APPROACH TO ANSWERING QUESTIONS

(1) Was a K formed?

a. Offer/Acceptance
b. Bilateral/unilateral?
(2) Is it Enforceable?
a. Consideration
b. Promissory Estoppel
c. Restitution/Unjust Enrichment
(3) Is a Writing Required?
a. SOF
(4) What does the K mean?
a. Principles of Interpretation and Parol Evidence Rule
b. Implied Terms, Obligation of Good Faith, Warranties
(5) Was there performance of the K or was it breached?
a. Material Breach, Anticipatory Repudiation, Express Conditions
(6) If Breached, are there any Defenses?
a. Incapacity, Duress/Undue Influence, Misrepresentation/Non-Disclosure,
Unconscionability/Public Policy
b. Mistake, Impracticability/Frustration of Purpose, Modifications
(7) If No Defense, what are the Remedies?
a. Expectation Damages
b. Reliance & Restitution D., Specific Performance, Agreed Remedies

1
GENERAL INTRO STUFF:
• “Agreement:” two or more persons have expressed themselves in
harmony
• “Consideration”: bargained for exchange
• in a contracts case need:
o legal theory: basis for imposing liability
o Remedy: so what? What can I get for a breach of this legal
claim
• We want to know how the legal theory relates to the remedy in terms
of what a person gets if there is a breach of the obligation
• 1-106 of UCC: put party in position had he been in had the contract
been performed – GENERAL RULE OF WHAT WE ARE TRYING TO DO
IN K LAW
• primary duty: duty to perform
• Remedial duty: arises when contract is breached
• GENERAL THEORIES OF OBLIGATION:
o Agreement w/ consideration
o Promissory estoppel (justified reliance on a promise)
o Unjust enrichment
o Promises for benefits rec’d
o Tort
o Form contracts
o Statutory warranty
REMEDIES: from greatest damages to least
1. lost expectancy damages- put the p in the position monetarily he
would have been in had the k been performed
2. reliance damages – put the p in the position he would have been in
had the agreement not been made
3. restitution theory - sum that = any benefit the p conferred on the d,
thereby restoring this value to the p

(1) WAS A CONTRACT FORMED?

Contract- agreement w/ consideration.
III. REACHING AGREEMENTS: THE PROCESS of K FORMATION
A. Intent to Contract
a. Mutual Assent: §17: Formation of K requires a bargain in which there is a manifestation of
mutual assent to the exchange and a consideration
i. §22: Manifestation of mutual assent ordinary takes form of offer/acceptance
b. Objective Theory: Existence and terms of K determined from the manifestations made by
each party--NOT by each parties’ subjective intention.
i. Test: What a reasonable person in position of other party would conclude that his
objective manifestation of intent meant

2
 ii. Use objective theory bc we want ppl to be able to rely on what they hear
iii. Problem w/ obj intent is that u give up the intention of the parties
c. Embry v. McKitttrick (1907): “Get Your Men Out Case”
i. Embry thought this meant he had another year of employment guaranteed while
McKittrick said he never intended this
ii. Holding: only need to see if Embry was “reasonable” in his decision as to what was
going on here – found for P bc no reasonable person in Embry’s position would
think that McKittrick gave him this affirmation that it would mean anything less
than you were hired for a year
d. Lucy v. Zehmer (1954):
i. Facts: lucy and zehmer were drinking at a restaurant. Lucy offered zehmer 50 k for
zehmers farm, which z had refused to sell to L in the past. Z claims he thought the
offer was a joke, however, he decided to play along and wrote on the back of a guest
check a title to the land – signed by all parties. Lucy wanted to enforce order
ii. Holding: ct found for lucy bc “it must look to the outward expression of a person
as manifesting his intention rather than to his secret and unexpressed
intention.” So z’s intentions were irrelevant, what was relevant was l’s
reasonable belief based on z’s behavior
1. The parties here entered an enforceable k even if z was not serious bc l
reasonably believed that he was
2. Lucy’s belief has to be both “reasonable” and “honest” (Embry v.
McKittrick- very equivocal statement in that case where boss told him
to keep working than fired him- “get your men out case”)
3. if l knew z was joking, would not enforce this bc then he shouldn’t have
relied
e. Contract law enforces agreements when a reasonable person would believe the promisor
intended to be bound
f. Determines what a reasonable person would believe by examining the circumstances, the
language of k, length of negotiations, subject matter of k, setting of negotiations, previous
conduct of parties etc.
g. Raffles v. Wichelhaus (1864) : Effect of Misunderstanding:
i. Facts: k called for p to sell cotton scheduled to arrive on a ship called the
“Peerless.” Buyers refused to take the cotton. Claiming that the cotton arrived on a
ship called the Peerless that sailed from Bombay in Dec and they had intended to
buy the cotton from a ship that had sailed in Oct. so sellrs and buyers thinking of diff
ships
ii. Rule: A misunderstanding exists when: all 3 must be satisfied to render k
unenforceable
1. The parties k is ambiguous, meaning that it is reasonably susceptible to
more than one meaning
2. The parties actually had in mind diff interpretations of the language
3. The misunderstanding is material, or imp
iii. Holding: so here the k is ambiguous bc 2 Peerless’s, the parties did have in mind
diff interpretations, and the misunderstanding was imp bc they sailed on diff dates
h. Restatement Second §201:
i. Cts will enforce the parties meaning of a k, even if its irrational if both parties meant
it
ii. However, “where the parties have attached different meanings to a promise or
agreement or a term thereof, it is interpreted in accordance w/ the meaning attached
by one of them if at the time the agreement was made:

3
 1. That party didn’t know of any different meaning attached by the other and
the other party knew the meaning u had attached
2. that party had no reason to know of any different meaning attached by the
other and the other had reason to know the meaning attached by the first
party

B. The Offer
a. Definition
i. R2K §24: An offer is the manifestation of willingness to enter into a bargain so
made as to justify another person in understanding that his assent to that bargain is
invited and will conclude it
ii. UCC §2-206: An offer should be interpreted an inviting acceptance in any manner
reasonable under the circumstances. An order or offer to buy goods for shipment is
an offer inviting acceptance
iii. Corbin: an offer is an expression by one party of his assent to certain definite terms,
provided that the other party involved in the bargaining transaction will likewise
express his assent to the identically same terms
iv. Whether a reasonable person, acquainted w/ all of the circumstances would
believe that the author of the communication alleged to be an offer intended to
be bound upon acceptance (assent) by the other party
v. ASK YOURSELF: has the party exhibited a willingness to be bound w/o
further action on his own part? (this is from the perspective of the offeree)
b. Power of Acceptance: --Offer confers to offeree the power of acceptance
i. §35: An offer gives to the offeree a continuing power to complete the manifestation
of mutual assent by acceptance of the offer
c. Requirements of an Offer
i. Must be an expression of a promise, undertaking, or commitment to enter K
1. Language: may show offer intended or not
2. Surrounding circumstances—ie: offers made as jokes
3. Prior circumstances/past relationships
ii. Must have certainty and definiteness in essential terms
1. Specify performances to be exchanged & terms that will govern relationship
2. Offeror is “master of the offer”—in addition to proposing terms of
exchange, may also prescribe manner and time for effective acceptance
iii. Must be communicated to offeree
1. Advertisements: §26: an ad is just an invitation to offer. BUT, an ad can be
an offer if there is some invitation to take action without further
communication.
a. Lefkowitz v. Great Minneapolis Surplus Store (1957):
i. Facts: dept store advertised a stole in a newspaper and said
“first come first served” p got to the store first and they
refused to sell it to him bc house rules was that the offer
was intended for women only
ii. Issue: would a reasonable person believe that the store
intended to be bound upon your acceptance? Was this an
offer or merely an invitation to come down to thes tore?
iii. Holding: this was an offer. A reasonable person would
believe the store intended to be bound upon an
acceptance bc the advertisement was “clear, definite,
and explicit and left nothing open for negotiation.”
Test: whether the facts show that some performance was

4
 promised in positive terms in return for something
requested
b. a lot of cts consider advertisements in newspapers as only an
invitiation to negotiate and not an offer
c. won’t enforce offers where values aren’t set forth bc value is
“speculative”
2. Merchants and Letters as Offers:
a. Fairmount Glass Works v. Grunden Martin Woodenware Co
i. Facts: prospective purchaser sent letter to a seller asking for
the lowest price at which the seller is willing to sell certain
jars. seller responded w/ price quotes and admonition “for
immediate acceptance”
ii. Holding: sellers communication is an offer even though
buyer could choose what he wanted
b. need a reasonable degree of definiteness – don’t just want it to seem
like they are just price quoting
c. things like a request for a firm offer and a response with a quotation
looks like an offer
d. make sure the offer isn’t “too good to believe”
d. Unilateral v. Bilateral K—an offer may propose either a bilateral or unilateral K
i. Unilateral K: K resulting from an offer that requires performance for acceptance.
In a unilateral k, the k is not complete until the person who is supposed to perform
performs. Then the promising party is bound to uphold the promise.
ii. Bilateral K: K that results from an offer and is open to how it can be accepted.
Bound from the moment the promises are exchanged
1. § 32: (Presumption of Bilateral K)Unless the language and circumstances
say otherwise, an offer is accepted EITHER by a promise to perform OR by
actual performance
2. saw this in Davis v. Jacoby where the Ps were granted relief for moving to
CA to care for dying aunt even though both aunt and uncle died before they
got there….still entitled to inheritance.
e. Duration of the Offer:
i. Rule: when a reasonable person would believe the offeree does not accept an
offer, contract law treats the offeree’s decision as a rejection of the offer (Akers
v. J.B. Sedberry)
ii. Rule: ordinarily an offer made by one to another in a face to face convo is deemed
to continue only to the close of their conversation, and cannot be accepted thereafter
(Akers)
iii. Time of acceptance: runs from the time the offer reaches the intelligence of the
person to whom they are addressed (Cline v. Caldwell)
f. Revocation of Offer
i. §§42, 43: Retraction by offeror—terminates offeree’s power of acceptance if
communicated to her before she accepts offer. Basically, revocation occurs when a
reasonable person would believe that an offer is withdrawn
1. Can be directly communicated or if offeree receives
a. correct info
b. notierty exception:if u have a public notice for an offer, u can
revoke that in the same manner by taking it down
c. from a reliable source

5
 i. Dickinson v. Dodds: ct held that knowing the offeror was
thinking of selling the property to someone else is an
implied revocation. Seller had no obligation to sell to buyer
bc no consideration when u tell someone u are going to sell
them land and then sell to someone else.
d. of the acts of the offeror that would indicate to a reasonable person
that the offeror no longer wishes to make that offer
2. Effective upon receipt (when received by offeree)
g. Irrevocable Offers
i. Option Contracts – they are only revocable when supported by consideration
for the option, otherwise, they are gift promises. So just telling someone u will
keep an option open for them until a certain date is revocable
1. R2K §25: An Option K is a promise which meets the requirements for the
formation of a K and limits the promisor’ power to revoke an offer
a. §87(1): Option K must have own separate consideration—the
offeree must purchase the option by providing an additional
consideration (different from consideration needed for the K itself)
i. subsection (1)(a): nominal consideration is ok to revoke
an option k but GROSS disproportion btw the payment
and the value of the option commonly indicates that the
payment wasn’t bargained for but was a formality or a
pretense and in these cases no consideration
ii. §87(2) recognizes possibility of apply PE if relied on option
2. Marsh v. Lott (1908):
a. Facts: for 25 cents, P was given the option to purchase real estate
for 100 K owned by D. D tried to revoke the option when P sought
to exercise it
b. Rule: any money consideration, however small, paid and rec’d
for an option to purchase property at its adequate value is
binding upon the seller thereof for the time specified therein,
and is irrevocable for want of adequacy
ii. Firm Offers
1. UCC §2.205: no consideration needed for an option (called firm offer)
a. Requirements
i. Offer to buy/sell goods must be made by a merchant
1. §2.104(1): m=person who deals in goods of the
kind involved in the transaction or who otherwise,
by trade or profession, represents that he has skill or
knowledge in regard to the goods or the transaction
ii. Offer must be in a signed record
iii. Must give explicit assurance that it will be held open
iv. If assurance contained on form supplied b offeree, the
offeror must sign the assurance separately
b. If satisfied consideration not needed to make offer irrevocable for
time stated, or reasonable time if no expiry date specified
c. Limits period of irrevocability to maximum of three months
iii. Detrimental Reliance:
1. §87(2): Where offeror could reasonably expect that the offeree would rely
on her detriment on the offer it will be held irrevocable as an option K
for a reasonable length of time.

6
 2. Contractors relying on bids of subcontractors
a. Drennan v. Star Paving: Contractor made a bid relying on the
subcontractor's estimate, but then it turned out that the subcontractor
had made the wrong calculations. Judge Traynor says that P
(contracter) committed to the project in reliance on D’s
(subcontractor's) estimate. D knew it would be used by P. The P
acted reasonably to mitigate the damages, spending several months
trying to get bids from other subcontractors
i. Rule: A promise which the promisor should reasonably
expect to induce action or forbearance of a definite and
substantial character on the pt of the promise and which
does induce such action or forbearance is binding if
injustice can be avoided only by enforcement of the
promise
ii. §87(2)=codification of Drennan
iv. Part Performance of Unilateral K Offers
1. Traditional Rule: a unilateral K could be revoked at any time before
acceptance (before performance of requested act completed)
2. Modern Approach: §45: An option K is formed upon start of performance
by the offeree making the offer irrevocable for a reasonable time
3. An offeree who begins performance doenst have to notify the offeror at all
unless the offeror asks for notification in which case must notify “w/
reasonable promptness and certainty”
4. Petterson v. Pattberg:
a. Rule: taking money out of a bank, traveling to your house, and
stating she was there to pay so if u revoke offer before the actual
payment is tendered that’s ok
b. Dissent: this is part performance and is enough to bar
revocation
5. Brackenbury v. Hodgkin:
a. Facts: mom asked daughter to come live with her and take care of
her- daughter did this and started to take care of mom but problems
arose and daughter ordered off premises.
b. Holding: find for Ps bc she didn’t let them complete it ! consistent
w/ modern rule that partial performance of a unilateral k creates an
option k.
h. Termination of Offer
i. Rejection §38
ii. Counter-offer §39
1. Serves as
a. rejection of original offer
b. new offer
2. Except when offer irrevocable
iii. Lapse of Time §41
1. B/c offeror “master of offer”—can set time limit
iv. Death/Incapacity
i. Limitations of Agreement Law:
i. Preliminary writings: facilitates further negotiation of the ultimate agreement – cts
have to decide whether to enforce them
ii. Memorial = final writing

7
 iii. An agreement is unenforceable where you have a mere agreement to agree in
which a material term is left for future negotiations (Martin v. Schumacher)
iv. Arnold Palmer v. Fuqua Industries Inc (1976):
1. Facts: Arnold and Fuqua intended to combine forces and create one large
company. One of they many docs they sign is a “memorandum of intent”
that contains most of the details of the merger. The memo also states that
the parties lawyers will proceed as promptly as possible to prepare an
agreement acceptable to the parties for the combination. Under the
“conditions” section, it states “that the obligations of the parties shall be
subject to the “preparation of the definitive agreement for the proposed
combination in form and content satisfactory to both parties and their
respective counsel” press release also issued saying the companies have
merged. then Fuqua decides to terminate the transaction
2. Holding: 3 ways to treat this memorandum of intent:
a. Its not legally enforceable at all
b. It is legally enforceable
c. It’s a legal obligation to make a reasonable effort to conclude the
deal
3. cts look to parties intentions to figure this out
4. use the reasonable person test to figure out parties intentions
5. look at extrinsic evidence to determine whether this is a k: lang of
writing, degree of detail, importance of subject matter, statements and
conduct of both parties etc
6. Rule: if you intend to be bound, you are bound irrespective of whether this
is a formal agreement
7. In this case, this was a jury ? as to whether parties were bound
8. To fix this problem, put in express language “THIS IS NOT AN
ENFORCEABLE K YET”
v. Restatement Second 27: Existence of K Where Written Memorial is
Contemplated:
1. If u manifest assent that’s sufficient to constitute the conclusion of a K then
that will suffice instead of a written memorial
2. However, the circumstances may show that these are preliminary
negotiations
3. Comment a: if all that’s left is the written memorial and u’ve negotiated
everything, ur bound
4. Comment b: if there’s more to negotiate, you’re not bound until the written
memorial
5. Comment c: ways to see if your k is complete
6. Comment d: subsequent written agreement may make a binding
modification to the terms previously agreed to
C. The Acceptance
a. R2K §50(1): An acceptance is the offeree’s manifestation of assent to the terms of the offer,
made in a manner invited or required by the offer
i. Acceptance must be manifested and communicated—objective theory
ii. This is a voluntary act where by accepting u create the set of legal relations called a
k
iii. Objective theory : asking whether a reasonable person would believe the
offeree intends to accept the offeror’s terms and form a k, not whether the
offeree actually intended to do so
b. Method of Acceptance

8
 i. Offeror is “master of his offer” may prescribe method by which offer may be
accepted, but if none is specified than any reasonable method becomes the mode of
acceptance
ii. Bilateral K: (where not specified): acceptance may be given in any reasonable
method—either promise or performance
1. The offeree can still accept an offer for a bilateral k by beginning
performance if a reasonable person would believe that the offeree’s
conduct in performing constitutes a promise to perform
a. White v. Corlies: (1871)
i. Facts: prop owner wrote a builder that “upon agreement u
can commence at once” to improve his offices. The builder
began work by purchasing and working on lumbar but none
of the work earmarked for this job nor performed at the site.
ii. Holding: not an acceptance bc “no indication to the other
party of acceptance” however, had the work indicated an
acceptance the result would have been diff (had the builder
performed work at the site)
iii. RULE: where an offer is made by one party to another
when they are not together, the acceptance of it by the other
party must be manifested by some appropriate act
1. Its ok if the manifestation doesn’t come to offeror’s
mind as soon as its made- ie: if u mail an
acceptance form, he is bound from the postmark
date, not the date he receives the acceptance
iv.
iii. Unilateral K: accepted by full performance of requested act.
1. Offeree must give notice of acceptance
c. Silence as Acceptance
i. §69: Offeree’s silence and inaction operate as acceptance only where
1. Benefit of Services: Offeree takes benefit of offered services w/reasonable
opportunity to reject them and reason to know they were offered
w/expectation of compensation
2. Reason to Understand: Offeror has stated/given offeree reason to
understand assent may be manifested by silence or inaction, and offeree in
remaining silent and inactive intends to accept the offer
3. Previous Dealings: B/c of previous dealings, reasonable that offeree
shouldnotify offeror if he does not intend to accept
ii. §69(2): Exception to silence: an offeree is bound to an offer when she does any
act inconsistent w/ the offeror’s ownership of offered property
d. When Acceptance Becomes Effective
i. Mailbox Rule: Acceptance is effective upon proper dispatch
1. Only applies to acceptance by promise, not performance
2. 39 USC §3009: if u get something n the mail that u didn’t order, u can
consider it as a gift bc the mailing of unordered goods are an “unfair trade
practice” so u don’t have to pay for it
3. §2-206 read as MB Rule
a. unless there are some other circumstances, an offer invites
acceptance in any manner that’s reasonable in the circumstances
ii. Adams v. Lindsdell: MAILBOX RULE: k is complete as soon as the letter of
acceptance is put in the mail

9
 1. Policy reasons for this: we want offerees to be able to rely as soon as they
know something is in the mail
2. However, if the person expressly tells u that the offer is revoked before u
get the acceptance in the mail, then u cant rely on the mailbox rule
iii. iii. Option K: Acceptance effective upon receipt by offeror, NOT dispatch –
Restatement 64
iv. SUMMARY: if A posts an acceptance before she receives a revocation of the
offer, a k is formed. If she posts her acceptance, but the postal service loses it, a
k is formed. If she posts her acceptance but retrieves it form the post office a k
is still formed
e. Acceptance Varying From Offer
i. Mirror Image Rule: requires an acceptance to match the offer exactly, w/no
alteration or qualifications. If acceptance deviates from offer in any way (or material
way) it does not qualify as an acceptance, but is a rejection and counteroffer
ii. Last Shot Rule: if final communication in a series of correspondence contains
new/different terms, and following receipt, recipient renders performance w/o
objecting taken to have agreed to them
1. §UCC 2-207 rejects both these rules—see below
D. Offer and Acceptance under the UCC and Battle of the Forms
a. Intro
i. UCC §1.103: unless they are displaced by particular provisions of the Code, the
general principles of common law apply to transactions governed by the Code
1. UCC says very little about process of offer and acceptance formation of a
sales K largely subject to common law rules
ii. Battle of the Forms
1. Many K involve preprinted forms that contain standard terms known as
“boilerplate” conflict between parties
2. §2.207 concerned w/resolving disparities between standard forms
3. REJECTS Common Law Mirror Image and Last Shot Rules

b. Acceptance, Rejection, and Counteroffer

i. §2.207(1): A definite and seasonable expression of acceptance operates as an
acceptance even though it states terms additional to or different from those offered
unless acceptance is expressly made conditional on assent to the different terms
1. §2.207 provides no guidance on whether initial communication qualifies as
an offer must be resolved using general common law principles
2. Once an offer established under CL, §2.207(1) concentrates on whether or
not response is an acceptance
ii. Acceptance:
1. Seasonable & definite expression of acceptance w/different/additional terms
iii. Not Acceptance: (counteroffer or rejection)
1. Not seasonal (sent after offer lapsed)
2. Not definite expression of acceptance
3. Expressly conditional

c. Treatment of Proposals in an Acceptance

i. §2.207(2): The additional terms are construed as proposals for addition to the
contract. Between merchants such terms become part of the contract unless
1. (a) the offer expressly limits acceptance
2. (b) they materially alter it; or

