves profits by reducing the contract price by the [total] amount it would have spent to perform. But constant overhead expenses are not included as a cost of performance because a plaintiff must pay them whether or not the contract was breached. * The plaintiff is compensated for overhead by recovering the contract price, reduced only by expenses saved because the contract did not have to be performed. * Doing that effectively made Leingang pay the amount twice.

The overhead will always bet there and should not count. Net profit should not be determined in terms of reasonable expense and anticipated profit. * Kearsarge Computer, Inc. v. Acme Staple Co. * Acme fired Kearsarges company. The trial court found for Kearsarge. Acme appealed. Held for Kearsarge. * Just because they fired him, it didnt make it easier for him to get more jobs. It also didnt mean he had less costs because a lot of his costs were fixed- including 3 employees, all of whom have different functions. So the court decided the operating costs were fixed. * Involve the unique personal service to such an extent that when the provider of such services seeks new business after a breach of contract, the income from such new business mitigates the damages owed to him by the breaching party. Parker v. Twentieth Century-Fox Film Corp * Rule of law- Damages under an employment contract must be mitigated by those monies that could be earned from the same or similar employment. * A wrongfully discharged employees rejection of or failure to seek other available employment of a different or inferior kind cannot be used by the employer as a means of mitigating damages. * Parker had a contract with Fox for a musical. They reneged on the contract and offered to replace the musical with a western. Nobody is saying her actions to find another job was less than reasonable. The fact question for Fox was that Parker was required to mitigate. They believe that the substitute job offer was similar. Trial court granted summary judgment because there was no fact question. * The Supreme Court and Trial Court held that the second contract was an improper substitution. Believed that the differences were a matter of law that should be decided by the law. Standard measure of damages for wrongful damages is the value of the salary. * Dissent: * Believed that the differences were a matter of fact that should be decided by the jury. * Also can only reject a job in a reasonable way. * Flint believes the dissent is correct. * Billetter v. Posell * This lady gets a job at a department store and signs a contract. They then hired someone else to take her place and offered her a lower salary. She obviously quit and asked for her salary from Jan to June and the Christmas bonus. * Defendants cannot credit the unemployment compensation. * They also cannot credit the amount of money they offered her after demoting her. * An employee, upon wrongful discharge [that prevents the employee from performing], should not be required to accept a new employment under circumstances which permit the claim that [she] consents to a modification of the original contract and an abandonment of her right of action under it. * Comment: The Collateral Source Rule * Collateral source rule of tort law, which denies to the tortfeasor a

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reduction in damages for compensation received by the injured plaintiff from other sources, often insurance. * Collateral Source Rule- (Torts) The doctrine that an injured party receives compensation for the injuries from a source independent of the tortfeasor, the payment should not be deducted from the damages that the tortfeasor must pay. * Tortfeasor- One who commits a tort; a wrongdoer. * All cases have a different view on the collateral source rule. * United Protective Wkrs. Local No. 2 v. Ford Motor Co. * The court deducted from his recovery social security benefits and retirement annuity payments he received. Without taking away those reductions he would have gotten more than he was suppose to get. * Hall v. Miller * We think the better rule is that the collateral source rule [denying a defendant a reduction in damages] should apply to actions sounding a contract as well as a tort Nonetheless, as between two parties, it is better than that the breaching defendant escape liability altogether. * Seibel v. Liberty Homes, Inc. * Held that there should be no offset with respect to social security benefits the employee would receive until his projected retirement. * Liability with respect to economic damages would be reduced if the discharged employee finds another job but statutory benefits often have other characteristics and reflect other policies than the common law of contracts. * Filter v. City of Vernonia * The court urged that in unemployment cases the employer does contribute to the program sought to be used as a set off, and that although the amount of the contribution does not correlate directly with the amount of benefits paid, we believe that the increased rates and direct contributions that can result after an employees claim create a significant disincentive to employers engaging in the type of cost/benefit analysis in Seibel. Missouri Furnace Co. v. Cochran * Missouri had a contract with Cochran. Cochran rescinded the contract. Missouri had to get coal at a higher price. Missouri sued for the difference between $4 and $1.20. The trial court refused to instruct the jury on anything but the market price difference as the measure of damages. Missouri moved for a new trial. * The reason was that the change in price was temporary. However, at the time, it didnt appear to be a temporary aberration but the court didnt care. * Any company would have done what Missouri did. Missouri complied with duty to mitigate. * Duty arises at the date of performance.

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installment contracts have multiple delivery dates of performance. * Common law- no duty to mitigate until day of performance because other person still might perform. * UCC- no duty to mitigate. You can either cover or sue at time of breach. Motion for new trial denied. Even though the contract was breached early on, the court would only consider the money on the date of performance. Rule- The measure of damages for a failed delivery of goods in installments is the difference between the market price on the day of failure and the contract price. Reliance Cooperage Corp. v. Treat * The two groups signed a contract. The Treat wrote and said that his costs were rising and that he wanted an increase in the contract price. Reliance said that they expected Treat to comply with the contract, he refused. They made remedies before the date of the contract was expected to take place. * The doctrine of anticipatory breach by repudiation [an even that precedes performance] is intended to aid the injured party, and any effort to convert it into a benefit to the repudiator should be resisted. Ordinarily there is no duty to mitigate damages until there are damages to mitigate, and here it would not be until December, when Treats performance became due. Until then, Treat was obligated and at liberty to produce and deliver the staves and if he had done so Reliance would have been required to take and pay for them. Note: Breach by anticipatory Repudiation * American courts do not require the plaintiff to sue immediately upon repudiation. * Hochester v. De La Tour * The plaintiff hired a traveling companion to accompany them on a tour for three months. Before he was asked to come, she backed out of the contract. He brought the suit before the contract date. * The court said that the plaintiff did not have to wait until the date of the contract to sue because until then he must enter into no employment which will interfere with his promise to start service on that date, remain idle, and lay out money on a useless preparation. * Common Law Rule- You cannot sue for damages until the day of the contract because the party can always change his mind. Now a reasonable time after you learn of the breach. * A party who announces its intention to breach a contract releases the other party from any obligations under the contract. * Anticipatory Repudiation: A partys definite and unequivocal announcement of an intended breach is equal to an actual breach. This doctrine encourages mitigation in the face of an intended breach of contract. The only time a party cannot sue for anticipatory repudiation is when they have fully

performed. In this event, the opportunity to mitigate damages has passed and the party must wait for an actual breach in order to bring an action for damages. * Comment: The Buyers Damages under the UCC * What does learned of the breach mean? The three cases that follow, show that there are tons of different meanings: * Oloffson v. Coomer * Learned of breach=day told of breach * Cargill, Inc. v. Stafford (10th Circuit-OK & CO) * Learned of breach= time of performance * Flint thought this was a stupid and lousy case. * Cosden Oil & Chemical Co. v. Karl O. Helm Aktiengeschellschaft (5th Circuit- TX) * At a commercially reasonable point after the seller informs the buyer of repudiation * The time when the buyer learns of the breach (2-713) differs from the common laws focus on the time for performance, illustrated in Missouri Furnace and Reliance Cooperage. Neri v. Retail Marine Corp. * Return of deposit offset by any damages by seller can show. 2-718(a) * Includes profits if seller is retail business. * Includes incidental costs-insurance, warehouse * Deposit minus 20% of $500 whichever is less. * If figured under 2-718(3)(a) dont add $500. * Commonwealth Edison Co. v. Decker Coal Co. * Can a seller qualified to recover the contract price under 2-709 seek a larger recovery under 2-708(a)? * 2-708(a) available only to a seller who is not entitled to the contract price. * 2-708(a) is a sellers fallback position. * Do the facts fit the contours of the action for the price, and only if they do not does the court look at the 2-708(a) alternatives. * Applies only when 2-708(a) is inadequate to put the seller in as good a position as performance would have done. Hadley v. Baxendale * Reliance damages are part of expectancy. If contract had gone through they would have spent the money. Needed shaft to be delivered and fixed within the next few days. Neglected to tell the company that without the shaft, the company could not operate. The plaintiff won the damages of lost profits because the defendant had failed to deliver the shaft on time. This was later reversed. * Couldnt have predicted loss in profits. Must have specific notice. * Standard measure of damages that any reasonable person would consider to be the ordinary consequence of the breach. But what would a reasonable man would have thought? The ordinary damages that flow as a result of the breach. Most people would assume that the plaintiffs would have a back up shaft. The plaintiff needs to give the defendant information because lost profits do not

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ordinarily flow from the contract. Have to have knowledge that a bad result will occur. General Rule- will not recover lost profits for a new business because it is speculative. A party injured by another partys breach of contract can only recover those damages that may fairly and reasonably be considered either as arising naturally, or as may reasonably be supposed to have been in the contemplation of both parties, at the time the contract, was made, as the probably result of such a breach of the contract. What is forseeabilitiy? * Forseeability of fact: Natural and ordinary consequence * Forseeability of law: The judge decides Two rules of Hadley v. Baxendale, two rules were created: 1. reasonably occurring in ordinary business 2. reasonably occurring events that flow from special knowledge Nisi- Latin for unless; denotes a ruling that will be declared final unless the party adversely affected by it can show cause as to why the ruling should not take effect. Nolle Prosequi- A formal declaration that a prosecutor or plaintiff will no longer prosecute a particular case. Rule Absolute- A rule which commands that an order be forthwith enforced. Lamkins v. International Harvester Co. * International Harvester failed to deliver $20 lighting equipment. * Lamkins was unable to sow the soybeans he would have since he did not have the light. * International harvester shouldnt have had to guess that a $20 accessory would have resulted in thousand dollars worth of damages. Victoria Laundry (Windsor) Ltd. v. Newman Indus, Ltd. * Laundry didnt get steamer from Newmans. Newmans should have known the importance of a steamer to a laundry. * Plaintiffs can recover for the loss of business profits during the period they were without a steamer but they cannot get money for lucrative dying assignments. It was reasonable information that without a steamer the laundry company would be unable to do regular business. Note: Liable to Result * Heron II * Sugar delivered 9 days late and the sugar market collapsed. * Plaintiff recovered for his loss because the defendant should have known that other people deliver sugar. * Rule- what is foreseeable is the possibility of a risk of change in market price- not actual amount. Hector Martinez & Co. v. Southern Pacific Transp. Co. * Hadley rests on the belief, that, absent specific notice, the shaft was not an indispensable element of the mill. * Because [the injury] is not an usual consequence although it is a proximate consequence, are arbitrary extensions of the Hadley rule. * In this case it was obvious that the dragline itself has use value. * Test is what should have been foreseen.

Note: Foreseeability Today * Prutch v. Ford Motor Co. * Issue of consequential damages turned on 2-715(2)(a) of the UCC. Any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise. * Since Ford screwed up, they left the plaintiffs with only two options. The plaintiffs decided that they should have tried to produce part of a normal crop rather than no normal crop. Restatement of Contracts 351, Unforseseeability and Related Limitations on Damages 3. Damages are not recoverable for loss that the party in breach did not have reason to forsee as a probable result of the breach when the contract was made. 4. Loss may be foreseeable as a probably result of a breach because it follows from the breach: * In the ordinary course of events, or * As a result of special circumstance, beyond the ordinary course of events, that the party in the breach had reason to know. 5. A court may limit damages for foreseeable loss by excluding recovery for loss of profits by allowing recovery only for loss incurred in reliance, or otherwise if it concludes that in the circumstances justice so requires in order to aboid disproportionate compensation. * This clause gives the court an out where it is disproportionate. Valentine v. General American Credit, Inc. * Woman is fired and seeks to recover mental distress damages arising out of the alleged breach of contract. * Loss of job is NOT that bad to cause mental distress. It is not comparable to the loss of a marriage or a child and generally results in estimable monetary damages. * It is permitted only when the defendant is to secure relief from an annoyanceelements of personality. * Hancock v. Northcut * Contract damages pertaining to ones dwelling are not among the contracts, which if breached, are particularly likely to result in emotional distress. * Mental distress usually intangible. * Contract damages must be ascertainable in both nature and origin. * Could increase the high cost of housing in California. * Narrow range of exceptions- emotional tranquility is the contracts essence. * Note: Emotional Distress Damages * Restatement, Second 353 * Recovery for emotional disturbance will be excluded unless the breach also cause bodily harm or the contract or the breach is of a kind that serious emotional disturbance was a likely result. * Examples include- carriage and disposition of dead bodies (TX) and contracts for the delivery of message concerning death (TX).

