Contracts Posner 2003

CHAPTER 1: REMEDIES FOR BREACH OF CONTRACT
THE GOALS OF CONTRACT DAMAGES
Case name Facts Issue Holding Reasoning

Expectation
Hawkins v. P sues D surgeon for breach of Was there a K and a There was a K and Purpose of damages is to put P in as good a position as he
McGee warranty of operation success – breach? Were a breach. would have been in had D kept the K. Difference b/t value to
1 “I guarantee to make a 100% damages Damages measure him of a perfect hand and value of hand in present condition,
perfect hand.” appropriate? should have been which includes any ill effect (the ill effect is not a separate
expectation element of damages; it’s included in expectations measure)
damages.
Sullivan v. Entertainer underwent surgery What’s measure of Reliance measure Don’t know how much money she could have been making
O’Connor for better nose; instead got a damages – of damages is w/a perfect nose.
2 worse nose. expectation or correct. Credibility of patients re: alleged statements of their doctors.
reliance?
Diminution in value vs. cost of performance
Groves v. John P leased land and screening plant Which kind of Cost of Don’t want to reward D’s bad faith (willful breach)
Wunder Co. to D for 7 yr term; D paid expectation damages performance is Law aims to award P w/what was promised
3 $105,000 and promised to grade is correct – correct measure of No economic waste in remedying defects
(make land of uniform grade diminution in value damages.
after removing gravel and sand); or cost of Class notes –
D deliberately breached by performance? like buying a lottery ticket when measure is cost of
removing only best gravel performance; no lottery when measure is diminution in value.
Under the Restatement, expectation interest = loss of value

resulting from the breach
Peevyhouse v. P family leased ½ of farm to Ds Was $5000 damage No – correct Statute: “no person can recover a greater amount in damages
Garland Coal & to strip mine; Ds supposed to fill award correct? measure is for breach of an obligation than he would have gained by the
Mining Co. in pits and smooth surface; Ds diminution in full performance”
4 didn’t leave land looking nice at value - $300.
cost of $29,000 for land value Cost of performance would give P family $4700 over value
increase of $300 of land. Result of gross disparity b/t two measures of
expectation damages. But you’d expect family to value land
beyond market value – they have to show this.
Dissent – diminution in value damages takes benefit written

into K from P and transfers it to D
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Advanced, Inc. v. Defectively constructed house. Diminution in value Cost of When likely that P will use award to actually repair, not
Wilks Jury awarded cost of v. cost of performance. pocket it and sell home, then okay to award cost of
5 performance, even though higher performance. performance damages.
than diminution of value
damages.
Acme Mills & P to buy wheat from D at When should wheat Delivery date, July 27 was reasonable, when wheat was $0.975. Damages
Elevator Co. v. $1.03/bushel. No delivery date have been since none are $0.975-$1.03 <0. Means no damage award.
Johnson specified in K. On July 14, delivered? What are specified, is Spot market price at reasonable date of delivery was less than
5 wheat was $1.16. On July 27, damages? whatever is P would have had to pay D. So D doesn’t owe P anything. D
down to $0.975. P wants reasonable. would have owed P if spot market price was over $1.03.
anticipated profit of $1.16-1.03
=$0.13/bushel
Jacob & Youngs v. K required Reading pipes in Diminution in value Diminution in Cost of performance would require tearing down house to
Kent house. D installed non-Reading v. cost of value = value of replace non-Reading w/Reading pipes. Default rule for
5 pipes and refused to replace. performance. house w/ Reading expectation damages is diminution in value b/c normally you
pipes-value of are commercially, not emotionally, attached to the land.
house w/o
Reading pipes = 0 Doesn’t matter whether breach was willful. As long as
victim is put in same position as would have been had K been
performed, no legal reason to complain.
Louise Caroline D to build nursing home. Did Diminution in value Cost of Damages should not put P in better position than it would
Nursing Home, not complete work by K date. v. cost of performance=0. have been had K been performed.
Inc. v. Dix Constr. P wants diminution in value = performance K price-amount
Corp. market value of completed already paid to As long as cost of performance + amount already paid to D
6 building-value of building as D D>cost of does not exceed K price, no compensable damages since P
left it completion  no can just hire someone else to finish at same cost as expected.
compensable
damages
Watt v. Nevada D’s train set fire to P’s hay, which How do you value Market value P’s own use of hay was so conjectural that no estimate could
Central R.R. Co. P was stockpiling for use as feed hay which only had minus costs to be given for its value at the time of destruction.
7 in case of severe winter value as emergency bring to market:
Hay would’ve sold for $10- feed? $12-2-6.50 = P wants damages equal to cost of replacing the hay, but this
12/ton $3.50/ton would result in huge profit for P, since he actually ended up
Cost of baling = $2/ton not buying replacement hay.
Cost of trans. = $6.50/ton
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LIMITATIONS ON EXPECTATION DAMAGES

Duty to mitigate
Rockingham P Luten to build bridge under K What is correct Expenses incurred P had duty to mitigate upon knowledge that D would not be
County v. Luten w/County. D notified P that it damage reward to perform K plus able to perform.
Bridge Co. would have to breach the K when P is put on anticipated profit.
7 (anticipatory repudiation) – P had notice of D’s Had P not Punishing P b/c now we have much more waste – a bridge
spent $1900 on construction at anticipated breach performed at all, it nobody uses or wants.
this point. P did not stop; now before P fully would be K price
suing for $18,300 cost of performs? minus cost to
building bridge. perform = profits.
Leingang v. City D awarded K to P to cut weeds Should damages be No. Correct P would have to pay overhead expenses regardless of
of Mandan Weed on large lots. Awarded different reduced in a measure of whether the K was breached.
Board K to someone else for small lots. performance K by damages is K
9 But D assigned large lots to small constant overhead price minus costs
contractor for $1933 K price. D expenses? to perform,
asserts that damages should be excluding
reduced by overhead expenses, overhead.
too.
Parker v. D to pay $750,000 to Shirley Did P fail to Summary So as long as alt. employment comparable or substantially
Twentieth MacLaine to play female lead in mitigate by rejecting judgment for P similar, then she should accept it. But 2 ways role could be
Century-Fox Film “Bloomer Girl,” musical comedy. alternative offer? affirmed. different – doesn’t add to reputation; western more difficult
Corp. D offered her lead role in “Big to make.
9 Country, Big Man,” a western
drama, instead. P declined, Dissent says comparability of roles is question of fact and
demands K salary + interest. D therefore should have gone to jury.
alleges deliberate failure to
mitigate damages.
Billetter v. Posell D hired P to work in store as Are damages $75/wk + unpaid Employee not required to perform same work for less pay in
10 floor lady & designer for $75/wk $75/wk, Christmas bonus mitigation of damages. If P had accepted $60/wk, she
+ $500 Christmas bonus. Then $75-60/wk= $15/wk, would’ve lost right to higher wage (consenting to K
said they would pay $60/wk for or $75- modification).
same work. unemployment
comp. P received Unemployment benefits not deductible from damages award
since they are meant to alleviate distress of unemployment,
not to diminish amount employer pays to employee for
wrongful discharge damages.
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Missouri Furnace P to buy coal from D at Are damages K2-K1 Spot market price- D should have stuck to the spot market instead of entering
Co. v. Cochran $1.20/ton. Partway through price = $4-1.20 or K1 price. into a forward K w/someone else.
10 performance, D notified P of spot market price-
rescission. P entered into K1 price = $1.30- UCC §2-712 relaxes rule, however:
forward K w/Hutchinson at 1.20? Buyer may recover difference b/t cover price and K price
$4/ton. Shortly after price spiked plus incidental costs.
in spot market to that price, it
went down to $1.30.
Hadley Rule
Hadley v. Ps’ mill’s crankshaft broke; had Are damages too Yes. Hadley rule = absent special circumstances known by parties
Baxendale to send it through D carrier to get remote? at time of K, damages should be awarded that compensate
11 new one – told clerk to rush. Ps any naturally arising cost to the injured party and/or such as
received new shaft several days may reasonably be supposed to have been in the
late, resulting in loss of profits. contemplation of both parties at time of K as probable result
of the breach of it.
P didn’t tell D that crankshaft was required to keep mill

running. Only told them to rush. Loss not foreseeable to D.
No natural flow of loss from breach.
Black v. Same D as Hadley case. Failure Damages remote? No. Jury can decide what the loss was arising out of D’s delay.
Baxendale to ship cloths for sale.
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Lamkins v. P ordered tractor from D; wanted Special Damages are Nothing to prove that D should have expected that he would
International lights for night use. No lights. circumstances – e.g., disproportionately be liable for lost crop profits for failure to deliver $20 light.
Harvester Co. Didn’t delivery lights for a year. Hadley rule large compared to Not reasonable to believe that dealer tacitly agreed to such
12 P wants lost profits from not applicable? consideration; will damages for failure to deliver light.
being able to plant 25-acre tract. use “tacit
agreement” test. P could have bought light himself.
Victoria Laundry P ordered large boiler from D for Can P recover lost Yes. Lost profits Loss of laundry profits reasonably foreseeable result of
(Windsor) Ltd. v. delivery on June 5. D knew P business profits for foreseeable. failure to deliver on time, since D knew that P wanted to use
Newman Indus., wanted to use it a.s.a.p. for period b/t June 5 and boiler for use in laundry business. Loss was “liable to
Ltd. business. Boiler damaged on Nov. 8? result.” But P can’t recover for loss of “particularly
12 June 1, before delivery. Repair lucrative” dyeing Ks of which D had not been specifically
couldn’t be made until Nov. 8. told.
P couldn’t buy boiler from someone else by June 5. Special

order.
The Heron II D to transport P’s sugar to Iraq. Under Hadley, can P Yes. P wins lost Foreseeable that late arrival would mean difference in market
12 9 days late. By that time, market recover lost profits? profits. price of sugar if someone else’s cargo got there first.
price of sugar dropped b/c
another cargo of sugar had
arrived.
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Prutch v. Ford P sues manufacturer for crop Consequential Yes. Rejects tacit agreement test which permits consequential
Motor Co. damages caused by defective damages damages only if seller specifically contemplated or actually
13 equipment. appropriate? assumed risk of damages.
Consequential damages need only be foreseeable, not
actually foreseen.
Valentine v. P seeks damages for mental Does Hadley rule No. No market standard for emotional distress – difficult to
General American distress above and beyond support claim of determine value of it.
Credit, Inc. exemplary damages for breach of foreseeable
13 employment K. emotional distress When emotional distress is a big deal, too variable and
upon being fired? unpredictable – employer would never accept terms
assigning liability to it for emotional distress. Even if
foreseeable, can’t foresee amount of distress. Even if can
foresee amount of distress, no market standard for it.
Courts just don’t want to deal w/it.
Freund v. P author to provide manuscript, Can P recover any No. Promotion delay: no evidence for it.
Washington D publisher to provide $2000 damages under
Square Press, Inc. advance, hardcover publication, Hadley or Lost royalties: no guarantee of number of books that would
14 royalties. D didn’t do last 2 expectation damages have been sold.
things. P wants damages for generally?
delay of promotion, lost Cost of publication: Book not going directly to P. Goes to
royalties, cost of publication. public. They pay money, of which 10% goes to P.
RELIANCE AND RESTITUTION