10
 3. (c) notification of objection to them has already been given or is given
within a reasonable time after notice of them is received
ii. Scope and Basic Purpose: 2.207(d) only applies if response to an offer is found to
be an acceptance.
1. Does not apply to counteroffer (which only leads to K if accepted) or if
performance occurs as contemplated by §2.207(3).
2. Since 2.207(1) says K exists despite variance between terms, 2.207(2) treats
such additional terms as proposals that do not become part of K unless
conditions satisfied
iii. Grounds for Excluding Proposals from K
1. Terms do not become part of K unless both parties=MERCHANTS
a. §2.104(1): Merchant
i. Person who deals in goods of that kind or,
ii. Person who, by following a particular occupation,
has/represents having knowledge or skill concerning the
goods
2. Term does not enter K if it MATERIALLY ALTERS IT
a. Material if significant element of the exchange bargained for by a
party
b. Comment 4: proposed alteration in acceptance is material and does
not enter into K if it would result in “surprise or hardship” to other
party
3. Ardente v. Horan (1976):
a. Facts: the horans were going to sell prop to ardetnes, As made a bid
and D accepted the bid, but in the purchase and sale agreement, d
said that they needed to know that certain things were going to be
included in the transaction. Ds refused to sell the items and didn’t
sign the purchase sales agreement and P filed for sp
b. Holding: Ps offer was conditional and therefore it operated as a
rejection of D’s offer and no contractual obligation was created
c. Rule: “when there is an offer to form a bilateral k, the offeree
must communicate his acceptance to the offeror before any
contractual obligation can come into being” – must do so in an
overt manner
d. Insufficient that offeree intended to accept
e. Rule: TO BE EFFECTIVE, AN ACCEPTANCE MUST BE
DEFINITE AND UNEQUIVOCAL
f. Counteroffer: an acceptance which is equivocal OR upon
condition OR with a limitation is a counteroffer and requires
acceptance by the original offeror before a contractual
relationship can exist
g. U are allowed to impose extra things u want as an offeree just can’t
make it seem like if those things aren’t included then you’re out of
the deal
h.
4. Term does not enter K if OFFER LIMITS ACCEPTANCE to its terms
a. Offeror can simply eliminate possibility of proposals entering K by
putting appropriate standard language in offer
b. Issue: giving effect to standardized exclusions or conditions, §2.207
breaks faith w/avowed purpose of disregarding boilerplate
5. Term does not enter K if OFFEROR OBJECTS

11
 a. If offer did not limit acceptance to its terms, the Offeror still has
opportunity to eliminate proposal by subsequent objection, either
i. in anticipation of proposal or
ii. within reasonable time of acquiring notice of it
b. Again raises inconsistency of 2.207’s reaction to boilerplate
iv. Omission of “Different” Terms from Text
1. Issue: 2.207(1) refers to “additional” and “different” terms, while 2.207(2)
only mentions “additional terms”  Two Problems
a. (1) Not always easy to tell if term is “additional” or “different”
b. (2) Not clear if omission of “different” terms intended or oversight
2. Approach 1: some courts have treated omission as inadvertent and applied
subsection irrespective of whether term “additional” or “different”
a. Comment 3—seems to assume both fall w/in 2.207(3)
b. Advantage: eliminates problem 1 above
3. Approach 2: – when u have an offer and acceptance w/ something
different, the conflicting term in the acceptance falls out. The offer
term is in. theory is that offeror is master of acceptance“Fall Out Rule”
4. Approach 3: conflicting terms cancel each other out—“Knockout Rule”
a. If purpose of 2.207 to take boilerplate less seriously, makes no sense
to prefer one “different” term over another—in spirit of 2.207
b. Both should fall away an be replaced by whatever term the law
would supply in the absence of agreement
c. Majority follows this rule
5. Hill v. Gateway 2000 (1997):
a. Facts: Hills called Gateway on the phone and ordered a computer.
They gave their credit card info and Gateway delivered the comp.
the container contained terms including an agreement to arbitrate all
disputes and the hills had 30 days to return the comp. after 30 days,
hills brought an action to return comp and gateway wanted
arbitration.
b. This is a ROLLING K: where consumers order and pay for
goods before having an opportunity to read most of the terms
which are contained in the goods packaging – roll as the deal
progresses
c. Holding: gateways shipment of the comp w the terms constituted an
offer. The hills accepted the offer by keeping the comp for more
than 30 days. The k which was formed at the end of the 30 day pd
included the arbitration provision.
i. Hills tried to argue that k was formed when they paid for
comp and gateway shipped it. So the additional terms
should drop out according to the ucc
ii. Ct rejects hills arg bc they had ample time to find out
terms of k and gateway conditioned the k formation on the
hills accepting the terms something they couldn’t do until
long after the phone order and payment
6. Stepsaver case goes the other way : printed terms on comp software
package are not part of the agreement (these terms materially alter the
agreement)

d. Form Contract between Sellers and buyers goods:

12
 i. §2.207(3): Conduct by both parties that recognizes the existence of a K is sufficient
to establish a contract for sale although the writings of the parties do not otherwise
establish a contract. In such a 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 Act
ii. Only applies when no K formed by writings
1. Typically b/c offeree’s response is not an acceptance w/additional or
different terms but a counteroffer which has never been deliberately
accepted
iii. If no K formed by the writings of the parties, but their conduct (typically in form of
tendering and accepting performance) shows they intend a K K recognized as
existing
iv. K includes only those terms which parties’ writing agree—all conflicting terms fall
away
v. Missing terms
1. If any applicable trade usage of course of dealing or performance between
parties, the missing terms can be supplied as a matter of factual implication
2. Failing that, UCC itself provides number of standard terms—“Gap
Fillers”—that are implied as a matter of law into all sales of goods unless
excluded by the K
a. §2.308: delivery must take place at seller’s premises
b. §2.310: requires payment on delivery
c. §2.314 and §2.315 provided for minimum warranties

e. The 2003 Revision of §2.207

i. Revision gets rid of agony trying to decide if nonconforming terms in acceptance
should become part of K and eliminates general orientation toward terms proposed
by offeror
1. Once it is clear a K was created—adopts the approach of keeping terms
which parties agree and eliminating conflicting terms
2. Gaps created filled by substituting gap-fillers either supplied by
a. Article 2 default provisions or
b. Trade usage
c. Common law
3. No equivalent to 2.207(1)—doesn’t deal w/issue whether K formed
ii. §2.206(3): Whether a response with additional/different terms qualifies as an
acceptance
1. A definite an seasonable expression of acceptance in a record (encompass
electronic communication rather than just writing) constitutes an acceptance,
even if it has terms additional to or different from the offer
2. No longer makes provision for an acceptance that is expressly made
conditional on assent to its terms
a. Eliminates possibility that an offeree, by including boilerplate
language in all acceptance/acknowledgment forms, will
automatically be treated as having made counteroffer
b. Language and terms of offeree’s response must be interpreted in
context to decide if sufficiently express assent to qualify as
acceptance or if counteroffer intended
iii. §2.207: What to do with additional or different terms
1. Adopts test based on “knockout rule” and existing §2.207(3)

13
 2. K consists of terms which parties have agreed, whether in the record or
otherwise, plus terms supplied or incorporate by Article 2

(2) IS THE K ENFORCEABLE?

II. ENFORCING PROMISES: BASES OF LEGAL OBLIGATION
A. Intention to be Bound: The Objective Theory of K
a. Objective Theory:: Person bound not by "intent" but by a reasonable interpretation of her
words or actions. (maker of promise can be legally bound w/o intending to be)
i. Test: What a reasonable person in the position of the other party would conclude
that his objective manifestation of intent was.
b. R2K §17- Formation of a K requires a bargain in which there is a manifestation of mutual
assent for the exchange of consideration. There is no mutual assent if the parties attach
materially different meanings to the K.
c. No Assent in Presence of Fraud
d. Joke as a Offer?
i. Court will look at whether it was reasonable for one party to believe that the joke
was a promise, they'll look at the parties relationship, etc.
e. POLICY: Benefits and Problems With the Objective Test
i. Benefits: If the Cts allowed a subjective test then no Ks would be binding, they
would never be enforced, people would not enter into them, and commerce would
suffer. (EE). Persons who sign Ks would be sure to read them before the sign.
ii. Problems: Can bind people to K that don't want to be bound, or even if its unfair/not
efficient for them to be bound
.
B. Consideration
a. Definition: Consideration is a legal detriment suffered by the promisee in exchange for the
promisor’s promise—as basic rule, K not enforceable w/o consideration. What the promisor
gets in return for the price of the promise. Detriment to the promisse or benefit to the
promisor
i. Elements: (1) bargained-for-exchange and (2) detriment
b. POLICY: functions of consideration
i. Evidentiary provides evidence of the existence and terms of a K
ii. Cautionary make parties aware that they have made legal commitment
iii. Channeling provide objective basis for court to determine promise is contractual,
rather than mere generous impulse or tentative or informal expression of intent

c. Bargain Element: Promise given as part of a “bargain”—negotiation resulting in voluntary

assumption of obligation by one party upon condition of an act or forbearance by the other
i. R2K §75: To constitute consideration, a performance or a return promise must be
bargained for
1. Definition of Consideration:
Consideration for a promise is:
a. an act other than a promise or,
b. a forbearance, or
c. the creation, modification or destruction of a legal relation or
d. a return promise
bargained for and given in exchange for the promise.

14
 2. consideration may be given to the promisor or to some other person
ii. The consideration must also be ADEQUATE: a lot of courts feel uncomfortable
stepping in saying what is adequate, because the theory is that parties should decide
what something is worth and third parties shouldn’t interfere. However, cts don’t
like to enforce unbalanced exchanges, esp where the imbalance is severe. (see this
in things like duress, unconscianability, misrepresentation).
1. Sham/Nominal Consideration: Generally courts do not look at adequacy
of consideration (R2K §79)—BUT where “consideration” paid so small as
to be nominal, the court may conclude no real “bargain” present at all not
enforceable
iii. Adequacy Not Considered: R2K §79: Consideration does not require that the
performance or promises exchanged be of equal value. As long as legal detriment
has been suffered in exchange for the promise, the court does not inquire into its
value in relation to the promise
1. Exceptions: gross inadequacy (“shocks conscious, or result of fraud, lack of
capacity, duress, undue influence) & nominal consideration
2. POLICY: autonomy, not paternalistic (only protect for lack capacity)
3.
4. Hardesty v. Smith (1851): ct was considering whether a worthless
invention was good consideration for a promise to pay for it. Holding: bc
the purchaser examined it, and there was no fraud, or warranty, or mistake
of fact, he is the best arbitrer of whether the thing is of any value and
how great that value is to him. Here he got all the consideration he
contracted for.
5. Maughs v. Porter (1931): auction winner won an automobile at an auction
organized and advertised by the auctioneer and he refused to pay for the
automobile when it was delivered and refused to pay the auction winner the
value of the car. Rule: “a gift is a K without consideration, & to be valid,
must be executed. . . Delivery of possession of thing given or means of
obtaining it so as to make the disposal of it, irrevocable, is indispensible to a
valid gift” -> HERE IT WAS THE DELIVERY THAT MADE IT SO
THAT THE CAR DEALER COULDN’T GET THE GIFT BACK.
a. Tramp hypo: guy gives money to tramp to get free clothes and
walk away from the shop. Cardozo said no consideration here bc
this was a gift
b. WHEN IN DOUBT, LOOK TO SEE IF THERE IS A BENEFIT
TO THE PROMISOR – IF YES, THEN MOST LIKELY
CONSIDERATION
c. The promisor’s motive: the promisor’s motive must be to extract
the consideration…. Doesn’t matter if its their actual motive, it
matters what a reaonsable person would think their motive is. Also
doesn’t have to be your primary motive, may be one of many
motives u have for making the contract.

iv. Gifts: Promise to make gifts generally unenforceable b/c lacks “bargain” element of
consideration
1. Dogherty v. Salt: Aunt gave nephew note that said she would give him $
when died, but only evidence of this was one witness. Note was a
voluntary and unenforceable promise of an executory gift, and was NOT

15
 enforceable b/c there was NO consideration. No value received by aunt
for her promise.
v. Past Consideration: If promise made in return for detriment previously suffered by
promise no bargain no consideration

d. Detriment Element: Promisee suffers legal detriment-- relinquishment of a legal right

i. Could take form of
1. An immediate act (doing or giving something)
2. A forbearance (refraining from something) or
3. The partial or complete abandonment of an intangible right
ii. Hammer v. Sidway: Uncle promised (was the promise also an offer? Yes, it was.
Manifestation of willingness to enter into a bargain, so made as to justify another
person in understand that his or her ascent to the bargain would conclude it and form
a contract) nephew $5K if not drink and smoke until 21. Court used
benefit/detriment test, and found that a waiver of a legal right is enough detriment to
be consideration.
1. Note: If the Uncle promised $5K if nephew did not smoke pot NOT be
upheld, b/c giving up a right that is not legal is not consideration.

Restatement 2nd 81: Consideration as a motive or inducing Cause:

(1) “the fact that what is bargained for does not of itself induce the
making of a promise does not prevent it from being consideration for a
promise”
(2) the fact that a prmise does not solely of itself induce a performance or
return promise does not prevent the performance or return promise
from being consideration for the promise
Baehr v. Penn-o-Tex Oil (1960):

Rule: not only must a reasonable person believe that one of the promisor’s motives was to extract
consideration from the promisee, but a reasonable person must believe that the promise induces the
promisee to deliver that consideration. Baher tried to assert that his promise to forbear from suing in
exchange for D’s promise to pay rents was consideration – BARGAINED FOR PROMISE. CT
HELD: Evidence was insufficient to infer that Baher’s delay in filing suit was forbearance in
consideration of assurance of payment.
 Agreement of forbearance to sue may be consideration but need
something more than what the p has here which is that he didn’t institute
suit immediately
 Looks like P just deferred suit for his own convenience – he was on
vacay and waited till he got home to start suit
 Nothing that suggests D sought forbearance
 No evidence that either party took D’s assurances seriously
Neuhoff v. Marvin Lumbar and Cedar Co. (2004):
forbearance needs to be express or implied from circumstance

16
u cant just think in ur head that u didn’t plan on doing something
mere forbearance to sue on a claim w/o any promise either in express terms or by fair implication from all
the circumstances doesn’t form sufficient consideration
Springstead v. Nees (1908):
Restatement Second 74(1): u only have to be reasonable or honest about your
belief about something – u don’t need both
Facts: P and D were both kids of dad who died- dad only left property to 2 of the
kids and the other kids were pissed so the two kids told the other three that they
would sell the prop and give them the rest of it. They didn’t do so the kids who had
no prop sued.
Holding: ct found for the 2 kids who had inherited prop bc the other kids had no
colorable claim -> the property was never theirs to begin w. so there was no
consideration in this case, HOWEVER, had the siblings really thought the property
was theirs, they would have a reasonable claim bc it would be colorable

Forbearance: (Corbin): forbearance is not sufficient consideration if its made upon a claim
that you know isn’t valid. This is for public policy reasons bc we don’t want blackmail. Ie: u
tell ur neighbor that she has wrongfully trespassed on your property and cut down trees and
she has to pay u $500 so u won’t sue. If u know the trees are really on her prop, ur
forbearance is not consideration. HOWEVER, if u really think the trees are on your property,
even if they are on her property, its still consideration because your claim then is
REASONABLE or HONEST. (Restatement 74) –DOUBTFUL OR COLORABLE CLAIM –
when u are wrong in ur belief but its still honest or reasonable so it counts as consideration

e. Promise in exchange for a promise: bilateral contract

f. Promise in exchange for an act: unilateral contract
g. Executory exchange: when no one has done anything yet – so both parties have
made promises but neither has performed yet- u are free to back out of these
until one of the parties has reasonably relied in some way
i. Pre-Existing Duty Rule: One does not suffer detriment by doing or promising to do
something that one is already obliged to do or by forbearing to do something that is
already forbidden no consideration. ie: if I tell u will sell u something for 10
dollars then ask you for five more and u say okay, and then later on don’t want to
give it to me, u don’t have to bc I originally only said 10
1. Purpose: prevents coerced modification
2. Modification: If parties to an existing K agree to modify the K for sole
benefit of one of them modification usually unenforceable for lack of
consideration
a. Exception: (R2K) where modification is “fair and equitable” in
view of circumstances not anticipated
3. Shortcomings of PED Rule
a. Can evade by simply adding some minor new detriment
b. Rule covers all modifications, even price increases
4. UCC Abandons PED Rule
a. §2.209 replaces PED Rule with Good-Faith Test
h. Illusory Promises (R2K §77)
i. Mutuality of Obligation: When consideration consists of the exchange of mutual
promises, the undertakings on both sides must be real and meaningful.
1. De Lost Santos v. Great Western Sugar Co (1984):

17
 a. De los santos was a trucking company that “agreed” to transport in
its trucks such tonnage of beets as may be loaded by Great Western
from Great Western’s supply of beets. De Los Santos’s
compensation depended on how many beets it carried for Great
Western. At the time of the agreement De Los Santos knew that
GW had entered identical agreements w other carriers. When GW
terminated the agreement w/ De Los, De Los claimed that GW
broke agreement while GW said they had right to use other
transporters
b. Holding: G W made “no promises at all other than the promise to
pay for the transportation of those beets which were in fact loaded
by GW onto trucks of De Los” GW had no obligation to load
any beets so they had the right to terminate De Los - > K VOID
FOR LACK OF MUTUALITY OF OBLIGATION (GW
DIDN’T HAVE TO DO ANYTHING)
c. Where there is no mutuality of obligation, neither party can sue
2. Weiner v. McGraw-Hill (1982)
a. FactS: Mcgraw enticed Weiner to leave his job and come work for
them. They told him that they wouldn’t fire him basically w/o just
cause. He worked “at will” for 8 years then fired for no good
reason. He sues bc placed “good faith reliance” on the company in
leaving old job
b. D’s defense: lack of mutuality bc P had a free way out of
employment whereas they couldn’t fire w/o just cause
c. Holding: lack of mutuality but didn’t matter here, bc u don’t
need mutuality when a promisor receives OTHER VALID
CONSIDERATION. the other consideration here is that P bought
“just cause” – they couldn’t fire w/o just cause… this was the price
of the promise by giving up these other offers. So even though he
could quit at any time, his quitting and coming to work for the
employer was the consideration to support the employers promise.
3. Mattei v. Hopper (1958):
a. D agreed to sell his land to P so that P could construct a strip mall.
P had 120 days to obtain leases for the mall. While the 120 days
were running, D notified P that she wasn’t selling. Ds arg was that
the deposit receipt was only an offer by her which could only be
accepted by the P notifying her that all the leases were obtained.
She’s saying lack of mutuality. This was a satisfaction clause (Ds
performance was conditioned on P obtaining satisfactory leases).
Consideration here was the promises
b. Holding: many cts interpret satisfaction clauses to require “good
faith” on the part of the promisor (the party who must be satisfied)
-> your decision has to be reasonable or honest. The satisfication
clause is the reason this was not void.

ii. Illusory Promise (lacks mutuality of obligation) NO CONSIDERATION

1. A promise that isn’t real -> when one of the promiseees leaves a party free
to perform or withdraw from the agreement at his own unrestricted pleasure
(ie: I will give you $100 for your dog, but only if you decide you want to
sell your dog)
2. Wood v. Lucy (1917):

18
 a. Wood had the exclusive right to place lucy’s indorsements of
fashion designs on clothing and to place lucy’s own designs on sale.
The parties agreed to split the profit. After lucy plaeed her
indorsement on fabrics herself and kept the profits wood sued her
for breach of k
b. Lucy’s defense: wood had not obligated himself to do anything so
agreement was unenforceable- no promise he would use reasonable
efforts to place her indorsements or market her designs – lack of
mutuality
c. Holding: implied mutuality of obligation – implied promise that
wood would use reasonable efforts to do this stuff for her. “ a
promise may be lacking and yet the whole writing may be instinct
w/ obligation” here the k was instinct w obligation bc: she granted
him an exclusive right, she wouldn’t get any money unless he made
some reasonable effort, he had to account monthly in order to
determine how much he owed lucy -REASONABLE EFFORTS
STANDARD

C. Promissory Estoppel
a. R2K §90: A promise which the promisor should reasonably expect to induce action or
forbearance on the part of the promises or a third person and which does induce such action
or forbearance is binding if injustice can be avoided only by enforcement of the promise
i. Evolved from defense of Equitable Estoppel (relied on statement of fact to detr.)
ii. Drops the part that said the reliance had to be “definite and substantial in character”
iii. It is a reliance theory
iv. Two views
1. Substitute for consideration K law expectation damages, OR
2. Independent basis for liability Tort law restitution damages
b. Elements
i. Promise made (“an assurance in whatever form of expression given, that a thing will
or will not be done” must be “clear and definite”)
ii. Reasonable expectation by promisor that it will induce reliance in form of action or
forbearance (look to see whether the promisees reliance is reasonable) (see reliance
thing come about in Seavey)
iii. Promise does induce action or forbearance detriment (promisee must act bc of the
promise)
iv. Injustice can only be avoided by enforcing the promise (public policy arg)
c. Grautitous Promises (before pe was its own theory- when they still used consideration
to justify their actions)
i. Kirksey v. Kirksey: brother in law invited his sister in law to move to his land after
his brother died. He promised to give her a place to live and so she left the land she
was planning to purchase and moved to her brother in laws land. After 2 yrs he
asked her to leave and she wanted the promise enforced. Held: not bargained for
consideration b/c promise of D to sister in law that if came down to see him she
would get a house merely a promise made as a gift.
ii. Ryerss v. Presbyterian Congregation of Blossburg:
1. Ryerss promised the congregation $100 to help build a church, they did so,
then he reneged.
2. Holding: ct enforced this promise made to a charity, focusing on their
reliance on the promise and insisting that that reliance proved the promise

19
 to be “abundantly supported” by consideration. consideration here was the
labor, trouble, expense to which he subjected the party as well as the benefit
he would get from an enterprise wherein he was interested. Winnie: thinks
this was a gift
iii. Seavey v. Drake (1882):
1. Facts: dad gave son property, upon which son made substantial
improvements, but he didn’t give him the deed to it before he died. This
was an oral promise too.
2. Holding: “a promise of a gift of land is enforceable if the promise
induces the promisee to improve the land”. Said promisees reliance
“constituted in equity, a consideration for the promise”
3. NEW RULE : “if u reasonably and justifiably rely on a promise and
the person promising knows you are relying on that promise and if
promise isn’t enforced and if its not you are going to suffer a detriment
ct will enforce the promise”
4. Note: This case might be decided differently today under doctrine of
promissory estoppel which had not yet been developed
iv. Siegel v. Spear and Co. (1923):
1. D told P that he would store his furniture in their warehouse free of charge.
D said he would take care of ins in case anything happened. There was a fire
and all of Ps furniture destroyed. D never got the ins. No consideration bc
store agent got nothing in exchange for storing Ps furniture
2. Holding: consideration here is the confidence placed in the D to execute
the trust. Consideration and reliance are 2 diff things but here the ct seemed
to be relying on reliance
d. Expansion of Promissory Estoppel into Realm of Bargained for Transactions:
i. Wheeler v. White (1965):
1. ct enforced White’s promise to procure or make a loan so that Wheeler
could develop his property, after Wheeler relied by tearing down an existing
building and preparing the property for new construction
2. the elaborate k was unenforceable bc the parties hadn’t agreed on key terms
(ie interest rate of loan) – failed for indefiniteness
3. HOWEVER, even though there was a k and it was nonenforceable, ct still
enforced this agremenet on the basis of pe!!!
4. Rule: if theres a promise that’s made to influence the conduct of the
promisee and which induces this conduct and this conduct by the promissee
must be done before the promise can start to be enforced, and the promisor
knew this, u can use promissory estoppel
ii. Hoffman v. Red Owl Stores (1965):
1. Facts: Red Owl told Hoffman that it would give him a Red Owl franchise
for 18k. during prolonged negotiations Red Owl kept “upping the ante” by
asking for more money and add’l commitments from the hoffmans. Red
Owls representations induced Hoffman to sell the fixtures and inventory of
their grocery store and to buy and sell a bakery and to commit to a new
building lot all to become a franchise. Deal never went through. We never
had an agreement w/ consideration here bc this was all in the negotiations
phase
2. Holding: Red Owl’s representations induced the Hoffmans to rely to their
detriment.
3. Rule: under pe, a party can be liable for representations made during
negotiations prior to the culmination of the k!!!!!

