Outline of Cases and Rules

8/8/2019 Outline of Cases and Rules

1/38

- Introductiono RST 1: Contract Defined

A contract is a promise or a set of promises for the breach of whichthe law gives a remedy, or the performance of which the law in

some way recognizes as a duty.

o RST 344: Purposes of Remedies

Judicial remedies under the rules stated in this Restate serve toprotect one or more of the following interests of a promisee:

(a) his expectation interest, which is his interest in havingthe benefit of his bargain by being put in as good a positionas he would have been in had the contract been performed,

(b) his reliance interest, which is his interest in beingreimbursed for loss caused by reliance on the contract bybeing put in as good a position as he would have been in

had the contract not been made, or (c) his restitution interest, which is his interest in having

restored to him any benefit that he has conferred on theother party.

o RST 345: Judicial Remedies Available

The judicial remedies available for the protection of the interestsstate in RST 344 include a judgment or order

(a) awarding a sum of money due under the contract or asdamages,

(b) requiring specific performance of a contract or enjoiningits non-performance,

(c) requiring restoration of a specific thing to prevent unjustenrichment,

(d) awarding a sum of money to prevent unjust enrichment,

(e) declaring the rights of the parties, and

(f) enforcing an arbitration award.

o UCC 1-102: Scope of Article

This article applies to a transaction to the extent that it is governedby another article of the UCC.

o UCC 1-103: Construction of UCC to Promote Its Purposes andPolicies; Applicability of Supplemental Principles of Law

(a) The UCC must be liberally construed and applied to promote itsunderlying purposes and policies, which are:

(1) to simplify, clarify, and modernize the law governingcommercial transactions;


2/38

(2) to permit the continued expansion of commercialpractices through custom, usage, and agreement of theparties, and

(3) to make uniform the law among the various jurisdictions.

o UCC 2-102: Scope; Certain Security and Other TransactionsExcluded From This Article

Unless the context otherwise requires, this Article applies totransactions in goods; it does not apply to any transaction whichalthough in the form of an unconditional contract to sell or presentsale is intended to operate only as a security transaction nor doesthis Article impair or repeal any statute regulating sales toconsumers, farmers or other specified classes of buyers.

o UCC 2-105(1): Definitions: Goods

Goods means all things (including specially manufactured goods)

which are movable at the time of identification to the contract forsale other than the money in which the price is to be paid,investment securities and things in action. Goods also includesthe unborn young of animals and growing crops and other identifiedthings attached to realty as described in the section on goods to besevered from realty.

1. Objective Theory of Mutual Assent

a. Mutual assent is a meeting of the minds. An actual subjective meetingof the minds is not necessary. Rather, courts use an objective test by with

each party is bound to the apparent intention that he manifested to theother(s).

b. An offer creates a power of acceptance in the offeree and a correspondingliability on the part of the offeror. For a communication to be an offer, itmust contain a promise, undertaking or commitment to enter into acontract, rather than a mere invitation to begin preliminary negotiations(there must be intent to enter into a contract). One can look to thefollowing:

i. Language1. Usually there are technical words that can be construed as

an offer (ex. I offer or I promise). However, some

language is merely an invitation for an offer (ex. I quote orI am asking for).2. If there is ambiguity, then the language will be construed in

the favor of the offeree.ii. Surrounding Circumstances

1. The circumstances surrounding the language will beconsidered in determining whether an offer exists. (ex. when


3/38

a statement is made in jest, anger, etc. and is understood inthat context, then it has no legal effect).

2. However, if a statement is subjectively intended to be in jestbut is reasonably understood by the hearer as having beenmade seriously, then it is an offer because it is interpreted

objectively (reasonable person test).a. Would a reasonable person in the position of theofferee understand from the offerors words andconduct an intent to be bound?

b. Did the offeree in fact so believe?i. The court looks to outward manifestations and

reasons whether a reasonable person in theofferees position thinks there was an intent tobe bound.

iii. Prior Practice and Relationship of the Parties1. A court will look to the prior relationship and practice of the

parties involved in determining whether there is an offer orpreliminary negotiations.iv. Method of Communication

1. The more broad the communicating media, the more likely itwill be view as merely the solicitation of an offer (Exception:rewards).

a. Advertisements are generally not construed as offers.Items containing price quotations are usuallyconsidered as mere invitations for offers. However, ifthe language of the advertisement can be construedas containing a promise, the terms are certain anddefinite and the offeree(s) is clearly identified, then itwill be treated as an offer.

v. Industry Custom1. Generally accepted customer in the industry is used to

determine whether a offer was made.c. An offer must be definite and certain in its terms. Typically it must include

the identity of the offeree, the subject matter, and the price to be paid.The general principle is that the parties make their own contract and thecourts do not make it for them. However, even if all the terms are notspelled out, the promise will usually be enforceable as long as the courtcan use some objective standard in including the missing terms.

i. Identification of the Offeree1. In order to constitute an offer, a statement must sufficiently

identify the offeree or a class to which she belongs to showthat there was a power of acceptance created.

a. To have the power to accept, the offeree must haveknowledge of the offer. As such, the proposal mustbe communicated to her.

ii. Definiteness of Subject Matter


4/38

1. The subject matter must be certain to determine what thepromise actually is.

a. Real Estate Transactions require the identification ofthe land and the price terms. A deed description isnot necessary, but there must be some particularity.

b. For the sale of goods, the quantity being offered mustbe certain or capable of being made certain.i. The quantity cannot be unreasonably

disproportionate.c. The nature of the work to be performed is required in

an offer for services.

Cases and Rules

Lucy v. Zehmero Parties have a dispute about if there was an actual agreement for Defendant to

sell farm to Plaintiff. Court looked to parties outward manifestations where theynegotiated for 30-40 minutes and wrote down agreement on a receipt that stateda price. Court found that mutual assent was already established before Zehmersaid he was joking. Further, undisclosed intentions are immaterial if the actionsof the parties have but one reasonable meaning.

Reasonable person in Lucys position would understand there was abusiness transaction/offer intended by Zehmer.

Lucy believed there was an offer.

Leonard v. Pepisoo Parties in dispute about Pepsi commercial that advertised Harrier Jet. Court

looked to outward manifestations of the parties and contrary to Lucy v. Zehmerfound that the commercial was clearly a joke. First, the price of the Harrier Jetwas not close to the actual cost and it was obvious that the subject matter was a

joke (exaggeration).

Reasonable person in Leonards position would not believe that thecommercial was actually an offer to sell a Harrier Jet. [No MutualAssent].

Leonard believe there was an offer, but it was not a reasonable belief.

RST 17: Requirement of a Bargaino (1) Except as stated in Subsection (2), the formation of a contract requires a

bargain in which there is a manifestation of mutual assent to the exchangeand a consideration.o (2) Whether or not there is a bargain a contract may be formed under special

rules applicable to formal contracts or under the rules stated in 82-94.

RST 27: Existence of Contract Where Written Memorial Is Contemplatedo Manifestations of assent that are in themselves sufficient to conclude a contract

will not be prevented from so operating by the fact that the parties also


5/38

manifest an intention to prepare and adopt a written memorial thereof; but thecircumstances may show that the agreements are preliminary negotiations.

Smith v. Boydo

Parties in dispute about if the standard of purchase and sales agreement for theproperty constituted a contract. Boyds did not intend to be bound before thecontract was actually written and signed. It was upon their signature that theSmiths offer would have been accepted, so there was no oral contract in place.These are common trade practices in real estate and Boyds are not bound.

2. Offer That Creates Power of Acceptance

Cases and Rules

RST 22: Mode of Assent: Offer and Acceptanceo

(1) The manifestation of mutual assent to an exchange ordinarily takes the formof an offeror proposal by one party followed by an acceptance by the otherparty or parties.

o (2) A manifestation of mutual assent may be made even though neither offer noracceptance can be identified and even though the moment of formation cannotbe determined.

RST 24: Offer Definedo An offer is the manifestation of willingness to enter into a bargain so made as to

justify another person in understanding that his assent to that bargain is invitedand will conclude it.

RST 33: Certaintyo (1) Even though a manifestation of intention is intended to be understood as an

offer, it cannot be accepted so as to form a contract unless the terms of thecontract are reasonably certain.

o (2) The terms of a contract are reasonably certain if they provide a basis fordetermining the existence of a breach and for giving an appropriate remedy.

o (3) The fact that one or more terms of a proposed bargain are left open or

uncertain may show that a manifestation of intention is not intended to beunderstood as an offer or as an acceptance.

