657 Contracts Outline

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Damages

Hawkin’s v McGee-expectancy damagesmental reservations are immaterial-objective theory of assentCompared hand to machine, ie Article 2 applies

Factors to consider when awarding damages:Avoidibility limit-if the expense could have been avoided by getting the goods from someone elseForseeability limit-must be reasonably foreseeable that damage would have occuredCertainty limit-must show it was reasonably certain you were going to get $50 profit to get damages

McGee v US Fidelity

Nurse v. Barns-reliance damages, benefit of bargain was zero but received damages anyway

Calculating damages

Other Remedies

Specific Performance-monetary damages are not adequate, land is unique, court of equity, may have to show clean hands

Loveless v. Diehl-land is unique—specific performance, Policy decision, need certainty of option contract to keep credit economy workingUCC §2-716 goods may be awarded if they are unique, applies to transactions of goods, does not apply to security transactions (security on loan i.e. collateral) or international goodsINCLUDES CONSUMER TRANSACTIONS§2-102 says excludes servicessometimes you have mixed transactions such as construction, apply purpose test-primarily wanted services or goods? And the Gravaman test-is the complaint due to service or due to defective problem of good?§2-105(1) Goods are all moveable things§2-106(1)Article 2 only applies to sales of goods, present and future, sometimes it has been used by analogy for transaction of goods, such as a lease of property, but doesn’t work as well outside of sales.

Buyer remedies under UCC§2-711-716 When seller breaches, buyer may cancel and have goods - specific performance or Replevin for unique goods, uniqueness is determined not soley by the good itself but the situation of contraction replevin is given after you have tried to cover and for various reasons can not you can get original contracted goods


-“covered”-buyer covers by good faith and reasonable purchase of substitute good from another party(doesn’t have to be cheapest on mkt just reasonable), seller must pay the difference between his price and the third parties’ price, includes incidental damages (ie time between finding substitute goods). If buyer can not or does not wish to replace goods with substitute, he is still entitled to other remedies; or

- damages including incidental and consequential, (not for cover) damages account for fluctuations in mkt price and time of price is determined at time of delivery and place of delivery. includes aggrieved seller, which forces the seller to buy back the goods from the purchaser. Damages can also be recovered after acceptance of goods. Reasonable breach of quality awards damages for the difference between the warranted and the product as is. (Parallel to Hawkins).

Incidental damages can arise from movement of product, inspection, care of good

Consequential include things that at the time of contraction the seller had reason to know and for which could not be reasonably be prevented by cover -idea is minimization of costs in good faith - includes injuries proximately caused by the unknown breach of warranty. -This turns on whether it was reasonable for the buyer not to inspect the good before use

International sale of goods-CISG (UN’s policies on goods) appliesWe have adopted it along with other countries along with reservations

Reaching an Agreement

Objective theory of assent-if mental reservations counted, could not rely on contract

Embry v. Hargadine, McKittrick Dry Goods Co.-meeting of the minds judged by reasonable person standard.

Relating to submission of evidence

Texaco v. Pennzoil-evidence can only be submitted if it applies to objective externally expressed manifestations of assent

Subjective understanding of the parties

Lucy v. Zehmer- two part test, Lucy BELIEVED that Zehmer was serious and was REASONABLE to believe that he had a contract based on overt manifestations. If he knew that Zehmer was joking we wouldn’t want to protect him

Whats an offer?


Restatement holds that an offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understand that his assent to that bargain is invited and will conclude it.

Nebraska Seed Co. v. Harsh- This was a request for bid. Court analyzed factors that a reasonable person would determine it to be a formal offer. Such as details left out, price, delivery date, wording itself, how are offers usually made in the custom of the trade, Also to note, problem that if it was offer, potential buyers could all accept and wouldn’t have enough goods to supply them all. Policy of inventory constraints.

Advertisements-generally not offers, considered preliminary negotiations

Leonard v. Pepsico-in order for ad to constitute an offer it must be “clear, definite, explicit, and leave nothing open for negotiation”. Reasonable person std of offer. Puffery.

Letters of Intent

Empro manufacturing Co. v. Ball-Co-held that not all letters of intent are binding, because they objectively showed they didn’t want to be bound and there were terms to be decided. solutions to holding other party when not ready to contract: (1) Binding letter of intent, lay out general terms and say details later(Pennzoil)-get expectancy damages (2) Contract to negotiate in good faith-weak, says don’t negotiate with other people-only get reliance damages because terms were not laid out and court would not be able to determine the benefit of the bargain to award expectancy (3)option contract-one-sided binding agreement, contract not to revoke offer

Texaco v. Pennzoil-must determine intent of parties when constructing preliminary memorandums. factors to consider when deciding if Intent exists:

-express reservations-partial performance especially by side claiming no contract

-essential terms -complexity or magnitude of transaction

UCC can fill in open gaps except for quantity §2-305, can determine price.

Revoking an Offer

Dickinson v. Dodds-promise was not a contract but rather a naked promise-nadum pactum, lacks consideration. Can revoke offer anytime before it is


accepted. Dickinson accepted knowing that offer was no longer valid, must accept in good faith. This case would come out the same if applying UCC.

§36 Methods of Termination of The Power of Acceptance (1) An offeree’s power of acceptance may be terminated by (a) rejection or counter-offer by the offeree, or (b)lapse of time, or (c)revocation by the offeror, or (d) death or incapacity of the offeror or offeree. (2) In addition, an offeree’s power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms of the offer.

§43 Indirect Communication of RevocationAn offeree’s power of acceptance is terminated when the offeror takes definite action

inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect.

AcceptanceMirror Image Rule-anything other than acceptance of the specific terms of the original offer

constitutes a counter-offer and is therefore not an acceptance. Partial performance helps show that mutual assent has occurred, difficulty is in determining assent to which terms.

