Contracts Outline Fall 2003

8/14/2019 Contracts Outline Fall 2003

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1Contracts Outline Fall 2003Coenen

Chapter 1 - Introduction

A. General Theories of Obligation and Remedies- elements for cause of action for breach of contract1. There has to be a promise2. The promise has to be broken

- a breaching party can recover damages when a breach of contract occurs when there is- substantial performance;- acceptance; OR - divisible contract case - you actually have part of the product in a tangible form

1. Remedies - 3 kinds1. Restitution - any benefit given to the D by the P2. Reliance - to put the P in the position the P was in had he never made a

contract, ie the position before the contract was entered into3. Expectancy - puts the P in the position she would have been had the contract been fully performed

- this is the standard measure of damages for breach of contract2. Sullivan v O’Connor

- P patient alleges that D doctor broke his contract by messing up her nose job- promises made by the doctor: fix the nose, only in two operations- the P was awarded money - and the D is appealing saying that the trial judgeshould have limited recovery to $622 (reliance damages)- the P appeals and says that the wants the expectancy damages - the difference between her new worse nose and her would-be way better nose

- the worsening of the P’s nose is recoverable under either expectancy or reliancetheory - since we have to put her in a pre-contract condition and when we have tocompensate for the diminution in value of her nose- the court says that it doesn’t have to choose between reliance theory andexpectancy theory

- pain and suffering from the 3rd operation are recoverable under both- Kaplan (the judge) seems to be leaning more towards reliance damages

- cause of action are suspect - doctors rarely promise specific outcomes- expectancy is excessive - factors suggest that moderation is appropriate,and the doctor was absolved of negligence at trial

3. White v Benkowski- Ds agreed to supply Ps with water prior to P’s buying of house next door - relationship deteriorated, and Ds cut of water, etc- contract drawn up by Joe - the real estate agent- biggest problem with the contract = ambiguity of the term “adequate water supply”- other problems - no renewal clause, non contingency plan to assess damages, nolimitations on water usage on either the supply or use side, quality of the water - there is a breach of contract claim - but the issue is on the remedies



- at trial, the jury awards compensatory damages of $10 and punitive damages of a bunch- appeals court struck the punitive damages and reduced compensatory damagesto $1

- Wis Sup Ct reinstated the $10 award - since the jury believed that this was predicated on actual injury- they agree with appeals court about the punitive damages - but say that punitive damages cannot be awarded in an breach of contract case- reasons for this holding -

- no such cases exist, relies later on persuasive authority from other jurisdictions, relies on Chitty, Simpson, Corbin - legal thinkers

Chapter 2 - General Theories of Obligation

A. Agreement with Consideration - the leading theory- consideration (per Restatement) = something (a performance or return promise)sought by the promisor given by the promiseein exchange for the promise

- courts are prepared to find there is consideration even if its clear that theexchange related motives - the appearing motives - of the promisor and the promisee are subordinate or subsidiary to other motives

1. Hardesty v Smith- lamp invention that turned out to be crap case - the buyer is claiming that theinvention was crap, so he shouldn’t have to pay- for a promise to be enforceable, there has to be consideration for the promise

- in this case - there is consideration - in return for the promise to paymoney, the seller transferred the rights to the invention to the buyer

- courts do not look at the adequacy of consideration- would have to measure the relative value of things- do not want the courts to become price judgers, etc

- so the buyer loses and has to pay for the crappy invention2. Dougherty v Salt

- Aunt Tilly and Napoleon case- she promises to give him money in the future if he is a good dude- there isn’t any consideration for the promise - no exchange took place, so the promise is unenforceable- based on the facts, it doesn’t show that the kid ever made a promise - so therewas never anything given by the kid to the aunt in return for the promise of theaunt to give money- could argue that the guardian filling out the paper is consideration - but thiswasn’t don in exchange for the promise - only incidental to the promise- a gratuitous promise is never enforced



- however, a completed gift is enforceable - since it is now in the promisee’s possession, and the promisor clearly had an intent to give- what if Napoleon had given Aunt Tilly a flower and a kiss after she gave him thenote - still not enforceable - since it wasn’t’ sought by the promisor

3. Fuller - Requirements for Consideration

a. functions performed by legal formalities1. Evidentiary - provides in writing or by notary evidence of contract iscase of controversy

- need evidence that the promise was really made2. Cautionary - to deter inconsiderate action - make sure that it’s thoughtout and not spontaneous3. Channeling - getting what you want on paper so that an outsider canunderstand it

b. substantive bases of contract liability1. Private autonomy2. Reliance on promise (expectation promise will be fulfilled)

3. Unjust enrichment (more immediate reason for judicial interventionthan just reliance)c. policies

1. An unenforceable promise is one that is gratuitous or not relied upon2. Half-completed exchange is more enforceable than when nothing hashappened ie Weiner, Seavy

4. Maughs v Porter - guy advertised in the paper that if people came to his auction, they might win anew car - P goes to the auction, wins the car and sues the D for delivery of the car - there is consideration for the promise

- something - the detriment of the promisee of going to the auction5. Hamer v Sidway

- there is a promise - if the nephew is good until he turns 21, the uncle will givehim $5000 - but the gift isn’t complete- there is consideration for the promise - the kid gave up his legal right to do the bad things- argument made by the uncle’s estate is that the giving up of the privileges benefitted the nephew - the court says that this doesn’t matter - there was consideration under the Restatement definition

6. Tramp Hypothetical- the promisee - the tramp - does what is asked and walks to the store - down the block - but the promisor runs up and says I revoke- this is a conditional gift - there is no consideration here, because her walkingdidn’t provide a benefit to the promisor - if you are in this world of conditional gift, you should look at the factor or whether the condition benefitted the promisor - because then it would be sought by the promisor in exchange for the promise

7. Baehr v Penn-O-Tex Oil- a promise is made - there is an assurance given that the assignee would pay theaccounts’ rent for the gas station



- court rules that there is no consideration- D debt assumer promised to pay Kemp’s rent to P lessor - the alleged promise is P’s promise not to sue the D - debt assumer - this is a something - but it wasn’t sought by the promisor (since there is nothing

in the evidence to indicate that he did seek it) - although you can

argue that it is in his interest since no one wants to be sued- another 2nd and independent reason that there was no consideration - there reallywas no forbearance - since he waited until it was convenient for him to sue- so the forbearance isn’t consideration since it wasn’t sought by the promisor OR given by the promisee

8. Springsteed v Nees- Sophia and George (Ds) make an alleged contract with the other siblings (Ps) tonot take the P’s interest in one property in exchange for the Ds getting all of another property- the consideration is forbearance (not asserting a claim) about the 2nd property- 2 doctrine of forbearance per Corbin

1. Colorable claim doctrine - claimant who forbears must have areasonable claim - a colorable claim2. Honest belief doctrine - all the forbearer needs to have is an honest belief in the claim - even if the claim is totally invalid- as a practical matter, the difference between these two doctrines mightnot be all that great

- the court says that the claim by the Ps isn’t colorable - says that it is clearlyinvalid- there was nothing in the evidence to say that the Ps had an honest belief in their claim - since they didn’t object to the division of the property at the outset (it wasthe Ds who raised the issue)

9. Dyer v National By-Products- employer gave employee the promise of lifetime employment- consideration for the promise - promise not to sue for the chopped foot- court applies the honest belief test here - and the case is remanded

- this test allows more cases to be tried and more Ps to win than thecolorable claim test - since all the P has to have is an honest belief

- they don’t apply the colorable claim test - although even the courts that allow thehonest belief test say that the absence of a colorable claim is evidence that there isno honest belief

10. De Los Santos v Great Western Sugar Company- transaction between the hauler and haulee (beet owner), deal is to pay money for hauling such tonnage as may be loaded, reverse promise is to haul the beets- here, the beet owner doesn’t employ the hauler enough, so hauler sues- court said that the haulee wins since he didn’t make a commitment to theagreement- haulee had complete discretion to use the hauler some, a lot, or not at all - the promise was illusory and there was no mutuality of obligation