AN OFFER IS DISTINGUISHABLE FROM:

RST 26: Preliminary Negotiationso A manifestation of willingness to enter into a bargain is not an offerif the person

to whom it is addressed knows or has reason to know that the personmaking it does not intend to conclude a bargain until he has made a furthermanifestation of assent.


6/38

Lonergan v. Scolnicko Defendant was trying to sell his property and sent numerous letters to Plaintiff,

which Plaintiff thought was an offer. Scolnicks ad for the sale of his propertywas considered an invitation for an offer as well as the form letter that was sentto Lonergan providing him with further information about the property. Lonergan

should have known from the letter on April 8 that he needed to act quickly andthere were other potential buyers, so it was clear that it was not an offer [ nopower of acceptance]. The letter that Lonergan sent in response would be anoffer that Scolnick had the right to accept.

Fairmount Glass Works v. Grunden-Martin Woodenware Co.o Grunden sent letter asking about quote of mason jars and Fairmount replied by

stating their quotes for immediate acceptance. Grunden accepted letter fromFairmont, but they were unable to book the order. A price quote is not usuallyconstrued as an offer, but due to the language of Fairmonts letter (i.e.immediate acceptance), court found it was an offer. Grunden accepted and

Fairmount is bound.

UCC 2-206: Offer and Acceptance in Formation of Contract [Sale of Goods]o (1) Unless otherwise unambiguously indicated by the language or circumstances

o (a) an offer to make a contract shall be construed as inviting acceptance inany manner and by any medium reasonable in the circumstances;

o (b) an order or other offer to buy goods for prompt or current shipmentshall be construed as inviting acceptance either by a prompt promise toship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does notconstitute an acceptance if the seller seasonably notifies the buyer that

the shipment is offered only as an accommodation to the buyer.

***UCC does not provide definition of offer, so look to the common law***

Leonard v. Pepsico, Inc.o Advertisements are typically not construed as an offer and are usually invitations

for offers and created no power of acceptance. Leonards letter with the OrderForm would have been considered the offer and there is no enforceable contractbecause Pepsico did not accept. In order for advertisements to be construedas an offer, it must be clear, definite, explicit and leave nothing open fornegotiation, meaning the acceptance would complete the contract.

3. Termination of Power of Acceptance/Destruction of the Offer

Once an offer is made, a power of acceptance in created in the offeree [RST 35].

RST 36: Methods of Termination of the Power of Acceptanceo (1) An offerees power of acceptance may be terminated by

(a) rejection or counter-offer by the offeree, or


7/38

(b) lapse of time, or

(c) revocation by the offeror, or

(d) death or incapacity of the offeror or offeree.o (2) In addition, an offerees power of acceptance is terminated by the non-

occurrence of any condition of acceptance under the terms of the offer.

Cases and Rules

Revocationo A revocation is the retraction of an offer by the offeror. A revocation terminates

the offerees power of acceptance if it is communicated to her before sheaccepts.

o Revocation by Direct Communication

Revocation directly communicated to the offeree by the offerorterminates the offer.

o Revocation by Indirect Communication

The offer may be effectively terminated if the offeree indirectlyreceives:

(1) correct information;

(2) from a reliable source;

(3) of acts of the offeror that would indicate to a reasonableperson that the offeror no longer wishes to make the offer.

o A revocation is generally effective when received by the offeree.

o Offers can be revoked at will by the offeror, even if he has promised not to

revoke for a certain period, except under certain situations where the offerorspower to terminate the offer is limited.

o

An option is a distinct contract in which the offeree gives consideration fora promise by the offeror not to revoke an outstanding offer.o Under Article 2-205:

(1) If a merchant;

(2) Offers to sell goods in a signed writing; and

(3) The writing gives assurances that it will be held open;

(4) The offer is not revocable for lack of consideration during thetime state, or if no time is state, for a reasonable time (but periodcannot exceed three months).

o Where the offeror could reasonably expect that the offeree would rely to herdetriment on the offer, and the offeree does so rely, the offer will be held

irrevocable as an option contract for a reasonable length of time. At the veryleast, the offeree would be entitled to relief measured by the extent of anydetrimental reliance (RST 87). The case law indicates that this may be limitedin those situations in which the offeror would reasonably contemplate reliance bythe offeree in using the offer before it is accepted.

o An offer for a true unilateral contract becomes irrevocable once performancehas begun. However, the unilateral contract will not be formed until the total actis complete. Once the offeree begins to person, she is given a reasonable time


8/38

to complete performance during which time the offer is irrevocable. The offereeis not bound to complete performance and may withdraw at any time prior tocompletion of the performance.

o RST 45 states that an option contract is formed upon the start ofperformance by the offeree, making the offer irrevocable for a reasonable

time. It is as if the offeree had paid consideration to keep the offer openfor a reasonable time.o Part Performance

RST 45, 87, 90: The rules limited an offerors power to revoke donot apply when the offeree is only preparing to perform. However,substantial preparations to perform may constitute detrimentalreliance sufficient to make the offerors promise binding to theextent of the detrimental reliance.

RST 45: If the offerors cooperation is necessary for performance,his withholding of it upon the tender of part performance is theequivalent of part performance.

Rejectiono RST 38: Rejection

(1) An offerees power of acceptance is terminated by his rejection of theoffer, unless the offeror has manifested a contrary intention.

(2) A manifestation of intention not to accept an offer is a rejection unless theofferee manifests an intention to take it under further advisement.

o An express rejection is a statement by the offeree that she does not

intend to accept the offer. The rejection will terminate the offer.o A rejection is effective when received by the offeror.

o If an offer is rejected, the offeror may restate the same offer and create

a new power of acceptance.

o RST 37: Termination of Power of Acceptance Under Option Contract

Because an option is a contract to keep an offer open, a rejection of or acounteroffer to an option does not constitute a termination of the offer. Theofferee is still free to accept the original offer within the option period unlessthe offeror has detrimentally relied on the offerees rejection.

o RST 39: Counter-Offers

(1) A counter-offer is an offer made by an offeree to his offeror relating to thesame matter as the original offer and posing a substituted bargain differingfrom that proposed by the original offer.

(2) An offerees power of acceptance is terminated by his making of acounter-offer, unless the offeror has manifested a contrary intention or unlessthe counter-offer manifests a contrary intention of the offeree.

o A counteroffer is an offer made by the offeree to the offeror thatcontains the same subject matter as the original ofer, but differs in its


9/38

terms. A counteroffer serves as a rejection of the original offer as wellas a new offer.

o However, an inquiry will not terminate the offer when it is consistenwith the idea that the offeree is still keeping the original proposal underconsideration. The test is whether a reasonable person would believe

that the original offer had been rejected. Ex. Would you consider lowering you price by $5,000?

o RST 40: Time When Rejection or Counter-Offer Terminates the Power of

Acceptance Rejection or counter-offer by mail or telegram does not terminate the

power of acceptance until received by the offeror, but limits the power sothat a letter or telegram of acceptance started after the sending of anotherwise effective rejection or counter-offer is only a counter-offer unlessthe acceptance is received by the offeror before he receives the rejectionor counter-offer.

Lapse of Timeo RST 41: Lapse of Time

(1) An offerees power of acceptance is terminated at the time specified inthe offer, or, if no time is specified, at the end of a reasonable time.

(2) What is a reasonable time is a question of fact, depending on all thecircumstances existing when the offer and attempted acceptance are made.

o The offeree must accept the offer within the time period specified or, if

no time period is specified, within a reasonable time. If she does notdo so, then she will have allowed the offer to terminated.

o If the terms are unclear as to time, then the time limit is what a

reasonable person in the offerees position would have assumed.o If the offer provides that it will expire within a particular time period, that

period commences when the offer is received by the offeree. If theoffer is delayed in transmission and this fact is or should have beenapparent to the offeree, the offer terminates at the time it would haveexpired had there been no delay. All relevant facts must beconsidered in determining whether this knowledge is present.

Minnesota Linseed Oil Co. v. Collier White Lead Co.o Negotiation for oil between the parties via telegram. Telgram sent on July 31st

giving offer, but was not accepted until August 3 rd. The Court found that the

Plaintiff expected an immediate response given the fluctuation in price, so theoffer was no longer valid at the time of acceptance because it was not acceptedwithin a reasonable time.

Death or Incapacity of the Offeroro RST 48: Death or Incapacity of Offeror or Offeree

An offerees power of acceptance is terminated when the offeree or offerordies or is deprived of legal capacity to enter into the proposed contract.


10/38

o If either of the parties dies or is adjudicated insane prior to acceptance,the offer is terminated. It is not necessary that the death or insanity becommunicated to the other party. However, the offer will notterminated in this fashion if the rules limited an offerors power toterminate are applicable (ex. option contract).