Ardente v. Horan-question of qualified acceptance or absolute acceptance. Acceptance must be definite and determine whether you are willing to go forward even without the other parties consent to additional terms, or whether the acceptance is conditional on terms accepted (counteroffer).

Mail-Box Rule-acceptance is effective upon offeree’s mailing of acceptance…protect offeree b/c offeror is master of agreement and has the option to include in the offer that acceptance

is determined upon receipt. Protects offeree also b/c as soon as acceptance is mailed, they rely on contract being formed (ex. Might begin performance immediately) Mailbox rule is default rule. Does not apply to options, acceptance is operative only upon receipt by the offeror because the offeree’s interests are protected by the existence of the option.

Unilateral contract-acceptance by performanceBillateral-acceptance by promise

Carlill v. Carbolic Smoke Ball Co- offer can be made to the public, anyone who performs accepts, this was a reward, unilateral contract, ex: Abercrombie catalogue, accepts the buyers offer by shipping the jeans (performance). If they send the wrong jeans, this is acceptance and breach at the same time because otherwise if

you didn’t notice until later they could claim acceptance of a counteroffer.

-this was considered an offer because all the terms were given as opposed to PepsiCo which refers you to the catalogue for terms of an offer. -Generally ads are invitation for offers because rarely have all the terms


-no prior notice is needed for unilateral contract, notification is given after performance

White v. Corlies-construction of office, terms were added by buyer and sent back to builder, who claimed to manifesting assent by the purchase of lumbar. Corlies revoked offer and White sues for breach of contract. This was a biliateral, written offer, and the purchase the wood was not an appropriate manifestation of assent.

2-206 says that an offer outlines reasonable modes of acceptance, shipment of goods is acceptance if done in a timely manner, shipment of the wrong goods is acceptance and breach unless seller notifies buyer that they are sending as accommodation, and acceptance by performance must unambiguously express acceptance to the offeror ( buying of wood was not unambiguous expression of acceptance)

Petterson v. Pattberg-Patterson goes to buy mortgage from Pattberg, he opens the door, and rejects his offer before Patterson has chance to perform by giving him the money.when an offeror invites acceptance by performance, he is not obligated to pay until performance is completed, however once performance has begun, the offeror can not revoke the offer (option contract is created), and offeree has promised to complete performance once has has begun it.

Acceptance by Silence

Hobbs v. Massasoit Whip-Plaintiff sends eelskins to the defendant, defendant did not overtly manifest his acceptance and did not pay, but kept skins. This was acceptance by silence because of the history of their relationship. There are only a few circumstances in which it is may be permissible to assume acceptance by silence—course of dealing, usage of trade, expressly outlined in offer, or offeree takes benefit of offered services with reasonable opportunity to reject…

E-Commerce and Mutual Assent

Caspi v. Microsoft- Caspi clicks ‘I agree’ to terms which include a forum selection clause, registration could not proceed without agreeing to the terms. Court found that this type of manifestation of assent was valid and called it Click-wrap.

Ticketmaster v. Tickets.com-ticketmaster alleges tickets copies interior webpages. In doing so tickets bypasses the homepage where ticketmasters terms and conditions are located. In these terms deeplinking is expressly prohibited. TM sues for breach of contract.The court holds that since users do not have to click I agree and the terms are submerged at the bottom of the screen, no way of knowing whether the user was giving notice. Merely placing the terms on the page does necessarily create a contract with users. Court references shrink-wrap on cds, and says this is different because notice is conspicuous.


They call this display of terms as browse-wrap and holds that it is not necessarily form contract.

Sphect v. Netscape- Specht downloaded from internet free software from Netscape. Specht sues Netscape saying that the software violates federal privacy acts. The terms and conditions were visible only if visitor scrolls down through page and does not require a ‘clicked’ assent before downloading. The terms included an arbitration clause and states that if you use software, it is governed by the license agreement and that if you don’t agree, don’t download. Preliminary question of applying UCC to transmitted information, courts apply it even though it is technically not a good. 2-103 does not apply to information transactions.We don’t have acceptance here, Ardente v. Horran says that acceptance must be definite and unequivocal, burden on defendant to place click-wrap. A download is not an unequivocal manifestation of assent, this is browse-wrap, you have option to scroll through but don’t have to click I agree, question of how prominently the terms and conditions are displayed, circumstantial. The download was free and you are not pressing download button to agree to term s of license but because you want the free software. Court says that a prudent person wouldn’t know to look for terms in these circumstances. Browse-wrap here was held unenforceable.

Browse-wrap being enforceableRegister.com, Inc v. VerioVerio gets customer information off of Register.com and only after doing so then sees the terms and conditions, Verio breaches them, and continues to retrieve information and continues breach. Court held that since the use was so systematic, Verio knew the terms, even though they came after retrieval, and held the terms enforceable. This is also acceptance by silence, 65 (a) where you reap the benefits of the offeror

UCITA( Uniform Computer information Act)-has only been adopted by two states, MD and VA, validates terms that you might know only after you have paid, very controversial because it is too pro licensorUETA( Uniform Electronic transaction Act)-not controversial , primarily a technical question about medium neutrality, stating that you can discriminate against the electronic medium, makes paper rules equivalent to electronic rules. This is like Caspi, where clicking ‘I agree’ is the same as signing. This is law in 40 states.