11. Wood v Lucy, Lady Duff-Gordon- D promises to give P exclusive rights to her name and revenues from use



- she decides to use her name herself and the sales rep sues her - she argues that his promise was illusory - since there was nothing in the contractabout what he would have to do

- court says that he did make a promise - it was implied that P would use

reasonable efforts to make the money, court implies a duty- court relied on other terms in the contract - duties to account for profits, duties toget copyrights, trademarks, etc

12. Weiner v McGraw-Hill- employer promises to employee: the employee will not be terminated without just cause and promises to retain employee absent just cause for firing- the employee didn’t make any reciprocal commitment to employer - employee gets fired and then sues employer - court says that employee did give consideration

- gave up his previous job and benefits acquired- employee turned down other jobs

- employee did show up for work - for quite a while- don’t focus on the mutuality question - look for whether there is considerationfor the promise that P seeks to enforce

13. Mattei v Hopper - seller promises to transfer his land, buyer promises to pay $, subject to leasessatisfactory to the buyer - seller breaches the contract - saying that there was no consideration for the promise to sell

- says the clause about the satisfactory leases negates the considerationsince the buyer wasn’t necessarily going to buy

- court rejects this argument because the promisor’s duty to act in good faith wasconsideration- the promisee - the buyer - has made a return promise that is subject to acondition - but the promise is still good enough to be a something - and therefore,the argument of illusory and non-mutuality isn’t good

14. Ricketts v Scothorn- Grandpa promised that he would give Katherine $2000 and then she wouldn’thave to work - is quitting her job consideration - no - it is hard to say that she does it as a formof paying a price or making a trade for the promise- court enforces the promise - relying on the doctrine of equitable estoppel

B. Obligation Arising from Justified Reliance - Promissory Estoppel1. Elements

1. There has to be a promise2. The promise does induce action or forbearance3. Reliance has to be of definite and substantial character 4. Situation where injustice can only be avoided by enforcement of the promise5. Promisor must reasonably expect to induce action of definite and substantialcharacter that does in fact occur



2. Kirksey v Kirksey- suit brought by Antillico - who sues her dead husband’s brother - because he promised to give her a gift of land and a house and then breached the promise- she doesn’t win - court says that the promise was a gift- he said that if she moved out to his land, then he would give her some of the

land and a house to live in - through a letter - court rules that this was just a condition of the promise- difference from the tramp hypo: the tramp had nothing to lose by walkingaround the corner - could argue the decision is wrong, since she had much to lose by relocating- then have to figure out if the dead husband’s brother would benefit by her moving - court says no - but there are arguments that he would- there is a cause of action for promissory estoppel here

3. Ryerss v Trustees of Presbyterian Congregation of Bloosburg4. Seavey v Drake

- P seeks to enforce the promise of land given to him by his father

- son had given a $200 note to his father - but this isn’t consideration, since ithappened after the promise - and not at the same time- the son also built a building on the property - but this isn’t consideration - sinceit wasn’t sought by the promisor - court apples a specialized reliance doctrine - the part-performance doctrine

- enforces the promise because of the particular reliance on theimprovements

5. Siegel v Spear & Co6. Wheeler v White

- person who wants the loan doesn’t do much work, because of assurances of loan-arranger - court says the contract isn’t detailed enough to be enforceable- but the elements of PE are established

- there is a promise- the promisor should have reasonably expected forbearance from the promisee - because there was an added reassurance that the loan wouldcome through- the reliance was of substantial character and the promise induced

reliance- justice can only happen if the contract is enforced

7. Hoffman v Red Owl Stores- Hoffman relied in various ways for the contract to go through - he bought site,sold stores, etc.- can’t sue for breach of contract because there were promises, but there was no K - the facts are good for PE - but Wisconsin hasn’t adopted the law yet- argument that there isn’t PE - it was stupid to engage in reliance on indefinite promises- this contract is enforceable - because it is necessary to prevent injustice

8. Aretha Franklin case



- broadway show promoter spends lots of time and money to try and get Aretha tocome - negotiations are all but final - she gets scared of flying and doesn’t fulfill- promoter wins based on PE - since he worsened his situation on reliance of her fulfilling her end of bargain despite indefiniteness of the K

9. Local 1330, United Steel Workers v US Steel Corp

- company spokesperson tells employees that whether or not the plant becomes profitable will be a huge factor whether it will close or not- the plant isn’t profitable and the plant closes - the employees sue- cause of action for promissory estoppel fails because

- the conditions of the promise weren’t fulfilled- key step in the courts reasoning: the company didn’t breach the promise, because the condition under which it was bound to keep the plantsoperating never occurred

C. Obligation Arising from Unjust Enrichment1. implied-in-fact contract

- has elements of binding agreement- courts can infer a contractual relationship based on circumstances andsurrounding contexts, even if there isn’t an expressed or written promissoryexchange- to establish an implied-in-fact contract to pay for services

1. Services carried out so recipient should understand that a) performed for recipients and b) services were gratuitous

2. 2 limitations on ability to recover under UE theory (per Dobbs)1. Volunteer - gave it as a gift2. Intermeddler - didn’t give the opportunity to prevent the gift- in a situation where there is no opportunity to reject the benefit, UE can’t occur in the absence of some special policy

3. Bloomgarden v Coyer - introduction by Bloom, the deal-arranger, or Coyer to Carley - which whomBloom has a pre-existing business relationship- Bloom never mentioned his expectation of a finder’s fee - and the Ds thoughtthat he was going to benefit by increasing business or something- cause of action for unjust enrichment isn’t good - since he never told the peoplethat he wanted a finder’s fee - and even when he did insinuate it, it was after heintroduced the people (essentially never giving them a chance to turn it down)- here, the Ds weren’t unjustly enriched - since they didn’t have a warning thatthey were going to have to pay - and thus couldn’t prevent the action

4. Dog house painter hypo- a painter mistakenly paints wrong house, while the owner watches, but doesn’tstop him - can the painter recover under UE? Yes - the owner was unjustlyenriched - since he had the opportunity to stop him and didn’t

5. Brown v Brown- courts will presume that services rendered from one sibling to another aregratuitous

6. Sparks v Gustafson



- G sues the Sparks estate to recover money for G’s services rendered- G manages Sparks’ building for many years and then sues for money after Sparks dies- using Brown, could argue that there was a relationship established between Gand Sparks that G was willing to manage the property for free

- and he doesn’t sue for the services until after Sparks is dead - indicating that hedidn’t intend to get money from Sparks- but G gets money here because his actions as manager can’t be consideredgratuitous - they went above and beyond what a friend would do

7. Gay v Mooney- the P - nephew-in-law and his wife - house the wife’s uncle for many years prior to his death - and they did this in exchange for him giving a house for thenephew’s kids- the breach of contract cause of action doesn’t work because this type of transaction needs to be in writing- the terms of the unrecoverable contract are determinants with respect to the UE

cause of action- P wasn’t a volunteer - since the lodging wasn’t a gift- P wasn’t an intermeddler - since D promised the house and there was adeal

- there was UE because his living there was based on a condition8. Kerns v Andree

- P and D have an oral contract that D will buy a house if P makes certain changesto the house- P makes the changes, then D decides not to buy- P finds another buyer, but has to make other changes- court says that P can recover money spent by fulfilling D’s demands - since it iswhat D wanted, if D had continued with the contract, he would have benefitted- the money spent making changes to suit the new buyer aren’t recoverable - sincetheses didn’t benefit the D

9. Posner v Seder - cause of action - quantum meruit - reasonable value - of services- P sues employer for overtime worked - his contract said that he would be paid$17/week for an entire year - regardless of hours worked - the D fired the P, so D broke the contract- court says that the P is allowed to recover the reasonable value of all servicesrendered to the employer - issue is how to determine that given the contract- P claims that he should get money for overtime worked thus far - D claims that P should get nothing - since the contract said no matter how manyhours he worked, he was going to get $17- neither theory is right per the court - P should be able to recover for all servicesminus the money received- sent for retrial - to determine hours worked

