282Ch. 9 - STATUTE OF FRA UDSFigure 9-1The Statute of Frauds (S/F)This chart will help you determine whether the contract (K) In question falls within the Statute, i.e., whether it must be in writing to be enforceable. This chart does not cover the Marriage provision, which is covered at E HI.~~Start hereDoes the K involve aIs the other personWas the promise by Apromise by A 10 pay(B) directly liable 10 Yes'madedirectlytothe r----Yesthe debt (or makeYe,-> the promisee for thecreditor?good the default} ofdebt or another (8)?performance?'I.NoSuretyshIpWas the promisor's (A's) mainProvisionhe K fallspurpose in making theThe suretyshipwithIn thepromise to further A's ownprovision does notsuretyshipInterests (the ~Mainapply 10A's promise.Pfovision andPurpose" rule)?Skip ahead to the One-must be InNoYear Provision on thewriting.Inext page.'---A--------Ye.'-----~jDoes the K involve aHas the vendor made theHas the vendee detrimentally relied on promise to transfer anYescontracted-forr--No- .. the K in a way that is "unequivocallyinterest in land?conveyance?referable" to the K (e.g., she moved in and made big lmprovements)?II.Land KYes--------Yes"-NoProvisionhe K is removeBul check thatfrom the S/F; theThe K)sK doesn't fallThe K fallsNovendor mayremoved fromw/in the One-within the SIF, recover thethe Land K---------------.Yearand must be Inpurchase price.Provision.Provisionwriting.(next page)Does the K involve theIs the K primarily for theAre the goods to be sale of goods with a totalK price of $500 or more?Yesprovision of servicesspecially manufactured,(e.g., construction K)?Nowhere seller has begunproduction or committed toNoprocure them?YesYesNoIII.he K does not fall withinHas the defendantSale of Goodsthe UCC's sale-of-gOOdsS/FJO-----Ye.-1 admitted in pleadings orProvisionprovision. Skip ahead to thesworn testimony that the KOne-vaar Provision (lop offor sale exists?next page).,esNoIf D is the buyer, has D See footnotesBut check that Khe K falls withineither paid for the goodS, on next page.doesn't faU w/in thethe S/F andor received andNo orOne-Year Provisionmust be in-NfAaccepted them? (next page)writing.

CONTRACT FOR THE SALE OF GOODS283Figure 9-1The Statute of Frauds (cont.)Continued fromprevlo~s pageWill It be ImpossibleMost courts holdto fUlly perform the KHas one side fullythat the K is now within 1 year from theYes-performed the K?vesremoved from theday It was enteredone-year provisionInto?of the S/F.4!NoNo!!Contlnue!The K falls witllinIV.AnalysisiThe K is not withInthe S/F and must One YearProvisionbefore arswenng!the SIF.be in writing.,,iII...---.... --.... -----__------lri-----Analyze the possibility that Analyze the possibility of aone party may have the party's death or disability.2right to termInate the K.3,- ..!._. ContinueAnalysis .. __.IiNotes to Figure 9-11Example where death means discharge (so the promiseThe answer will b .. ""surety" who' . e no where It's only theis wIthin the S/F and must be in writing): A employs B for and sa..OS liable Example: A telephones 8C nev~s~ dsend merchandiseto C; I'll pay." Si~cea term of 4 years.3 Whether a party's exercise of the right to terminate theB Theref~r er~~ the m~rchandlse,C isn't hable tocontract within the first year should be viewed as a form Surety,and ~~ , s ~romlse Isn't a true promise ofof "performance" (in which case the contract is not withinnt WIthin the Suretyship provisionOependlng.the t-year provision and need not be in writing) or as a disabIlity woo~~nterpretatlon, a party's death orform of "discharge" (with the opposite result) is"~"u either make performancedetermined by looking to whether the contract has fulfilled COntractWOwlr~hlnone year (in which case theits principal purpose. See E V(B)(2)(b).Simply"dlsc~a no~ be Within the Statute) or would~:A 5.year contract lets either party terminate byCOntractWO Idrge the contract (in which case thegiving 30 days prior notice at any time. This would likely decide wh ~. stili be Within the Statute). Tobe found not within the Statute: the giving of notice in the Dnnci~cl interpretationis correct, ask whetherorder to terminate would be a form of performance- (the fUlfilled eva Dfyroose of the contract would becontract would have fulfilled its main purpose of lasting Withinthe en I a party died or became disableduntil proper termination), and that notice could happenPOSSible:r~~r If so, complete performance ISwithin the first year.~mIIn one year. See E V(B)(2).4 Therefore, the party who hasn't fully perfonned yet must Q.rfQrmanceatpeswheredh!dIsability. means full~rry out the performance that she .orallya9!eed to make.F): (1) A r ~ (so the contract IS not Within the 51That's true even if the fully-perfonnlng party sdies, confr~:~ses to employ 8 for 8's lifetime (if 8performance was not complete until more than one yearto B andIS fUlfilled); (2) A sells her businessafter the contract was made. A dies,.' shepromises'no t t0 compete for 5 years (If.Won t be competing).

242Cb.7 -CONDITIONS, BREACH, AND OTHER ASPECTS OF PERFORMANCEIn other words, a party who has second thought about his deal, but not based on anynew information or developments, may not use the demand for a urances as a meansof rewriting the contract.a. Worry about buyer's credit: For instance, a eller who has econd thoughts about the wisdom of agreeing to ship on open account will be permitted to use 2609 ifhe receives Ilew information indicating the buyer's financial weakne . But the seller will not be permitted to use the provi ion if the buyer' condition remains the sameas it was at the time of tbe contract (even if that condition is 0 weak that a reasonable person in seller's position would not have agreed to ship on open account in the first place). See 2609, Comment I.4. Consequence of refusal to give assurances: If such a request for a surance is given,tbe party receiving the request must either satisfy it or be held to have repudiated the contract. 2-609(4) provides that "after receipt of a justified demand failure to provide withina reasonable time not exceeding thirty days such assurance of due performance as is ade- quate under the circumstances of the particular ca e is a repudiation of the contract."a.Application:Thus in the four situations listed on p. 241 above,the seller, buyer, dealer and buyer, respectively, would have the right to demand reasonableassurances from the other party. If the other party did not respond with adequateassurances within at most thirty days (or, in a non-UCC situation,within "a reasonable time"> Rest. 2d, 251(2)), she would be held to haverepudiatedthe contract, and theaggrieved party would have the right to cancel the contract, refuse to perform, andsue for breach.5. What constitutes adequate assurance: What constitutes "adequate assurance" of due perfo~ance IS,according to 2-609(2), to be determined "according to commercial stan- dards, at least where the contract is between merchants.Example: Seller contracts to deliver certain precisely-machined parts to Buyer. Buyer then learns that Se IIer has made deliveries"of comparable parts to 0ther buyers recently, and those other deliveries have been defective, Buyer now demands reason-able assurances that Seller will deliver conforming parts, If Seller is a reputable,mer' chant, and there is no id' ods 10 the,eVI ence that he has frequentlydelivered defectivegohpast, hISstatement t B h' e thatt eBouyert at he is aware of the recent defectsand IS surif thuyer's delivery will not be sidefectivewill be'e assurancButI '.Ie Similarlysufficient,beere ISeVidence tbat Seller is a known "cornercutter," verbal guaranteeswill not enough, and Seller willb b'C nunent 4 to 2-609,pro a ly have to post a performance bond, See 0a. Demand for mo th. ecari!)'must be careful ~:st han contract allows: A party wbo has grounds for I~;,eCOWtract ca/lsfi C IS demand for assurances insists on much more than nlfllct calls for ino~ omment 2 to 2-610 states tbat a demand "for more than th~c:ever,when under a e way of counts Cis not itself a repu d' t' n ... ' flOexceptf ,"r-per1onnanceia 10on conditions air reading It arnounts to a statementof intention not t0 perform hi hw IC go beyond the contract, it becomes a repudIation,""

REPUDIATION AND PROSPECTIVE INABILITY TO PERFORM243Table7-1ISSUES CHECKLIST: Conditionsand BreachUse this checklistto help you spot issues in analyzing the effects of (I) tbe non-occurrenceofa condition, (2) a breach, and (3) a prospective inability to perform.IssueRule or ReeommendationExamples[II Daes the fact patternIn deciding, consider these rules: Example of Rule 2: Insurer writes fire cover- involve a condition ratherRule 1: Intent of the parties con- age on Owner's house. Policy says that Owner than (or in addition to) atrois."shall give notice of fire within 3 days." Courtpromise?will probably say that this is a promise byRule 2: If fulfillment is withinOwner, but not a condition on Insurer's duty to tbe obligee'scontrol, an interpre-pay. So if Owner gives notice on Day 5 after tation that makes the matter athe fire, Insurer will still have to pay (but can promise by the obligee, not arecover any damages actually caused by the condition on the obligor's duty,late notice).is preferred.12] If there is a condition,Rule: An express condition isExample afConstructiveCondition:Bis it express or construe-onc agreed to (perhaps implic-agrees to buy S's borne. Tbe contract says tbat tive?illy) by tbe parties. A construe-(I) By April I, S will present proof of market- tive conditionis imposed by tbeable title; and (2) Closing will occur on Aprilcourt for fairness.15. Even iftbe parties don't say tbat S's proof of marketable title is a condition to B's duty toclose, the court will impose a constructive condition making B's duty to close conditional on S's having presented proof of marketable title. (See Rule 3 in box [4].)13] Iftbe conditionisRule 1: Yes, generally -- strictExampleofRuIe1: For $100, S gives B an express, does its non-occur-compliance with express condi-option to buy S's bouse, option to be exerei ed rence relieve the obligor oftions is ordinarilyrequired.by B's depositiog tbe full contract price IIIescrow by April 15, "time being oftbethe duty to perform?Rule 2: But courts look for rea-essence." Court will treat B's deposit by tbesons to "excuse" the non-occur- April 15th date as an express condition on S's renee of the condition, to avoid duty to convey; therefore, strict complia.n~e is forfeiture.required, and if 8 is a day late, the condl~10nwill be deemed to have failed and S won t have to honor the option.E ample of Rules I &2: Same facts as [2J (S [4] If the cnnditionis COl/-Rule 1: Strict compliaoce is notm~st give proof of marketable title by April Sfructive,does its DOD-usually required.I). S presents proof of marketabletitle by occurrence relieve the obli-Rule 2: Substantial perfor-A ril 3. Since timely proof I a constructive zor oftbe duty to perform?malice normally is required.(n~t strict) condition on B's duty to c1os~, S'sRule 3: In a bilateral contract,substantial performance is enough to satisfy each party's substantial perfor- the condition, and B must close by tbe 15th. mance of his promise is gener-ally a constructivecooditinn of the other party's duty to perform-a subsequently-duepromise.