Reliance
Chicago Coliseum P conducts matches. D is world’s Can P recover loss No to all. Loss of profits: no – too speculative.
Club v. Dempsey Champion Heavy Weight Boxer. of profits, expenses Expenses before signing: no – injured party can only recover
15 D breached K by not performing prior to signing K, damages which naturally flowed from breach.
(denied existence of K). expenses in Expenses from action in court: no – D clearly breached; P
attempting to force took action at own risk and expense
D into compliance, Expenses b/t signing and breach: no – promoter to be paid
and expenses b/t the out of gate receipts; no unconditional payments in K.
signing of the K and
the breach? Only expenses incurred in furtherance of general scheme to
put on the fight are recoverable (no overhead).
Security Stove & D breached by failing to transport P entitled to all Yes. P informed D of purpose of necessity of prompt delivery.
Mfg. Co. v. one irreplaceable part of expenses incurred in
American Ry. exhibition burner to convention. relation to the No expectation damages b/c amount of lost money from
Express Co. P recovered damages for convention? prospective customer too speculative.
18 expenses only.
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Anglia Television D agreed to star in play; D Can P recover Yes. D knew that a lot of money had already been spent which
Ltd. v. Reed double-booked so couldn’t expenditures would be wasted if he breached. If D hadn’t entered into K
19 perform. P couldn’t find incurred prior to K? then P could have hired someone else. Reliance damages
replacement. P seeks reliance supposed to put P back in position it was in when K was
damages equal to expenses entered; they were in position to hire someone else.
incurred prior to and subsequent
to making of K. Difference b/t Reed and Dempsey: only one Heavy Weight
Champion of the World; lots of actors.
L. Albert & Son v. P to buy 4 machines from D for Can P recover Yes. J. Learned Hand:
Armstrong Rubber reconditioning old rubber during reliance damages Where venture would’ve been profitable, injured party can
Co. WWII. 2 of them not delivered even if P’s venture recover expenses.
19 until after war over. Buyer wants would have been Where venture would’ve been unprofitable, injured party can
to recover $3000 in reliance unprofitable? recover expenses but promisor can reduce amount by
damages = cost of preparing showing and subtracting amount promisee would’ve lost had
foundations for machines. the K been performed. Otherwise risk of promisee’s venture
is imposed on promisor.
Restitution; quantum meruit
Boone v. Coe Oral K for P & families to leave Can Ps recover for No. K unenforceable under statute of frauds (had to be in
20 KY to live on and cultivate D’s expenses incurred writing).
farm for one year. D wouldn’t let and time lost on the
them in house or farm. Ps went faith of a K that is Exception: if D benefited from Ps’ part performance –
home. Want reliance damages = unenforceable under quantum meruit, a.k.a. unjust enrichment, restitution, implied
expenses of abandonment, travel, the statute of frauds? K. D didn’t benefit from Ps’ actions, so no recovery.
and lost time
United States v. Sub, Coastal Steel, suing D under Can Coastal recover Yes. D shouldn’t Standard for measuring reasonable value of services is amt.
Algernon Blair, federal statute. D breached by in quantum meruit benefit from for which services could’ve been purchased from one in the
Inc. failing to pay for crane rental; since it provided D breach. P’s position at time and place the services were rendered.
21 Coastal stopped work. Amount w/labor and
due to Coastal for work done and equipment, even Williston on Contracts: recovery is undiminished by any loss
services provided was $37,000; though it would’ve that would’ve been incurred by complete performance
had Coastal finished work, it lost money if K was
would’ve lost more than $37,000. fully performed? Notes:
Trial ct. awarded $0 damages. Under expectation measure, D doesn’t have to pay.
Under restitution measure, D still gets windfall since it
received $40,000 worth of work for only $37,000.
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Kearns v. Andree D breached K to buy P’s house Can P recover even Yes – even though P complied w/D’s requests w/expectation that D would
22 after P repainted and repapered if K was the attempted K compensate him. Doesn’t matter that D wasn’t benefited in
walls to D’s specifications. unenforceable? Can was the end.
Wants expenses for meeting D’s the law imply an unenforceable, it Work was done to satisfy D’s desires under terms of
specs, for meeting purchaser’s agreement to make showed the agreement for sale in good faith w/honest belief that
specs, and for difference b/t K reasonable parties’ agreement was enforceable; therefore P entitled to reasonable
and resale prices. compensation? expectation of compensation, less any benefit to P by doing work requested
compensation. by D.
Oliver v. P lawyer agreed to represent D in Did P effectively Yes. Had P been Rule is when P is fired before completion, repudiates K and
Campbell divorce proceeding for $850. 29- finish performing fired at any time K is no longer relied upon as fixing limit of compensation.
23 day trial. D fired P. Court filed under K at time he before effective But P’s performance was “in effect” complete at time of
findings in favor of D’s wife. was fired, thus completion of K, wrongful discharge.
Reasonable value of P’s services entitling him only to would’ve been
was $5000. the K price? entitled to Notes: other courts would disagree; would pro-rate the K
restitution in price according to how much work P finished.
amount of But restitution is to prevent unjust enrichment.
reasonable value
of services.
Britton v. Turner P to work under term K on D’s Can P recover if he Yes, so long as D Employer must pay value of services received; laborer must
23 farm for 1 yr for $120. Left after voluntarily breaches received value, he pay damages incurred by employer if laborer fails to
9.5 mos. Wants $100 in quautum K? must pay complete performance. No incentive for employer to drive
meruit = worth of work done. D reasonable worth employee away or for employee to abandon before
doesn’t seek damages for P’s of what he completion. They will both be punished.
breach. received.
Notes: court is transforming a term K into an at-will K. Bad
b/c employee has no incentive to stay. But on flip-side,
employer can drive employee away so he won’t have to pay.
Thach v. Durham D to sell sheep to P. P breached. Can breaching buyer No. D (seller) was willing to perform. Breaching buyer should
24 P seeks restitution of $3100 get his down not be favored over this seller.
down payment. payment back?
Purpose of down payment is ex ante form of restitution
should buyer breach.
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CONTRACTUAL CONTROLS ON THE DAMAGE REMEDY

Liquidated damages
City of Rye v. D developers to build 12 apt. Whether agreement Penalty. No Only situation in which provision fixing damages will be
Public Service buildings. After building first 6, and bond provide statutory authority upheld is if the amount is a reasonable measure of the
Mut. Ins. Co. required to post bond w/city to for a penalty or for for city to exact a anticipated probable harm. Amount cannot be grossly
25 ensure completion of last 6. liquidated damages. penalty from disproportionate to anticipated probable harm.
Agreed to pay $200/day for each developers. City
day completion delayed. More loses. City failed to prove harm was accurately anticipated by
than 500 days late. City demands amount of bond.
$100,000 amount of bond.
Yockey v. Horn Two former business partners Is liquidated Yes, as long as Liquidated damages clauses are enforceable if amount is
26 entered into agreement to refrain damages provision injured party was reasonable either at time of K or at time of injury. $50,000
from voluntarily participating in enforceable? actually damaged. was reasonable estimate at time of K.
any litigation against each other.
D voluntarily gave deposition in
litigation against P. P sued for
breach
Muldoon v. Lynch P to erect monument out of Is penalty clause No. No showing of actual damages.
26 special Italian marble w/in one enforceable? Enforcement would result in $7820 penalty –
yr; D to pay $18,788 upon disproportionate to any actual damage.
completion. Marble couldn’t be
transported for over 2 yrs. Notes: P. proposes “backwards liquidated damages” –
Penalty clause provides $10/day instead of deducting $10/day for lateness after certain date,
for lateness. award $10/day bonus for earliness before later date. Not a
damages provision, so can’t be held unenforceable.
Wilt v. Waterfield P to buy D’s farm for $19,000. Was clause a penalty Yes. P may D was bound to do many things under the K, not just sell the
27 Paid $1900. D sold to someone which did not limit recover more than farm. All obligations were of varying degrees of importance
else. P awarded $7000 damages. recovery of actual penalty clause in – failure of any would give cause for different amt. of
D wants recovery limited to 10% damages? K. damages having no relation to amt. fixed in K. Court doesn’t
of K price. like one set amt. of damages for lots of mini-obligations.
Fretwell v. Burglary alarm system. Alarm Is limited liability Yes to both. Limited liability: K states that D is not an insurer; offers
Protection Alarm went off – D’s employee and clause enforceable? increased monthly payment if insurance desired; provision
Co. police didn’t check if alarm line Is indemnity clause not unconscionable, not against public policy.
28 was cut. Burglars entered, took enforceable?
$91,379 worth of property. D Indemnity: K can relieve party from liability for own future
contends that K limits liability to acts of negligence as long as it is clear in K and act is not
$50. illegal immoral, or against public policy.
Notes: limited liability provision is okay; liquidated damages

not.
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ENFORCEMENT IN EQUITY

Specific performance
Van Wagner Michaels leased exterior wall Specific Money damages Specific performance would disproportionately harm D and
Advertising Corp. space to P. P leased billboard to performance vs. through expiration assist P. Imposes undue hardship on D – inequitable.
v. S & M Asch. Michaels sold building to money damages of lease. Also, s.p. of real property leases not usual type of damages
Enterprises D before P lease expired. D tried awarded under common law.
29 to cancel the lease. Held to be Equitable relief granted only when common law remedy
breach of K. inadequate.
Curtice Bros. Co. P canning plant suing D for s.p. Specific Specific Usually for ordinary goods and personal property, s.p. is not
v. Catts on K w/farmer who agreed to sell performance vs. performance b/c a remedy.
30 entire tomato crop from specified money damages of difficulty of This is exception b/c P couldn’t buy from someone else. Can
land. calculating money calculate lost profits, but damaged reputation to P’s buyers
damages. too difficult to calculate.
Paloukos v. P to purchase car from D. 5 mos. Specific Yes. S.p. S.p. only available where goods are unique or under UCC 2-
Intermountain later, D returned deposit, unable performance claim unavailable. 716(1) exception; available only when all other remedies are
Chevrolet Co. to deliver b/c of product properly dismissed? inadequate.
31 shortage. Cannot order impossible performance of D selling to P that
which D does not have.
Laclede Gas Co. Automatic renewal agreement Should s.p. be Yes. S.p. should No market for propane, so P can’t go to spot market and sue
v. Amoco Oil Co. unless P cancels. P is distributor granted, i.e. are all be granted in form for damages.
32 and D supplier of propane. D other remedies of injunction. This was long-term K which probably could not be made
seeks to terminate based on lack inadequate? w/another supplier.
of mutuality (it can’t cancel
while P can). P seeks injunction
against termination.
Fitzpatrick v. Oral K – D would pay $8/wk, S.p. appropriate for No, even though Equity will not ordinarily specifically enforce a K for
Michael leave her life estate of house and personal service K? no adequate personal service b/c:
33 title to cars if P nurse would care remedy at law 1) better for society – s.p. could result in “obnoxious”
for him and household. P alleges since K violates situation or in “mischief”
that D’s relatives poisoned his statute of frauds 2) Courts don’t have means or ability to enforce
mind against her; D did and P’s defense is performance
everything to drive P away. P partial P’s services “everyday” – implies that if unique, s.p. might be
seeks s.p. performance. appropriate. Emphasis on inability to force D to accept and P
to provide services.
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Injunctions
Dallas Cowboys P sought injunction to restrain D Negative injunction Yes – case On appeal, court held verdict unsupported by evidence –
Football Club, from playing football for anyone appropriate? remanded to definition of “unique” too narrow. No other players equal to
Inc. v. Harris except them. Jury rendered determine whether or better than D available to P. Temporary injunction
34 special verdict that D not D was unique and granted.
exceptional or unique football whether
player. substitutes
available.
Pingley v. D organ player to play in P S.p. and injunctive No. S.p. not ordinarily a remedy for personal services K unless
Brunson restaurant for 3 yrs. D quit after relief appropriate? performer has unique/exceptional skill. 5 other organists of
34 playing 10 nights. P awarded s.p. comparable ability in area available for hire.
and order enjoining D from
playing for anyone else during Injunctive relief erroneous b/c no express covenant in K to
times in conflict w/K. not compete or perform elsewhere. Absent express negative
covenant, court won’t enjoin services to another during term
of breached K.
Covenant not to compete
Fullerton Lumber P operates retail lumber yards; K restraint Somewhat. In Appropriate length of time for covenant not to compete is 3
Co. v. Torborg hired D to manage yard; K has unreasonable and business where yrs, since that’s how long it took D to build up P’s business –
35 noncompete covenant, unnecessary to customer contacts a competent manager can do the same.
prohibiting D from working for protect P’s interests? very important,
any other building material co. employer needs Notes:
for 10 yrs after leaving P w/in 15 protection. Covenant not to compete clause is injunction equivalent to
mi of any yard where D was However, 10 yrs is liquidated damages clause. Employer is allowed to protect
employed as manager. Under D, excessive. own interests, but can’t be unreasonable.
yard business tripled in 3 years.
D quit and set up own yard in
same town. P sued to enjoin him
from working in town.
Data P alleges breach of 5-yr Did co. act in good Yes. Court Previous approaches to overbroad covenants:
Management, Inc. noncompete covenant covering faith, and if so, can chooses to alter 1) Hold them “unconscionable” and hence unenforceable.
v. Greene all of Alaska. Trial ct found covenant reasonably covenant to render This approach can lead to unduly harsh results.
36 covenant overbroad, denied P’s be altered? it enforceable 2) “Blue pencil” rule – court renders it enforceable by
action for injunction. since co. acted in deleting specific words. This approach values wording over
good faith. substance.
3) If drafted in good faith, that is, employer did not willfully
overreach, court can reasonably alter it to render it
enforceable.
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S.p. of a right exercised in a K
Northern D to remodel P’s plant. P has K Should court grant No. Not court’s S.p. inappropriate b/c impractical here to try to enforce it. P
Delaware Indus. right to order a two turn-week s.p. of the K right job to supervise may claim damages later if delay results in damages.
Dev. Corp. v. E.W. work – designate day & night and order hiring of construction
Bliss Co. shifts over full work week and add’l workers? projects.
36 entitled to court order directing D
to employ at least 300 workers
for these shifts.
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CHAPTER 2: GROUNDS FOR ENFORCING PROMISES
FORMALITY