10. Kelley v Hance- contract is that the P will build a sidewalk and curb for D, P breaches thecontract after completing some of the work



- P sues for recovery for services performed - but loses - since there wasn’t asubstantial amount of the work done

11. Britton v Turner - P and D had a contract for employment and P breaks it early- P can’t recover on breach of contract theory

- but can P recover on UE theory? Yes- an employer contracts to receive services, so this is different from Kelley -where the D contracted to receive a whole sidewalk - a finished product- concern about treating employees unjustly or unequally - a person who breachesafter a term of employment gets treated worse than someone who breaches after just one day

12. DeLeon v Aldrete- P defaulted after paying some money towards a tract of land, and wants to gethis money back - D sold the land to another person for a $200 loss- here - the non-breaching party got expectancy damages - the $200 that they took as a loss

- but the court permits the P to recover the $800 that the Ds were unjustlyenriched by the payments of the P12. Watts v Watts

- case is a review - to remind that where one renders services, can assert anexpress claim, an implied-in-fact claim, or an UE claim- court finds here that a co-habitating non-spouse can pursue any suit

13. Variant Terminologya. Unjust Enrichment b. Restitutionc. Quasi-Contractd. Quantum Meruite. Common Counts

D. Obligation Arising from Promises for Benefit Received1. Mills v Wyman

- the promisee cares for the son of the promisor, who is an adult, until the son dies- this occurs for 15 days an involves much effort- father promises to pay for the services that have been rendered, and expensesthat promisee had to incur - there isn’t consideration - since the services weren’t sought by the promisor inexchange for the promise - and since the services pre-date the promise- there is a moral part to this contract - but because there was no pre-existingconsideration then it is no enforceable

2. Webb v McGowin- P prevented the block of wood from falling on the D at the expense of injuries to

himself - the D paid him for his services until the D died- now the P is suing D’s estate to continue the payments- the court does enforce a promise to pay based on a moral obligation



- this promise was obviously made cautiously - since there was 30 days betweenthe act and the promise and the D had paid Webb for so long before his death

3. Boothe v Fitzpatrick - promise to pay for past keeping of bull- the care of the bull wasn’t requested by the promisor in exchange for the

promise - no classical consideration - because there wasn’t a trade - it’s a pastconsideration case- held to be enforceable because of material benefit- point of this is that subsequent promise is equivalent to the acceptance of the benefit

4. Harrington v Taylor - P prevents the D’s wife from chopping D’s head off with an ax- D then promises to give P payment for saving his life - P sues to get the damages- this action for promise for past benefit received isn’t sustained

5. Edson v Poppe

- two different Poppes - the father and the son- the land-owner William rents the land to tenant George - and George has adriller come on and drill a well- the land-owner promises to pay for the drilling, then refuses to pay- 2 defenses in this case: never made the promise, no consideration- cause of action here is for breach of promise - factors:

- was the benefit definite and substantial? Yes- was the promise formally made? No- part performance? No- reliance on the promise made by the land-owner? No- promise is specific amount? No

- court says that because this is so close to an UE situation, the additional promise pushes us over the edge

6. Concept of moral obligation

E. Obligation Arising from Tort1. Ways tort and contract law fit together

- there is a tort cause of action - intentional interference with contractual relation- tort cause of action for promissory fraud

2. Mauldin v Sheffer - concerns whether the non-performance or misperformance of a contractualobligation is non only a breach of contract, but also a tort matter - oral agreement for D engineer to give designs to P architect to use in his bid for a building contract - D’s designs were wrong, so P lost the contract and other contracts - P sues for expectancy damages and punitive damages (to deter future bad acts)- principle - there has to be a breach of legal duty to be sued for tort action

- decide whether there is a legal duty by statute or common law- in this case, there is a legal duty, because the D was a professional and thisimplies a legal duty



3. Distinction between non-feasance and misfeasance- non-feasance - not performing under the contract at all = no tort action- misfeasance - performing your duties, but doing so only partially or doing soincorrectly = yes tort action

4. Foley v Interactive Data Corp

- P claims D fired him unfairly - not in good faith - because he was awhistleblower - court dismisses the case- you can’t sue for a tortious, bad faith breach of contract- this is distinguishable from bad faith breaches by insurance companies

- insurance companies supply a service that is a public interest- unless punitive damages are available against insurance companies, theremay not be an incentive to pay - since compensatory damages are only theamount of the claim originally

5. Hargrave v Oki Nursery- D sells diseased vines to P

- alleged fraud in this case is that the D knowingly promised healthy vines, butsent diseased vines- seller’s argument - action should only be for breach of contract - since it said inthe contract the rights and responsibilities of the seller

- counter - you can have both an action for breach of contract and one for atort claim

- elements of fraud:- representation of a material existing fact, falisity, scienter, deception, andinjury

6. Products liability- occur mostly when people are in sales transactions- the Restatement, and most jurisdictions, recognize this tort cause of action for the delivery of defective products- 3 things:

1. No privity of contract is required - can sue for product liability eventhough you are not in a contract at all2. You can’t contract around this tort based cause of action - comment m2-3163. You’ll discuss it in torts

F. Obligation Arising Solely from Form- seals and crap don’t really mean much today

G. Obligation Arising from a Statutory Warranty1. Keith v Buchanan

- P is dissatisfied because he bought a boat that he doesn’t like - says it’s notseaworthy - so he sues the seller

- claims that P asserts -- breach of express warranty - something stated or written



- breach of implied warranty - implied through the actions and interactions between seller and buyer

- could assert- breach of contract - but have to look at terms of the contract- UE - probably not

- breach of implied warranty of fitness for a particular purpose- there’s not a claim under the Song-Beverly Consumer Warranty Act- there was no written undertaking to preserve or maintain the utility or performance of a consumer good or to provide compensation

- what express warranty was breached according to the P?- the representations about the seaworthiness of the boat

- hypo - the salesman says it’s a super duper boat - probably not a good claim,since it would be characterized more as an opinion rather than statement of fact- why does the court say that there is not an opinion in this case, but a descriptionof the boat and an affirmation of fact?

- opinion indicated by:

- lack of specificity in statement- a statement that is made in an equivocal manner - or a statement which reveals the goods are experimental in nature

- statements made in negotiation are presumptively an affirmation of fact- statements made in advertising brochure can create express warranties

- another aspect - the statement of fact has to be part of the bargain- this doesn’t mean that the statement has to be relied upon by the buyer - it is enough that the statement is a factor or consideration in the basis for the bargain

- hypo - brochure said the cabin of the boat is orange - but the cabin turns out to be blue - can he sue for breach of express contract?

- yes - it wasn’t in accordance with the contract- no - he walked on the boat and saw the cabin and bought it anyway

- in this case, why does the court throw out the breach of implied warranty of fitness for a particular purpose?

- P didn’t rely on the seller - but on his own knowledge and the experts2. Webster v Blue Ship Tea Room

- fish chowder with a fish bone in it is still merchantable - since the goods were fitfor the ordinary purpose for which the goods were used - and everyone knows thatthere are fish bones in fish chowder

3. Used car hypo- Coenen goes to dealership and says he wants a good used car and thesalesperson drives one out - Coenen then test drives the car - he drives it home and it falls apart - causes of action?- implied warranty of fitness for a particular purpose? No

- he didn’t rely on the seller’s skill or judgement - since he took it for a testdrive

- breach of express warranty? No- there was no specific language stating that the car worked

- other side - the seller said that it was a good car



- have to figure out whether this was an affirmation of fact with respect tothe car or just an opinion or commendation?

- tend towards opinion - because the statement lacks specificity- was the statement part of the basis for the bargain?