Reliance/Restitution * Fruend v. Washington Square Press, Inc. * Unpublished book. Wanted to prove three things: * Delay of his academic promotion. * Comes no where close to proving this. * Loss of royalties * Cost of publication had he made his own arrangements. * Restitution= returned manuscript. * No reliance claimed * Expectation interest=royalties. * Cannot possibly figure out how much he would have made, especially since he did not make very much out of his last publications. * The value to the plaintiff of the promised performance-publication- was a percentage of sales of the books published and not the books themselves. * Damages are not determined by the cost of publication but by the royalties and royalties are impossible to determine. * Amount must be proven with reasonable certainty. * Fera v. Village Plaza, Inc. * Shopping center breached for rental to a store. * New business is not able to recover for loss of profits. (TX) * Further lost profits are allowed as an element of damage in any case where, by reason of the nature of the situation, the profits may be established with reasonable certainty. * Inter alia- Among other things. * Fera did because a lot of evidence was given by similar businesses of what profits would be. * Restatement of Contracts 352, Comment b * Evidence of past performance will form the basis for a reasonable prediction as to the future. * If the business is a new one of it is a speculative one that is subject to great fluctuations in volume, costs or prices, proof will be more difficult. Damages may be established with reasonable certainty with the aid of expert testimony. * Note: Rule Versus Standard * New business rule does not mean that lost profits are never a recoverable item of damages in a breach of contract case. * Rules have the advantage of being definite and of limiting factual inquiry but the disadvantage of being inflexible, even arbitrary, and thus over inclusive. * Standards are flexible, but vague and open-ended. Alternative Interests: Reliance and Restitution * Damage rules protect both expectation and reliance interests- the defaulter must account for gains prevented and losses caused. * Restitution- restores the benefit conferred on the defendant. * Expectancy- contemplates recovery of the whole difference in value between the condition as promised and the condition actually resulting from the treatment. * Reliance- put the plaintiff back in the position he occupied just before the parties entered upon the agreement, to compensate him for the detriments he suffered in reliance upon the contract. * Chicago Coliseum Club v. Dempsey

The club could not get money for loss of profits because it was impossible to figure out the profits. * Expenses incurred trying to enforce compliance not allowed because it was undertaken at the plaintiffs risk. * Could not get $ associated with the injunction order because that is a cost they incurred themselves. * Contract was not immediately consummated. * Expenses before contract which were not part of contract cannot be recovered. * Only expenses allowed are those incurred between signing and breach. * Must mitigate damages. * Security Stove & Mfg. Co. v. American Ry. Express Co. * Relied on equipment to be delivered. Important piece was missing. * Allowed to recover because the plaintiff had given the defendant the necessary information for a reasonable person to understand the importance of delivery. * All of plaintiffs losses were caused by defendants breach. * Reliance damages awarded. (Hotel, shipping, travel) * Anglia Television Ltd. v. Reed * Actors breaches contract, Anglia sues for costs incurred. * The actor must have known lots of money was wasted when he breached the contract, so he can still pay for costs incurred prior to the contract. * Anglia did not claim the profits it would have earned because it did not know. * Plaintiff must choose between lost profit and wasted expenditure. * With this case, not confined to costs incurred prior to this time. * Contradict Dempsey case? * In order to get profits, you have to incur expenses, why cant you get wasted expenditure and profits? * Luten Bridge- page 41. * Would be double dipping. * Restatement of Contracts, Second 349 * As an alternative to the [expectation interest measure of damages], the injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed. * L. Albert & Son v. Armstrong Rubber Co. * Machines not delivered on time. Gets $ for preparing foundations but not for profits till it is able to prove that. * If suing for expectation, then the burden of proof is on the plaintiff. Boone v. Coe * Plaintiff left Kentucky for Texas. * Defendant didnt have dwelling, failed to have a completed barn, and didnt let them cultivate land. * It was an oral contract. Oral contracts for land not under the statute of frauds.

Not to be performed within one year. * Statutes of Fraud only bars recovery on contracts more than year. * Work may be awarded for quantum meruit- but the defendant must receive a benefit. The defendant did not receive a benefit. * Could not receive reliance because there was no enforceable contract. * quantum meruit- Work and labor done. Restitution when there is no contract in place. Three types of quantum meruit: 6. Work & Labor done 7. Goods said & delivered 8. Money had & received. * Benefit- Something the defendant gains that would make it unjust for him to keep it. Statute of Frauds of 1677: (Flint LOVES this) * No action shall be brought whereby to charge the defendant unless the agreement upon which such action shall be brought, or some memorandum or not thereof, shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized. 5 classes of agreements: 9. Contracts for the sale of an interest in land, 10. Contracts for the sale of goods for a price exceeding a specified amount ($500 or more in the UCC, 2-201) 11. Promises to answer for the debt, default or miscarriage of another (I.e., suretyship or guaranty.) 12. Contracts not be performed within one year 13. Contracts in consideration of marriage. * Verbal contracts ok for labor, not ok for sell of goods, land and etc. United States v. Algernon Blair, Inc. * Subcontractor sues for general contractors breach to receive compensation for value of work and materials. * Miller Act- Can sue for quantum meruit or under contract. * Plaintiff would have lost money under the contract, so the court awarded under quantum meruit for work done. * Standard for recovery not the contract price, but the cost that one in the plaintiffs position would charge at time and place services were rendered. * Unjust impoverishment + unjust gain = strongest case for restitution interest. * The measure of recovery for quantum meruit is the reasonable value of the performance, and recovery is undiminished by any loss which would have been incurred by complete performance. * Surety- A person or entity who is held liable for the payment of a debt or performance of an obligation by another person or entity. * Kearns v. Andre * Plaintiff has a house that they want to sell. Defendant places a down payment and then requests that the plaintiff make several changes. All of the sudden defendant pulls out of contract. Plaintiff loses money on the house because defendants changes sucked. * Sued on restitution. Plaintiff wins because the defendant received benefit of plaintiff doing what he asked. Where the defendant

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theoretically never benefits is the equivalent of preparation cases. Farash v. Sykes Datatronics, Inc. * Building altered and leased. * Plaintiff sued for breach of lease but recovered only for the work done to fix up the building. * The court invoked Kearns. Comment: The Doing and Giving Problem * Restatement, Second 370 * A contracts to sell B a machine for $100,000. After A has spent $40,000 on the manufacture of the machine but before its completion, B repudiates the contract. A cannot get restitution of the $40,000 because no benefit was conferred on B. * Intended to show the doing and giving problem. Much depends on what the party in breach requested and agreed to pay for. * Curtis v. Smith * The plaintiff is asked to build wing walls but then the defendant cancels the contract after the plaintiff had already quarried stone. Plaintiff wanted the money for his work. * If the contemplated work is not delivered so that the defendant receives a benefit from it, the plaintiff by his work and materia, does not lay the foundation for recovery under the common counts, however wrongfully the defendant may have prevented the completion and delivery of such perfected work. Oliver v. Campbell * Lawyer sues client on a contract that had already been completed. * Cannot sue for restitution when one has already fully performed. Note: Discontinuity at Full Performance * Full performance should be called substantial. * If you fully perform a contract can you sue for restitution? * Unable to sue for restitution, should get out of contract instead. * Judge Learned Hand- Restitution is available to the injured promissee though it requires the equivalent of something which the promissory has never undertaken to perform. * Noyes v. Pugin * The court said that It is difficult to perceive why [plaintiff] should receive more compensation for the labor actually performed by him than he would have received for the same services had the contract not been broken by the defendant. Comment: The Common Counts and Restitution WILL BE ON EXAM * Quantum meruit- work and labor done * Value of services performed, benefit given to defendant * Quantum valebat- Goods sold and delivered * Three writs or forms of actions that could be used to enforce duties: * Detinue- provided a remedy for an owner to recover possession of goods, and might possibly be used, for example, by a buyer in sale of goods.

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Convenant- Limited to the enforcement of promises under seal. * Debt- Closest to a general contract remedy- not limited to liabilities arising from contract but could be used to collect a sum of money due for any reason, including contract, statute, or local custom. * Trespass- the form of action that always showed the greatest capacity for growth and change- and with the damages remedy that was to become the standard sanction of the common law for breach of contract. * Misfeasance- the action would lie only where a promissory performed negligently and caused injury. * Nonfeasance- Failures to act as promised. * The breach of promise remedy through trespass on the case became to be known as sufficiently distinct to have a title of its own, assumpsit (he undertook or he promised). * assumpsit- form of action to sue for an expressed action, written or oral. * Indebitatus assumpsit- general assumpsit- transformed into a complete substitute for debt, available whenever debt would lie, by the decision in Slades case. This style of pleading alleges that after a performance was rendered, there was a subsequent promise to pay. Quasi-contract- an implied contract but not a real contract. Restitution- Equitable in nature Slades Case * Trying to enforce oral contracts. * Slade could not prove promise, all he could prove was that he gave grain and got no money. * The judges decided that the second promise did have to be proved. In doing this they made available to litigants a remedy to collect debts in which disputes over facts would be decided by juries so that debtors could not escape payment by wager of law, that is by getting 12 friends to perjure themselves.

Britton v. Turner * This case allows restitution to be awarded to a party in breach. * An employer and employee entered into a one year employment contract which called for $120 in compensation to be paid to the employee. The employee worked for 9 months and then breached the employment contract without justification. * The court held that the employee could recover $95 for the reasonable value of his services. The employee in this kind of situation is entitled to a restitution recovery of the reasonable value of his or her services because he or she has conferred a benefit upon the employer. * Law isnt concerned if the person was a wilfull breach- you either perform or dont. * Benefit conferred on defendant daily. * No damages shown- if there had been value of performance minus damages. * The jury in this case found the reasonable value of the employees services to be

equal to a pro rata amount of the contract price. Law considered with moral qualities- Flint was as mad as a hornet. Thach v. Durham * Still entitled to recover for whatever benefit conferred. * Though person who breaches should not be favored. * Pinches v. Swedish Evangelical Lutheran Church * Quantum meruit on contract * This guy built this church. The specifications were not perfect. The work done was done in good faith and reasonably adapted. It would be impossible to redo without tearing down the church. Defendants want money to redo. * It was unintentional (boggles Flint how the architect/ contractor did not catch it), the building is still used so its not like they dont receive a benefit. They also did not turn down the building. * They sued on restitution because the value of the church was worth more than the breach. * If it had been reasonable they could have deducted the amount. * Court would not allow damages in because plaintiff would get nothing and defendant would get church= unjust enrichment. * Judges knew the church wouldnt be rebuilt, it was substantially completed. * Kelley v. Hance * Deviated slightly in a construction contract. It was not willful, contractor can recover. * Note: Willful Breach * Vines v. Orchard Hills, Inc. * Minority rule. * Buyers claim seller breached contract * In Conneticut made plaintiff to prove defendant suffered damages. * Defendant suffered no damages but almost doubled money. * Time of breach, not time of sale. * Let plaintiff go back and prove damages. * DeLeon v. Aldrete * Dont get excited over it. * Late on payments, so this guy sold to someone else, so the guy who was late on payments wanted his money. * General rule- 10% or less, valid and enforceable. * The purchasers loss increases as the seriousness of his breach decreases. * Punitive damages are alien to the law of contracts. * The defendant was only allowed to retain more than the amount they lost. Therefore the defendant shall only retain 200 and the plaintiff should get the rest back. * Note: The Forfeiture * New York Rule= Majority Rule * Denying defaulting purchasers recovery of down payments on real estate contracts should be retained. * If parties are dissatisfied with the present rule, they should say so at the bargaining table. Assume equal bargaining powers. Contractual Controls on the Damage Remedy