Congregation Decedent made oral promise to Is the promise an No – not No legal benefit to promisor or detriment to promisee.
Kadimah Toras- give $25,000 to P synagogue, enforceable K? supported by
Moshe v. DeLeo who planned to name library consideration or No evidence that promise to name library induced decedent
39 after him. Asserts that the evidence of to make/renew promise.
promise is supported by reliance.
consideration & bargain, or by Allocation of $25,000 in P’s budge insufficient showing of
reliance. reliance – merely hope or expectation.
Against public policy to enforce oral promise w/o

consideration or reliance.
EXCHANGE THROUGH BARGAIN

Bargaining
Hamer v. Sidway Uncle William, D’s testator, Is there valuable Yes. Enough that something is promised, done, forborne, or
41 promised nephew $5000 if he consideration to suffered. Any forbearance of a right is sufficient to sustain a
would refrain from smoking, enforce K? promise. Nephew gave up right to engage in certain
drinking, gambling until age 21. activities; uncle benefited b/c he wanted nephew to refrain.
Nephew refrained; sold right to
money to P; D refuses to pay on Even if P benefited from refraining, still gave up something.
ground of failure of Constitutes consideration.
consideration.
Earle v. Angell P’s aunt promised $500 if he Can P recover from Yes. First, a K to pay money after one’s own death is valid.
42 attended her funeral. He did, she aunt’s executor?
had left note ordering executor to Second, promisor benefited by satisfaction of knowing he’d
pay him if he attended. be there. Promisee attended; gave up his right not to attend;
this renunciation of legal right was motivation for the
promise.
Bargain and exchange
Whitten v. Extra-marital affair. D wanted Was there No. P didn’t bargain or exchange for D’s sole promise of not
Greeley-Shaw written promises in writing. P consideration? Unenforceable calling him at home or work. D included it b/c she felt P
42 signed her list. P to make agreement by should get something in return.
payments, gifts, visits; D reason of failure
promised not to call P at work or of consideration.
at home.
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Fischer v. Union Decedent handed P daughter Can daughter claim No – it was $1 was not real or valuable consideration for the property –
Trust Co. deed to property, who got $1 ownership? merely a gift. only nominal. Grantor’s love and affection for daughter is
43 from brother to hand to father. insufficient consideration to compel performance of an
executory K.
Batsakis v. D promised P $2000 at end of Is $25 for $2000 Yes. “Mere inadequacy of consideration does not void a contract.”
Demostsis war b/c he gave her $25 to help adequate Court will enforce any deal where one party is motivated to
44 her and family during war. consideration? give something in exchange for something else. D valued
having $25 now at $2000 later, or P valued giving $25 now at
$2000 later.
Duncan v. Black P demands cotton allotment Did provision No. Cotton Cannot sue for breach of K which violates statute, is
44 transfer from D to fulfill K extend for every yr allotments only inherently illegal, or is against public morals or policy.
provision of 65 acre allotment after K, and if so, valid for year of
w/land; D refuses; P demands was there valid assignment. No If there was consideration, it was such that the law cannot
damages for breach of K consideration? valid recognize; therefore no valid consideration
consideration b/c
contrary to statute.
Implied contracts in fact or in law
Martin v. Little, Student notifies publisher of Was there implied in No. Student gratuitously conferred benefit. Volunteered
Brown & Co. plagiarism. Demands 1/3 of fact or implied in information. Since no explicit K to reward student for
45 lawsuit proceeds based on law enforceable K? notifying publisher, no remedy.
argument of implied contract. Implied in fact: no, publisher didn’t even promise reward
Implied in law: no, even though publisher benefited, nothing
in correspondence indicating understanding that student
would be compensated or that any promise for info was
made.
Collins v. Lewis P sheriff notified D by letter that Was there implied K Yes. Law implied P rendered services w/o being asked, but expects to be paid
46 he would keep D’s cows for him by law? a K. for it and D knows this. D accepted P’s services, knowing
at D’s expense. Kept cows for 38 that P expected payment. Law implies from these
days. Sheriff wants fair value of circumstances that D promises to pay P a reasonable amt for
cows’ keep based on implied K. the services.
Seaview Ass’n of P homeowners ass’n provide Was there implied Yes. Implied K in Ds had actual or constructive knowledge of nature of
Fire Island, N.Y., several benefits to homeowners K? fact. community and what P did for benefit of residents.
Inc. v. Williams (Ds), who refuse to pay Payment is thus required by all community homeowners of
46 assessments. proportionate share of full cost of maintaining facilities and
services.
- 13 -
PROMISES GROUNDED IN THE PAST

Consideration already given at time promise made
Mills v. Wyman P provided care for D’s son. D Is there valid K No K b/c promise Consideration already given (caring for son) when promise
46 then promised to pay expenses. when consideration must be motivated made (I will pay expenses). No K.
already given when by detriment to Only 3 exceptions to rule that consideration given in past
promise is made? promisee defeats breach of K claim:
bankruptcy
infancy
running of statute of limitations
Webb v. P saved decedent’s life. Should P recover Yes, even though Decedent was serious about paying P – had been paying him
McGowin Decedent paid P $15 every 2 even though doesn’t fall under every two weeks until death.
47 weeks in gratitude until his death. consideration any exceptions
D executor refuses to pay further already given when (bankruptcy, Decedent received material benefit.
installments. promise made, and infancy, statutory
seems like limitation). Decedent would have definitely agreed to pay the amount
gratuitous promise? offered/given in exchange for being able to live.
Harrington v. P neighbor saved abusive Should P be able to No. Invalid Humanitarian acts are not valid consideration to entitle P to
Taylor husband’s life by preventing wife recover from the consideration. recovery at law.
47 from hitting him w/axe. husband?
[Gratuitous] promise for benefit received
In re S.’s wife died. Asked her mother Were services No. Normally Do not have to show legally enforceable obligation.
Schoenkerman’s & sister to move in to care for gratuitous b/c b/t presumed to be Schoenkerman wanted to pay them for their services b/c of
Estate kids & manage house. They family members and gratuitous b/t moral obligation.
47 served 10 yrs. He had promised therefore no K? family members.
them money. They want amt But here we have Sister-in-law wanted full fair value of services, which
promised. acknow-ledgment amounted to more than amt promised. Denied.
of moral
obligation.
- 14 -
RELIANCE ON A PROMISE

Kirksey v. Kirksey D promised P a place to stay on Was there valuable No – it was just a D didn’t ask her to come in order to cultivate his land. He
48 his land indefinitely after P’s consideration given gratuitous didn’t bargain for her to leave her house to live on his land.
husband (D’s brother) died. After in exchange for D’s promise. All he did was invite her.
2 yrs, D forced her to leave land. promise?
He argues no consideration for
the promise. She argues she
cultivated land and left her home
to go to D’s.
Ricketts v. Katie worked as bookkeeper; Is this enforceable Yes – Katie should Grandfather specifically wanted her to quit her job. He
Scothorn grandfather walked in w/$2000 promise? get what offered money. She quit on faith of his promise to give her
48 promissory note, saying he didn’t grandfather money. She gave up her right to work b/c he asked her to.
want her to work; she quit; year promised if she
later, she took another job w/his quit. Court compares it to giving $ to charities.
consent.
Allegheny College Decedent promises P college Is this gratuitous Gratuitous Although it was a charitable subscription, the naming (or
v. National $5000 to be paid after death, w/ promise promise. giving up right to name the fund something else) was
Chautauqua instructions for fund naming. (unenforceable) or Unenforceable. insufficient consideration.
County Bank Pays $1000. She repudiates prior charitable Naming was not
48 to death. P wants balance of subscription valid If college wanted to argue promissory estoppel, would have
promise from D executor, who (enforceable as long consideration. to prove reliance. P failed to prove any reliance upon her
argues gratuitous promise. P as consideration Reliance upon promise to donate money, i.e., we already started building
argues consideration in form of shown)? promise not w/her donation included in the budget, or we could have sold
naming. shown. naming to someone else for more money.
Promissory estoppel
East Providence D indebted to P; K required D Does D have Yes. Interest D must show following for successful claim in promissory
Credit Union v. have car insurance, and if D successful claim in accrued on estoppel:
Geremia didn’t have it, P would pay for it promissory estoppel insurance
50 and add cost to debt already – was there valid K premiums that 1) Promise: P promised to pay insurance, and P should have
incurred. P notified D that it re: who would pay would have been known about the Ds’ reliance
would be adding to debt. D insurance premium? paid by P 2) Reliance: did not buy insurance – Ds relied to their
presumed that P would follow constitutes detriment
through, but P failed to pay consideration b/c 3) Can injustice be avoided only by enforcement of the
premium. Car was totaled. D now has to pay promise?
more interest.
There was a K
here. P’s failure to
perform was
breach.
- 15 -
Seavey v. Drake Father promises son land but no Should promise not Here, yes. Son took possession and improved land = partial
50 deed transfer. Son takes in writing (violates performance; father knew about it. Would’ve been fraud had
possession, improves it. Father Statute of Frauds) & father never intended to give land to son but stood by while
knows. Son claims enforceable w/o consideration be receiving benefit (improved land).
promise. enforced?
Forrer v. Sears, Employee left employer; Can employee No, b/c employer Default rule as to kind of employment: terminable, at-will.
Roebuck & Co. employer asked him to come prevail on kept his promise; Why?
51 back for “permanent promissory estoppel the real dispute Don’t want employees to be stuck.
employment” argument? was whether Employment relationships are at-will unless otherwise
but fires him after 6 mos. “permanent specified.
employment”
means “for-cause” Promissory estoppel test:
or “at-will.” 1) Should D have reasonably expected the action P
took?
2) Did promise induce the action or forbearance?
3) Can injustice be avoided only by enforcement of the
promise?
Hunter v. Hayes Employer promised to hire P, but Can employee Yes. Employer didn’t keep promise and P met requirements of PE
52 never did. prevail on grounds test. Opposite outcome from Forrer b/c D here didn’t keep
of PE? promise.
Possible problem: employer has incentive to hire and then

immediately fire to avoid liability.
Stearns v. Emery- Suit for breach of oral Can employee avoid No – promissory P has neither alleged nor proven fraud – he was adequately
Waterhouse Co. employment K for definite term Statute of Frauds estoppel does not compensated for the time he worked.
52 >1yr; P was fired before term based solely on allow P to avoid
was over reliance on oral statute of frauds. Equitable estoppel and partial performance doctrine would
promise? have allowed P to avoid statute of frauds.
Goodman v. Ps applied to be franchisees of Can Ps recover even Yes – Ps proved Ds were estopped from denying a K b/c Ps proved reliance.
Dicker radio store; Ds represented that if there was no valid detrimental
53 application was accepted and K based on PE reliance on Ds’ Ct awards cost incurred but not expected profits. Reliance
promised to deliver radios, but it argument? statements and damages, not exp.
was ultimately denied; Ps conduct.
incurred expenses in setting up But usually cts award exp. damages in PE cases (Johnny tells
franchise. uncle he wants to buy car; uncle says I’ll give you $1000.
Uncle liable for $1000, even if car price is $500.)
- 16 -
Levine v. P leased store premises to D for 2 Were terms of the No, b/c alteration Even if ct believed D’s version, same outcome:
Blumenthal yrs - $175/mo for 1st yr, $200/mo written lease was not supported Promise: I’ll reduce rent by $25/mo
54 for 2nd. D couldn’t pay $200 rent changed by the by consideration. Consideration: I promise to not go out of business.
w/o going out of business. P subsequent oral But this is just a promise not to breach, and D can’t waive
orally agreed to accept $175. P agreement? right to bankruptcy. Not consideration.
suing on final month’s rent plus
$25 difference times 11 mos. *Ct seems to suggest that any nominal consideration would
suffice.
PROMISES OF LIMITED COMMITMENT