- should know that good car is a statement of opinion - plus, he

shouldn’t rely on it anyway - since he’s a used car salesman- breach of implied warranty for merchantability?- can’t argue that the buyer hd a particular purpose, but can argue that thecar wasn’t fit for ordinary purposes- there is a good cause of action for this breach

H. Statute of Frauds- this is a pervasive and important defense- in certain settings, according to the SoF, the situation will require that the promise be put in writing- 4 questions to ask in any SoF case

1. Does the SoF apply in this case?

2. If the case is within the statute, does a memo, note, or other writing satisfy thestatute?3. If the case is within the statute and there is no note in writing, does the statuteof the case law recognize an exception?4. If the case is within the statute, there is no complying writing, and there is noapplicable exception, does any other doctrine mitigate what would other be theeffect of non-compliance?

1. Howard Schoor Associates v Holmdel Heights Construction Co- D - lawyer for company - made promise to pay Ps for money company owed- attorney says that he’s not liable - since the promise violates the statute of frauds- main purpose doctrine

- when you make a promise to pay for the debts of a 3rd party = suretyagreement- when someone makes a surety agreement for their own interest, the SoFdoesn’t apply

- here, the D was a creditor - by giving the money- and D was the attorney for the company and the major stock holder - so he hadan interest in the company succeeding - so the SoF doesn’t apply to his agreementand he is liable

2. Jonesboro Investment Corp v Cherry3. McIntosh v Murphy

- alleged contract here - the employee P would work for the D employer for oneyear - so P moved to Hawaii to start the new job and D fired him after 2 ½ months- D claims that the contract isn’t valid under the SoF- whether it’s acceptable under the SoF is determined by when the contract datestarted - whether it started on the Saturday that the P called to accept the offer or on the Monday that he actually started work - trial judge gets around this problem by saying that he isn’t going to count theweekend - although this is shaky reasoning since the statute doesn’t say anything



about counting weekends and you would count weekends in the normalemployment contract- trial judge is probably looking for an excuse to take away the SoF defense - because the employee relied on the promise- this goes towards question #4 - there is the doctrine of equitable estoppel and

reliance that would mitigate in this case - and he can succeed on this- dissent: the jury should be able to decide when the contract started- it appears that the P in this case receives expectancy damages- factors to look at to see if there should be an exception:

- evidence that corroborates the making of a promise- P performed the contract for 2 ½ months- although you can say that this just proves that he was employed,not that he had a contract- making and terms are otherwise established by clear andconvincing evidence - evidence here doesn’t show that the contractwas for one year

- P moved to Hawaii - shows he did rely on some terms- was there definite and substantial reliance- depends on your view of how aggressive courts should be inapplying the statute of frauds- he did move to Hawaii - but, it’s Hawaii, how bad is that?

4. Hypo - person in Hawaii promises to sell an elephant to a person in CA for when hemoves to HI to open up a petting zoo - then the seller says no

- seller asserts statute of fraud defense - since the sale was for more than $500- exceptions that might apply in this case

- 3a - problem that the buyer has in invoking this - the elephant isn’tmanufactured- 3b - doesn’t apply- 3c - we would need to know more - but presumably the answer is no

- can you assert this PE exception under 2-201 of SoF?- yes - cite McIntosh v Murphy- no - argue 1-103 - principle of law or equity - here estoppel - is a purposeof the UCC- yes - the UCC doesn’t always use the principles - if they are displaced bya particular provision of the UCC

- and if they wanted to write in an exception they would have- courts are divided on this - some say that it should be inferred and otherssay that it was purposely excluded

Chapter 3 - Remedies

A. Expectancy Damages for Breach of an Agreement with Consideration1. Groves v John Wunder Co

- both sides are looking for expectancy damages here, but measuring them indifferent ways



- P and D make a contract that D will use P’s land and then grade it - but Ddoesn’t grade the land- owner lessor seeks - the value of the completed performance of the grading- lessee says that he should have to pay the value of the land as completed - minusthe value that it is now

- majority thinks that the cost of completion is the proper measure- the owner is entitled to what he has lost - the lost work - but has he reallylost anything?

- dissent thinks that the value of the completed land minus the present valueshould be the measure

- what the owner has lost is the value of the improvement- hypo - Coenen wants a statute of Fuller on his roof and the contractor leavesmid-way through and says that he is doing Coenen a favor, since the statute woulddecrease the value of the land

- Coenen recovers the cost of completion - since he can do whatever hewants with his own property

- here, the owner didn’t specifically contract to have his land graded - this is the problem and where the majority and dissent split- best case for the P-owner-lessor? Manure case - where the manure-spreader claimed that if he did his job, the land would be less valuable - and the farmowner got the cost of completion- best case for the D? Dry oil well case - difference in value of the land is the proper measure- how would this case come out under different theoretical frameworks?

1. Economist- the dissent is correct - since the grading would cost $60,000 andyou would only get a $12,000 benefit

2. Making of contracts should be facilitated and formed- majority provides incentives for lessors- dissent provides incentives for lessees

3. Pastor - do the right thing- majority wins - keeping your promise is the important rule

4. Concerned about unjust enrichment- dissent rules - because the cost to grade is far greater than thevalue

2. Peevyhouse v Garland Coal and Mining Co- P and D have contract allowing D to strip mine and then do restorative work - if the damages for completion are grossly disproportionate to the increase invalue to the land, then they should not be awarded- court awarded the $300 increase in value to the land, not the $25,000 cost of completion

- there is a statute in this case that says this - and the court relies on this3. Rock Island Improvement Co v Helmerich & Payne

- another mining case - where D didn’t reclaim the land- court concludes that the correct measure of damages is the cost of completion



- because statutes have been enacted- the statute (and this case) overturn Peevyhouse - but only because the statuteshave been enacted- the statute doesn’t specifically talk about cost of completion damages for breachof contract - but the court says that the statute changes everything - because it

articulates an underlying policy of the state that didn’t exist when Peevyhousewas decided- criticism - interpretation of the statute didn’t give the parties notice - sincePeevyhouse was still on the books up until this case

- in Groves, Peecyhouse, and Rock Island -- in each of these cases, the court assumes that remedy should be money- could order specific performance - this would be good since the injured partywill get what they contracted for - and this would prevent P from using the moneyfor something other than completion- could order restitution damages - but this might not come close to putting the person in the position that they would have been in without the contract

- what would be wrong with juries deciding these cases?- inconsistency in the application of the law involving disputes- can discourage people from entering into contracts in the first place- juries don’t understand technical issues

3. Radford v De Froberville- before giving cost of completion - see if the owner is really going to complete

4. Freund case- author wants the cost of manufacturing the books that didn’t get made since theD broke the contract- court rules that he can only get royalties - and since these weren’t adequatelyspecified, he doesn’t get these

5. Thorne v White- involved a breach of a building contract - by the builder - the owner then contracts with someone else to build the roof - and then sues for the difference in costs- court finds that there is a difference between the work asked of the breaching builder and the work from the new builder - the new builder did more things- if we award the difference - we are going to put the owner in a better positionthan if the contract had been fully performed- if the work was the same in both contracts - than he would get the difference incosts

6. Warner v McLay- the owner of the property breaches the building contract- the builder has a right to recover lost profits - from not being able to completethe contract- why didn’t the builder win? The two parties don’t have the real figures- the builder isn’t seeking the actual profit, but a reasonable profit - and this wouldnot necessarily put the builder in the position that he would have been in if thecontract had been fully performed



- you have to take into account the net profit, the total amount of expendituresthus far, and the gain that the builder has retained- ways to measure damages:

- full contract price minus the amount saved by the builder cause by the breach

- to recoup costs incurred plus the net profit the builder would haverealized had the builder been able to finish the project and get the fullcontract price- full contract price = D- costs avoided = C- costs incurred = A- net profit = B- so A+B+C=D

- then subtract C from both sides of the equation- A+B=D-C

- so you can measure the builder’s damages in both ways and they make

sense7. Handicapped Children’s Ed Bd of Sheboygan County v Lukaszewski- Luk took a job with the school, but then breaches when she finds job with moremoney - the school then has to hire someone - who is more experienced and costsmore- the school is suing saying that Luk should pay them the difference between her salary and the new person’s salary- she says that the new person is better than she was, so the replacement isn’t thesame as the original - but this doesn’t matter, since this new person was theschool’s only option- this is a case of efficient breach - the extra money that she would make at her new job would be more than the damages that she would have to pay the school -so she would come out with more money anyway