244Ch.7 - CONDfTIONS, BREACH, AND OTHER ASPECTS OF PERFORMANCETable 7-( (cont.)IssueRule or RecommendationExamples15J If both parties oweRule I: Parties' intent counts.Example of Rule 2: Contractor contractsto future performances, what'sRule 2: Where one party's per-paint 0' house for $1 OK. ontract is silent the order in which the par-formance requires time, and theabout when payment is due. Contractor ties' performances are due?other's doesn't, probably thedemands 1/2 payment when house is 1/2performance requiring time mustpainted. Since painting takes time, and payingoccur first.doe n't, court will probably say that house must be fully painted before any paymentisRule 3: If performances calldue.occur simultaneously, probablythey must do so (i.e., they areExample of Rule 3: B contracts to buyS'scar concurrent conditions). So eachon April 15 for $1OK. The K says nothing party's duty of performance isabout when payment is due. Payment and conditioned on the other's ten-delivery of the car (and title to it) are concur- dering performance at the samerent conditions. If on the 15th S doesn't tender time.delivery (i.e., show himself presently ableandwilling to deliver immrnediate title and pos-session), B doesn't have to pay the money. Conversely, if B doesn't tender the money (show it's available immediately), S WOD'tbe in breach for failing to tender delivery.161 Is the contractRule: If the contract can beExample:Painter agrees to paint three identi-divisible?divided up into correspondingcal statues on Owner's front lawn. Contractpairs of part perfonnanees, suchlists a price of $1,000 for each ofthc3 paint that one side of each pair is prop-jobs. Since each statute's painting and thepay- erly regarded as an agreed-uponment of $1,000 are agreed equivalents. con- equivalent of the other part, thentract is divisible into 3 parts, one for eachthe contract is divisible.statue's painting. (See [7] for how this mat-tcrs.)171 If the contract is divisi-ble, did P substaflliailyper-Rule: If yes, P can recover atExample:Same facts as Example in [6].form any part?the c~ntractrate for that part,Painter paints the first statue, then abandons even if P materially breached allthe job. Since the K was divisible (i.e.,eachother parts.statute's painting and the payment nf$I,Ooo were agreed equivalents),-can recoverPalUter$I,OOO for the first statue, even though he ut didn't substantially perform the whole J(. ~ Owner can counterclaim for damages for e failure to paint the 2d and 3d statues.) ____[81 Was the non-occur-8's dutyrence of the conditionRule: If obligor's cOoperalioll isExample: B agrees to buy S's house,excusetf!needed for the condition tocon ditiitioned on B's getttng.a mortgage corn-ofOccur,and ohligor doesn't coop-mitment on specified terms within 30 daYSeerate, condition's non-ocen-,..I'for a tJlOrtgag.sigmng. B never even app resthe renee will be excused.Since B's cooperation was necessary for per-condition to be satisfied, B's failure to cO~i_ ate excuses the non-occurrence afthe COO tion, and S must close even without themortgage commitment.

REPUDIATION AND PROSPECTJVE INABILITY TO PERFORM245Table 7-1 (eont.)IssueRule or RecommendationExamples191 Did the beneficiary ofRule: If obligor waived the ben-Example: S contracts to ship 10 widgets to B, thecondition (the obligor)efit of the condition, the condi-delivery to occur by May I; payment due from waivethe benefit of thattion's failure to occur will beB 30 days after delivery. On April 25, S asks condition?excused. (But obligor mayfor an extra 15 days to deliver. B agrees. Sretract the waiver ifthere's beendelivers on May 14. B must pay, because Bno reliance by tbe obligee.)waived the benefit of the condition (a con-structive condition that delivery occur by May I). (But if, after giving the 15 day extension, B called back within one hour to retract the extension, the retraction would be effective, if S hadn't yet relied on the extension.)1101 Has a party (A) indi-Rule 1: B may request reason-Example of Rules 1 and 2: Star agrees to per- catedthat he will likely beable assurances of A's perfor-form 6 nights per week for I month in Pro- unable or unwilling to per-mance, and may suspend hisducer's upcoming musical. performances to forma not-yet-due dutyown performance until these arestart May 1. Producer is to make an advance owedto B when the timereceived.salary payment of$3K to Star on April 25. On comes?Rule 2: If A does not furnish theApril 20, Producer learns that Star has justrequested assurances within asigned with someone else to appear nightly reasonable time, B may treat thebeginning May I. (I) Since Producer has rea- lack of assurances as a repudia-sonable grounds for insecuriry about whether tion, and cancel the contract +Star will perform, Producer can demand 8SSur- sue for damages.ances, and suspend payment of the $3Kadvance until these are received. (2) If Stardoes not promptly(and reasonably) assure Producer that she call and will perform 81the beginning of the May I run, Producer can can- eel the agreemeot and sign someone else for the role (plus recover breach damages).E xamp Ie: Sarne fact s as . the above Exampleon P. 242. If Buyer's requestfor assur- rae1D.ance states, "We demandthat you post a $100,000 performance bond in~~mll1fying us against.any i:tuture deftive deIiveries," this might well be held to be a statement . of.etec,that go beyond the contract" an d mig h Iditiintentionnot to performexcept on con I lOns.'thereforebe a repudiation,entitling Seller to cancel his performance.6 Also applicablewhereperformancehas b egun. . A party's "right to adequateassurancec:tbe contract has not yet begun, bUI of performance"exists not only where penormanceon.d btially. and defectively, made. The mechanicsalso whereperformancehas alrea y eenpar,..'where perfomlancetS SItII entirelyexecutory.o f 2-609 apply in exactlythe same way as

c182Ch.6 -PAROLEVIDENCE AND INTERPRETATIONFigure 6-1The Parol EvidenceRuleIUse this chart to see whether evidence can be introduced to supplement or contradict a written contract. If the evidence is being used to Interpret the meanIng of a term used In the contract, the parolIevidence rule does not apply (as the chart shows),The evidence is treated as if It were part of the main written K.Start here'---i'---"'"IYe.Does the evidence inIs there aIs the evidence Inquestion involve anwrittenquestion contained Inagreement made contract (K)?Yesa side writing that,..........--NOsubsequent to thewas signedwritten K?contemporaneously with the mern written K?NoNoDid the parties intend thewritten K to be the finalYesr----''---,expressionof theirIIs the evidenceagreement (te., anintended solely to"integration")?NoYe.explain or Interpret aterm In the writing?No or->\e.NoNIAYesYesIs the evidenceintended to prove fraud. illegality,If:he evidence is of a prior oral orduress, mistake, lackIs the evidenceof consideration, or written agreement (or simultaneousIntended 10 prove theNoother facts making theoral agreement), is thai atheragreement a collateral one that is (1)Noexistence of aK void or voidable?condition (either toYessupported by separate considerationthe K's existence or to and (2) not inconsistent with the Iwriting?a party's duty)?Rules: (1) Evidence of prior oral ~r written (ar contemporaneousora)Is the integrationagreements or negotiations that."total" (intended tocontradictany term in the writing ISinclude all details") or r---IPartlal~not admissible.(2) However, such "partial"?evidence that merely supple~ents(doesn't contradict)the partial! ~integration is admissible.(True forContinueTotalUCC and non~UCC.) Analysis~!RUle: Evidence of prior oralor written (orN.ote that the judge (not thecontemporaneous oral) JUry) decides whether theagreements or negotiationsIntegration is total or partial.are not admissible to either supplement or contradict the writing. (True for UCCandnon-UCC.)

SITUATIONS IN WHICH THE PAROL EVIDENCE RULE DOES NOT APPLY183Example: Same facts as above example. Assume the writing has a merger clause, say- ing that there are no other agreements between the parties regarding the automobile transaction. Suppose further that the writing says, "B shall have no right to keep the car in A's garage at any time." B will not be allowed to prove the alleged oral agree- ment, since that agreement is directly inconsistent with the writing, and the writing is a total integration.D. Subsequent transactions: As we said earlier, the parol evidence rule never bars evidence that after the signing of the writing, the parties orally or in writing agreed to modify it or rescind it. In other words, the parol evidence rule bars only evidence of transactions that occurred prior to (or in some cases contemporaneously with - supra, p. J 73), the writing.E. Interpretation: The parol evidence rule does not bar extrinsic evidence when offered to aid in the interpretation to be given to an ambiguous term of the contract. This rule is discussed extensively in the next section, "Interpretation," beginning on p. 184 infra.Quiz Yourself onWHEN THE PAROL EVIDENCE RULE DOES NOT APPLY49. Enrico Fermi patents a new invention: a solar-powered flashlight, He enters into a written agreementto sell the patent to Alhert Einstein, The parties orally agree that the contractwill not become effectiveuntil the patent is reviewed and approved by a patent expert, Moe Howard, of the patent law firm Larry, Moe, and Curly Joe, P.C. Howard reviews the patent and tells Einstein, "It's bogus, Only a stooge would buy this." Fermi sues Einstein, seeking to enforce the contract. Einstein wants to introduce evidence of tbeoral condition. Will the parol evidence rule prevent him from doing so?SO. Gary Gullible enters into a contract with Sam Slick, owner of the "Betterthan New" used car lot, for the purchase of a used car. While examining the car, Gary asks Sam if it had ever been in any accidents, Sam says, "Absolutely not. This car is in the same condition it was in the day it left the assembly line." On thesales contract, Gary is required to initial a clause stating as follows:"Buyer has had an opportunity to inspect this vehicle and to satisfyhimselfof its condition prior to the purchase, Buyer accepts this vehicle in its current condition, Buyeris not relying in any wayan any oral representations concerning the vehicle's condition that may have been made by Seller."A few months later, during a routine service, a mechanic points out someobvious repair work i~dicating thh'"ime in tht Gary ues to have the contract rescinded, Ate car as been in a major accident sometllne ine pas,strial, may Gary enter evidence that Sam knowinglylied about the accidentissue?Answers49. No. The parol evidence rule only operates when a contract is effictive. This mean that anything showing it's not effective _ fraud, a lack of consideration, duress, mistake, or, as here, failure of a conditionto the Contract's effectiveness _ is admissible, Here, the allegation is that the agreemen~ IS only binding ,If Howard approves the patent. If true, this would be a condition to the contract's effectIveness, so Einsteincan intrOduce evidence to prove the condition was agreed upon,SO. Yes Eh"th Bssurned the risk of the car's condition and that eller. ven t ough the disclaimer statesat uyer a.'th Sduri mad'd ce evidence of his conversation WIam unnge no oral representations, Gary will be able to intro u

