KorRiee G

Outline
Contracts: A contract is a promise or set of promises that the law will enforce.
- Common Law are written opinions of judges in decided cases that applies to services.
- UCC is a body of laws that governs commercial transactions that applies to the sale of
goods.

I. Mutual Assent is needed to form a contract between parties. Pg. 49

A. The Manifestation of Mutual Assent is when a party either make a promise or
begin or render a performance. (Meaning you need an offer and acceptance) See
Second Restatement of Contracts 18
 Lucy v. Zehmer
 Gleason v. Freeman

B. The Objective Theory of Contracts Formation is used by the court to

determine if someone is reasonable and deciding whether or not the parties
assented to be bound. The objective theory of assent has two components: See Pg.
52
1. Would a reasonable person in the position of the promise understand from the
promisor’s words and conduct an intent to be bound.
2. Did the promisee in fact so believe.
 Leonard v. Pepsico

II. Offer is the manifestation of willingness to enter into a bargain, so made as to justify
another person in the understanding that his assent to that bargain is invited and will
conclude it. See Second Restatement of Contracts 24, Pg. 69

An offer must be definite and certain. To be capable of being converted into a

contract of sale by an acceptance, it must be made under circumstances evidencing
an express or implied intention that its acceptance shall constitute a binding contract.
See Pg. 78
 Maryland Supreme Corp. v. Blake Co.: The court found the offer for
the sale of concrete to be definite and certain.

A. A Manifestation of Willingness to enter into a bargain is not an offer if the

person to whom it is addressed knows or has reason to know that the person
making it does not intend to conclude a bargain until he has made a further
manifestation of assent. See First Restatement of Contracts 25, Pg. 73
 Lonergan v. Scolnick: Scolnick intended to find out whether
Lonergan was interested and not to make a definite offer. The April 8
letter was notice that Scolnick had to make some further expression of
assent. Court found that no contract was entered between parties.

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B. An Advertisement is an invitation to an offer. Common law’s general rule that
advertisements of goods by display, sign, handbill, newspaper, radio or television
are not ordinarily intended or understood as offers to sell. It is not an offer
because of potential of over acceptance. More people would accept the offer than
the inventory you might have. An advertisement for a reward can be an offer
because the offeror would have control of the inventory and want they produce.
 Leonard v. Pepsico – The Jet was included in the commercial as a
joke and was not sufficient or clear.
 Sateriale v. R.J. Reynolds Tobacco Company: Advertisements for
rewards can constitute offers. RJR cancelled the Camel Cash, stopped
printing catalogs, and told participants that there was no merchandise
left. RJR had control of how many C-Notes they produced and
potential acceptances.

C. Termination of Offer happens before acceptance. See Pg. 95-97, 103, 107, 109.
There are four ways to “kill” or, more delicately put, to terminate an offer:
1. Rejection – Offeree says no (express/implicit)
2. Revocation – Offeror terminates own offer/takes back offer. Revocation can
be? Direct or Indirect. Direct is directly letting the person know they no
longer want to give the offer. Indirect would be they make an offer to
someone else without directly telling you.
3. Lapse – inaction by the offeree you don’t accept in a reasonable time period.
(facts/circumstances)
4. Death/Lack of Capacity – Either party dies there is no contact/Either party is
mentally incompetent
 Dickinson v. Dodds: Dodds revoked his offer to sell property to
Dickinson by expressing intent to sell instead to Allen.
 Minnesota Linseed Oil Co. v. Collier White Lead Co.: Defendant
acceptance of the offer was not in a reasonable time since in that
industry prices fluctuate.
 Beal v. Beal: Carlton brought suit for specific performance. The last
option agreement was not supported my consideration. Calvin died
and Cecilia took over the property and Carlton tried to exercise the
option.

D. Irrevocable Offer (Preserving the Offer) is an offer that is open for a specified
time through an option agreement and is not able to be changed. See Pg. 109, 110

E. An Option Contract is a promise which meets the requirements for the

formation of a contract and limits the promisor’s power to revoke an offer. In
other words, an option is an agreement to keep an offer open that requires
consideration to give it its irrevocable character. It must be supported by
consideration to prevent the defendant from asserting his withdrawal before
plaintiff acceptance and before the expiration of the time fixed in the option
within which acceptance could be made. If the option is not enforceable you only
have the offer. See Second Restatement of Contracts 25, Pg. 112, 119

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  Beal v. Beal: Carlton brought suit for specific performance. The last
option agreement was not supported my consideration. Calvin died
and Cecilia took over the property and Carlton tried to exercise the
option.
 Board of Control of Eastern Michigan University v. Burgess: The 60-
day option agreement to sale Burgess house to the University lacked
consideration. The consideration of one dollar was never provided.

