CONTRACTS Dow Fall 2015

Important Definitions
Contract=legally enforceable agreement; O+A+C
Offer=something that creates the power of acceptance
Must be clear, definite, explicit such that a reasonable person knows what the parties have
agreed to when the offerree accepts
Acceptance=something that mirrors the offer
Consideration=Benefit to promisor/Detriment to promisee + Bargained For
Bargained For=Induced action

Principles

Freedom of Contractparties to a K are acting in accordance w/ their individual wills

There are no compulsory contracts
Master of the Offerin determining a K, it is the will of the party that controls
o Courts give benefit of ambiguity to offerree, however
No party can make another a debtor against his or her will
Mutuality principleuntil both parties are bound, neither are bound

Hawkins v McGee: patient sues for 100% perfect hand

P: Dr. went out of his way to solicit the operation, shows intent behind promise
D: No reasonable man would understand that verbal warranty on a surgery is a
contractual relation
Ruling: Evidence shows that both parties believed the verbal warrantysolicitation showed
Dr.s intent to create a 100% perfect hand
What about damages?

CONTRACTS Dow Fall 2015

Overview of Doctrine: Rule and Counter-rule
Hurley v. Eddingfield, p. 56: family physician doesnt come to dying patient
P: Dr. had duty to rescue and come to aid of dying patient
D: There was previous discrete K but no ongoing K
Ruling: Dr. isnt legally bound to patienthe cannot be forced into contract against his will
Cotnam v. Wisdom, p. 163: Drs. Perform surgery on fatally injured patient w/o K
P: The patient wouldve consented to surgery if he was conscious; reasonable
compensation should be given for sustaining recovery fees
D: Patient was unconscious, so no acceptance and no K
Ruling: implied K that deceased could be held liable to services given to him in good faith
while in a helpless condition (just like infants or idiots)
Continental Forest, p. 67: Chandler gets plywood fr. wrong company
P: Chandler should pay for price of goods they received/wood is wood
D: K wasnt entered with Cont. Forest
Ruling: There is a quasi contract requiring payment and the price owed Cont. Forest is the
amount of enrichment btw parties that it would be unjust for one party to retain
3 Contractual Agreements:
1. Express=both parties agree
2. Implied=no express agreement, but both parties actions imply agreement
3. Quasi=no K at all, but for purpose of bringing about justice, it should be treated as
though there were a K (restitution)
Boston Ice Co. v. Potter, p. 1504: Company delivers ice to person who didnt want to be in
business with that company
P: Potter should pay for price of goods they received/ice is ice
D: Didnt want to be in a K w/ Boston Ice and expressly told them (fraud?)
Ruling: Person has a right to select and determine with whom he will contract
Taft v. Hyatt, p. 377: Who gets reward for fugitive?
P: Attorney isnt entitled b/c he didnt lead to apprehension; friends arent entitled b/c
they didnt know of reward before; police isnt entitled b/c he was doing his duty
D: all believe they led to apprehension of fugitive
Ruling: Offer for reward to multiple offerees is a mere proposal and specific performance
entitles person to rewardnone of these made K
Noble v. Williams, p. 76: Teachers buy school supplies
P: they are entitled to recovery from intervening to fulfill their teaching K
D: Teachers shouldve enacted mandamus to get supplies--their actions were voluntary
Ruling: The obligation to buy supplies was not theirs, their teaching K gave them right of action
to bring mandamus
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CONTRACTS Dow Fall 2015