Bilateral contract = a promise exchanged for a promise (instead of performance)
Davis v. General P offered new recipe; D said Was there a valid No – D’s was “We’ll pay you if we want to” is not consideration. Illusory
Foods Corp. okay, but all payment is at D’s legal K? Can P sue illusory promise promise when a K lacks mutuality/consideration.
55 discretion; D uses recipe, pays for breach?
nothing. Also, even if valid K, D kept promise.
Nat Nal Service The agreement was that P will Is it valid legal K? No – illusory Neither party was bound by terms of alleged K at any time.
Stations v. Wolf purchase gasoline from D as long promise. Buyer could buy from someone else next time; seller could
55 as D pays the discount to P. refuse to sell to buyer.
Obering v. Swain- Swain’s promise: If we buy land, Are parties bound No, not normally. Before condition occurred, looks like “we’ll resell the land to
Roach Lumber we’ll resell it to you minus the by K that is But the future you if we feel like it” – illusory promise, lack of mutuality.
Co. timber. Obering’s promise: If you contingent upon event has already
55 buy land, we’ll buy it from you. future event? happened. Now But now that the condition has occurred, Swain is bound to
they are bound. resell land to Obering, and Obering is bound to buy the land
from Swain.
Paul v. Rosen If Buyer obtains the lease, D will Conditional K No, want of Securing the lease was the condition. No duty placed on P to
56 sell business and stock to Buyer. enforceable? mutuality. secure it. So D doesn’t have duty to perform either.
Wood v. Lucy, Lucy hires Wood to place her Can Lucy get out of No – promise not Wood’s promise to pay her profits was, in effect, a promise to
Lady Duff- endorsements and sell her the K on ground that illusory. use reasonable efforts to bring profits and revenues.
Gordon designs – he has exclusive right. it was based on an He also had duty to try to sell her designs and place her
56 Wood will give her % of profits. illusory promise? endorsements on others’ designs; otherwise, no point in
promising to account for profits.
Lucy claims that “unless he gave
his efforts, she could never get Implied promise – Wood undertook a duty, and performance
anything” – e.g., lack of would result in keeping a promise which would benefit Lucy.
mutuality He would be in breach if he failed to make reasonable efforts.
Omni Group, Inc. Omni: If we get the feasibility Assuming that Omni No – immaterial If the option is dependent on the occurrence of specified
v. Seattle-First report and we’re satisfied w/it, acted in good faith that satisfaction conditions, promisor can cancel only if the conditions do not
Nat’l Bank then we will buy the property. (which is a question was dependent on occur (the feasibility report is not satisfactory).
57 Omni unsatisfied w/report. of fact), was the Omni.
promise illusory?
- 17 -
Feld v. Henry S. Output K: P will buy all Is K enforceable? Yes. Requirements of the output K: so long as D uses best efforts
Levy & Sons, Inc. breadcrumbs that D produces; D to supply the goods (“reasonable output”), and P uses best
57 will sell all breadcrumbs it efforts to promote their sale.
produces to P. UCC §2-306 says output K requirements are enforceable.
Corensweet, Inc. Agreement provision = Cancellation clause Ct upholds
v. Amana terminable by either party. provision. No
Refrigeration, Inc. breach.
58
Sheets v. Teddy’s P was fired after reporting Ct doesn’t rule on K Wrong to fire How could P have made a K claim?
Frosted Foods, regulatory violations to claim, only on employee for By showing there was an implied duty of good faith in the
Inc. employer. Type of employment K wrongful discharge doing his job. employment K, and that D failed to fulfill that duty.
58 = terminable at will. tort claim.
- 18 -
CHAPTER 3: THE MAKING OF AGREEMENTS
MUTUAL ASSENT

Mutual Assent
Embry v. P’s employment K about to Proper jury No – the jury There only needs to be a manifestation of reasonable,
Hargadine, expire for the yr. Asked for new instruction? instruction called mutual consent – the objective standard.
McKittrick Dry K, had impression that D would Conversation had to for application of
Goods Co. take care of it. D denied giving have occurred the subjective “The law imputes to a person an intention corresponding to
60 any indication that he would according to P and standard = actual the reasonable meaning of his words and acts.”
renew. Fired P 4 mos. later. Jury both parties intended intention, meeting
verdict for D. to make the K, in of the minds.
order to find for P.
Kabil Ds provide helicopter services; Proper for ct to Yes, b/c allowing D’s ground for objection is that the question has no probative
Developments deny existence of construction allow P’s counsel to it would not weight when applying the objective standard.
Corp. v. Mignot project K w/P; P sues for breach ask VP of Kabil confuse the jury as Ct says even the “staunchest objectivist” would not let a jury
60 of K. whether he felt in to what constitutes hold 2 parties to a K when neither thought the other meant to
his mind that it was the creation of a assent.
obligated to give the K.
work to D?
New York Trust D organized several Mexican Should ct enforce K No. Don’t want this kind of sham transaction to affect bankruptcy
Co. v. Island Oil subsidiary corps. to appear as even when apparent cases.
& Transport Corp. owners/operators, but D really that neither party
61 controlled all of them. A meant it?
successor got hold of one of them
and demanded that D pay
balances due on one of its sham
Ks.
McDonald v. D employer gave P employee Did handbook No; if it did, there Disclaimer must be set aside in some way – capital letters,
Mobil Coal choice b/t being fired or statement convert an must be bold or colored print, indented and its own paragraph so that
Producing, Inc. resigning. P claims breach of K at-will K into a for- consideration, but it is reasonably visible in proportion to its importance.
61 based on terms of employee cause K? P gave none.
handbook. Claims it constituted a Case remanded for determination of whether promissory
valid K sufficient to modify estoppel applies.
terms of his at-will employment.
- 19 -
Moulton v. P received letter from D, stating Whether D’s letter No – D’s letter According to the Restatement, vagueness is indicative of a
Kershaw that it had salt for sale at certain and P’s telegram was an invitation lack of intention to be bound.
61 price; “shall be pleased to receive order constitute a K. to deal or an
your order.” P ordered 2000 Offer vs. invitation advertisement, not Language of the letter was not what a businessman would use
barrels. Next day, D withdrew to deal. an offer. to offer to sell a definite amt of property to a specific indiv.
letter and refused to deliver. P Word “sell” not used. It was a general letter addressed
sued for breach of K. generally to those D thought might be interested in buying
salt. Advertisement.
Cf. Keller v. Ybarru – seller offering grapes from certain

vineyard, but no specified quantity. Held to be a K. Why?
Lefkowitz v. Great D published 2 adverts: “Sat. 9am, Were the ads offers First ad too Conventional view is that ads are invitations to deal.
Minneapolis 3 brand new fur coats worth to or invitations to indefinite to create However, ct’s test is: “whether the facts show that some
Surplus Store $100, first come first served, $1 deal? an offer; second performance was promised in positive terms for something
62 each.” ad was definite so requested.”
“Sat. 9am, 2 brand new pastel it was an offer. Ads left nothing open for negotiation. D did not have right to
mink scarfs selling for impose new or arbitrary conditions not contained in the
$89.50...each $1. Black Lapin published offer. Objective rule applies to your
Stole, worth $139.50...$1.” representations (what you thought in your head doesn’t
P first in line at store on both matter; manifestations do.)
Saturdays. D refused to sell to
him b/c of “house rule” that sales Damages? Exp. for lapin stole = $139.50-$1.
only be to women. But for fur coats, not sure, b/c says “to $100” – don’t know
exact value. That’s why ct says the first ad was too indefinite
to create an offer.
Joseph Martin, Jr. 1-yr lease, renewable up to 5 yrs. Can tenant get s.p. No. Rule: An Cts can only enforce definite provisions of a K.
Delicatessen v. $500/mo for 1st yr, graduated up to compel landlord agreement to
Schumacher to $650/mo for 5th yr; “the tenant to extend lease at agree on a Neither party was bound to a formula by which to reach the
63 may renew for an add’l period of appraiser’s figure or material term in agreement in the future, e.g., “annual rentals w/in the range
5 yrs at annual rentals to be reasonable sum future negotiations of the fair market value” would be enforceable.
agreed upon;” tenant gave notice decided by ct? is unenforceable.
of desire to renew; landlord Old common law thinking: vagueness is evidence that parties
demanded $900/mo. didn’t want cts involved. Cts don’t know what to do anyway.
Incentive for parties to be clear.
UCC §2-204(3): K for sale doesn’t fail for indefiniteness

even though 1 or more terms are left open.
UCC §2-305: Can leave price blank; ct will look to market
price.
- 20 -
Empro Mfg. Co. P wants ct to enforce letter of Was the writing an No. Ct refuses to “Sliding scale” of bindingness:
v. Ball-Co Mfg., intent as binding agreement. P enforceable K? enforce the sale. - letter of intent
Inc. left itself lots of escape clauses, - option K
64 but D ended up pulling out of - regular K
deal. Easterbrook doesn’t buy the argument that it was an
[enforceable] option K.
Misunderstanding
Raffles v. Agreement to buy cotton from D (buyer) argues no Ct agrees. Subjective standard. Isn’t this bad? Maybe if we say the K
Whichelhaus “Peerless” (ship) – but 11 boats K b/c no meeting of was too ambiguous, so not going to enforce it at all.
64 w/that name. 1st Peerless left in the minds. Is that
Oct. 2nd one left in Dec. Buyer right? Actually, it’s a misunderstanding case – parties attach
says, I meant Oct. Peerless. different meanings to same words.
Seller says, I meant Dec.
Flower City K to paint units. Sub says only Who’s right? Can ct. Would expect ct to No meeting of the minds. Maybe ct went easy on sub since it
Painting interior. General says int. and enforce according to agree w/general. was new to the business (unsophisticated).
Contractors v. exterior – consistent w/trade trade usage? But instead says
Gumina Constr. usage. no K Misunderstanding again.
Co.
65
CONTROL OVER CONTRACT FORMATION