Gh.4 _ PROMISES BINDING WITHOUT CONSlDERA TION146entitled to recover the quite fixed, definite sum that it turned down, not the "profits" that it would have made from a continuation of the P-D relationship.2. Other theories of recovery: Although reliance-baed damageare the standard in prom- issory estoppel cases, there are other theories of recoverywhieh will in orne situationsbeappropriate.a. Restitution: The plaintiff may be able to argue that he ha conferred something.oj value on the defendant, for which the latter should be required to pay. Recovery isthus based on restitution,or prevention of unjust enrichment,Example: D, a property owner, asks P, a contractor,to help him plan for puttingupa building on D's land. P makes trips to the property,does a survey,gets data foran application to a government agency, all in the expectationof being awarded a contract for the work. D then gives the work to anothercontractor, and P sues for the reason- able value of the work he did.Held, P may recover the reasonable value of his services. Hill v. Waxberg, 237F.2d 936 (9th Cir. 1956).b. Expectation measure:In some promissoryestoppel cases, the traditional contract measure of damages, expectation damages, will be appropriate.The expectation mea- sure places the plaintiff in the position be would have been in had the contract (orhere, promise) been fulfilled. Typically, this meanstbat the plaintiffis awarded theprofits he woul have made bad the promise been kept. (See infra, p. 308.).Limit d .. nonI.mu e view on lost profits:However,as in the ordinarycontract sltua .'courts will not award lost profits wherethese are too speculativeor II/leer/olll.(See irfra, p. 313.)Example: In the franchise negotiation contextdiscussedabove,it will usuallybe the case that even bad the promised franchisebeen awardedit would havebeentenninable at some po mt.by the franchisor:thereforea court' awar di109damages for failure t."fits tothe.0 grant a promised franchisemay limit recoveryfor lost properiod up until the earliest time the francbisor could have terminated.ii, Lack of go d f . hfi 'tl thisfael.0aith:If the promisor is shown to have acted in bad or t,will weigh in favor 0f an award of expectation rather than rehance. damages.seeRest. 2d, 90, Illustr. 9.Example' In H. .a:t thetime.. otnnan v. Red Owl supra p 145 suppose that D knew a ded It made the prorni f fr .',.,be aw3f . Thi ,se 0 a anchise to P that the franchise would never ~;.bth IStact would hav e "P s chancesof.some pro!its he u",reli-Improvedrecovennghave made from operating of the supermarket(in addition to or instead oft e.ance expenditures th at he . fact recovered)..toM. Promissory estoppel under th....at expliCItly recognized in the uee He vee. The doctrineof promissoryestoppelISn f thesaleof goods may non th \'owever, most courts have held that a party to a contract ~~sp26. Furthennorein a e e ess mvoke the d.. appropriatecircumstances.See W",,f'.octnne inh caSeoan offeror,ne SItuatIon which' IS.handled by promissoryes toppel'.ted Coe who re kes hisometimeshevo es his offer afterer iinducing.the offeree to reasonablyre IY on It, t

PROMiSSORY ESTOPPEL147Figure 4-1PromisesBinding Without ConsiderationlIn gene~promise requires consideration in order to be binding. There are several exceptions to thisI rule, however. Use the chart below to see whether the facts fall within one of the exceptions, makingthe promise binding without consideration.Has a partypromised to paya past debt thatOlder cases hold that theStart is no longerMost courts willpromise is automaticallylegallyenforce the promiseunenforceable, but modernhere... enforceable,-Yeseven though there Isdecisions often ignore thedue to theno consideration for"requested in advance" statute ofit.factor.limitations or to a bankruptcy discharge?/NoContinue Analysis"'"Did that party requestHas a party promisedin advancethatthe ~Yes-'"Did the promisor lntend the topayforservices -Yes-toservices beservices as a gift? already received?performed?"-I___---I' YesNoNo.,The promise isMost modern courtsnot enforceable,will enforce the promiseHas a party reaffirmedsince it's aas needed to prevent a promise to perform aThis promise ispromise to makeinjustice (especially voidableduty (e.g., r-Yesenforceable withouta gift.where the benefit isconsideration.substantial and costly toduress, infancy)?render).INoHas a party made aHas a party made anHas a party made awritten promise10irrevocableoffer in apromise on which the........make a charitablesigned writing that: (1)Has a party made apromisee foreseeablyl--Nocontribution?recites a purportedwritten guaranty to vNo .....and reasonably~onsideratlon for the f-No-to> pay another person'srelied to herIrrevocability; and (2)already-existingdebtdetriment?proposes a fairto a third person?exchange within aIMost courts willreasonable time?Yesenforce theNo..Ves-,Ipromise, evenVeswithout substantialreliance by the charity.The offer isThe promise can beIrrevocable for theMost courts will enforceenforced to the extent11m e stated, even if thethe guaranty if the writingnecessary to avoid~~ed considerationrecites a purportedinjustice, under the 01' Irrevocability wasconsideration to thedoctrine of Promissory never In fact paid.guarantor, even if theEstoppel.nsideratlon wasn't paid

106Ch.3 -CONSIDERATIONFigure 3-1Contract Modifications and Settlements, and the Pre-Existing Duty RuleThe main use of this chart is when the parties to a contract or dispute have purported 10 modify the contract or settle the dispute; the chart will help you determine whether there's consideration for the~~-~modification or settlementStartpurported 10debtor who has~'~1~Have the partiesIs the promisee aIs the promisee a claim-holder whoheremodify aThis chart doespromised 10 payB (Debtor'shas promised notGo 10 contract orNo not apply.part or all of aYes~ Promises)to bring suit, inParteYes"settle adebt that, at leaston nextreturn for theon nextdispute?arguably, hepagepotentialpagealready owed?defendant'spromise to pay toV'sNo settle the claim?L..-J,-------No,--_Part A(Under the uee, IhePre-Existing Duty Problems notcontract modificationinvolving a Debtor or Claimantneeds no consideration to be binding. So even ifA is promising to do onlywhat he's already requiredHas the promisee10 do, in return for a(A) arguablyThis chartmodification of B's duties promised merely toNodoes notDoes the casethat's favorable to A, do what he wasapply.involve the salethere's no considerationalready legallyof goods?obligated to do? r------ves,__ -erL-_",.-__problem. (But themodification must be made~----N/In good faith.)/0/This is the ~3-party Pre-Existing Duty" scenario.Is the promisee (A) nowMost courts hold Ihat A'spromise to C to perform aasking Ihe person 10 Whomh~ a.lready owed the pre.duty thai A already owes B No- exrstlnq duty (B)l- Is B's modified promise a response satisfies the detrimentto modifyYes to new circumstances that were requirement (so that C'sS's promise in a way thatnot anticipated by the parties at the counter-promise 10 A issolely benefits A (the "2-partytime of the original contract?enforceable),Pre-Existing Duly- scenario)?IVesA's new promiseatlsfles the detrimenIs the proposedelement, so B's COUnter-agreement fair andpromise of modificationYesequitable to B in light ofNois supported bythe new circumstances?A has not givenconsideration and is considerationfor B'senforceable.promise ofmodification, so B is-Yesnot bound to honorHas A promised to dothe modification.anything extra ordifferent(no matter how small) compared to her original obligation?

THE PRE-EXlSTlNG DUTY RULE107Figure 3-1Contract Modificationsand Settlements, and the Pre-ExistingDuty Rule (cont.)Part BDebtor'sPromise of Payment in Return for Concession from CreditorYou should be here only if thecase involves a debtor'spaymentThe creditor's cashing of theof (or promise to pay) all or part ofHas the debtor tendered acheck will generally be treated a possibly-owed debt, incheck in partial payment,as an enforceabledischargeexchange for some promise of amarked "payment in full,"of any balance owed, even if concession by the credltcrwhich the creditor has thenthe creditor writes 'under (e.g., more time to pay, orcashed?protest" or the like on thepromise 10 take a lesser amount).check. (Uee 3-311.)Nohe debtor's payment 0promise to pay (even aIs there a bona fidelesser amount than claimed)dispute aboutconstitutes a detriment toeither: (1) the debt'shim, so the creditor's returnvalidity or (2) thepromise to lake less moneyamount owed?or give more time ise debtor's payment orenforceable./promise to pay probablyYesYesfalls withinNo''___the pre-existingduty rule (he'sonly promising to make aHas the debtorHas the debtorpayment he already owes), so thegiven any newpromised to payNocreditor's counter-promiseof asecurity to theInterest inconcession is probablycreditor in return forexchange for theunenforceablefor lack of the creditor'screditor's grant ofconsideration.concession?extra time?Part CSettlements& Promises Not to SueYou should be here only if the case involves a claim-holder who has promisedDoes the claim-holder have(orally or in writing) not to _____a bona fide (even if incorrect) bring suit on her claim, in----..Is the claim the claim-holderNsubjective belief that the return for the prospectiveis giving up a valid one?claim is valid?defendant'spromise to make some payment on theclaim.Yes'--------.J YesNo/Most (but not aU)The claim-holder'sHas the claim-courts hold that the forbearance from suit isThe claim-holder'sholder signed aI-Yesclaim-holder'sforbearancefrom suit iswritten releaseforbearance from suit Isd~~nSideratlon, making theprobably not consideration,of the claim?consideration,making the eMant's return promise ofmaking the defendant'sdefendant's return promisepayment enforceable.retum promise of paymentof payment enforceable.unenforceablefor lack of consideration.