Sommers v. Putnam Bd. of Educ., p. 168: Father drives children to school
P: Requested school to do its job, but denied--he is entitled to recovery from intervening
D: Dad shouldve enacted mandamus to get rideshis action was voluntary
Ruling: Quasi contract b/c of beneficial intervention that requires justice
Beneficial Intervention Requirements:
1. prompt performance is matter of grave public concern
2. person with who obligation rests has failed to perform though aware
3. it is reasonably apparent that its impossible to perform
4. person who intervenes must be of proper credentials
Davis & Co. v. Morgan, p. 77: Employee offered a raise in his K to stay
P: promise of extra compensation was gratuitous
D: was promised more money for staying the remainder of the term
Ruling: Promise was naked b/c there was no considerationMorgan no worse off, no better
Schwartzreich v. Bauman p. 79: Employee offered new money in new K
P: the new K w/ more money was agreed upon and the old was terminated
D: the new K had no considerationstill bound by 1st K to do the same work
Ruling: The mutual promise by both parties to terminate existing K and make new one is
consideration (expressed rescission)2nd K is enforceable
Wood v. Boynton, p. 84: diamond v. topaz stone
P: Only sold stone to Boynton under false conception of value, wants to rescind
D: Didnt know the real value at time of sale either
Ruling: Only reasons for rescinding sale are fraud or mistake in delivering the actual article;
seller is no worse off, no better and she took risk by going in to sell
Sherwood v. Walker, p. 887: Beef cow v. Breeder
P: We both agreed on the transaction and thats the price the cow should be sold at
D: There was a mistake in the nature of the cow when the price was agreed upon
Ruling: The K was to sell the cow as a beef creature; the cow is a breeder and the K doesnt
apply
Laidlaw v. Organ, p. 89: tobacco price goes up b/c of blockade
P: Organ withheld info about blockade (fraud), so the K is invalid
D: withholding info is part of businessmaybe immoral, not illegal
Ruling: Concealment of facts is standardnot bound to tell external knowledge; it is up to seller
to do own due diligence (as long as the parties dont impose on each other)
Swinton v. Whitinsville Bank p. 93: Termite-infested house
P: WSB didnt disclose that house we bought is infested w/ termites (fraud)
D: there was no false statement or misrepresentation, Swinton couldve checked
themselves
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Ruling: non liability for bare nondisclosure
*In many other jurisdictions, not disclosing about known defect is fraud
Caveat emptor=let purchaser take care of his own interest
What assumptions is someone permitted to make? (What would a reasonable person
assume?)
Hadley v. Baxendale, p. 106: mill shaft repair
P: Baxendale breached K and should pay the damages for how long the mill was closed
D: Hadley didnt inform that the mill was shutdown until new shaft arrived when K was
made
Ruling: Hadley made a false assumption that Bax. knew mill would be closed. Only damages fair
are the ones arising naturallyreasonable person would assume the mill could operate using
another shaft (not from loss of profit or wages)
Shaw v. Shaw, p. 154: husband married to two women
P: Believed she was in a marriage and is entitled to all the benefits she wouldve received
if this had been true
D: her marriage was not legally valid and shes entitled to nothing
Ruling: Mrs. Shaw made a false assumption, but there is an implied warranty w/ a marriage that
the man is legally able to marry and doesnt have second wifewhat a reasonable person would
assume (entitled to half of estate+damages)
Upton on Severn v. Powell, p. 171: wrong fire brigade
P: brigade sent outside of its area and is free to charge for the cost of services
D: didnt intend to enter K w/ wrong brigade
Ruling: Powell called the Upton police and asked for the brigademust be treated as request
implying that he wanted Upton brigade
Vickery v. Ritchie, p. 173: Turkish bath house/shitty architect
P: Builder deserves to be paid amount they arranged
D: Client deserves to pay amount they arranged
Ruling: There is no K b/c of the architects deceit, just an agreement of payment. P is entitled to
fair value of his labor and materials or quantum meruit (what one has earned)

CONTRACTS Dow Fall 2015

Offer and Acceptance

Indefinite Contracts
Lefkowitz v. Great Minn. Surplus Stores, p. 183: fur coat ad
P: Ad offer was explicit and P met with proper acceptance
D: The offer was not directed to males; Stores right to modify offer
Ruling: Ad is offer made to general public and specifically stated first come, first served
explicit enough that performance is acceptance and is binding
Jenkins Towel Service v. Fidelity-Phil. Trust, p. 186: property open to bidders
P: Met all the terms of the offer from Fidelity
D: The letter was an invitation to bid, not an offer
Ruling: The letter was an offer of the properties, subject to terms and conditions that the plaintiff
alone accepted. Performance is ordered
Dissent: The letter sent out even specifically asked for offers, should be taken as written
Moulton v. Kershaw, p. 190: Offer of salt
P: Ordered 2,000 barrels of salt according to price in letter offer
D: Letter wasnt an offer, simply a preliminary negotiation
Ruling: The terms of the letter are not clearwe are authorized to offer, not will sell
An offer must be clear, definite, and explicit such that the reasonable person knows what
the parties have agreed to.

Modes of Acceptance
Prescott v. Jones, p. 238: Fire burns bldg down and no insurance
P: Jones sent letter saying to accept policy renewal, be silent
D: Policy lapseddemurrer
Ruling: Silence cannot be acceptance to turn Joness offer into Kbreaks mutuality principle b/c
silence could be interpreted as acceptance or non-acceptance and offeror would never know
Carlill v. Carbolic Smoke Ball Co., p. 373: smokes 42 balls, gets sick
P: Ad stated terms and P met them
D: P didnt notify of her acceptance, not meant to be binding
Ruling: The ad is a unilateral offer, of which acceptance may be communicated
contemporaneously with notification of completed performance of the conditions (consideration
b/c CSB benefitted from Carlills use)

CONTRACTS Dow Fall 2015

Firm Offers
Dickinson v. Dodds, p. 316: merchant offers to sell house, sells to other person
P: Dodds made offer to sell house and attempted to accept before revocation
D: Didnt need to keep offer open, sold house to other person
Ruling: B/c Dickinson had heard that house had been sold to another person, the offer was
revoked to him; Also, offer stating it would stay open wasnt binding
Baird v. Gimbel Bros, p. 323: sub/gen contractor
P: Made bid based off Gimbels estimate and wouldnt be able to withdraw w/o great loss
D: Putting in a bid is not acceptance, they tried to revoke bid shortly after
Ruling: Gimbel revokes before Baird accepts construction jobnot binding
Drennan v. Star Paving, p. 326: sub/gen contractor
P: Made bid based off Stars estimate and had to perform according to w/ great loss
D: Putting in a bid is not acceptance, they tried to revoke shortly after
Ruling: The gen. contractor relied on subs bid, and the loss of the mistake should fall on party
who caused it