New Headley Tobacco Warehouse Co. v. Gentrys Exro New Headley enters into 22 year lease with Gentry. Ten years later, Gentry sent

a letter to the company stating they could extend the lease if they met certainconditions specified within the letter. New Headley did not respond to the letteruntil Gentry had already died. Since there was no consideration, the offer wasrevocable, meaning it could have been withdrawn at any time before acceptance.As such, the court reasoned that a revocable offer is terminated by the offerorsdeath because there couldnt be mutual assent.

Revocation by the Offeror

o RST 42: Revocation by Communication From Offeror Received by Offeree An offerees power of acceptance is terminated when the offeree receives

from the offeror a manifestation of an intention not to enter into the proposedcontract.

o RST 43: Indirect Communication of Revocation

An offerees power of acceptance is terminated when the offeror takesdefinite action inconsistent with an intention to enter into the proposedcontract and the offeree acquires reliable information to the effect.

Dickinson v. Doddso Dodds makes offer to Dickinson to sell home and puts a designated time by

which Dickinson can accept the offer. Before that time period elapses, Doddssell the property to someone else. Dickinson is informed by a third party (hisagent) and the Court found that since he was informed by a reliable person, hewas aware the offer was no longer in place. [Indirect Revocation].

4. Option Contract and Firm Offer- is offer irrevocable

Cases and Rules

RST 25: Option Contractso An option contract is a promise which meets the requirements for the formation

of a contract and limits the promisors power to revoke an offer.

RST 45: Option Contract Created by Part Performance or Tendero Where an offer invites an offeree to accept by rendering a performance and does

not invite a promissory acceptance, an option contract is created when theofferee tenders or begins the invited performance or tenders a beginning of it.


11/38

o (2) The offerors duty of performance under any option contract so created isconditional on completion or tender of the invited performance in accordance withthe terms of the offer.

RST 87: Option Contract

o An offer is binding as an option contract if it (a) is in writing and signed by the offeror, recites a purported consideration for

the making of the offer, and proposes an exchange on fair terms within areasonable time; or

(b) is made irrevocable by statuteo (2) An offer which the offeror should reasonably expect to induce action or

forbearance of a substantial character on the part of the offeree beforeacceptance and which does induce such action or forbearance is binding as anoption contract to the extent necessary to avoid injustice.

Beall v. Beallo Carlton Beall bought property and obtained a three year option contract to buy

Calvin Bealls portion. There was $100.00 of consideration to keep it open. Herenewed the option for another five year with an additional $100.00consideration, but there is no record it was paid. Carlton tried to exercise theoption and sent letters to Calvins wife, but she did not respond.

o Court reasoned that an option contract is a binding agreement that is supported

by consideration. If there is no consideration, then there is a revocable offer. Itis still set for the time period unless revoked.

o ***Exception to this rule in UCC 2-205 (firm offers)***

UCC 2-205: exception to the rule set forth in Beallo Offer by a merchant

Merchant person who deals in goods of the kind or otherwise by hisoccupation

to buy or sell goods

Goods all things which are movable at the time of the time of theidentification to the contract. (RST 2-105).

in a signed writing which by its terms

Signed includes using any symbol executed or adopted by a partywith present intention to authenticate a writing.

Writing includes printing, typewriting or any other intentionalreduction to tangible form.

o Gives assurance that it will be held openo Not revocable for lack of consideration during the time stated or if time not stated,

a reasonable time.o Period of irrevocability does not exceed three months.

o Term of assurance provided on a form supplied by offeree must be separatelysigned by the offeror.


12/38

Board of Control of Eastern Michigan University v. Burgesso Burgess signed an agreement leaving a 60-day option for Board of Control to

purchase his property. There was an acknowledgement that a $1.00consideration was paid, but both parties admit it was never received. Board of

Control tried to exercise option and Burgess refused.o Court reasoned that there must be valid consideration to constitute an

enforceable option contract. A written acknowledgement of receipt creates arebuttal presumption that consideration has passed, but it doesnt bar thepresentation of evidence to contradict any such acknowledgement. Since therewas no consideration, the agreement is an offer that could be revoked beforeacceptance.

o ***There would be an option contract if RST 87(1)(a) was applied.***

5. Effective Acceptance - Offeror is Master of Offer

Case and Rules

RST 30: Form of Acceptance Invitedo (1) The manifested intention of the offeror determines the person or persons in

whom is created a power of acceptance.o (2) An offer may create a power of acceptance in a specified person or in one or

more of a specified group or class of persons, acting separately or together, or inanyone or everyone who makes a specified promise or renders a specifiedperformance.

RST 50: Acceptance of Offer Defined; Acceptance by Performance; Acceptance

by Promiseo (1) Acceptance of an offer is a manifestation of assent to the terms thereof made

by the offeree in a manner invited or required by the offer.o If an offer provides that it may be accepted only by performance then:

Most courts hold that an offer to form a unilateral contract is notaccepted until performance is completed. The beginning ofperformance may create an option so that the offer is irrevocable.However, the offeree is not obligated to complete performancemerely because he has begun performance, as only completeperformance constitutes an acceptance of the offer.

Generally, the offeree is not required to give the offeror notice that

he has begun the requested performance, but is required to notifythe offeror within a reasonable time after performance has beencompleted. However, no notice is required if:

The offeror waived notice; or

The offerees performance would normally come to theofferees attention within a reasonable time.

o Unless otherwise provided, an offer is construed as inviting acceptance inany reasonable manner and by any medium reasonable under the


13/38

circumstances. Any objective manifestation of the offereescounterpromise is usually sufficient.

The offeror is the master of her offer and may require an act tosignify acceptance.

RST 51: Effect of Part Performance Without Knowledge of Offero Unless the offeror manifests a contrary intention, an offeree who learns of an

offer after he has rendered part of the performance requested by the offer mayaccept by completing the requested performance.

RST 52: Who May Accept An Offero An offer can be accepted only by a person whom it invites to furnish the

consideration. Generally only the person to whom an offer is addressed has the power of

acceptance. This is so even though the offer does not call for personalperformance or special financial responsibility on the part of the offeree.

One may also have the power of acceptance if she is a member of a classto which an offer has been directed. If the offer is made to the generalpublic, anyone may qualify as an offeree. If the offer requestsperformance from an unlimited number of persons, performance byanyone knowing of the offer will cut off the power of every other person toaccept, provided that the offeror desires only one performance and thereis no indication that he is willing to pay more than once.

The offeree must know of the offer in order to accept, and this is truewhether the offer is for a bilateral or unilateral contract.

- An offer will be construed as an offer to enter into a bilateral contract unless it

specifically provides that it may be accepted only through performance. It maybe accepted either by a promise to perform or by the beginning of performance.

o Generally, acceptance of an offer to enter into a bilateral contract must becommunicated to the offeree.

Exception

If the offer provides that acceptance need not becommunicated, then no communication of the acceptance isrequired.

La Salle National Bank v. Vega

o This was for a trust contract between the parties. The document stated that theagent for the purchaser would sign it and then the seller. Vega signed thedocument. However, there was also a requirement that it would only becomeenforceable once signed by the trust and it was not.

o Court found that the document was not an offer for Vega because it did not givehim a power of acceptance. Rather, it was an offer from Vega that could beaccepted through a signature by the trust. La Salle did not fulfill the requirementof the offer and as such, there was no contract.


14/38

Ever-Tite Roofing Corp. v. Greeno Greens signed a document for re-roofing. The agreement would be binding once

signed by a principal or authorized officer or upon commencing the work. Oncethe Greens credit was approved, Ever-Tite got equipped for the job and went to

the Greens residence. When they arrived, there were other workmen that theGreens had hired without informing Ever-Tite. The Greens would not allow themto do the job.

o Court found that Ever-Tite was reasonable in how much time it took them tobegin the work. Its acceptance of the offer began when it started commencingthe work and the Greens did not revoke the offer before then, so there was abinding contract.

Davis v. Jacobyo Plaintiff was considered like a daughter to the Whiteheads. When they moved to

Canada, Mr. Whitehead wrote several letters indicating that he and Mrs.

Whitehead were ill and that he wanted them to come and help him with hisfinances and they would get everything in the will. The will did not contain whathe said it would and the Supreme Court ruled in favor of the Plaintiff for specificperformance because it constituted a bilateral contract, not a unilateral contract.

o ***Court prefers bilateral contract over unilateral contract when language is

vague: RST 32. However, the classical view states that the most closely relatedshould be chosen.***

RST 32o In case of doubt an offer is interpreted as inviting the offeree to accept either by

promising to perform what the offer request or by rendering the performance, as

the offeree chooses.