Cobaugh v. Klick- Unilateral K: performance is Was this a unilateral Was enforceable C gave up legal right to not hit a hole-in-one. That’s
Lewis, Inc. hole-in-one, promise is give free K (was there unilateral K – sufficient consideration. The promise of the car motivated
66 car. K-L doesn’t want to give car, consideration) or since C. the detriment, the forbearance of right.
arguing no consideration and contingent gift (no performed, K-L Also, reasonable person wouldn’t have known that the
wrong tournament. con- must fulfill promise was for a different tournament. Objective standard –
sideration)? promise. only manifested intent matters.
Allied Steel & F hired A for construction in F’s What constitutes Full performance Ct holds that the offer was not clear about the means of
Conveyers, Inc. v. plant. Initial purchase order K acceptance of the of the service and acceptance.
Ford Motor Co. had narrow indemnity provision. offer (the purchase order Ks Although offeror is master of the offer, the offer must be
66 Then amended to include broad amendment on both sides. A is clear about the means of acceptance. If it’s unclear, the
indemnity provision. But before containing broad bound by the offeree has the choice to accept in any reasonable way.
A returned the acknowledgement indemnity amendment b/c its
(specified manner of acceptance), provision)? performance was
injury occurred. A says not liable acceptance.
since provision not in force at the
time.
- 21 -
Davis v. Jacoby Rupert Whitehead lost lots of What kind of K was Whitehead’s letter Promise exchanged for a promise. “So if you can come, Caro
67 money. Has niece Caro, raised as it – unilateral or was an offer to will inherit everything.”
daughter. Asked her and husband bilateral? enter into a Ct grants s.p. Caro and husband win.
Frank to come save him; bilateral K, which
promised they would receive all was accepted by Restatement says that the preferred interpretation for when
his wealth. They accepted, but Caro and husband unclear whether unilateral or bilateral K is that it’s a bilateral
didn’t come before he killed by letter before K since it immediately and fully protects both parties.
himself. He had willed Rupert’s death. Presumption in favor of bilateral.
everything to nephews.
Also, facts of case point towards presumption that Whitehead
meant bilateral, since the K would have required Caro to be
there until Mrs. Whitehead’s death; if Mr. Whitehead died
first, he would have to rely on Caro’s promise to stay until
his wife died.
Methods of Termination of the Power of Acceptance
Petterson v. Offer: if you pay mortgage by Was there a K? No – offer was to Since offeror withdrew the offer before the offeree accepted
Pattberg certain time, I’ll give you a enter into a by performance, the offer never became a binding promise
67 discount. Debtor shows up unilateral K. and no K was ever made.
w/money in hand, creditor tells Promise only
him that he already sold becomes binding
mortgage to someone else. when performance
is made.
PRECONTRACTUAL OBLIGATION

Dickinson v. June 10, seller makes offer, open Can offeree No. When offeree learns of sale of land to someone else, this
Dodds til June 12. successfully sue knowledge is constructive notice of seller’s revocation.
69 June 11, seller sells to someone seller for breach of
else. Offeree learns of it. K? Even the statement/promise of availability for a certain
June 12, offeree accepts. period does not prevent seller from revoking offer before
acceptance.
Thomason v. D withdrew offer to sell land S.p. appropriate? Yes. Even though no evidence of $1 payment, no consideration
Bescher before deadline for payment by P. required for K under seal. Jury found P able & willing to pay
69 D argues it was an option K full amt at all times.
which was withdrawn before P’s As soon as P accepted and offered to perform by the
performance and therefore not deadline, option became a bilateral K.
enforceable.
- 22 -
James Baird Co. v. 12/24: D (sub) sent offer to P P sues based on No K; p.e. N/A. Offeror (D) provided for acceptance only after the awarding
Gimbel Bros. (J. (general) based on incorrect promissory estoppel. of the general K. Since offer was revoked prior to award, no
Hand) estimate of linoleum cost. D denies existence acceptance possible.
70 12/28: P received letter, made bid of a K, and thus also
to Dept. of Hwys; D telegraphed existence of a P.e. N/A b/c “an offer for an exchange is not meant to
notice of w/drawal promise on which P become a promise until a consideration has been received.”
12/30: Dept. accepts P’s bid could rely. Offer + acceptance = promise. W/o the acceptance can’t
12/31: P receives D’s argue p.e.
confirmation of w/drawal
1/2: P formally accepts D’s offer. This was a regular offer to enter into a bilateral K. Offer
could only be accepted after awarding of general K. Since
offer revoked before that, no more offer to accept.
Not an option K b/c it requires parties to be explicit that it is

an option K.
Drennan v. Star D (sub) bid $7131 for paving. P Was D’s offer Yes – D knew that Restatement §87(2), Option K: an offer which offeror should
Paving Co. (J. (general) relied on it to make its binding? general would rely reasonably expect to induce action by offeree before
Traynor) bid. Won the K. Then sub on its bid to make acceptance and does induce the action is binding as an option
71 demanded $15,000 to do job. own bid. K to extent necessary to avoid injustice.
Doesn’t require consideration.
Traynor assumes that offer is irrevocable unless explicitly
said to be revocable, b/c you cannot reasonably rely upon an
offer which you know to be revocable.
Opposite from Hand assumption of revocability.
Ragosta v. Wilder Promise to sell property if buyers Was trial ct’s award Yes. Buyers had not begun performance. Financing was only
73 showed up by certain date for s.p. erroneous? preparation for performance.
w/money, provided not sold to
someone else by that time.
Buyers arranged financing and
incurred costs. D revoked offer.
Hoffman v. Red P had $18,000 to open Red Owl Can P recover on No K, so §87(2) Terms not specific enough for there to be a K.
Owl Stores, Inc. franchise. D said that was enough breach of K or p.e.? [option K,
73 $. P did everything D told him to reasonable Damages awarded based on expansive reading of promissory
do to prepare – sold old business, reliance induced] estoppel.
relocated, worked at a Red Owl does not apply.
for training. D raised price Recovery based Forrer v. Sears cites this case, and decides the other way.
incrementally to $34,000. on p.e. Might have been scared about how far this case went in
applying p.e. b/c there was no bargain resulting in a K.
Skycom Corp. v. P alleges agreement; D wins on Can P get damages Ct. of Appeals “A promise that is designed to induce commercially
Telstar Corp. s.j. b/c no K. based on p.e.? reverses. reasonable detrimental reliance will be enforced to
74 compensate the relying party for his injury in relying...
[Hoffman v. Red Owl].”
- 23 -
CONDUCT CONCLUDING A BARGAIN

Mirror-image rule (common law)
Livingstone v. D’s Offer: $1800 Was there a K even Yes – D re-opened Common law mirror image rule: P’s reply did not match D’s
Evans P’s Reply: Send lowest cash though P counter- offer in his reply offer, which is why it was a counter-offer. Had D not re-
74 price. Will give $1600 cash. offered? to the counter- opened offer by replying, “cannot reduce price,” and instead
D’s Reply: Cannot reduce price. offer. just replied, “I reject your counter-offer,” then there would be
D enters into K w/someone else. no K.
P accepts original offer.
Exchange of printed forms (“battle of the forms”) – change in mirror-image rule of offer and acceptance
Idaho Power v. W’s price quotation form: Can IP recover No – W’s form See UCC §2-207, Add’l terms in Acceptance or
Westinghouse limitation of liability, integration damages from fire limited its Confirmation, which converts the counteroffer into an
Electric Corp. of merger clause caused by liability, and IP’s acceptance despite add’l or different terms (mirror-image rule
75 IP’s purchase order form: equipment failure? integration of doesn’t apply).
integration of merger clause – merger clause
“supersedes all previous does not operate P’s form did not specifically contest D’s disclaimer. So ct
agreements.” to nullify W’s refuses to drop the disclaimer or supply the contested term.
disclaimer.
Shrinkwrap licenses – accept-or-return offer
ProCD, Inc. v. D purchased software; license Was shrinkwrap Yes, treated Offer: abide by license agreement; accept it by not returning
Zeidenberg inside the box, indicating that D license enforceable? exactly like product; reject it by returning. UCC §2-204(1) – offeror can
78 could return product if did not regular Ks. specify what constitutes acceptance.
accept terms, but by keeping Acceptance: D kept the software, used it, and thus accepted
product, D accepted terms. the offer, creating the K.
UCC §2-206 – buyer accepts goods when he fails to make an
effective rejection.
Hill v. Gateway P purchased computer over Were terms inside Yes – ProCD So long as terms are reasonable (not unconscionable), we
2000, Inc. phone; terms inside box; box enforceable? governs. will enforce them. Shrinkwrap licenses are enforceable –
80 arbitration clause; also an “accept subject to same rules as regular Ks.
or return w/in 30 days” clause
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Implied vs. express K
Morone v. Morone Unmarried couple living Whether a K as to No, yes. Express Ct refuses to imply a K from services by/between these
81 together; P (woman) has two earnings and assets K enforceable. people b/c assumption is that services are gratuitous based on
causes of action based on: may be implied in nature of relationship – pt of relationship is mutual
(1) Reliance arg/P.E. fact from couple enjoyment of co. Risk of fraud as well.
(2) Partnership agreement living together, and
Wants money for both. whether an express Ct holds that an express agreement b/t these people is
K is enforceable. enforceable b/c it’s an express K – immaterial what their
personal relationship is w.r.t. the K’s validity.
THE EFFECTS OF ADOPTING A WRITING

Parol evidence rule
Mitchill v. Lath M. made writing to buy L.’s Is the writing the K, The writing alone 3 conditions in order for oral agreement to vary a written K:
82 farm, who orally promised to tear the oral promise + is the K. 1) the oral agreement must be a collateral one
down ice house the writing the K, or Condition (3) not 2) it must not contradict express or implied provisions of the
are they two met. written K
separate Ks? 3) it must be one that parties would not ordinarily be
expected to embody in the writing
Hatley v. Stafford S. leased farm to H. for growing Proper for trial ct to Yes. The written For trial ct to be correct:
83 wheat. Condition: S. has right to allow H. to agreement 1) the agreement was not inconsistent w/the written
buy out H. for max. $70/acre to introduce evidence constituted a lease and
build mobile home park. S. of oral agreement partial integration, 2) it was “such an agreement as might naturally be
exercised right, but H. demanded that buy-out and it met made as a separate agreement by parties similarly
$400/acre = fair market value of provision would requirements of situated”
the wheat crop. H. forced to cut expire after 60 days? parol evidence
immature crop. admissibility rule. To be inconsistent, the oral term must contradict or negate an
express provision in the writing.
To not be naturally included, can consider many factors; here,
a literal reading would have led to unreasonable result – H.
would lose $330/acre.
Hayden v. Agreed to exchange properties; Was evidence of oral Yes. Alleged oral Legal effect of the K was “reasonable time” for performance;
Hoadley Ds promised in writing to make agreement properly agreement was if allow oral evidence, it would change the legal effect of the
86 certain repairs as part of excluded? about deadline K. This K is unequivocal and complete.
consideration for Ps’ conveyance. and repair details.
See Restatement §§209,213, 214, 216
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Luria Bros. & Co. K to sell scrap steel to P, who Was parol evidence Yes. D argued that D’s confirmation form said “this order constitutes the entire
v. Pielet Bros. sued upon D’s non-performance properly excluded as K was expressly agreement b/t the parties” – therefore UCC §2-202 is
Scrap Iron & and won; D offered oral inadmissible under conditional upon applicable:
Metal, Inc. agreement evidence UCC 2-202? being able to get Can never admit parol evidence which contradicts the terms
88 the scrap from of the written K.
supplier. Cannot admit parol evidence when the writing is intended to
be complete.
Promissory Fraud; Parol Evidence Rule
Lipsit v. Leonard Employment arrangement = P sues for breach of Alleged oral NY law allows parol evidence where P seeks rescission or
88 series of annual letter K by breaking oral promises restitution, as opposed to affirmation and enforcement.
agreements. P claims specific promises; also tort inadmissible
oral promises accompanied claim based on fraud under parol See p. 90 for more on tort action for promissory fraud.
writings, e.g., P would be given in the inducement. evidence rule.
equity interest in the business But fraud claim
improperly
dismissed.
Bank of America Ds offered to prove they signed Parol evidence No. Not admissible to prove a promise contradictory to the
Nat. Trust & Sav. promissory note after bank admissible? writing.
Ass’n v. promised them uninterrupted Only admissible where it relates to some independent fact,
Pendergrass operation of ranch for 1 yr. “some fraud in the procurement... or some breach of
90 confidence...”
Sabo v. Delman Parol evidence allowable here b/c P seeks to set aside
91 agreement on basis of fraud (as opposed to proving breach of
K or enforce promise)
Pacific Gas & K to replace metal cover of P’s Offered extrinsic Parol evidence Parol evidence offered was the admissions of P’s agents and
Elec. Co. v. G.W. turbine. Indemnity clause: D to evidence that parties should have been D’s conduct under similar Ks w/P.
Thomas Drayage perform “at own risk and intended the admitted. Trail ct’s plain language interpretation left K unambiguous to
& Rigging Co. expense” and to indemnify P indemnity clause judge; therefore any extrinsic evidence inadmissible (“four-
91 “against all loss, damage... only cover injury to corners” rule)
liability... in any way connected property of 3rd Application of this rule here denies relevance of parties’
w/this K.” parties and not to intentions.
P’s. K terms weren’t detailed enough. Extrinsic evidence
demonstrates intentions.
Spaulding v. Trust: beneficiary receives What happens if Literal v. Have to go w/intention of trust creator – did not intend that
Morse $1200/yr, then after entering beneficiary doesn’t purposive beneficiary keep receiving payments even if he didn’t go to
92 college, $2200/yr up to 4 yrs. go to college? interpretation college.
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STANDARDIZED FORMS