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Pacheco v. Scoblionko * Kid dumb as shit , doesnt go to class, cant go to camp and dad wants his money back for the camp. * What was the defendants purpose in putting the refund/liquidated damages clause in the contract? Does a clause of this type serve any substantial and legitimate business interest? * Test of enforceability is two pronged: 1) whether damages are difficult to estimate accurately and 2) The amount fixed is a reasonable forecast. * Camp was unable to show that the damages existed and therefore they were determined to be excessive. Two viewpoints- 1) Dont like penalties 2) Judge Posner- if you sign a contract it is enforceable. Posner- Flints favorite judge. City of Rye v. Public Service Mut. Inc. Co. * Facts: Developers were to build 6 buildings and posted a bond of $100,000 for the completion of 6 buildings. They were 500 days late and were suppose to pay 200 dollars for each day. The city wanted to exact the bond from them. * Decision: Liquidation clause was a penalty. The city had to show it was an enforceable damage clause so they had to show it was a reasonable amount for losses incurred. * Yockey v. Horn * Facts: Signed a contract that they would not testify against each other and etc. Horn participated in litigation against Yockey. * Decision: There was no pecuniary harm but damage to his reputation. It is hard to calculate the damages of emotional harm. The amount was reasonable so he got money. * Muldoon v. Lynch * Facts: This lady wants a gaudy monument for her dead husband. 20 ton marble was delayed in a port for two years. The lady wanted a deduction of 10 dollars a day for the delay. * Decision: Law abhors forfeiture and/or penalty. Court was angry with the wording of the contract which had the word forfeiture. Plaintiffs got to get their money. * Plaintiffs get the money that the lady owed them is because the clause was a penalty. * Restatement of Contracts, Second 356(1) * Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of anticipated or actual loss caused by the breach and the difficulties of proof of loss. A term fixing unreasonably large liquidated damages is un enforceable on grounds of public policy as a penalty. * Note: One Look or Two? * Time of contracting test validity (the reasonableness of the forecast when made, taking account of the difficulty of accurate estimation.) * UCC 2-718(1) * The first sentence of 2-718(1) focuses on the situation of the parties both at the time of contracting and at the time of breach. * Thus, a liquidated damages provision will be valid if reasonable with respect to either (1) the harm which the parties anticipate will result from the breach at the time of

contracting or (2) the actual damages suffered by the nondefaulting party at the time of breach. UCC 2-718(1) does, in some measure, signal a departure from prior law which considered only the anticipated harm at the time of contracting Thus, decisions which have restricted their analysis of the validity of liquidated damages causes solely to the anticipated harm at the time of contracting have, to this extent, been abrogated by the UCC in cases involving transactions in goods. Having satisfied the test set forth in the first part of UCC 2718(1), a liquidated damages provision may nonetheless be invalidated under the last sentence of the section if it is so reasonably large that it serves as a penalty rather than a good faith attempt to pre-estimate damages.

Wilt v. Waterfield * Facts: Defendant was contracted to sell the farm to plaintiff, but sold it to someone else. The plaintiff wanted his money back because he said the down payment was excessive penalty. * Decision: Courts dont like undifferentiated clause. the damages accruing thereby to the plaintiff might in some of such instances be entirely disproportionate to the $1,900 stipulate in the contract. Being so, such arbitrary amount would constitute a penalty. * To arrive at that intention, a court may consider whether the agreement contains various stipulations of various degrees of importance, the breaches of which would be easy to calculate in damages as to some and difficult as to others, in which event the sum specified would be construed as a penalty and not liquidated damages. * Comment: Applying Damages Clauses * Clause- what would a reasonable person believe. * LD for delay and completion. They were late. * LD unenforceable because purpose of clause was to guard against damages and there were no damages. * Fretwell v. Protection Alarm Co. * Facts: Alarm company had an agreement with the Fretwells to secure their property. If the system didnt work their liability was only $50. The Fretwells get broken into and lose a bunch of money. There was a clause in there stating the security company was not an insurer. But offered to insure them if they paid extra. The Fretwells agree to indemnify the Security company for all kinds of negligence. * Decision: Not really a liquidation clause, instead a limited liability clause. Does not make an attempt to estimate the damages. Since the limited liability clause is neither unconscionable nor against public policy, the Fretwells only get $50. The idea of an indemnity clause is to shift the blame. It is meant to protect you against third persons. Whose going to go out and get the insurance? The intention to indemnify is unequivocally clear. The clause to indemnify made the company where Fretwell was president, responsible for the loss because he contractually agreed to take responsibility. The clause is clear and conspicuous. * Flint doesnt like public policy arguments. * Comment: The Penalty Rule and Efficiency Enforcement in Equity * The Court could appoint a receiver, but a receiver costs a lot of money. Courts dont like

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to be constantly supervising to make sure their orders get enforced. If they violate the order, hold them in contempt and put them in jail or fine them. One of the reason they dont require specific performance because people might not perform as well and they might not like each other. Van Wagner Advertising Corp. v. S & M Enterprises * Facts: Billboard case. Question of fact. Was there specific performance. * Decision: Whenever a clause is ambiguous, you can do oral testimony. Damages should have been awarded through the expiration of Van Wagners lease. * Curtice Bros. Co. v. Catts * Tomato case- needed tomatoes for canning company. * Facts: The farmer agreed to sell his tomatoes from a specific crop to the canning company. Instead, he only delivered a portion of it to the canning when the price of tomatoes were low. The canning company must procure the tomatoes in advance in order to carry on their canning. It might be possible for them to buy more at a higher price and to sue for the difference. But if they cant get any then they are screwed. Irreparable harm. * Decision: Granted them equitable relief. The court places an injunction not allowing them to sell the tomatoes to anyone else, which would encourage the people to fulfill their contract. They could appoint a receiver to pick the tomatoes. * Comment: The History of Equity * Equity remedy designed as a supplement to common law remedies, not meant to replace them. * TX- 1836 merged law and equity. Allowed trial by jury. Hung over of old concept that suing for equity- no jury. Constitutional at common law. * Restatement of Contracts, Second 360 * In determining whether the remedy in damages would be adequate to protect the expectation interest of the injured party], the following circumstances are significant: * The difficulty of proving damages with reasonable certainty, * The difficulty of procuring a suitable substitute performance by means of money awarded as damages, and * The likelihood that an award of damages could not be collected. * UCC 2-716(1) * Specific performance may be decreed where the goods are unique or in other proper circumstances. * Generally understood that this action preserves the historical adequacy test of equity jurisdiction. * Paloukos v. Intermountain Chevrolet Co. * Facts: Dismissal below of a claim for specific performance was proper. Cannot sell what they dont have. Specific performance nevertheless remains an extraordinary remedy generally available only where other remedies are in some way inadequate. * Decision: The Chevrolet was not unique. Laclede Gas Co. c. Amoco Oil Co. * Facts: Amoco agreed to supply Laclede propane for an unlimited amount of

time. Amoco was not allowed to terminate it, but Laclede was allowed to. (Not public utility). Eventually natural gas would spread around the community and squeeze out the propane which would effectively end the contract. * Decision: Was there mutuality in the damages? Amoco said that since they could not get specific performance, Laclede did not deserve specific performance. You do not need mutuality in damages- smoke screen. Will the court have to supervise its order? Texas will just hold them in contempt. Was there an adequate remedy at law? They could get it from other places but only for the short run. So no adequate remedy at law. No way to value the substitute because the substitute cannot be located. * Specific performance will not be ordered when the party claiming the breach of contract has an adequate remedy at law. * Comment: The Vendees Equity Action * Many time in these long term contracts, there is always an uncertainty about the ability to cover. In dealing with a short term contract, it is easy to find a market to cover in. Twenty or thirty year contracts means that covering in a long term is speculative. In long term contract, the court is reluctant to give anything but specific performance. * Gartrell v. Stafford * Facts: The vendor agreed to sell land in Nebraska to the plaintiff. Then the vendor refused to give the vendee his land. * Decision: The court demands specific performance. Vendor cannot get specific performance, Vendee can. Vendor does not normally get specific performance because his damage remedy is adequate- all he was expecting to get was profit. Fitzpatrick v. Michael * Facts: Plaintiff suing for specific performance over oral agreement and wanted a receiver to make sure he complied. The defendant demurred, the demurr was sustained and the case was thrown out and the plaintiff appealed. In Maryland, an oral agreement to make a will is void under the statutes of fraud. Agreements that are not performable in a year have to be performed in a year. So an oral agreement about a will is enforceable because the guy might croak before the end of the year. The problem about land is it has to be written down except for the doctrine of part performance. If someone takes physical possession of land and makes improvements, it is not longer in the statute of frauds (legal remedy) so it is an equitable performance. In order to get the equitable remedy, she needs to have an adequate remedy of law. * Decision: The court decided she has no remedy at law because she has no enforceable contract. She doesnt get equitable jurisdiction because specific performance is not allowed in most personal service contracts. She gets nothing because there is no written contracts. Notes * Covenant not to Compete- You are not allow to compete with other competition. * If you start working for someone else, then the company you use to work for can get an injunction so that you dont work for someone else. * Need to look at time (how long the part lasts), scope (geography). * The court can revise this portion of the contract in it to make it enforceable. * In Texas they do not rewrite this. * He thinks its odd. * Dallas Cowboys Football Club, Inc. v. Harris

Facts: Harris has a contract with the Rams. He quits, then returns to the league but goes for the Dallas Texans. This was bad because the Rams had sold his right to the Cowboys. * Decision: They cannot make him perform for them but they can get an injunction to stop him from playing with anyone else. The Cowboys dont get a benefit. So disproportionate remedy against Harris- he gets penalized and Cowboys get no benefit. * Pingley v. Brunson * Facts: Defendant plays organ. He quits. * Decision: Cannot get specific performance. No way to supervise how he will work. Cannot get an injunction. There is an adequate remedy of law because there were three other organists. So they could have calculated the differences between the cost of the organists and sued for damages. * Enforcing Noncompete Pledges * Indeed, a court normally will not decree specific enforcement of an employees anticompetitive covenant unless necessary to protect the trade secrets, customer lists or good will of the employers business, or perhaps when the employer is exposed to specific harm because of the unique nature of the employees services. * Once the term of an employment contract has expired, the general public policy favoring robust and uninhibited competition should not give way merely because a particular employer wishes to insulate himself from competition. * Fullerton Lumber Co. v. Torborg * Lumber guy signs noncompete policy. The business triples. The lumber guy quits and starts his own company. Lumber company sues. Trial court says the lumber company. * The court has agreed that 10 years is excessive. Need to decide on a reasonable time period. * Data Management, Inc. v. Greene * There are three approaches to overly-broad covenants: 14. To characterize such clauses as unconscionable and hence unenforceable. The court in this case did not favor this approach. 15. Approach is to the blue pencil rule, under which a court renders a covenant enforceable (that is reasonable) by deleting specific words or parts of a cluase that, by its terms is divisible. The court rejected this as being merely semantic in that it values the wording of the contract over its substance. It also unduly limits a courts consideration of all the factors comprising reasonableness. 16. Holds that if an overbroad covenant can reasonably altered to render it enforceable, then the court shall do so unless it determines the covenant was not drafted in good faith. Northern Deleware Indus. Dev. Corp. v. E.W. Bliss Co. * Plaintiffs wanted to make the defendants requisition 300 more workmen for a night shift. * The court said it was impractical to have specific performance. * Would be inappropriate in view of the impression of the contract provision relied upon and the impracticability if not impossibility of effective enforcement

by the Court of a mandatory order designed to keep a specific number of men on the job. * City Stores Co. v. Ammerman * These people sent in a letter to help with rezoning. Rezoning granted, didnt get there store as promised. Specific performance granted for plaintiff. * Specific performance granted because damages could hardly compensate for the loss of the sought for opportunity to raise Lansburghs image and economic position in the Metropolitan Washington area by its anticipated expansion into the suburbs, * Grayson-Robinson Stores v. Iris Const. Corp * Pursuant to the parties contract, the dispute was submitted to a panel of arbitrators, who rejected the excuse offered by Iris that it could not borrow the money it needed. * Comment on Arbitration * Flint opposes. * A modern arbitration act is said to qualify for that designation by containing the following provisions: 17. Irrevocability of agreements to arbitrate future disputes. 18. Judicial power to compel a party to arbitrate at the request of the other. 19. Judicial power to stay, pending arbitration, a court action instituted in violation of an arbitration, a court action instituted in violation of an arbitration agreement. 20. Court authority to appoint arbitrators and fill vacancies when the parties fail to do so. 21. Restrictions on judicial power to review awards of arbitrators 22. Specification of the grounds for attack of awards, such as fraud or evident mistake. Grounds for Enforcing Promises * Introductory Note * Cohen, the Basis of Contract * Covenant- original form of action on breach of contract. * Debt- Half completed exchange. * Consideration- distinguish between gift and agreement. * If you got it, then its good, if you dont, then its worthless * Even if its in writing and there is no consideration, then the promise is worthless. * The mere inadequacy of consideration will NEVER overturn something. You can never determine if it is inadequate until you decide whether or not it is enforceable or not. * Meritorious Consideration-Equitable issue. Words no longer used anymore. * You got to live with a bunch of Yankees, if you like them you are welcomed to them * Seal worthless in Texas * We want to enforce contracts for which there was an intent to do it. * Sharp, Pacta Sun Servanda * Promises should be enforced unless some intelligible and controlling practical reason for not enforcing them is made to appear.