Output Contracts
Eastern Air Lines, Inc. v. Gulf Oil, p. 428: price increase on fuel in K
P: They have a valid K, which took price fluctuation into account
D: The intent of indicator in the K was to follow market price, and now it doesnt
Ruling: ambiguity of the K falls on Gulfchange was foreseeable; also, for policy reasons,
Eastern winning will keep price of air travel down
Utah Intl. v. CO-Ute Electric, p. 437: built bigger generators
P: the K is invalid b/c terms were laid out based on size of generator, which was changed
D: They have a K w/ max. and min. set outnot invalid
Ruling: Changing size of generators affects max. price, but not min. pricehalf of K is invalid
Schlegel Mfg. Co v. Coopers Glue, p. 446: offer to sell glue
P: Coopers offered to sell and deliver glue and there was acceptance
D: The K had no consideration
Ruling: Schlegel never agreed to do or refrain from doing anything and unless both parties are
bound, neither is bound

Correspondence
Cushing v. Thompson, p. 349: protest group rents armory
P: Mailed signed offer back which was acceptance forming a K
D: Revoked before they received the acceptance back through the mail

CONTRACTS Dow Fall 2015

Ruling: Mailbox rule states acceptance occurs when dispatched in the mail; performance
ordered
RI Tool Co v US, p. 354: RIT bids on bolts and makes mistake
P: RIT tried to correct their mistake and revoke before too late
D: too late, they were awarded bid before revoking
Ruling: no binding contract b/c RIT withdrew bid before acceptance was effective

Unilateral agreements
Davis v. Jacoby, p. 385: Caro comes to take care of dying aunt and uncle
P: Daviss accepted by letter and arranged to move down to help dying aunt
D: Daviss never performed what was asked of them (acceptance)
Ruling: ambiguous as to whether acceptance was valid by promise or performancewhen in
doubt, presumed a bilateral K, where promise makes K binding
Crook v. Cowan, p. 391: Carpet maker
P: made the carpets according to the offer, wants payment
D: he never informed of acceptance
Ruling: The order was unconditional and specific, fulfilled completely by Crook; valid K
To find intent of an offeror, look at specific language in the offer. When in doubt, assume
bilateral b/c both parties are bound at earliest point.

Forms
Roto-Lith v. Bartlett, p. 260: cellophane bags w/ emulsion
P: Bartlett sent bags w/ defective emulsionwant money back
D: warranty was expressly stated on boxes and used anyway by Roto-Lith
Ruling: Roto-Lith accepted bags w/ knowledge of conditions and so was bound by them
Last Shot Doctrine= the last version of the offer is the one that goes into effect, unless
objected to (Sec. 2-207 attempts to abolish this Doctrine)

CONTRACTS Dow Fall 2015

Consideration
Gratuitous Promises and Reliance
Siegel v. Spear, p. 285: storing furniture for the summer
P: creditman undertook the voluntary act of finding insurance for furniture
D: it was a gratuitous promise, there was no consideration for finding insurance
Ruling: When a person makes a gratuitous promise, and then enters performance (taking in the
furniture), he is held to full execution. Siegel gave Spear the furniture after the promise and
placed his full confidence in him.
Underwood Typewriter Co., p. 294: trying to find a subleaser
P: Realty Co. asked for suitable subleaser and time and money was spent in finding one
D: The K was just a benefit for Underwood, no consideration on it
Ruling: When Underwood relied on the Realty Co.s promise, there was consideration executed
upon request
Feinberg v. Pfeiffer, p. 308: Board gives Feinberg $200/mo. for rest of her life
P: For her faithful service, they promised her money for life once she retired
D: Past work is not consideration, promise is not legally binding
Ruling: Feinberg retired and gave up valuable job b/c of reliance on promiseonly way to avoid
injustice is to enforce K (promissory estoppel)
Promissory Estoppel=promise which promisor should reasonably expect to induce action
on part of promisee and is binding if injustice can be avoided by enforcing the promise
Kirksey v. Kirksey, p. 473: man gives sister-in-law place to stay
P: brother-in-law promised a place to live and so I came; reliance on that promise
D: it was a conditional gift, not a bargained-for exchange
Ruling: brother-in-law is already legally entitled to his own property; his promise was a gratuity
Warm fuzzies are not consideration b/c then consideration would be essentially cancelled
out; people make promises all the time that are not meant to be legally binding
Devecmon v. Shaw, p. 480: Eurotrip
P: Uncle promised reimbursement for trip to Europe before he died
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D: The uncle died and so did his debt to Devecmon
Ruling: Devecmon incurred expenses up front, which was surely a detriment to him and he was
induced into action; Uncle meant to make this promise legally binding
Hamer v. Sidway, p. 438: reward to refrain from drinking and smoking
P: Uncle promised money for performance before he died, perf. was completed
D: Uncle has died and there was no consideration
Ruling: Jr.s promise to abstain from his legal right to drink and smoke is a detriment that makes
sufficient consideration
De Cicco v. Schweizer, p. 494: engaged couple gets money for marriage
P: father-in-law promised annual payment for rest of life following marriage
D: not legally bindingalready engaged and past consideration doesnt count
Ruling: engagement not legally binding, so they still gave up legal right to rescind (detriment)
Allegheny College, p. 501: donation to college, but doesnt have money
P: Johnston pledged $5k and gave first $1k, we promised to set up memorial in her name
D: pledge was simply a gift that she tried to withdraw if she didnt have money left
Ruling: College assuming duty of perpetuating her name is sufficient consideration
Dissent: Terms of the offer (memorial in her name) asked for performance, which couldnt be
completed until after her death, at which point offer was withdrawn