Allied Van Lines, Duty to read. Generally, you are bound by a K you
Inc. v. Bratton knowingly sign, and not having read it or not knowing about
93 it is not a defense.
Agricultural Ins. Bova parked car on D’s lot, Was the ticket a No. Not a K. Ticket was just a token. Bova did not expect that it’s a K.
Co. v. Constantine received a ticket releasing lot valid K? Just a claim ticket. No evidence of her assent.
93 from liability.
Sharon v. City of P, then 16, & father signed Was release valid? Yes. Valid Obvious that the document they signed was what the title
Newton Parental Consent, Release from release. said it was; they didn’t have to sign – could have rejected
93 Liability and Indemnity terms by not signing.
Agreement”
Mundy v. Former ins. policy: no limit for Did the renewal Yes. Adequate On jacket is table of contents w/notice at bottom in capital
Lumberman’s silverware loss. Current policy: policy provide notice. letters to read new policy; inside booklet, each change is set
Mut. Cas. Co. $1000 limit. P argues that ins. co. adequate notice of off from the others.
93 did not give adequate notice of change?
change.
Weisz v. Parke- Ps bought art at auction, but Auction house liable No. Disclaimer Disclaimer was clear and in front pages of catalog. Ps have
Bernet Galleries, forgeries. Disclaimer in auction to Ps? limited liability. duty to act w/caution in this situation, where artwork value
Inc. house catalog, “Conditions of depends on authenticity.
94 Sale”
Henningsen v. 10 days after buying new car, Was disclaimer on No. Would be a Factors ct considers to strike down K:
Bloomfield steering wheel spun out of sales K which violation of public Unequal bargaining power
Motors, Inc. control; car totaled. Wife sued for limited liability policy to enforce Confusing
94 personal injuries; husband for enforceable? the K. Unfair
consequential losses, alleging Not obvious that there were warranty conditions
breach of implied warranty of Lack of sophistication
merchantability.
Richards v. P wants to ride w/husband Is exculpatory K No – it is void as Evaluative considerations:
Richards trucker; signed “Passenger enforceable? against public - whether it violates public policy
96 Authorization” – 2 purposes: co. policy. - as construed strictly against the party seeking to rely
authorization and passenger’s on it (here, the co.)
general release of all claims. Pub pol of imposing liability on persons whose conduct
creates an unreasonable risk of harm outweighs the pub pol
of freedom of K.
See p. 96 for details of why this exculpatory K is void.
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CHAPTER 4: POLICING THE BARGAIN
COMPETENCY TO CONTRACT

Minors
Halbman v. Minor H. bought car from L. Does minor have to No. When a minor Doctrine of incapacity/”infancy doctrine:” absolute right of a
Lemke Total price $1250. H. paid $1000, make restitution to disaffirms a K, minor to disaffirm a K for the purchase of items which are
97 took car; would pay balance in vendor for damage only has to offer not necessities. Minor entitled to recover all consideration,
$25/wk installments. Then L. to property prior to to return the and minor must restore as much of consideration received as
would transfer title. 5 wks after disaffirmance, the property. remains in his possession.
agreement, engine broke; H. got item not being a
it fixed but didn’t pay bill. L. necessity and having Purpose: protect minors from own improvidence and from
transferred title to avoid liability. been returned? crafty adults.
H. returned title to L. and
disaffirmed K.
Olson v. Veum Minor and adult brother Can minor disaffirm Yes. Cited in Halbman to illustrate difference b/t using infancy as
98 purchased farm tools; abandoned even if cannot make a shield and a sword.
farming prior to payment; minor restitution?
disaffirmed.
Webster Street 2 minors rented apt. Disaffirmed Can minors get rent Yes – can Apt. not a necessary b/c both minors voluntarily left home.
Partnership v. lease, sought return of rent money back? disaffirm b/c here, Landlords may refuse to K w/infants to protect themselves;
Sheridan payments. apt. was not a also encourages infants to return home, which is good.
99 “necessary”
Mental Competence
Otelere v. 60 yr-old teacher diagnosed Was she mentally Yes. Her choice not rational based on the facts – she had
Teachers’ w/involutional melancholia; incompetent so as to originally (10 yrs earlier) filed to take smaller allowances
Retirement Bd. applied for retirement, wanted all void the application? during lifetime, leaving reserve to husband (happily married).
99 benefits paid “w/o option” – He gave up $222/wk job to stay home w/her when she was
max. payments made for life, no depressed.
reserve after death
But if he quit job, wouldn’t they need more money? Not
necessarily a crazy transaction.
Farnum v. Silvano 94 yr-old conveyed house to 24 Was she mentally No. Entering into a K requires parties to fully understand what
99 yr-old landscaper for 1/2 market competent at time of they are agreeing to do and the consequences of that
value; she had lucid intervals but conveyance? agreement.
usually confused
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Odorizzi v. P teacher arrested on crim Was resignation Yes – sufficient Undue influence: coercive persuasion, overcomes the will
Bloomfield charges of homosexual activity; invalid? elements to justify w/o convincing the judgment, high pressure working on
School Dist. superintendent of sch dist and rescission of mental/emotional weakness; victim is unduly susceptible
101 principal came to his apt, consent b/c of and/or person(s) exerting influence in dominant role,
encouraged him to resign, no undue influence. mismatch resulting in unfair advantage.
time to consult lawyer, said they
were helping him
Von Hake v. 82 yr-old P distressed over Was there a No. Typical fraud case. No confidential relationship – no long-
Thomas foreclosure sale of ranch; D confidential standing relationship of trust, no substitution of will, no
102 induced him to believe that he relationship b/t the fiduciary duty.
wanted to save the ranch; gained parties?
P’s trust
REVISIONS OF CONTRACTUAL DUTY

Austin Instrument, L. K’d w/Navy to produce radar Can L. recover for No. Ct affirmed K voidable on ground of duress when party est. that it was
Inc. v. Loral Corp. sets. L. awarded subK to A. to aggregate price A.’s award for forced to agree to K by means of a wrongful threat
102 supply 23 components. Then L. increases it paid to balance on 2nd precluding the exercise of his free will.
won another K from Navy. A. A. on ground of subK. Economic L. needed to prove that it could not get the goods from
wanted subK for all 40 economic duress? duress not proven someone else, and that the ordinary remedy for breach is
components; threatened to stop by L. inadequate.
delivery on 1st subK if not
awarded 2nd + be paid higher
prices. A. stopped delivery. L.
couldn’t find anyone else to
substitute in time for its Navy
deadline.
Smithwick v. K to buy land for $35/acre. P Is K void on ground No. P paid money voluntarily. “Duress exists only where the
Whitley possessed and improved it for 3 of duress? unlawful act of another has deprived one of free will.”
103 yrs. D refused to close the deal;
offered to sell for $50.
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Alaska Packers’ Fishermen hired to go to Alaska; Are amendments to No. Pre-existing Fishermen would get paid more even through they didn’t
Assn’ v. payment was $50 for the season Ks enforceable? duty rule. promise to do more. Pre-existing duty doctrine is an
Domenico and 2 cents for each salmon application of the consideration doctrine. It’s an alternative
104 caught. After unloading vessel, invocation to the duress doctrine.
fishermen stopped working,
demanded $100 each and unless “hold up” – demand almost as much money as employer
paid, would return to S.F. would lose if they don’t work at all.
Impossible to get replacements,
so gave in. See p. 105 for distinguishing bad kind of K modification
from the good kind.
Schwartzreich v. Original K - $90/wk salary; new P fired after one mo. Yes. P testified that he received offer for $110/wk from someone
Bauman-Basch, K - $100/wk wage; both Ks for 1 Can he recover? else, and D offered $100 to make him stay. D testified that it
Inc. yr was too late to get replacement if P left, so offered $100.
106 Can make new K in which promises are consideration for
each other. I promise to stay if you promise to pay me more.
Brian Constr. & P general hired D sub to perform New K void? No. B/c of unforeseen burden, pre-existing duty rule doesn’t
Dev. Co. v. excavation work; D discovered apply. Sub was doing more work for more money.
Brighenti considerable rubble underground,
106 requiring excavation depth
beyond plans, not covered by K
Universal “No oral modification clause” – Can P recover Yes. K provision Unless K for sale of goods, K can be changed through oral
Builders, Inc. v. all change orders must be in expenses for the need not be agreement even if there’s no oral modification clause.
Moon Motor writing and signed by D and/or extras D’s agent enforced. Condition is considered waived when enforcement would
Lodge, Inc. Architect requested? result in something approaching fraud.
107
Hackley v. K1: Headley to cut & deliver Headley claims Headley accepted Don’t want to discourage people from making Ks w/people
Headley logs, to be scaled by person $6200 according to the $4000 bc who are or seem to be in financial distress.
108 selected by Hackley. Scribner scale, needed money; Cts want parties to settle their disputes on their own;
K2: After Headley sued Hackley, Hackley only gave can he now uncomfortable w/deciding what the price should be.
Headley released all claims for $4000, which was recover balance
$4000, but now claims duress. according to Doyle on ground of
scale duress? No.
Marton “Time and materials” K to Can he recover No. Cashing check constituted an accord and satisfaction that
Remodeling v. remodel house; refused check for $1500 balance after could not be altered by words added.
Jensen $1500 less than bill. But then cashing the check?
109 cashed it after writing “not full
payment.”
Denney v. Reppert Several claimants for reward for Who can claim 3 employees of robbed bank: no, they have duty
110 arrest of bank robbers. reward? 4 of general public: no, didn’t follow procedure
3 state policemen: 2 on duty, no. 1 off duty, yes
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Board of Everett Bible wanted for murder Who gets reward for Johnson and Officers not obligated to arrest fugitives from other states.
Comm’rs of in KS. Didn’t pay after eating in Bible’s arrest? police officers Had they not stopped fight, Bible probably would’ve shot
Montgomery Johnson’s diner in OK. Chased split it equally. Johnson.
County v. Johnson him, fired shots at each other. 3 Had Johnson not tackled him, officers wouldn’t have noticed
111 officers broke it up. him.
In re Estate of 64 yr-old widow made oral Can Lord compel No. Void as against public policy. Want to discourage people
Lord v. Lord promise to Lord that if he estate to fulfill from marrying for money. Caring for spouse is already a duty
111 married her and cared for her, she promise? – can’t K for it.
would leave him her entire estate.
MISTAKE, MISREPRESENTATION, WARRANTY, AND NONDISCLOSURE