Discerning the Agreementinterpretating the meaning of terms ambigious terms

Raffles v. Wichelhaus-Raffles contracted to sell cotton to Wichelhaus to be delivered from Bombay at Liverpool on the ship ‘peerless’. Unbeknownst to the parties was the existence of two different ships carrying cotton, each named ‘peerless’ arriving at Liverpool at different times. * a reasonable person would not know which ‘peerless’ the parties meant (objective)


*no contract is formed **if one party should have known or had reason to know (also usage of trade) the intent of the other party in using the term, the contract is enforceable according to the term used by the nonknowing party, (subjective) *** Sometimes said there is a hierarchy to the interpretation of terms. (UCC) Express terms-in words, then set in order as they get less specific, Course of performance-this k, Course of dealing (prev k), Usage of trade (industry)

Oswald v. Allen-Dr. Oswald negotiated to purchase two sets of care coins from Mrs Allen who belived that her Swiss Coin Collection alone was being purchased *can’t enforce k because reasonable person can’t determine the terms of the contract, and therefore can not fashion a remedy for breach. AMBIGIOUS

Restatement-when two parties have attached different meanings to a promise or term, neither party is bound by the meaning of the other party UNLESS one party has reason to know the meaning attached by the other party, the nonknowing party’s term prevails.

*writings are interprtated as whole

Vague Terms Weinburg v. Edelstein-Weinburg sued Edelstein to stop Edelstein’s sale of skirts and blouses which looked like two-piece dresses. *construe vague terms against the drafter!! , contra proferentem * if this is part of the deal, the defendant better be told about it ahead of time, did the defendant know he couldn’t sell them when signing, if no, then it wasn’t part of the bargain. Policy-drafter is in best position to draft the k the way he wants it.

Frigaliment Importing Co. v. B.N.S. International Sales Corp-Frigaliment ordered a large

quantity of “chicken” from B.N.S., intending to buy young chicken suitable for broiling and frying, but BNS believed, in considering the weights ordered at the prices fixed by the parties, that the order could be filled with older chicken, suitable for stewing only, and termed “fowl” by Frigaliment. How to interpret terms * The court looks at the (1) the language of the contract (2) negotiations (3) the words of the context in the usage or trade (4) government definitions (5) commercial context **in this case there was a way to objectively determine what the word means, unlike peerless, because plaintiff failed to prove the narrower meaning, cant show breach of k


B. Filling Gaps in the Terms Sun Printing & Publishing Ass’n v. Remington Paper & Power Co. Inc- Sun entered into agreement for Remington to sell Sun rolls of paper. For the first four months of the agreement, the price and length of time that price would apply were clearly established. The remaining time in the k called for the price to be determined by the parties, but not to exceed the price charged by Canadian exporter. The length of time was also to be determined by the parties.* indefiniteness problem so Sun trys to cure by concession by paying the highest price-cant do because the max price fluctuates**court could fill gap of period or price, but not when both are missing***don’t want to misconstrue k, we have no idea what the k is here****dissent said that there were so many possible remedies, suggests that the parties have only agreed to agree*****UCC has gap filler for everything but quantity

Texaco v Pennzoil- two questions of certainty, are there enough central terms to show that they were even in a k, and are there enough terms to award damages for breach

Illusory promises New York Central Iron Works v Us radiator company-US Radiator contended that a

requirements contract it had entered into with New York Central Iron Works should not be enforced because Central’s needed supplies were much greater than the parties anticipated and had previously supplied. requirements contract-buyer buys everything they need from seller output contracts- seller will sell their entire capacity to buye *these contracts can produce nothing, I can say I don’t need anything, *solve illusory problem by holding that quantity must be determined in good faith *they weren’t becoming dealers of iron, they were staying in radiator business and underselling their competitors because they had a contract to get iron at what turned out to be good price **UCC §2-306 says enforceable under good faith but not for disproportionate quantities

Gulf v. Eastern-requirements contract, Gulf was to provide Eastern with jet fuel as needed for 5 years. Price for oil went up and gulf refused to supply anymore*Gulf argued that there was lack of mutual obligation, if one party isn’t bound the other isn’t, and the contract was indefinite, how does the court determine reasonable quantity? (1) Course of dealing—typically installment contracts in the past, (2) course of performance—hadn’t objected in the past years to providing the oil under this same contract 2-208, and (3) estimates—can award damages for what they said they would need. *solve mutual obligation problem by good faith, as long as Eastern operated in good faith they will need jet fuel

Wood. V. Lady duff Gordon-Wood had an exclusive right to sell defendants clothing for which she would recieve portion of profits. Defendant broke the contract by selling products without Woods permission.Wood sues to enforce the exclusive clause. Defendant argues that there wasn’t mutual obligation.*court holds that the contract had implied promise to bring profits in good faith, i.e. using reasonably


diligence in expanding the mkt.*the words of the contract required the D to make monthly accountings and get copyright patents which showed the intention that this promise obligated Wood with duties

Cure by concession and least level of benefit are methods of dealing with indefinite/uncertainty problems by trying to concede to the other party in order to carry out the k

FORM CONTRACTS AND CONTRACTS OF ADHESIONCarnival Cruise v. Shute-the Shutes sought to file suit in WA against Carnival for injuries sustained on the ship in violation of a forum selections clause contained on their tickets.*are non negotiated clauses inforceable? They can be*Shutes admitted that they were aware of the forum selection clause* Forum selection are enforceable unless there are contract defenses. They do have some little opening for the possibility that under some circumstances, enforcing the forum selection clause may put the plaintiff in such bad shape that might be unfair to enforce. Here the plaintiff traveled a lot anyway and admitted to knowing about the clause*Cruise lines have special interest in limiting forums because their clients are from all over the world and would be an expense they would have to include in the tckt price if didn’t enforce the forum.

Caspi v.Microsoft- plaintiff assented to click-wrap with forum selection clause. Plaintiff claimed they didn’t know about the clause. Court says that they had ample oopurtunity to review and reject, that reasonable person should have known about the clause and therefore we don’t need subjective agreement. Enforceable.