F. Firm Offer Rule UCC 2-205 is if a merchant makes an offer it is written and
signed, even if no consideration the option is irrevocable, and it is no longer than
three months. When a merchant makes such a promise he understands and
intends for it to be binding, and such offers are so understood in the marketplace.
See UCC 2-205, Pg. 119

G. A Counteroffer is a rejection of an offer and introduction of a new offer.

III. Acceptance of an offer is a manifestation of assent to the terms thereof made by the
offeree in a manner invited or required by the offer. See Second Restatement of
Contracts 50, Pg. 121

A. Manner of Acceptance is when the offeree takes certain steps in order to have a
binding contract. An offeror has complete control over an offer and may condition
acceptance to the terms of the offer.
 La Salle National Bank v. Vega: The contract between parties is not
enforceable because it was not accepted according to the requires
terms of the rider. An offer to form a contract may only be accepted
according to the terms of the offer.
 Ever-Tite Roofing Corp. v. Green – This was a bilateral contract and
the court determine that the credit check was the commencement of
the work, this there was an acceptance.
 IF UCC then 2-206 (a) an offer to make a contract shall be construed
as inviting acceptance in any manner and by any medium reasonable
in the circumstances;

B. Bilateral Contract is a promise for a promise or a performance. If it is a promise

for a promise would it be reasonable for a person to expect that person would
uphold the promise. See Pg. 131
1. Can accept by promise or performance (If you can accept any way)
2. You need notice only by promise, but not by performance.
 Davis v. Jacoby: Mr. Whitehead promised his niece Davis that if
she promised to take care of Mrs. Whitehead she will inherit
everything. Mr. Whitehead died. It was a bilateral contract because
Mr. Whitehead was only looking for a promise and the letter that
Davis sent was her notice of promising she would take care of the
wife.

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 Unilateral Contract is a promise for a performance. It would be reasonable that a
person performance would be looked as an acceptance. See Pg. 131
1. Only can accept by performance
2. You do not need notice, because you only are doing it by performance.
C. Promissory Acceptance is when a promise can be effective as an acceptance, at
least under most circumstances. See Pg. 141

D. Mailbox Rule is when mail is involved an acceptance is effective on dispatch

rather than receipt. See. Pg. 146, 147, 148, 149
Exceptions: If the offeree rejects and then accepts, the first communication
received by the offeror controls. If the acceptance arrives first, a contract is
formed. If the rejection arrives first the offer has been revoked.
 Adam v. Lindsell established the mailbox rule.

E. Acceptance by Performance is when the performance of a condition is an

acceptance of an offer. See Pg. 149, 151
 Carlill v. Carbolic Smoke Ball Co.
 Marchiondo v. Scheck (The Trial Court erred by denying plaintiff’s
requested finding concerning his partial performance.)

F. Option Contract Created by Part Performance in UNILATALIRAL is where

an offer invites an offeree to accept by rendering a performance and does not
invite a promissory acceptance, an option contract is created when the offeree
tenders or begins the invited performance or tenders a beginning of it.

G. Acceptance by Silence or Inaction is where the relation between the parties is

such that the offeror is justified in expecting a reply, or the offeree is under a duty
to reply, the latter’s silence will be regarded as acceptance. Under such
circumstances, “one who keeps silent knowing that his silence will be
misinterpreted, should not be allowed to deny the natural interpretation of his
conduct,” etc. (Silence is not usually an acceptance unless: 1. There is reasonable
Expectation or 2. Duty.) See Pg. 162

Where an offeree fails to reply to an offer, his silence and inaction operate as an
acceptance in the following cases only:
(a) Where an offeree takes the benefit of offered services with reasonable
opportunity to reject them and reason to know that they were offered with
the expectation of compensation.
(b) Where the offeror has stated or given the offeree reason to understand
that assent may be manifested by silence or inaction, and the offeree in
remaining silent and inactive intends to accept the offer.
(c) Where because of previous dealings or otherwise, it is reasonable that
the offeree should notify the offeror if he does not intend to accept. See
Second Restatement of Contracts 69
 Laredo National Bank v. Gordon

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H. Imperfect Acceptance can take the form of an acceptance with a condition or a
counteroffer which is an implied rejection. It is conditioned upon acceptance of a
new offer. (1. Counteroffer 2. Acceptance with a condition 3. Acceptance plus
new or different term; It Is always an implied rejection.) See Pg. 165