64Ch.2 - OFFERAND ACCEPTANCEFigure 2-2Mailbox Rule: Determining~hen an The Acceptance BecomesEffectiveThe mailbox ruledoesAcceptancenot apply.r,But the offer winbeIs the offer for a~NoContinuetemporarilyStart here ---.bilateral contract?effective when"AnalysisIrrevocable onceperformance Isthe offeree startscomprete.10 pertoon.VesTacceptance been I-- NAcceptance),Has the offeree'snot yetdispatched?effective.IVesIMost courts hold that, theWas the manner ofacceptance Is effective acceptanceupon dispatch only if it is negligent (e.g.,yes-... ...actually received misaddressed)?without delay.Otherwise. It Is onlyeffective upon receipt.No(Conllnue analysis.)'------~Acceptance is:,effective uponr\,dispatch, underNHas the offeree atsoContinue ~naIYSIS\,the mailbox rule.sent a rejection?Ir:Has theVesofferee alsoEnd of inquiry. GoI,;sent af-- Noback to prior box.The acceptance isyYerejection?effective on receipt jfand only if it arrivesWas the rejection before the rejectionSent._ sent before or after arrives. (If rejectionBeforethe accePtance was r-Afterarrives first, rejectionsent?Sent_The acceptancecontrols.)controls, and Iseffective upon dispatch, even If received after the rejection.opotomac,Idif havethe had a telegram, "I revoke my offer." Potomac would have made a profit of$75on the job (It woupaintrecover.to spend $250 more in labor cbarges to finish the job). The red paint,IS. valueless toac?won't be used on thisjob, Is there a contract in force, and if so, how much may Pntornth houseaDdbaSIC facts. Now however, assume that Washington waits unti0 0s "I revoke,(B) Same..'I P t mac arnv, es ate "Isthe respends one day sanding it (a necessary part of the painting job); Washingtontben say ,a Contract in force, and if so, bow much may Potomac recover?!fer to sell14, JeSSIca'Rabbit.,. s MlCrobrewery sends the following letter to ToontownTavern. . "We herebyh from0the dateof you 50 kegs of beer at a pnce. of $40 per keg, Tbis offer shall remain. open for 2 mont s

WHEN ACCEPTANCEBECOMES EFFECTIVE65receipt." Toontown does not give or promise anything of value in return for this offer. After six weeks, Jessica Rabbit's Microbrewery sends another letter that says, "As we have not heard from you in all this ilfe, we revoke our offer." A week later, Toontown Tavern faxes a letter to the Microbrewery saying, "We accept your offer of 50 kegs at $40 per keg." Is there a contract?15. The Founding Fathers select Ben Franklin to choose a king for the newly-fonned United States. He sends an offer in the mail to Prince Henry of Prussia,(A) Assume for this part that a few days after the offer is sent by Ben, the Founding Fathers decide that having an American king isn't such a hot idea after all. They therefore tell Ben to send a revocation ofthe offer. Ben mails the revocation on July 4. Prince Henry mails an acceptance on July 6. The Prince receives the revocation on July 7. Ben receives the acceptance on July 8. Is there a contract?(B) Assume for this part that Ben never sends a revocation. The Prince mails an acceptance on July 4 (while the offer is still open). He then changes his mind, and mails a rejection on July 7. Due to the vaga- ries of the Pony Express, the rejection arrives at Ben's house on July 10, and the acceptance arrives onJuly II. Is there a contract?(C) Same basic facts as (B). Now, however, assume that the Prince mails a rejection on July 4, then changes his mind and mails an acceptance on July 6. The rejection arrives on July 8, and the acceptancearrives on July 10. Is there a contract?16. Selznick, a film producer who is looking for a female lead in his new Civil War picture, mails an offer for the role to Esther Plotkin. Plotkin is overjoyed, and immediately mails back her acceptance, properly addressed. The postal service loses the letter, and, alas, Selznick never receives it. Is there a contract?Answers12. No. An offer is terminated when the offeree learns of an act by the offeror that is inconsistent with the offer. Selling the subject of the offer to someone else would certainly qualify as a revocation (though merely looking for other potential buyers would not). Consequently, Chris' offer was revoked at the moment Leif learned of the sale. Therefore, there was no live offer for Leifto accept as of the moment hesent his "acceptance" telegram, and that telegram had no effect.13. (A) No conventional contract is in force, but potomac can recover its $500 reliance damages, since this sum will be needed to avoid injustice. First, notice that the offer by Washington was for a unilateral contract (since it was to be accepted by Potomac's perfonnance, not by its promising to perfonn.) UnderRest. 45, once Potomac started to actually perfonn on a umilateral contract, it would have had a tempo- rary option to enter into a fully-binding contract (see part (B) below). But the buymg of the red paint would probably be held to be a mere preparation to perform, not the conunencement of perfonnance; 10that case, 45 wouldn't apply. However, under Rest. 2d 87(2), "an offer which the offeror should rea-sonably expect to induce action ... of substantial character on the part of the offeree before acceptance and which does induce such action...is binding as an option contract to the extent necessary to aVOId injustice." This would apply here. Since giving potomac the $500 it spent on paint would be enough to "avoid injustice,"this is all the court will do _ potomac won't be entitled to true enforcement of the con-tract (i.e., to recover the $750 it profit it would have made on top of the $500 It spent).(B) Yes; Potomaccan recover $1250. Once the offeree under an offer for a unilateral cont~c~ com- me..tr ct i e it becomes temporarily irrevo-nces actual performance,the offer gives nse to an option con a , .. ,'.cable for the time needed for the offeree to promptly performancein accordance WIth the terms of Ole

eh.2 - OFFER A D AEPTANE50ii, Mere rumor not sufficient:imilarly,if the offereemerelyhears r/llllors thai tbe offeror has or will take a tion inconi tent with the offer, and she reasonahly disbelieves the rumor, there i no r vati n, e en if the rumorturns out tohale been true. Rest. 2d, 43,omment d.iii. Act not learned of by offeree:If thefTer r takean act inconsistent withme outstanding offer (a by selling land tthird pers n) but the offeree doesnol learn of the inconsi tent act, hi power of ac cptancc i not revoked. So theotTer~ can then accept the contract (as umingher power of acceptancehasn't tenninaled for some other reason, such as lap cf time), and if the offeror does not perfonn, sue him for breach.Note: Not all offers are revocable.di cuss ion of varioukinds of irrevocable offers is given infra, p. 52.5. Revocation of general offer:uppose that an offcr ha been made by lIewspaperadvel' tisement or other general public notice. If so, it may be revokedby a similar generalnotice (e.g., publication in the same newspaper a the originaloffer).a.Offeree does not learn of revocation:ucha revocationby generalnotice will be effective even if one of the potential offereedoes not learn about it and actsinreh ance on the offer (e.g., by capturing a criminalto get a reward.)Rest. 2d, 46.H. Death or incapacity of offeroror offeree:If eitherthe offereeor the offeror dies,onfeither loses the legal capacity to enter into the contract(e.g., she becomes insane; seethediS' cussion of capacity,'.ifira, p. 470) the power to acceptis terminated. This.' ISso evenIfthebInofferee does not leam of the offeror's death or incapacityuntil after he has dispatched whateintends as an acceptance. See Rest. 2d, 48.1. Exception for 0bitive theory:Observe that the "revocation.by deat h"Ie whenitit jecrure,.capplied to an offeror 'd' eath that IS unknownto the offeree. a sharp exception totbegen tSISIceral oh] tih,.n ofasS en.~ec ive t eory of contracts _ under the objectivetheory"a manifestatlOtheIS effecti.regard to actual mentalassent"J'(Re t. 2d, 48, Commen t ) sOCecttve Withouta,offeror's unseen death should not terminate hiaent.ee Famsworth, 3.18.the2. Option contracts'If h..ble offer), e

CONSiDERATIONC16is rendered to one other than Promisnr does /l01 preventMerchant'sdeliveryto the son from being consideration for Promisor's prorni e to pay $ I00.See generally Rest. 2d, 7 J. [87]C. Uses of doctrine:The requirement of consideration rendersunenforceabletwo main types of trans- actions: [86]III Promises to makegifts (which are promises that do not sati fy the "bargain" clement);and121 Business situations in which one party has 1I0treally promised to do something or given anything up, even though he may appear to have done so ( cenarios that do not ati fy thc "detriment' ele- ment). The main situations falling into this category are cases where the parties to an existing con- tract modify it to the sole benefit of one of the parties (the "prc-cxi ting duty" cenario).II, THE BARGAIN ELEMENTA. Promises to make gifts: A promise to make a gift is generallyunenforceable,becauseit lacks the "bargain" element of consideration. [87-92]Example: A says to B, his daughter, "When you tum 2 I in four yearsI will give you a car worthC$10,000." The four years pass, A refuses to perform, and B sues for breach of contract. B will lose,APbecause there was no consideration for A's promise. In particular, A's promise was not "bargainedfor."SUI. ~xistence of cond~t~on: . Even if the person promising to make a gift requires the promisee to Leet certain conditions 111 order to receive the gift, there will still be no consideration (and the Epromise wLIIthus be unenforceable) if the meeting of the conditions is not really "bargained for"by the prorrusor, [87-92]sExamp~~: A promises his widowed sister-in-law B a place to live "if you will come down and U~ee me." 10 response, B travels to see A, thereby incurring expenses. Even though B has suf Mereld a detriment" (the expenses), the "bargain" element is lacking _ A was not promisingB Maf p acef toh live because Ite want ed t0 sec her, but was merely imposing a necessary pre-condl' A~nkor er to get the gift. Therefore, his promise is unenforceable for lack of consideration.R[ tr sey v. KII'ksey]Ya. Occurrence of condit' . f bndition and theIon IS 0enefitto promisor:But if the promisorimposes a CO b bly ,be occurrence of this condin Ion . 0f benefit to him, then the bargaine Int pro awillpresent.IISerneExample: A promises his nepheB $5...'d gam' bling until age 21 Bsb.w,000 If BWIJJ refrain from smoking,dnnklllgandbyconsideration)beca.0 a stams . Here , A's.was "bargainedfor" (an d thus supporte bleApromise.[,usewas attempti g tbtaid ddeslra'Hamer v. Sidway]n0 0 tamsomethinghe regareasi.Altruistic pleasure not sufficiake a gi~expects to derive altr istient:But the fact that one who promisesto rnIsuf ficient to Const'ltnte I~~bszc pleasure, or love and affectionfrom makingtbe gift is /10aargam."'b. Mixture of bargain and gift:Wh'..-if!, the conSideratIOn requiremt iere a tranSactIOn IS a mixture of a bargatn a/ld a.seJlt.he other an item at a en lShnonetheless satisfied. For instanceif one partypromises to luetl t nrnmipnce t at both pam..'.rket va ' ia promIse is supported b con'. res recogmzeIS a large discount to Its rnaactualpayment of, the discount l .slderatLon (10 the form of the buyer'spromiseto pay, ore pnce). [89]