StepSaver v. Wyse-Stepsaver uses products by Wyse and TSL in their products. Consumers complain and StepSaver sues TSL and Wyse for breach of warranty. Trial court rules in favor of TSL (Wyse dismissed). StepSaver appeals on grounds that the boxtop agreement was not meant to be the final expression of their terms. * 2-204 says we don’t need to determine when the contract was formed because we know there is k when both have performed

2-207*Court applies 2-207 which allows a definite acceptance to operate as acceptance even if the terms are changed unless acceptance is expressly made conditional on the additional terms*if you make it conditional, acts as rejection and counterofferRoto-Lith had argued that any clause put in a party’s favor is a conditional acceptance, but then mirror image rule applies all the time, this is overruled. Conditional acceptance must be express.*additional terms become proposals for addition to the contract*if between merchants the additional terms become part of the contract unless offer expressly limits acceptance to the terms of the offer, they materially alter the contract, or notification of their objection has already been given or is given in a reasonable time after they have been received

*under common law we have problem of last shot rule, change in terms would constitute a counter offer, and acceptance would come by the last form to get in before performance.


*TSL argued for last shot rule, that changes were a counteroffer that they accepted when they performed by keeping and using the software and thus consenting

Holding: court refused to believe that acceptance of the box top agreement was a conditional term because StepSaver refused to these terms originally and TSL proceeded to send the software implying that they were willing to contract even w/o this term. Therefore the boxtop agreement was proposal for additional terms that were a material alteration because rid of the warranty and therefore under 2-207(2) the term does not become part of the contract.

§2-316 Any exclusion or modification of an implied warranty of merchantability must be obvious and for merchantability must be in writing

ProCD v. Zeidenberg- ProCD compiled information into computer database which it sold on CDs. Every box stated on the outside that there were additional terms on the inside, and the terms of the license were on the cd and appeared on the user screen every time the software ran. The license agreement stated that the software could not be used for commercial purposes. Zeidenberg sold the information on the internet.

*court applies 2-204, parties to contract in whatever manner they desire, ie acceptance by conduct, held that the license was enforceable when the outside indicated that there would be terms inside and the buyer was given opportunity to reject and return the goods for a refund.*the offer invited acceptance by conduct, acceptance occurred when Zeidenberg used the CD and did not return it, not when leaving the store.*Judge Easterbrooke does not apply 2-207, says only appropriate for multiple forms, here there is only one form. *notice that this differs from ordering from Abercrombie, Zeidenberg was analyzed as the offeree.*these types of contracts happen all the time, you buy ticket before you fly, money is paid before the terms come.

Terms that follow laterHill v. Gateway 2000Facts: Hill purchased a computer from Gateway through a telephone order. The computer was sent with terms and unless returned within 30 days the terms within govern the contract. The Hills kept the computer for longer than 30 days before complaining about its components. Hill filed suit for breach of warranty and Gateway sought enforcement of arbitration clause (strategic move to avoid class action suits, plaintiffs would only get value of computer and no lawyer likely to take their case)*Easterbrooke says vendor (gateway) is the offeror, master of the offer, created k to be accepted by conduct (keeping computer longer than 30 days)*this determines that 2-207 doesn’t apply because terms were part of the offer, no form battle*Hills conceded to knowing that the terms existed (case might have turned out differently if otherwise)*the terms stand or fall together, if plaintiff wants to sue for warranty, must take arbitration clause too*court held the terms binding because they had the opportunity to reject and didn’t within the specified time.

Klocek v. GatewayUnited States District Court of Kansas


facts are almost identical to Hill, shorter time to return product, but terms again were sent along in the box.*Buyer is now offeror, Gateway is offeree, Gateway acceptance occurred over the phone. K formation*terms that were sent later with computer were proposals for additional terms to k* 2-207 applies because the terms sent were different from the k formed over phone*was not counteroffer because acceptance was not conditioned on Klocek’s acceptance of the additional terms—gateway did not say on the phone that their acceptance was conditional on Klocek’s agreement to a 5 day review and return policy-2-702 (2) says because Klocek is not a merchant, the additional terms do NOT become part of the contract (unless Klocek agrees-which they didn’t)*arbitration clause does NOT become part of the agreement.

Written manifestations of Assenta. Parol evidence Rule-Partial v. complete integrationpartial allows for parol evidenceThomas v. LibbeyFacts: Libbey argued that Thompson’s written agreement to sell his logs contained a verbal warranty of quality, which Thompson breached. *question of whether oral evidence as to the verbal warranty could be admissible at trial, when the agreement was in writing*traditional view on parol evidence, if the contract looked complete on its face, the parties intended to integrate the entire agreement in writing, conclusive presumption by court, they will NOT allow parol evidence. Once agreement is found to be completely integrated, court will only look at the contract itself, and no other oral or written previous or past expressions are not relevant.*held that the agreement was complete on its face and did not allow oral testimony.

parol evidence can be used to convince judge that the writing was partial integration

Brown v. OliverBrown buys hotel from Oliver. Two years later Oliver rents out a room in the hotel and made off with the furniture in the night. The only written contract was for the sale of land. Brown claims that there was an oral contract for the sale of furniture. (think statute of frauds-makes sense to only have written agreement for the land)*whether parol evidence can be used to determine the intent of the parties to put the entire agreement into the written contract*if this case would have been decided by Libbey, the court would have looked at the written contract and concluded that it was on its face whole, and not allow parol evidence on the furniture*MODERN RULE: the parites can submit parol evidence to a judge in order for him to determine whether the parties intended the entire agreement to be contained in the writing (complete integration) or whether the parties intended the writing to only be a part of the agreement (partial integration)*if the judge decides that the parties only partial integrated the agreement, then parol evidence is admissible at trial to prove that there was a contract for the sale of furniture as well.