8. Concept of Efficient Breach- should people be encouraged to efficiently breach a contract?

- economist? Yes- pastor? No - contracts should be honored

- idea behind it is that it increases overall societal welfare9. Cooper v Clute

- seller contracts to deliver cotton to buyer, seller sells cotton to someone else for more money- buyer sues for the difference in price - but gets nothing- buyer gets nothing - because the market value for the cotton is the original pricethat contract was for - so to replace the cotton would have cost the buyer nothing- the important date is the date that the buyer learned of the breach (per UCC)

10. Neri v Retail Marine Corp- case where there is a breach by the buyer of a contract to buy a boat and therehas been a purchase price of $12,500- there is a deposit of $4250 paid to seller, seller orders the boat for a wholesale price of $10,000, the buyer then breaches



- the seller sells the boat to a 3 rd party for the original purchase price - but incurs$674 in incidental costs and $1250 in attorney’s fees - suit by buyer andcounterclaim by seller - trial court says that seller only gets to keep $500 in statutory damages - so the buyer gets back $3750 - per sec 2-718(b) of the UCC

- but the trial judge doesn’t read until the end of the statute - where it says that the buyer’s right to restitution can be offset by other things- so the seller should recover his lost profit

- difference between 2-706 and 2-708- what the trial judge should have done was take the deposit and subtract that fromthe lost profit - and then take off the $674 in incidental expenses- argument that the buyer shouldn’t get back the deposit - it was liquidateddamages - and rules in 2-718(1) prohibit recovering these

- rules in 2-718(2)(b) - situation where there is a deposit - and should get back either $500 or 20% of deposit, whichever is less - in this case, $500

11. UCC provisions

- 2-708- sub¶ 1 - focus on can the seller get difference in value damages under this sub¶ - if the seller resells the goods and makes a good deal - better than the market price?- sub¶ 2 - deals with the lost volume seller situation and the situation of the special manufacturing seller - who doesn’t complete the work

- 2-718- sub¶ 1 - liquidated damages- sub¶ 2 and 3 - specialized situation where the buyer makes a deposit andthen the buyer refuses to take delivery and tries to get the deposit back

B. Availability of Lost Expectancy Damages- the most important provision of the UCC is 1-103(b) - that says that the principles of law and equity are sucked into the UCC1. Hadley v Baxendale

- there is a broken crank-shaft and the D is contracted to take it to the repair shop, but D negligently doesn’t take it on time- 2 types of damages

- general - arise generally from the contract- special - or consequential - arise from specific circumstances

- P sues D to recover lost profits - special damages- judge says that special damages are only recoverable when both partiesunderstood they would be recovered - reasonably contemplated- judge says that the result would have been different if the facts were different -ie if the shippers knew that the mill was stopped until they got the crank-shaft back

2. Armstrong v Bangor Mill Supply Corp3. Clark v Marsiglia

- after the owner of the painting tells the repairer to stop, the repairer keepsworking - and then the repairer sues for the full contract price



- court says the owner doesn’t owe the repairer anything - since he said stop- fairness - it’s not fair to pile damages needlessly- efficiency - it’s inefficient to do work that no one wants anymore - it’snot socially valuable

4. Shiavi Mobile Homes v Gironda

- seller could have sold trailer to breaching party’s father, but didn’t- was the father’s offer valid? Court says that it doesn’t matter - even if it wasn’tan offer, a reasonable person would still have pursued the utterance of the father to see if the father would make a deal

5. Duty to Mitigate Damages- try to make the damages as small as possible - ie sell or replace when you havethe chance- the decision to mitigate or not is quite consequential

6. Lost Volume Seller Principle- in the Mobile Homes case, the seller resells the mobile home and then seeksdamages under 2-706 for the difference between the contract price and the resell

price - this may have been a lost volume seller situation - so should he havesought damages under a different provision of the UCC?

- Olds case - p 264 - about a lost volume seller of services- do profits on job b mitigate damages on job a - which was wrongfully breached?- this will be determined when you figure out whether he was a lostvolume seller

7. Parker v Twentieth-Century Fox Film Corp- Shirley McLaine case - she was contracted to perform in one move, D breachedthe contract and offered her a part in the other movie- she doesn’t take the other part and sues for her salary - the D says that she didn’tmitigate her damages (by taking the other part)- trial judge awards summary judgement to the P - Shirley gets her money- dissent: should have gone to the jury - since the judge was really determiningsome issues- is determining whether the employment was inferior or different an issue of factor an issue of law?

- issue of fact - the problem is a question of reasonableness - which shouldgo to the jury- issue of law - majority says that as an issue of law, the two jobs werevery different

- how do we answer the question about whether the job was different or inferior?- go to the jury - but we can’t do this every time- expert testimony - ie how common are approval rights in the movieindustry? - still have the problem about deciding inferiority- is there an affidavit from the P herself - talking about whether she wouldlike one job over the other - have to decide what it means to be inferior or different



- policies underlying the limitation on an employee’s duty to mitigate - such thatan employee doesn’t have to take work if the court deems it to be different or inferior

- it’s not fair to make the employee take a job for which he isn’t trained or experienced

- how do we determine what is fair?- honoring the expectation of the employee- shouldn’t make the employee do what is unfair or unreasonable- more specific - shouldn’t make the employee suffer mental or psychological distress- concerns of being humane and forcing an employee into a lesser economic or social status

- per Hillman - p 263 - it wouldn’t be fair to expect the employee to mitigatedamages from the contract-breacher

9. Evergreen Amusement Corp v Milstead- delay in building, owner sues for lost profits

- court rejects introduction of evidence of profits that the same theater made whenit really opened - since you need specific numbers, not general ideas- maybe compare it to the first 2 months that it did actually open - and thencompare this with the 2 months of the next year that were the same two monthsthey are trying to recover for

8. Lakota Girl Scout Council v Havey Fund-Raising Management- trying to reduce damages recoverable because of speculative nature of lost

profits- jury awards way less than the P is asking - but the stupid D still appeals- why is this evidence of lost profits worse than that in evergreen?

- appears to be pie in the sky; the amount raised was way far short- their damage computation was done based on their own company - not a projection, but exactly what really did happen

- why is this evident of lost profits better than that in evergreen?- former campaign director testifies that the goal was reasonable; Heaveyhimself also testified that goal was reasonable

9. Chrum v Charles Heating and Cooling- D installed furnace for P, furnace caught fire and burnt all of P’s stuff - mental distress damages aren’t recoverable for breach of contract - except wherethe contract is intensely personal (ie surgery)- in Michigan, in order to recover for a tort, you have to show an objective andsubstantial physical injury - although not physical impact

- why? To have some objective proof of the harm- there probably isn’t a tort case here - since they just had emotional distress

- but if there were stressed so bad that their hair fell out, this might be atort claim

- compare White v Benkowski - where there was just a little impact - and here theloss was great, so they should recover

10. Punitive Damages in Contract Cases11. Qualifications and Limits on Lost Expectancy Recovery



- denial of atty’s fees- Am rule - subject to 2 exceptions

1. Where the parties contract around the rule - this frequentlyhappens - esp in contracts for collection of debts - enforceable tothe extent that the fee is reasonable

2. It’s a common law rule - and can be trumped by statute- ie Truth in Lending Act, Magnuson-Moss Warranty Act(you can’t disclaim an implied warranty when the seller makes an express warranty 108-A)

- recovery of pre-judgement interest on non-liquidated amounts of expectancydamages

- the law on this subject varies from jurisdiction to jurisdiction- forseeability limit- speculation- mental distress

C. Reimbursement of Reliance Costs as an Alternative Remedy Where There is a Breach of anAgreement with Consideration

1. Nurse v Barns2. Chicago Coliseum Club v Dempsey

- cause of action for breach of contract - there is clearly a contract and a breach- issue is damages - question is what can P recover?- how do we decide this?