20
 iii. Elvin Asosciates v. Franklin (1990):
1. Enforced Franklin’s promise to appear in a broadway musical even though
she and the producer had contemplated but had not yet signed a final
agreement. Franklin’s defense was “no signed k”
2. Holding: judgment for Elvin bc she had informed the producer she had
performed and had shown enthusiasm for the project. She should have
known producer would commit major expenditures before she would be
available to sign the k
iv. Local 1330 v. Steel Corps (1980)
1. Facts: Ps are suing to ask that the two plants be kept open at the risk of destroying
their lives if they are closed. These plants were obsolete and no longer profitable.
They are arguing that there was forbearance here to keep the plants open if the
plants were to remain profitable. D’s defense is that plants are not profitable and
they have an absolute right to close them. Profitable was a “condition” on their
promise. Held: no prom estop bc none of the claims were “definite promise”
condition never ach’d etc. Winnie: the ps in this case should have known better.
Didn’t matter even if the company said they would stay open till they were
bankrupt!

e. 3 main categories where PE is applied:

offer-acceptance- reliance (Wheeler Case)
3. offer-reliance- no acceptance
3. no offer- reliance- no acceptance
f. POLICY
i. Autonomy—keep you to your word
ii. Efficiency/Social welfare—better off enforcing, increase productivity
iii. Promissory estoppel is still not very successful bc:
1. Cts are reluctant to apply the theory in exchange settings bc it subverts imp
doctrines of k law that bar enforcement
2. Usually not someones primary theory and ppl bring weak claims
3. Usually not available when an enforceable k governs the situation
4. Usually only get reliance damages
.

E. Restitution for Unjust Enrichment and Moral Obligations

a. Unjust Enrichment: independent basis of liability where no K into existence. Recipient of
benefit “unjustly enriched” at expense of grantor (not a gift). Theory is not based on
agreement btw the parties, but on the justice of requiring one party to disgorge a benefit
rec’d from the other party. When a party confers a benefit on another party and it would be
unjust to retain the benefit w/o paying for it !!!! also called: restitution, quantum meruit,
quasi contract, contract implied in law
b. Elements of Unjust Enrichment
i. P conferred benefit on the D
ii. D has knowledge of the benefit
iii. D has accepted or retained benefit conferred
iv. Inequitable for D to retain the benefit w/o paying fair value for it
c. Exceptions to unjust enrichment:
i. Gratuitous – no injustice in retaining a gift
ii. Intermeddler- one who gives a benefit w/o giving the other the opportunity to reject
it (ie: u paint someones house w/o asking and the value of their house goes up, u
have no grounds bc they didn’t ak for u to paint the house)

21
d. Cases in which unjust enrichment applies:
i. Unenforceable agreements
1. Keeping the benefit is not unjust
2. no benefit
a. Gay v. Mooney (1901):
i. P allowed his uncle to come live with him in exchange for
the uncle devising a dwelling to the P’s kids
ii. This was not an agreement in writing and under the SoF it
would have to be to be enforceable, therefore, u have an
agreement w/ consideration that is not enforceable.
iii. Holding: the service was not a gift but a sale and therefore
the one who sold the service has the right to be paid for it
from the one who bought it
b. Kearns v. Andree (1928):
i. P built a house for D to Ds specifications – they had an oral
agreement that D would but the land for $8500. P made all
changes and secured bank mortgage for $4500. After this D
backed out and P was forced to sell house for $8250.
ii. Holding: D is liable to P because D requested the services.
Therefore, even if u choose not to accept the benefit, you
have benefited to the extent of the fmv of the services
rendered. The work done to adapt the property to the needs
of the D was done in good faith and in the honest belief that
agreement was sufficiently definite to be enforced.
iii. Winnie: don’t use this as a paradigm case for ue bc this
is a hybrid where this looks more like reliance.
c. Anderco v. Buildex (1982):
i. Parties had different ideas about what the k entailed bc of
miscommunications.
ii. Ct says theres no implied or express k bc there was never a
meeting of the minds, which is essential for an express k.
also, bc the c t knows that the D rec’d some benefit, but its
impossible to determine the benefits worth the ct leaves
the parties where they are
ii. Breach of an enforceable k:
1. Injured parties may recover under ue
a. Posner v. Seder (1903):
i. P and D entered into a k where D was to employ P for a
year and pay him per week w/ or w/o overtime. D broke k
by discharging p.
ii. Holding: he could have sued for either breach of k or unjust
enrichment here. If he sues on ue, he is trying to recover for
the value of his services.
b. Kelley v. Hance (1928):
i. P and D entered into a k in which P agreed to excavate to
the proper level and construct a concrete sidewalk and curb
in front of D’s property before it got cold- D didn’t start till
way later when he had originally agreed to start work w/in a
week. P removed a strip of earth and then quit on k
ii. Holding: P cannot recover for partial performance of work
done. This is bc u can only sue for ue when there is a

22
 voluntary acceptance of a benefit (but here this benefit
could not be rejected). a voluntary acceptance of a
benefit implies a promise to pay
iii. Cant use substantial performance here bc the contractor
willfully abandoned the project and didn’t substantially
perform
2. Breaching parties may recover under ue
a. Britton v. Turner (1834):
i. Facts: an employer hired an employee to work for one year
for the sum of $120 but the employee quit w/o good cause
after 9.5 months. The employee wanted to recover for the
work he performed. -> wanted to recover the reasonable
value of his labor
ii. Holding: found for employee for following reasons:
1. If u didn’t allow recovery, it would penalize an
employee who tried to fulfill the k but failed, bc
what if he worked 11/12 months for a k but didn’t
get paid
2. This was a day-to-day k
3. General understanding in community that u
compensate for the work performed
4. Didn’t expressly say in k that he could recover
nothing if he didn’t complete the k
5. Didn’t want to have a situation where employers
made the work conditions really bad near the end of
the k to induce the employee to quit

In this case, the employee would only be able to recover the price of
the k and not the fmv of his labor. Also, breaching party is liable
for the damages to the employer bc of his breach (ie: employer had
to pay a substitute employee at a higher rate). If the damages are
greater than the benefit conferred on the employer, the employee
cannot recover at all.

iii. conferral of a benefit in the absence of a k:

1. have to show: that conferring party did not intend to make a gift, that
benefit was not forced upon the recipient, and that justice requires that
the party receiving the benefit pay for it (this means that party who was
getting the benefit would have to think that the other party wanted to get
paid and that it was not a gift)
2. business relationships
a. Bloomgarden v. Coyer (1973):
i. Bloomgarden introduced two parties to form a business deal
btw them. When asked what he wanted as his
compensation for this fxn, he told them that he just wanted
to ensure that his company got some work out of what the
other two companies were going to do. After awhile, he
finally asked for a finder’s fee. he didn’t ask for any
compensation until after all the work was done.
ii. 2 theories here of what P is claiming:

23
 1. contrat implied in fact: true ks containing all the
necessary elements of a binding agreement but they
aren’t written or oral. Rather they are inferred from
the conduct of the party. U have to show that the
recipient knew u expected remuneration for your
services, which here clearly based on
Bloomgarden’s actions, Coyer could not have know
that .
2. Quasi Contract: (unjust enrichment):
a.
b. You have to know at the time the benefit
is being conferred that u want payment
and that the other person knows u expect
payment.
c. These benefits have to be understood not
be rendered gratuitously and must be
beneficial to the recipient.
d. Compensation is not mandated where
the services were rendered simply to gain
a business advantage
e. No unfairness results form the denial of
compensation to the claimant who had
no expectation of personal remuneration
at the time of performance
b. Sparks v. Gustafon (1988):
i. Gustafon managed building for Sparks. Sparks died and
Sparks son took over. Gus never requested compensation
for his services even though he spent a lot of time managing
and collecting rents on the building. Wound up running the
business into a ditch.
ii. Holding: ct finds for P bc he rendered extensive business
services for which one would ordinarily be expected to be
paid
1. Gus didn’t foist the services
2. Ct looked at expectation of payment, which here
bc he had waited so long, didn’t really seem like he
expected to be paid
3. No benefit conferred here really either bc he ran
it into a ditch
3. personal relationships:
a. Watts v. Watts (1987):
i. Facts: parties cohabited for more than 12 yrs, joint bank
accts, joint purchases, filed joint income tax returns, and
were listed and husband and wife on other legal documents.
When they broke up, the woman sought ue claim bc she
wanted to share in the wealth accumulated during the
relationship.
ii. Holding: such a relationship and joint acts of financial
nature can give rise to an inference that the parties intended
to share equally.

24
 iii. Rule: if u act as if u are married, the party receiving the
benefit reasonably should understand that the other
party expects to share in the wealth of the relationship.
iv. Claim for unjust enrichment is valid b/c (1) there were
benefits conferred on D by P, (2) there was appreciation or
knowledge of benefits by D and (3) D accepted and retained
benefits under circumstances making it equitable for the D
to retain the benefit
v. Winnie: cap off your ue arg with “fairness” : why should
he take everything? They were in this together. This is bc
ue is grounded in the equitable principle of fairness.

Restatement of Restitution: §1: Unjust Enrichment: A person who has been unjustly
enriched at the expense of another is required to make restitution to the other

Definitions: Implied Ks

iv. K Implied in Fact: Inferred from parties conduct, not solely from words—fact-
finder must interpret parties conduct to give definition to unspoken agreement
1. ie: Person awake when doctor performs treatment, failure to say no infers
agreement to pay for treatment
v. K Implied in Law: Legal fiction—an obligation created by the law w/o regard to
parties expression of assent by words or conduct—adopted to provide remedy where
one party was unjustly enriched (received benefit under circumstances making it
unjust to retain it w/o giving compensation) aka. Quasi-Contract
1. ie: Person unconscious law implies agreement to pay
F. Promissory Restitution (Moral Obligations)
i. Common Law Rule: Moral Promise Not Enough
1. A Moral Promise, or a Promise for Past Consideration is Not Enough
2. Contract law will not enforce promises for past consideration (ie: making a
promise after u already get the benefit- ie: u mow my lawn and then I tell u I
will give u $100, no consideration bc I didn’t get anything from u in
exchange for my promise)
3. Mills v. Wyman: (1825) past consideration:
a. M took young man in, cared for him. After M gave services, W, his
father, promised to pay. W never paid, M sued.
b. Rule: Court says moral obligation is not enough for
consideration, and a promise after the services are rendered is
not binding Majority rule in most states
c. Exceptions are for bankruptcy, debt by infants and SoL
4. Restatemnet Second 82(1): promise to pay for a past k is enforceable if the
indebtedness is still enforceable or would be except for the effect of the SoL
a. Rule: for a moral obligation to support a subsequent promise to
pay, there must have existed a prior legal or equitable
obligation, which for some reason had become unenforceable,
but for which the promisor was still morally bound
ii. Restatement View: Material Benefit Rule
1. Material Benefit Rule: if a person receives a material benefit from another
that is not gratuitous, a subsequent promise to compensate the person is
enforceable. §86 adopts this rule

25
 2. R2K §86: Promise for Benefit Received
a. Promise made in recognition of benefit previously received by the
promisor from the promissee is binding to the extent necessary to
prevent injustice
b. Promise not binding if (a) the promise is a gift (b) promisor not
unjustly enriched or (c) the value of the promise is disproportionate
to the benefit.
3. Elements
a. Promisor has been unjustly enriched by benefit previously received
from promise
b. The benefit was not given as a gift
c. The promisor subsequently makes a promise in recognition of the
benefit
4. Webb v. McGowin: P saves D’s life from a falling pine block in a factory,
unbeknownst to D, and incurs debilitating injury. D promises afterward to
compensate P for injuries. D dies and estate stops payment. Court holds
that moral obligation is enough consideration where the promisor has
received a material benefit. W saving his life was a material benefit
Restatement view=minority rule
5. Edson v. Poppe (1910): Modified doctrine of moral obligation
a. Facts: P at the request of D dug a well on the Ds prop where P was
a tenant which cost P $ and increased the prop value. After seeing
well D agreed to pay P the reasonable value of digging and casing
of the well but then refused this
b. Holding: Ds subsequent promise to pay is enforceable and
binding and supported by sufficient consideration
i. Rule: “modified doctrine of moral obligation” -> a
promise to pay for a material benefit that was previously
conferred is enforceable
6. Debt, bankruptcy, infancy -> third approach under Restatement
7. Harrington v. Taylor (1945):
a. Husband assaults wife who runs to neighbors house. Wife knocks
hubby down and tries to ax him in the head but neighbor intervenes
and takes ax to hand. Husband promise to pay neighbor for
damages but only pays a small sum
b. Held: dimissed her claim saying it was “voluntary” or
“humanitarian”
c. Husband made the promise after he rec’d the benefit so he didn’t
extract anything from neighbor in return for his promise
b. POLICY
i. Posner: The term smacks of morality, but it can be better explained on economic
terms. For a doctor, to provide free service would be prohibitive if he was not
reimbursed, and so he would not offer his services to help someone unless he knew
he was getting paid. Plus, courts that apply restitution are reasonably confident that
if the parties would have contracted for these things, had they been able to

G. Obligation Arising from a Statutory Warranty;

1. concerns the quality of performance and cts will enforce them

26
 A. Keith v. Buchanan (1985):
a. Facts: P purchased a sailboat from D. P was very knowledgeable about sailboats
but took D’s word that the vessel was “seaworthy.” Turns out it wasn’t. Relied on
UCC 2-313: express warranty: affirmation of fact: “any description of goods
which is made a part of the basis of the bargain”
b. To determine whether a statement made by a seller constitutes an express warranty:
Need to decide in these cases whether a statement by the seller is an “affirmation of
the fact or promise” or “merely the seller’s opinion or commendation of the goods”
c. Holding: ct held there was an “express warranty”
i. Look at: “what statements of the seller have in the circumstances and in
obj judgment become pt of the basis of the bargain?”
ii. HOWEVER, no “implied warranty here” -> the major question in
determining the existence of an implied warranty of fitness for a
particular purpose is the reliance by the buyer upon the skill and
judgment of the seller to select an article suitable for his needs (here the
buyer didn’t rely on seller’s statements bc he had extensive knowledge of
sailboats and knew what he wanted, did research)
iii. Implied Warranty: Section 2-315 of UCC “where the seller at the time
of contracting has reason to know any particular purpose for which the
goods are required and that the buyer is relying on the seller’s skills,
implied warranty that goods will be for that purpose”
B. Webster v. Blue Ship Tea Room (1964):
a. Facts: girl chokes on fish bone in chowder at restaurant. She was a native NE. CoA
is based on UCC 2-314 – standard of merchantability: has to be fit for ordinary
purpose. HOWEVER, section (3)(b) : when u examine the goods yourself, you
can’t rely on the warranty- she had stirred the soup
b. Holding: no breach of implied warranty -> as someone who eats chowder she
should have reasonably anticipated that there would be a bone in her chowder

(3) IS A WRITING REQUIRED?

IV. STATUTE OF FRAUDS
A. Basic Rule: A few types of K are unenforceable unless they are in writing
a. POLICY: Intended to prevent enforcement of falsely alleged K through perjured testimony.
However, when K really made orally, SOF can be used by the party seeking to evade K
b. 3 Questions to Ask
i. Does the K fall w/in SOF?
ii. If K falls w/in SOF, does it satisfy the Writing Requirement?
iii. If no, does K fall w/in an Exception to SOF?
B. SOF: Common Law
a. Classes of K that fall w/in SOF: R2K §110:
i. Executor/Administrator—K answer for duty of decedent
ii. Suretyship—K answer for debt or duty of another
1. Schorr v. Holmdel (1975): “self interest exception to writing”
a. Construction co wound up not paying everything they owed to an
engineering co. Sugarman (Ds lawyer) owned a lot of stock in the
construction co and agreed to personally pay all their outstanding
debts. We have a letter and 2 checks here assuring the ps of this ->
promise made for the debt of another.

27
 b. Holding: judgment for P bc tthis was mainly done for D’s self-
interest. Apply the “leading object or main purpose rule” ->
“when the leading object is to subserve some interest or purpose
of one’s own, ur promise does not fall within the SoF and
therefore doesn’t have to be in writing”
c.
iii. Marriage—K made upon consideration of marriage
iv. Land K—K for sale of an interest in land
1. Jonesboro v. Cherry (1965):
a. Appellees offered to sell land and then refused to convey the
property. Contract didnt state conditions and terms of sale and time
of payment, so is this writing sufficient?
b. Holding: judgment for appelles – “terms and conditons of the
sale must be state in written memorandum in order to take
transaction out of SoF”
v. One Year—K not to be formed w/in one year from making thereof – need it in
writing when it can’t be performed within one year
1. Effective date: runs from date of agreement, not performance
2. K NOT w/in SOF One Year Provision
a. If K possible to complete w/in one year not w/in SOF, even though
actual performance may extend beyond one-year period
b. If K measured by a lifetime, not w/in SOF b/c it is capable of
performance w/in a year since person can die at any time
3. McIntosh v. Murphy -I’ll hire you for a year but really a year and a day
case –
a. Rule: 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 the action or forbearance is
enforceable notwithstanding the Statute of Frauds if injustice can be
avoided only by enforcement of the promise. –
b. To determine if injustice can be avoided the courts look at
i. 1. the availability and adequacy of other remedies
ii. 2. the character of the action or forbearance in relation to
the remedy sought
iii. 3. the extent to which the action or forbearance
corroborates evidence of the making and terms of the
promise or the making and terms are otherwise established
by clear and convincing evidence
iv. 4. the reasonableness of the action or forbearance
v. 5. the extent to which the action or forbearance was
foreseeable by the promisor
b. Writing Requirements
i. General Requisites of a Memorandum: §131: Memo can be written in any form
(note, handwriting, fax, etc..) but it must:
1. Identities of parties to the K
2. Indicate K’s subject matter
3. Contain K’s essential terms
a. Who, What, When, Where & How much
4. Contain signature of the party against whom the enforcement is sought
ii. Several Writings: §132: The memorandum may consist of several writings if

28
 1. One of the writings is signed and
2. Writings clearly indicate they relate to the same transaction
iii. Signature: §134: Signature to a memorandum may be any symbol made or adopted
w/an intention, actual or apparent, to authenticate the writing as that of the signer
c. Exceptions to SOF
i. Part Performance: A P who has rendered part performance under an oral
agreement falling w/in the SOF may recover in quasi-K for the value of the benefits
he has conferred upon D
1. Winternitz v. Summit Hills Joint Venture: P operated pharmacy, near end
of lease told D he would like to renew, mentioned might sell pharmacy and
asked if he would be able to assigned the renewed lease. D orally agreed to
renew lease and said P could assign if new tenant financially sound. P found
tenant, but D refused to renew lease—wanted to negotiate a new lease with
the buyer. Ct finds that P "partially performed," he relied on the transfer of
land, and changed his position, so the SOF does not apply
ii. Promissory Estoppel (Reliance): §139: A promise which the promisor should
reasonably expect to induce action or forbearance on the part of the promises or a
third person and which does induce the action or forbearance is enforceable
notwithstanding the SOF if injustice can be avoided only by enforcement of the
promise. The remedy granted for breach is to be limited as justice requires
1. Alaska Democratic Party v. Rice: R had oral agreement to become
executive director of the ADP for 2 years (thus can’t be performed in one
year w/in SOF). R left her current job and moved to Alaska. But then
ADP withdrew its offer of employment. Issue: can PE enforce a contract
that falls within the statute of frauds? Yes- R relied on promise, so she gets
damages despite SOF
C. SOF for Sale of Goods under UCC
a. Classes of K that fall w/in SOF
i. §2.201—K for sale of goods for price of $500 or more
ii. §1.206—K for sale of personal property for $5,000 or more
b. Writing Requirements: §2.201
i. Writing sufficient to indicate K was formed
ii. Signature of party to be charged
iii. Quantity term (can be estimate)
1. Price, time, place of payment or delivery can all be omitted
c. Exceptions to UCC SOF
i. Goods Specially Manufactured §2.201(3)(a): No writing is required if seller began
manufacture goods specially made for buyer
ii. Estoppel by Pleading or Testimony §2.201(3)(b): No writing required if party
against whom enforcement is sought admits in his pleading, testimony or otherwise
in court that a K for sale was made
1. Note: This provision marks change from common law rule, which permitted
D to admit that an oral argreement had been made and at same time use SOF
as a defense.
iii. Goods Accepted or Paid For (Part Performance) §2.201(3): No writing required
w/respect to goods for which payment has been made and accepted or which have
been received and accepted.