THE "DETRiMENT" ELEMENTC-17Example: A is a close friend of B. B has long admired A's painting "Irises" by Picasso, which as both parties know has a market value of $200,000. A promises to sell "Irises" to B for $20,000, and B promises to buy it for that price. The contract is enforceable because each promise is supported by consideration, notwithstanding the presence of a significant "gift" element to the exchange. [89]2. Executed gifts: It is only the promise to make a gift, not the actual making of a gift, that is unenforceable for lack of consideration. Once the promisor makes the gift, he cannot rescind it for lack of consideration. [92]B. Sham and nominal consideration: Even though a deal looks on its face as if it is supported by consideration, the court may conclude that the purported consideration is sham or nominal, and is thus not consideration at all. [90]1. Nominal amount: Thus where the "consideration" that has been paid is so small as to be nominal, the court may conclude as a factual matter that there is no real "bargain" present at all. If so, the promise will not be enforced, due to lack of consideration.Example: A says to B, his son, "In consideration for $1 paid and received, I promise togive you a car worth $10,000 four years from now." Even if the $1 is actually paid, theC court will probably conclude that A did not "bargain" for the $1, and that there is thus noA consideration; A's promise will therefore be unenforceable.Pa."Adequacy" irrelevant:But if the consideration is big enough to suggest that there wasSa hargain, the fact that it is "inadequate" is irrelevant. (See infra.)U2. Payment not in fact made: If a non-trivial payment is recited, but the payment was not inL fact made, most courts will take this as evidence that no bargain was present. Always, theE question is whether there was in fact a bargain, and payment or non-payment is merely non-dispositive evidence of whether there was a bargain.sC. Promisee unaware: Generally, the promisee must be aware of the promise, for the act performedU by him to be consideration for the promise. This means that if a reward is promised for a certainM act, and the act is performed without the actor's bei.ng aware of the reward, he cannot recover. [91]MAD. Promise exchanged for previous detriment:If the promise is made in return for detriment pre-Rviously suffered by the promisee, there is no bargain, and thus no consideration.Y1. "Past consideration is no consideration": As the idea is often put, "past consideration is no consideration." This statement is essentially correct.2. Illustrations: Thus promises to pay a pre-existing debt, and promises to pay for services already received, usually lack the "bargain" element, so there is no consideration to support them. (But these two types of promises may be binding even without consideration, as dis- cussed below.) [92-93]m. THE "DETRIMENT"ELEMENTA. Generally:For consideration to be present, the promisee must suffer a "detriment." That is, she must do something she does not have to do, or refrain from doing something that she has a right to do. (Example: After P has already retired from working for D, D promises P a lifetime pension, for which P need not do anything. At common law, this promise would probably be unenforceable, because P has not suffered any detriment in return for it.) [94]I. Non-economic detriment:Even a lion-economicdetriment will suffice. (Example: If Apromises B $5,000 in return for B's abstaining from alcohol and tobacco, B's refraining will be

C18CONSIDERATIOa "detriment"that will serve as consideration f r A'pr misc. ThuA's promise will be enforce. able.) [94]2. Adequacy nol considered: The court will not inquire into the "adequacy" of the consideration As longas thepromisee suffers some detriment, 110 mailer how .fIIlDlI, the court will not findcon. sideration lackingmerely becau e what the promi ee gave up was of much less value than whathe received. [9597]Example: D is desperate for fund during WWII, and pr mi: c t pay P 2,000 after thew& in return for $25 now. Held, there is con idcratin f r D' pr 011 c.0 P mny cnllect. Mere "inadequacyof consideration" is no defense. [Balsakis v. Demotsi. ].a. Minor effort or other thing of non-monetaryvalue:The prin iplethat courtwill nol acquire into the adequacy of the considerationmeanthat considerationcan consist ofthe promisee'sdoing something that requires only a lilly bit of effort ami has 110financia! value For instance,the promisee's effort in clipping a COIlPOt/ or jillit/g0111 a contest elltryform will typicallybe enough to constitute consideration for the ther side's promie.Example: P enters a promotion in which she is promised by 0 (a casin ) a free spin ofa rou Clette wheel. As required by the promotion, she waits in line at the wheel. allows her IDcardIn Abe swiped so thar her gambling habits can be 01 nitorcd, and then is given her free spin:PPclaims to have won, and 0 argues that even if she did there was no con ideration supportmgSD's promiseto P of a prize if she won.'UHeld, for P. By going to the casino, waiting in line, and allowing her gambling patlemsto Lbe monttoreri, P underwent a detriment that was con ideration for D's promise to pay thepnze EIfP hada winning spin. [Gottlieb v, Tropicana Hotel and Cosit/o] [96]sb. Lack,of bargain' . BUI rernem ber Ihat extreme disparity'.m, value betweenwhat Ihe promisee,U~Ivesup and receives may suggest that there is not in fact a "bargain"in which case therewill e no consideratIOneven tbough the detriment requirementis sati fi~d.MB. Pre-existing duty rule: If ad,.d todo,Mor ifbe fo b,partyoes Orpromises to do what he is already legally oblIgatehAhas not in~u~;~ ~r,,~romlses~?forbear from doing somethingwhich he is I/o/legallyentitled to d~ieRetrunenrfor purposes of consideration.This is the pre-existingdilly rule,[9yI. Modification:This generalI'.difY the Contract for the sibfi ru e means that If parues to an existing contractagree to",o ble alconunon law for ~ ck efne It for one of them, the modi fication will usuallybe unenforcea true' lion cases, [98-101],ac 0 conslderahon , Beon theIIookout for this scenarioespecra. IIy in COliSExample: Contractor agrees t0letedhyMay I' HalfW through the 0 pave wner's driveway for $5000the job to be comp nit the price to ay'pro'. Contractor.Owner "gotten very b Y Incre$6 000jeer,tells"I'veusvyoU$6,000, nowj~st fi~~~ Io~ ~tve ,~ofinish 6 weeks late," Ow~er says, "OK, I agree to ;aYnJo~ than $5 000 C.me, Contractor fil1Jshes on time but Ownerrefuses to p Y, "Ontractor sues for the extra $1,000.'Owner s promise to pathill 110/ /JIenforceable_ theYe extra $1,000 (a modificationof the contract) Werely promising to docontract was mod'fi d to the Sole benefit of Contractor,h was nJwhat hI IeW 0, I coO'sideration to supp rt Oe was already legally obligated to do, Tbereforebe did not fum1sIowner'spr.,a. Restatemomlse of the extra $1 '000 . [99]ent: The Second RI rtlle,2. Exception fo. .estatement, and most modem courts, follow this genera0ex'r unanhelpatedeirc) ma~eaceplloll to Ihepre-existing d ty umstances: But modem courts (and tbe Restatement ofcir CUmstance.urule where thd',.. bl 'n vIewS 1l011t111lcipatedby the'e mo ,fieatlOn IS''fair and eqllliaeIpartIes when the contract was made." [99]

THE "DETRIMENT"ELEMENTC-19Example: Contractor makes a six-year contract, for $50,000 per year, to annually repaint a bridge owned by City, using specified paint to be furnished by Contractor. Before the fourth year, Contractor tells City (truthfully) that the cost of the particular paint specified in the contract has doubled in the last year, due to new safety legislation. City agrees to adjust the contract price to $55,000, whicb would restore Contractor to the same level of profit as both parties anticipated wben tbe contract was originally signed. Wben tbe time comes for payment, City refuses to pay tbe extra $5,000, citing the pre-existing duty rule.Even tbougb, in return for the promise of extra money, Contractor merely promised to do wbat he was always required to do (paint the bridge and supply the specified paint), the modification is "fair and equitable in view of circumstances not anticipated by tbe parties when tbe contract was made." So City's promise to modify will not be invalid for lack of consideration, and Contractor can require City to pay the extra $5,000.3.Extra duties:Even under the traditional pre-existing duty rule, if the party who promises to do what be is already bound to do assumes the sliglttest additional duties (or even different duties), his undertaking of these new duties does constitute tbe required "detriment." [100]Example: Contractor agrees to build a house for Owner for $30,000. Midway through thejob, Contractor realizes he's losing money, and threatens to walk off the job if Owner doesC not increase the price to $40,000. In return for this price increase, Contractor is willing toA change the kind of fittings in the windows, as requested by Owner; this change will actu-P ally save Contractor money.SMost courts would hold that the change of specifications, even though actually lessU burdensome to Contractor, constituted consideration for Owner's promise to pay more forL tbe house.Ea. Where change is mere pretense: Tbe "additional" or "different" duties promised by thes person already legally bound must not, however, be merely a pretense for avoiding tbeU pre-existing duty rule, [100]M4.Rewards and bonuses:Outside of the modification context, a promise to pay a reward orM bonus will be unenforceable under the pre-existing duty rule, if the promisee is already underA a legal obligation to perform the act being rewarded. [10 I]R Example: Officer, employed by City, has tbe duty to investigate crimes and arrest theyguilty. He learns of a reward offered by City for "information leading to the arrest and con- viction of..." the person responsible for a particular robbery. Officer arrests a suspect, who is convicted. Officer won't be entitled to the reward, because tbere is no consideration for his act of making the arrest - he was only doing what his job already required him to do.5. VCC: For contracts for the sale of goods, tbe UCC abolisltes tlte pre-existing dilly rille. Sec- tion 2-209(1) provides tbat "an agreement modifying a contract ... needs no consideration to be binding." But there must be good faith, and any no-oral-modification clause must be com- plied with. [10 I]6. Agreement to accept part payment of debt: Some courts apply tbe pre-existing duty rule to render unenforceable a creditor's promise II0t to require payment by his debtor of tlte ful! debt. Tbese courts also treat a unenforceable a creditor's promise to allow thc debtor extra time to pay. These courts reason that the debtor already owes tbe money, and is therefore not promising to do something he was not already required to do. This is known as the rule ofFoakes v. Beer. [IOJ-I04]a.Modern trend:But the modem trend is to abolish or limit the rule of Foakes v. Beer. For instance, the UCC, in 2-209(1), says that "an agreement modifying a contract within this