- look at expectancy damages - not permitted - too remote andunpredictable- they can recover damages incurred after signing the agreement and before the breach

- where expectancy damages are too indefinite, P can recover reliance damages

- can P recover the money paid to the other fighter? No- P never even paid the money - so there was no loss - so no recovery- this money was contracted before and apart from the contract with D

- another category of damages - expenses incurred in attempting to restrain the Dfrom engaging in other contests and to force him into compliance ie injunction

- not recoverable - court says that after the breach, anything that you doisn’t recoverable - even though the money wouldn’t have been spent if thecontract hadn’t been entered into

- things that might be recoverable- expenses of Weisberg - not likely to get recovered - because there is noreason for P to pay for the money that Weisberg is out- $10 to Dempsey - most sure thing - according to Fuller - reliancedamages, but also restitution damages, since it enriched D- $300 to architect - would get on a reliance theory (wouldn’t get onrestitution - but this doesn’t matter)



- wages to asst secretaries- salaries of regular officers - least chance of recovering - since they wouldhave to pay for these people anyway- money to get Hoffman to Colorado for Dempsey physical- money to get to LA for signing of contract

- Shank/RR arrangements3. Autotrol Corp v Water Systems Corp

D. Validity of Clauses Providing for a Specific Monetary Remedy in the Event of Breach or Repudiation of an Agreement with Consideration

1. HJ McGrath Co v Wisner - concerns a liquidated damages clause- traditional test for assessing the validity of a clause:

1. Were the damages not susceptible to accurate estimation2. The damages must be a reasonable forecast of the non-breaching party’sactual damages

- if the clause doesn’t meet these requirements, then it is termed a penaltyclause and is unenforceable - why?- because we should presume there was some sort of bargainingwrongdoing- penalties don’t seem to unjustly enrich the non-breaching party

- there is a farmer and a cannery who make a contract that the farmer will deliver all of the farmer’s tomatoes to the canner - if the grower breaches, he will payliquidated damages of $300- grower does breach - selling to higher amounts, canner seeks $300 in damages- CA Sup Ct says this clause is unenforceable - because the damages formula herewasn’t a reasonable forecast of the actual damages

- court said that the damages could have been accurately computed - bytaking the cover price

- if this happened today, UCC 2-718 would govern the case - so the 2-part testwouldn’t be applied - and the liquidated damages clause would be upheld

- since the amount was reasonable and comparable to the actual harm2. Better Food Markets v American Dist Telegraph Co

- the burglar alarm use contracts that they will get only $50 liquidated damages if the company breaches their contract- court applies 2-part test - although this doesn’t make sense, since it’s the owner of the store that is saying that the liquidated damages clause isn’t enough to cover the losses- in looking at this through the UCC - look to see whether the clause isunconscionable- if we characterize the clause as a limitation on damages clause - this changes theanalysis

E. Monetary Remedies Where the Theory is Promissory Estoppel1. Williston and Coudert car hypo

- uncle promises Johnny $1000 to buy a car, but Johnny buys one for only $500



- does Johnny get the extra $500?- no - Johnny would be unjustly enriched if he got the money

- there is an argument that both are wrong - since there was no consideration for the promise

2. Goodman v Dicker

- promise to deliver radios and to permit the franchisee to have a franchise breached- court finds no finalized contract here, but permits an action for PE - since thefranchisee relied on the promise to his detriment ($1150)- damages awarded by the trial court - reliance damages of $1150 for setting up

the store and expectancy damages of $350 for lost profits- but the court seems if-y to let an award for both reliance and expectancydamages stand- argument that he shouldn’t have gotten the $1150 - he could have used it to buyother things, he would have had to spend this to get the profit- use Restatement 90 to argue that expectancy damages should be a cap on awards

3. D&G Stout (General) v Bacardi Imports- court deals with the type of PE where the relied upon promise is the promise toemploy in an at-will relationship- Bacardi promised to General that it would remain Bacardi’s distributor - soGeneral didn’t sell the company- then Bacardi withdrew their account from General and General had to sell the business for $550,000 less than the original offer - B sues to recover difference- contract was terminable at will - and this matters because then there were noexpected profits- court holds that it was reasonable for General to rely on the promises made byBacardi - even though their relationship was at will - since B knew that G wasentering into negotiations - so B made the promise in a particular context that itknew was important

4. Walters v Marathon Oil Co- P made improvements to gas stations, based on promises made to them by D thatD would supply them with oil for their station - but before this happened, Dstopped giving out new contracts- court seems to say that this is the exceptional case where expectancy damagesare recoverable because this would put the P in the position he would have been inif the contract hadn’t been entered into- did the franchisees take reasonable steps to mitigate their damages?

- court blends the facts, common sense, and the law in determining whatthey tried to do- they didn’t try to contact D, but they aren’t expected to have done this

- even assuming proper mitigation, are damages too speculative?- yes - cite new business rule - can’t recover lost profits, since they aretrying a new business- no - expert witnesses; and it isn’t a new business anyway - since therehad been a gas station there before



F. Restitutionary Relief and Theories of Obligation1. Where a Non-Breaching Plaintiff Conferred a Benefit and Elects RestitutionaryRecovery

a. US for Use of Susi Contracting Co v Zara Contracting Co- there is a material breach of contract - and based on this breach, the non-

breaching party elects to seek restitution rather than expectancy damages- the P grader seeks payment for unexpected costs created by difficult sub-surface soil conditions - weknow that under the contract itself, thegrader wasn’t entitled to any extra costs

- there is no cap on the recovery - ie the limit in the contract is not thelimit for possible recovery- because the D is the one that defaulted, the P can waive the contract andsue in quantum meruit

b. Johnson v Bovee- it is appropriate to cap the restitutionary recovery even of a non- breaching P suing a contract-breaching D

- court says that the cap should be the contract price - and % completionshould be paid as a % of the contract price for all the work 2. Where a Non-Breaching Plaintiff Conferred a Benefit but had a Negative Expectancy

3. Where a Non-Breaching Plaintiff Conferred a Benefit but Cannot Prove LostExpectancy

a. Bausch and Lomb v Bressler - P pays D $500,000 to be the exclusive distributor of D’s products- D breaches the contract- buyer can’t recover $500,000 on expectancy theory - because it’s notrelated to expected profits- reliance theory? No - the reliance would be offset by the loss - and therewas evidence that this was a losing contract - so, under the theory of theAlbert case, you can’t get damages based on reliance- restitution theory? Have to ask sub-questions...

- can a non-breaching party recover restitution damages if the other two measures are unavailable? Yes - although there has to be asubstantial or material breach - which there was here

- the P won’t get all of the $500,000 - it needs to be off-set by the valuethe Ps received during the period before the contract was breached

b. Osteen v Johnson- same kind of case as B&L and Zara - non-breaching party sues thecontract breaker - rule: if there is a breach, you can get restitutionary damages- hypo - the breach was a supposed mis-listing of the other person as co-author of a song - no recovery, since the breach wasn’t material- here - the breach was material - failure to put out the 2 nd record

- so she gets $2500 paid to promoter minus the benefit conferredon her by the D promoter



4. Where the Plaintiff has Materially Broken the Contract After Conferring a Benefit5. Where the Plaintiff has Conferred a Benefit but the Contract is Invalid, Frustrated, or Otherwise Unenforceable

G. Specific Performance

1. Kitchen v Herring- proposition: when land is involved in a suit, the court will always use specific performance to remedy the breach of a conveyance of land contract - a purchaseand sale of land

- broader rule - court will order injunctive relief when monetary damageswon’t be an adequate remedy

- court says that it would be a departure from the settled rule of the court not toaward specific performance in this case

- they don’t want to carve out an exception to this very convenient rulethat triggers the right result in the vast majority of cases

- UCC 2-716 governs sales of unique objects

2. Curtice Brothers v Catts- court orders specific performance of delivering tomatoes- the tomatoes don’t have to be unique, under the UCC, there can be other circumstances- court says that there is no adequate remedy at law, so specific performanceshould be ordered

- although this isn’t really true - since they can calculate lost profit -although they can’t calculate loss of market share, reputation, etc

- what evidence is there that the buyer can’t cover on the open market - and sospecific performance should be ordered?