Adequacy (and peppercorns)

Haigh v. Brooks, p. 564: guarantee of 3rd party payment
P: Brooks offered to pay bills of exchange if we surrendered first K back to him
D: first K wasnt even valid (b/c no consideration--past consideration doesnt count)
Ruling: Turning over the document was sufficient consideration (Brooks asking for document
back shows that they wanted it)
Intent generates the consideration doctrine: after intent is made clear, the promisee can
rely on the promise (a condition cannot show intent in same way as consideration)
Real Estate Co. of Pitt., p. 716: $1 to keep offer open
P: K said in consideration of $1 paid, K will stay open
D: $1 was never paid and is so small anyway
Ruling: The K acknowledges the payment of the $1 and should be construed as written by its
plain meaning; size of consideration doesnt matter
Krell v. Codman, p. 728: mother promised under K in England to pay
P: mother agreed under seal to pay son
D: the K was made in England, had no consideration, and mother is now deadnot
binding anymore
Ruling: The seal shows intent of the mother to make promise legally binding; honoring law of
English Ks, payment of debt ranks after debts for value but before legacies
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Consideration is as much a form as a seal
Goulet v. Goulet, p. 730: wife promises not to sue husband for car wreck
P: seeking payment from accident in NH, K was made in ME with no consideration
D: K was signed, sealed, and dated in ME that wife wouldnt sue
Ruling: K is governed by ME laws, which states: seal has legal binding effect, despite presence
of consideration
Aller v. Aller, p. 731: father promises money owed to dead wife to his daughters
P: Father gave notes with seal to daughters promising money
D: seal is presumptive of consideration, but there wasnt any here
Ruling: Both parties understood there should be no consideration; taking time to put a seal on it
was formal and intended to make it legally binding, not promissory gift (shows intention the
same way consideration is designed to)
Schnell v. Nell, p. 737: honoring wifes promise in will
P: Schnell promised the money and consideration was 1c and promise not to sue on estate
D: Schnell should morally honor commitment, but promise wasnt legally binding
Ruling: A mere exchange of money (where 1c is obviously unequal value to amt. promised)
cannot be binding; the right not to sue on a frivolous will is not sufficient consideration (this
would be hostage-taking)
Pillans & Rose, p. 744: merchants promises to guarantee
P: VM&H made promise to guarantee White who went insolvent
D: There was no consideration, pre-existing duty of White to pay P&R
Ruling: Btw merchants, an agreement in writing requires no consideration

Moral Consideration
Gillingham v. Brown, p. 512: Brown promises to pay his old debt

P: Brown promised to pay expired debt w/ $5 down payment and $10/month after
D: SOL ran on old debt and new promise had no new consideration

Ruling: Where there is a promise to pay obligation, but that obligation is no longer enforceable,
the new promise is enforceable to the new promises extent even if no new consideration
Eastwood v. Kenyon, p. 519: Kenyon promises to pay wifes debt

P: he promised to pay old debt, improved his wifes land

D: past consideration is no considerationdoesnt need to pay promise w/o consideration

Ruling: Couldnt enforce this K or else it would get rid of necessity of consideration; would be
different if Kenyon made promise to Blackburn (the original creditor)
Mills v. Wyman, p. 523: Mills takes care of Wymans adult son

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P: Took care of his son and was promised compensation

D: past consideration is no considerationdoesnt need to pay promise w/o consideration

Ruling: Couldnt enforce this w/o considerationwould be different if Mills was doctor (Cotnam
v. Wisdom)
C___ v. W____, p. 527: Mother sues for child support promised and notarized in K

P: The K acknowledged consideration and father shouldnt deny the truth of the K
D: the recited consideration in K is recognition of fathers moral obligationnot legally
binding

Ruling: there is no statute to impose legal obligation of child support, so K isnt enforceable
without consideration
Webb v. McGowin, p. 537: Webb saves McGowins life and gets injured

P: saving McGowins life was material benefit and the subsequent promise to pay and
beginning of payment was affirmation of this debt
D: There was no considerationmoral obligation is insufficient