I. Mirror Image Rule is when an acceptance must be coextensive with the offer
and may not introduce additional terms or conditions. (Meaning acceptance
should mirror the exact terms of the contract.) See Restatement of Contracts 58,
Pg. 167
Exceptions: Many modern courts have relaxed the rule, holding that only an
acceptance that differs materially from the terms of the original offer prevents
contract formation. (Immaterial vs material). Black’s Law Dictionary defines
“material alteration” as “a change in a legal instrument sufficient to alter the
instrument’s legal meaning or effect.” Do the changes directly affect the party
performance obligation under the contract? See Pg. 168, 169
 Gresser v. Hotzler - The issue whether these changes were immaterial
or material. Black’s Law Dictionary defines “material alteration” as
“a change in a legal instrument sufficient to alter the instrument’s
legal meaning or effect.” Gresser changes were material and directly
affect Gresser’s performance obligations under the contract. The
Hotzlers never accepted the new terms, so a contract was not created.

J. Conditional Acceptance is when the offeree is willing to agree to the offer

provided that some changes are made in its terms or that some condition or event
occurs. A reply to an offer which purports to accept it but is conditional on the
offeror's assent to terms additional to or different from those offered is not an
acceptance but is a counter-offer. See Second Restatement of Contracts 59

K. Acceptance with Suggestions or Inquires (Acceptance of Offer Which States

Place, Time or Manner of Acceptance) if an offer prescribes the place, time or
manner of acceptance its terms in this respect must be complied with in order to
create a contract. If an offer merely suggests a permitted place, time or manner of
acceptance, another method of acceptance is not precluded. (Acceptance which
Requests Change of Terms) an acceptance which requests a change or addition
to the terms of the offer is not thereby invalidated unless the acceptance is made
to depend on an assent to the changed or added terms. See Second Restatement of
Contracts 60, 61, Pg. 172

L. Mirror Image Rule that Pertains to the Sale of Goods UCC 2-207 (Additional
Terms in Acceptance or Confirmation (1) A definite and seasonable expression
of acceptance or a written confirmation which is sent within a reasonable time
operates as an acceptance even though it states terms additional to or different
from those offered or agreed upon, unless acceptance is expressly made
conditional on assent to the additional or different terms.

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 (2) The additional terms are to be construed as proposals for addition to the
contract. Between merchants such terms become part of the contract unless:
(a) the offer expressly limits acceptance to the terms of the offer;
(b) they materially alter it; or
(c) notification of objection to them has already been given or is given
within a reasonable time after notice of them is received. (This is a
counteroffer)
(3) Conduct by both parties which recognizes the existence of a contract is
sufficient to establish a contract for sale although the writings of the parties do not
otherwise establish a contract. In such case the terms of the particular contract
consist of those terms on which the writings of the parties agree, together with
any supplementary terms incorporated under any other provisions of this subtitle.
See UCC Section 2-207, Pg. 173, 194
 Dorton v. Collins & Aikman Corporation
 Diamond Fruit Growers, Inc. v. Krack Corporation
 Klocek v. Gateway, Inc.

M. The Last Shot Rule the offeree/counterofferor gets all of its terms simply
because it fired the last shot in the exchange of forms. See Pg. 186

N. Warranty of Merchantability is an assurance that the goods are fit for the
ordinary purposes for which such goods are used. See Pg. 189

O. Electronic Acceptances occurs of over the Internet or through other forms of

electronic communication where the deal is consummated between computers and
without the benefit of human interaction, written signatures, or physical
agreements. See Pg. 201
 Hancock v. AT&T

P. Mutual Misunderstanding is when one party is contending that even though the
parties thought they had a deal, there never was a deal because they later
discovered that their respective understanding of what a contract term meant were
fundamentally different. Meaning there can be no mutual assent if the parties have
assented to different things. See Pg. 212

Q. Effect of Misunderstanding
(1) There is no manifestation of mutual assent to an exchange if the parties attach
materially different meanings to their manifestations and
(a) neither party knows or has reason to know the meaning attached by the
other; or
(b) each party knows or each party has reason to know the meaning
attached by the other.
(2) The manifestations of the parties are operative in accordance with the meaning
attached to them by one of the parties if
(a) that party does not know of any different meaning attached by the
other, and the other knows the meaning attached by the first party; or