CONSIDERATIONC-20articleneedsno consideration to be binding ...... Thieems I overrule Foakes " Beer,andto makea seller'spromise to take partial payment in return for good enforceable.b. Disputed debt: Also, the rule of Foakes v. Beer applieonly to debts where the partiesarein agreementaboutamount and liability, called "liquidated"debt . If the debtor in good faithand reasonablydisputes his liability, or the amount of that liability, then a settlement by whichthe creditoragreesto take less than he thinks is due i enforceable (even in courts followingthetraditionalFoakes" Beer rule).c. Cashing of cbeck tendered as settlement: Debt rs ometimes end a check for lessthatthe amountdue, and mark it "ill [ull settlement." ven if the creditor write "Ill protest" onthe check,but cashesit, the UCC holds that the cashing normally constitute an acceptancebythe creditorof theproposed settlement, and the credit r cann t sue f< r the balance. 3-311. [1031i. Requirements: But 3-311 allows the debtor to be discharged by the creditor' cashiag of thecheckonly if three conditions are met:o the check or accompanying written communieatin containeda "conspicuous state-ment to the effect that the instrument watendered as full satisfaction of the claim," andCo theclaim was either "unliquidated" or was "subjected to a bona fide dispute, andAPo the debtor acted in good faith.Sii. Right to return payment: There's an important exception that can hurt the debtor, Uthough:the creditor has the right, within 90 days after ea hing the check, to reversethe Ltransactionby paying the debtor back the amount of the check' the creditor is thereby Erestoredto the rights it had before cashing the check. 3-311 (c)(2)_7. 0lth1ersettlements (e.g., tort suits): Settlements of other kind of suits (e.g. tort suits) maysim'SheI anyci raise con.Slderafion problems. If the plaintiff is surrendering a claim that 'is in fact rnva'I'd I ,h~ Ue given consideration to support the defendant's promise to pay a settlement? To facilitatesettle' Mtbments,I' courts, . today generall y take a reIaxed view of what's needed to constitute conSIidera(onI by Me p aintiff in return for the settlement promise:Aa. Valid claim surrendered'IfI"rt areinRagreementth t thi... a p aintiff promises to waive a valid claim, all eou S forythe de~ da ~ this promise ISa "detriment" to the plaintiff, and constitutesconsideration en nt s promise to pay a settlement.b. Surrender of invalid clai. If.'isesto forbear from s .. a,.m., on the other hand, the claim that the plamtlff prom herethe modemvi umg On IS Invalid (or of uncertain validity) thingare trickier. But even v~considerationl~;e);~~;~sented by the Second Restatement) 'is that the forbearing plainliffglo the plaintiff's forborne cia'.o b'.tm ISone whose validity is uncertain, or, 't e pla1l1liffsubjectivelbeli. (Ven IfItdoesn't in fact hye ~eves that the forborne claim has possiblement e ave any pOSSiblemerit). [104]i. Execution of release: Furthe'.'forbeariPg fromasserting her cia' d nnore, even if the would-be plaintiff who \ beplaiD" tiff exeClI/esa writt I~ oes not SlIbjectively believe tbat the claim is valid, I td nt blr'.ell Instmlllelll S ttlih.defeo agamed for that instrumen.e mg t e claim, and the prospecttve,forthedefendant's counter- rit, the mstrumen; itself will be sufficientconsideralion p omlse, 111 most states. [105]

ILLUSORY,ALTERNATIVE AND IMPLIED PROMISESC-2lIV. ILLUSORY, ALTERNATIVE AND IMPLIED PROMISESA. Illusory promises: An "illusory" promise is not supported by consideration, and is therefore not enforceable. An illusory promise is a statement which appears to be promising something, but which in fact does not commit the promisor to do anything at all. [I J 1-1l5JExample: A says to B, ''I'll sell you as many widgets at $4 apiece, up to 1,000, as you choose to order in the next 4 weeks." B answers, "Fine, we've got a deal." B then gives A an order for 100 widgets, and A refuses to sell at the stated price because the market has gone up. 8's prom- ise is illusory, since she has not committed herself to do anything. Therefore,A's promise is not supported by consideration, and is not binding on him.1. Right to terminate: If the contract allows one or both parties to terminate the agreement at his option, this right oftennination might make the promise illusory and the contract therefore unenforceable. [113Ja. Unfettered right: If the agreement allows one party to terminate simply by giving notice at any time, the traditional common-law view is that the party with the termination right has not furnished consideration. But the modem trend is to hold that as long as the termi-nating party has the obligation to give notice (even if this obligation is an implied one),C this duty of notice itself furnishes consideration.AB. Implied promises:Courts try to avoid striking down agreements for lack of consideration. OnePway they do this is by finding that the promisee has made an implied promise in return. [l14-116JSUExample: D, a fashion designer, gives P the exclusive right to sell products made from D'sL designs. P promises to pay royalties on any product sold, but the agreement does not expresslyE require P to make sales. D violates the agreement by letting someone else sell ber designs. Psues D, who defends on the grounds tbat P did not really promise to do anything, and that theresis thus no consideration for D's promise of exclusivity.UHeld, for P - P can be impliedly found to have promised to use reasonable efforts to mar-M ket D's designs, thus furnishing consideration for D's counter-promise. [Wood v. Lucy, LadyM DujfGordon].ARV. REQUIREMENTSAND OUTPUT CONTRACTSYA. Requirements and output contracts generally: In a requirements contract, tbe parties agree that the seller will be the exclusive source of all the buyer's requirements for a particular type of item for a particular time. In an output contract, the buyer agrees to take all of the seller's output of a particulartypeofitem. [115-117J1. Enforceable today: Under traditional consideration rules, requirements and output contracts were sometimes found lacking in consideration. But today, requirements contracts are gener- ally enforced, assuming (as is usually the case) that the buyer is found to have implicitly promised to lise his best ejforts to generate a need for the goods. Similarly, output contracts are generally enforced, as long as the seller has implicitly promised to attempt to maintain his production at a reasonable level.2.uee approach:The uee explicitly validates requirements and output contracts. uee 2-306 provides that "a term which measures the quantity by the 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 the absence of a stated estimate to any normal or otherwise comparable prior output or require- ments may be tendered or demanded."

C-22PROMISES BINDING WITHOUT0IDERATIOa. Best etTortsimposed on buyers and seller:here i. a pc ial typc of good-faith obligationimposed by 2-306 on buyers and sellers under requirementsc niracts. 2-306(2) saystiIlIIV"A lawfulagreement by either the seller or the buyer f r exclusidealing in the kind ofgood;A. concerned imposes unless ntherwi c agreed anbllgau n by the seller to lise best efforts/a sllpplythegoods and by the buyer to lise best efforts 10 promote their sale." [116]i. Significance: Therefore, under a requirementcontract thbuyer must make besteffoill to promote the sale of the good , and cannot .Ii//lply decide that the entire produc:linli not worthcarrying. Conversely, under an output C ntra I the cller cannot simply deci~ to stopselling or manufacturiug the item, and must instead makc best efforts to supp~ thegoods.HAPTER 4PROMISES BINDINGWITHOT0IDRATIONI, PROMISES TO PAY PAST DEBTA. General nl~: Most states enforce a promise to pay a past debt. even th ugh no eonsiderntion forlbe Cpromise IS given. Thus promises to pay debts that have b en dischargedby bankruptcy, or thatareDO APlooger collectIblebecause of the statute of limitations,are enforceablein most states. [127-128JB.SI. Writing required:Most states require a signed writing; at least where thc promise is to payaUdebt barredby the statute oflimitations.LEII, PROMISE TO PAY FOR BENEFITRECEIVEDA. Generally: A promise tDb'ally~senfbl.0 payorellefits or services one has previouslyreceived will genernrorceae even witho tid.lId orwhth.u consr eration, This is especiallylikely where the services were reques ,Uere e service, were furnish ed. hrequest . an emergency. [129-130]MWIt outinMUJ.AOTHER CONTRACTS BINDING WITHOUTCOSIDERATIONRA. Modification of sales contracts'U dIe ofgoodlYISbinding without consid..n er the uee, a modificationof a contractfor the sa id tsloB at $4 a piece. Before ~~: ~:~~~See ,~-209. [131] (Example: A contractsto supply 100 w:,::grees. Under UCC 2 209 thP'.says, My costs have gone up' I'll have to charge you $5.. n f~ promising to- the " IS modIfication' IS en1orceable,r:even though'8 receivedno coosideratlOpayhIgh' pnce.)erI. No-oral-modification clauses'"ct wiJlnor'and B said thar an~ x~1e: On the facts of the above exampleif the original contrnct be uld~ mally be enforced (E"But a no oral modifications"clausein a sales contratweeo,!enforceable only if mo I.walton must be in writing8's promis~ to pay the higher poce wo In wntmg.),B. OprTIon contracts:Recall that 0 ti.nsider1lriOO'. hus an Offertbat purports t b'P 011 Contracts are sometimesenforceableWIthout CO .dfortltt~~evocability, will be enfor~ed e enforceable, and that falsely recites that considerationwas pa~orceablrjfirm offers" under certain.n most courts. Also, rememherthat uee 2-205 renders eoC. Guarant'Circumstances. [133]~cnforc.d les' [ most states, a gllar.ther) 'i1"..nWI .de WIthoutconsideratioGallfy (that IS, a promiseto pay tbe debts of anotbatCOO51 eratlon has been paid (thou;i, th:nerally, the guaranteemust be in writing,and must state[134.13ilconsIderatIOn does not in fact have to bave been paId).