6. Promissory Acceptance Does Offer Invite Promissory Acceptance Only?

RST 56: Acceptance by Promise; Necessity of Notification to Offeroro Except as stated in RST 69 or where the offer manifests a contrary intention, it is

essential to an acceptance by promise either that the offeree exercisereasonable diligence to notify the offeror of acceptance or that the offeror receivethe acceptance seasonably.

RST 58: Necessity of Acceptance Complying With Terms of Offero An acceptance must comply with the requirements of the offer as to the promise

to be made or the performance to be rendered.

RST 59: Purported Acceptance Which Adds Qualificationso A reply to an offer which purports to accept it but is conditional on the offerors

assent to terms additional to or different from those offered is not an acceptancebut is a counter-offer.


15/38

RST 60: Acceptance of Offer Which States Place, Time or Manner of Acceptanceo If an offer prescribes the place, time or manner of acceptance its terms in this

respect must be complied with in order to create a contract. If an offer merelysuggests a permitted place, time or manner of acceptance, another method of

acceptance is not precluded.

RST 62: Effect of Performance by Offeree Where Offer Invites Either Performanceor Promise

o (1) Where an offer invites an offeree to choose between acceptance by promise

and acceptance by performance, the tender or beginning of the invitedperformance or a tender of a beginning of it is an acceptance by performance.

o (2) Such an acceptance operates as a promise to render complete performance.

RST 63: Time When Acceptance Takes Effecto Unless the offer provides otherwise,

(a) an acceptance made in a manner and by a medium invited by an offeris operative and completes the manifestation of mutual assent as soon asput out of the offerees possession, without regard to whether it everreaches the offeror; but

(b) an acceptance under an option contract is not operative until receivedby the offeror (Exception to Mailbox Rule).

RST 64: Acceptance by Telephone or Teletypeo Acceptance given by telephone or other medium of substantially instantaneous

two-way communication is governed by the principles applicable to acceptanceswhere the parties are in the presence of each other.

RST 65: Reasonableness of Medium of Acceptanceo Unless circumstances known to the offeree indicate otherwise, a medium of

acceptance is reasonable if it is one used by the offeror or one customary insimilar transactions at the time and place the offer is received.

Cases and Rules

Hendricks v. Beheeo Behee made an offer to buy Hendricks property and mailed to their real estate

agent. The Hendricks signed the agreement only two days later, but Behee

revoked offer to Smiths before they notified him of the acceptance.o The Court found that Behee wasnt aware of the acceptance, so he is allowed to

revoke the offer because an uncommunicated intention to accept an offer is notan acceptance. When the offer calls for a promise, the offeror must be notified ofthe acceptance. Behee notified Smiths of his revocation, so no contract.

RST 50


16/38

o (3) Acceptance by a promise requires that the offeree complete every actessential to the making of the promise.

Mailbox Rule

- Acceptance by mail or similar means creates a contract at the moment ofdispatch, provided that the mail is properly addressed and stamped, unless:o (1) The offer stipulates that acceptance is not effective until received; oro (2) RST 63: An option contract is involved. An acceptance under an

option contract is effectively only upon receipt.

Since in most states, a revocation is only effective upon receipt,under the mailbox rule if the offeree dispatches an acceptancebefore he receives a revocation sent by the offeror, a contract isformed.

Because a rejection is effective only when received, an offereesending both an acceptance and rejection could create problems

for the offeror if the mailbox rule were applicable. Ex. a contract would be created when the acceptance was

dispatched even if the offeror received the rejection andrelied on it before receiving the acceptance.

o If the offeree sends a rejection and then sends an

acceptance, the mailbox rule does not apply.Whichever one is received first is effective.

o If the offeree sends the acceptance first, the mailboxrule applies. However, if the offeror received therejection first and changed his position in relianceon it, the offeree will be estopped from enforcing the

contrac.t An acceptance transmitted by unauthorized means or improperly

transmitted by authorized means may still be effective if it isactually received by the offeror while the offer is still in existence.

Adams v. Lindsello Lindsell sent an offer in the mail on September 2nd to Adams for the sale of wool

and asked that acceptance by received in the course of post. The mail wasmisdirected due to a clerical error by Lindsell and Adams did not receive it untilSeptember 5th. They accepted the offer the evening it was received, but Lindsellwas expecting it earlier and already sold the wool to someone else.

o Court found that when an acceptance is made through the mail, it is effective ondispatch rather than receipt. As such, a contract was formed.

7. Nonpromissory Acceptance / Acceptance by Performance

RST 54: Acceptance by Performance; Necessity of Notification to Offeror


17/38

o (1) Where an offer invites an offeree to accept by rendering a performance, nonotification is necessary to make such an acceptance effective unless the offerrequests such a notification.

o (2) If an offeree who accepts by rendering a performance has reason to knowthat the offeror has no adequate means of learning of the performance with

reasonable promptness and certainty, the contractual duty of the offeror isdischarged unless

(a) the offeree exercises reasonable diligence to notify the offeror ofacceptance, or

(b) the offeror learns of the performance within a reasonable time, or

(c) the offer indicates that notification of acceptance is not required.

RST 45: Option Contract Created by Part Performance or Tendero Where an offer invites an offeree to accept by rendering a performance and does

not invite a promissory acceptance, an option contract is created when theofferee tenders or begins the invited performance or tenders a beginning of it.

o The offerors duty of performance under any option contract so created isconditional on completion or tender of the invited performance in accordance withthe terms of the offer.

RST 69: Acceptance by Silence or Exercise Dominiono (1) Where an offeree fails to reply to an offer, his silence and inaction operate as

acceptance in the following cases only: (a) Where an offeree takes the benefit of offered services with reasonable

opportunity to reject them and reason to know that they were offered withthe expectation of compensation.

(b) Where the offeror has stated or given the offeree reason to understand

that assent may be manifested by silence or inaction, and the offeree inremaining silent and inactive intends to accept the offer.

(c) Where because of previous dealings or otherwise, it is reasonable thatthe offeree should notify the offeror if he does not intend to accept.

o (2) An offeree who does any act inconsistent with the offerors ownership of

offered property is bound in accordance with the offered terms unless they aremanifestly unreasonable. But if the act is wrongful as against the offeror it is anacceptance only if ratified by him.

Cases and Rules

Carlill v. Carbolic Smoke Ball Co.

Marchiondo v. Scheck


18/38

o If part of the consideration is given or tendered by the offeree in response to aunilateral contract, the offeror is bound by a contract.

8. Acceptance by SilenceCases and Rules

RST 69: Acceptance by Silence or Exercise Dominiono Where an offeree fails to reply to an offer, his silence and inaction operate as

acceptance in the following cases only:

Where an offeree takes the benefit of offered services withopportunity toreject themand reason to know that they were offered with the expectationof compensation.

Laredo National Bank v. Gordono Reject banks argument. There is an exception to the general rule that silence to

does not an acceptance. When the relation between the parties is such that the

offeror is justified in expecting a response, or the offeree is under a duty to reply,the offerees silence will be regarded as an acceptance. The bank started thiscorrespondence war and there is an expectation that services were beingprovided and waited months to respond to the letter while services were stillbeing continued. They reasonably knew that their silence would be construed asan acceptance.

9. Contract for the sale of goods: formation of contract 2-204/ offer andacceptance 2-206/ firm offer 2-205 (offer revocable) / battle of forms / mirror imagerule

- U.C.C. 2-205: Firm Offerso An offer by a merchant to buy or sell goods in a signed writing which by its

terms gives assurance that it will be held open is not revocable, for lack ofconsideration, during the time stated or if no time is stated for reasonabletime, but in no event may such period of irrevocability exceed threemonths; but any such term of assurance on a form supplied by the offereemust be separately signed by the offeror.

- U.C.C. 2-206: Offer and Acceptance in Formation of Contracto An offer to buy goods for current or prompt shipment is construed as

inviting acceptance either by a promise to ship or by current or prompt

shipment of conforming or nonconforming goods. The shipment ofnonconforming goods is an acceptance creating

a bilateral contract as well as a breach of the contract unless theseller seasonably notifies the buyer that a shipment ofnonconforming goods is offered only as an accommodation. Thebuyer is not required to accept accommodation goods and mayreject them. If he does, the shipper is not in breach and may


19/38

reclaim the accommodation goods because her tender does notconstitute an acceptance of the buyers original offer.

- Traditional contract law insisted an absolute and unequivocal acceptance of eachand every term of the offer (the mirror image rule).

o

At common law, any different or additional terms in the acceptance makethe response a rejection and counteroffer.

Statements by the offeree that make implicit terms explicit do notprevent acceptance.

A grumbling acceptance is an effective acceptance as long as itstops short of actual dissent.