Ruling: services werent gratuitous b/c agreement of McGowin to pay and beginning to pay show
this; holding McGowin liable encourages this kind of conduct
Balfour v. Balfour, p. 116: husband promises to support wife and leaves her

P: husband promised to pay and wife relied on him

D: did not intend to make this a legally binding K

Ruling: Arrangements btw husband and wife should not be construed as Ks (Also, love is
inadequate consideration that shouldnt be determined by courts)
Davis v. Gen. Foods, p. 121: use of old ladys ice cream recipe

P: she believed that Gen. Foods would recompense her, thats why she sent recipe
D: K stated payment was matters resting solely in our discretion

Ruling: Davis thinking this is so entirely unreasonable and ridiculous it cannot be construed as
something a reasonable person would think (2 conflicting principlesDaviss subjective
intention vs. reasonable persons intention (objective))
Armstrong v. MGhee, p. 128: Armstrong sells disappointing horse as joke

P: Was joking about offer and people around knew that

D: Went through the whole action of taking horse home

Ruling: if both parties knew Armstrong was joking, K isnt bindinglow price shows intent of
Armstrongs joking
Petterson v. Pattberg, p. 689: Pattberg offered to sell property and Petterson tried to perform

P: went to Pattbergs home and tried to offer cash, but refused

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D: revoked the offer before payment was tendered

Ruling: Unilateral K isnt binding until performance is completed; Also, if someone knows they
no longer have power of acceptance, they cannot try to accept
Wood v. Lucy, Lady Duff-Gordon, p. 451: lingerie designer exclusivity K

P: She broke K by putting label on other designs

D: He wasnt doing his part of K, wanted outinvalid K b/c no consideration by him

Ruling: The fact that Wood intended to market the designs is implied in Ktechnicality that it
wasnt stated in plain language
(Adverse to Davis v. Gen. Foods, where she loses on technicality of language)

Statute of Frauds
Eastwood v. Kenyon, p. 760: Suretyship of husband for wifes debt

P: Kenyon promised to pay off wifes debt

D: no new consideration on promise

Ruling: guarantee on others is void unless in writing; if Kenyon promised creditor, would be
different
Bader v. Hiscox, p. 770: Bader gets married to drop sons charges

P: He promised land if she got married to his son and charges were dropped b/c of it
D: K for land, marriage must be in writing b/c statute of frauds

Ruling: Exception to land provision when part of consideration has already been exchanged (she
had already gone through w/ marriage); exception to marriage provision b/c main purpose of
marriage was to drop charges, not the actual marriage
Doyle v. Dixon, p. 773: Dixon cant go into grocery business for 5 yrs

P: Doyle sues Dixon for violating K

D: K was under statute of frauds b/c it couldnt be performed in 1 yr

Ruling: Would promisors duty be fully performed if he died within a year? Yes, so not within
statute.
Boone v. Coe, p. 808: Boone moves down to live on Coes land

P: Coe didnt do as promised and Boone wants payment for losses incurred
D: K over land must be written b/c under statute of frauds

Ruling: Parol lease of land for one year is within statute, so invalid; Also, Coe received no
benefit from Boone, so no unjust enrichment.

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Crabtree v. Eliz. Arden, p. 783: employment K in pieces

P: He had K for over a year and this was in different written acknowledgements
D: K for over a year performance must be on a written K b/c statute of frauds

Rulings: Series of documents satisfies having a K in writing to satisfy statute as long as one
piece is signed by person against whom enforcement is sought.
Imperator Realty v. Tull, p. 801: oral agreement on top of written K for land

P: Tull needs to pay b/c they had a K

D: IR promised on top of written K to do something and it wasnt done

Ruling: K was about land, but oral agreement was distinct and didnt need to be in writing; the
additional promise wasnt within statute.

Unconscionability
To assert unconscionability and make the K unenforceable, must establish one of two
elements:

Procedural ucs=Lack of meaningful choice (the item is essential or you have no

other options)
Substantive ucs=Unreasonable terms of the K (may be things such as price,
obscurity, predatory sales behavior, etc.)

All of the elements of a K are present, yet court refuses to enforce the agreement (opposite of a
quasi-K)

Williams v. Walker-Thomas, p. 596: furniture co. tries to repo furniture after stereo purchase

P: there was inequality of bargaining power and Williams was exploited by the provisions
D: the terms of the K stated that repossession is allowed if payment is defaulted

Ruling: Court finds this K ucs due to unequal bargaining power, hidden terms, and lack of
meaningful choice.
Patterson v. Walker-Thomas, p. 603: furniture co. tries to repo furniture after default

P: the items sold were grossly overpriced and K is ucs

D: the terms of the K stated that repossession is allowed if payment is defaulted

Ruling: Price is only one element of ucs; Buyer must also have lack of meaningful choice.
Jones v. Star Credit Corp., p. 607: door-to-door freezer salesman

P: item was grossly overpriced and they were solicited by salesman

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D: the terms of the K stated price and were straightforward

Ruling: Ct. is concerned for uneducated & illiteratesalesman took advantage of welfare
recipient; this shows overpricing + lack of meaningful choice
To make an ucs K enforceable, must take out unreasonable provision(s), because you
cannot grant meaningful choice.
Readjustment of Ongoing Deals
Modifications must:

Be agreed to by both parties; AND

Be supported by new consideration

Stilk v. Myrick, p. 649: 2 crewman drop out of sea voyage and the rest p/u the slack

P: picked up more work as a result of crew leaving and was promised more $
D: The K was the same as before.