Ambigious terms


Pacific Gas and Electric Co. v. G.W. Thomas Drayage & Rigging Co.Facts: defendant contracted to fix the plaintiffs turbine, the defendant agreed to pay the plaintiff for injury to property resulting from repair. During repair there was property damage to crop. The defendant tried to put evidence that the parties intended the indemnity clause to only be to third parties property, standard provision, but not damage to plaintiffs own property. *court held that since the words are by definition ambiguous, parol evidence could be used to determine what the parties meant to be covered by their words (indemnity clause). *CA thinks all words can be ambigious and thus reasonably susceptible to interpretation*can provide evidence to judge to prove that the words are ambigious and then can have parol evidence at trial, judge must find that the words were reasonably susceptible to that meaning*this is the restatement approach, recognizing that all words can have a latent ambiguity

Trident Center v. Connecticut General Life Insurance Co.Facts: Trident borrowed money from the defendant to finance the construction of a building. Under that contract, trident was to pay back the loan over a period of time and could not pay in full before a period of 12 years. In the case of a default occurring in years 1-12, the lendor had the option of accelerating the note and adding 10 percent prepayment fee. Interest rates dropped and trident wanted to pay in full before the 12 yrs were up claiming that under the provision of default, they could pay in full before the 12 years and just incur the cost of the prepayment fee. *court was forced to follow ruling in PGE and allow the judge to hear parol evidence to determine what the parties intended in their contract*outwardly disagrees with PGE claiming that all contracts then become susceptible to parol evidence because all words according to CA are ambiguous

Solution preventing parole evidence being used: expressly say that this agreement is complete and final expression of the parties agreement

Two ways to judge whether parol evidence is admissible: whether the contract is complete on its face (integrated) and whether the contract is ambiguouscan always provide evidence that occurred after contract formation—this is not parol evidencealways allowed to use parol evidence to establish fraud or duress in contract formation

Mistakes in IntegrationTravelors Insurance Co. v. BaileyFacts: A mistake was made on defendants life insurance policy and was not realized until 30 yrs later. The mistake lead to the defendant getting a much better policy than he paid for. Insurance company sues for reformation of the contract.*rule: if there is a mistake and evidence to prove it that both parties intended the same content of the writing, the court may enforce the parties to reform the contract to show original intent. *court reformed the k

Requiring a Writing--Statute of Frauds (purchase of land or k not to be performed within one year or goods over 500 dollars)-exception for special manuf. goods and partial performance and admitting k’s existence)remember that the statute does not discriminate against electronic medium, most states have adopted the


UETA, which not controversial, the UCITA however is and has only been adopted in MD and VA, for states that have not adopted the UETA, most have ESIGN

No reliance damages in Boone for unenforceable contract under statute of fraudsBoone v. CoeFacts: Defendant promised to lease farm in Texas to the plaintiff starting on the plaintiffs arrival, in reliance the Plaintiffs spent money and traveled there. Defendant refuses to lease plaintiff the land.Plaintiff sues for reliance*the contract was not written down, and k was not to be performed in one year, Statute of frauds dictates that oral agreement is not enforceable. *can not recover reliance damages* if the defendant had benefited, like p paying D up front, damages in restitution, court may have implied a contract because of unjust enrichment, see quasi-contractual contracts

split of authority on reliance damages for statute fraudsRiley v. Capital Airlines, IncFacts: Seller sold water methanol to the buyer, seller purchased equipment for this and plaintiff alleges that they entered into a five year contract. The plaintiff argues that the goods were specially made for the defendant and therefore should not be barred by the statute of frauds. *contract was not to be performed within one year—statute of frauds would normally require written k*now must look at exceptions, for specially manufactured goods or partial performanceTEST for specially manufactured goods(1) goods specially manufactured for the buyer and(2) not suitable to sale to others in his course the seller’s business and(3) circumstances showing that it was for the buyer* court held that the goods were not specially made for the buyer, plaintiff mixed products only upon the defendants request.—looks at the reason for exception in Goddard, where carriage builder who made a carriage specifically for the defendant and couldn’t resell it to someone else could receive expectancy, didn’t think these were parallel cases. *doctrine of partial performance does not relieve the plaintiff from the statute of frauds, because the court used an analysis of mini contracts that were completed contract by contract.*contract bared by statute of frauds!*issue of reliance damages for purchasing of equipment*court awards reliance because of injustice not because there was a enforceable k*applies promissory estoppel and creates exception allowing reliance damages for k barred by statute of frauds if the promisor should reasonably expect the promisee to rely on it and they do—reliance damages

ConsiderationDistinguishing Bargains from Gratuitous Promisesunder common law, analysis was done by detriment or benefit to establish consideration, some courts may still use this analysis, however the modern approach is to determine whether there was mutual inducement—give me that which I want and I will you this which you want *think Adam Smith, sometimes useful to look at benefit and detriment to identify if there was inducement


Johnson v. Otterbein UniversityFacts: Johnson promises to give a gift to the university to pay off a specific debt of the university but fails to do so. University sues to collect note.* court doesn’t believe that there was a really bargain for exchange, doesn’t think there is mutual inducement because we don’t really think that Johnson was induced to give the money in exchange for the univ paying off their debt, no consideration

Hamer v. SidwayFacts: Hamer’s uncle promises to pay him 5k if he refrains from drinking alcohol, using tobacco, swearing and gambling until hes 21. Hamer performed, uncle wrote back said he would keep money until he was capable of using it. Uncle dies before giving the money. executor of Story’s estate refused to honor it. Is there consideration? Rule: A waiver of a legal right can be sufficient consideration*court believes that the uncle was trying to induce Hamer not to engage in these activities, and Hamer was induced not to engage in these activities by the uncle’s offer. Mutual inducement therefore enforceable promise. *courts will not usually inquire into the adequacy of the consideration unless they expect there is duress, fraud, or misrepresentation; simply determine whether there was consideration*also usually won’t look closely into intent of inducement, lawfirm asks you to move to CA, may be that you really wanted to move to CA anyway, but reasonable person test would think you were being induced to go to CA from the consideration given by the lawfirm