A request for clarification does not necessarily amount to arejection and counteroffer.

- UCC 2-207: Battle of the Formso The two fact situations that are typically covered.

(1) oral agreement or agreement reached by informalcorrespondence followed by formal memorandum (confirmation)that includes terms not discussed.

(2) offer and acceptance where wire or letter intended asacceptance adds further minor suggestions or proposals.

o Discussing (2) first:

UCC 2-207(1)

A definite and seasonable expression of acceptance or awritten confirmation which is sent within a reasonable timeoperates as an acceptance even though it states termsadditional to or different from those offered or agreed upon,

unless acceptance is expressly made conditional on assentto the additional or different terms.

o Is there a definite and seasonable (timely)

expression of acceptance in response to an offer?

Generally, in order to have a definiteexpression of acceptance, the documentresponding to the offer must manifestacceptance and NOT diverge significantly(from the offer) as to a dickered term.

A dickered term or dickered-for term is aterm that the parties have negotiated andagreed upon.

Type of goods; Quantity of goods;Delivery date; Price.

Thus, if there the dickered-term isdifferent, there is generally no definiteand seasonable expression of acceptance.


20/38

o Are there terms additional to or different from thoseoffered stated with the acceptance?

Additional term determine whether is was notin the offer beforehand.

Different term if it was in the offer, but has

changed. (conflicting terms).o Is the acceptance expressly made conditional on

assent to the additional or different terms?

UCC 2-207(2)

The additional terms are to be construed as proposals foraddition to the contract. Between merchants such termsbecome part of the contract unless:

o (a) the offer expressly limits acceptance to the termsof the offer;

o (b) they materially alter it; or

o (c) notification of objection to them has already beengiven or is given within a reasonable time after noticeof them is received.

- If the acceptance is not deemed to be expressly conditional on assent to theadditional term, a contract has been formed and the additional terms are viewedas proposals.

o When between a merchant and a nonmerchant, the proposals do not

become part of the agreement unless the nonmerchant expressly agreesto it.

- Comment 4 gives insight on examples of terms that materially alters the terms ofthe contract.

o You must determine if the addition causes surprise (other party notaware) or hardship (causing additional costs).

o If there is a material alteration, then it would not become part of that

contract unless the offeror expressly agrees.o Example?

Clause negating such standard warranties as fitness for aparticular purpose.

- If there is no oral agreement, then conduct may establish a contract.

***Knock-out rule is majority rule***

UCC 2-207(3)

Conduct by both parties which recognizes the existence of acontract is sufficient to establish a contract for sale althoughthe writings of the parties do not otherwise establish a


21/38

contract. In such case the terms of the particular contractconsist of those terms on which the writings of the partiesagree, together with any supplementary terms incorporatedunder any other provisions of this Act.

- U.C.C. 2-207: Battle of the Formso Article 2 has abandoned the mirror image rule, providing instead that the

proposal of additional or different terms by the offeree in a definite andtimely acceptance does not constitute a rejection and counteroffer, butrather is effective as an acceptance, unless the acceptance is expresslymade conditional on assent to the additional or different terms. Whetherthe additional or different terms become part of the contract depends onwhether or not both parties are merchants.

o Even if a contract was not formed under 2-207(1), conduct by both parties

that recognizes the existence of a contract is sufficient to establish thecontract.

Cases and Rules

10. Other UCC Provisionsa. Article 2 Gap Filler: U.C.C. 2-305(1)

i. Article 2 includes some very specific gap fillers for situationswhere certain terms are not included in a contract for the sale ofgoods. Under Article 2, the price will be a reasonable price at thetime of delivery if:

a. Nothing is said as to price;b. The price is left to be agreed to by the parties and they fail toagree; or

c. The price is to be fixed by some external factor or third partyand it is not so set.

ii. Under Article 2, a contract will be formed even if the parties agreethat one of the parties will fix the price in the future. However, theparty to whom the contract gives the right to fix the price must act ingood faith. U.C.C. 2-305(3).

11. Acceptances that Deviate from Offer

Cases and Rules

Dorton v. Collins & Aikman Corporationo Plaintiff purchased carpet from the Defendant on numerous occasions. When

they ordered carpet for one of their customers, they found out it was polyesterrather than the type of material they bargained for. They had already receivedthe acknowledgment form and accepted the carpet.


22/38

o U.C.C. 2-207 applies (1) where an agreement has been reached by oral orinformal correspondence and is followed by one or both of the parties sendingformal acknowledgements stating the terms; and (2) where a wire or letterexpressed and intended as the closing of an agreement adds further minorsuggestions. Under UCC 2-207(1) a contract is recognized notwithstanding the

fact that an acceptance or confirmation contains terms additional to or differentfrom those of the offer or prior agreement, provided offerees intent toacceptance the offer is definitely expressed and that the offerees acceptance isnot expressly conditioned on the offerors assent to the additional or differentterms. The additional terms are treated as proposals for addition to the contract.

This rule is intended to alter the mirror rule in common law, which requiredthe terms of an acceptance or confirmation be identical to the terms of theoffer or oral agreement. If there are additional terms from those of theoffer, then it constituted a rejection of the original offer or agreement andbecame a counter-offer. If the buyer paid and accepted the goods, it wasdeemed they accepted the counter-offer.

o It is not enough that the acceptance is expressly conditional; rather anacceptance must be expressly conditional on the offerors assent to those terms.It must be directly expressed, not implied or left to inference.

Legally significant language: subject to all the terms and conditions. not enough.

o Under UCC 2-207, if an arbitration provision materially alters an existing

agreement, it will not be incorporated into the contract unless expressly agreed toby both parties.

Klocek v. Gateway, Inc.o When the Plaintiff received his computer, Gateway includes the Standard Terms

and Conditions within the box. It stated that when the computer system is keptbeyond five (5) days after the date of deliver, the terms and conditions areaccepted by the customer. Paragraph 10 includes an arbitration clause statingthat any dispute arising out of or relating to the agreement or its interpretationmust be settled exclusively at arbitration. Plaintiff brought suit against theDefendant on an action related to the purchase of a Gateway Computer (breachof contract and breach of warranty).

o Gateway accepted the Plaintiffs offer to purchase the computer. Under 2-207,the Standard Terms constitute either an expression of acceptance or writtenconfirmation. As an expression of acceptance, it would constitute a counter-offeronly if Gateway expressly made its acceptance conditional on plaintiffs assent to

the additional or different terms. It must be clearly expressed in a mannersufficient to notify the offeror that the offeree is unwilling to proceed with thetransaction unless the additional or different terms are included in the contract.There was no clear expression by Gateway that such a condition existed. In fact,Gateway shipped the computer beforehand. Since the Plaintiff is not a merchant,the Standard Terms did not become part of the parties agreement unless plaintiffexpressly agreed to them (2-207 Comment 2). Gateway has not presentedevidence that the Plaintiff expressly agreed to the Standard Terms or that it


23/38

informed the Plaintiff of the five-day review and return period as a condition of thesale. Simply keeping the computer beyond 5 days is not sufficient todemonstrate an express agreement by the Plaintiff because silence or merefailure to object is not typically an acceptance.

o ***pg. 175 footnote

12. Problems of Misunderstood, Incomplete or Indefinite Terms

- RST 20: Effect of Misunderstandingo (1) There is no manifestation of mutual assent to an exchange if the

parties attach materially different meanings to their manifestations and

(a) neither party knows or has reason to know the meaningattached by the other; or

(b) each party knows or each party has reason to know themeaning attached by the other.

o (2) The manifestations of the parties are operative in accordance with themeaning attached to them by one of the parties if

(a) that party does not know of any different meaning attached bythe other, and the other knows the meaning attached by the firstparty; or

(b) that party has no reason to know of any different meaningattached by the other, and the other has reason to know themeaning attached by the first party.

- RST 33: Certaintyo (1) Even though a manifestation of intention is intended to be understood

as an offer, it cannot be accepted so as to form a contract unless theterms of the contract are reasonably certain.

o (2) The terms of a contract are reasonably certain if they provide a basisfor determining the existence of a breach and form giving an appropriateremedy.

o (3) The fact that one or more terms of a proposed bargain are left open or

uncertain may show that a manifestation of intention is not intended to beunderstood as an offer or as an acceptance.

Raffles v. Wichelhaus

Varney v. Ditmars

13. Problems of Postponed Agreements

Walker v. Keith

14.Consideration as an Element of Contractual Obligation

o RST 17(1)


24/38

The formation of a contract requires a bargain in which there is amanifestation of mutual assent to the exchange and aconsideration.

o Modern Law View RST 71: Requirement of Exchange; Types ofExchange

(1) To constitute consideration, a performance or a return promisemust be bargained for.