29
(3) WHAT DOES THE K MEAN ?
V. PRINCIPLES OF INTERPRETATION & THE PAROL EVIDENCE RULE
A. Principles of Interpretation
a. Problem: Parties sometimes fail to express their assent adequately b/c left material aspect of
their agreement indefinite (terms vague, ambiguous, omitted, or unresolved)
b. General Rules and Definitions
i. No K comes into being if
1. A material aspect of agreement is left indefinite by the parties and
2. Uncertainty cannot be resolved by process of interpretation or construction
ii. But Court will try to interpret K when evidence parties intended to form K
1. UCC §2.204(3) and R2K §33(2): K should be treated as reasonably certain
if language of agreement, interpreted in context and in light of legal rules,
provides enough content to establish an intent to K
iii. Interpretation: inferring meaning from facts—evidence of what the parties said and
did and the circumstances surrounding the agreement
iv. Construction: inferring meaning from law—what the parties probably would (or
should) have meant
c. Order of Interpretation
i. Intended Meanings of the Parties
1. R2K §201: (Whose Meaning Prevails)
a. Parties attached the SAME meaning to a promise, agreement,
term interpreted in accordance w/that meaning. Cts will enfrce
this meaning even if it contradicts objective interpretation of the
language
b. Parties attached DIFFERENT meanings interpreted in accordance
w/meaning of one party if the other party either knew/had reason to
know of the meaning attached by the former
c. Berke Moore v. Phoneix:
i. Facts: dispute over what “concrete surface included in the
bridge deck” actually means, Ct holds that mutual
understanding of parties rule- when the understanding of
one is the understanding of both no violation of pe – won’t
allow the understanding of one however
2. When Special Meanings Are In:
a. if u show some type of ambiguity
b. reasonably susceptible to meaning u want to offer
c. must be communicated (can’t have a special meaning in your head)
d. industry terms
e. 201(2) of Restatement- if other person knew or had reason to know
of meaning and u haven’t objected to it, but u don’t have reason to
know they are thinking otherwise
f.
ii. Language of Parties in Forming the Agreement
1. Both UCC §§1.205(4) & 2.208 and R2K §203(b): give greatest weight to
express terms

30
 a. Patent Ambiguity: two different uses of a word (ie: bank—money
or river)
b. Latent Ambiguity: term clear on face but could have different
meanings in light of extrinsic facts/evidence (ie: “chicken” above)
2. In seeking meaning of ambiguous or other indefinite term:
a. Modern courts generally reject “plain meaning rule”
b. Look at ENTIRE CONTEXT of parties dealings and will recognize
an interpretation that departs from dictionary meaning of word when
evidence establishes parties meant it in a different sense

iii. Course of Performance: UCC §2.208, R2K §202(4)

1. AFTER parties begin performing K, their conduct in proffering and
accepting, or otherwise reacting to performance may provide evidence of
what was intended by the indefinite term

iv. Course of Dealings: UCC §1.205(1), R2K §§202, 203

1. Parties conduct in PRIOR dealings may provide information that helps to
interpret a term that has generated dispute in the present transaction
a. Transaction must be substantially similar
b. Term in controversy must have been present in earlier dealings
c. Past conduct must be relevant to meaning in issue
v. Trade Usage: UCC §1.205, R2K §202(5)
1. Usage must be pertinent to term in issue
2. Usage does in fact exist in trade or market in which the transaction occurred
3. Both parties must be sufficiently connected to trade or market in question
4. Usage must not be excluded by/incompatible w/express terms of agreement
vi. Implied Terms (Gap Fillers)
1. Gap Filler—provision legally implied into K to supplement or clarify its
express language—standard terms supplied by law. When the ct decides
that parties left an important term out. Will employ the objective
interpretation strategy – ct enforces what a reasonable person would believe
a k means, not necessarily what the parties actually intended.
2. Common Law (some examples)
a. Haines v. City of NY: If parties to a K do not specify its duration, it
will be presumed that the parties intended to k for a reasonable pd of
time-
Exception: This does not apply to contracts of employment
or exclusive agency, distributorship, or requirement Ks
which have been analogized to employment Ks
b. If parties do not state that rights under a K are personal to the
oblige, the oblige may transfer (assign) those rights to another
c. If K does not provide for the sequence of performance, it is
presumed that when both performances are a single instantaneous
act, they must be made concurrently…etc.

3. UCC Article 2 (some examples)

a. Unless agreement expresses otherwise, §§2.312, 2.314, 2.315 imply
certain minimum warranties that a seller makes

31
 b. If parties do not specify price of goods, §2.305 infers they agreed to
reasonable price unless apparent intent otherwise. If payment terms
not expressed, §2.307, 2.310 assume COD.
c. In requirements/output K, §2.306(1) implies both a good faith and
reasonableness obligation on parties to determine quantity
d. Principles (Maxims) of Construction/Interpretation
i. Primary purpose rule: If the primary purpose of the parties in making the K can be
ascertained, that purpose is given “great weight” (§202(1))
ii. Interpret K as a whole: A writing that forms part of the same transaction should be
interpreted together as a whole. (§202(2))
iii. Negotiated terms control standard terms: A term negotiated b/w the parties will
control over a standardized portion of the agreement (ie: boilerplate) (§203(d))
iv. All terms are made reasonable, lawful, and effective: “Ut res magis valeat quam
pereat,” “The thing should have effect rather than be destroyed.” Also prefer
interpretation making term reasonable and lawful. (§206)
v. Public policy preferred: If public interest is affected by K, that interpretation or
construction is preferred which favors public interest
vi. “Contra proferentum,” “All things presumed against opponents”—ambiguous term
construed against drafter (§206)
vii. “Noscitur a sociis”: “Known from its associates”—when series of words used
together, the meaning of each word in the series affects the meaning of others
viii. “Ejusdem generic”: “Of the same kind”—a general term joined w/specific one will
be deemed to include only things that are like the specific one
ix. “Expressio unius est exclusio alterius”: “The expression of one thing excludes
another”—if one or more specific terms are listed w/o any more general or inclusive
terms, other items, although similar in kind are excluded

B. The Parol Evidence Rule

a. Basic Rule: Where parties execute a writing that is/intended to be a final expression of their
agreement no parol ev. may be admitted to supplement, explain, contradict it. If writing
not final and complete expression of agreementconsistent, but not contradictory parol
evidence may be admitted to supplement or explain those parts that have not been finally
expressed
i. Parol evidence—evidence of alleged terms not incorporated into the written
memorial of agreement, but claimed by one of the parties to have been agreed to,
either in writing or orally, at some time before its execution
ii. Parol: anything that came before the making of the k or at the time of the making of
the k.
iii. any evidence after the making of the k to change the terms can always be admitted
bc that’s a modification
iv. Full integration: writing the parties intended to be complete on all terms
v. POLICY: functions of PER
1. Prevents injustice: excludes evidence that is probably unreliable or dishonest
2. But causes injustice--preventing party from proving what actually agreed
3. Efficiency: efficient use of court time, efficient transactions—encourages
parties to record agreement fully
b. 3 Kinds of PE Rules:
i. Plain Meaning Rule: if theres no facial ambiguity, no extrinsic evidence
(Greenfield)

32
 ii. Traynor Approach (CA Law ): 2 Step Approach: (words have no definite
meaning)
1. Allow ct to get all credible evidence in on the meaning that one party is
alleging other than the plain meaning to see whether or not this term or word
in the k is reasonably susceptible to that meaning being put forth
2. If the ct after hearing the obj and subj evidence determines that terms is
reasonably susceptible to meaning being proffered, give evidence to jury so
jury can determine whose meaning prevails
iii. NY Version: if no facial ambiguity, will allow party who’s claiming its ambiguous
to put in obj evidence to show meaning other than plain meaning –Will allow in
course of performance, course of trade,
1. Course of dealing: previous relations btw the two
2. Course of performance: that specific k
3. Usage of trade: trade customs
c. Two Views of PER
i. Williston view: Judge should decide whether integration and what type
1. Merger Clause: clause indicating that writing constitutes the sole
agreement between the parties.
a. Conclusively establishes document is a TOTAL INTEGRATION,
2. “Four Corner’s Approach: Judge determine whether integration by
looking exclusively at the document—judge does not look beyond the “four
corners” of the document in making decision.
a. “Reasonable person” standard—interested in whether reasonable
people in position of contracting parties would have naturally put
the terms of the alleged oral agreement into final writing
ii. Corbin view: Actual intention of parties should be looked at
1. If all evidence introduced by parties show they in fact did not intend written
K to contain all terms of their agreement, and that in fact, oral agreements
were made and intended to be binding this evidence given to jury
2. Places less emphasis on writing itself than Williston
3. Effect of Corbin position: comes close to eviscerating PER
d. Common Law PER
i. R2K §210: Completely and Partially Integrated Agreements
1. Completely Integrated Agreement: integrated agreement adopted by the
parties as a complete and exclusive statement of the terms of the agreement
2. Partially Integrated Agreement: integrated agreement other than a
completely integrated agreement (one or more terms of agreement have
been fully, finally, clearly expressed in writing)
ii. R2K §213: Effect of Integrated Agreement on Prior Agreements (PER)
1. Binding integrated agreement discharges prior agreements to extent that it is
inconsistent w/them (no parol evidence that contradicts writing)
2. Binding completely integrated agreement discharges prior agreements to
extent are w/in scope (no parol evidence at all for complete integration)
3. An integrated agreement that is not binding or is voidable and avoided does
not discharge a prior agreement
iii. Restatement 1st Section 240 (1)(b) permits proof of a collateral agreement if such an
agreement would be naturally made by parties similarly situated as were the parties to the
written agreement.

33
 e. UCC PER
i. UCC §2.202: Final Written Expression: Parol or Extrinsic Evidence
1. Terms w/respect to which the confirmatory memo of the parties agree or
which are otherwise set forth in a writing intended by the parties as a final
expression of their agreement…may not be contradicted by evidence of
any prior agreement or of a contemporaneous oral agreement but may be
explained or supplemented
a. by course of dealing or usage of trade (§1.205) or by course of
performance (§2.208); and
b. by evidence of consistent additional terms unless the court finds the
writing to have been intended also as a complete and exclusive
statement of the terms of the agreement
ii. Special Terms: Even a complete integration can be explained or interpreted by
reference to course of dealing, usage of trade, course of performance
1. Evidence relating to these terms does not usually provide substance of
agreement, but instead aids in interpretation of meaning
2. Such evidence NOT SUBJECT TO PER in both UCC and Common Law

Content of Writing Qualities of Writing Result

Total Integration ►all terms included ►No parol evidence may be admitted
=all terms fully and ►terms fully expressed
clearly expressed ►no vagueness or ambiguity
►apparent comprehensiveness—possibly
expressed in merger clause
Partial Integration ►some terms written in full and final form ►Parol evidence admissible to explain or
=some terms fully ►those terms are clear and unambiguous supplement missing/ incomplete terms,
and clearly expressed ►other terms are not included at all, or are not in but cannot contradict them
final and comprehensive form ►Parol evidence not admissible to
supplement final terms
Unintegrated ►writing is only a partial memorandum, and does ►Parole evidence is admissible to
=no terms are fully not fully, finally and clearly reflect any of the supplement or explain the writing, but
and clearly expressed terms cannot contract what is written down

f. Exceptions to PER—does not apply to:

i. Evidence offered to explain the meaning of the agreement (course of dealing,
course of performance, trade and usage)
1. Eskimo Pie Case: see below
ii. Agreements (oral or written) after execution of writing
1. These are, in essence, modifications
2. Parties may insert “no oral modification clause” in writing
iii. Evidence showing K subject to a condition
iv. Ambiguity:
1. Ct must admit pe if a writing is unclear, even if the parties intended the
writing to be complete
2. “when the language in the k is reasonable susceptible to more than one
meaning”
3. Greenfield v. Phillies Recording Inc (2002):
a. Facts: Ronettes entered into a k w/ Philles and saying that k didn’t
give studio unconditional ownership of the rights, while the studio is
saying otherwise. They went ahead and synchronized the recording.

34
 b. Holding: said that contract silence didn’t create an ambiguity. Read
the WHOLE document to figure out parties intent.
c. Plain Meaning Rule: if k is plain and unambiguous on its face go
w/ that, don’t get pe in to show some other meaning than the plain
unambiguous meaning
4. P G and E v. Drayage (1968): context rule
a. Facts: parties disagreed over the meaning of the word indemnify in
a k calling for drayage to replace a portion of pg and e’s steam
turbine. Said d agreed to perform work at its own risk and expense
and agreed to indemnify p against all loss, damage, expense liability
etc. D wanted to introduce pe to show that parties intended the
indemnification provision to cover only property owned by third
parties, not the p’s property
b. Holding: according to the traditional approach, u would only look
at the word “indemnify” to figure out what it means. Here the ct
goes further by saying “the test of admissibility of extrinsic
evidence is whether the evidence offered is relevant to prove a
meaning to which the lang of the instrument is reasonably
susceptible.
c. Traynor’s 2 Step Approach: first judge looks at the credible,
relevant evidence then judge sifts it to see if all this info should
get in
d. Words don’t have absolute and fixed meanings
e. Traynor doesn’t think lang is clear and plain on its face. Need
to look at it to see if its reasonably susceptivle to another
interpretation and if so that goes to jury
f. Cts should look preliminarily at all credible evidence to determine
parties intentions
5. Eskimo Pie Corp v. Whitelawn: only the objective evidence
a. Rule: allowed objective evidence, including course of performance,
usage of trade, and course of dealing at a formal preliminary
hearing. So in the absence of ambiguity, pe will not be admitted to
determine that meaning that is to be attributed to such language.
b. Cts wont allow parties private understanding of a term
inconsistent w/ general usage

v. Evidence offered to show K was invalid for any reason

1. ie: fraud, duress, undue influence, incapacity, mistake, illegality
vi. Higher Burden of proof – Hield v. Thyberg (1984):
1. Ct admitted evidence that the parties intended the purchase price of 15 k in a
k for the sale of a business to really mean 50 k. parties set forth lower price
in written agreement to defraud the SBA into making the purchaser a loan.
Ct admitted the evidence but required the seller to prove the oral agreement
by clear and convincing evidence, a higher burden than the normal
preponderance of evidence.
vii. Evidence introduced to establish a collateral agreement b/w the parties
1. Collateral agreement supported by separate consideration: an oral
agreement that is collateral to the main agreement and that is supported by
separate consideration, may be demonstrated even though it occurred prior
to what seems to be a completely integrated writing
2. Mitchell v. Lath (1928):

35
 a. Facts: prior to contracting the Laths promised Mitchell that they
would remove an ice house adjacent to the land. This was an oral
promise.
b. Holding: the evidence of the oral agreement is not admissible bc it
doesn’t satisfy the 3 requirements of an oral agreement to modify a
written k:
i. Agreement must be collateral: side agreement that rises out
of the primary k and has same consideration
ii. Agreement must not contradict express or implied
provisions of the written k
iii. Must be an agreement that would not ordinarily be expected
to be written into the k
c. ct here felt that the promise if it had been made would have been
part of the written agreement
d. Dissent: this would constitute a collateral k bc typical land sale k
focuses on the terms of the conveyance and does not include
personal service agreements. Also felt that parties really had made
this agreement
e. Winnie: since deeds are fixed form, might be difficult to write
something in

VI. SUPPLEMENTING THE K: IMPLIED TERMS, GOOD FAITH, WARRANTIES

A. Rationale for Implied Terms
a. Court may enforce not merely the terms which the parties have thus “agreed,” but also other
terms, which the court finds to be “implied” in that agreement
b. R2K §204: When the parties to a bargain sufficiently defined to be a K have not agreed
w/respect to a term which is essential to a determination of their rights and duties, a term
which is reasonable in the circumstances is supplied by the court.
c. UCC Gap Fillers: Art. 2 provides many terms that will be implied as a matter in law for K
for sale of goods. (ie: §2.308—place of delivery, §2.310—time of payment)
d. Why court may imply terms:
i. Although parties didn't discuss term, court will assume that if they had discussed it
this is what they would have agreed to
ii. Ct thinks that in the aggregate, the parties will be more likely to contract w/each
other and with others IF the Ct will insert terms when they are missing.
iii. The Ct should in the end do what is fair
e. Definitions
i. Implied term (implied in fact): any term that court finds to be implicit in the parties
words or conduct, even though not literally expressed by them
ii. Implied by law: made part of the agreement by operation of the rules of law rather
than by the agreement of the parties themselves—imposed by court

B. Implied Obligation of Good Faith

a. R2K §205: (Duty of Good Faith and Fair Dealing): Every K imposes upon each party a duty
of good faith and fair dealing in its performance and its enforcement
i. Wood v. Lucy Duff-Gordon (NY 1917): Wood agreed to pay Lucy half profits
earned from placing her endorsements/selling her designs, but had not explicitly
promised to promote her wares. When Lucy breached exclusive agency by

36
 endorsing products on her own and keeping profits, Wood sued for his share. Lucy
argued there as no K—although Wood had undertaken to pay half profits to her, he
had not actually promised to do anything to earn those profits. Cardozo found
Lucy’s grant of an exclusive agency gave rise to implication that Wood was obliged
to use best efforts in generating profits
ii. 5 Step Inquiry of Good Faith:
1. look at section 205
2. look at purpose of 205 in comment a
3. look to common law and comments in section 205
4. look at facts to see why it might or might not be bad faith
5. exluder way of looking at things –is this bad faith?
iii. Fortune v. Nat’l Cash Register Co:
1. Facts: Fortune worked for NCR and they tried to terminate his k right after
he got a big sale. Then they wound up putting him in a shittier position. It
was a terminable at will k by either party as long as there was written notice.
2. Rule: parties to ks and commercial transactions must act in good faith
toward one another.
3. Holding: this is bad faith termination bc if you’ve worked and already
earned commission and the reason to keep u from working is to get the
commission you’ve already earned, that’s bad faith! U cant terminate an at
will k when the agent is on the brink of successfully completing the sale.
That’s bad faith!
iv. Tymshare v. Covell:
1. Facts: k granted salesperson commissions on sales above cerain quota.
Clause granting employer right to raise sales quota retroactively which
would reduce employees commission. Employer raised sales quota.
Employee claimed bad faith
2. Holding: u don’t have discretion to increase quota for any reason
3. Rule: certain express powers are implicitly absolute while others are
not.
v. Centronics Corp v. Genicom Corp (1989)General Rule:
o “under an agreement where one party has discretion to deprive another party of a
substantial portion of the agreement’s value, the parties intent to be bound by an
enforceable k raises an implied obligation of good faith to observe reasonable limits in
exercising that discretion, consistent w/ the parties’ purpose or purposes in
contracting”
• 4 questions raise by claim for good faith:
o does the d have discretion that is tantamount to a power to deprive the p of a substantial
portion of agreements value?
o Is this what the parties intended?
o Has the d’s discretion exceeded the limits of reasoanbleness?
 Look at purposes of k and measure that against the reasoanableness of the
complaining party and the community values of honesty, decency and
reasonablness
o is the cause of damage complained of the d’s abuse of discretion or does it result from
events beyond the control of either party, against which the d has no obligation to protect
the p?