- the contract itself - might be a decision based on pricing rather than supply

3. Defenses to Specific Performance- providing of personal services limitation

- specific performance can be denied even though the performance might be unique- 13th amendment prohibits slavery- the people might not be performing to their capabilities

- unconscionability- unfairness

4. LaClede Gas v Amaco Oil- agreement for D to supply P with propane gas until natural gas mains were putinto the area- court awards specific performance, applies UCC 2-716- what is the single best fact for the buyer in demanding specific performance?

- it was a long term contract- specific performance given because the buyer couldn’t find a substitute withoutincurring a lot of expenses

3. Pratt Furniture Co v McBee





- the words - “go ahead, you’re all right. get your men out, and don’t let thatworry you” - were what made it a contract- distinguish this case from where the basketball coach said the same words to atryouter

- Embry case - employee gave pres an ultimatum in the course of the

situation- the tryouter isn’t offering anything in return for the contract- no contract previously existed in the basketball case

2. Lucy v Zehmer - case involved three separate possible arguments of why Lucy should lose

1. Whether or not the D was intoxicated - so drunk that the D was legallyincapacitated and therefore unable to participate in the making of thecontract2. There was no contract actually formed3. Even if there was a contract, equity should decline to enforce it under the circumstances

- court rejects the argument that there is no enforceable agreement here1. There is a legally binding contract because of the execution of thecontract was a serious business matter and not a joke

- Both the wife and husband signed the contract - shows that theywere less likely to both be joking - also suggests seriousness anddeliberateness- Other 10 facts - making the contract appear valid

2. Lucy actually believed - and a reasonable person would have believedas well - that he was entering into a contract

- tried to get money, went to a lawyer, immediately disagreed whenthe Zehmers said they were kidding

3. Tilbery v Eagle Lock Co- company “promises” or “offers” benefits to employees- question is whether Eagle Lock ever assumed an contractual duty- argument that no contract was made:

- language “we reserve the right to discontinue these benefits” and “thisdoesn’t mean that we are making a contract”

- so how did the court conclude that there was a contract?- desiring to show our appreciation cuts the other way- we “offer” - this is standard language of a contract- they are trying to get employees to work harder - and you don’t do this by giving nothing

- interpretive principles- don’t interpret language to mislead people- have to interpret language in the context of the whole letter

4. Cargill Commission Co v Mowery- seller sends an offer that has a code word that is wrong as to the amount that is being offered, buyer accepts the invitation and seller says that he isn’t going todeliver



- court enforces the contract - and notes that the buyer had resold the wheat beforehe learned of seller’s breach

- if the buyer hadn’t already resold the wheat, the court might be morelenient, since then the buyer wouldn’t have relied on the seller’s promise

5. Raffles v Wichelhaus

- buyer had contracted with the seller to buy bales of cotton from the boat thePeerless - but there were actually two boats - and the buyer wants cotton from theOct boat, while the seller is thinking of the Dec boat- buyer rejects the cotton- court concludes - under Restatement 20 - that there is no contract here - becausethere was no manifestation of mutual assent- the seller loses in this case

- Restatement section 201 says that if both acted in good faith and they didn’t know abouteach other’s misunderstanding, there is no enforceable contract

C. The Offer 1. Lefkowitz v Great Minneapolis Surplus Store, Inc

- D advertises that there are coats for sale, P goes to buy the coats and the seller won’t sell to him - says they are only for women or something- buyer wins - but not on the first breach of contract (too speculative) but does winon the second breach of contract

2. Ford Motor Company case- if goods are advertised for sale at a certain price, there is no contract - only aninvitation to bargain

3. Courteen Seed Co v Abraham- court finds the wire sent saying 23 cents per pound not to be an offer - court says the seller’s motion for nonsuit should have been granted because

- the seller was asking - he wasn’t offering anything- ask is the verb that is used in the key written communication - whichisn’t the same as offering

- single most important fact in this case?- seller sent a sample prior to Oct 8 communication - indicates that we aresomewhere along the progression of negotiation- communication from buyer to seller - says to wire firm offer

- practical reason it couldn’t be an offer - if everyone replied to the circular, hewouldn’t have enough stuff

3. Fairmont Glass Works v Grunden-Martin Woodenware Co- 3 separate issues:

1. Does the seller’s letter on Apr 23 constitute an offer?- court says yes - because of phrase “for immediate acceptance”

2. Was the Apr 23 offer - once we conclude that it’s an offer - properlyaccepted?

- no - letter sent in return violated the mirror image rule - itcontained an extra provision - “first quality goods”- but the court says that it didn’t violate the mirror image rule - because this wasn’t what the seller was concerned with, this was a



standard business term, offer implicitly included the provision -since who would want crappy goods?

3. Assuming there was a proper offer and acceptance, was the resultingcontract too indefinite to be enforced?

- seller’s arguments: 1. 10 carloads is too indefinite - courts reject

this argument, 2. Contract is indefinite withrespect to the types of jars that are covered and the timing of thedelivery - court rejects this argument too

4. Southworth v Oliver - buyer alleges that there is a complete contract for the sale of land, seller saysthat he never meant to make the offer - court says that a reasonable person could find that an enforceable offer wasmade and accepted here - relying on the surrounding circumstances- argue that court is wrong - the P buyer knew that the information was being sentto other parties - so not everyone could accept

- word “information” on the materials provided - as opposed to “offer”

- reference to market value is purely informational- negotiable sale date - more like we don’t have an offer, since it isnegotiable

- mirror image rule - the seller was trying to sell the permits together with theland, and the buyer only wanted a piece of the land - although this desire of theseller was never communicated- the seller’s intentions don’t matter - it’s more about what he actually did - principle of manifested intent

D. The Acceptance1. Ardente v Horan

- case where the P buyer is seeking specific performance of a real estate contract- buyer bids, seller agrees - and buyer prepares and sends agreement- judge preceded on the wrong assumption that the delivery of the purchase andsale agreement to P constituted an offer by Ds to sell property

- wrong because when the seller sent the buyer the document, he didn’tsign it - so it was more like an invitation than an offer

- if we ignore this problem and go with the assumption, have to decide if therewas acceptance

- question about whether the extra condition about the furniture beingincluded was a collateral issue (where the acceptance would be good) or amended to the contract (in which case it would violate the mirror imagerule - and acceptance wouldn’t be good)

2. Eliason v Henshaw- court finds that there is no contract here - if we accept the facts as the evidenceindicates them to be- no contract as a matter of law - since there was no acceptance- this is the acceptance was sent to the wrong place, and got to the Ds after theyhad already sold the goods



- there isn’t a contract until the offer has been received and accepted by both parties- the mode of transportation isn’t the issue - just so long as it gets there in the time period allotted by getting to Harper’s Ferry by wagon

3. White v Corlies

- offer by the owner of a building - the builder says the owner accepted, and so he breached the contract- owner says he rescinded his offer prior to the builder’s acceptance- case has to do with whether acceptance can occur by performance of the contract

- or whether it has to be a direct communication- court finds that as a matter of law, there wasn’t any acceptance

- since the builder never communicated to the owner that he accepted or that this is what his work was supposed to indicate

- could characterize the builder’s performance in this case as preparation - so itwouldn’t be commencing performance

E. Duration of Offers- if you make an offer - this creates the power of acceptance in the other party - and if the party accepts, then you have to make the contract1. Akers v JD Sedberry

- the employees met with Sedberry - and make an offer of recision - to call off thecontract; Sedberry doesn’t accept the offer at the meeting - but calls them 3 dayslater to accept the offer - the power of acceptance had gone away