The promise must induce the detriment and the detrimentmust induce the promise.

Consideration must exist on both sides; that is, promisesmust be mutually obligatory.

(2) Performance or return promise is bargained for if it is soughtby the promisor in exchange for his promise and is given by the

promisee in exchange for that promise. The benefit to the promisor need not have economic value.

(3) The performance may consist of

(a) act other than a promise;

(b) a forbearance, or

(c) the creation, modification, of a legal relation.o In is not enough that the promisee incurs detriment;

the detriment must be the price of the exchange; andnot merely fulfillment of certain conditions for makingthe gift.

o If the promisors motive was to induce the detriment, itwill be treated as consideration; if the motive was nomore than to state a condition of a promise to make agift, there is no consideration.

(4) Performance or return promise may be given to promisor orsome other person. It may be given by promisee or some otherperson.

o Objective Theory applies to determination of consideration.

o ***Pay attention to comment b.***

Consideration and the promise bear a reciprocal relation of motiveor inducement: the consideration induces the making of the

promise and the promise induces the furnishing of theconsideration. The promisor is seeking this return promise, but youcannot just have a one-sided inducement. A mere pretense of abargain does not suffice as where the purported consideration isnominal. Schnell.

Just because there is not consideration, does not mean thepromise cannot be enforced. (Discuss later)

o Also illustration #14


25/38

Consideration could be for the benefit of a third party.

RST 76: Conditional Promiseo (1) A conditional promise is not consideration if the promisor knows at the time of

making the promise that the condition cannot occur.

RST 77: Illusory and Alternative Promiseso A promise or apparent promise is not consideration if by its terms the promisor or

purported promisor reserves a choice of alternative performances unlesso (a) each of the alternative performances would have been consideration if

it along had been bargained for; oro (b) one of the alternative performances would have been consideration

and there is or appears to the parties to be a substantial possibility thatbefore the promisor exercises his choice events may eliminate thealternatives which would not have been consideration.

RST 78: Voidable and Unenforceable Promiseso The fact that a rule of law renders a promise voidable or unenforceable does not

prevent it from being consideration.

- Consideration Return Promiseo Promise is consideration only if the promised performance would be

consideration. RST (2d) 75, Illustration 2 (pg. 33).o Promise cannot be illusory. RST (2d) 77

Generally, a promise is illusory if person making the promiseretains complete discretion over its performance. The promise isan illusion.

Ex. I promise to do C only if I want to.o The fact that law renders a promise voidable or unenforceable does NOT

prevent a promise from being consideration. RST (2d) 78.

Reed v. UND and the NDAD

o Reed was a student at the UND on a hockey scholarship. He required as part ofthe preseason conditioning program to participate in a10 kilometer racesponsored by NDAD. Prior to the race, Reed signed a form that stated he wasentering in this event at his own risk and NDAD would not be liable for hisinjuries. He promised not to sue in exchange to run the race. Reed sufferedextensive damage to his kidneys and liver as a result of dehydration as a resultof the race. He had to have one kidney and two liver transplants. Reed suedNDAD alleging negligence in not providing medical care and water. NDADargued that a contract was formed releasing them from liability.

o ISSUE: Whether the form Reed signed releasing NDAD of liability had adequate

consideration to make it a binding contract?


26/38

Consideration

Any benefit conferred or agreed to be conferred upon the promisorby any other person to which the promisor is not entitled lawfullyOR

Any prejudice suffered or agreed to by suffered by such person,

other than such as he, is lawfully bound to suffer as inducementto the promisor

Reed is the promisor and in support of his promise for releasing NDADfrom liability, he was allowed to run the race.

Kirksey v. Kirkseyo The Plaintiff (promisee) was a wife of Defendants brother, but had been a widow

for some time with several children. In 1840, the Plaintiff resided on public landunder a contract of lease. The Defendant (promisor) resided about 60 to 70miles away. On October 10, 1840 the Defendant sent a letter to Plaintiff statingthe he felt bad for her and if she came to see him, he would let her have a

place to raise her family (key language at issue). Within a month or two, thePlaintiff abandoned her possession and removed her family to houses that theDefendant provided. He gave her land for two years to cultivate and after thattime, he would put her in a house in the woods. He later required her to leave.

o Is the promise by the Defendant supported by consideration to make it a bindingcontract?

The promise on the part of the Defendant was a mere gratuity and thus,a contract did not exist for lack of consideration.

She was going to have to travel anyway to get the land and the Defendantdoes not benefit from her travelling. There was no consideration.

Common law rule: Benefit (Promisor) v. Detriment (Promisee)

Modern law rule: RST 71

Hamer v. Sidway

o Names are confusing because neither party was named Hamer or Sidway. Bothparties were named William Story. The older William (testator) was the uncleand the younger William was his nephew. In March of 1869, testator and Storywere attending a wedding and testator stated that if Story did not drink, smokeor play cards or billiards until he is 21, testator would give him $5,000 thatday(key language at issue). Story accepted and when he turned 21 he wrotetestator a letter stating he had lived up to the requirements of the contract. The

testator responded on February 26, 1875 stating that he was sure that Story hadlived up to the promise and he would have his $5,000. He agreed to give it tohim and hoped he would make good use of it because the testator had workedvery hard for it. Testator died before paying Story and the executor of testatorsestate refused to pay the money. Story brought an action in the trial court forspecific performance against the testators estate.

o Was there valid consideration when Story actually benefitted from refraining from

the use of liquor and tobacco instead of incurring a harm? Yes. Story gave up a


27/38

legal right which is sufficient to constitute valid consideration. Is there arequirement that the promisor be benefitted in order to acquire consideration?No. It is enough that something is promised and in exchange there is a returnpromise, performance or forbearance by the promisee.

Consideration consists either in some right, interest, profit, or benefit

accruing to one party, or some forbearance, detriment, loss, orresponsibility given, suffered, or undertaken by the other.

The testator wanted his nephew to stop doing someone he islegally entitled to do and promised to give him $5,000. Promisorwas seeking a forbearance and when the nephew decided not tosmoke and drink it is considered the consideration for the $5,000.

Legal detriment will result if the promisee does something he is under nolegal obligation to do or refrains from doing something that he has a legalright to do. The detriment to the promisee need not involve any actualloss to the promisee or benefit to the promisor (Hamer).

A legal benefit to the promisor is a forbearance or performance of an act

by the promisee which the promisor was not legally entitled to expect ordemand, but which confers a benefit on the promisor.

Schnell v. Nello Plaintiffs entered an agreement with Schnell on February 13, 1856 because

Schnells wife had made a will that ordained to give the Plaintiffs $200 each. Theprovisions were deemed to be void because Mrs. Schnell had no property at thetime of her death and any joint property. In light of this fact, Schnell agreed thatbecause his wife had been a dutiful and loving wife and in consideration of onecent, he would pay the money within three years ($200 per year). The Plaintiffsagreed to pay one cent and abstain from collecting any claims upon him or his

estate that arose from Mrs. Schnells will. There is no record to determine if theone cent was paid. The Plaintiffs brought an action against Schnell to enforcethe written instrument he had signed agreeing to pay them $200 each.

o Whether the instrument sued on does express consideration sufficient to give it

legal obligation? Generally, the court does not look to the adequacy of consideration,

but when it is on its face inadequate, there is an exception. Thepromise of one cent is not sufficient for consideration because it is nominalon its face. It is clearly not a real exchange equivalent to $600.00. Thewill and testament of Schnells wife did not impose a legal obligation uponhim to pay the amount she promised and his promise to do so was no

legally binding on that ground. The will was not legally enforceable inthe first place and the Plaintiffs could not have sued under the willanyway.You cannot forebear a legal right that you do not have. Thepromise was a gift. The past services of his wife are objectionablebecause they are past considerations the fact that she was a good wifeconstituted no consideration for his promise to pay the sum of money. Amoral consideration will usually not support a promise.

You cannot bargain for a performance that has already been done.


28/38

15. Contract Modification and Consideration

- If has traditionally been said that the promise to perform or the performance of anexisting legal duty will not be sufficient consideration.

o

EXCEPTIONS New or Different Consideration

If the promisee has given something in addition to what shealready owes in return for the promise she now seeks toenforce, or has in some way agreed to vary her preexistingduty, such as by accelerating performance, there isconsideration.

Voidable Obligation

A promise to perform a voidable obligation is enforceabledespite the absence of new consideration.

o Minors ratification of a contract upon reaching the

age of majority. Unforeseen Circumstances

Under the majority view, mere unforeseen difficulty inperforming is not a substitute for consideration. But if theunforeseen difficulty rises to the level of impracticability,such that duty of performance would be discharged, moststates will hold that the unforeseen difficult is an exception tothe preexisting legal duty rule.