Promises supported by consideration are not enforced in cases of duress, fraud, misrepresentation, non-disclosure in some relationships, mistake, impossibility, forfeiture, inconsistency with controlling rules of criminal and civil liability, or inconsistency with other defend public policy.

Formality * Congregation Kadimah Toras-Moshe v. DeLeo * Facts- This guy kept making a promise to give $25,000 to the synagogue. * Decision- Claim against estate, have a fiduciary responsibility to protect the beneficiaries. Was not in writing. It was not a completed gift. If he really intended to do it, why didnt he do it before he croaked? * Note * Failed to make completed gift. * Gift v. promise=difference? * Fuller, Consideration and Form * Consideration used in determining promises. * Gratuitous promises shit * The Evidentiary Function is to provide evidence of the existence and purport of the contract, in case of controversy. * The Cautionary Function- A formality may also perform a cautionary or deterrent function by acting as a check against inconsiderate action. * The Channeling Function- That a legal formality may perform a function not yet described can be shown by the seal. The seal not only insures a satisfactory memorial of the promise and induces deliberation in the making of it. * Comment: Formalism and the Seal * Texas- seal is worthless. * Exchange through Bargain * Hamer v. Sidway * Facts- Uncle told nephew at a family wedding that if he abstained from drinking, tobacco, poker, billiards or swearing he would get a sum of 5,000 dollars. He didnt do any of it and his uncle promised the 5,000 but kept it for a while. Though there was a letter from his uncle. * Decision- His detriment is that he relinquished his legal rights. The uncle did not benefit anything, but this doesnt matter because it is either Benefit conferred or detriment sustained= consideration. They then said he had a benefit but didnt say what, it was probably the pleasure of his nephew being a good boy. There was a condition imposed and a condition fulfilled. * The party who abandons some legal right in the present or limits his legal freedom of action in the future as an inducement for a promise, gives sufficient consideration to create a legally binding contract. * Mesne Assignment- An previous assignment of a right or interest that occurred prior to the current assignment. * Earle v. Angell * Facts- Aunt orally tells her nephew, you would receive $500. Nephew attends funeral and Mary left a paper saying that if he showed up he could get the money. * Decision- Promise for promise=ok. No benefit conferred because aunt is dead. Detriment because you went to the funeral that you had the freedom not to go to. Detriment does not have to primary motive. * Whitten v. Greeley-Shaw

Facts- Written agreement. Woman said she wouldnt call the office or the home. * Decision- Plaintiff did not seek any of the things placed into the writing. She only placed things in the paper so that he would have gotten something so it was an enforceable contract. By 1987, benefit conferred or detriment, that type of terminology is no longer focused. Now they are concerned with whether or not there is a bargain. (Bargain assumes that there was some negotiation between two parties.) * Restatement of Contracts, Second 71, 81 * Know well. * Section 71. Requirement of Exchange; Type of Exchange * To constitute consideration, a performance or a return promise must be bargained for. * A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise. * The performance may consist of * An act other than a promise, or * A forbearance, or * The creation, modification, or destruction of a legal relation. * The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person. * Section 81. Consideration as a Motive or Inducing Cause. * The fact that what is bargained for does not of itself induce the making of a promise does not prevent it from being consideration for the promise. * The fact that a promise does not of itself induce a performance or return promise does not prevent the performance or return promise from being consideration for the promise. * Rest.2d. 81 is intended to make explicit a limitation on 71s bargained for test of consideration. A comment to 81 observes that a promisor- even the typical commercial bargainer- may have even more than one motive in negotiating an exchange, adding: Unless both parties know that the purported consideration in mere pretense, it is immaterial that the promissorys desire for the consideration is mere pretense, it is immaterial that the promisors desire for the consideration is incidental to other objectives and even that the other party knows this to be the case. Fischer v. Union Trust Co. * Facts- Get damages for breach of covenant contained in the deed. While dad was alive, conveyed a warranty of deeds for one dollar. There was writing, signed and delivery. Grantor (dad) agreed that he would pay them off. She is suing him because he didnt pay them off and the property was foreclosed and wanted the damages. * Decision- Valid consideration for paying off of the debt. The dollar was a nominal consideration. (Can only reach this conclusion after you decide that the contract is unenforceable, but it has nothing to do with whether or not the contract was enforceable.) Contract was not enforceable because there was no

bargain. If there had been a bargain, the dollar would have been adequate. Now there is a need for a bargain. * Comment: Meritorious Consideration * A court of equity may be induced to act if a donor has attempted to carry out the gift but the actions taken are in some way incomplete or defective, and the donor has died in ignorance of this. * A critical fact in these cases is that the donor has died believing the transfer to be fully effective. * Simmons v. United States * No bargain. * Consideration- does not have to be inducing cause. * Comment: Nominal Consideration * Schnell v. Nell * A promise to pay 600 dollars for one cent is an unconscionable contract, void at first blush, upon its face, if it be regarded as an earnest one. This is so because the one cent is, plainly, in this case, merely nominal, and intended to be so. * He also doesnt have to carry out his wifes intentions because he is morally obligated. Duncan v. Black * Essentials to consideration: * Good faith * Some foundation * Cotton is an allotment on year to year basis. Since cotton is year by year they could have only contracted for one year in the future. More importantly the bargain went against state laws of allotment. * Illegal Consideration * Military College Co. v. Brooks * Paid for military school, son dismissed. * The father was not going to pay for a promissory note. Elected to buy his peace of time being by giving the first note, which postponed any such suit until the maturity of that note. This, under our decisions, was adequate consideration to support the note. * Restatement of Contracts, Second 74 * Forbearance to assert or the surrender of a claim or defense which provides to be invalid is not consideration unless * The claim or defense is in fact doubtful because of uncertainty as to the facts or the law, or * The forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid. * The execution of a written instrument surrendering a claim or defense by one who is under no duty to execute it is consideration if the execution of the written instrument is bargained for even though he is not asserting the claim or defense and believes that no valid claim or defense exists. Martin v. Little Brown & Co. * Appellant voluntarily turns in plagiarizer. Gets honorarium but wants 1/3rd. Demurrer may be sustained in this case. * There was no contract. Payment was never discussed.

A promise to pay for services can, however, only be implied when they are rendered in such circumstances as authorized the party performing to entertain a reasonable expectation of their payment by the party benefited. * There was no promise. * They were not unjustly enriched at the expense of another. * There was no quasi contract. * That a person who requests another to perform services for him or to transfer property to him thereby bargains to pay therefore- In this case they didnt request. * There was no intentional infliction of emotional distress. * Collins v. Lewis * Cows- took em away, tried to get em back, kept em, sold em. * A true implied contract can only exist where there is no express one. Such a contract arises where a plaintiff , without being requested to do so, renders services under circumstances indicating that he expects to be paid therefore, and the defendant, knowing such circumstances, avails himself of the benefit of those services. * Seaview Assn of Fire Island, N.Y., Inc. v. Williams * Defendants didnt want to pay assessments. * Defendants had actual or constructive knowledge of the nature of the community and the plaintiffs activities of the benefit of residents. Their purchases impliedly accepted the conditions accompanying ownership of property. * Martin v. Campanaro * Recovered on a quantum meruit basis. * But quantum meruit is ambiguous; it may mean (1) that there is a contract implied in fact to pay the reasonable value of the services or (2) that, to prevent unjust enrichment, the claimant can recover on a quasi-contract (an as-if contract) for that reasonable value. * The whole point of quantum meruit recovery is to compensate plaintiffs who have provided a benefit to defendants but who do not have a contract- express or implied- with those defendants. Promises Grounded in the Past * Mills v. Wyman * Defendants son was 25, no longer under the care of his dad. Dad promised to repay these people who took care of his son when he sick. Dad changed his mind. * Moral obligation not sufficient for consideration * Past services is not sufficient consideration to support a promise. * Past expense is not sufficient consideration to a support a later promise to pay for the expenses. * Nonsuit- Judgment ordered on nonsuit results when the plaintiff has no legal basis for his action based on the proof presented at college. * Comment: Promises to Pay Barred Obligations * Webb v. McGowin * Saved McGowins life but severely injured himself. Appellant was injured for life. * Saved life = moral obligation * No pre-existing legal obligation.

No legal obligation to pay when McGowin falls (except with doctors expected to pay) * Moral obligation = value consideration * Benefit to the promissory or injury to the promisee is a sufficient legal consideration for the promissors agreement to pay. * Past act of saving a party from death or serious bodily injury, that results in injuries to the saving party, is sufficient consideration for the saved partys subsequently induced a promise to pay the saving party. * Assumpsit- In contracts this refers to oral promises made without written record as evidence of the promise. * Demurrer- In court pleadings this is a claim that even if all of the allegations are accepted as true, the party claiming the allegations still has not shown a legal basis for recovery. * Harrington v. Taylor see book * This case holds that a humanitarian act, voluntarily performed, does not suffice as legal consideration for a subsequent promise. The defendants wife was assaulting the defendant with an axe when the plaintiff intervened and saved the defendants life. In the process, the plaintiffs hand was severely injured. The court held that the defendants oral promise to compensate the plaintiff was unenforceable. That is, where the voluntary act occurs before the defendants promise is made, the act does not constitute consideration for the promise. * Henderson, Promises Grounded in the Past: The Idea of Unjust Enrichment and the Law of Contracts * But if a mans house takes fire, the law does not presume or imply a contract to pay his neighbors for their services in saving his property. * Restatement of Contracts, Second 86, Promise for Benefit Received 23. A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. 24. A promise is not binding under subsection (1) * If the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; * To the extent that its value is disproportionate to the benefit. * Edson v. Pope * At request of defendant, a bunch of money was spent on the house. * Plaintiff won, because plaintiffs actions were not voluntary. * The circumstances did not indicate that plaintiffs drilling was gratuitous or an act of voluntary courtesy to the defendant. The subsequent promise was therefore supported by sufficient consideration. * Muir v. Kane * Real estate broker had an oral contract to find a house for these people. Broker wants money, services had already been rendered and broker wins. * In re Schoenkermans Estate * Lived and helped out for 10 years, sued for promised money, won promised money but not amount in excess. Reliance on a Promise * Kirksey v. Kirksey