Mistake
Jackson v. Lucy conveyed land she was Was there Yes. Constructive Elements arising out of constructive fraud:
Seymour unfamiliar w/to her brother for constructive fraud, fraud. - confidential, close relationship; D owes P a duty
111 $275. 2 1/2 yrs later, found out entitling P to - gross inadequacy in price
land had up to $5000 worth of equitable relief? - D’s admission that had he known about timber,
timber; brother had already cut would’ve paid more
and sold it at unknown price.
Sherwood v. Parties agreed on price for cow Can K be rescinded Yes. Mutual The mistake regarding the cow was material as to its
Walker based on belief she was barren. on ground of mutual mistake – wrong substance – a breeding cow is substantively different from a
112 Turns out she wasn’t; D refused mistake? about state of barren cow.
to sell. world. They bargained for and intended for sale of a barren cow.
Cannot deliver a breeding cow b/c different in substance.
Smith v. Zimbalist D bought “this Stradivarius” and Can K be rescinded Yes. Not only a mutual mistake.
113 “this Guarnerius” from violin on ground of mutual There was also warranty in bill of sale that goods would
collector. Price - $8000. mistake? correspond to the description.
Imitations, worth $300.
Gartner v. Eitkill K for sale of land. Parties thought Is D entitled to Yes. Reliance was P told D it was suitable for commercial use; D relied instead
113 it could be developed, but zoning rescission even reasonable. of checking at City Hall. D had no duty to inquire further.
restrictions. though he’s Since there was mutual mistake of fact, K can be rescinded.
sophisticated party?
Elsinore Union D bid on K using sum of subs’ Can D get rescission Yes, b/c it was Clerical error = tallying up numbers incorrectly
Elementary bids. Made clerical error. Didn’t of K even though it clerical error, not Error in judgment = wrong guess or judgment abt costs or
School Dist. v. realize it until next morning, after was unilateral, not error in judgment. length of time needed to do job
Kastorff he was awarded K. mutual mistake? Cts generally allow rescission due to unilateral mistakes
114 when mistake is clerical error.
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The Warranty Alternative (to Mistake)
Tribe v. Peterson Everyone w/prior experience Did sellers make an This was just an Description of horse was just a well-founded opinion. No
115 w/horse found him to be calm assertion or state an opinion. Does not misrepresentation abt horse’s disposition.
and gentle. Buyer alleges “no- opinion? constitute an An express warranty is created by any affirmation of fact
buck guarantee” – sues for express warranty. which buyer relies upon to make decision to purchase.
breach of express warranty when Seller did not give a warranty as to horse’s future behavior; at
horse throws him and wife. most, gave warranty as to its past behavior.
UCC §2-313.
Hinson v. Deed restricted use of land to Can buyer get Yes – seller Where a deed explicitly restricts use of land, there is implied
Jefferson residential purposes; turned out rescission and breached implied warranty that the land can be used w/in the restriction.
117 that land could not support restitution? warranty. *Most cts have not followed Hinson for implied warranty.
sewage system required for See UCC §2-314, Implied Warranty; only applicable to sale
residential building. of goods, not land.
Warranty and Misrepresentation
Johnson v. Healy Negotiations for sale of new Can P get damages Damages for Can now invoke breach of warranties in real estate K actions.
118 house – D said that house made or only rescission breach of express
of best material, nothing wrong for negligent and implied Calc of damages: trial ct awarded cost of repairs so far
w/it. P purchased; 3 yrs later, misrepresentation? warranties. No ($5000). Incorrect. Damages for breach of warranty is to put
foundation walls cracked, longer caveat P in position he would have been in had the house been as
causing damage. Alleges emptor rule for warranted. But damages limited to cost of diminution in
misrepresentation & negligence. sale of new homes value of house if cost of fixing exceeds value of entire house.
Nondisclosure and Concealment
Cushman v. Kirby Mrs. Kirby told Ps that “water Were there Yes. Sellers owed duty to make full disclosure upon being asked.
120 conditioner” apparatus made actionable Mrs. Kirby represented that she had full information but
water “good, fine, a little hard, misrepresentations disclosed only part of it. Mr. Kirby’s silence constituted
but system takes care of it.” Mr. made by the Kirbys? misrep b/c he had affirmative duty to speak.
Kirby silent. Ps bought house. Remember: buyer must have relied on misrep in order to get
Sued for misrepresentation when rescission.
found that water was sulfuric.
Restatement §161 applies to both buyer and seller.
Eytan v. Bach Buyers thought paintings were Can buyers recover No. Dealer had no Buyers expected paintings to be far more valuable than the
121 originals but didn’t ask seller. on ground of fraud duty to disclose. price they paid, when they found out they were wrong and
Paid a little less than what they or the paintings were worth only a little more than price, cannot
were worth. misrepresentation? sue for not getting a better bargain. Seller didn’t lie.
No misrep b/c the prices speak for themselves?
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CHANGED CIRCUMSTANCES JUSTIFYING NONPERFORMANCE

Taylor v. Caldwell Ds rented Surrey Gardens and Do Ds have to pay No. There was an Performance was “personal” – basic assumption of the K was
122 Music Hall to P for 4 days. for Ps’ lost profits in implied condition. the continued existence of the Music Hall. This was implied
Before 1st concert, burned down. breach of K action? condition, the nonoccurrence of which excused both parties
from performance under the K.
Tompkins v. K to build schoolhouse by Oct. 1. Did builder fulfill K No. Hadn’t yet Fire not a legal justification for nonperformance. Should
Dudley Wasn’t finished yet when it at time of fire? handed over in have included a force majeure or acts of God condition of
123 burned down Oct. 5. finished condition. liability in the K.
Carroll v. P to construct reinforced concrete Can P recover in Yes, if D benefited When labor and materials have become attached to owner’s
Bowersock floor in D’s warehouse. Began quantum meruit? from P’s labor and realty, owner has benefited.
124 work; warehouse burned down materials. How did this action come about? Both parties released from
w/o fault. obligation under the K b/c of implied condition of
warehouse’s existence. So contractor wants restitution for
conferring a benefit.
Olsson v. Moore P began renovation Can P recover in Yes. Ps’ work increased value of D’s property; therefore, D
125 (improvements) on house w/D’s quantum meruit for benefited. D also gave consent.
permission before closing of sale. improvements made
House burned down before on house? Like Seavey v. Drake – father-son farm case.
closing; D collected on ins.
policy, but it didn’t cover P’s
improvements.
Prevention by Government Regulation or Order (see Restatement §264)
Louisville & D R.R. recalled P’s lifetime pass, Can P get money Yes. RR cannot When there’s a lawful K which is later decreed unlawful by
Nashville R.R. which was originally given in damages for recall get something for the gov’t, the party who has received performance (here, the
Co. v. Crowe consideration for P’s conveyance of pass after statute nothing. RR) cannot keep it w/o paying for it.
126 of strip of land forbade such passes?
Impossibility and Impracticability
Kel Kim Corp. v. Lease required P to obtain public Can P get No – grounds of Problem does not fall w/in impossibility doctrine: not being
Central Markets, liability ins. policy for $500,000 declaratory impossibility and able to obtain insurance was foreseeable problem
Inc. to any single person and $1M in judgment to excuse force majeure not
126 aggregate. Liability insurance them from applicable At common law, force majeure clauses only excuse a party
crisis; P couldn’t get required complying w/ins. when they specifically include the event; the clause in this K
coverage for over 1 yr. provision? required that the cause be the same in kind and nature as the
enumerated causes. It wasn’t.
Bunge Corp. v. Farmer to sell dealer 10,000 Is farmer excused No. Act of God Goods weren’t identified in the K as those that were
Recker bushels of soybeans; severe from performance? defense doesn’t destroyed. UCC §2-613 only applies when goods are
128 winter weather destroyed crop apply here. identified. Farmer had to deliver any 10,000 bushels.
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American Trading Charterer hired tank owner to Can owner recover No. Add’l expense Suez was the probable route, not required. Cape was well-
& Prod. Corp. v. transport oil from TX to Bombay. based on was neither recognized alternate route. Add’l expense less than 1/3 K
Shell Int’l Marine, Price based on weight and cost of impossibility and extreme nor price.
Ltd. passage through Suez Canal. It quantum meruit? unreasonable.
129 closed. Owner had to go via Cape How much add’l expense constitutes “extreme and
of Good Hope. Wants extra unreasonable?”
compensation for extra mileage. UCC §2-615, cmt. 4 states that the rise in cost must “alter the
essential nature of the performance”
Frustration
Krell v. Henry D rented flat to view coronation Can D recover? Yes, there was Taylor v. Caldwell implied condition rule. Ceremony taking
130 processions; event was cancelled; implied condition. place was the condition.
wants money back 3-part test for frustration:
What was the foundation of the K?
Was performance prevented?
Was the event preventing performance reasonably
foreseeable?
Lloyd v. Murphy Car dealership lease allowed for Can D invoke No. D failed to Frustration test: whether unanticipated circumstance, the risk
131 new auto sales and limited used frustration doctrine prove that the of which should not be fairly thrown on the promisor, has
auto sales, plus repair shop/gas to excuse parties value of the lease made performance vitally different from what was reasonably
station. Fed gov’t ordered new from lease was destroyed. to be expected.
car sales discontinued except for agreement? (1) But war and its consequences were reasonably
narrow class of people. D foreseeable at time of K. (2) New car sales were only
repudiated on ground of restricted, not made impossible or illegal. (3) D was able to
commercial frustration. sell new autos at other locations.
Chase Precast Supplier K’d w/general to Can supplier recover No. Frustration Test: event cannot be foreseeable, nor can the risk have been
Corp. v. John J. provide concrete median barriers anticipated profits? excuses both of the kind tacitly assigned to the promisor.
Paonessa Co. for hwy project. After producing parties. General’s K w/Dept. of Hwys had std provision allowing
132 1/2 the barriers, general told Dept. to eliminate items found unnecessary. Supplier knew
supplier to stop, paid it for all the abt this provision and that it also prohibited claims for
barriers it had already produced. anticipated profit.
UNCONSCIONABLE INEQUALITY