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 (b) that party has no reason to know of any different meaning attached by
the other, and the other has reason to know the meaning attached by the first
party. See Second Restatement of Contracts 20, Pg. 216
Meaning there is a manifestation of mutual assent even if they have a different
meaning that they are bargaining for. Another party has no reason to know what
you think and you know the meaning of the other party
 Raffles v. Wichelhaus

IV. Consideration
(1) To constitute consideration, a performance or a return promise must be
bargained for exchange (of legal detriments)
(2) A performance or return promise is bargained for if it is sought by the promisor in
exchange for his promise and is given by the promisee in exchange for that promise.
(3) The performance may consist of:
(a) an act other than a promise, or
(b) a forbearance, or
(c) the creation, modification, or destruction of a legal relation.
(4) The performance or return promise may be given to the promisor or to some other
person. It may be given by the promisee or by some other person. See Second
Restatement of Contracts 71, Pg. 265, 266, 309
 Reed v. UND and NDAD: The court determine that Reeds
surrender(forbarence) of a legal right in exchange for NDAD allowing
him to run the course during the race constitutes consideration for the
release.
 McCormick v. Dresdale: forbarence to assertion the surrendet of a
calim of defens which proves to be invalid unless the for or surrending
party believes that the claim or defense may be failry determined to be
valid
 Kirksey v. Kirksey: The rest of the justices believe Kirksey’s promise
to his brother’s wife to give her a house and land to cultivate until she
could raise her family was just a gift and thus unenforceable. Judgment
reversed. Gratuitous and non-gratutious promises
 Hammer v sidway: a waiver of any legal right at the request of
another party is sufficient consideration for a promise

When looking for “consideration” you want to look for the following:
1. What is the bargain or want is being exchange.
2. If it’s not a promise and it’s a performance does that performance bring with it
some type of change or forbearance.

A. Determining Consideration
1. Your identifying an exchange/bargain (What is one parties giving to another)
2. Identifying the consideration in that exchange (What makes that promise a
bargain; what is each party giving)

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B. Legal Detriment is doing something that law doesn’t require you to do or
promising not to do something that the law allows you to do (you are giving up
something usually your right to sue.) When the other person occurs the detriment,
the other person occurs a benefit. For a legal detriment both parties are giving
some type of sacrifice.
 Hamer v. Sidway: The court found that the nephew giving up his right
to drink, smoke, and play cards was adequate consideration.

C. Illusory Promise is a promise which by their terms make performance

entirely optional; with the promisor and does not constitute a promise. For
example, a promise where you are not giving a return promise. See Restatement of
Contracts 77, Pg. 290, 292
 Keena v groupon: Even if the the obligations of the parties are not
mutual, the contract is still valid and not illusory

D. Mutuality of Obligation is equivalence in the values exchanged. Meaning each

party has to give up something and they have to feel like they are trading
something of value. See Second Restatement of Contracts 79, Pg. 296

E. Preexisting Duty Rule is when an agreement modifying a contract is not

supported by consideration if one of the parties to the agreement does or promises
to do something that he is legally obligated to do or refrains or promises to refrain
from doing something he is not legally privileged to do. Meaning when you have
preexisting duty it cannot be used as consideration for a new duty or promise. See
Pg. 303

F. Hold-up Game is when an agreement has been procured by coercion or duress

and will hold the parties to their original contract regardless of whether it is
profitable or unprofitable. See Pg. 304

G. Modification, Rescission and Waiver UCC 2-209 (1) an agreement modifying a

contract within this article [for the sale of goods] needs no consideration to be
binding. As between merchants a requirement on a formSee UCC Section 2-209
(1), Pg. 304

H. Modification Contract there can be no consideration for the promise of the other
party, and there is no warrant for inferring that the parties have voluntarily
rescinded or modified their contract. The promise cannot be legally enforced,
although the other party has completed his contract in reliance upon it. Meaning
when you modify a contract you are essentially forming a new contract. That
new agreement needs some type of consideration. See Second Restatement of
Contracts 84, Pg. 296, 298
 Alaska Packers’ Ass’n v. Domenico: The court determine that the
parties had a duty to perform under the original agreement. The sailors
were obligated to perform the duties of the contract and APA promise
to pay $100 instead of $50 was not supported by consideration.

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I. Modification of Executory Contract (The modern trend way from a rigid
application of the preexisting duty rule is reflected by R 89) a promise
modifying a duty under a contract not fully performed on either side is binding
(a) if the modification is fair and equitable in view of circumstances not
anticipated by the parties when the contract was made. See Second
Restatement of Contracts 89(a), Pg. 305
 Angel v. Murray: the court determined based on the substantial growth
of 400 dwelling units, Maher’s request for $10,000 per year is fair and
equitable and is an enforceable modification to the initial contract.