PROMlSSORY ESTOPPELC-23IV. PROMISSORYESTOPPELA. General approach: Promises which foreseeably induce reliance on the part of the promisee will often be enforceable without consideration, under the doctrine of promissory estoppel ("RE. "}. Rest.2d, 90's definition of the doctrine is as follows: "A promise wbich the promisor should rea- sonably expect to induce action orforbearance on the part of the promisee or a third person andwhich does induce such action or forbearance is binding if illjustice can be avoided only byenforcement of the promise."[137]Example: A promises to pay for B's college education if B will attend school full time. Aintends this to be a gift. B gives up a good job and enroUs in college, incurring a liability of$5,000 for the first year. A then refuses to pay the bill. Under the doctrine of P.E., B would be able to recover at least the value of the lost job and first-year tuition from A, even though A's promise was a promise to make a gift and was thus not supported by consideration.1. Actual reliance: The promisee must actually rely on the promise. (Example: On the facts of the above example, B must show that without A's promise, B would not bave quit his job and attended college.) (138J2.Foreseeable reliance:The promisee's reliance must also have been reasonably foreseeableC to the promisor. [138JAB. Possible applications:PS1. Promise to make a gift:The P.E. doctrine is most often applied to enforce promises to makeUgifts, where the promisee relies on the gift to his detriment. [138JLa.Intra-family promises:The doctrine may be applied where the promise is made by oneEmember of a family to another. (Example: Mother promises to pay for Son's college edu-cation, and Son quits his job. Probably the court will award just the damages Son sufferssfrom losing the job, not the full cost of a college education.)U2. Charitable subscriptions: A written promise to make a charitable contribution wiU gener-M ally be binding without consideration, under the P.E. doctrine. Here, the doctrine is wateredM down: usually the charity does not need to show detrimental reliance. (But oral promises toA make charitable contributions usually will not be enforceable unless the charity relies on theR promise to its detriment.) [139JY3. Gratuitous bailments and agencies: lfa person promises to take care of another's property (a "gratuitous bailment") or promises to carry out an act as another person's agent (gratuitous agency), the promisor may be held liable under PE. if he does not perform at all. (However, courts are hesitant to apply P.E. to promises to procure insurance for another.) [140]4. Offers by sub-contractors: Where a sub-contractor makes a bid to a general contractor, and the latter uses the bid in computing his own master bid on the job, the P.E. doctrine is often used to make the sub-bid temporarily irrevocable. [141Ja.Reliance by general contractor:In the sub-contractor-bid scenario, be sure to checkfor reliance by the general contractor (GC). If there is no real (and justifiable) reliance by the GC on the sub-contractor'sbid, the GC will not be permitted to use RE. to make the sub- contractor's bid temporarily irrevocable. [141JExample: Suppose the sub-contractor discovers its bid i too low and tells the G about this before the GC's own bid has been opened by the owner. In thi cenario, th GC might be ahle to avoid the problem by revising or withdrawing its master bid. If the G has this opportunity and doesn't use it, then the GC has not reasonably relied, and will not qualifyfor promi sory estoppel.

MISTAKEC-245. Promise ofjob: If an employer promisean at- ...ill job to aln c(mPI] yce, and thcn revokesilie promisebeforethe employee shows up for w rk, P. . may, pp y. 14Example: A offers a job to B, terminable by ithcr at any ume. B quit his cstablishedjob. BeforeB shows up for work, A cancel the j b fTcr. un 1111 -hI h Id that even thoughB could have been fired at any time once h hawed up. B sh uld e able to coliecuhe valueo! thejob he quit from A, under a P.E. theory.6. Negotiations in good faith: A person who tie rotiates with n thcr may be f und to haveaduty to bargainin good fuith; if bad faith is found, the un may usc P L t furnish a remedy.[14J 145]Example: A, owner of a shopping mall, pr miscs that it will ne zonate a lease for particul. space with B, a lenant. B rejects an offerf space fr m n iher landlord. A then leasestb< spaceto one of B's competitors for a higher rent. A court might applyP.E., by holdingthatA implicitlypromised to use good faith in the neg tiari ns and breachedthaI promise.a. Promises of franchise:The use of P. . tprotect ncgotiaungpanicsi especially Iike~where the promise is a promise by a nationalcorp rati n I awarda franchise to theoiliCparty.(Example: P, a national company that runs a fast foodham, pr mises B a franchise.B Aquits hisjob and undergoes expensive trainingin the restaurant busines. If A then refus~ro paward the franchise, a court might use P.E. to enforce the pr mise,at least to the extentof Sreimbursing B for his lost job and training expenses.)UC. Amount of recovery: Where P.E. is used, the damagesawarded are generallylimited to thosenec~'Lsaryto"prevelll;niUSlice"U,.sua IIy, thiISWI'11 mean that the plaintifT receivesrelillllce damag,esraili&.E~hanthe greaterexpectation measure. In other words, P is placed in the p sitin he would havebeenlDad the pronnse never been made. [145-146]SExamdPle:If A pr,omises B a franchise, and B quits his job in reliance the court wil1probabdlY Uawar B the value of th I .,d h e roa e Mfram the franchieast Job, not the greater sum equalling profit that B waul avanchise.MARCHAPTER 5YMISTAKEI. MISTAKE GENERALLYA. Definition'. A".is a "belie' /1'.mistake"1M.'taI,s 1101111accord wuh lire facts. " [153-154].utnal mistake'If b h..id 10~"",ulllal.".atpanles have thearne mistakenbelief,the mistake IS sal2. Unilateral'. B contrast if ani. "Io/elaI'Y.3. Exislin f.,yone party has Ihe mi takcn belief, the mistake IS III".w-.g act. The doctrines a\,..bout ant\mg/ac/, nol an erroneob I' pp Icable to mistake apply only to a mistakenbehefaEus e lef about "" la I'11hl/ppen ill Ilre/lIllIre.1111xample: If Buyer and Seller b.. . . facta IOp3l' thiSISa mistake B t .f Boththink that a stone is an emeraldwhen It IS1D.lari~IQstable over the ~ex~ filuyer and Seller both think that the price of oil will remaIn r~i5Igke.SIne' dIve years and',c' 's oat a e It oes not relate t..'III lact il goes up by 50% per year, t,tlS I4M'0 eXISlingfact.Istakeoflaw'A.'amis'take.mistake about a IeI..dcaObe.ga PI/tic/pIe,according to most courts to ay,

MUTUAL MISTAKEC-25II. MUTUAL MISTAKEA. Three requirements for avoidance:Three requirements must be satisfied before the adversely- affected party may avoid the contract on account of mutual mistake: [155]1. Basic assumption: The mistake must concern a basic assumption on which the contract was made. (Examples: The belief that a violin is a Stradavarius when it is in fact a worthless 20th century imitation is a "basic" mistake. But the seller's belief that a buyer to whom he is selling on credit is credit-worthy is probably a "collateral" rather than a "basic" mistake.)2.Material effect:The mistake must have a material effect on the "agreed exchange of perfor- mance." (Example: If both Buyer and Seller thinks that a violin is a Stradavarius, but it is in fact a Guamarius worth almost the same amount, the mistake would not have a "material effect" on the agreed exchange.)3. Risk: The adversely-affected party (the one seeking to avoid the contract) must not be the one on whom the contract has implicitly imposed the risk of the mistake. Often, the contract does not make it clear which party is to bear the risk nf a certain type of mistake, so the court allocates this risk in the manner that it finds to be "reasonable" in the circumstances.B. Special contexts:[155-160]CA1. Market cnnditions: Mistakes as to market conditions will generally 1I0t be "basic" ones, soP the mistaken party will not be able to avoid the contract. (Example: Seller agrees to sell Black-S acre to Buyer. Both parties believe that comparahle land is worth $5,000 per acre. Buyer can'tavoid the contract if comparable land is really worth $2,000 per acre.) [156]UL2.Existence of subject matter:The existence of the subject matter of the contract is usually aE"basic" asswnption. [156]Example: Seller agrees to sell land containing timber to Buyer. Both parties believe thats there are 100,000 board feet on the property. In fact, fire has destroyed much of the timber,U so that only 20,000 feet remain. This will be a basic assumption, so Buyer can avoid theM contract when the facts emerge, whether this is before or after closing.M3. Quality of subject matter: A major mistake as to the qllality of the contract's subject matterA is often a "basic" assumption, so the disadvantaged party can avoid the contract. (Example: IfR both parties believe a violin is a Stradavarius when in fact it is an almost worthless imitation,ythis will be a mistake on a basic assumption, and Buyer can avoid the contract.) [156-157]4. Minerals in land: In land-sale contracts, the Seller will almost always bear the risk that valu- able oil and gas deposits will be found on the land (i.e., Seller cannot avoid the contract when such a discovery is made). [159]5. BUilding conditions: When a builder contracts to construct a building on land owned by the other party, the huilder will almost always be found to bear the risk of a mistake about soil or other unexpected conditions, so he cannot avoid the contract if cou truction proves much more difficult than expected. [159]6.Used paintings and other collectibles:Suppose the owner of a painting or other used "col- lectible" sells it in a private sale, and the object turns out to be of a fundamentally diffcrent- and more valuable _nature than either ide believed. Courts generally have allocated this risk to the owner/seller, on the theory that seller had the opportunity to ascertain the true value and can't ride on the coattails of a buyer who does so. [159]