Wife moves house to live on dead husbands brothers land. She sold her house. There were no terms or promise, then the brother kicked her off. Plaintiff sustained loss and inconvenience. * It was only a gift promise, and thus could not be enforced due to a lack of consideration. * Moving was not to be thought of as substantial reliance on the offer, but rather an act incidental to the gift. * A bargained-for exchange is required for all contracts, and merely changing position in reliance on a statement is insufficient to impose contractual liability in absence of any bargain. * Gratuity- Something voluntarily given and acquired without a bargained-for exchange. * Ricketts v. Scothorn * A woman who quit work in reliance on her grandfathers promise to support her sues when the executor of her grandfathers estate fails to pay. Her condition was changed for the worse. * Where a person changes position in detriment reliance on a promise, the promisor may be estopped from later denying the promise. * Estoppel in pais- The doctrine by which a person may be precluded from asserting some right where his acts or words have induced another person to change in position in reliance; also know as equitable estoppel. * Quid pro quo- Something in exchange for something else, as in a bargained-for exchange. * Prescott v. Jones * Letter about insurance, plaintiff didnt pay or respond. * Defendants made an offer to insure, but there was no acceptance by the plaintiff. An acceptance requires words or other overt action. Allegheny College v. National Chautauqua County Bank * No consideration but Cardoza finds it. Flint does not like Cardoza, prob. because he is from the North * In this case, Justice Cardoza set forth the requirements for valid consideration. A charitable donor promised to donate money to Allegheny college. In return the college promised to name a scholarship fund after the donor. The court held that an enforceable bilateral contract, supported by valid consideration, had been formed. * Justice Cardoza opined that in order for a promise to be supported by consideration three requirements must be met: 25. The promisee must suffer a legal detriment; 26. The detriment must induce the promise; and 27. The promise must induce the detriment. * Thus, a charitable organizations promise to name a scholarship after a donor is sufficient consideration to make the donors promise enforceable if it is induced by the promised contribution and the promise to contribute is induced by the promised naming of the scholarship. Although the court held that an enforceable contract had been formed, the case is often noted for Justice Cardozas statement

that we have adopted the doctrine of promissory estoppel as the equivalent of consideration in connection with our law of charitable subscriptions. Thus, as indicated now under 90 (2) of the Restatement 2d, promissory estoppel may be an alternative basis for enforcing the promise in similar cases. * The tramp case* If a benevolent man says to a tramp: If you go around the corner to the clothing shop there, you may purchase an overcoat on my credit, no reasonable person would understand that the short walk was requested as the consideration for the promise, but that in the event of the tramp going to the shop the promisor would make him a gift. Yet the walk to the shop is in its nature capable of being consideration. It is a legal detriment to the tramp to make the walk, and the only reason why the walk is not consideration is because on a reasonable consideration it must be held that the walk was not requested as the price of the promise, but was merely a condition of a gratuitous promise. * If condition occurs, does promissory receive benefit? Yes, consideration. * Siegel v. Spear & Co. * Decided four years before Allegheny College. Seigel purchased furniture from Spear & Co., giving a mortgage to secure payment of the price and a promise not to remove the furniture from his New York apartment until it was paid for. Left town for a few weeks but asked them to insure his furniture. They didnt and it was destroyed by a fire. * The court decided there was consideration and the store should have insured. The store was acting as a bailee. * Carr v. Maine Central R.R. * If it is shown that defendant accepted the papers for the specified purpose but then failed to perform its duty, plaintiffs may recover all the damage they sustained as the result of such failure. It matters not at all that defendant was not to be paid for what it undertook to do. * Comment: Misfeasance and Nonfeasance * When the cause of action arises merely from a breach of promise, the action is in contract. The action of tort has for its foundation the negligence of the defendant, and this means more than a mere breach of contract. * Misfeasance* NonfeasanceEast Providence Credit Union v. Geremia * Stretch of Imgination * Promissory estoppel takes place of consideration. * This case illustrates when a promise to procure insurance will be enforceable. The Geremias purchased a car with the help of a loan from the Credit Union. At the outset, the Geremias agreed to obtain car insurance. However, Mr. Geremia later became ill and could no longer pay the premiums on the insurance. The Credit Union promised to make the premium payments for the Geremias and the Geremias agreed

to allow the Credit Union to add the amount of these payments to their loan balance. However, the Credit Union failed to make the premium payments. When the car was subsequently destroyed, the Credit Union sued for the balance due on the loan, and the Geremias counterclaimed for the insurance proceeds. The Court held for the Geremias on two grounds: 28. The agreement to pay interest on the money borrowed to pay the insurance premium was sufficient consideration to make the Credit Unions promise unenforceable; and 29. The promise was enforceable by promissory estoppel, since the Geremias had relied on the Credit Unions promise to make the premium payments which caused the Geremias to forebear maintaining the insurance policy. * This last basis for the courts decision is controversial since the facts indicate that the Geremias could not have continued to maintain the insurance policy anyway. Thus, there is a question of whether the Credit Unions promise called a real forbearance by the Geremias. Promissory Estoppel: Requirements and limitations for the Doctrine: 30. Was there a promise which the promisor should reasonable expect to induce action or forbearance of a definite and substantial character on the part of the promisee? 31. Did the promise induce such action or forbearance? 32. Can injustice be avoided only by enforcement of the promise? I. & I. Holding Corp. v. Gainsburg * Promised to give 5K. * Charitable subscription. * Enforceable under Promissory Estoppel * Find reliance where there is none. * Charity has more weight. Salsbury v. Northwestern Bell Tel. Co. * Restatement of Contracts, Second, includes a new subparagraph 90(2), [providing that] A charitable subscription of a marriage settlement is binding without proof that the promise induced action or forbearance. * However, where a subscription is unequivocal the pledge or should be made to keep his word.

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Note Charitable subscription enforceable without consideration. Texas and 42 states do not follow Seavey v. Drake * Paid taxes and made improvements. * Wanted oral promise to deed of land. * Statute of Frauds- Cannot transfer title of land if not in writing or/and signed by gift giver. * Wanted to prevent perjury. * In this case, promise should not have been enforced because it violates statutes of fraud.

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Plaintiff wins because the expenditure in money or labor in the improvement of the land induced by the donors promise to give the land to the party making the expenditure, constitutes, in equity, a consideration for the promise and the promise will be enforced. * No restitution- not requested to do anything, mere volunteer. * Conduct is evidence. Comment: Reliance and the Statute of Frauds * Conduct can act as a type of evidence. * Must know difference between equitable and promissory estoppel. * Equitable- Defense prevents someone from pleading Statute of Frauds. * Promissory- brings a course of action to prevent someone from using Statute of Frauds. * Important- Equitable and promissory estoppel cannot get around the Statute of Fraud in the UCC 2-201. The UCC explicitly states that. * 90s statement of promissory estoppel, Section 139 provides: 33. A promise which the promisor should reasonably expect to induce action of forbearance on the part of the promisee or a third person and which does induce the action or forbearance is enforceable not withstanding the Statute of Frauds if injustice can be avoided only be enforcement of the promise. The remedy granted for breach is to be limited as justice requires. 34. In determining whether injustice can be avoided only by enforcement of the promise, the following circumstances are significant: * The availability and adequacy of other remedies, particulary cancellation and restitution; * The definite and substantial character of the action or forbearance in relation to the remedy sought; * The extent to which the action or forbearance corroborates evidence of the making and terms of the promise, or the making and terms are otherwise established by clear and convincing evidence; * The reasonableness of the action or forbearance; * The extent to which the action or forbearance was foreseeable by the promisor.

Forrer v. Sears, Roebuck & Co. * Full time, permanent employment. Sues for reliance.

Permanent- @ will unless its in writing- can fire for any reason with or without cause. * Hunter v. Hayes * Promissory estoppel applied because she wasnt hired. Stearns v. Emery-Waterhouse Co. * Likes case- too easy for someone to lie. * Promissory estoppel for employment- what were you relying on? * Goldstick v. ICM Realty * Addresses where an employment contract is involved, the use of promissory estoppel to get around the [one year provision of the statute of frauds in particularly troublesome. * The type of employment relationship in the country would be seriously undermine d if employees could use the doctrine of promissory estoppel to make alleged oral contracts enforceable. Goodman v. Dicker * Decision: Illusory promise- promise that is not a promise at all or promise that is not enforceable. There was no contract. D was stupid enough to rely on an illusory promise. Does the court know the difference between equitable or promissory estoppels? * This case holds that reliance damages are recoverable in an action based on promissory estoppel where the defendant promised the plaintiff a franchise. A higher award of the plaintiffs expectation interest would be inappropriate given that there was no enforceable contract. In Goodman, the plaintiff applied to the defendant for a franchise to sell Emerson radios. The defendant led the plaintiff to believe that the franchise had been approved, and the plaintiff spent $1,150 to hire salesman and advertise before he found out that the franchise had not in fact been approved. * The courts holding, which allowed plaintiff his reliance damages, is significant for two reasons: 35. It allowed damages under a reliance measure, whereas the traditional rule would have allowed only a restitution recovery; and 36. Recovery was permitted even though the franchise was terminable at will. * New business=no profits=no reliance * American Natl Bank v. A.G. Sommerville, Inc. * Equitable estoppel. * Must pay, waived all personal defenses. * Didnt get cars * Could not say it, mouth sewn shut, made misrepresentation of the fact that shut mouth. * DUlisse-Cupo v. Board of Notre Dame High School * We agree that the representations plaintiff alleges do not invoke a cause of action for promissory estoppel because they are neither sufficiently promissory nor sufficiently definite to support contractual liability We disagree that the representations are insufficient to sustain a cause of action for negligent misrepresentation Even an innocent

misrepresentation of fact may be actionable if the declaring has the means of knowing, ought to know, or has the duty of knowing the truth. * Does not need to prove that the representations made by the defendants were promissory. * Defendants did not exercise reasonable care in communicating. Restatement of Contracts, Second 90 * A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. * A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance. * Comment d- Partial Enforcement- A promise binding under this section is a contract, and full scale enforcement by normal remedies is often appropriate. But the same factors which bear on whether any relief should be granted also bear on the character and extent of the remedy Unless these is unjust enrichment of the promisor, damages should not put the promisee in a better position than performance of the promise would have put him. In the case of a promise to make a gift it would rarely be proper to award consequential damages would place a greater burden on the promisor than performance would have been imposed. Comment: Promissory Estoppel Damages * Equitable estoppels- whenever you see facts that lead you to believe there was a misrepresentation and you see the word estoppels floating around there, then you might apply equitable estoppels. Tort like remedy= reliance. Shuts their mouth. * Promissory estoppels- Lost profits. New business does not get lost profits. So maybe defendant didnt get it. * Bilateral contract- Promise for promise. * In order for my promise to be enforceable you must have consideration. Reliance on Contract Adjustments * Modification of valid contract after its become effective. Is modification enforceable? One party will rely, where theres evidence shot at equitable or promissory estoppel? Mahban v. MGM Grand Hotels, Inc. * The lease contained a clause permitting either party to terminate if the leased promises are damaged or destroyed to such an extent that they cannot be put in tenantable condition by Lessor within 180 days after such damage or destruction. * Relied on this letter. Plaintiff sued for damages for breach, urging that defendant had lost the contractual power to terminate.