C. UCC and Obligation of Good Faith

a. General Rule

37
 i. §1-203: (Obligation of Good Faith): Every K or duty w/in this Act imposes an
obligation of good faith in its performance or enforcement
b. Definition of “Good Faith”
i. §1.201(19): means honesty in fact in the conduct or transaction concerned
1. SUBJECTIVE—requires evaluation of actor’s state of mind
2. Revised Art. I both subjective & objective—“honesty in fact and
observance of commercial standards of fair dealing” (same as Art.2)
ii. §2.103(1)(b): in the case of a merchant means honesty in fact and the observance of
reasonable commercial standards of fair dealing in the trade
1. SUBJECTIVE and OBJECTIVE (reasonable standards)

c. Termination of K in Good Faith

i. §2.309(3): Termination of a K by one party except on the happening of an agreed
event requires that reasonable notification be received by the other party…
d. Good Faith in Output & Requirement K and Exclusive Dealings
i. §2.306: (Output, Requirements, and Exclusive Dealings)
1. A term which measures quantity by output of the seller or requirements of
the buyer means such actual output or requirements as may occur in good
faith, except that no quantity unreasonably disproportionate to any stated
estimate or in the absence of a stated estimate to any normal or otherwise
comparable prior output or requirements may be tendered or demanded
2. A lawful agreement by either the seller or the buyer for exclusive dealing in
the kind of goods concerned imposes unless otherwise agreed an obligation
by the seller to use best efforts to supply the goods and by the buyer to use
best efforts to promote their sale
ii. Requirements K: quantity of goods to be supplied is left flexible, based on buyer’s
requirements for the goods during K period (Buyer agrees to buy all its requirements
for the goods from seller, and seller agrees to supply whatever buyer orders)
iii. Output K: quantity of goods left flexible, based on seller’s production rather than
buyer’s requirements. (Seller agrees to sell and buyer agrees to buy seller’s entire
output of goods during K period)
i.
D. Exception: Employment-At-Will Doctrine No Good Faith Requirement
a. Employment-At-Will: an employment relationship is subject to termination at any time, or
for any cause, by an employee or an employer in the absence of a specific agreement
otherwise. Don’t’ need a showing of “good faith”
i. Exceptions: public policy (can’t fire whistleblowers for refusal to commit perjury),
additional consideration, promissory estoppel, handbook
b. POLICY:
i. Autonomy/Mutuality—can quit at any time/can be fired at any time
ii. Social welfare—better for society not to impose excessive obligations on employers
b/c when they do less likely to hire
iii. Economic efficiency—good faith for termination restrict flow of commerce
E. Warranties
a. Caveat emptor: Early English courts adopted principle of ‘caveat emptor’—buyer beware
i. American courts responding to changing mkt conditions at turn of 20th century
changed the rule to impose obligations on the seller as to quality of goods sold
b. Express Warranty §2-213: express warranty given by seller or manufacturer of a consumer
product concerning the quality/nature of the goods

38
 i. §2.213(1): Seller may provide for EW by words, description, sample/model
ii. §2.213(2):Mere ‘puffery’ is not enough to establish an EW (affirmation of fact must
be objective and capable of being proven) & Seller can be held to an EW even
though never uses word “warranty” or “guarantee”
iii. Disclaimers: §2-316(1): a disclaimer of an express warranty is inoperative if the
disclaimer cannot be construed to be ‘consistent’ w/ an express warranty
1. Parol evidence rule excludes oral evidence of express warranty when parties
later entered into formal written K
c. Implied Warranty of Merchantability: §2.314
i. §2.314(1): “Unless excluded or modified…, a warranty that goods shall be
merchantable is implied in a K for their sale if the seller is a merchant w/respect to
goods of that kind. Under this section the serving for value of food or drink to be
consumed either on premises or elsewhere is a sale.”
ii. §2.314(2): to be “merchantable”—2 (of 6) most look at criteria are that goods must
1. pass w/o objection in the trade
2. be fit for the ordinary purposes for which they are used
iii. Disclaimers: §2-316(2) and (3): to disclaim, the language must mention
merchantability and must be conspicuous
1. To be conspicuous, a court must find a reasonable person in buyer’s position
would not have been surprised to find the warranty disclaimer in the K
2. Another way to disclaim implied warranties is through an ‘as is’ disclaimer
d. Warranty of Fitness for a Particular Purpose §2.315
i. Where seller had reason to know any particular purpose goods required for
ii. Seller had reason to know that buyer was relying on seller’s skills or judgment to
furnish suitable goods
iii. Buyer did in fact rely on seller’s skill or judgment
1. ** Does not require that goods are defective in any way—merely that the
goods are not fit for the buyers particular purpose
2. ** Not limited to merchants
e. Proving breach: Buyer must prove several things, including:
i. D made a warranty (express or implied) under UCC
ii. Goods were defective at time of sale (did not comply w/warranty)
iii. Buyer’s loss/injury was proximately and actually caused by defect
iv. No affirmative defenses (disclaimed, statute of limitations, lack of privity,
lack of notice, assumption of risk) apply
f. Bayliner Marine Corp v. Crow: P sold boat to D who later sued for breach of all 3 types of
warranties when boat didn’t go up to speed and therefore wasn’t fit for offshore fishing
i. No Express Warranty: (1) particular affirmation of fact given by Bay did not relate
to product purchased by Crow and (2) a statement purporting to be merely the sellers
opinion or commendation does not create a warranty
ii. No breach of Implied Warranty of Merchantability: goods must pass objection in the
trade and are fit for ordinary purposes  no standard of merchantability given in the
record so no evidence supporting first part and fact that Crow used boat extensively
argues against a claim that goods incapable of performing ordinary function
iii. No breach of implied warranty of fitness for a particular purpose: such a claim
requires that the buyer must prove a threshold matter that made known to seller
(5) WAS THE K BREACHED?

X. CONSEQUENCSE of NONPERFORMANCE: CONDITIONS & BREACH

A. Conditions:

39
a. Conditions v. Promises
i. Definition & Distinction
1. Promise: §2: a manifestation of intention to act or refrain from acting in a
specified way
a. Nonperformance breach K, entitle other party to damages
b. If a promise is breached, the other party is still obligated to perform
but may sue for damages due to breach
2. Condition: §224: an event, not certain to occur, which must occur, unless
its nonoccurrence is excused, before performance under a K becomes due.
It comes after acceptance and prior to discharge. Rights and duties of
parties depend upon it
a. Nonperformance  discharge the other party’s duty
b. If a condition is breached, allows other party to walk away from k
3. Promissory Condition: if event both P+C breach of such entitles other to
withhold counter performance AND seek remedies. Ouch!
4. Non-promissory/pure conditions:
a. not promising to do something, but if u don’t do it, the other thing
won’t happen
b. “I promise to pay you $10 to pick up my dry cleaning” – but u are
not promising to do it, so if u don’t pick up the dry cleaning, u don’t
get the $10. The dry cleaning is a condition precedent to you
paying.
c. 3 MAJOR DISTINCTIONS:
i. an event that is merely promised by a party
ii. an event that is both promised by a party and designated as
an express condition to the other party’s duty- promissory
condition
iii. an even that is merely an express condition to one party’s
duty – non promissory or pure condition
5. Dependent Covenant: when you don’t have to do something unless the
other party performs
6. Independent Covenant: when you have to perform first regardless if the
other party performs ie: u have to build before he has to pay
7. Difference btw Promises and Conditions:
a. Promises: create duties/disabilities in the promisor. Discharge
duties. If u don’t fulfill your promise you breach the k
b. Conditions: postpone an instant duty. Create duties. If a condition
doesn’t happen, it absolves the other person from liability or not
keeping their part of the bargain
8. In building law, builder usually has to substantially perform not be
liable
9. Maturity: a party is discharged from an agreement when it is “too late” for
the condition to occur. Time may be stated expressly in the agreement or it
may be implied from the circumstances
ii. Distinguishing between P&C:INTENT— may be indicated by choice of words
1. If, provided that, unless condition
2. I covenant that, I stipulate that, I promise that promise/duty
iii. Interpretation of Promise Preferred
1. Nonperformance of a condition completely discharges other from their
obligation, even if caused little or no damage

40
 2. Party who breaches a promise liable only for damage caused by the breach
b. Precedent/Subsequent/Concurrent Conditions
i. Condition Precedent: any event, other than a lapse of time, which must occur
before performance under a K is due
ii. Condition Subsequent: an even which operates by agreement of the parties to
discharge a duty of performance after if has become absolute.
1. No substantive difference—the non-occurrence of either condition operates
to discharge contractual duty---distinction procedural (burden of proof)
2. R2K abandons both these terms
a. “condition precedent” condition
b. “condition subsequent”event of discharge
c. §227(3)—when in doubt to whether condition (condition precedent)
or event of discharge (condition subsequent) treat as condition
iii. Concurrent Conditions: type of condition (precedent) which exists when parties
are to exchange performances at the same time.
1. Presume concurrent: When K provides for counter-performances and K not
prescribe sequence of performance general presumption that if they are
capable of being rendered at same time, they are due at same time
2. If not capable: If performances not capable being rendered @ same time
general presumption that performance that takes more time goes first
c. Express Conditions
i. Def: a condition on which the parties have agreed that specifies the order of
performance and/or the quality of performance. The other’s duty does not mature
until the condition specified is met. If a duty to perform doesn’t mature bc of the
failure of an express condition, there can be no breach of that duty.
1. Applies to any condition which parties agreed, whether agreement stated
explicitly or implied in fact from the parties conduct [§226, Comment a]
2. Implied in fact: the owner’s duty to pay being conditional upon the
builder’s prior performance is evidenced by the parties past dealings.
General trade customs. Gap filling is justified on the basis of the probable
intentions of the parties
ii. Strict Compliance: When performance subject to an express condition, the duty to
perform does not arise unless the condition is exactly satisfied.
1. Rationale: parties have clearly chosen to make performance subject to
stated even, and court should honor intention.
2. Substantial Performance NOT ok: Thus, even if seems condition very
technical or unimportant, or has been substantially satisfied, court should
not second guess parties by treating condition as being met
iii. Merritt Hill Vineyards v. Windy Heights Vineyard:
1. Facts: P contracted w/ D to purchase a majority stock interest – there were
several conditions precedent to the purchase of the stock including
satisfactory title ins policy- conditions were not met and D refused to refund
deposit
2. Holding: these were express conditions precedent set forth- no words of
promise employed. However, P entitled to his deposit
iv. WAS AN EXPRESS CONDITION CREATED?
1. Howard v. Federal Crop Ins Corp:
a. Facts: howards sought to recover on an insurance policy after
excessive rain damaged their tobacco crop. One of the provisions of
the policy state that “it shall be a condition precedent to the payment

41
 of any loss” that the howards establish that the contract protected
them against the hazard that occurred. Another provision state that
the “tobacco stalks shall not be destroyed until the insurance co
inspected them.” Howards plowed field before it was inspected. Ins
co claimed that the second provision established a condition
precedent to their obligation to pay
b. Holding: provision was not a condition precedent largely bc the k
used the language of a condition in the first clause but not in the
second. Ins policies generally construed against the insurer. When
it is doubtful whether words create a promise or a condition, they
will generally be construed as creating a promise. Policy- cts hate
forfeiture! They will do what they can to prevent it.
i. Provisions of a k will not be construed as conditions
precedent in the absence of language plainly requiring
such construction
v. INTERPRETING THE CONTENT OF EXPRESS CONDITIONS:
1. Gibson v. Cranage: portrait case – rejection based on good faith
a. Facts: P contracts to paint a portrait of D’s daughter subject to Ps
satisfaction. Clause- “if it was not perfectly satisfactory to me I
need not take it or pay for it” D wasn’t satisfied
b. Holding: judgment for d – when satisfaction involves fancy, taste,
or judgment cts usually apply an honesty test. A painting is
personal and specific in nature. Reasoning is that D was the only
person who could decide if he liked it
c. Rule: where the k is personal and specific in nature, the ct uses
a subjective test. This is subject though to good-faith. Looking
at what the person would want, not what a reasonable person
would want- whether they were honestly dissatisfied w/ it
2. Forman v. Benson: rejection based on bad faith
a. Facts: Forman wanted to buy prop from Benson – satisfaction
clause: “subject to seller’s approving buyer’s credit report.” The
credit report was fine but Benson still rejected it, meanwhile tried to
up the price and renegotiate w/ Forman.
b. Rule: “a reasoanbleness standard is favored by the law when the k
concerns matters capable of objective evaluation. However, where
the circumstances are such that it is clear the provision was added as
a personal concession to one of the contracting parties, the
subjective, rather than the objective standard should be applied”
c. So in this case, clause in ? was def an inducement to get the d to
sign the k – so use the subjective standard, HOWEVER, still find
for P bc personal judgment standard is subject to good faith!!!!! –
don’t reject p bc of bad credit and then still try to negotiate w/ him
3. Rizzolo . Poysher: you ignore conditions when there’s fraud
vi. IMPLIED CONDITIONS FIXING THE ORDER OF PERFORMANCE:
1. Simultaneous Exchange:
a. Concurrent conditions: when two promises have to be rendered at
the same moment
b. 2 promises must be done simultaneously if the k is silent about
order of performance
c. Cohen v. Kranz (1963):

42
 i. P contracted to purchase D’s house – paid deposit – before
closing, sent a letter saying that they knew title was
defective so weren’t going to go through w closing
ii. Rule: a tender and demand are req to put the vendor in
default where his title could be cleared w/o difficulty in a
reasonable time.
iii. Here the defects were curable – if this is the case, u have
to give them the opp to cure the defects!
iv. So, since the defects were curable, the p’s failure to
tender as well as his advance rejection of the title work
as an anticipatory breach of k and preclude his own
recovery of the down payment.
v. Winnie – what the lawyer should have done was to tell
the seller what was wrong. On the day of closing should
have made the demand and tender- tender own
performance and demand other person tender theirs.
Saying “im ready and now I’m asking u to do what u
need to do”. Then if the other person doesn’t do what
they need to do in a reasonable time then they are in
default and then u have the right to get your money
back
2. Sequential Performance:
a. one parties duty to perform cannot be conditioned or dependent
upon the other party’s rendering a performance that is to come at a
later time
b. Stewart v. Newbury:
i. Facts: through a series of letters, S agreed to do the
excavation and concrete work on Ns new building.
Agreement omitted any reference to pay pds, although s
said parties agreed on phone that payments would be made
in “usual manner.” S claimed custom was to pay 85% of
work done every 30 days and 15% upon completion. S sent
bill for 3 mo work which n refused to pay. s stopped
working and sued n.
ii. Rule: n had to pay only after S had substantially
performed the k
1. This supports the rule that the party whose
performance takes longer must perform first
2. So if your performance took roughly the same time
would just have concurrent performance
3. Tender: ready, willing, and able to perform
c. To mitigate harshness against performing w/ o pay until you’ve
substantially performed, contract for payments in installments, labor
law statutes
vii. IMPLIED CONDITIONS FIXING THE QUALITY OF PERFORMANCE:
1. Plante v. Jacobs:
a. Facts: J hired P to build a new home. They selected a stock floor
plan. Patio walls and floor was defective, cracks and there was a
misplaced wall btw the kitchen and living room that narrowed it by
a foot. Cost of rebuilding the wall was 4k. Js had already paid
20k…didn’t want to pay the last installment of over 6k. if P had

43
 substantially performed, J would pay the purchase price and get
money back for damages
b. Holding: said P had substantially performed- Js had used a stock
floor plan. Deducted cost of fixing defects. Didn’t care that wall
was misplaced bc didn’t diminish the market value!
c. Substantial performance damages: k price – damages caused by
incomplete performance
d. Diminished value rule (applied to figure damages for wall): diff
btw value of house as it stands – fmv
e. Cost of replacement/repair rule: allow costs for each itemized
problem
2. OW Grun Roofing v. Cope:
a. Facts: Grun constructed a new roof for Cope but it was streaky and
wrong color
b. Rule: in the matter of homes and their decoration mere taste or
preference, almost approaching whimsy may be controlling w/
the homeowner so that variations which might, under other
circumstances, be considered trifling, may be inconsistent w/
that ‘substnatial performance’ on which liability to pay must be
predicated
c.

d. Constructive Conditions
i. Def: conditions not agreed on by the parties, but rather implied as a matter of law by
the court to ensure fairness [ie: should exist b/c public policy, or parties reasonably
would have intended to include it if addressed the issue]
1. ie: where each party make promises, each parties’ performance generally a
constructive condition to performance of subsequent duties by other party
2. gap filling is justified on the basis of general policies and principles.
3. In construction cases, a builder must substantially perform in order to satisfy
an implied in law condition
ii. Substantial Compliance: (not strict compliance) adequate to satisfy constructive
conditions. Since not established by clear manifestation of assent more flexible
e. Satisfaction of Promisor As Condition
i. §228: When it is a condition of an obligor’s duty that he be satisfied w/respect to the
obligee’s performance or w/respect to something else, and it is practicable to
determine whether a reasonable person in the position of the obligor would be
satisfied, an interpretation is preferred under which the condition occurs if such a
reasonable person in the position of the obligor would be satisfied.
1. Objective v. Subjective Satisfaction: When doubt to standard that
“satisfaction clause” in K implies, court usually presume objective standard
of “reasonable satisfaction.” Courts interpretation depends in part on the
nature of the subject matter of the K
a. K where objective test used: when performance of K relates to
mechanical fitness, utility, marketability, ie: building K or in sale of
goods usually construed to require objective satisfaction
b. K where subjective test used: where object of K is to please tastes
or convenience of a person on matter no objective standard, ie:
portraits, clothing, artistic performances, special food/drink
f. Excuse/ Avoidance of Conditions
i. Prevention of Condition

44
 1. Promisor, acting in bad faith, obstructs fulfillment of condition, which plays
a significant role in conditions’ non-fulfillment precludes assertion by
promisor of conditions’ non-fulfillment
ii. Impossibility:
1. Hanna v. Commercial Traveler’s Mutual Accident Association:
a. Facts: guy disappeared- had an ins policy that required notice w/in
10 days of death to collect on policy. However, bc of this
disappearance, wife didn’t find out till 5 yrs later that he was dead.
Ps arg: her noncompliance w/ the notice was excused by the
impossibility of compliance
b. Policy arg: reason for this notice is bc ins co doesn’t want to be
paying out claims 20 yrs down the road
c. Holding: this policy was a voluntary undertaking – party agreed to
this provision so it stands irrespective of the odd circumstances here
– this was an event beyond the parties control
iii. Estoppel
1. Party who is beneficiary of condition, by words or conduct, induces other to
act to their detriment by causing him to justifiably believe that the condition
has been satisfied/compliance will not be required may be estopped from
claiming its non-fulfillment
iv. Waiver §84
1. Intentional relinquishment of a known right – u can do so expressly or by
conduct
2. Party unilaterally gives up contractual right w/o asking for or receiving
anything in exchange
3. A party can retract a waiver if the other party has reasonable time to perform
according to the original terms of the k
4. Waivers defeat express conditions
5. YOU CAN TAKE BACK A WAIVER BC IT IS A VOLUNTARY
RELINQUISHMENT OF A KNOWN RIGHT, BUT YOU CAN’T
TAKE BACK A K MODIFICATION BC THAT’S A CONTRACT
AND THEN NEED BOTH PARTIES TO ASSENT TO
MODIFICATION.
6. Since no considerationrelinquished right must be non-material
a. Material right (central to K) cannot be given up by unilateral waiver
b. BUT: §2.209 not require consideration for modification waiver of
a material part of exchange would b valid despite lack consideration
7. Retraction: B/c no consideration—waiver made prior to due date for
condition’s fulfillment can be retracted
a. BUT—right to withdraw subject to other party’s reliance
8. CT Fire Ins Co v. Fox:
a. Facts: ins co tried to waive a filing req after the time for filing had
passed. Had one of their agents tell the Foxes that everything was
set it terms of reimbursement, and had even reimbursed a motel
patron. There was a nonwaiver agreement which said that no action
of the insurer in investigating waived any portion of the contract-
this was the D’s arg
b. Holding: find for Foxes bc this non-waiver policy benefitted the
insurer – will strictly construe against the insurer. Doubt that the
agent didn’t have any power to waive. Once the insurer or its

45
 authorized agent indicate by a course of conduct that proof of losee
is unnecessary such a req is waived.
v. Forfeiture §229
1. Forfeiture allows court to disregard an express condition of a technical or
procedural nature where the strict enforcement of the condition would have
a. an unfair, disproportionate, and harsh deprivation of the rights or
property of the person who expects performance, AND
b. an unfair benefit to party whose performance subject to condition
2. Should NOT be used if condition=material part of exchange
3. R2K expresses general preference in favor of interpretation that will avoid
forfeiture where doubt re: existence, scope, nature of condition §227
a. JNA Realty Corp. v. Cross Bay Chelsea Inc: P had lease
agreement w/D’s predecessor. Lease had renewal option on 6
month notice by D When 6 month approach and D did not send
notice, P demanded (who spent 15,000 in improvements) vacate.
Court held: D excused from express condition b/c would result in
unreasonable forfeiture. P’s lack of telling him to renew done in
bad faith b/c market value property gone up.
i. No Forfeiture Here bc:
1. Mere negligence and inadvertence can happen to
ppl
2. Chelsea would be forfeiting substantial investments
that JNA knew about and said nothing about clock
ticking
3. Landlord is not harmed at all here
ii. Reasoning here: JNA had regularly informed Chelsea about
other duties, Chelsea’s delay in notification wasn’t willful,
grossly negligent, Chelsea would lose good will. Chelsea
didn’t do this to try to find a better deal on the market
iii. Policy: if u are a few days late doesn’t matter, worried
about speculation at expense of landlord which could be a
real thing just not in this case
iv. Rule:
1. Where a tenant significantly invests in the
leasehold, its failure to satisfy a condition is
pardonable, the landlord lulls the tenant into
failing to satisfy the condition, and the landlord has
not relied on the condition, a ct is likely to refuse to
enforce the condition against the tenant
b. Holiday Inns v. Knight: some cts refuse to enforce express
conditions when enforcement would result in excessive harm to one
of the parties. Party seeking to avoid the harm doesn’t have to show
waiver, impossibility, or unjust enrichment, just harm. In this case,
option k to purchase land for fivey ears-
c. Ny law: if the landlord shows that he has been harmed in a
significant way its over
d. Unjust enrichment is another theory to avoid forfeiture- so if u
build something and halfway through u have to stop, the person will
not be completely absolved of all liability but will rather have to pay
u fair market value for what u did do

46
 e. A lot of times in cases of forfeiture its just notice and unless it’s
a situation where time is of the essence, cts work really hard to
avoid forfeiture

B. Breach
a. Total Breach:
i. Def: A material and incurable breach that is sufficiently serious to justify
discharging the nonbreaching party from her obligations to perform the K.
ii. §242: Factors to Determine if Breach Total
1. Those stated in §241 (factors for material breach)
2. Extent which it reasonably appears to the injured party that delay may
prevent or hinder him in making reasonable substitute arrangements
3. Extent to which agreement provides for performance w/o delay…
iii. Effect of total breach
1. Withhold performance
2. Terminate K
3. Claim full damages for break of K (actual and future)
b. Material Breach: (Total Breach)
i. Def: A failure/deficiency in performance (not substantial performance) so central to
K that it substantially impairs its value and deeply disappoints the reasonable
expectations of the promise. Allows a party under Restatement to suspend
performance and eventually terminate if the problem isn’t fixed.
ii. §241: Factors in Deciding if Breach Material
1. Deprivation of expected benefit: the extent to which the non-breaching party
is deprived of the benefit which she reasonably expected from the K
2. Adequacy of compensation for loss: extent to which the non-breaching party
may be adequately compensated for his loss by the awarding of damages.
3. Part performance: the greater the part performance which has been rendered
by breaching party, the less likely it is breach will be deemed material
a. Rationale: the more a breaching has done on a K the greater will be
the result of forfeiture if recovery is denied
b. Breaching at the outset: a breach will occurs at beginning of K
highly likely to be deemed material, even though relatively trivial—
b/c breaching party will suffer no forfeiture in such situation
4. Likelihood of cure of breach: if breaching party seems likely to be able to
and willing to cure the breach, it is less likely to be deemed material
5. Willingness of breach: if party’s behavior fails to comport w/standards of
good faith and fair dealing, more likely regarded material
iii. Effect:
1. Suspend performance
2. Await cure
3. Claim compensation for any loss suffered
a. P’s failure to perform not innocent, having been brought about by
gross negligence or willful conduct
iv. Walker and Co. v. Harrison:
1. Facts: tomato sign case – k provision for sign maintenance
2. Holding: sign makers 2 mo delay in cleaning the sign was not a material
breach
3. An immaterial breach doesn’t give you the right to withhold
performance or cancel performance