Ruling: P did not specifically agree to do more work (no new consideration) and he wasnt
induced to stay
Foakes v. Beer, p. 668: payment plan with interest?

P: Paid off all the installments, agreement never addressed any interest
D: Interest required on original debt, just b/c not re-stated doesnt mean the payment plan
took it away

Ruling: The down payment for paying early wasnt consideration for a new agreement where
interest was given up (A lesser sum cannot be paid in satisfaction of a greater sum aka the down
payment).
Hackley v. Headley, p. 674: Duress case during payment stage

P: Headley owed $6k for services and would only give $4khe was forced into signing
K for the $4k agreement b/c of bad financial state (under duress)
D: Hackley lawfully signed an agreement on the $4k

Ruling: Hackleys poor financial situation caused by his own doingbigger policy implication
by allowing poor financial state a qualifier for duress in all signed Ks
Parol Evidence Rule
PER=when 2 parties have made a K and expressed it in writing as complete and accurate,
evidence (parol or otherwise) of antecedent understandings will not be admitted for
purpose of varying or contradicting the writing.
5 Elements:
1. Applies only to written agreements
2. K must be integrated

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a. Full Integration=absolutely everything is expressed in the K and no extrinsic
evidence is allowed
b. Partially Integrated=subject matter of the agreement is complete, but
suggests further agreements werent addressed in that writing, so some
evidence can be allowed to explain, but not to vary or contradict
c. Unintegrated=much of what parties agreed to isnt in the writing so rule
doesnt apply and all extrinsic evidence is allowed
3. Evidence may be parol (nonwritten) or written
4. Applies to only things agreed on before formationnever subsequent
5. Only applicable when party is trying to vary or contradict the writing
Common Trend: strict, robust PER to defeat ability of parties to assert fraud and therefore,
allow more cases to end at summary judgment
Crawford v. France, p. 832: architect draws up expensive hotel plans

P: made K to design the hotel suitable to their needs and performed, needs payment
D: told architect hotel shouldnt exceed $45k orally and plans were $60k

Ruling: The written K is clearly incomplete b/c it didnt discuss this portion (partially
integrated), so need to parol evidence to clear up ambiguity or uncertainty.
Mitchill v. Lath, p. 837: Sellers of property dont remove ugly icehouse

P: Bought the property on the condition that the ice house would be removed
D: this wasnt written and is unenforceable

Ruling: The agreement wasnt collateral and so its unenforceable.

In order to consider an oral agreement:
1. it should be collateral in form
2. it mustnt contradict the provisions of the written K
3. it must be one that wouldnt ordinarily be expected to embody in writing
Collateral agreement=a second, oral agreement with either separate consideration or is
commonly not included in terms of first K
Danann Realty Co. v. Harris, p. 843: merger clause signed b/c of fraud

P: The merger clause in written K states that This Is All There Is

D: Realty Co. used fraud to trick them into signing K w/ merger clause

Ruling: Parol evidence would directly contradict terms of the K and so isnt allowedbig policy
decision to limit being able to bring fraud against any K w/ this clause
Zell v. American Seating Co., p. 852: appropriate commission?

P: They agreed to a commission beforehand and Co. convinced him to sign agreement
w/o stating the actual agreed to oral termsit was supposed to be a sham
D: The written agreement states all the terms that should be followed.

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Ruling: A purported written agreement, which the parties designed as a mere sham, lacks legal
efficacy, and that extrinsic parol evidence is admissible to show that the written agreement was
a sham, and not meant to be the authority.
Raffles v. Wichelhaus, p. 869: cotton from a ship named Peerless

P: Agreed to buy cotton from Peerless (coming in Oct.) and it never showed
D: Agreed to sell cotton from Peerless (coming in Dec.) and he didnt buy it

Ruling: Latent ambiguity made K open to 2 different interpretations (no meeting of the minds)
if theres latent ambiguity and mutual mistake of material fact, so no K

Third Party Beneficiaries

Triangular relationship where the issue is whether the third party to the K can sue despite not
having privity

The only way 3PB can be held is if both parties intend to benefit the third party, therefore
creating an enforceable right
An incidental beneficiary is created when theres no intentnot enforceable

Two Types

Creditor beneficiary
Donee beneficiary

Rescission: Promisee and Promisor cannot rescind agreement once:

1. 3PB manifests assent, or
2. 3PB brings suit to enforce the promise, or
3. 3PB detrimentally relies on the promise
Lawrence v. Fox, p. 1333: Creditor Beneficiary