Contained no misrepresentation as to whether defendant intended to waive its contractual rights. Summary judgment was wrong. * Levine v. Blumenthal * Reduced rent both parties agreed. Then the landlord wanted back rent. * If the tenant wanted to get away with it, they would have to provide additional consideration such as merchandise or property. * Legal duty of tenant- pay rent. * Comment: The Legal-Duty Rule * Foakes v. Beer * Cannot discharge through party payment. * The inability of the parties to discharge a money debt through party payment was not finally settled until this case. * Texas requires consideration. Promises of Limited Commitment * Introductory Comment * Bilateral contract- performance on both sides. * Unilateral contract- performance on one side. * Davis v. General Foods Corp. * Martin case and plagiarist * Gave recipe and sued for quantum meruit and breach of contract because she did not get paid. * Defendants letter was not binding, it was just an illusory promise. * Nat. Nal. Service Stations, Inc. v. Wolf * Increase volume of gas=discount promise. * Cannot be considered because it went against the Statute of Frauds because it could not be performed within one year of the making thereof. * Comment: Mutuality of Obligation * Obering v. Swain-Roach Lumber Co. * Paul v. Rosen * Neither party could perform, purely illusory. * No lease, no stock. * Since the contract made the securing of the lease a condition to the effectiveness but placed no duty on plaintiff to secure it, the entire contract was void for want of mutuality and defendant owed no duty to perform it. * Restatement of Contracts, Second 77, Illusory and Alternative Promises * A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performances unless * Each of the alternative performances would have been consideration if it alone had been bargained for [definition of consideration]; or * One of the alternative performances would have been

consideration and there is or appears to the parties to be a substantial possibility that before the promisor exercises his choice events may eliminate that alternatives which would not have been consideration. * Most people feel this is meaningless because it means nothing. * Always true therefore provision meaningless. Got it, you have consideration. Wood v. Lucy, Lady Duff-Gordon * Another Cardoza case, Flint HATES Cardoza. * A famous fashion designer attempts to invalidate an exclusive-dealing arrangement by arguing that the supplier never made any promise to market her goods. * Exclusive dealing arrangements impose an obligation by the seller to use his best efforts to distribute and market goods. * Exclusive dealing arrangement- An agreement whereby a distributor expressly or implicitly contracts to supply all of a sellers goods, using the distributors best efforts. Omni Group, Inc. v. Seattle Natl Bank * A promise for a promise is sufficient consideration to support a contract If, however, a promise is illusory, there is no consideration and therefore no enforceable contract between the parties. * A promise that is dependent upon a condition of personal satisfaction is not illusory. * The court implied an obligation of good faith on the part of P in the performance of these conditions of personal satisfaction. * Comment: Flexible Business Arrangements * Lima Locomotive Mach. Co. v. National Steel Castings Co. * A contract to buy all that one shall require for ones own use in a particular manufacturing business is a very different thing from a promise to buy all that one may desire, or all that one may order. The promise to take all that one can consume would be broken by buying from another, and it is this obligation to take the entire supply of an established business which saves the mutual character of the promise. Feld v. Henry S. Levy & Sons, Inc. * Bread crumbs. The equipment broke down, would resume if price increases. * Since bread crumbs were but a part of defendants enterprise and since there was a contractual right of cancellation, good faith requires continued prohibition until cancellation, even if there be no profit. UCC Section 2-306 Output, Requirements and Exclusive dealings provides: * A term which measure the quantity by output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded. * A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise

agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale. * Comment: The Franchise Dealer and the Law * Sheets v. Teddys Frosted Foods, Inc. * Facts: Sheets was a quality control employee with Teddys. He was an at-will employee- if the employee can walk at anytime so the employer can walk any time. The employer was lying about the products they were selling. Sheets wanted workers compensation for wrongful termination. He is asking for mental anguish, punitive damages, and etc. There is no statute that authorizes this type of action. * Decision: Flint thinks public policy is nonsense and this case and the case that follows this one. Public policy should be determined by the legislature. This case is remanded for a trial and the judge determines the public policy. Judges are suppose to determine the public policy based on legislature. He could have made an anonymous tip or told the newspapers or etc. The court bails him out. Judge made public policy gives employees an unfair advantage. * Price v. Carmack Datsun, Inc. * Facts: Individual injured in an accident. Defendant did not want him filing so that his insurance premium was not raised. He chose to file under group insurance. There was at-will employment and you could fire for any reason. There was no statute. The public right only exists where there is a statute that authorizes it. * Decision: Did not find in favor of the plaintiff. Most states follow this decision and do not permit their at-will employees to sue for wrongful termination and discharge. Firing does not violate public policy. * Note: The Publics Policy * Would you rather have legislature or judges enact public policy? The Making of Agreements * Mutual Assent * In order to have a contract you must have an offer, acceptance and consideration. Mutual assent- agreement- agreements between the parties can be in writing, oral, acts or failure to act. Actions speak louder than words because words have different meanings to different people. So when dealing with contracts, there are problems with the law. * Two schools of thoughts- wrong school won. School of thought- subjective intent- what the parties actually mean by the words- what intent did they have. Objective intent- designed because we dont want contract determination to be dependent on the personal whims of individuals. Want to look objectively to a reasonable person and how they would have interpreted the contract. Makes it easier on the courts. Not really worried about what the parties meant. From time to time, exceptions. Even if it adopts objective theory, it must accept subjective intent because the laws of evidence says its acceptable. * Trying to figure out what the bargain is. Right of one party who rely on the reasonable expectations of the apparent agreement of the other side. * Embry v. Hargadine-McKittrick Dry Goods Co. * Facts: The plaintiff went to the defendant to ask to be rehired. He kept being put off. Eight days after contract expired, the plaintiff

alleged reemployment. Discrepancy in the evidence as to what was said during the conversation where he was allegedly rehired. The defendants wanted the judge to request the jury that they must find that the conversation occurred as the appellant swore and but both appellants believed there was a contract. The plaintiffs only wanted the jury to consider what he believed. * Decision: In the state of Missouri only one person had to believe there was a contract. Would a reasonable person had assumed that Embry relied on a contract. If the evidence that is presented would lead a reasonable person to believe he had a contract of employment, then he wins. Who makes this decision? Doesnt matter if it is clear or unambiguous- the judge will decide. If there are two sets of facts the jury will decide. McKittrick was careless in the language he used, if one party is careless in the words he uses, he loses. * Whittier, The Restatement of Contracts and Mutual Assent * If only one person thinks he has a deal and another person knows he doesnt have a deal, the court will still find mutual assent. Kabil Developments Corp. v. Mignot * Facts: Another good example where the person is careless with what they say or misled the other to think that there was assent. Kabil asked Mignot to provide helicopters. Considered the quote Mignot gave and placed it in their contract bid. Mignot wanted to make sure the site was safe and etc. after the bid had been accepted. Confusion because one side was giving it a rough estimate, another side was considering it an implied contract. During trial, plaintiff was asked how he felt. Objection because it does not matter how he felt. The trial court overruled the objection. * Decision: Not in error to permit testimony because the jury understood it was a subjective statement. * New York Trust Co. v. Island Oil & Transport Corp. * Decision: If both parties were joking and they both knew they were joking then the defendant wins. Had they been innocent, the results would have been different. * In pari delicto potior est conditio possidentia- when parties are equally at fault the defendant has the strongest position. * Robbins v. Lynch * Intent fact = conclusion * Intent is a conclusion rather than a fact. McDonald v. Mobil Coal Producing, Inc. * Facts: Employee fired for sexual harassment. He was an at-will employee who believed he was a permanent employee. The plaintiff felt it was a breach of contract based on the handbook. The handbook repeatedly said the handbook was not a contract. * Decision: Disclaimer was not conspicuous- didnt stand out. The wording left the relationship between the employee and handbook unclear. All Mobil was trying to do was prevent the company from becoming unionized so it offered protections. * Kari v. General Motors Corp. * Facts: Separation clause that stood out. * Decision: Since the employee handbook was couched in

disclaimers and stood out then the employee handbook did not change the course of employment. * Pine River State Bank v. Mettille * Facts: Distinguished from the McDonald case because there was no employee handbook when the employee took the job. * Decision: The employees retention of the job is a sign of acceptance. Offered in order to provide job security. Moulton v. Kershaw * Facts: Salt delivery. Got in the mail, an offer for cheap salt. (Did they assume they were the only ones who got the offer? Did they assume the salt was unlimited?) Decided that they wanted to buy salt. (The letter did not offer to sell or we offer but said that it was authorized to offer.) * Decision: The salt company had a limited amount of salt, refused to supply the salt to the asking company. They were not allowed recover. The court said that it had to have specify whom, what and how many and price. No absolutely necessary to specify quantity but if I make a real offer the quantity must be reasonable. Joeseph Martin, Jr. Delicatessen v. Schumacher * Facts: Joe has a delicatessen that had a renewal clause. The contract said the rent would be what they decided upon. The landlord wanted an absurd amount. Joe asked for a reasonable rental and the landlord wanted Joe evicted. * Decision: The contract is not enforceable because it is uncertain. Restatement of Contracts, Second 33 37. Even though a manifestation of intention is intended to understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain. 38. The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy. 39. The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance. * UCC 2-204(3) has gap fillers are terms inserted if they are left out. * Formation has nothing to do with terms, needs intent to enter contract, cannot create offer or acceptance. Southwest Engg Co. v. Martin Tractor Co. * UCC 2-204(3) reads: Even though one or more terms are left open a contract for sale 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. * Subsection (3) states the principle as to open terms underlying later section of Article 2. If the parties intend to enter into a binding agreement, this subsection recognizes that agreement as valid in law, despite missing terms, if there is any reasonable certain basis for granting a remedy. The test is not certainty as to what the parties were to do nor as to the exact amount of damages due the plaintiff. Nor is the fact that one or more terms are left to be agreed upon enough of itself to defeat an otherwise adequate agreement. Rather,

commercial standards on the point of indefiniteness are intended to be applied, this Act making provision elsewhere for missing terms needed for performance, open price, remedies and the like. The more terms the parties leave open, the less likely it is that they have intended to conclude a binding agreement, but their actions may be frequently conclusive on the matter despite the omissions. * UCC 2-310(a) supplies the omitted term. Empro Mfg. Co. v. Ball-Co Mfg., Inc. * Empro had plenty of escape hatches, but Ball-Co ditched out. * No flat disclaimer comfort. * Cannot claim comfort from the fact that the letter of intenet does not contain a flat disclaimer, such as the one pronouncing that the letter creates no obligations at all. * They could not get reliance because everything they came up with were normally associated with pre-contractual efforts. Wheeler v. White * Special exceptions. * Uncertain + indefinite= no contract * A party to an otherwise unenforceable agreement may recover reliance damages under the Restatement 2ds view of promissory estoppel where the promise induced his foreseeable, definite, and substantial reliance. Reliance will put him in the position he would have been in had he not relied on the promise. Plaintiff owned some land which he planned to develop as commercial property. Defendant promised the plaintiff a construction loan, and the parties signed a document which later turned out to be unenforceable as a contract because basic, material terms were omitted from the agreement. Before the loan was to come through, the defendant encouraged the plaintiff to demolish some buildings on the property which had a value around $58,000 so that construction could begin as possible. The promise loan never materialized, and the plaintiff sued the defendant because he was unable to obtain alternative financing. The defendant asserted that plaintiff could have no recovery since the purported loan agreement was unenforceable as a contract. However, the court permitted plaintiffs recovery of his reliance damages in promissory estoppel under the above-stated principle. * Loan Agreement- No UCC Raffles v. Wichelhaus * Peerless case. * Latent ambiguity. * Two parties to a cotton transaction disagree as to the exact identity of a ship named in their contract. * If they attach a different meaning there is no contract. * A contract can be voided if it contains an ambiguous term which was, in fact, interpreted differently by the parties. * Ad Litem- For the purposes of the suit. However, the majority most probably meant ad idem. A consensus ad idem is a meeting of the minds. It is this which the majority claims did not exist between the parties. * Demurrer- A demurrer is a means of attacking a partys pleading. In essence, the attacker argues that the pleading need not be answered because it is insufficient of defective in some manner. There are a variety of different demurrers.