47
 v. Winnie- have them tender performance when you’re not sure if breach is material
and if it turns out it is sue for damages
1. If u don’t get paid for the work you’re doing 2 things happen:
a. Further performance doesn’t become due
b. After an appropriate pd of time u can terminate k
2. 2 step analysis to figure out if u should repudiate when person hasn’t
paid:
a. was the failure to pay really significant?
b. Was the breach long enough to justify u terminate?
3. Restatement: if u have a material breach ,u can’t just terminate. The
aggrieved party can only initially suspend then must stand by and wait for a
cure.
4.
vi. K and G Construction Co v. harris:
1. Holding: subk materially breached the k to perform excavation work when
he crashed a bulldozer into a house the contractor was building, destroying a
wall and causing damages in excess of 3400
c. Partial Breach: (Immaterial Breach)
i. Def: When party has substantially performed, the deficiency in performance said to
be a partial breach. It is not material, or may become material in time, but is not yet
important enough to qualify b/c possibility of a cure. Non-breaching party must
continue w/ k but u preserve ur right to sue for damages
ii. Substantial Performance: once determined breach not material, it is necessarily
partial, and the performance that has been rendered is substantial.
1. Restatement §237: if the agreement makes full performance a condition,
substantial performance is not sufficient and if relief is to be had under the
k, it must be through excuse of the non-occurrence of the condition to avoid
forfeiture
2. Elements of Substantial performance:
a. Deprivation of expected benefit: how much was the non-breaching
party deprived of the benefit he expected? – the mor he was, the
more likely that the breach was material
b. Part performance: the extent of the part performance – the
greater the extent, the more likely it is that the breach was non-
material
c. Likeliness of cure: if the breaching party seems more likely and
willing to cure, than breach is less likely to be material than if cure
was impossible
d. Willfullness: a willful (intentional) breach is more likely to be
material than a negligent one
e. Delay: a delay doesn’t necessarily mean that u didn’t substantially
perform – bc u presume that time is NOT of the essence unless k
says so – even if k says time is of essence, short delay wont
necessarily mean material
f.
iii. Effect of partial breach/substantial performance
1. Does NOT discharge party from performance under K
2. U can suspend performance w/ an immaterial breach
3. Claim compensation for any loss suffered
a. Difference in value between what promised and what performed

48
 b. “Economic waste”—if damages based on cost of rectification so
disproportionate to actual harm. [ie: K for deck to be built 40’ on
each side and built 39’ cost to tear down and build entire new
deck to rectify minor defect=economic waste]
iv. Jacob & Youngs, Inc v. Kent (1921): Jacobs (P) hired to build home for Kent (D).
When dwelling completed, discovered P did not use Reading pipe as specified in K.
Cardozo: found P breached K, but substantially performed and breach was trivial
and innocent
1. Substantial Performance Rule: Where someone has performed
substantially then the other party’s duty to pay is not discharged
2. Measure Damages Rule: Generally would use expectation damages, but
here there was good faith and damages are trivial and cost to repair out of
proportion to damage, so use Economic Loss Rule – difference in market
value, not cost of completion
3. Held that the use of Reading Pipe was not a condition precedent bc: u
have to weigh the purpose to be served, the desire to be gratified, the
excuse for deviation from the latter and the cruelty of enforced
adherence
4. Proposition of this case: in the absence of an express promissory
condition precedent requiring perfect performance, k law usually
doesn’t require a perfect performance before the other party must
perform
5. Condition precedent here is: J and Ys substantial performance not perfect
performance
v. Brown Marx Associates v. Emigrant Savings Bank: “it is not substantial
performance of ‘a condition’ that must be rendered; substantial performance is the
condition, the fact that must exist before payment is due”
1. You cant substantially perform an express condition precedent, you need to
perform it!
2. Express conditions precedent trump implied in law
vi. Divisible Contracts:
1. John v. United Advertising:
a. Facts: United had a k with John to make 7 signs for him for his
hotel chain- there was a problem w/ 2 of these signs. Issue as to
whether this k was divisible.
b. Divisibility: if u can divide consideration on both sides
proportionately, cts will look at these individually to see if u
substantially performed each one so if u have a material breach of
one doenst imply a material breach of all
c. Holding: this k was severable in nature. Factors to look at in
determining severability:
i. Intent of parties
ii. Apportionability of consideration
iii. Whether the parties assented to the k as a whole, so that if
one of the parts of it were struck out there would be no k
iv. P’s claiming here: i wanted this as a package deal - this was
all or nothing while d is claiming that this was severable
v. Key things to look at is apportionment of payment – if its
something that looks severable will apportion it out but if
it’s a payment schedule that u broke up cause its convenient
to do that ct wont look at that as severable (Kirkland)

49
 vi. UCC – if u can apportion price, u can demand the price of
each

C. Anticipatory Repudiation
a. General Idea: Where party makes it unmistakably clear, even b4 performance under K due,
that does not intend to perform.
i. Allows other party to suspend and cancel own performance, and even institute a suit
for breach before time performance due.
ii. Doesn’t usually extend to unilateral ks (MRI case)
iii. Elements:
1. Total breach
2. Takes place after parties contract but before performance is due
3. Allows injured party to take mitigation steps and to be immediately
discharged of his contractual obligations
b. What is Anticipatory Repudiation
i. R2K §250: A repudiation is
1. a statement by the obligor to the oblige indicating that the obligor will
commit a breach that would of itself give the oblige a claim for damages for
total breach under §243 or
2. a voluntary affirmative act which renders the obligor unable or apparently
unable to perform w/o such a breach
ii. Hochster v. De La Tour:
1. Facts: D engaged a courier to accompany d on a trip starting on june 1. On
may 11 d sent a ltr to courier saying he had changed his mind and didn’t
want his services. Courier sued on may 22 sometime after that but before
june 1 courier accepted another job.
2. Issue: can courier sue before time for performance and whether the ct
should sustain the action even though he got a substitute arrangement so
couldn’t perform the first arrangement anyway
3. Holding:
a. Mitigation of damages rule: instead of laying around idle and
buying things for a job u know u don’t have, u should go out and try
to find something else.
b. Second, doesn’t matter that courier now couldn’t perform the
june 1 k so that if d wanted to change his mind he could. Once u
reject something done
c. Doesn’t matter that it might be difficult to calculate damages
d. Rule: aggrieved parties may treat an anticipatory repudiation
as a breach of k
e. Test for whether the person has repudiated: party must “utterly
renounce the k or do some act which renders it impossible for
the person to perform” – so just saying u might not want to do
something is not enough
f. U can sue for damages as soon as u find out about AR or wait
till the time has come for u to perform
iii. Hathaway v. Sabin:
1. Facts: k required D to furnish music hall –snowstorm- shut down hall too
early in the day. Musicians showed up and no music hall
2. Rule: a party who becomes involved in difficulties for which he is not
responsible, if ultimately able to perform, is not to be deprived of the

50
 benefits of his k bc of an assumption by the other party that the
difficulties would prove insurmountable
3. Ct here is saying u jumped the gun
iv. UCC §2.610, Comment 2: Repudiation can result from action which reasonably
indicates a rejection of the continuing obligation
v. Thus—must be a definite and unequivocal intent not to perform such that the breach
would be material or total—mere doubtful/indefinite statements will not be regarded
c. Adequate Assurance of Performance
i. §251/§2-609: A party who has reasonable grounds for insecurity can demand
adequate assurance of due performance from other party, and if failure to give
assurance, can suspend performance of K
ii. Reasonable grounds for insecurity
1. Significant financial difficulties
2. Failure to perform important obligations under K
3. Other party’s failure to perform obligations under K
4. Demand for adequate assurance must be based on circumstances that arise
after K formed, not on situation known while K formed
iii. Writing for assurance
1. §2-309: a party who has reasonable grounds for insecurity may in writing
demand adequate assurances, (cts divided whether or not need be in writing)
2. §256: more flexible approach—demand need not be in writing, although
writing demand preferable (time permitting)
d. Retraction of Repudiation
i. §256(1)/§2.611: A party who commits an anticipatory repudiation may change her
mind and retract the repudiation so long as the other party has not relied to his
detriment on the repudiation or notified the repudiating party that he is treating the
repudiation as final.

(6) IF K BREACHED, ARE THERE ANY DEFENSES?

Even if u have a duty under a k, there are 2 kinds of defenses to raise:
1. policing doctrines- defenses involving either grossly unfair terms or
overreaching by one party at the beginning of the promising stage or both
full or partial defenses such as those based on changed circumstances
VII. AVOIDING K: INCAPACITY, DURESS/UNDUE INF, MISREPRESENTATION,
UNCONSC,PUBLIC POLICY, STANDARD FORM
A. Incapacity
a. Generally: Principle basis of regulation of K=legal status of one of the parties.
i. Law generally assumes all have capacity to enter into binding contractual
relationships—2 classes lack this capacity (1) minors, (2) mentally incompetent
ii. If enter into K, can enforce it against other party—but K is voidable—not absolutely
void—but may be annulled or affirmed when of age/regained mental competence
b. Minors:

51
 i. R2K §13: (Infants): “Unless a statute provides otherwise, a natural person has the
capacity to incur only voidable contractual duties until the beginning of the day
before the person’s 18th birthday”
1. Minor’s incapacity=objective fact—not based on subjective attributes
ii. POLICY: protection from immaturity and exploitation by adults
iii. Disaffirmance: Can disaffirm K, even before reaching majority, OR can use infancy
as a defense when sued by other party on the K
iv. Ratification: B/c K is not void, but merely voidable at minor’s option, can choose
to enforce it. If chooses to enforce—said to have ratified K—but may not ratify until
reach adulthood. Can occur in 3 separate ways
1. Express ratification
2. Failure to make timely disaffirmance—if fails to disaffirm w/in reasonable
time after reaching majority
3. Ratification by conduct—former infant induces other party to perform (ie:
both parties being to exchange performances under K at time after majority)
v. Exceptions where Minor May Incur Legal Liability
1. Necessaries: Minor’s K for necessaries (goods/services reasonably needed
for minor’s livelihood) may be enforced, not as K, but as unjust enrichment
a. B/c recovery in restitution, not K major party can recover no
more than market value of goods & services, even if K price higher
2. Misrepresentation of age: If minor deliberately lies about age to induce
other party to contract, the Court might
a. Fully enforce K by estopping minor party from asserting minority
b. Deny enforcement of K, but hold minor liable for tort of fraud
c. Mental Incapacity
i. Basis/Nature Voidability
1. Subjective standard: Mental incapacity based on subjective attributes
a. In contrast to objective incapacity of a minor
2. Presumption of capacity: presumption that adult fully capable of
contracting burden on allegedly incompetent party to prove incapacity
a. To prove incompetent, must demonstrate that both
i. Condition exited at time of contracting
ii. It was in nature and extent serious enough to preclude an
adequate degree of assent
b. Other party entitled to rely on apparent capacity unless some
behavior/circumstances signal a problem
i. In contrast to minor—person cannot claim believed older
3. POLICY: protection of exploitation, but risk of paternalism and intrusion
ii. Test for Mental Incapacity:
1. Cognitive Test: §15(1)(a): [At time of contracting,] person “unable to
understand…the nature and consequences of the transaction”
a. Strict test, confining avoidance to cases where party so profoundly
disabled did not know what was doing
b. Other party cannot claim relief on genuine manifested intent
2. Broader Test: §15(1)(b): [At time of contracting,] person “unable to act in
a reasonable manner in relation to the transaction and the other party has
reason to know of his condition”
a. Trend toward broadening test, wider range of psychological
disturbances that impair person’s ability to make rational decisions
b. Under this test, incapacity may not be apparent, must show:

52
 i. Other person knew of the mental condition
ii. Transaction not one which a reasonably competent person
might have made. [R2K §15, Comment b]
3. Note: No requirement that party seeking avoidance must show terms of K
unfair. Basis of avoidance=lack of meaningful assent (yet unfair terms may
provide evidence of incompetence b/c rational person would not agree)
iii. Avoidance and its Consequences
1. Fair K: §15(2): If party contracted on fair terms, w/o awareness of other’s
incapacity then power of avoidance “terminates to the extent that the K
has been so performed in whole or in part or the circumstances have so
changed that avoidance would be unjust. In such a case, a court may grant
relief as justice requires” (both parties back to status quo)
2. Unfair K: When K not on fair terms or other party had knowledge of
mental illness/defect K can be disaffirmed at any time until completed
a. Incompetent party may be excused from paying to the extent that
benefits received did not ultimately enrich him

B. Duress & Undue Influence

a. Duress:
i. Elements
1. Physical compulsion/Improper threat
2. Victim has no reasonable alternative
3. Threat actually induced making of K
ii. Subjective Standard: not based on whether will of person of “ordinary fitness”
would be overborne (objective view) but based on subjective attributes of individual
person (ie: if they can prove they are unusually timid and were in fact coerced)
iii. Ways of Committing Duress
1. Violence/threat of violence
2. Imprisonment/threats of such
3. Wrongful takings/threats of such
4. Threats to Breach K
iv. §174: Duress by Physical Compulsion Void
1. Where person’s manifestation of assent is physically compelled so that the
act of manifesting assent is completely lacking in free will K void
v. §175: Duress by Threat Voidable
1. If party’s manifestation of assent is induced by an improper threat by the
other party that leaves the V no reasonable alternative K voidable
2. 3rd party to transaction induces V K voidable, UNLESS--3rd party, in good
faith, w/o reason to know of duress relies materially on transaction
vi. Economic Duress: Most frequent form of duress in K litigation
1. One party threatens to breach K unless modified/new one drawn up.
2. If carried out, would result in irreparable injury that could not be avoided by
a lawsuit or other means
3. Threat made in “breach of duty of good faith and fair dealing” §176(1)(d)
4. Standard Box Co v. Mutual Biscuit Co (1909):
a. Facts: Standard manufactures boxes. There is a market shortage of
boxes and mutual needs boxes to package its biscuits. Mutual wil
go out of business if it doesn’t get these boxes. Standard knows of
this plight and agrees to sell boxes at their market value. Later
mutual wants some of its money back saying that standard charged

53
 them more than they had under previous ks and therefore, mutual
has paid under duress.
b. Holding: no duress here bc there was no k and p had a right to set
its prices and d’s action to accept was voluntary. There had to be
some kind of compulsion/coercion and there was none of that here.
He was charging the market price. D has a right to set his own
prices and p has no right to demand a certain price.
c. Hypos:
i. if standard tried to charge mutual 10x the amt that boxes
cost cause he knew mutual couldn’t get them elsewhere,
that’s duress bc its exploitation
ii. if boxes were plentiful but mutual failed to find this out,
then no duress if standard tries to charge 10x more bc a
reasonable person should have found out about availability
of boxes
iii. if standard doesn’t know about mutual’s plight and tries to
charge 10x more, no duress, bc no motive to exploit
iv. if boxes were plentiful but mutual didn’t get ks from other
companies bc it was negligent and had to contract w/
standard who tries to charge 10x more, duress, bc
negligence doesn’t justify exploitation
d. To see if u have a good claim for duress, answer all three “yes”:
i. Was the person trying to take advantage of your client?
ii. Did your client have other reasonable choices, or stuck
dealing with this party?
iii. Did the accused party enjoy gains she otherwise would not
have made?
5. need to make sure the party is not just “driving a hard bargain”
6. don’t have duress where: (Machinery Hauling v. Steel of WVA)
a. party is driving a hard bargain
b. market makes k more difficult to perform
c. financial circumstances forces one party to make concessions
7. Rule: the opportunity to go to ct to adjudicate your k rights doesn’t negate a
claim of duress.
a. Access to cts is not a reasonable alternative (SP Dunham and Co v.
Kudra)
b. In that case of the furs, a public suit would have really ruined their
reputation
vii. Remedy:
1. If physical compulsion/extreme duress under §174, K is void
2. Otherwise, K voidable at V’s election avoidance and restitution
3. May be able to get an adjustment on its terms if want to keep K
4. If act of duress is a TORT can get damages in tort on top of K damages
.
b. Undue Influence
i. §177: When Undue Influence K 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
relationship between them is justified in assuming that the person will not
act in a manner inconsistent w/his welfare” (concerned w/abuse of trust)
ii. Elements

54
 1. V had a relationship of dependency and trust w/other party that gave other
party dominance over him and justified V in believing dominant party
would not act contrary to his interests
2. Dominant party improperly abused this position of trust and psychological
advantage by unfairly persuading V to enter into K adverse t his interests

C. Misrepresentation & Non-Disclosure

a. Def: §159: “A misrepresentation is an assertion not in accord w/the facts”
b. Innocent misrepresentations: when you misrepresent some material fact innocently bc u
really believed things to be as you said they were
i. Bates v. Cashman:
1. Rule: “a person may rescind a k to which he has been induced to become a
party in reliance upon false though innocent, misrepresentation to a material
fact when he becomes aware of such”
2. Winnie: u have to have reliance on the misrepresentation and
misrepresentation must be a material fact
c. When Misrepresentation K Voidable: §164:
i. Fraudulent or Material Misrepresentation of Fact
1. Fraudulent Misrep §162(1)—(know false + intent to mislead)
a. Maker intends to induce party to manifest assent and maker
i. Knows he is lying
ii. Doesn’t’ know/believe telling truth
iii. Doesn’t’ have confidence in what saying is true
iv. Knows doesn’t have a basis for what he is saying
b. Note: PER cannot be used to exclude evidence of fraud
c. Holcomb v. Hoffschneider (1980): Fraudulent Concealment
i. Facts: realtor told the buyers they were buying more
property than they actually were. It was an irregular shaped
piece of land so difficult for buyers to really know by
looking how much acreage it was even though it looked off
to them. They claimed they relied on this acreage in buying
the property.
ii. Holding: for Ps bc of reliance
iii. Rule: buyers are under no obligation to survey land and
may normally rely on representations of sellers in
measurements. So buyer did act reasonably here in not
learning the facts.
d. Weintraub v. Krobatsch (1974):
i. Facts: W was selling a house to K but failed to tell k that
house was infested w/ roaches. Even an exterminator
couldn’t get rid of this problem. W wanted to rescind their
offer on the house and owner refused to give them deposit
back.
ii. Rule: you have a duty to disclose what in good faith
ought to be disclosed.
iii. Things to prove at trial:
1. owner was aware of problem
2. deliberate concealment of infestation
3. this was material to the transaction that it would
have upset the deal

55
 2. Material Misrepresentation: §162(2)
a. Likely to induce a reasonable person to manifest assent, or maker
knows it would be likely to induce recipient to do so
ii. Causal link: Relied on by Recipient in Manifesting Assent
iii. Duty to disclose: most say that sellers have duties to disclose but buyers don’t have
duties to disclose- so if u walk property and step in a hole and discover oil, no duty
to disclose that to seller – reasoning is that sellers have a greater/equal opportunity
to find thigns out
iv. Justifiable Reliance
1. Reliance on assertion of OPINION (as opposed to fact): § 169
a. Recipient NOT justified in relying on opinion UNLESS he
i. Is in a relation of trust or confidence with the maker
ii. Think maker has special skill, judgment, knowledge
iii. Is particularly vulnerable to this misrepresentation
d. Non-Disclosure: while no general duty to disclose information, special circumstances result
in non-disclosure fraudulent/actionable
i. Half-truths: if part of the truth is told, but another portion is not, so as to create an
overall misleading impression, this may constitute misrep (§159(b))
ii. Positive concealment: if the party has taken positive action to conceal the truth, this
will be actionable even though it is not verbal (§160)
iii. Failure to correct past statement: if the party knows that disclosure of a fact is
needed to prevent some previous assertion from being misleading, and doesn’t
disclose it, this will be actionable (§161(a))
iv. Fiduciary relationship: if parties have some kind of fid rel, so that one believes
other looking out for his interests, will be a duty to disclose material facts (§173)
v. Failure to correct mistake: if one party knows that the other is making a mistake as
to a basic assumption, the formers failure to correct that misunderstanding will
constitute a misrep if the non-disclosure amounts to a ‘failure to act in good faith or
to act in accordance w/ reasonable standards of fair dealing’ (§161(b))
vi. Easier standard for rescission: some cts held that even where one party’s silence
does not justify the other in suing for damages, the ct may grant the equitable relief
of rescinding the K
e. Remedy
i. K law disaffirm K + restitution
ii. Tort law affirm K + reliance damages (Fraud also a tort)

D. Unconscionability
a. Generally: Judicial weapon against unfair K where the court has the power to refuse
enforcement of an unconscionable K (or to adjust the K) b/c it is shockingly unfair.
i. Used mostly w/respect to consumer K and for sale of goods, overall used sparingly
ii. Decision made by judge as matter of law
b. R2K §208/UCC § 2.302(1): “If the court as a matter of law finds the K or any clause of the
K to have been unconscionable at time it was made, the court may [remedies]
i. Refuse to enforce the K, or may
ii. Enforce the remainder of the K w/o the unconscionable term, or may
iii. Limit application of unconscionable term to avoid unconscionable result”
c. Elements: two types of unconscionability, both usually must be present, but not always