Dahl v. Hem Pharmaceuticals CorpFacts: Drug company running a study and for participating promised participants a year supply of the drug. Plaintiff received the placebo and defendant refused to supply the year supply of the drug to them. Defendant claims no mutual inducement bc they participated voluntarily and were free to withdraw.*court holds that the plainitiff’s consideration was showing up and continuing for the length of the study and getting poked and prodded. *plaintiff is induced by offer of free drugs, and company is induced by the plaintiffs performance in the study—mutual inducement (note remember that if you didn’t know about getting the free drugs for participation—like finding the dog w/o seeing the reward sign—you were not induced—and therefore there was no enforceable promise to pay you the reward or give the drugs)*also remember Petterson, where unilateral contract is binding once performance has begun, drug company can not revoke offer once the plaintiff begins the study

Insufficient Consideration(1) Past ConsiderationMoore v. ElmerElmer went to Moore to get his future read. Moore predicted Elmer would die. Elmer promised to pay off Moore’s mortgage in consideration of the past readings if she was right in her prediction for the time of his death. Elmer dies as predicted. Moore sues the estate for the promised money.*there is no inducement for past consideration, she had already made the predictions, he was not inducing her to do anything


*he had already paid for the readings, didn’t owe her anything, (ie no inducement to clear name or debt)*promise to pay off debt was not enforceable

(2) Moral Consideration Mills v. WeinmanFacts: Defendant’s 25 year old son becomes sick away from home, plaintiff took care of the son until he dies, father writes promising to pay for the past services and then later refuses to pay.*consideration is all past, the plaintiff had already taken care of the son, the defendant’s consideration may have been for moral obligation but legally sufficient (if he had been a minor then there would be other consideration-debt incurred by infants gives father benefit—see quasi-contractual)*father is not induced to pay in order to have his son taken care of, his son has already been helped and is actually now dead*moral obligation here was insufficient to enforce promise

Webb v. McGowinFacts: Webb saves McGowin’s life by pushing a concrete block out of the way and ends up crippling himself. McGowen promises to 15 dollars every week for the remainder of Webbs life. Later, McGowin dies and Webb sues the estate for the unpaid instalments. *court implies a promise because they are able to determine the extrinsic value of life and limb, what benefit McGowin received from Webb, once McGowin expressly agreed to pay for the continuing service of having a life, the court find that the benefit/detriment analysis provided sufficient grounds for consideration of the promise, this was an exception for justice, (could be analyzed using past and moral exceptions—but court found consideration anyway)*generally courts are reluctant to find consideration if they cant determine a quantitative value for the services, here they could compare values of limb ect to determine detriment and benefit.

Contract Modification and the Pre-existing Duty RuleAlaska Packers’ Assn. v. DomenicoFacts: Domenico hired the seamen Alaska Packer’s Assn to fish in Alaska for the salmon season. In Alaska, the seaman stopped working and demanded more money. Domenico would have been unable to find replacements so the superintendent on the boat agreed to pay more wages. Once the season was over, the Alaska Packers sued for the higher prices claiming that they earned the higher price because the fishing nets were defective and they were being paid a lump sum and then per fish caught. Plaintiff wins. Defendant appeals saying there was lack of consideration for the higher wage because the k was for the exact same services that were previously contracted for. *court uses pre-existing duty rule (this is only at common law) to determine that there was no consideration for the increased wage, couldn’t bargain for services they already had.*if this was for the sale of goods, UCC would apply, and hold that if we could find a good faith reason/legitimate commercial reason for modification, we could uphold a change in contract without new consideration.

Brian Construction and Development Co. v. BrighentiFacts: Brian had a general contract to build a post office. Brian subcontracted to Brighenti to do the foundation for the building, k specified that they would perfrom everything necessary to complete job. Brighenti discovered the remains of extra building upon excavation which would make the job much


more difficult. Brighnetti refused to work unless they were given more money. Brain construction gave them xtgra 10 percent, and Brighnetti still refused to finish. Brian finished it himself. Brain sues for breach of contract for the cover cost of completion of the project.*court found that the additional increase was a new contract for the additional work needed to remove the old foundation. Supported by additional consideration of 10 percent and mutual inducement of the parties. (this wasn’t like Alaska bc we wernt concerned about good faith)*general principle is that when parties agree to perform an obligation which they are already obligated to perform (pre-existing duty) even for a different price, the second agreement does not constitute a valid agreement, however, unforeseen circumstances that make the performance unduly burdensome can be an expetion to this rule and sufficient for valid consideration.*2-209 agreement modification does not need extra consideration to be enforceable*all modifications must be in writing (according to this case)

Adequacy of ConsiderationNewman & Snell’s State Bank v. HunterFacts: defendant gave the plaintiff a note in exchange for her dead husband’s note to plaintiff and also her dead husband’s stock in his company. When the husband died he was insolvent. The company was also insolvent. Defendant sought to void the note for lacking consideration and plaintiff filed suit.*the worthless note was insufficient consideration. There is no bargain because the bank wasn’t trying to induce the wife to clear the husbands name by giving the bank a note since the note was worthless. *once we know that the note is worthless we suspect that there was no bargain (peppercorn)*if we think there is a bargain we usually wont look at the adequacy of consideration*in order for moral obligations to be adequate consideration, the benefit had to have been given to the defendant, ie if the wife was clearing her own name by promising to pay and old and null debt, could be binding promise