Dickey v. Hurd * Cash for land. * Waited until time expired and did not inform him that he had interpreted the thing wrong. * It was Hurds duty to inform him that the offer called for payment rather than a promise of payment. Should have corrected him. * It was not open to him to lie quietly by. * Restatement of Contracts, Second 20, Effect of Misunderstanding * There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and * Neither party knows of has reasons to know the meaning attached by the other; or * Each party knows or each party has reason to know the meaning attached by the other. * The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if * That party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first party; or * That party has no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party. Control over Contract Formation * Cobaugh v. Klick-Lewis, Inc. * Golf course offered a car, but it was meant for two days earlier. Willingness to enter bargain. The gift if not without consideration. * Benefit=publicity=consideration * Mistake avoidance of contract * Note: Unknown Offers of Rewards * In the above case, the offeror bargains for a performance, not a return promise. * Comment: Master of the Offer * The offeror is the master of the offer. * Offeror has the power to determine not only the substance of the exchange and the identity of the offered (that is, the person or persons in whom a power of acceptance is created), but such procedural matters as the time, place, and form or mode of acceptance. * Mailbox Rule- Stick something in mail, presumed to be received. Offer not made when posted but when received. * Allied Steel & Conveyors, Inc. v. Ford Motor Co. * Ford sought to hold Allied to an indemnification agreement when an allied employee was injured at the Ford plant. * An offer which suggests a means of acceptance may become binding by performance by the offered. * Estoppel- A doctrine which precludes a party from asserting a particular claim or right due to some prior, disqualifying act on their part. * Implead- A measure under Federal Rule of Civil Procedure 14 by which the third party can be brought into a civil action because, among other possibilities, they are liable to the defendant for part of all of the damages which the

defendant may be required to pay the plaintiff. Indemnification- A defendant in a civil action is entitled to seek compensation from a third party who is responsible to them for any damages the defendant is required to pay. A claim for indemnification can be predicated, as in this case, on a prior agreement between the defendant and the third party. * Third party defendant- A third party who is successfully brought into a civil action by impleader is deemed a third party defendant with respect to the original defendant. * Third party plaintiff- A defendant in a civil action who successfully impleads a third party will be deemed a third party plaintiff with respect to the impleaded party. * Panhandle Eastern Pipe Line Co. v. Smith * Must be explicit or acceptance can be in any manner. Davis v. Jacoby * If it is unclear whether an offer looks to a unilateral or a bilateral contract, the offer can be accepted either by performance or by a promise to perform. Thus, a letter which promised an inheritance to a woman and her husband if the couple would manage her uncles affairs and care for his dying wife as an offer which could be accepted either by the couples arrival, or by their promise to arrive, so long as they undertook preparations to fulfill that promise. The couple had thus accepted by sending a letter promising to perform and hence the death of the uncle before they actually began did not affect their rights. That is, there is a general presumption in favor of bilateral contracts where the offertorys offer is unclear as to which type of contract was intended. The couples acceptance of the bilateral contract meant that there was not an offer pending which would have resulted in the termination of the couples power of acceptance upon the death of the offeror. Instead, they had entered into a contract, the terms of which were enforceable after the death of one party to the agreement (so long as they performed their promise to care for the uncles wife.) Thus, the neice had an enforceable right to an inheritance from her uncles estate. * Jordan v. Dobbins * This case illustrates the general principle that where either the offeror or offered of a pending contract dies, the power to accept the contract is terminated. * A third party wished to buy goods on credit from a department store. Dobbins executed a standing offer that he would gaurantee any of the third partys debt s to the department store. Dobbins died, a fact of which the department store was unaware, and the department store sued Dobbinss estate for debts owed by the third party. The court held, however, that the death of Dobbins (the guarantor) operated as a revocation of his guarantee whether or not the department store (creditor) had notice of the death Therefore, the debt owed by the third party could not be recovered from Dobbinss estate. * Restatement of Contracts, Second 36, Methods of Termination of the Power of Acceptance * An offerees power of acceptance may be terminated by * Rejection of counter-offer by the offered, or * Lapse of time, or * Revocation by the offeror, or * Death or incapacity of the offeror or offered. * In addition, an offerees power of acceptance is terminated by the

nonoccurrence of any condition of acceptance under the terms of the offer. Petterson v. Pattberg * Flints favorite case * Decision: Finds this to be an option contract. Uses the analogy from Section 45. Part performance is in fact consideration for the subsidiary promise. Uses reliance by the general contractor by using the bid to keep the subsidiary promise. * This case holds that an acceptance of a contract offer unambiguously calling for a unilateral contract is not effective until performance actually starts. Prior to time performance begins, the offeror can freely revoke his offer. * Revocation of Offer * Only contract when completely performed either party can back out. * Restatement of Contracts, Second 45, Option Contract Created by Part performance or Tender * Where an offer invites an offered to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offered tenders of begins the invited performance or tenders a beginning of it. * The offerors duty of performance under any option contract as created is conditional on completion or tender of the invited performance in accordance with the terms of the offer. * Compare to 87 Brackenbury v. Hodgkin * This was an equity action to reconvey real property, to enjoin a party from further prosecution of an action, and to obtain clear title to the real property in question. * Is a contract created under a unilateral offer when the offeree completes performance? * A contract is created when the offeree begins the invited performance under a unilateral offer. * This rule binds an offeror to a unilateral offer once performance has begun. However, it does not find an offeree. This violates a general rule of consideration called the mutuality of obligation rule. (To have valid consideration both parties must be bound to a contract.) Because this rule of law violates the rules of law in consideration, it is often referred to as a consideration substitute. * Comment: The Remedy Problem in Brackenbury * White v. Massee * Controversy between father and daughter, father said it was morally impossible to go home. * Impossible to grant equitable relief, so the plaintiff pays $800 a year as rent for the premises. * OBrien v. OBrien * The husbands remedy was damages for the detriment he had suffered in giving up his medical malpractice. * He failed to show his age, his earnings from the practice he surrendered, and the maximum amount he could earn by resuming his practice, so there was no basis for which damages could be awarded.

Precontractual Obligation * Only offer, no contract. * Thomason v. Bescher * This was a dispute over the effect of a seal on a writing. * A seal is valid consideration substitute. * Equity looks to the fairness and true bargain between the parties and for the most part will not enforce a seal. Under these facts most of the courts opinion is dicta in that an offer was made and accepted before being withdrawn and nothing about the consideration for the option was relevant to make this ruling. Had D withdrawn the offer before acceptance than the issue of the relevance of the seal would be important in enforcing the irrevocable option. * Marsh v. Lott * No matter how small the amount of money, it is still consideration. * Smith v. Wheeler * Recital of money= consideration. * Restatement of Contracts, Second 87(1), Option Contract * An offer is binding as an option contract if it * Is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or * Is made irrevocable by statute. * James Baird Co. v. Ginbel Bros., Inc. * This was a breach of contract action for the failure to deliver linoleum. * Can promissory estoppel cannot be applied against an offer for an exchange not meant to become a promise until consideration has been received. * See Section 87 of the Restatement. I have only seen one case that has correctly applied that offer doctrine under promissory estoppel and that case quotes the wrong section. This section talks of an offer instead of a promise. * Drennan v. Star Paving Co. * A general contractor wants to enforce a subcontractors bid on a construction job. * An offer may not be freely revocable if the offered has substantially relied on the offer. * Promissory Estoppel- Justice Traynor does not identify it as such, but the rule which he cites from section 90 of the Restatement [First] of Contracts is also known as the doctrine of promissory estoppel. As with, other estoppel doctrine, the promisor is precluded from claiming that their promise is not binding if the elements apply. * See Section 32 and 62. * Restatement of Contracts, Second 87(2) * An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offered before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice. * Only to avoid injustice, do not have to tender actual performance. * Compare Section 45. * Ragosta v. Wilder * A shop owner and a prospective buyer dispute the meaning of a cash-

in-hand offer that the owner made for the sale of the shop. An offer is freely revocable until the offeror is bound by a valid acceptance. * Equitable Estoppel- Equitable Estoppel precludes a person from asserting a right or defense due to an affirmative act on their part. Generally, a person makes a representation which induces reliance in another party and is then stopped from disclaiming any obligations to that party. * Hoffman v. Red Owl Stores, Inc. * Facts: Mr. Hoffman wants to open a franchise. Red Owl keeps raising the prices. He wants reliance damages, but no expectancy because there was no contract. No offer, mere negotiations. Restatement 87(2) does not apply. Restatement 90 relies on a promise. * Decision: Inequality of bargaining power. Reliance damages, limitation on the damages. Unjust enrichment if he got the money back for the groceries and other shit. * Texas Law-In Texas, if all you have is promissory estoppel then Statute of Frauds applies. The only way he can get around it, the parties agree that the agreement will be reduced to writing and/or one party leads the other part to believe there had been writing. Equitable estoppel is a way to get around Statute of Frauds. * Skycom Corp. v. Telstar Corp. * Contract count fails. * There was no fraud or false representation that a party will close contract. Conduct Concluding a Bargain * Livingston v. Evans * Decision: By bargaining, rejected original offer and ended contract. The phrase cannot reduce price kept the negotiations open renewed original contract. * Once you put conditions on your offer, are they mere inquiries or treated as the counter offer. * Comment: The Deviant Acceptance at Common Law * When the answering communication is held to be qualified, and thus deviant, the analysis typically resumes with an inquiry as to whether the response to be found to operate as a rejection can also serve as a counteroffer which the original offeror (now an offered) can in turn accept. * Idaho Power Co. v. Westinghouse Electric Corp. * Decision: Anytime you accept the stuff and put it in your plant, you have not made a counter offer and have accepted. If you manifest unwillingness to go through with the deal, then there is a counteroffer and the situation is different. Nothing in the acceptance that challenged the disclaimer so the knock out rule does not apply. * Note: Unless Expressly Made Conditional * Roto-Lith, Ltd. V. F.P. Bartlett * Roto-Lith bought emulsion from Bartlett. There was a printed clause saying that there were no express or implied warranties. Roto-Lith did not contact Bartlett to argue over the clause. Accepted with knowledge of the terms. * Bad decision.

A Reassessment of 2-207 * Contracts revoked by death or counteroffer. * Under UCC 2-207- tried to prevent contracts going back and forth forever. ProCD, Inc. v. Ziedenberg * A purchaser of a computer software database resold the database on the Internet in violation of the license included with the software. * You cant buy software and sell it over the internet. * A license enclosed in a software package forms a binding contract between the software seller and buyer if the package provides notice that the purchase is subject to the license and the buyer can receive refund if the buyer does not agree to the licenses terms. Morrison v. Thoelke * Action for a breach of contract. * An acceptance by mail is irrevocable when it is mailed. * Some jurisdiction follow the rule that acceptance by mail is only valid when received. There are many flaws under both types of rules. The rule followed in this case does not allow a person to take advantage of acceptance by mail and then submit a cancellation by a faster means of notification and take advantage of opportunities that may have arisen after mailing and before receipt. * Kibler v. Caplis * Caplis wrote a letter giving Kibler an option. He sent a telegram which was never delivered. * It is evident the parties had in mind that the offer to sell would be good only until noon of the 8 th. Unless actually notified by that time of its acceptance, we do not think the defendant could be held. * Restatement of Contracts, Second 63, Time When Acceptance Takes Effect * Unless the offer provides otherwise, * 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 offerors possession, without regard to whether it ever reaches the offeror; but * An acceptance under an option contract is not operative until received by the offeror. * Restatement of Contracts, Second 69 * Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following cases only: * Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation. * Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer. * Where because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he does not intend to accept. * An offeree who does any act inconsistent with the offerors ownership of offered property is bound in accordance with the offered terms unless they are manifestly unreasonable. But if the act is wrongful as

against the offeror it is an acceptance only if ratified by him. Hobbs v. Massasoit Whip Co. * A course of conduct may be used to establish a contract in appropriate cases. * A prior course of dealings, plus retention of the foods, will create a manifestation of assent. * Whether a contract was formed is determined by an objective standard under the circumstances. The prior course of conduct by D would lead an objective person to believe that a contract was in place. D had duty to speak if he did not want to be bound. * Morone v. Morone * This was a dispute over assets and earnings of an unmarried couple. * A contract to share earnings and assets be implied in fact from the relationship of an unmarried couple. * Implied contracts between cohabitating couples will not be enforced or considered because of the inability of the court to determine the true nature of the dealings between the parties and the private nature of the relationships. Express contracts will be enforced but as said in this opinion even they need to be established with clear and convincing evidence. The Effects of Adopting a Writing * Introductory Note * Parole Evidence Rule- The principle that a writing intended by the parties to be a final embodiment of their agreement cannot be modified by evidence that adds to, varies, or contradicts the writing. This rule usually operates to prevent a party from introducing extrinsic evidence of negotiations that occurred before or while the agreement was being reduced to its final written form. * Deals with what the terms actually comprise the final, enforceable contract of the parties. * Arises when a party to a written contract wants to show that one or more other terms were preciously agreed upon, but somehow ended up not being included in the final writing that memorializes the contract. * How to determine what a term means once it has been established that the term is part of the final enforceable contract. * How the courts are to construe the language? * How much evidence should be allowed where one party asserts that the parties had a special meaning for a word that is contrary to the normal usage of that term. * UCC 2-202 * Combines the parol evidence and interpretation rules into a single section. * Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented * By course of dealing or usage of trade (Section 1-205) or by course of performance (Section 2-208); and * By evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms in the agreement.