56
i. Procedural Unconscionability: transaction exhibits bargaining unfairness where
one party induced to enter K w/o having a meaningful choice-> “bargaining
naughtiness” (fine print, high pressure, misrepresentation, unequal barg power)
1. §2.302, Comment 1: Aim is this element is to
a. prevent “oppression and unfair surprise”
b. but not disturb “allocation of risks b/c superior bargaining power”
2. §208, Comment d: factors indicating bargaining power unconscionable
a. “Belief” by stronger party that there is no reasonable probability
that weaker party will fully perform K
b. Knowledge of stronger party that weaker party will be unable to
receive substantial benefits from K
c. Knowledge of stronger party that weaker party unable reasonably
protect his interests by reason of physical or mental infirmities,
ignorance, illiteracy or inability 2 understand language of agreement
3. Ex: typically indications of lack of real assent when you have
a. Oppressive clauses tucked away in boilerplate,
b. high pressure salespeople misleading illiterate consumers,
i. Ryan v. Weiner: Weiner assured Ryan (old man w little
education) that he could help him keep his home that he was
about to lose.
ii. Holding: ct saw this case as Weiner taking gross advantage
of Ryan in a weakened state.
iii. Rule: “when one with substantially greater knowledge,
experience and resources himself seeks out the powerless
to deal with them directly on matters of vital
importance, he assumes some responsibility to assure, to
the extent circumstances permit that they do understand
the nature of the transaction proposed. If he does not do
this and the transaction is oppressive and shockingly
one-sided, he cant retain the bargain”
iv. Substantive uncon: grossly one-sided deal- Ryan was
really getting nothing in return for the bargain
v. Proce uncon: Ryan was
vulnerable/uneducated/unsophisticated
vi.
c. Industries in which all sellers offer same unfair “adhesion K”
ii. Substantive Unconscionability: substance of K/clause unduly unfair and one-sided
“grossly unfair terms” (content of terms, inflated prices, unfair disclaimers,
termination clauses)
1. ie: excessive price or unfair modification in buyer or seller’s remedies
2. Wiliams v. Walker-Thomas Furniture Co: P sold furniture to D (welfare
mom) under printed form K containing cross-collateral clause where P
retained right to repossess all items previously purchased in even of any
default. At time D made last purchase, still owed $164, but already paid
$1,400 toward clearing account. D defaulted on payment, P sought to
replevy all goods previously sold to D. Court remanded case to lower court
for determination of unconscionability. However, in these cases, if the
buyer is a large credit risk and sellers in comparable contexts use these
cross-collateral clauses it may not be unconscionable
3. Weaver v. American Oil Co: Weaver leased a gas station from American
requiring him to indemnify American for its own negligence, so that when

57
 an American employee sprayed gasoline on Weaver and he was burned
American sought a declatory judgment finding the amt of Weaver’s liability.
Holding: ct wouldn’t enforce the provision, however, indicated that result
might have been different if American had explained the clause to Weaver-
focused on Weaver’s status and how he was from high school.
4. Jones v. Star Credit Corp: ct struck down a term on substantive uncon. Ps
are welfare recepients who bought a home freezer for $1234.8. Unit worth
$300, and Ps were late on payments so company wanted to take it back.
Lots of credit charges accrued. Ct found for reciepents bc of inequality in
bargaining power, difference in value of freezer and price, seller knew about
limited financial resources etc.
iii. Unconsinability Factors to Consider:
1. Age, status, intelligence, business sophistication, bargaining power,
explantion or lack thereof of terms, firmness of seller’s position, availability
of alternative sources of supply
E. Public Policy:
a. want to urge that public policy you are seeking to enforce is more important than freedom of
k. successful in limited circumstances
b. Exculpatory Clauses:
i. They absolve a contracting party from liability to the other party for any number of
acts or omissions or from liability at all.
ii. McCutcheon v. United Homes Corp (1971):
1. Facts: tenants injured in stairways in building they lived in- there was an
exculpatory clause that absolved landlord of all liability.
2. Holding: this clause contravenes long established rules of tort liability that
exist in the landlord-tenant relationship. So offends public policy. Also,
landlord had an affirmative duty here to exercise reasonable care to inspect
and repair.
3. Rule: Exculpatory Clause Must:
a. Contravene long established common law rules of liability, such
as a landlord’s duty to maintain common areas
b. Absolve a party in total (clause precludes liability in any context
for that type of conduct)
c. State must have an interest in protecting a large class of citizens
who can’t protect themselves (ie: tenants in substandard
housing)
c. Covenants not to compete:
i. Clauses included in employment agreements in which the employee agrees not to
compete when employment contract ends. These are customary in some trades
ii. Karpinski v. Ingrasci (1971) oral surgeon case:
1. Facts: I was an oral surgeon who worked for K straight out of school. 3 yr
employment k in which I promise never to practice oral surgery or dentistry
in the 5 counties except as K’s employee. K ended and I started practicing
oral surgery in restricted area. 90% of his new patients came from I’s
practice
2. Holding: clause was reasonable as to area and time, but said I could practice
dentistry in restricted area. Ct looks at :
a. Geography- the 5 counties were counties covered by Ps practice so
that’s kosher
b. Temporal – “forever” is okay.

58
 c. Terms of practice: this is the only one it failed on bc it was too
broad- d only practed oral surgery under p so should be allowed to
practice dentistry bc not competing then
F. Standard Form:
a. “Contracts of Adhesion”: take it or leave it ks. Help to predict risks. Terms will be
favorable to seller
b. Fairfield Leasing Corp v. Techni-Graphics (1992):
i. Facts: TGI leased a coffee machine, infested w/ roach eggs, stopped making
payments on it. Provision in lease waiving jury trial and TGI wanted one
ii. Holding: waiver shouldn’t be enforced bc its inconspicuous- also jury trial is a
fundamental right. Clause was deeply set in k
iii. To waive a right, u must be aware you are waiving it and mutually assent to it
iv. This is procedural unconscianability
c. C and J Fertilizer v. Allied Mutual Ins Co. (1975):
i. Facts: Fertilizer purchased burglary ins form allied who defined “burglary” as
requiring visible marks of entry on the exterior of the building. C didn’t know this
and when there was a break in with no physical marks on exterior they couldn’t
recover
ii. Holding: realize that there’s a transformation in law and now u don’t really need
mutual assent bc of standard form ks. Employ the doctrine of reasonable
expectations: if u knew that term was in there, u wouldn’t have signed. What
are the reasonable expectations of the signer?
1. Doctrine that protects ppl that don’t read. If something is explained to u or
u read don’t use this doctrine!
2. U are looking at what P would have reasonably anticipated from not reading
the k and here, the term burglary doesn’t even comport with a laymans
definition!
G. Inequality of the Exchange:
a. Black Industries v. Bush (1953): “relative values of consideration in a k btw business
men dealing at arm’s length w/o fraud will not affect the validity of the k”
b. Jackson v. Seymour:
i. Facts: Seymour was Jackson’s sister and Jackson took care of her property- wound
up having to sell it bc she needed money so he bought it form her for a low value.
Turns out the land was worth much more bc of valuable timber that neither party
knew about at time of sale. She is arguing for inequality of exchange
ii. Holding: hold for the woman here bc of constructive fraud (not actual fraud bc
no intent to deceive but still fraud). Reasoning for constructive fraud –confidential
relations of parties, distress of vendor, mutual mistake. This shocks the conscience.
Ct is really pissed here bc he kept saying if he had know he would have bought
it for more but when he found out he didn’t make any such offer!

VIII. JUSTIFICATIONS NONPERFORMANCE: MISTAKE, CHANGED CIRC, MODIFICATIONS

A. Mistake
a. Def: §151: A mistake is “a belief that is not in accord with the facts”
i. Not mistakes: error of judgment, incorrect prediction of future events, mistaken
understanding between parties
b. Mutual Mistake (both parties acted on the same mistaken belief)
i. §152: When Mistake of Both Parties Makes K Voidable
1. Where a mistake of both parties at the time a K was made as to a basic
assumption on which the K was made has a material effect n the agreed

59
 exchange of performances, the K is voidable by the adversely affected party
unless he bears the risk of the mistake under rule stated in §154
2. In determining whether the mistake has a material effect on the agreed
exchange of performances, account is taken of any relief by way of
reformation, restitution, or otherwise
3. Mistake must be :
a. Mutual: both parties had to share the mistaken assumption
b. Material: must be a lg or serious mistake
c. Mistake: only be able to rescind if u took the facts as true
ii. Mistake v. Misunderstanding:
1. Mistake: a belief that is contrary to the facts- not an ambiguity
2. Misunderstanding: a term in the k that is ambiguous so that u were
thinking diff things (peerless case)
iii. Requirements to Avoid K b/c Mutual Mistake
1. Mutual Mistake: at the time of contracting, the parties must have shared an
erroneous belief concerning a fact
2. Basic Assumption on which K was Made (mistake=central party bargain)
a. Not Basic:
i. (1) market conditions, (2) financial ability (§152, Comm b)
b. Basic: (1) existence of subject matter, (2) quality of subject matter
c. Sherwood v. Walker: seller agrees to sell buyer a cow which both
thought barren, K price $80, prior to delivery seller realizes cow
pregnant, refuses to deliver her, value of breeding cow $750.
i. Rule: party may avoid K if “the thing actually delivered
or received is different in substance from the thing
bargained for and intended to be sold”
ii. Here—mistake went to very nature of thing (barren cow
substantially different creature than breading one)
iii. However, if the dissent was right in this case and the buyer
was really thinking something diff – then it was an
unanticipated gain and rescission would be justified
d. Wood v. Boynton: could claim mutual mistake if both parties
thought the stone was worth $1 and turned out to be much more.
Usually no duty to disclose on part of buyer if he thinks its worth
more, but cts have carved out an exception when someone is in a
superior position w/ info and will require them to disclose
e. Lenawee v. Messerly: “as is clause”
i. Facts: clause that said that purchaser of real property “has
examined this property and agrees to accept same in its
present conditons”
ii. Holding: parties intended to ALLOCATE THE RISK of
a defective septic system to the purchaser of the
property, even though the purchaser failed to discover
the defect after and inspection and the defect made the
property uninhabitable
iii. Rule: cant avoid k on the basis of mutual mistake when one
party has assumed the risk!

3. Material Effect on Agreed Exchange

60
 a. Must show “resulting imbalance in the agreed exchange is so severe
that he cannot fairly be required to carry it out” (§152, Comment c)
b. Advantage to other party: court likely to find material effect where
mistake not only disadv party seeking avoidance, but also
advantages other party (as opposed to not improving via mistake)
4. Risk of Mistake not Allocated to Party Seeking Avoidance
a. 3 Ways Risk of Loss will be Allocated to a Party §154:
i. Agreement of the parties: risk allocated to that party by
agreement of the parties
ii. Conscious ignorance: “aware, at time K made, that he has
only limited knowledge w/respect to facts to which mistake
relates but treats his limited knowledge as sufficient” OR
iii. Allocation by court: risk allocated to him “by court on the
ground that it is reasonable in the circumstances to do so”
5. Lenawee County Board of Health v. Messerly: Owner of property install
septic tank w/o permit in violation of health code. Not known to D when
bought property. D sold land to Pickleses “as is.” P condemned property.
Pickleses sought rescission of K for mutual mistake. Ct said where both
parties innocent, must use its equitable powers to determine who assumes
loss. Here--Pickleses b/c of “as is” clause—(see: §154: allocation by court
where “reasonable in the circumstances to do so”)

c. Unilateral Mistake (one party acted on mistaken belief)

i. §153: When Mistake of One Party Makes K Voidable
1. Where a mistake of one party at the time a K was made as to the basic
assumption on which he made the K has a material effect on the agreed
exchange of performances that is adverse to him, the K is voidable by him if
he does not bear the risk of the mistake under rule stated in §154 and
a. The effect of the mistake is such that enforcement of the K would be
unconscionable OR
b. The other party had reason to know of the mistake or his fault
caused the mistake
ii. Requirements to Avoid K b/c Unilateral Mistake
1. One party, at time of K, made error concerning a fact
2. Same as Mutual Mistake
a. Basic assumption on which K made
b. Material effect on agreed exchange
c. Does not bear risk
3. Plus two more
a. Enforcement would be “unconscionable”
b. Other party
i. had reason to know of mistake or
ii. his fault caused mistake
iii. Triple A Contractors v. Rural Water District:
1. Facts: triple A messed up on its bid offer – clerical error
2. Rule: in the absence of fraud a unilateral mistake does not excuse the
nonperformance of a k
3. However, most cts will say when clerical errors are so gross that its too
good to be true they will excuse performance bc of the unilateral
mistake
d. Remedies for Mistake §158:

61
 i. Avoidance: (rescission) if granted, court will essentially treat K as if never been
made and will attempt to return each party to the position he was in just prior to
execution of K
1. Restitution as element of avoidance: often returning each party to position
he was in prior will mean one party pay restitution. Requires that each party
return to the other benefits she has received from the other.
ii. Reliance Damages: when restitution not adequate to place parties in position they
were in prior to execution of K
iii. Adjustment of K as substitute for avoidance

B. Changed Circumstances, Impracticability, and Frustration

a. Impossibility of Performance
i. Def: If performance by a party has been made literally impossible by the occurrence
of unexpected events, then the K may be discharged- happens after parties make
their agreement. “mistake as to the future”
ii. Diff btw this and mutuality of mistake:
1. Mutuality of mistake happens at time parties contract while this happens
afterwards
iii. Older common law doctrine where change in circumstances made K objectively
impossible to perform. Most common categories of literal impossibility include:
1. Destruction or other unavailability of subject matter of the K
2. Failure of agreed upon means of performance
3. Death or incapacitating illness of a party
iv. Taylor v. Caldwell: objective impossibility
1. Facts: owner of the music hall rented the hall for a performance sometime
in the future. K says nothing about what happens if hall burns down and it
does.
2. Supervening event: fire
3. Rule: if k performance depends on the continued existence of a person or
thing and that person or thing ceases to exist, performance may be excused
for impossibility of performance – this thing existing was an implied
condition
4. Rule only applies if neither party is at fault in causing the destruction
5. Foundation of k: existence of music hall
6. When parties don’t allocate the risk, the ct tries to figure out how the
parties would have allocated the risk if they had thought about this
supervening event
7. Cts will look to what the foundation of the k was and then what would
the parties do in event of this risk
8. Also economic approach where some cts place the risk on superior risk
bearer bc they can get insurance
v. Canadian Industrial Alcohol v. Dunbar Molasses: subjective impossibility
1. Facts: supplier of molasses promised to deliver a certain quantity but failed
to do so bc the sugar co didn’t output enough. Their defense was
impossibility of performance
2. Holding: supplier acted unreasonably in failing to secure a k w/ nat’l sugar
3. Rule: the duty will be discharged if the mill is destroyed before delivery is
due. The duty will subsist if the output is reduced bc times turn out to be
hard. Suppliers fault that it didn’t contract with nat’l sugar to assure a

62
 certain quantity when other reasonable suppliers would have done so is
subjective impossibility!
4. Implied condition that supplier would get the quantity otherwise would have
dealt directly w/ nat’l sugar
b. Impracticality of Performance
i. Def: If performance by a party has been made highly impractical by the occurrence
of unexpected events, then K may be discharged
ii. UCC and R2K broaden scope of impossibility doctrine impracticability
1. R2K §261: (Discharge by Supervening Impracticability)
a. “Where, after a K is made, a party’s performance is made
impracticable w/o his fault by the occurrence of an event the non-
occurrence of which was a basic assumption on which the K was
made, his duty to render that performance is discharged, unless the
language or the circumstances indicate the contrary”
2. UCC §2.615: seller’s non-delivery is excuse “if performance as agreed has
been made impracticable by the occurrence of a contingency the non-
occurrence of which was a basic assumption on which the K was made…”
iii. Elements of Impracticality
1. K  Event, Non-occurrence of which was Basic Assumption of the K.
when something is not a physical impossibility but cts will excuse it bc
maybe the cost of doing it is redic.
a. Basic Assumption relates to future state of affairs
i. (Whereas for Mistake—BA relates to existing state affairs)
b. Event changes very nature of exchange
i. §2.615, Comment 1: describes this event/occurrence as an
“unforeseen supervening circumstance not w/in the
contemplation of the parties at the time of contracting”
c. What might constitute such an event?
i. §262: Death/Incapacity, Person Necessary for Performance
ii. §263: Destruction, Deterioration, or Failure to Come into
Existence of Thing Necessary for Performance
iii. §263: Prevention by Gov’t Regulation or Order
1. prohibiting performance which legal at time of K
iv. “A severe shortage of raw materials or supplies due to a
contingency such as war, embargo, local crop failure,
unforeseen shutdown of major sources of supply…w/in
contemplation of this section” [§2.615, Comment 4]
d. Cost Increases: must be EXTREME
i. §2.615, Comment 4: ‘Increased cost alone does not excuse
performance unless the rise in cost is due to some
unforeseen contingency which alters the essential nature of
the performance.
2. Effect of Event Render Party’s Performance Unduly Burdensome
a. Mineral Park Land Co v. Howard:
i. Facts: k for d to take from p all the earth and gravel they
would need for construction of the bridge- d took all that
was easy to take and got the rest elsewhere- would have
been really costly to get the rest
ii. Holding: Available doenst just mean whats there but whats
practical and reasonable for D to take

63
 iii. Rule: “a thing is impossible in legal contemplation when
it is not practicable and a thing is impracticable when it
can only be done at an excessive and unreasonable cost”
iv. Winnie thinks this is mutual mistake and not
impracticability bc it existed at time of k
b. Transatlantic Financing Corp b. US:
i. This was the ship case with getting from TX To iran and in
this case it was totally forseeable that there might be a
problem going through suez canal but important caveat
from this case: “forseeability or even recognition of a risk
doesn’t always necessary prove its allocation. Parties to
a k are not always able to provide for all the possibilities
of which they are aware, sometimes bc they cannot
agree often simply bc they are too busy”
ii. Doctrine of commercial impractability:
1. Something unexpected must have occurred
2. The risk of the occurrence must not be assigned by
the k or custom and
3. the unexpected occurrence must have rendered
performance commercially impracticable

3. Party Seeking Relief Not at Fault in Causing Occurrence

4. Party Seeking Relief Must Not Have Born the Risk of Event Occurring
a. If party adversely affected by event had expressly or impliedly
assumed risk of occurrence non performance cannot be excused
b. Force Majeure Clause: general provision in a K allocating the risk
of disruptions or calamities
c. Fixed price K: extreme cost increases suffered by sellers who have
signed fixed-price K—generally found to have implicitly assumed
risk of cost increases when signed K (look for foreseeability)
iv. Relief for Impracticality
1. When impracticality fully defeats the feasibility of performance by a party,
it is a complete defense to that party’s failure to perform, relieving him of
the duty of performance and liability for damages.
a. Restitution Damages—If performance K rendered by a party prior
to finding of impracticability, benefit/value must be returned,
measured w/same restitution principles applicable to mistake
2. If impracticability does not go to the entire basis of the K, the court has
discretion to aware relief short of fully excusing performance.
a. See Comments 6,7 UCC §2.615 and R2K §269, 270
b. May be more appropriate to adjust the terms of K, to excuse portion
of performance, or simply permit a delay to enable difficulties to be
surmounted
c. Frustration of Purpose
i. Def: When unexpected events completely or almost completely destroy a party’s
purpose in entering K, parties may be excused from performing – destruction of the
foundation of the k
ii. Difference btw Frustration of Purpose and Impossibility:
1. Frustration -> the purpose of entering into the k is destroyed – not that u
cant do something
2. Impossibility -> possibility of entering into k is destroyed

64
 a. Destruction of subject matter
b. Failure of the agreed upon means of performance
c. Death/incapacity
iii. R2K §265: (Discharge by Supervening Frustration)
1. Where, after a K is made, a party’s principle purpose is substantially
frustrated w/o his fault by the occurrence of an even the non-occurrence of
which was a basic assumption on which the K was made, his remaining
duties to render performance are discharged, unless the language or the
circumstances indicate the contrary”
iv. Factors to be considered: In determining whether the defense of frustration of
purpose should be allowed, the courts consider several factors:
1. Foreseeability: the less foreseeable the event which thwarts the promisor’s
purpose, the more likely the ct will allow frustration defense
2. Allocation of Risk: if the parties implicitly allocate risk to promisor, ct will
not excuse performance
3. Totality: the more totally frustrated the party is, the more likely that he is to
be allowed to use the defense
4. Fault: whether the party seeking discharge was at fault
v. Krell v. Hnery:
1. Facts: rented room for coronation, king got sick, wanted money back
2. Holding: even though k didn’t expressly state why the room was being
rented, the procession was the foundation of the k.
3. In each case must ask:
a. what was the foundation of the k?
b. was the performance of the k prevented?
c. Is the supervening event of such a character that it wasn’t in the
parties contemplation at the time of the making?
d. Was this event forseeable? Should henry have guarded against it?
were re other uses for the room or was the procession the whole
thing?
vi. Lloyd v. Murphy: (partial frustration)
1. Rule: must have total frustration or near total frustration.
2. Restatement: substantial frustration
vii. Diff btw Frustration and Impossibility:
1. Frustration the reason has been defeated. Your motivation for entering
into the k has been defeated not your ability to perform your side or other
persons side of k!
viii. UCC View
1. UCC does not expressly grant this defense either to sellers or buyers.
However, both sides in sale cases may nonetheless be able to use it
2. Buyers: More likely buyer of goods would qualify for this doctrine.
a. UCC can be supplemented by common law—see: §1.103(b):
making common law applicable “unless displaced by the particular
provisions of this act…”
b. So—common law doctrine of frustration probably available to
buyer if can convince court that Code’s failure to give him any
express impracticability defense does not mean drafters intended to
preclude all common law relief
3. Sellers: Rare that facts would lead seller to try this doctrine

65
C. Modification
a. Modification under Common Law
i. Preexisting Duty Rule: §73: “Performance of a legal duty already owed to the
promisor is not sufficient consideration” Theory is to prevent hold up game
1. THUS a modification of K which benefits only one party is unenforceable
for LACK OF CONSIDERATION
2. POLICY: prevent coerced modification and economic duress
3. Alaska Packers v. Domenico: Seamen (P), who had agreed to ship from
San Fran to Alaska at a fixed pay refused to continue working once reached
Alaska, and demanded new K w/more compensation. B/c unable to hire new
crew, D drew up new K, raised $$, signed it. P resumed work but when
came back to San Fran, D refused to honor. Court held 2nd K not
enforceable b/c a promise to pay men for doing that which they are already
under K to do is not sufficient consideration.
4. Modern cts don’t use the preexisting duty rule here, but rather look to
see if there was any duress bc coercive modifications are invalidated as
duress!
ii. Exceptions: When Modification of Executory K is Binding: §89 – “a promise
modifying a duty under a k not fully performed on either side is binding if:
1. Unforeseen circumstances: If the modification is fair and equitable in view
of circumstances not anticipated by the parties when the K was made (89(a))
a. Angel v. Murray: P contracts w D to collect garbage. Although K
entitles her to 150,000/yr for 3 years, L requests additional
10,000/year from city b/c operating costs increased due to new city
dwellings. Modification enforceable b/c fair and equitable,
voluntarily entered into, and motivated by events unanticipated at
time of first K
b. Modern Rule: “cts enforce agreements when unexpected
difficulties arise during the course of performance even though
no consideration for the modification as long as parties
voluntarily agree”
2. Promissory estoppel: To the extent that justice requires enforcement in
view of material change of position in reliance on the promise (89(c))
iii. Where Extra Duties Assumed:
1. §73: “…a performance [similar to that previously due] is consideration if it
differs from what was required by the duty in a way which reflects more
than a pretense of a bargain”
a. If the party who promises to do what she is already bound to do
assumes the slightest additional duties, her undertaking of these new
duties does constitute the required “detriment” for consideration.
b. BUT “additional” or “different” duties promised by person already
legally bound cannot be a pretense for avoiding the PED Rule
iv. Some States Reject PED: Some states have repudiated the PED Rule and allow
promise to modify K w/o any consideration. (NY)
v. Accord and Satisfaction:
1. need to show:
a. minds have met
b. bona fide dispute
c. Release of a claim on one side (creditor) to sue for a higher amt
which u think is owed. On the other side, tendering the lesser

66
 amt of money now so the creditor cant come after u later for the
higher sum of money
d. Umistakable communication to the creditor that tender of the
lesser sum is upon the condition that acceptance will constitute
satisfaction of the underlying obligation
e. Honest belief less is due
f. Con Ed v. Arroll:
i. Rule: when the amt due is in dispute and the debtor
sends a check expressing his intent that this should
count as payment in full, the cashing or retention of the
check is deemed as acceptance by the creditor of the
conditions stated and operates as an accord and
satisfaction of the claim

b. Modification under the UCC

i. Rejects PED Rule: §2.209(1): An agreement modifying a K w/in this Article needs
no consideration to be binding
ii. K Containing a “No Oral Modification” Clause: §2.209(2): A signed agreement
which excludes modification/rescission except by a signed writing cannot be
otherwise modified/rescinded, but except as between merchants such a requirement
on a form supplied by the merchant must be separately signed by the other party
1. NOM Clauses Binding: Look at original K—if it says anything to the
effect of “this K may not be subsequently modified except in writing”that
clause will be enforced, and any subsequent oral modification (even if
proved beyond a doubt, even if benefiting both sides) is not binding
2. Qualifications: NOM ineffective if on form supplied by merchant unless:
a. (1) the other party is also a merchant or
b. (2) the other party has separately signed the NOM clause
iii. SOF: §2.209(3): The requirements of the SOF section in this Article (2.201) must
be satisfied if the K as modified is w/in its provisions
iv. Good Faith & Unconscionability in Modifications: While it removes PED Rule
(aiming to prevent extorting concessions from others by threatening breach of K),
UCC nonetheless guards against such extortion in two ways:
1. §2.09, Comment 2: “modifications…must meet the test of good faith
imposed by this Act. The effective use of bad faith to escape performance
on original K terms is barred, and the extortion of a “modification” w/o
legitimate commercial reason is ineffective as a violation of good faith”
a. The test of “good faith” between merchants or as against merchants
includes “observance of reasonable commercial standards of fair
dealing in the trade” §2.103
2. §2.302: court can refuse to enforce any K which it finds “unconscionable”

(7) IF NO DEFENSES, WHAT ARE THE REMEDIES?