Contract modification after performing one party wants modify the terms of
the contract:
1. Parties voluntarily agree.
2. The modification was made before the contract was fully performed on either
side.
3. Unanticipated circumstance.
4. Unfair/equitable See Pg. 305

J. Nominal Consideration does not have any value to the deal. See Pg. 286
 Schnell v. Nell: The court found that Schnell promise to pay the
people in his wife will in exchange for one cent was nominal
consideration and unenforceable.

K. Moral Consideration is doing something that you feel is right and will not
support a promise. See Pg. 286 (Moral Obligation Pg. 312, 319)
 Mills v. Wyman: The promise made by Wyman to pay for Mills’
expenses that incurred by taking of his sick son is without
consideration and unenforceable.
 Webb v. McGowin: Court found that a moral obligation may be
sufficient consideration for McGowin promise to pay for Webb injury
if the promisor received a material benefit. Webb was injured after
redirecting a block that could have possibly killed McGowin.

L. Material Benefit (Promise for Benefit Received)

(1) A promise made in recognition of a benefit previously received by the
promisor from the promisee is binding to the extent necessary to prevent injustice.
(2) A promise is not binding under Subsection (1)
(a) if the promisee conferred the benefit as a gift or for other reasons the
promisor has not been unjustly enriched; or
(b) to the extent that its value is disproportionate to the benefit.
See Second Restatement of Contracts 86(1), Pg. 319, 321, 322
 Harrington v. Taylor: Taylor’s promise to pay Harrington for her
damages was not supported by considerations from Harrington. The
injury happened before the promise and a Harrington act of saving

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 Taylor was a voluntary humanitarian act. Court found it to be
unjustified not to compensate the individual.

M. Past Consideration is inconsistent with the meaning of consideration. You can’t

bargain for someone to do something that she has already done – stuff that
happened before a promise can’t be “bargained for”; can’t be consideration. See
Pg. 309
Exception to Past Consideration Pg. 315 (3.3)

Promise to Pay Debt Barred by Statute of Limitation (Promise to Pay

Indebtedness; Effect on the Statute of Limitations)
(1) A promise to pay all or part of an antecedent contractual or quasi-contractual
indebtedness owed by the promisor is binding if the indebtedness is still
enforceable or would be except for the effect of a statute of limitations.
(2) The following facts operate as such a promise unless other facts indicate a
different intention:
(a) A voluntary acknowledgment to the obligee, admitting the present
existence of the antecedent indebtedness; or
(b) A voluntary transfer of money, a negotiable instrument, or other thing
by the obligor to the obligee, made as interest on or part payment of or
collateral security for the antecedent indebtedness; or
(c) A statement to the obligee that the statute of limitations will not be
pleaded as a defense. See Second Restatement of Contracts 82

Bankruptcy (Promise to Pay Indebtedness Discharged in Bankruptcy) An

express promise to pay all or part of an indebtedness of the promisor, discharged
or dischargeable in bankruptcy proceedings begun before the promise is made, is
binding. See Second Restatement of Contracts 83

Material Benefit Rule [courts don’t usually use it, but you might want raise it
on your exam] (Promise for Benefit Received)
(1) A promise made in recognition of a benefit previously received by the
promisor from the promisee is binding to the extent necessary to prevent injustice.
(2) A promise is not binding under Subsection (1)
(a) if the promisee conferred the benefit as a gift or for other reasons the
promisor has not been unjustly enriched; or
(b) to the extent that its value is disproportionate to the benefit.
See Second Restatement of Contracts 86

N. Natural Obligation exists when there is a moral, but not judicially enforceable,
duty to render performance where “the law implies particular moral duty to render
a performance.” See Pg. 316

O. Promise Reasonably Inducing Action or Forbearance

(1) A promise which the promisor should reasonably expect to induce action or
forbearance on the part of the promisee or a third person and which does induce

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 such action or forbearance is binding if injustice can be avoided only by
enforcement of the promise. The remedy granted for breach may be limited as
justice requires. See Second Restatement of Contracts 90(1), Pg. 325
[The predecessor of § 90, in the First Restatement, read as follows:
§ 90. Promise Reasonably Inducing Definite and Substantial Action.
A promise which the promisor should reasonably expect to induce action or
forbearance of a definite and substantial character on the part of the promisee and
which does induce such action or forbearance is binding if injustice can be
avoided only by enforcement of the promise.]