P: Holly gave Fox $300, which he was supposed to pay to Lawrence the next daythe
consideration was Foxs promise to pay
D: There was no privity btw Lawrence and Fox

Ruling: That where one person makes a promise to another for the benefit of a third person,
that third person may maintain an action upon it.
Seaver v. Ransom, p. 1356: Donee Beneficiary

P: Mrs. Beman was dying and intended to leave her house to niece, Seaver
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D: Seaver was just a third party to a promise btw Mr. and Mrs. Bemanno rights

Ruling: the right of the beneficiary to sue on a K made expressly for his benefit has been fully
recognizedSeaver alone was damaged by the breach of K
**issue of gratuitous promises arises here
Socony-Vacuum v. Continental Cas., p. 1364: contractor and materialman

P: CC provided a surety bond and need to pay out for the labor done that wasnt paid for
D: CC provided a bond to the subcontractorintent to benefit Socony-Vacuum,
materialman, or just the contractor?

Ruling: It is contemplated that performance under the bond would not only benefit the prime
contractor, but also the materialmen; surety co. is in much better to take a loss than the
materialmen anyway
Lucas v. Hamm, p. 1371: Atty. negligently draws up will, cutting Lucas out

P: Lucas was intended to inherit this money and its attys fault that he wont
D: Atty. Has never even met Lucashad no duty to him

Ruling: Despite not knowing Lucas, it is sufficient that the promisor must have understood that
the promisee had such intentfor drafting a will unmistakably shows intent of testator to
benefit the persons to be named in the will
Copeland v. Beard, p. 1421: 3PB Rescission case

P: Copeland, intended beneficiary, wants Beard and X to follow through on their

agreement
D: Copeland has no rights b/c he hadnt assented to the K before they changed their
arrangement

Ruling: Parties may rescind their K before intended beneficiary agrees to it

Assignments and Delegation
This occurs after the original K is contemplated

Obligor= owes a duty

Obligee= person to whom the duty is owed
Assignment= the transfer of contractual rights
o Assignor= someone who assigns the rights
o Assignee= someone who has rights assigned to them
Delegation= the transfer of contractual duties
o Delegator= delegates duties to someone else
o Delegatee= receives duties from someone else

Personal Performance is NOT delegable. Certain duties that arent:

1. Ks w/ intent of no delegation (Boston Ice)

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2. Dissolving Business
3. Delectus PersonaeK for duty peformed by specific person
4. Setoffspecial arrangements of a K (Cont. Forest)

Speelman v. Pascal, p. 1492: My Fair Lady Royalties promise

P: Pascal wanted Speelman to have the future rights from the production after his death
D: It was only a gift for the futurenot enforceable

Ruling: Future rights of an existing K are assignable, even if the amount hasnt been
conclusively intendedgift was valid b/c it intended to make irrevocable present transfer
Langel v. Betz, p. 1500: Real estate assignments

P: The assignment was made to Def. and they need to perform their duties
D: The assignment of rights didnt mean he had to perform anything

Ruling: mere assignment of a bilateral executory K may not be interpreted as a promise by the
assignee to the assignor to assume the performance of the assignors duties
Modern Law: Assignment of rights ASSUMES promise by assignee to assume duties of
performance, in the absence of agreement to contrary.
British Waggon v. Lea & Co, p. 1507: Agreement to rent wagons

P: the substitute of BW to do the maintenance work is acceptableL & Co. should still
be bound by their K w/ Parkgate (old co.)
D: L & Co. didnt have a K w/ BW; they had a K w/ Parkgate

Ruling: The duty delegated by ordinary repair and so wasnt prohibitedIce is Ice
Ark. Valley Smelting Co. v. Beldin Mining, p. 1511: delivery of ore

P: simply substituted standard work, delivering ore, and so is acceptable

D: No compulsory Ksthey should have a choice on who they contract with

Ruling: Ore was to be paid for after it was delivered and so there was a security interest in terms
of assignors credit and liabilitynot assignable

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Remedies
Three Categories:

Expectation Damages=difference btw what was promised and what was receivedputs
injured party where they wouldve been had K been performed
Restitution Damages=what the non-breaching party has paid the breaching party
Reliance Damages=costs non-breaching party sustains in reliance on breaching partys
promise to perform, including out-of-pocket expenses not made to breaching party
o Puts P back in position she occupied before K was entered and compensates for
detriments suffered in relying on the K (similar to Tort)

You can get expectation OR reliance/restitution, but not both

Hawkins v. McGee: Perfect Hand
Ruling: Expectation Damages: Perfect hand hand he was given
Acme Mills & Elevator v. Johnson, p. 1061: failure to deliver wheat

P: Johnson didnt deliver the wheat, so he owes damages

D: P wasnt damaged, market price of wheat had become lower than K price

Ruling: In Ks for delivery of property at fixed time and place, vendee is entitled to damages
against vendor for failure to comply. The measure of damages is difference btw K price and mkt.
price of property at the place and time of delivery