- lapse of time - basic test to determine this - if the offer is in a face to faceconversation, the offer has to be accepted within the conversation

- within a reasonable time - assuming no amount of time has beenspecified

- she also rejected the offer - she said that she didn’t accept the resignationand then talked about what they would do with the business

2. Caldwell v Cline- there is an offeror who makes an offer to transfer property, there is an acceptance by the offeree - Caldwell, but offeror says the offer is withdrawn- problem here - there is ambiguity as to when the power of acceptance goes away- it all boils down to interpreting the language of the offer - we’ll give you 8 daysto accept or reject the offer

- if we measure 8 days from the sending, the acceptance is too late- if we measure 8 days from the receipt, the acceptance isn’t too late

- court says that there is a contract as a matter of law- language of the offer - will give you 8 days - so it should be countedfrom time of receipt- abstract principles of contracts - contracts aren’t formed until the offereehas heard about the offer - although this doesn’t really have to do with thereasonable person standard and the offeror could contract around it- since he didn’t contract around it, the only fixed date that we have tocalculate the 8 days from is the time of receipt



3. Dickinson v Dodd- we have an offer that specifies a period of time within which the offer can beaccepted - and we also have an attempted acceptance

- question is whether the acceptance is effective

- it does come within the specified period of time- problem is - there was a revocation of the offer prior to acceptance- stands for the proposition that an offeror can revoke the offer even though the period of time specified in the offer hasn’t yet run- also stands for that the revocation can come by way of a 3rd party, rather than theofferor himself - the time of the receipt of the revocation is the time when the power of acceptance goes away - subject to the exception in the Shuey case - when there isa reward involved - no offer when the revocation is published in the same manner that the offer was published- reasons to think this was wrongly decided: you shouldn’t be able to do this; was

the language of the 3

rd

party actually a revocation- promises are enforceable if they are supported by consideration - but in thiscase, the promise to keep the offer open wasn’t supported by consideration - soit’s a gratuitous promise - a nudum pactum

- this is why offerors aren’t required to go through with their promisessometimes

4. Marsh v Lott- there is an offer that specifies a period of time in which the offeree can accept- there is an attempted revocation and then a later attempted acceptance- D offeror’s 2 arguments

- law of remedies and specific performance - there is a special rule that wecan look at adequacy of consideration in this context - and 25 cents isn’tconsideration - the court says he’s interpreting this incorrectly- this is pretextual consideration - there wasn’t any real consideration

- we have a transaction that envisions the payment of $100,000 - so25 cents wasn’t sought by the promisor - court says this doesn’tmatter - even nominal consideration will suffice in these cases

- Marsh seems to say that there is a special rule when we are talking aboutconsideration for a promise to keep an offer open - an option contract

- even nominal consideration would qualify as consideration to make sucha promise binding

- the Restatement goes one step further - all there has to be is a writing that recitesa preported considedration- UCC 2-205 goes further than the Restatement - you don’t have to go throughtthe ritual of reciting preported consideration - it’s enough if the offer is by amerchant that there be a signed writing - that the offer will be held open and isn’trevokable for lack of consideration

5. Collins v Thompson



- a rejector or counter-offeror loses the power of acceptance by reason of rejection- but there is an exception - the buyer or counter-offeror can qualify hisacceptance to leave the period of acceptance intact

6. Davis v Jacoby- promisor said that he would give all his property to Ps if they came and stayed

with him- according to D - how was the power of acceptance terminated so that no contractwas made?

- the promisor died - it’s a Restatement 36(1)(d) case- this was a unilateral contract - and acceptance could only occur upon performance - and the Ps had yet to perform

- in this case - it matters whether the contract was unilateral or bilateral- court says that it’s bilateral - and the acceptance was the return communication

- due to the distance between the two parties - D didn’t want performance, but a promise to perform- best fact - text of the letter - “will you let me hear from you asap”

- D was in a desperate situation- the relationship with the Ps caused D to trust them- in determining the meaning of an offer - we ask what would a reasonable personview as the intention of the person who makes the contract or communicates theoffer

- here there is a special rule that is operable - there is a presumption thatthe offer is a bilateral contract- why? In assuming this, you are more likely to protect both parties

7. Brooklyn Bridge hypo- unilateral contract - acceptance can only occur once the person has completelycross the Brooklyn Bridge - so the offeror can revoke at any time before this

- per original Wormser - however - per Restatement - once the person has started crossing the bridge -they have created an option contract

- the person doesn’t have to finish - but they won’t get paid- but the offeror can’t revoke once the person started to walk

8. Brackenbury v Hodgkin- 1st issue in this case - is there a valid contract? Court says yes - it was aunilateral contract- this is the mother offeror who requested that the daughter and son-in-law takegood care of her - they move and start to take care of her, but they stop becauseshe is mean

9. Petterson v Pattberg- the debtor approaches the door of the lender and offers to pay the mortgage withthe cash that he brought - lender refuses the money - saying that she already soldthe mortgage to someone else- the power of acceptance had gone away - the offer was revoked - when theofferor told the offeree of the selling of the mortgage



- dissent: the statement by the offeree that he had come to pay off the mortgage plus his present ability to pay constituted acceptance - and occurred prior to therevocation by the offeror

10. Baird v Gimbel Bros- D is a linoleum supplier - his employee makes a mistake in computing the bid,

but the bid is still submitted to the supplier saying that if the generalcontractor is successful in getting the contract, then he can use the price- P general contractor gets the price, but the D supplier withdraws the bid- court says the supplier isn’t bound - since there was a pre-acceptance revocation- P contractor tries to get the money on promissory estoppel - but the judge saysthat there wasn’t sufficient reason for the contractor to rely on the offer - since theoffer said that the quote was good only after they were awarded the contract

11. Drennan v Star Paving Co- there is an offer and attempted acceptance, but the subcontractor revokes theoffer because there was a mistake in the offer - court rules that promissory estoppel applies here

- sub didn’t say that his offer was revokable at any time - so there wasgood reason to rely on the offer 12. Holman Erection Co v Orville Madsen and Sons

- the general contractor tries to escape any sort of contractual duty- contractor uses P’s sub bid in the contractor’s bid for the entire job - but thendecide to use someone else on the actual work - court says that the general contractor isn’t liable to the sub - reasons

- there isn’t any reliance on the part of the sub - whereas there was clearlyreliance in the Drennan case- public interest - need to facilitate flexibility in the finialization of the gencontract - to comply with MBE rules- fairness argument

- the sub has tons of time to compose the offer - the gen contractor has very little time to do this

F. Bargaining at a Distance- mailbox rule - the rule that when the offeree puts the acceptance into the mail - it is thenthat the offer is accepted

- in cases where the offer is made by mail or other additional circumstances wherethe offeror envisions acceptance by mail

1. Adams v Lindsell- stands for the mailbox rule - mail acceptance is effective upon mailing rather than receipt- other argument on behalf of offeree - to say that a contract was formed whether or not the date of the posting the acceptance or the date of receiving theacceptance is controlling?

- the misdirection of the letter was the fault of the offeror - and the offereesent it as soon as it was received

- the offer wasn’t properly revoked - since the offeror didn’t tell the offeree2. Worms v Burgess



- under ordinary operation of the mailbox rule, there would have been a contract- but this isn’t an ordinary case - since there is an option contract involved- the court doesn’t follow the authorities that suggest that the mailbox rule should be abandoned with an option contract- why does the court do this?

- statute that says the mailbox rule- mailbox rule is widely recognized as custom - so why should peoplethink that it shouldn’t apply to option contracts- risk of dealing through the mail- offeror could have dealt with the risk in the contract itself - and sincethey didn’t, the mailbox rule should apply- the other authority didn’t give good reasons for their arguments- even Corbin said that you need to look at surrounding circumstances- cases that rely on this authority are only a slight majority

G. Agreements to Agree

1. Joseph Martin Delicatessen v Schumacher - an agreement to agree later isn’t good - unless it is specified how you are going to agree or thecourts can adequately determine amounts

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Contracts Outline Fall 2003

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