Dyer v. National By-Products, Inc.Facts: Dyer got hurt and lost his foot whiling working for the defendant. IN exchange to keep his job, he agreed not sue for what he thought was a legitimate claim. Then Dyer got fired. Dyer sued for breach of settlement agreement. Granted summary judgment for the defendant because Dyer’s claim was worthless because he claim was meritless under workers compensation (cant sue employer bc being given insurance from workers comp) and therefore really promised the defendant nothing.*this judgment was reversed, because the plaintiff believed he actually had a claim, he was induced to give up his claim for continued work and the company him to give up claim by providing him his job*this contradicting authority on meritless consideration, difficult to tell if the plaintiff really believed in good faith that he had a claim*restatement 79, once it is bargained for wont look at adequacy

Nominal ConsiderationScnell v. NellFacts: Schnell’s will left 200 dollars to Nell but the will was void at the time of her death bc she held no property in her own name. Schnell’s husband nevertheless agreed to give Nell the 200 dollars out of love and respect of his wife. In return Nell agreed to pay Schnell the sum of one cent. Schnell refused to honor his promise and Nell sued. *court held that the honoring of the deceased wife for her past services to her husband is inadequate since


it is past consideration, moral obligation obligation to pay off her debt to third party is insufficient, we can tell there is no inducement because the exchanged considerations have extrinsic values, who would bargain a penny for 200 dollars?

*usually nominal and recitals of considerations are not adequate considerations*however option contracts are enforceable even if they just have nominal consideration

Smith v. WheelerFacts: Wheeler gave Smith the one year option to buy some property. The agreement recited that the payment of one dollar was for the option, the dollar was never actually paid. When the Defendant tried enforce the option, Plaintiff filed compliant arguing that the option was void. Trial court held that option was not enforceable for lack of consideration. plaintiff appeals.*value of option depends on the difference between the offered price under the option and the mkt price*this court adopts the minority view that formalities in writing signaling that you want to be in a binding agreement should be enforceable, therefore doesn’t matter whether they pay this nominal sum, showed that they wanted to be bound by stating it. * mattered that it was in writing, action of tender was not important*majority view says that if you didn’t give the dollar, there really wasn’t consideration, minority view ignores the actual tender of the nominal consideration*2-205 says you need consideration for option contract if its over 3 months

Lack of Intention to be Legally BoundFerrera v. A. C. NielsonFacts: Ferrera was fired by defendant. Plaintiff claimed that the employee handbook limited the defendants right to fire her. Trial court granted the defendant summary judgment because the handbook could not constitute a disclaimer that it wasn’t contractual. Plaintif appeals. *big issue is whether or not the company treats the manual as binding*summary judgment was valid because the statement claiming that it wasn’t a k was very conspicuous and obvious, and no history of people following the manual as binding authority*no intent to be bound-hence no promissory estopel-nothing that would reasonably expect the employer be induced by

Promissory EstoppelA type of estoppel that prevents a person who made a promise from reneging when someone else has reasonably relied and will suffer a loss if the promise is brokenEquitable Estoppel: relied on some misrepresentation of fact

Family PromisesRicketts v. ScothornFacts: Grandfather makes a promise to pay to her granddaughter 2k plus interest because he didn’t want her to work. The right to the money was not conditioned on her working or not working. She quit her job and grandfather dies and she sues to the estate for the balance due on the note.*there isn’t consideration here, the grandfather was not induced to give her money by her quitting her job,


but she relied on the promise anyway*court calls this equitable estoppel (really promissory estoppel bc no misrepresentation of fact) and uses estoppel in place of consideration to make the promise enforceable. *note that the court gives expectancy damages for the entire value of note and not merely her reliance

Promises to Convey LandGreiner v. GreinerFacts: Father of the family dies and disherents his son, Greiner. The mother, Greiner, decides to put the son on equal footing and said said she would give him some land and a home to live on. In reliance, the son sells his own land, and moves to the town where mother lives. He made improvements on the land. Evil brother convinces mother not to give the other brother land, and she tried to resind on her promuse. Mom sues to get him off the land. *mother should have reasonably expected her promise to induce action and does induce action, and if it does it is binding if injustice can only be avoided by the enforcement of the promise*Charitable SubscriptionsAllegheny College v. National Chautauqua County Bank of JamestownFact: Donor agreed to pay the college 5k 30 days after her death to start a fund for students entering the ministry. Donor paid 1k during her life and then repudiated the rest. When she dies college sues her estate to recover the unpaid balance. Lower court ruled for the defendant. College appeals.*court held that there was consideration because believed that she was induced to give money to start fund her name and college was induced to start fund by her money and did not start fund after receiving part of the promised money*no need for promissory estoppel bc Cardozo found sufficient consideration

Promises of a PensionFeinberg v. Pfeiffer Co. Facts: Feinberg worked for Pfeiffer for long time. Pfeiffer decided that whenever Feinberg decided to retire they would pay her 200/month for the rest of her life. After working another 1.5 years, she chose to retire and began receiving payments. Board changes and they stop payments and Feinberg who could no longer work sought to recover damages. *Pfeiffer was not induced to get her to retire, they diddn’t say that if you retire now, we’ll give you 200/month* court applies promisorry estoppel here b/c she left company relying on their promise to pay her 200/month

James Baird Co. V. Gimbel Brosfacts: Gimbel D (subcontractor), offered to supply linoleum to various contractors who were bidding on a public construction contract. Baird P, relying on Gimbel’s quoted price, submitted a bit and later that same day received notice from Gimbel that there was an error with the quoted price and that their estimate was much higher than originally submitted. Baird’s bid was accepted and Gimbel refused to provide the linoleum at the original price. Baird sues for breach of contract.*court says there is no contract b/c the offeror’s (Gimbel) offer said that that “prompt acceptance ager the


general contract has been awarded” is required*Baird never accepted the offer and using the bid for the general contract did not constitute acceptance. *2nd issue of promisorry estoppels: judge thinks commercial contracts should not be used, contractor could have protected themselves by insisting on a contract that use of their bid prices in the general bid constitutes acceptance only if granted the general contract*to make binding, could put in contract