Woollums v. Woolums: 60 yr-old uneducated, Horsley won s.p. in No. Facts point Grossly inadequate purchase price can only mean that W. was
Horsley unsophisticated in business, trial ct; W.’s main towards gross misled and acted under gross misapprehension.
134 unable to work, conveyed all defense – undue misapprehension. [Proof of misrepresentation: agent told W. that nothing would
minerals, oils, gases, mining advantage. Should happen to increase value of land, when in fact H. knew that
privileges for 40 cents/acre ($80) s.p. be enforced on R.R. may want to build on it]
to very experienced businessman. appeal? K not equitable or reasonable or grounded upon sufficient
Land worth $15/acre, or $3000. consideration.
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Seymour v. Ellison to convey 2 farms to P in Should ct grant s.p. Yes. Disparity in Ellison was already owner of a 2/3 interest in the lots, so the
Delancy exchange for undivided 1/3 w/disparity in values values not value of the remaining 1/3 would be higher to him than to
137 interest in some lots. Farms and contradictory conclusive anyone else. Not a gross disparity if you take this into acct.
valued at avg. of $12,686; 1/3 evidence of Ellison’s evidence for
interest valued at $5000-6000 ability to do unconscionability.
(Ds’ witnesses) or $10,856 (P’s business at time of
witnesses). K?
Waters v. Min Ltd. P assigned her annuity policy Can K be rescinded Yes. Evidence of undue influence. Ds assumed no risk and P
137 having case value of $189,000 to on ground of gained no advantage. Gross disparity in the consideration:
Ds for $50,000. Lots of shady unconscionability? basically traded $189,000 cash for $50,000.
conduct on Ds’ side. UCC §2-302 and Restatement §208 – same stds to determine
unconscionability.
Case law: principle applied in testing –
whether performance could result in oppression and unfair
surprise b/c of superior bargaining power.
Williams v. Cross-collateral clause. Woman Is K void for Yes. Unconscion- “absence of meaningful choice” can mean gross inequality of
Walker-Thomas on welfare entered into credit K unconscionability? ability is absence bargaining power.
Furniture Co. w/store; paid on an installment of meaningful Usually there must be both procedural and substantive
139 plan – nothing paid off until choice for one objections to a K in order to constitute unconscionable
entire balance paid. Defaulted on party together clause:
stereo payment and store w/K terms Procedural element – K was confusing, surprising, obscurely
repossessed everything. unreasonably written, in fine print; she had no reason to believe that this
favorable to other was how the K would work. Evidence of absence of
party. meaningful choice – lack of info, lack of education, lack of
outlets to be able to make purchases
Substantive element – price too high? But don’t know
interest rate, so can’t tell.
*All cross collateral clauses are now illegal.*
As creditor, cannot collect more than you’re owed – law
against forfeiture.
Brower v. Ps claim arbitration clause is: Is the clause So substantively Procedural: no fine print, no high-pressured tactics, buyer has
Gateway 2000, invalid under UCC 2-207, unconscionable? unconscionable 30 days to reject terms and get purchase money back.
Inc. unconscionable under 2-302, and that ct decides that Substantive: Excessive cost is unreasonable – non-refundable
140 an unenforceable contract of absence of $2000 registration fee; deters customer from invoking the
adhesion. procedural process, leaving her w/no forum at all (since barred from
element doesn’t bringing lawsuit)
matter.
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Duty of Good Faith and Fair Dealing (Restatement §205)
Gianni Sport Ltd. June: D submitted purchase order Is agreement invalid Yes. Clause did Purpose of doctrine is to prevent oppression and unfair
v. Gantos, Inc. for women’s holiday clothing for on ground of not merely surprise. Case law est. two considerations:
142 delivery on Oct. 10 unconscionability of allocate risks (in (1) Relative bargaining power, relative economic
Clause: “Buyer reserves right to the cancellation which case it strength, and alt. sources of supply
terminate any or all of order w.r.t. clause? would not be (2) Substantive reasonableness of challenged term
Goods that have not been shipped unconscionable)
or which are not timely Nature of women’s fashion industry – changes all the time.
delivered.” Seller can’t just put holiday apparel back on shelf after last
Late Sept.: D cancelled; P agreed minute cancellation of a special order. P forced to absorb loss
to 50% price reduction if D or sell to D for lower price.
would accept goods Also, no evidence that clause was negotiable.
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CHAPTER 6: THE RIGHTS AND DUTIES OF NON-PARTIES
THIRD PARTY BENEFICIARIES

Creditor-beneficiary
Lawrence v. Fox H. loaned F. $300, told him he Does L. have cause Yes. 3rd party has Failure of consideration arg: S. Ct. held that a promise to pay
145 owed L. the money by the next of action against F. action against debt to 3rd party was valid consideration
day, asked F. to promise to pay L. for failing to pay party who
the $300 tomorrow in him next day? promised for his Privity arg: S. Ct. also held that where one person makes
consideration of H.’s loan to him benefit. Supreme promise to another for benefit of 3rd person, the 3rd person
today. Court said so. may maintain an action upon it.
No implied promise b/c only applicable to trusts arg: F’s

promise, supported by consideration, created a duty to pay L
as though H gave F the money for the purpose of paying L.
Donee-beneficiary
Seaver v. Ransom D’s wife was dying. He read her Can P recover from Yes, based on NY Types of cases where 3rd person may maintain an action
146 the will; she wanted to change it D for failing to rule applicable to against a promisor:
so that her niece, P, would get the make provision in Ks for benefit of 1) When there is pecuniary obligation running from the
house. Afraid she wouldn’t make his will for her? 3rd person. promise to the beneficiary
it in time to execute a revision. D 2) Where K is made for benefit of the wife, fiancée, or
promised he would provide for child of a party to the K
niece in his own will. 3) In public K cases, where municipality seeks to
protect inhabitants by covenants for their benefit
4) Where the promise runs directly to the beneficiary
although she does not furnish the consideration.
This is a situation of the last type – only P would be benefited
by performance and injured by breach.
Intended and Incidental Beneficiaries – Restatement §302
Pierce v. Nemours The intent to confer a benefit on a 3rd party beneficiary is to
Foundation be determined from the language of the K, and in the context
148 in which it was written.
Anderson v. Fox D’s lease required that he Was P an intended No. She’s an Intent to give P benefit of promised performance must be
Hill Village promptly remove ice & snow 3rd party beneficiary incidental clear and definite. Lease does not indicate that she or others
Homeowners from driveways and walkways. P of lease and thus beneficiary. like her were meant to be benefited by D’s promise.
Corp. slipped and fell on ice. entitled to damages
148 for her injury?
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H.R. Moch Co. v. D K’d w/city to provide adequate Can P maintain No. P is an City doesn’t have legal duty to supply inhabitants w/fire
Rensselaer Water water supply and pressure for fire action against D for incidental protection. Would be super-expensive liability for Ds to take
Co. hydrants; fire spread to P’s breach of K w/in beneficiary of the on. No indication in K that D intended to be answerable to
149 warehouse; inadequate water Lawrence v. Fox? K. indiv members of public.
pressure to put it out. Cardozo is worried about infinite expansion of liability.
ASSIGNMENT AND DELEGATION

Langel v. Betz K: P to sell land to H. H assigned Can P obtain s.p. of No. Ct applies Absent an express or implied promise to perform assignor’s
150 K to Benedict, who assigned it to a K for sale of land current rule, not duties, assignment of bilateral executory K does not create a
D. Assignment contains no against the assignee Restatement promise by assignee to perform the duties. Why? No privity
delegation to D of performance of the vendee? (§164/328) rule. b/t assignee and the vendor (here, D and P).
of assignor’s duties. D refused to None of the particular facts of the case imply a promise.
perform even after P granted
extension on D’s request. Restatement and UCC §2-210(4) takes opposite position:
delegation of duty is implied w/assignment of rights under a
bilateral executory K.
Revocability of Gratuitous Assignments (Restatement §332)
Cochran v. Taylor D gave Chenault option to buy Was the option Yes. - The option was not personal in its character, nor did D
152 certain property any time w/in assignable? rely on Chenault’s credit (P actually offered cash)
120 days; D revoked offer to sell; - Assignment not barred by any express terms; not
Chenault assigned all interest in forbidden by statute or public policy
agreement to P; P seeks s.p. - “this agreement is binding upon...assigns”
Basically a gratuitous transfer of an option. Fine as long as

it’s in writing and there’s some consideration (under seal, $1)
Macke Co. v. P purchased vending machine co. Were rights and Yes. Only exception (absent provision forbidding assignment &
Pizza of that D had prior Ks with. Ks duties assignable delegation) is if the K is for personal services or if the duties
Gaithersburg, Inc. were assigned to P. D attempted and delegable? have personal or unique characteristics.
154 to terminate Ks. P sued for Material difference b/t what D was getting from Virginia and
breach. what they could expect from P does not justify refusal to
recognize the assignment of the Ks. Quality of performance
would remain materially the same w/P.
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CHAPTER 5: THE MATURING AND BREACH OF CONTRACT DUTIES
THE EFFECTS OF EXPRESS CONDITIONS

Howard v. Federal Ins. policy required that damaged Was compliance by No. Doubt as to General legal policy opposed to forfeitures.
Crop Ins. Corp tobacco stalks not be plowed insureds w/this whether provision Ins. policies generally construed most strongly against the
156 under until after inspection by provision a created promise or insurer.
co.: “The tobacco stalks w.r.t. condition precedent condition precedent. Restatement §261: where it is doubtful whether words create
which a loss is claimed... shall to recovery, and thus When this happens, a promise or an express condition, they are interpreted as
not be destroyed until the Corp. result in a construed as creating a promise.
makes an inspection.” forfeiture? promise. Provision is not explicit. Therefore it’s a promise. Insurer
may recover damages resulting from P’s violation.
See p. 158 for other cases involving conditions.
Royal Globe Ins. Craven injured in car accident, Insurer seeks Ct declares insurer Established that notification was not prompt, as required by
Co. v. Craven didn’t give insurer formal notice declaration that it not liable to C b/c the policy. Craven had burden of proving that notification
158 of claim until >3 mos. after has no obligation to her notice was not was as prompt as possible – didn’t meet the burden.
released from hospital. Policy Craven under the timely. Ct wants to protect freedom of K.
requires timely notice. policy for this
accident.
Aetna Cas. & Sur. Claim against D for damages to Is Chubb discharged Not necessarily. 3 considerations:
Co. v. Murphy which P became subrogated. D from any further Depends on whether
159 failed to give Chubb notice for liability due to D’s it was materially 1) K provisions are part of a K of adhesion. Construe it in
over 2 yrs. after being served. failure to comply prejudiced by delay. favor of the insured.
Motion to implead Chubb as 3rd w/notice Burden of proof
party D filed and granted. Chubb requirements? shifts to insured. 2) Enforcement of notice provisions will operate as a
moved for SJ, alleging D’s forfeiture; must weigh insurer’s interest against loss of
noncompliance w/terms of policy coverage – if insurer can be protected by something short of
which required written notice as automatic enforcement of notice provision, then strict
soon as practicable. enforcement is unwarranted.
3) Forfeiture is not the only protection against prejudice

arising out of late notice. Would be like enforcing liquidated
damages clause when there are no damages.
But on this last point, burden of proof is on the insure b/c of

resemblance to unjust enrichment and restitution, where the
law allows a complainant to seek fair allocation of profit and
loss despite his won failure to comply w/K obligations.
Ct not as interested in freedom of K so much as preventing

objectionable or unfair loss.
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CHAPTER 1: REMEDIES FOR BREACH OF CONTRACT

THE GOALS OF CONTRACT DAMAGES

Case name Facts Issue Holding Reasoning

Under the Restatement, expectation interest = loss of value

Dissent – diminution in value damages takes benefit written

Case name Facts Issue Holding Reasoning

P didn’t tell D that crankshaft was required to keep mill

P couldn’t buy boiler from someone else by June 5. Special

RELIANCE AND RESTITUTION

Case name Facts Issue Holding Reasoning

Case name Facts Issue Holding Reasoning

Notes: limited liability provision is okay; liquidated damages

Case name Facts Issue Holding Reasoning

Case name Facts Issue Holding Reasoning

Against public policy to enforce oral promise w/o

EXCHANGE THROUGH BARGAIN

Case name Facts Issue Holding Reasoning

Case name Facts Issue Holding Reasoning

Case name Facts Issue Holding Reasoning

Possible problem: employer has incentive to hire and then

PROMISES OF LIMITED COMMITMENT

Case name Facts Issue Holding Reasoning

Case name Facts Issue Holding Reasoning

Cf. Keller v. Ybarru – seller offering grapes from certain

UCC §2-204(3): K for sale doesn’t fail for indefiniteness

CONTROL OVER CONTRACT FORMATION

Case name Facts Issue Holding Reasoning

Case name Facts Issue Holding Reasoning

Not an option K b/c it requires parties to be explicit that it is

Case name Facts Issue Holding Reasoning

THE EFFECTS OF ADOPTING A WRITING

Case name Facts Issue Holding Reasoning

Case name Facts Issue Holding Reasoning

Case name Facts Issue Holding Reasoning

REVISIONS OF CONTRACTUAL DUTY

Case name Facts Issue Holding Reasoning

MISTAKE, MISREPRESENTATION, WARRANTY, AND NONDISCLOSURE

Case name Facts Issue Holding Reasoning

Case name Facts Issue Holding Reasoning

Case name Facts Issue Holding Reasoning

Case name Facts Issue Holding Reasoning

No implied promise b/c only applicable to trusts arg: F’s

ASSIGNMENT AND DELEGATION

Case name Facts Issue Holding Reasoning

Basically a gratuitous transfer of an option. Fine as long as

Case name Facts Issue Holding Reasoning

3) Forfeiture is not the only protection against prejudice

But on this last point, burden of proof is on the insure b/c of

Ct not as interested in freedom of K so much as preventing

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