P. Reliance is when the promisee reliane is forseeable and definante

 Create an option contract through reliance

 Ricketts
 Weitex company
 Garwood packaging

Q. Equitable Estoppel is the effect of the voluntary conduct of a party whereby he is

absolutely precluded, both at law and in equity, from asserting rights which
might, perhaps, have otherwise existed, either of property, of contract, or of
remedy, as against another person who in good faith relied upon such conduct,
and has been led thereby to change his position for the worse, and who on his part
acquires some corresponding right, either of property, of contract, or of remedy.”
See Pg. 328
Equitable Estoppel is a doctrine that prohibits one party from asserting the truth
of a matter previously misrepresented by that party. The elements of equitable
estoppel are “conduct by one party which leads another party in reliance thereon,
to adopt a course of action resulting in detriment or damage if the first party is
permitted to repudiate his conduct. See Pg. 329
 Ricketts v. Scothorn: the court found equitable estoppel prevents a
promisor from revoking on an unenforceable gratuitous promise if the
promisee relied on the promise to his detriment. Scothorn relied on her
Grandfather Ricketts that he would pay her $2,000 to be at 6 per cent
if she’d quit her job.

R. Promissory Estoppel only succeed where all other elements of a contract exist
but consideration is lacking. It serves as a substitute for consideration. If there is
consideration there cannot be Promissory Estoppel
To have Promissory Estoppel you must show that:
1) The promisor made an unambiguous promise to the promisee;
2) the promisee relied on that promise;
3) the promisee reliance was expected and foreseeable; and
4) to the promissee detriment. See Pg. 332
 Dargo v. Clear Channel: The court found there to be consideration by
Dargo resigning her position at the radio station in Chicago and

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 relocation to Minneapolis. Therefore, incurring a detriment and thus
making promissory estoppel inapplicable.
 Dixon v. wells Fargo, N.A.: Wells Fargo convinced the Dixons that to
be eligible for a loan modification they had to default on their loan.
The Dixons relied on the promise and stop making their loan payments
as the bank requested and their reliance was expected so that they can
enter into discussion for a loan modification. As a result of the
foreclosure the Dixons lost their house suffering a legal detriment
which is sufficient for promissory estoppel.

S. Difference Between Equitable Estoppel and Promissory Estoppel

Equitable Estoppel is ruled as affirmative defense based on some kind of mis
representation.
Promissory Estoppel used as the basis for recovery of damages and only requires
a promise.

T. Defenses to Contract 5 out of 10 Categories.

1. Incapacity
2. Duress
3. Public Policy
4. Illegality
5. Unconscionability
6. Undue Influence
7. Misrepresentation/Fraud vs material 164

U. Law of Capacity
(2) A natural person who manifests assent to a transaction has full legal capacity
to incur contractual duties thereby unless he is
(a) under guardianship, or “without legal capacity”
(b) an infant, or
(Minor – contracts are voidable(has the right to cancel at their affermitive
statement that they are disaffirming the contract)
(c) mentally ill (Restatement 15) or defective, or
(Mental Incompetence – voidable at their option. (Medical expert, that
says decision driven by mental capacity)
(d)Physical incomp (intoxicated)…..(Objective Theory framework)
(Intoxicated – voidable by drunk person. Two criteria needed for it to be
voidable: 1. So intoxicated that “incapacitated” - Don’t understand what
they are doing; 2. There other person was aware that they were drunk from
a reasonable person standard.
See Second Restatement of Contracts 12, Pg. 412
 Kiefer v. Fred Howe Motors, Inc.: The court found Kiefer to be a
minor at the time of the sale of the car and that contracts entered by a
minor are void. Contracts are voidable at the minor option. If a minor
continues to go forward with the contract and become of the age of the
majority they will lose the power to void the contract

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V. Material misrepresentation:
 Halpert v Rosenthal
 Swinton v Whitinsville savings bank
 Weintraub v korbbatsch
W. Mistake 152 &154
 Nelson v rice:did the party that sold the painting if the bore the risk of the
mistake Look at B in154 aware of at the time contract is made, person has
limited knowledge
 C…if you take that risk the contract is still

X. When Duress by Threat Makes a Contract Voidable (Physical Duress)

If conduct that appears to be a manifestation of assent by a party who does not
intend to engage in that conduct is physically compelled by duress, the conduct is
not effective as a manifestation of assent. See Second Restatement of Contracts
174, Pg. 419