Mitchell v. Lath * Entered into a written agreement to buy and sell property. Whether or not it is so connected to the written agreement, that it should be in the written agreement. * Test in determining Parole Evidence Rule40. The agreement must in form be a collateral one 41. The agreement may be received to vary the contract 42. It must be one that the parties would not ordinarily be expected to embody in the writing. Hatley v. Stafford * Term in the contract that is expressly contradictory. * Other courts say is that there has to be reasonable harmony. * What it means to contradict or vary terms of the contract? Whole array of decisions defining this concept of variance or contradict * Hayden v. Hadley * Flint mocks * Plaintiffs action to recover damages for nonperformance, defendants offered to show that at the time the writing was signed it was orally agreed that something else should have happened. * The evidence was excluded. * This provision, though implied by the law, is as binding as any express term of the writing; the contract is just as it would be if the writing had actually said within a reasonable time. * Restatement of Contracts, Second 209, 213, 214, 216 * Restatement of Contracts, Second 209, Integrated agreements 43. An integrated agreement is a writing or writings constituting a final expression of one or more terms of an agreement. 44. Whether there is an integrated agreement is to be determined by the court as a question preliminary to determination of a question of interpretation or to application of the parole evidence rule. 45. Where the parties reduce an agreement to a writing which in view of its completeness and specificity reasonably appears to be a complete agreement, it is taken to be an integrated agreement unless it is established by other evidence that the writing did not constitute a final expression. * Restatement of Contracts, Second 213, Effect of Integrated Agreement on Prior Agreements (Parole Evidence Rule) 46. A binding integrated agreement discharges prior agreements to the extent that is inconsistent with them. 47. A binding completely integrated agreement discharges prior agreement to the extent that they are within its scope. 48. An integrated agreement that is not binding or that is voidable and avoided does not discharge a prior agreement. But an integrated agreement, even though not binding, may be effective to render inoperative a term which would have been part of the agreement if it had not been integrated. * Restatement of Contracts, Second 214, Evidence of Prior of Contemporaneous Agreements and Negotiations * Agreements and negotiations prior to or contemporaneous

with the adoption of a writing are admissible in evidence to establish * That the writing is or is not an integrated agreement; * That the integrated agreement, if any, is completely or partially integrated; * The meaning of the writing, whether or not integrated; * Illegality, fraud, duress, mistake, lack of consideration, or other invalidating cause; * Ground for granting or denying recission, reformation, specific performance, or other remedy. * Restatement of Contracts, Second 216, Consistent Additional Terms * Evidence of a consistent additional term is admissible to supplement an integrated agreement unless the court finds that the agreement was completely integrated. * An agreement is not completely integrated if the writing omits a consistent additional agreed term which is * Agreed to for separate consideration, or * Such a term as in the circumstances might naturally be omitted from the writing. Long Island Trust Co. v. International Inst. For Packaging Educ., Ltd * Parole evidence is admissible to show that the delivery of an instrument was conditional. * Dissent: In determining whether the varying condition is precluded it is essential to determine the completeness of the written undertaking. Key to this analysis is not whether the oral precondition is explicitly contradictory of a term of the integrated written obligation, but whether in a real sense it contradicts the terms of the obligation. Looking to the terms contained in this agreement it does contradict them. * The dissent has the better view. The precondition can be admitted if it does not contradict the written terms but it does upon a plain reading of the terms. * The Fraud Exception- Tort & Contract * NY allows parole evidence in fraud, however, damages for indemnification, not loss or benefit of bargain I.e. out of pocket approach. (Minority approach) * Extrinsic fraud- outside written contract * Intrinsic fraud- inside written contract. Lipsit v. Leonard * Dispute over a promise of ownership in an employment contract. * Is parole evidence admissible to show fraud inducement by oral promises and misrepresentations? Yes. * Claims of fraud in the inducement are not barred by parole evidence but the remedies available are limited to recission or restitution. The contract itself is not enforceable. * Bank of America Nat. Trust & Sav. Assn v. Pender grass * Note: Confing Promissory Fraud * Sabo v. Delman

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Majority view READ

LaFazia v. Howe * This was a dispute over the sale of a delicatessen. * A specific disclaimer against reliance on oral agreements or statements in a contract precludes damages of recission based on oral frauds. * This is terrible law. This is probably the only area in which a party can lie and state the magic words and get away with it. Fraud vitiates all contracts and to make a distinction upon the magic words contained in a contract is just plain bad law. On close examination the merger clause and the disclaimer clause were not that specific. This language and this type of game the state legislature should step up and pass a law that forbids these types of rulings. There are no magic words in contract law that can ever excuse or justify a fraud. * Recission- A partys unilateral unmaking of a contract for a legally sufficient reason, such as the other partys material breach. Generally available as a remedy or defense for a nondefaulting party and restores the parties to their precontractual positions. * Note: Contractual Exclusion of Fraud * Breach of warranty- 2-316, disclaimer of warranties in express contract is valid * Fraud- cannot circumvent by alleging oral representations that contradict express contract for sale by sounding in tort, I.e., fraud * In TX- its all preponderance of evidence, its not all clear and convincing. Preponderance is just a little more than * Majority rule- parole evidence admissible when ambiguity exists in language of contract and court must construe; parties difference of opinion on particular language of contract does not create ambiguity. * Extrinsic evidence=parole evidence. * Rio Grande Jewlers Suply v. Data General Corp. Hoffman v. Chapman * This was a dispute over the content of a deed. * The mistake of a draftsman acting as an agent of the parties in creating a deed becomes the mistake of all the parties involved. * This is a good case because the court takes you through almost all the law underpinning the purpose and limits of equity in reformation. You should read this case and plot all of its rules and the logic behind it until you understand and can recite most of them from memory. The remedy of reformation in this instance is considered equitable and as such the parole evidence rule was not applicable. * This commentator does not like the use of the words mutual mistake or unilateral mistakes in these contexts. They are not precise enough and do not show the true nature of the events and force courts to find mutual mistakes because if it is unilateral they would not be able to do justice. * Note * Interpretation of Written Agreements * Bethlehem Steel Co. v. Turner Constr. Co. * Robert Indus., Inc. v. Spence Pacific Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging Co. * The test for the admissibility of extrinsic evidence to explain the meaning of a written instrument is whether that evidence is relevant to prove a meaning to

which the language is reasonably susceptible. This case follows the Corbin view and rejects Willistons plain meaning rule of contract interpretation. Defendant contracted to repair plaintiffs steam turbine. The parties agreement stated that defendant promised to indemnify plaintiff against all damage resulting from injury to property. The defendant damaged the plaintiffs turbine while attempting to perform the repairs, and plaintiff sued for indemnity under the contract provision. The defendant argued that the parties meant that defendant was to be responsible only for damage to the property of third parties. * Under the Williston view, the court would look to the plain meaning of the document and conclude that defendant was responsible for damage to the turbine. However, the court in Thomas Drayage concluded that such a rule ignores the true (and possibly contrary) intention of the parties. Thus, the court held that oral testimony is admissible to ascertain the intent of the parties even if the language of their written document seems clear and unambiguous. However, before looking outside the four corners of the document, the court must preliminarily determine that the document is fairly susceptible of the asserted interpretation. * UCC 2-202: The UCC allows evidence of the course of performance and of the dealings between the parties to explain a writing. * Federal Dep. Ins. Corp. v. W.R. Grace & Co. * Note * Spaulding v. Morse * Note * Restatement of Contracts, Second 212 * A question of interpretation of an integrated agreement is to be determined by the trier of fact if it depends on the credibility of extrinsic evidence or on a choice among reasonable inferences to be drawn from the extrinsic evidence. Otherwise, a question of interpretation of an integrated agreement is to be determined as a question of law. * The Parole Evidence Rule and the Statute of Frauds * READ THIS * SOMETHING ON THE EXAM WILL BE FROM THE APPENDIX FROM THE STATUTE OF FRAUDS IN THE BACK. FLINT THINKS THIS IS IMPORTANT * Postscript * In Texas, four corners then it is NOT ambiguous. If it is not ambiguous, the court is going to interpret it. He thinks context is important but not going to determine the meaning. The court would rather figure it out themselves. Standardized Forms- Whither Assent? PUBLIC POLICY * Introductory Note * Flint doesnt think public policy has it place in the law. * If you know about it and you accept it, then you are bound by it. If you do not know about it and you accept it, then you are not bound by it. But you have a duty to read. * Sharon v. City of Newton * Mundy v. Lumbermans Mut. Cas. Co. * This was a dispute over an insurance policy.

An insured is bound by the terms of a renewal insurance policy as long as he received them. * The renewal policy was clear on its face and was not burdened by fine print and inordinate obfuscation. * This case merely shows assent to the receipt of standardized forms. P was upset because he expects the world to hand hold him in every endeavor of his life and if he didnt read the renewal policy with care he should be allowed to blame the insurance company. * Weisz v. Parke-Bernet Galleries, Inc. * Art gallery auction listed all the paintings and denied all responsibility. * One thing to note, the week before the auction you are allowed to go to the gallery and examine the painting. * Can you give a forged painting back and get the money for it? * It is reasonably expected by someone who goes to one of these things, that they are bound by their own risk. They realize that the value of that painting is whether it is real or not. * Comment: Forms Contracts * You can disclaim everything. * UCC 2-302- If it is deemed to be unconscionable, you can not disclaim certain warranties. Used in consumer. Henningsen v. Bloomfield Motors, Inc. * This was a damages action for a breach of an implied warranty. * An express contract agreement printed on a standard form that is listed in fine print and adopted industry wide will not alleviate the implied warranty of merchantability. * This was a contract of adhesion. P had only one choice: Take it or leave it and there was a strong evidence of fine print in the contract. People are bound what they sign. * Today will be sued in strict liability. It was a path-breaking case because it led to strict liability. * If I can draft around it from a contractual standpoint, how does the law protect the consumer? Liability in torts. Started to require that their be a signature block next to the limitation of warranty, so that the consumer noticed it and the company would not be held liable. * Superwood Corp. v. Siempelkamp Corp. * Strict product liability developed in large part to fill gaps in the law of sales with respect to consumer purchasers Limiting the application of strict products liability to consumers actions or actions involving personal injury will allow the UCC to satisfy the needs of the commercial sector and still protect the legitimate expectation of consumers We hold that economic losses that arise out of commercial transactions, except those involving personal injury or damage to other property, are not recoverable under the tort theories of negligence or strict liability. Richards v. Richards * This was a dispute over an exculpatory contract. * An exculpatory clause that is broad and all encompassing is void per se as a matter of public policy. * Tends to allow people to act below the standard of care. Will not drive extra-carefully.

First time in this state exculpatory contract held invalid in a non-consumer transaction. * The reasoning by this court is couched in terms of analysis and weight to all three issues but is as stated a per se rule if the clause is too broad and all encompassing. The fact that the clause was mislabeled and there was no room for negotiation are just added factors of no meaning full relevance that the court used in order to avoid having to in fact state a per se rule against broad and encompassing clauses but would allow them to find it in every instance wherein such a clause was used. * Flint believe dissent is correct, look up dissent. Broemmer v. Abortion Services of Phoenix * This was a dispute over an arbitration clause. * Before a contract of adhesion is declared unenforceable must there be a determination of the reasonable expectations of the adhering party and whether the contract is unconscionable but if the contract is determined to fall outside of the reasonable expectations the court does not need to examine unconscionability. * Restatement of Contracts, Second 211 49. Except as stated in subsection (3), where a party to an agreement signs or otherwise manifests assent to a writing and has reason to believe that like writings are regularly used to embody terms of agreements of the same type, he adopts the writing as an integrated agreement with respect to the terms included in the writing. 50. Such a writing is interpreted wherever reasonable as treating alike all those similarly situated, without regard to their knowledge or understanding of the standard terms of the writing. 51. Where the other party has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term, the term is not part of the agreement. * Bizarre * Oppressive * No opportunity to read * Illegible * Hidden * Comment: Section 211 and Reasonable Expectations * Plain Language Laws