Modification of Contract for the Sale of Goods

At common law, a contract modification generally isunenforceable unless it is supported by new consideration.Article 2 does not follow this rule and holds contractmodifications sought in good faith are binding withoutconsideration. [UCC 2-209 comment 2].

Forbearance to Sue

The promise to refrain from suing on a claim may constituteconsideration.

o RST 73: Performance of Legal Duty

Performance of a legal duty owed to a promisor which is neither doubtfulnot the subject of honest dispute is not consideration; but a similar

performance is consideration if it differs from what was required by theduty in a way which reflects more than a pretense of bargain Alaska Packers Assn v. Domenico: the preexisting duty (when a

party does what he has already obligated himself to do, then hecannot demand additional compensation because there is apreexisting duty/something more is required to constituteconsideration) came into place due to the issue ofcoercion andduress.


29/38

o RST 89: Modification of Executory Contract

A promise modifying a duty under a contract not fully performed on eitherside is binding

(a) if the modification is fair and equitable in view of circumstances

not anticipated by the parties when the contract was made; or (b) to the extent provided by statute; or

(c) to the extent that justice requires enforcement in view ofmaterial change of position in reliance on the promise.

o U.C.C. 2-209(1): Modification, Rescission and Waiver

An agreement modifying a contract within this Article needs noconsideration to be binding. [Just need good faith].

Alaska Packers Assn v. Domenicoo Employer, Alaska Packers (Appellant) owned a salmon packing factor in Alaska.

The employees (libelants) were California sailors and fishermen who contractedto work for the Appellant in Alaska during the salmon season for $50 per sailor orfishermen plus 2 cents for each red salmon he caught. The employees arrived inAlaska in April and in late May, they stopped working and demanded an increasein salary. The Appellant had not way to find any replacement workers in time totake advantage of the salmon season. The Appellant agreed in writing toincrease the employees salaries from $50 to $100. They returned to work andonce they returned to California, Appellant refused to pay more than what wasoriginally promised. The employees brought an action against the Appellantseeking to enforce the agreement modifying the employment contract. Theemployees attempted to show that the fishing nets that the Appellant provided

were defective and that was the reason they demanded an increase in wageso Is the modified agreement increasing the salary enforceable and supported by

consideration given that the employees would not be performing any differentservices from the original contract?

No. The modified agreement was without consideration because it wasbased solely on an agreement by the employees to render services theywere already contracted to render (preexisting contractual duty).

In Lingenfelder v. Brewing Co. the court found that the architectwas bound by the original contract and he tried to take advantageof owners necessities [cohersion and duress]. There wasalready a preexisting contract that he was obligated to perform

under and there was no additional benefit to the promisor(additional terms) and there wasnt anything creating an additionalloss to the architect. Allowing this would be to allow someone toprofit from their own wrongdoing (promoting bad faith). When aparty does what he has already obligated himself to do, he cannotdemand additional compensation (preexisting duty).

Angel v. Murray


30/38


31/38

Under a modern trend, some courts will enforce a promise ifit is based on a material benefit that was previouslyconferred by the promisee on the promisor and if thepromisee did not intend to confer the benefit as a gift. (RST86 and Webb).

RST 86: Promise for Benefit Receivedo (1) A promise made in recognition of a benefit previously received by the

promisee is binding to the extent necessary to prevent injustice.o (2) A promise is not binding under Subsection (1)

(a) if the promise conferred the benefit as a gift or for other reasons thepromisor has not been unjustly enriched; or

(b) to the extent that its value is disproportionate to the benefit.

- Courts normally will not inquire into the adequacy of consideration. If a partywishes to contract to sell an item of high market value for a relatively low price,

so be it. However, courts of equity may inquire into the relative values anddeny an equitable remedy if they find a contract to be unconscionable.o Token Consideration

If the consideration is only token (something devoid of value), it willusually not be legally sufficient because it indicates a gift ratherthan bargained-for consideration.

o Sham Consideration Small consideration ($1.00) that was never paid or intended to be

paid. Evidence can be introduced to show it was not paid.o Possibility of Value

Where there is a possibility of value in the bargained-for act,

adequacy of consideration will be found even though the valuenever comes into existence.

- The majority of courts still adhere to the view that detriment to the promisee inperforming an act or making a promise is the exclusive test of consideration. Thefact that this act or promise may confer a legal benefit to the other party, takenalone, is not sufficient consider.

- The Second Restatement departs from the use of the benefit/detriment test. Theonly question it would ask about consideration is whether something wasbargained for and given in exchange.

- The minority view is that either detriment or benefit to the other will suffice.

Harrington v. Tayloro The Defendant assaulted his wife who took refuge in the Plaintiffs house. The

next day, the Defendant came to the house and began another assault on hiswife. The Defendants wife knocked him down with an axe and was at the pointof cutting his head open when the Plaintiff intervened. She caught the axebefore it hit the Defendant, but it mutilated her hand. The Defendant promised to


32/38

pay the Plaintiff her damages for the injury, but after paying a small sum, failed topay anything else. The Plaintiff brought an action against the Defendant seekingrecover costs from the Defendant per their oral agreement.

o ISSUE: Whether there was a consideration recognized to support the promisemade by the Defendant.

No. Not only is this a past action, a humanitarian act of this kind that isvoluntarily performed is not considered consideration.

Mills v. Wymano Levi Wyman was about 25 years old when the nursing services were rendered.

He was returning from a sea voyage and became ill. The Plaintiff cared for Levifrom February 5th to 20th 1821. On February 24, 2010 after the services werecompleted, the Defendant promised to pay the Plaintiff for the expenses. Therewas no consideration for this promise except for the relationship that existedbetween Levi and Defendant. The Plaintiff brought an action for breach ofcontract to recover compensation for the board, nursing, etc. of Levi Wyman, son

of the Defendant from the 5th

to the 20th

of February 1821.o Did the fathers moral obligation serve as adequate consideration for his promise

of payment in order to constitute an enforceable promise?o No. Being a good Samaritan is not enough. A moral obligation may only

form consideration for an express promise in three cases: (1) debts barredby the statute of limitations, (2) debts incurred by infants, or (3) debtspreviously discharged by bankruptcy [Exceptions: Moral ObligationsPlus] since there was an original deal with consideration. The Plaintiffhad already performed the services before the promise was made.

Past actions cannot be consideration. It would have made adifference if the letter from the Defendant was received promising

to pay and the Plaintiff continued to provide services. There wouldhave been considerationtakes from past consideration to actualconsideration.

Webb v. McGowino On August 3, 1925, Webb was employed by W. T. Smith Lumber Company and

was clearing the upper floor of mill No. 2 of the company. He was dropping apine block from the upper floor of the mill to the ground, which weighed about 75pounds. This was the normal way to clean the floor and Webb was acting withinthe course of his employment. McGowin was standing in the way and wouldhave been struck if Webb would have dropped the blocked and severely injured

or killed. In order to prevent from hitting him, Webb fell with the block andMcGowin was not injured. Webb received serious bodily injuries where his rightleg was broken, the heel of his right foot torn off and his right arm broken. Hewas crippled for life and unable to do physical or mental labor. Since Webbprevented him from being injured and he had received serious injuries, McGowinagreed to pay $15 every two weeks for the remainder of Webbs life onSeptember 1, 1925. McGowin paid the sum (about 8 years) until his death on


33/38

January 1, 1934. An action for breach of contract was brought by the Plaintiff torecover unpaid installments.

o Whether the promise made by McGowin was supported by consideration.

Yes. There is another exception to the general rule that moral obligationsare not typically consideration. McGowin received a material benefit

(pecuniary interest) because Webb saved his life. Life has a monetaryvalue.

Boothe v. Fitzpatrick: The subsequent promise is simply aratification that a previous promise would have been made. If it isclear that there is a material benefit received by the promisor(the owners bull was saved) and there is a subsequentpromise, then you are simply ratifying and stating had heknown it would occur, he would have requested it ahead oftime. [sufficient consideration].

Supreme Court: The benefit has to material and substantial and to thepromisor, not to his estate. This reasoning is also emphasized that the

promisee suffered a detriment.

- Consideration Alternative Consideration and Moral Obligationo RST 71(1): To constitute consideration, a performance or a return promise

must be bargained for.

RST 86 comment a: Past consideration is inconsistent with themeaning of consideration stated in section 71. Basically, youcannot bargain for someone to do something that she has alreadydone.

o Generally, there is not consideration where promisor makes a promisebased on promisees past actions?