Y. When Duress by Threat Makes a Contract Voidable (Duress by Threat)

(1) If a party's manifestation of assent is induced by an improper threat by the
other party that leaves the victim no reasonable alternative, the contract is
voidable by the victim.
i. Assent induced by an improper threat.
- a harm loss, injury to person or economic intent.
- breach of duty of good faith and fair dealing
- can be positive action or refraining from action
ii. As a result, victim left with “no reasonable alternative”.
- circumstances
- “emergency situation”

(2) If a party's manifestation of assent is induced by one who is not a party to the
transaction, the contract is voidable by the victim unless the other party to the
transaction in good faith and without reason to know of the duress either gives
value or relies materially on the transaction. See Second Restatement of Contracts
175, Pg. 419

A contract is voidable on the grounds of duress when it is established that the

party making the claim was forced to agree to it by means of a wrongful threat
precluding the exercise of his free will. See Pg. 421

§ 175. When Duress by Threat Makes a Contract Voidable

(1) If a party's manifestation of assent is induced by an improper threat by the
other party that leaves the victim no reasonable alternative, the contract is
voidable
by the victim.
(2) If a party's manifestation of assent is induced by one who is not a party to the
transaction, the contract is voidable by the victim unless the other party to the

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 transaction in good faith and without reason to know of the duress either gives
value
or relies materially on the transaction.

§ 176. When a Threat Is Improper

(1) A threat is improper if
(a) what is threatened is a crime or a tort, or the threat itself would be a
crime or a tort if it resulted in obtaining property,
(b) what is threatened is a criminal prosecution,
(c) what is threatened is the use of civil process and the threat is made in
bad faith, or
(d) the threat is a breach of the duty of good faith and fair dealing under a
contract with the recipient.
(2) A threat is improper if the resulting exchange is not on fair terms, and
(a) the threatened act would harm the recipient and would not significantly
benefit the party making the threat,
(b) the effectiveness of the threat in inducing the manifestation of assent is
significantly increased by prior unfair dealing by the party making the threat, or
(c) what is threatened is otherwise a use of power for illegitimate ends.

Z. Undue Infulence is demonstatted when PROOF

 The first condition of undue influence is met if a party’s judgment is so
impaired that his mental state prevents him from freely contracting.

 The second condition requires excessive pressure or over-persuasion,

indicated by several of the following characteristics:

a. the people representing the dominant party outnumber the weaker party;

b. the time and/or location of the discussion is unusual or inappropriate;

c. consequences;

d. and/or the weaker party does in fact fail to seek the advice of counsel or a third party

the dominant party claims the agreement must be reached immediately, that there is no time to
consult an attorney or third party, that delay will have serious negative
Restatement Second of Contracts § 177
When Undue Influence Makes a Contract Voidable

1. Undue influence is unfair persuasion of a party who is under the

domination of the person exercising the persuasion or who by virtue of the
relation between them is justified in assuming that that person will not act
in a manner inconsistent with his welfare.

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2. If a party's manifestation of assent is induced by undue influence by the
other party, the contract is voidable by the victim.
3. If a party's manifestation of assent is induced by one who is not a party to
the transaction, the contract is voidable by the victim unless the other
party to the transaction in good faith and without reason to know of
the undue influence either gives value or relies materially on the
transaction.

AA. Economic Duress or Business Compulsion is demonstrated by proof that

“immediate possession of needful goods is threatened” or, more particularly, in
cases such as the one before us, by proof that one party to a contract has
threatened to breach the agreement by withholding goods unless the other party
agrees to some further demand. However, a mere threat by one party to breach the
contract by not delivering the required items, though wrongful, does not in itself
constitute economic duress. It must also appear that the threatened party could not
obtain the goods from another source of supply and that the ordinary remedy of an
action for breach of contract would be adequate. See Pg. 421, 422
Economic Duress (When Duress by Treat Makes a Contract Voidable)
(1) If a party's manifestation of assent is induced by an improper threat by
the other party that leaves the victim no reasonable alternative, the contract
is voidable by the victim.
(2) If a party's manifestation of assent is induced by one who is not a party
to the transaction, the contract is voidable by the victim unless the other
party to the transaction in good faith and without reason to know of the
duress either gives value or relies materially on the transaction.
Short Explanation of Economic Duress:
1. Impossible threat-breach of duty good faith and dealing
2. No reasonable alternative” Free will”
 Austin Instrument, Inc. v. Loral Corporation: The court determine that
Loral agreed to the price increases of the parts in consequence of the
economic duress employed by Austin.