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Sullivan v. OConnor, p. 131: deformed nose after plastic surgery

P: Pain and suffering damages, as well as the loss to her career

D: A specific promise for perfect nose from doctor cannot be taken seriously

Ruling: Sullivan can collect out-of-pocket expenses (restitution) and lost earnings/foreseeable
damages from relying on Ds breach (reliance)
Freund v. Wash. Sq. Press, p. 1113: exclusive K to publish a manuscript

P: wanst specific performance or the royalties he wouldve gained had it been published
D: Freund shouldnt recover more from breach than if K was performed

Ruling: trying to decide royalties is too speculativecan only give nominal compensation
Law attempts to secure to the injured party the benefit of his bargain, subject to the
limitations that the injury was foreseeable, and that the amount of damages claimed be
measurable with a reasonable degree of certainty and adequately proven.
Jacob & Youngs v. Kent, p. 1042: specific type of pipe (Material v. Minor Breach)

P: the K said a specific pipe and they are entitled to that specific performance
D: The omission of the wrong pipe was trivial and not willful

Ruling: Where substantial performance has been rendered, a minor failure to perform will be
excusedbreach was insignificant in proportion to entire K
Peevyhouse v. Garland Coal & Mining, p. 1119: repairing after coal-mining lease (Efficient
Breach)

P: the K called for specific performance in putting their land back together
D: specific performance would cost $29k, value of farm itself is only $5k

Ruling: If repairing defect or breach would cost a disproportionate amount to the objective to be
attained, diminished value rule is followed b/c it avoids economic waste
Gross Economic Waste=measure value before and after breach (If Peevyhouse wanted to
negotiate around this default rule, she must have stated this explicitly in the K).
Hadley v. Baxendale, p. 106: crankshaft shuts down mill

P: Bax. Breached and owes the incidental costs that followed when mill was shut down
D: assumed that the mill had more than one crankshaft and could keep operating

Ruling: consequential damages will only be awarded if they are reasonably foreseeable by both
parties at time of contracting
Damages from breach should be reasonably considered to be arising naturally or
supposed to have been in contemplation of both parties, at time they made the contract.

Remedies for Sale of Goods (under UCC)

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Gainsford v. Carroll, p. 1129: K to buy bacon

P: Carroll didnt deliver the bacon

D: he couldve bought bacon from someone else (cover)

Ruling: P still has money and could cover on day of breach, therefore, day of breach is the way
to determine damagesdamages are diff. in price of bacon on day K wouldve been performed
and price of bacon in K
Panhandle Agri-Service v. Becker, p. 1134: K to buy 10k tons of hay

P: Becker didnt deliver and PAS was planning to re-sell for a big profit
D: PAS didnt try to cover

Ruling: Cover isnt mandatory, but consequential damages are limited under 2-715 to instances
where buyer could not reasonably coverdoesnt get awarded loss of profits
Globe Refining Co. v. Landa Cotton, p. 1144: K to buy crude oil

P: Globe not only lost price diff damages, but also the use of their tanks
D: Didnt know that they would be liable for these extra reliance damages

Ruling: The mere knowledge cannot increase the liabilityknowledge must be brought home
to the party sought to be chargedreasonably believe that he accepts the K with the special
condition attached to it; awards market price damages

Equitable Relief/Specific Performance

Usually only granted if:
1.
2.
3.
4.

Terms of K are sufficiently certain

Remedy at law is inadequate (goods are unique)
Will not cause undue hardship, and
Enforcement is feasible (no long-term judicial supervision)

Courts prefer not to grant specific performance, unless extreme circumstances

Lumley v. Wagner, p. 1075: singer performs at exclusive theater

P: she signed a K to only sing at Lumleys theater and broke itwants injunction to stop
her from singing at other theaters
D: cannot force specific performance on her

Ruling: injunctive relief can be used to enforce a promise not to render personal services
(negative covenant)it couldnt be used to force her personal service, however
Stokes v. Moore, p. 1079: promise not to open loan business in Mobile

P: wants injunction against him opening a business like stated in K

D: can provide damages, but shouldnt order specific performance

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Ruling: specific performance is a discretionary remedy to prevent substantial injury where no
adequate remedy at law obtains; the payment for 4 yrs of work from P to D is consideration
enough for a covenant to not compete.
Campbell Soup Co. v. Wentz, p. 1097: carrot farmer stops delivering

P: without specific performance, damages would be SO hurtful and incalculable

D: the K was unconscionableway too one-sided

Ruling: K is too one-sided to be awarded w/ equitable relief (Clean Hands Doctrine) though this
wouldve been a situation where specific performance was probably necessary
Security Stove v. Amer. R. Express, p. 1188: transport the furnace to exhibit

P: Lost travel expenses and ARE shouldve known damage non-performance would
cause
D: There should only be market price damages for non-delivery of a good

Ruling: under special circumstances, expectation damages are too uncertain; SS awarded travel
costs b/c these grew out of the breach of K

Repudiation and Breach

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