C-26MISTAKEm. UNILATERAL MISTAKEA. Modern view: Where the mistake is unilateral, it is m re difficult ~ r the mistaken party to avoidilie contract than in the mutual mistake situation. The mi taken pany mu t make the arne three showin~ as for mutual mistake (basic assumption, malerial effect, nd ri k n the ther party), pills must show either that: [162-163]1. Unconscionability:The mistake is uch that enforcementfthe c ntroct would be III/consciona.ble; or2. Reason to know: The other party had reason to know of the mi take,r the other partY's!au! caused tbe mistake.B. Constructionbids: The most common type of unilateralmistake oc urs wheren contractor orsu~ contractor makes an error on a bid for a construction job. [162.163)1. Unconscionabitity:The mistaken contractor will su ceed in showingunconscionabilityonlyif he shows that not only will he be severely harmed if forced to perf rm, but also that the Olherpartyhas not reliedon the bid.CExample: Sub-contractorgives contractor a bid of S50 000 for electricalwork. Contracl~ Arelies on this bid to prepare her own master bid for the entire pr jeer.on tractor gets the COD, Ptract, enters into a sub-contractwith Sub-contractorandub-c rura t r then discovers thathll S~5~,000 bid should have been $75,000, due to a clerical error. The courtwould probablynol Uin It unconscionable to hold Sub-contractorto the contractbecauseon tractor has relied00Lthe $50,000 sub-bid.'E2. "Snapping up" of offer:Alternatively, the rni taken contractormay try to show that the olher party either knew or bad reason 10 kflOW of the error. (Example: On the above exarnp I if Suhe,Scontractor can sbow that Cthmislake, bon ractor s auld haveknownthai thereprobablywas aUc ontracr Sub-contractor's bid was much lower than all other sub-bid,the court is likely to letSubMon actor avoid the Contract based on unilateral mistake.)MAIV. DEFENSES AND REMEDIESRA. Negligence:Where a party seeks tid h. ') mislake.ythe fact that the mistakdoavOi I e contractbecause of his own (or both partIes IF'e wasue to his neg!''/1"ordinarilynot prevent.. rIgellce WIrelief..aUure to read writing:But if h.Iracl, heWIll no/ normally b. It e mIstake stems from a party's!ailllreto read Ihe cone entu ed to rescind. [165]B. Remedies'Th.A.'ere are two main remedies that may be appropriatefor mistake'[165-166]I..voldance:The most conunon r..d "relC~' slOn'l Here, the Court treats the c:medy IS uvoidance of the contract(sometimescalleeach party to the Position he was in'ntracr as If It has never been made, and attempts.toeturl1 he~ I willordered - each party'11Just before the Contractwa signedGenerallyrestlll/liOlWI return the be fh.,Examne ItS e has receivedfrom the other.pie: Seller agrees to sell'[.er uDd~an installment Contract BIS IOlerest in a particularparcel of vacantland to BuY 'forfbe Pro'.uyer makes it I.ded useperty IS to grow a part'Ic ear to Seller that Buyer'sonlyIOtenpplie5Afte thICUar shrub on twater sur repurchase,wells drilled bI , somethmgwhich requiresadequatebenealhIhe p Operty. Buyer sues Sell'y Buyer show that there is no adequatewaterA court would holder lOr reSCISSIO on groundsof mutual mistake.ef fbe thnCourtat Buyer is. IHowev , would also probabl.enllt ed to return of its downpayment.ropCr1J'during the time Buyer ha~ require Buyer to pay Seller for the fair rentalvalue oftbe POrt1pea' possession of'tC. ed to cI.onversely,Seller wouldbe requlf

REFORMATIONAS REMEDY FOR ERROR IN EXPRESSIONC-27sate Buyer for any increase in the value of the property brought ahout by Buyer's drilling of test wells. (But Buyer wouldn't get the cost of the drilling of the test wells, except to the extent those wells increased the value of the property.) [165]2. Reliance: Alternatively, the court may award reliance damages, especially where restitution! avoidance would not work because one party has suffered losses but the other has not received benefits.V. REFORMATIONAS REMEDY FOR ERROR IN EXPRESSIONA. Generally: If the parties orally agree on a deal, but mistakenly prepare and execute a document which incorrectly reflects the oral agreement, either party may obtain a court order for reforma- tion (i.e., are-writing of the document). [166]Example: Seller orally agrees to sell Blackacre to Buyer for $100,000. Their oral deal includes a provision that Buyer will also assume an existing mortgage of $50,000. The written agreement neglects the assumption provision. At either party's request, the court will reform the document so that it includes the assumption provision.CCHAPTER 6APAROL EVIDENCEAND INTERPRETATIONPSI. PAROL EVIDENCE RULE GENERALLYU LA. What the rule does: The parol evidence rule limits the extent to which a party may establish thatEdiscussions or writings prior to the signed written contract should be taken as part of the agree-ment. In some circumstances, the rule bars the fact-finder from considering any evidence of certains preliminary agreements that are not contained in the final writing, even though this evidence mightU show that the preliminary agreement did in fact take place and that the parties intended it to remainM part of their deal despite its absence from the writing. [171-172]MAII. TOTAL AND PARTIAL INTEGRATIONSRA. Definitions:[172]Y1. "Integration": A document is said to be an "integration" of the parties' agreement if it is intended as the filial expression of the agreement. (The parol evidence rule applies only to documents which are "integrations," i.e., final expressions of agreement.)2. Partial integration: A "partial" integration is a document that is intended to be final, but that is II0t intended to include all details of the parties' agreement.3. Total integration: A "total" integration is a document tbat is not only a final expression of agreement, bnt that is also intended to include al/ details of the agreement.B. Statementof rule:The "parol evideuce rule" is in fact two sub-rule: [172-173]I. Partial integration: When a writing is a partial imegration, no evidence of prior or contern- poraneou agreements or negotiations (oral or written) may be admitted if this evidence would contradict a term of the writing.2. Total integration: When a document is a total il/tegration, no evidence of prior or contem- poraneous agreements or negotiations may be admitted which would either contradict or add to the writing.

C-28PAROL EVIDENCEAND INTERPRETATIO3. Summary: Putting the two sub-parts together, the par I evidence rul provides that evidenceofl prior agreementmay never be admitted to contradict an integrnted writing, and may funbennor! not evensupplement an integration which i intend d to be complete4. Prior writings and oral agreements:The parol evidenruleppl ieto oral agreement: ani discussions tbat occur prior to a signing of an intcgratin, It alsopphes1 writings createdprim to an integration(e.g. draft agreements that were n 1 intended to be linal cxprcs ions ofagret, ment). [173]5. Contemporaneous writing:If an ancillary writing iigned al the same time a formaldocu,ment is signed,tbe ancillary document is treated as part of the writing, and will not be subjectro the parolevidencerule,6. Subsequent agreements:The parol evidence rulnever bars consideration of slIbseqllell!oralB.agreements,That is, a written COII/ractmayalways be modified after its execution, by anomi agreement.a. "No oral modifications" clause:However, if the written documentcontains a "110 oralmodificatiol/"clause, that clause will usually be enf reed by the court, unless the courtfw&Cthatthe defendant waived the benefits of that claus ,AC. VCC:Section-202of the vee essentially follows the common-lawparol evidence rule as summ"Pnzed above, [175-176]c.SUIII. ROLES OF JUDGE AND JURYLA. Preliminary determ't'h 'ucyEdeCIides: (I) wh th IDath IOns' ,made by jUdge:Nearly all courts hold that the judg, not t e,J .'I"" parti I;' or ,e ere wntmg was intended a an integration' " (2) if so whether the integratlOa'sra'total" and (3)I h'lellintegration, [177J 'wnet er particular evidencewould supplementthe terms ofa campUMl. Conflicting views'Cdi"T'~extremeiti.ourtslsagree about how the judge should makethese declswns,, wMintegr ti POSIlOdnsare: (I) the "[our comers" rule, by which the judge decideswhelher thereISAa Ion, an whether It IS tot I'd(2) etl"Corhin" vibhia or partial, by looking solely at the document: an,IRinclUding ew, Yw rch these' quest'are to be answered by looking at all avat'I ble eVldenc,yteslimon to dionsaMey,etermlOe the actllalillte/lfion of the partie , (I 77 -179], '2.rger clause: Most Contract',hewnlJJl1 constitutes the sale agrbSa "merger" clause, i.e, a clause statmg that t "taJo~ContamIlkely that Ihe Courtw'lleementfi d h etweea' " the pa rt'les, Th c presence' of such a causeImakes,IhcaJI not even consistentadditional'Im t e WnllOgt ha;e been mtended'as a total IOtegratlon"(in WhlC0pnor oral Orwntten terms may be hown), (178]IV. SITUATIONS WIlED.DOES NOT APPLY RE PAROL EVIDECE RULEA. FraUd mist kE.,'a e Orother voidab'!'aI1l'8)\lOtroduce e 'dIlty:Even if' ,,rty may'Il'VI ence of earlier oral aa wntmgIS a total integration,a pak a/cutSl ,;"lion, Orany other fact thatgr~~ments to show illegality, fralldduress, mistllke, laC bep3fOI~VIhence rule neverprevents tbe i~oud make the Contract void or voidableIn otber words, \te(#~r t at the Contractis voidable, [I~~~ Uctionof evidence tbat would show that no valid COI/tra 'v.Example: In order t ''I't)'ofA,the propea Induce Buyer to bofitab11, , that IItty, The parties then signI uy a rental property, Seller lies about the prrecilla,sa e Contract that contains a standard "merger" clause'.,le ,viIIIe Contractconstitutes theaI agreeb 'deDCe so ementetween the parties, The parol eVIfLU

INTERPRETATIONC-29not prevent Buyer from showing that Seller made fraudulent misrepresentations to induce him to enter into the contract.1. Particular disclaimer: But if the contract contains a very specific statement that 00 repre- sentations of a particular sort have been made, some courts prevent a party from showing that the disclaimer is false.Example: On the facts of the above example, suppose that the contract stated, "Seller has made no representationsor warranties regarding the profitability of the property, and Buyer has relied solely on his own investigation as to profitability."Some courts - though probably a minority -would prohibit Buyer from showing that Seller in fact made fraudulent misrepresentations about profitability.B. Existence of a condition: If the parties orally agree on a condition to the enforceability of the contract, or to the duty of one of them, but this condition is then not included in the writing, courts generally allow proof of this condition despite the parol evidence rule. [181-183]Example: A and B agree that A will sell a patent to B for $10,000 if C, an engineer advising B,approves. A and B sign a written agreement that seems to be complete, except that the contractdoes not mention C's approval. Nearly all courts would allow B to prove that the oral agree-Cment regarding approval was in fact made.AC. Collateralagreements:An oral agreement that is supported by separate consideration may bePdemonstrated, even though it occurred prior to what seems to be a total integration. [181]SUExample: ill a written agreement that seems to be a complete expression of the parties' intent,LA promises to sell B a particular