Schnell v. Nell: thought it would have been right to the Defendant topay the Plaintiff for taking care of his son. Past actions do notconstitute consideration. Further, a moral obligation is not enoughto make a contract enforceable.

- Harrington v. Tayloro A moral obligation is not typically sufficient to make a contract

enforceable. Application of the common law rule; differs from Webb.

EXCEPTIONS TO PAST CONSIDERATION RULE

- What are the exceptions to the rule that past consideration is not goodconsideration? (pg. 280)

o The Mills Court identified three situations that are exceptions to no pastconsideration rule:

Promise [moral obligation] plus a preexisting (now unenforceable)debt that was previously supported by consideration.


34/38

(1) Debts barred by the statute of limitations, (2) debtsincurred by infants, or (3) debts previously discharged bybankruptcy.

17. Promissory Estoppel

DEFINITIONS- Equitable Estoppel is strictly, an estoppel which arises out of a persons

statement of fact, or out of his silence, acts, or omissions, rather than from adeed or record or written contract. Equitable estoppel is available when oneparty knowingly misrepresents material facts that are then predictably reliedupon by the other. The misrepresenting party is estopped from assertingfacts that contradict its misrepresentations.

- Promissory Estoppel an equitable doctrine declaring that a promisewhich the promisor should reasonably expect [will] induce action or

forbearance on the part of the promisee or a third person and which doesinduce such action or forbearance is binding if injustice can be avoidedonly by enforcement of the promise. Restatement 2d 90.

- RST 90: Promise Reasonably Inducing Action or Forbearanceo (1) A promise which the promisor should reasonably expect to

induce action or forbearance on the part of the promisee or athird person and which does induce such action or forbearanceis binding if injustice can be avoided only by enforcement of thepromise. The remedy granted for breach may be limited as

justice requires.

RST 90 offers a mechanism whereby a purely gratuitouspromise might be enforced. [promissory estoppel].

Ricketts v. Scothorno John Ricketts was the grandfather of the Plaintiff, Katie Scothorn. On May 1,

1891, he spoke to the Plaintiff at the store where she worked. One of thePlaintiffs witnesses stated that John handed the Plaintiff a piece of paper andtold her he had it arranged for her not to work anymore. Plaintiff immediatelynotified her employer of her intention to quit and did soon after that. ThePlaintiffs mother also confirmed that she had spoken to John (her father) and hestated that he provided her with the note so she did not have to work. For a little

more than a year, the Plaintiff remained unemployed, but in September of 1892with the consent of her grandfather, she began working as a bookkeeper. OnJune 8, 1894, John died and had paid one years interest on the note. Heexpressed regret that he had not been able to pay the balance and wanted to sellhis farm in Ohio to cover it.

o Was the note provided by the Plaintiffs grandfather be supported by

consideration? If not, does the Plaintiffs reliance on the note form the basis forenforcing the promise?


35/38

No. A promise given without consideration ordinarily does not create abinding contract.

Yes. The doctrine of promissory estoppel prevents a promisee fromusing lack of consideration as a defense to breach of contract.Consequently, a promise can be enforced even though it was given

without consideration if the promisee has reasonably relied on the promiseto her detriment. Here, the Plaintiff relied on the note to her detriment andas such, it is enforceable.

Although a promise given without consideration ordinarily does notcreate a binding contract, the doctrine of promissory estoppelprevents a promisee from using lack of consideration as a defenseto breach of contract. Consequently, a promise can be enforcedeven though it was given without consideration if the promisee hasreasonably relied on the promise to her detriment. Here, thePlaintiff relied on the note to her detriment and as such, it isenforceable.

Katz v. Danny Dare, Inc.

Midwest Energy, Inc. v. Orion Food Systems, Inc.

o Plaintiff was building a gas station/convenience store with hopes to provideDefendants product. Defendant required that certain modifications be done tothe design before they could provide their product. Plaintiff redesigned andconstructed as Defendant required. Defendant then never agreed to the deal.

o ISSUES: Is there an enforceable contract and is it the type of contract that falls

under the Statute of Frauds. Whether the doctrine of promissory estoppel should

be applied to the oral agreement. Whether the Defendant Ries is liable for fraudand deceit for willfully misstating the extent of his authority.

No. The contract on September 4, 1996 is unenforceable pursuant to theStatute of Frauds. The one year provision falls under the Statute ofFrauds and cannot be performed within a year. As such, it has to be inwriting because this contract was for five years. The contract has to besigned by the party to be charged and it was not, so it is barred by theStatute of Frauds.

Yes. When you are dealing with a contract that would have beenenforceable except that it is barred by the Statute of Frauds, then you canmake a claim for promissory estoppel.

The elements of promissory estoppel are: (1) promise, (2)foreseeability of reliance; (3) reliance; and (4) avoid injustice.These elements are illustrated in RST 90.

18.Statute of Frauds

Radke v. Brenon
http://www.lawnix.com/cases/promissory-estoppel.htmlhttp://www.lawnix.com/cases/promissory-estoppel.htmlhttp://www.lawnix.com/cases/promissory-estoppel.htmlhttp://www.lawnix.com/cases/promissory-estoppel.html


36/38

o Plaintiff and Defendant are adjoining neighbors. When they acquired theirproperties, their lots and eight neighboring lots did not extend to the westshorelines that was nearby. The strip between the shoreline and the lots wasowned by Dr. Gulden until December 1, 1959 when the Defendant purchased theproperty. On June 28, 1960, the Defendant sent identical letters to Plaintiff

and eight other neighbors offering to sell them the irregular parcels thatseparated their lots from the lake. He stated he was only interested in the stripadjoining his property and had no interest in the other portions. Defendant alsosaid that he had no desire to make a profit if everyone was willing to buy theirportion of the adjoining property. He would divide the cost equally among all 10including himself (each lot for $212) on any terms agreeable. The letter was notsigned by Defendant, but his named was typed. Before the Plaintiff received theletter, he and the Defendant had already discussed acquiring the property on atleast two occasions. Two weeks after receiving the letter, he orally accepted theoffer. He learned before that time from a neighbor that two neighbors haddeclined to purchased and the divided cost was increased to $262. On August

14, the Plaintiff delivered a check to his attorney for $262 payable to theDefendants. On August 16, Plaintiffs attorney informed Defendants that thecheck would be held upon receipt of the deed. Some after, Plaintiff received aletter from Defendant dated August 16 stating the offer was revoked.

o Is this a contract that falls under the Statute of Frauds? Whether there is an

enforceable contract under the Statute of Frauds, specifically whether the letterwritten by the Defendant offering the land to Plaintiff is a memorandum sufficientto satisfy the statute of frauds.

Yes. This type of contract falls under RST 110 (1)(d) because it is thesale and interest of land. Yes. The memorandum (letter from June 28,1960) states the parties to the contract, the land involved and the general

terms and conditions upon which the sale will be made. Statute of FraudsRequirements: It also mentions the consideration of $212 and has atypewritten signature by the Defendant.

The statute requires that the writing express the considerationand that it be subscribed by the party by whom the sale is to bemade or by his lawful agent authorized in writing. Amemorandum is usually sufficient when, along with thestatutes requirements, it states expressly or necessarilyimplied the parties to the contract, the lands involved and thegeneral terms and conditions upon which the sale will bemade.

o RST 131: General Requisites of a Memorandum

Unless additional requirements are prescribed by the particular statute, acontract within the Statute of Frauds is enforceable if it is evidenced by oron behalf of the party to be charged, which

(a) reasonably identifies the subject matter of the contract,


37/38

(b) is sufficient to indicate that a contract with respect thereto hasbeen made between the parties or offered by the signer to the otherparty, and

(c) states with reasonable certainty the essential terms of theunperformed promises

Radke case would satisfy these requirements, but you couldargue that a clear and definite consideration is required.

o RST 132: Several Writing

The memorandum may consist of several writings if one of the writings issigned and the writings in the circumstances clearly indicate that theyrelate to the same transaction.

See Examples and Explanation (pg. 326) Crabtree case, 110N.E.2d 551 (N.Y. 1953).

o RST 134: Signature

The signature to a memorandum may be any symbol made or adoptedwith an intention, actual or apparent, to authenticate the writing as that ofthat of the signer.

o RST 139: Enforcement by Virtue of Action in Reliance

(1) A promise which the promisor should reasonably expect to induceaction or forbearance on the part of the promisee or a third person andwhich does induce the action or forbearance is enforceablenotwithstanding the Statute of Frauds if injustice can be avoiding only byenforcement of the promise. The remedy granted for breach is to belimited as justice requires.

(2) In determining whether injustice can be avoided only by enforcem

Documents

Outline of Cases and Rules