BB. When a Term is Unenforceable on Grounds of Public Policy

(1) A promise or other term of an agreement is unenforceable on grounds of public
policy if legislation provides that it is unenforceable or the interest in its
enforcement is clearly outweighed in the circumstances by a public policy against the
enforcement of such terms.
(2) In weighing the interest in the enforcement of a term, account is taken of
(a) the parties' justified expectations,
(b) any forfeiture that would result if enforcement were denied, and
(c) any special public interest in the enforcement of the particular term.
(3) In weighing a public policy against enforcement of a term, account is taken of

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 (a) the strength of that policy is manifested by legislation or judicial decisions
(b) the likelihood that a refusal to enforce the term will further that policy,
(c) the seriousness of any misconduct involved and the extent to which it was
deliberate, and
(d) the directness of the connection between that misconduct and the term. See
Second Restatement of Contracts 178, Pg. 440

Violating Public Policy is when an agreement affects the public interest

adversely and, therefore, is unenforceable. See Pg. 445

The Restraint (Under the Covenant for VMS v. Farber when Thinking if
Some Provision in the Contract Violates Public Policy) Are the hardships
outweighed by the company interest
1. Are the restriction no greater than necessary:
a. To protect employees legitimate “business interest”
2. Such interest are not outweighed by:
a. The hardship of the employee
b. And the injury to public
 Valley Medical Specialists v. Farber: The Supreme Court of Arizona
held that the restrictive covenant between Dr. Farber and VMS cannot
be enforced on the grounds of public policy

Illegality is when a contract is illegal it becomes unenforceable. If an illegality is

discovered before acceptance the offer becomes void. Illegal after contract
formation – contract is discharged under “Impossibility of performance”

Effect of Failure to Comply with Licensing or Similar Requirement PROOF

If a party is prohibited from doing an act because of his failure to comply with a
licensing, registration or similar requirement, a promise in consideration of his
doing that act or of his promise to do it is unenforceable on grounds of public
policy if
(a) the requirement has a regulatory purpose, and
(b) the interest in the enforcement of the promise is clearly outweighed by the
public policy behind the requirement. See Second Restatement of Contracts 181,
Pg. 440

CC. Unconscionability is generally recognized to include an absence of

meaningful choice on the part of the parties together with contract terms which
are unreasonably favorable to the other party.

Did each party to the contract, considering his obvious education or lack of it,
have a reasonable opportunity to understand the terms of the contract, or were the
important terms hidden in a maze of fine print and minimized by deceptive sales
practices? Ordinarily, one who signs an agreement without full knowledge of its
terms might be held to assume the risk that he has entered a one-sided bargain.
But when a party of little bargaining power, and hence little real choice, signs a

16
 commercially unreasonable contact with little or no knowledge of its terms, it is
hardly likely that his consent, was ever given to all the terms.

Professors General Principle for Unconscionability

A contract is unenforceable because the terms are so extremely unjust, or
overwhelmingly one sided in favor of the party with superior bargaining power,
that no reasonable person would agree to it.

Courts looks at:

1. Procedural Unconscionability
- is the process fair?

2. Substantive Unconscionability

- are the terms of the contract fair.

The Courts look at In determining whether a contract provision is
unconscionable, courts consider seven factors: (1) whether the agreement was
standardized and among parties of unequal bargaining power; (2) the time and
opportunity afforded to read the agreement; (3) the use of fine print for the provision in
question; (4) the provision’s commercial reasonableness; (5) the contract’s terms; (6) the
parties’ relationship; and (7) the circumstances surrounding the formation of the contract.

Unconscionable Contract or Clause UCC 2—302

(1) If the court as a matter of law finds the contract or any clause of the contract to
have been unconscionable at the time it was made the court may refuse to enforce
the contract, or it may enforce the remainder of the contract without the
unconscionable clause, or it may so limit the application of any unconscionable
clause as to avoid any unconscionable result.
(2) When it is claimed or appears to the court that the contract or any clause
thereof may be unconscionable the parties shall be afforded a reasonable
opportunity to present evidence as to its commercial setting, purpose and effect to
aid the court in making the determination. See UCC 2-302, Pg. 458
 Williams v. Walker-Thomas Furniture Company: In this instant case,
the trial court and the appellate court did not feel that enforcement
could be refused, and no findings were made on the possible
unconscionability of the contracts in these cases. The U.S. Court of
Appeals for DC looked at unconscionability of the contracts and
decided the cases must be remanded to the trial court for further
proceedings.
 Vernon v. Qwest: The court did not find that the contract was
unconscionable and the motion was stayed pending arbitration.

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