Drenna v. Star Paving Company (Majority view of applying Promisorry Estoppel)Facts: Defendant (subcontractor) provides bid to plaintiff for paving parking lot. P uses the bid in submitting their general bid for their construction of the school. Ps bid is accepted. D tells P that it is withdrawing its bid and cant perform the work for the original bid price because there was a mistake in their calculations. P looks for months for another bid to cover. P sues for difference price quoted by D and the price of cover (Expectancy).*Court says that P relied on the D’s sub-bid and that reliance was reasonable b/c this was commercial custom for subcontracting (relying on bid normal), in economic interest of subcontractor to have bid relied on*nothing in bid saying that it could be withdrawn*ct uses analogy of forming an option contract through promisorry estoppel , once bid is used in general contract, the sub contractor has to keep their offer open *courts now using promisorry estoppel in cases other than gift cases where there is no consideration and uses it where there could have been consideration, more about reasonable reliance

Goodman v. Dickerfacts: Dicker is local distributor for Emerson Radio. Goodman applied for dealer franchise to sell Emerson products. Dicker represented that the application had been accepted that the franchise would be gratned and that they would receive intitial delivery of radios. No radios were delivered. Goodman sues for breach. *there was no contract and no consideration*court uses promisorry estoppel to substitute for the entire contract, *distributor estopped from denying their earlier promises about giving them the franchise and estopped from claiming that even though the franchise contract was an at will contract, this still does not bar them from getting franchise contract…..since they relied on the assurances and were induced to do so to their detriment, promisorry estoppel used to prevent injustice *there is not expectancy but reliance, this is a move from Ricketts v. Scothorn where the grand daughter got the entire value of the note, not merely reliance on it (lost wages only)

Hoffman v. Red Owl Storesfacts: Red Owl promised Hoffman that they would give him franchise for specific amount of money. Relying on this, Hoffman sold his grocery store amongst other things. Throughout this reliance, Red Owl continually assured Hoffman that the deal would go through. Red Owl also raised the price. When Red Owl informed Hoffman that his father in law would have to sign statement that his loan was a gift, Hoffman ended negotitaionts and filed suit for breach of Red Owl’s representations. No contract ever formed, Hoffman wants damages for his expenditures spent b/c of relying on Red Owl’s promises.*promisorry estoppel used in substitute for breach of contract b/c no contract ever formed.*court awards reliance b/c unable to determine the terms of the contract were in order to award


expectancy damages (did not know profits, rent, ect.)*this is considered an outlier case in terms of promisorry estoppel b/c it substitute for a contract that no one knows the terms *some courts use PE for precontractual liability

Alden v. Presleyfacts: Alden is Elvis’s fiancés mother. Elvis promises to pay her mortgage, he dies. The estate refuses to pay the mortgage. She divorces her husband but still wants the house. She offers to pay for his share of the house hoping that she will still be able to recover from Presley’s estate. She sues estate to recover the gift.*court refuses to allow her to recover from estate b/c under promisorry estoppel b/c it is not reasonable to rely on a gift that has already been withdrawn*there is no injustice when she knew gift promise was no longer open….she speculated to win suit

PERFORMANCE

Implied Duty of Good Faith(both UCC and Restatment impose obligation of good faith in contract performance or enforcement)-UCC: good faith means honesty in fact in the conduct or transaction concerned, for merchants also includes observance of reasonable commericial standard of fair dealing in trade-this does not apply to at will employees -parties can define what good faith means in their contract as long as is not unreasonable-no general duty to negotiate in good faith- easiest way to tell that someone not negotiated in good faith: negotiating with someone else, if other party won’t even talk to you

Goldberg v. Levyfacts: Goldberg entered into lease to rent property from Levy for nine years at a price of 13800 per year plus 10% of gross receipts of Levy’s business. Contract provided that if total sales fell below 100k, tenant could cancel lease. Few years later, D gave notice to terminate lease due to low profits. P alleges D purposefully acted in manner to reduce gross income. P sues for breach due to breach of implied good faith.*court found that Goldberg was intentionally diverting profits to keep business below threshold sum*Good faith is implied in fact-reasonable person under circumstance where percentage rent clause would know that they need to make reasonable effort to procure profit and not deceive, *Good faith is implied in law b/c parties couldn’t disclaim good faith-this would be an illusory promise, must say so in lease if you want to disclaim good faith

Mutual Life Ins. Co of New York v. Tailored Womanfacts: P leases to D first three floors of the building for which they must pay fixed rent and an additional 4% of income. Main contract for period of 10 years. D and P signed another lease agreement where the D would lease the 5th floor at a fixed rate w/ no percentage of income clause. 5th floor satted that it would


not have any effect on the original 10 year lease. D moved sale of furs, its most profitable section, to the 5th floor. P sues for breach of contract.*court finds that if P didn’t D to move the fur dep’t to the 5th floor, they should have written that in contract, lease vague*no case of fraud or deception b/c there are acting in economic best interest, *this is different from Goldberg b/c there, they were trying to get out of lease, here they are just trying operate there property as efficiently as possible*Dissent said you have to look at both leases to determine what good faith means

Stop and Shop v. Ganemfacts: Stop and Shop leased property from Ganem with a minimum fixed rent and a percentage of sales clause. Lease does did not state how the premises should be used. Shop and Stop closed the market but continued its minimum rent payments. Stop and Shop opened 2 stores within a mile of the original store. Ganem sues to seeking to compel Stop and Shop to operate the market at the original store. *ct discusses the amount of rent as a relavent factor (if rent reasonable according to fair market, then extra percent would be considered bonus)*court finds that Stop and Shop was acting according to good business judgement and found that the new stores were not opened in bad faith to detract from the original stores business.. * Satisfaction clause cases, franchise cases, % rent cases all great examples of good faith deal


Documents

657 Contracts Outline