67
 Overview of Damages:
A. Expectancy Damages: Most common remedy. They attempt to put P in the position she would have been
had the D performed. Benefit of the bargain
a. Out of pocket costs she has incurred, plus
b. The profit which she would have made had K been completed
B. Reliance Damages: Compensation for harm caused by misplaced reliance on a promise. Puts P in position
prior to making K
a. Out of pocket expenditures incurred in performing K
C. Restitution: Attempt to prevent the unjust enrichment of the D by returning the P who has partially
performed the value of the performance he has rendered to the D

EXPECTANY DAMAGES
A. Purpose: Expectancy damages are the usual, and sometimes only measure of damages for breach K
a. Court attempts to put P in position she would have been in had the K been performed by D
b. Idea: “benefit of the bargain”

B. Calculating Expected Damages

a. §347: Subject to limitations in 350-53, injured party has right to damages based on his
expectation interest as measured by
i. loss in value to him of other party’s performance caused by failure/deficiency PLUS
ii. any other loss, including incidental or consequential loss, caused by breach, MINUS
iii. any cost or other loss that he has avoided by not having to perform
b. Methods of Measuring Expectancy damages:
i. Whether a party’s lost expectancy damages under a k should be measured
objectively, based on the market value of the promised performance “to some
hypothetical reasonable person,” or subjectively, based on the value of performance
to the “injured party himself” in light of the party’s particular circumstances
1. Some courts allow u to recover on ur subjective perspective, while others go
w. the reasonable person standard
2. Always want to look at the : PURPOSE OF THE CONTRACT
ii. Groves v. Wunder (1939):
1. Facts: Wunder leased a piece of Groves’ land in order to excavate gravel.
Wunder promised in the lease to “leave the property substantially the same
as it was when he started his work.” At the end of the lease, Wunder did not
leave land the same as it was. Cost of restoration would have been more
than 60 k but the restoration would have only increased the value of the land
by 12 k. so do u measure by cost of restoration or how much restoration
would increase land value?
2. Held: Groves was entitled to cost of restoration (60K) – saw Wunder’s
breach as deliberate and willful. COST OF COMPLETION DAMAGES.
a. UGLY FOUNTAIN COMPARISON- if u contract for a foolish
fountain on ur prop that will diminish ur prop value, as a
landowner u should have the right to do what u want w ur
land…so doesn’t matter that what u asked for actually
decreased the prop value.
3. Dissent: DIMINISHED VALUE DAMAGES- would have awarded the
12k bc Groves only suffered a 12 k loss in the value of the land as a result of
breach. Also said ugly fountain doesn’t work here bc the prop was not for a
unique or personal use but rather just for general sale. So Groves here didn’t

68
 contract for the foolish monument. MAJOR CONCERN HERE that if
Groves were awarded the 60 k, he could pocket the money and receive a
windfall instead of investing the money to restore the land.
4. Majority and dissent disagree on the “purpose of the land”
5. What the dissent and majority are really thinking about here is what
Groves really wanted the money for-> if he was just going to sell the
land, the 12 k would have been sufficient, but if he wanted the land
restored so he could enjoy its beauty, then the 60 k would be
appropriate.
6. Neither the dissent nor majority talked about whether the restoration clause
was bargained for bc that’s also key in figuring out how imp it was to either
party
iii. Peevyhouse v. Garland Coal and Mining Co.: Dimunition applied
1. Facts: Peevyhouses sued Garland for failing to restore the land after strip
mining as promised. Cost of restoration- 29k, but restoration would increase
the value of the land by only $300. Jury awarded 5000 bc this was a
compromise.
2. Held: focused on huge discrepancy btw these values and awarded the $300.
Seemed unconscionable and grossly disproportionate to award the 29 k .
purpose of k - felt ps were just trying to make some money here- economic
not personal.
3. Dissent: thought the P’s should have been awarded the 29 k because they
had really bargained for this restoration clause in the k and therefore, that
indicates that it was imp to them.
iv. Rock Island Improvement Co. v. Helmerich and Payne Inc (1983): CR applied
1. Facts: another land restoration case – OK legislature had adopted a statute
declaring the land conservation was the state policy and requiring the miner
to restore the land regardless of the cost.
2. Holding: said bc of the reclamation clause and the OK legislature stressing
the importance of this clause that parties prob negotiated with the notion in
mind that they had to restore land to what it was. State policy created a
strong presumption that the contract right of landowners to reclamation was
not merely incidental to the k but an imp bargained-for term. Therefore,
landowner entitled to cost of restoration even though it was grossly
disproportionate to the value of the land
3. GENERAL RULE : “u get cost of completion”
a. Don’t take Peevyhouse and Groves as law unless u get really
factually similar pattern
v. Radford v. De Froberville (1977):
1. Facts: D promised R he would build a wall separating properties but failed
to do so.
2. Held: used “cost of completion” test: convinced that P would use money
to build wall- bc he really wanted it built.
C. Expectancy Damages in Construction Setting:
a. Thorne v. White (1954):
i. Facts: Thorne was supposed to put a new roof on White’s house. Bc of bad
weather, Thorne had to stop and never returned to finish. White had to get a new
roofer and the new roofer wound up costing him 350 dollars more than Thorne’s
work. Problem here was that the new roofing company was putting on a whole new
roof of better quality whereas Thorne was just going over old roof and poorer
quality. Diff in what White was getting from each k

69
 ii. Rule: The p should only be allowed to recover what it has cost him to complete
the same work, over and above the original k
iii. COVER PRICE- CONTRACT PRICE = DAMAGES
iv. Cover price-> price to cover the k breach
1. u have to cover reasonably- so if u can get the same work done for the same
price must take that- substitute arrangement has to be reasonable. However,
if u can only find something that’s more expensive than the breaching
contractor will be held liable for the difference
v. Injured party shouldn’t be placed in a better position than he would have been
in had the contract been performed
b. Warner v. McLay (1918)
i. Breach of a k by the contractor. P is saying he is entitled to 10% profit.
ii. Rule: the p has the right to recover such sum in damages as he would have realized
in profits if the k had been fully performed. To ascertain this, u have to find the cost
and expense of the work and materials necessary to complete the k. this sum
deducted from the k price is the profit. Then the p can receive in addition to his
expenditures for work and labor supplied toward the completion of the k.

General Measure=Loss in value + Other loss – Cost Avoided-Loss Avoided

c. Elements
i. Loss in Value: P’s loss which deprives that party of performance expected under K
1. Value=What P Promised-What P Received
ii. Any Other Loss: Consequential and Incidental Damages
1. Consequential Damages: losses suffered by V of breach going beyond mere
loss in promised performance (direct damages) and resulting from impact of
breach on other transactions or endeavors dependent on the K
2. Incidental Damages: costs and expenses incurred by V of breach in
attempting to deal w/it and in taking action to seek a substitute transaction
iii. Cost Avoided: Breach may have beneficial effect on party by saving it further
expenditure that would otherwise have been incurred
iv. Loss Avoided: Breach may have further beneficial effect on that party by allowing
it to avoid some loss by salvaging and reallocating some or all of the resources that
otherwise it would have to devote to perform K
d. Handicapped Children’s Education Board v Lukaszewsi: D contracted w/Handicapped (P)
to provide speech therapy services, then offered better position, resigned, but resignation
rejected by P. P looked for replacement and only applicant was more qualified and had to
hire at higher salary. (10K v. 11K) P sued for difference.
i. Court held: An employer who has to obtain an employee at a higher price upon
breach of employment K may recover difference. Price New Employee-Price
Breaching Employee. (11K-10K)
ii. While D argues they got teacher w/more experience—this not what bargained for, so
doesn’t’ matter if a benefit was imposed on them
iii. This is the “foisted” – the more valuable choice was foisted upon u so u can recover
iv. Look at whether this is an efficient breach: by breaching u don’t incur any harm
and u still come out ahead.
e. Cooper v. Clute (1917):
i. Facts: seller contracts to deliver cotton to buyer for a certain price, seller doesn’t
deliver, market value at time and place of delivery was same as k price. Seller sells

70
 cotton to someone else for more money. Buyer sues for difference in price btw what
he paid and what he would have paid if seller delivered
ii. Rule: difference btw the k price and market value of property at the time and place
of breach.
1. so in this case, bc the market val of the cotton is the same as what the k was
for, the buyer gets nothing bc it would have cost him nothing to replace the
k
2. theory is that u have no been harmed if u can go out and get the same thing
for the same price as u would have if the contract was never breached.
3. Also this is a pretty standard item..
4. Buyer’s theory was unjust enrichment
5. UCC 2-713: comes out same way as this case
f. Neri v. Retail Marine Co. (1972)
i. Facts: Ps contracted to purchase a boat from D, gave downpayment, then P got sick
and wanted to rescind k. boat had already been ordered so D wound up having sell
the boat a few months later to another party for same price. D wanted damages for
profits he would have gotten from Ps sale and ps argued – u sold the boat to
someone else so why does it matter?? Asking for lost profit here.
ii. Holding: If a dealer has an inexhaustible supply of goods, the resale to replace the
breaching buyer costs the dealer a sale because had the breaching buyer performed
the dealer would have made two sales instead of one. The buyer’s breach, in such a
case, depletes the dealer’s sales to the extent of one and the measure of damages
should be the dealer’s profit on one sale.
g. UCC provisions:
i. 2-708
1. - sub 1 - focus on can the seller get difference in value damages under this
sub¶ - if the seller resells the goods and makes a good deal - better than the
market price?
2. - sub 2 - deals with the lost volume seller situation and the situation of the
special manufacturing seller - who doesn’t complete the work
ii. 2-718
1. sub 1 - liquidated damages
2. sub2 and 3 - specialized situation where the buyer makes a deposit and then
the buyer refuses to take delivery and tries to get the deposit back
3.

D. Limitations on Expectany Damages

a. Foreseeability: Damages are foreseeable when at the time of making the K, the party who
ultimately breached reasonably should have realized that those damages would be a likely
consequence of the breach. [Note: breach need not be foreseeable]
i. POLICY: economically efficient (efficient transactions) and fair. But also, arg of
economic waste- are we going to require someone to tear something down that they
did?
ii. Not likely an issue when direct damages are concerned
iii. Confines consequential damages to those losses that a party reasonably should have
contemplated, based on information which she had access at time of K
iv. Hadley v. Baxendale (Eng. 1864): “REASONABLY FORSEEABLE
RULE”Owners of mill delivered broken shaft to carrier for shipment to
manufacturer. Delay in shipment. B/c this was mill’s only shaft, delay idled mill
longer than necessary. Mill owners sued carrier for damages based on profit lost

71
 when mill could not operate during period of delay. Court found carrier not
accountable b/c no way of knowing delay would cause mill lie idle.
1. Rule: Damages for breach only recovered if 1 of 2 conditions satisfied:
a. Loss must be one that may fairly & reasonably be considered to
arise naturally—in ordinary course of things—from the breach,
OR (general damages)
b. Loss may reasonably be supposed to have been contemplated by the
parties at the time of K as a reasonable consequence of breach
(special damages)
v. Rule from Hadley found in §351 and §2.715 which break damages into 2 categories
1. General Damages: Damages that arise naturally, include
a. All easily imaginable direct damages
b. Consequential damages that should be obvious to breached w/o any
special or particular knowledge of other party’s circumstances
2. Special Damages: Consequential losses that derive from P’s special
circumstances. B/c the would not flow as an obvious and natural
consequence of the breach, D not liable for them, unless he is informed of
special circumstances at time of contracting
a. Reasonable Contemplation: a loss of such nature and approximate
extent could be conceive as a probability (not just possible)
i. Do not need a tacit agreement (where breaching party not
only foresaw, but tacitly accepted liability for loss)
ii. Rather, focus on relationship between information available
to breacher and loss
vi. Armstrong v. Bangor Mill Supply Co. (1929):
1. P sent broken cranshaft to get repaired, wasn’t repaired properly and as a
result p had to send it back and had to shut down mill for 6 days
2. Holding: judgment for ps bc d’s k to repair meant he would do this in a
workmanlike manner and reasonably skillful way
3. Tacit Agreement Test: some cts allow recovery of consequential
damages only if the D tacitly agreed to assume the risk
a. ucc rejects it but breacher has to be aware of the particular needs in
order for the other party to recover
v. Morello (pg227): Subcontractor contracted to do work worth $44K and did
some worth $9K and then abandoned, then prime contractor spent $54K to complete
it. Subcontractor sued for $9K and prime contractor counterclaimed for difference
btw $44K and $54K or $10K. Trial ct awarded prime contractor $1K, difference btw
$9K and $10K.
Damages were not calculated correctly b/c the $9K was counted twice since
the cost to complete after abandonment already included it.
b. M I T I G A T E: Mitigation of Damages: If P has, through bad or unreasonable action (or
inaction) aggravated her damages, the D is not held responsible for increase in loss caused
by P
i. No “duty” to mitigate, but if P fails to safeguard her own economic welfare, fairness
dictates she must be left w/added loss and D should not have to pay for it
ii. §350: (Avoidability as a Limitation on Damages)
1. Except as stated in Subsection (2), damages are not recoverable for loss that
the injured party could have avoided w/o undue risk, burden, or humiliation
2. The injured party is not precluded from recovery by the rule stated in
Subsection (1) to the extent that he has made reasonable but unsuccessful
efforts to avoid loss

72
 iii. Clark v. Marsiglia (1845): “DUTY TO MITIGATE” -> injured party must act
reasonable after the breach.
1. Facts: D delivered paintings to P to clean and repair and p started work then
d told him he didn’t want the paintings cleaned and p finished job anyway.
2. Holding: p cannot recover bc he had a duty to mitigate… u can only
recovery for expenses + profit, and therefore, if someone tells u to stop
working don’t keep piling up the expenses! That seems punitive.
3. Rule: AVOIDABLE CONSEQUENCES. U have to avoid losses where
reasonable to do so
4. Notes: the only way it may make sense to keep working after a countermand
is if it is more reasonable, for example, u are manufacturing goods that u
know u can resell it for more than the k price in a rising market for certain
goods.
iv. Schiavi Mobile Homes v. Gironda (1983):
1. Facts: Gironda contracted w/ Schiavi to buy a mobile home, gave deposit
then never paid the rest. Gironda’s dad said he would buy the mobile home
cause his son couldn’t but Schiavi said no and sold the home to antoher
party for less money then tried to sue Gironda for the expectancy damages
from selling 2 homes.
2. Holding: ‘when a k is breached, non breaching party has an affirmative
duty to take reasonable steps to mitigate his damages”
3.
Mitigation of Damages in Employment: Even though non-breaching party has to mitigate damages, the
Court will not expect them to take another job that their employer offers them if employer breached

v. Parker v. Twentieth Century Fox Film Corp (1970): injured employee

1. Facts: Fox hired parker to act in a musical -> k gave her approval rights
over the director and screenplay. Fox decided not to make that movie, broke
k, and offered her another movie ( a western) for same salary, however, she
lost her approval rights. Parker declined job offer and sought full salary
from musical.
2. Holding: theses were 2 diff kinds of employment and the substitute offer
was not “substantially similar” but was “different and inferior” - >
therefore, not a reasonable substitue (their mitigation sucked).
3. Rule: u may deny a substitute offer if it is either “different OR inferior”
4. Dissent: thought it was a jury ? bc whether two jobs are really different
needs to be decided by them - there will always be differences btw two
jobs, it’s the extent of those differences
5. Policy concerns: why should she be forced to work for a co that already
demonstrated that’s its not reliable? Will she not perform as well for them
now? how do we know fox wont come up w/ another substitute offer?
vi. Olds v. Mapes-Reeves Construction Co (1900):
1. Said that a subk could recover lost profits from a general k despite doing the
same work for the landowner.
2. ct reasoned that subk could have taken a completely diff job and should still
recover bc he could have had 2 jobs instead of one but/for the general k’s
breach
3. Problems w/ this case:
a. Subk job is only available bc of k’s breach – therefore, subk is not
losing work bc of the breach bc this is a substitute job

73
 4. contractor couldn’t claim diminution in value bc furnished a condition for
which the new k came about but that’s it
vii. Evergreen Amusement Corp v. Milstead (1955): “NEW BUSINESS RULE”
1. Facts: evergreen sued milstead bc it took them too long to complete the
work on the new theater and therefore theater opened later than anticipated.
– claimed 12.5 k in lost profits.
2. Holding: found for milstead bc said the damages were speculative and the
evidence offered doesn’t have a sufficient basis for estimating the damages
w/ reasonable certainty
3. Restatement §331: damages are recoverable for profits prevented by breach
of K “only to the extent that the evidence affords a sufficient basis for
estimating their amt in money w reasonable certainty”
4. “New Business Rule:” operates to bar a recovery of lost profits. This is bc
u don’t have that “degree of certainty” and damages are speculative if the
business has not been opened yet
5. NEW BUSINESS RULE TODAY: many cts allow for recovery of lost
profits when there is a “reasonably certain factual basis for computation of
probable loss”

c. Reasonable Certainty §352: P must prove by a preponderance of evidence that the breach
resulted in loss and has to give evidence of this loss. Can’t be speculative
d. Causation: Must be a link between breach of K and the loss (not really an issue for direct
damages, more for consequential)
e. Unfair Forfeiture: Where expectation damages would have the absurd and unfair result of
placing a great burden of liability on D far in excess of the real loss suffered by P, the court
has discretion to confine damages so as to reflect P’s true economic loss
f. Limits on loss expectancy: can’t recover for: lawyers fees, medical context, loss of rep or
good will, unforeseeable or difficult to prove damages
• Punitive Damages: Restatement Second §355: you can’t recover Pd in K breach, unless the
breach is also a tort for which PD are recoverable
o This rule applies even when the breach is intentional or even when it has been effected
w/ malicious intent
o We don’t allow PD for myriad reasons:
o usually k breaches don’t foster the same kind of resentment as to the wrongs called torts
and crimes
o economics perspective: don’t want to discourage efficient breaches of contracts where
its more economically beneficial to breach by allowing these extra damages
o usually Ks govern commercial interest where u can easily fix the compensation

E. Buyers and Sellers Remedies Under the UCC

a. Basic Principles
i. Expectation relief—essentially same concept as under common law
ii. Specific performance limit to special cases
iii. Damages primary remedy for breach
iv. Goal of damages—meant to achieve, as closely as possible, the economic position
the P would have been in had there been no breach
1. §1.106(1): Remedies provided by this Act shall be liberally administered to
the end that the aggrieved party may be put in as good a position as if the

74
 other party had fully performed but neither consequential or special nor
penal damages may be had except as specifically provided in this Act or by
other rule of law
v. Statutory formulas for calculating compensation
1. Buyer’s remedies for seller’s breach: §§2.711-2.717
2. Seller’s remedies for buyer’s breach: §§2.703-2.710

b. Buyer’s Remedies
i. Cover Damages §2.712
1. Cover Price - K Price + Incidental and Consequential damages
a. But the covering purchases must have been made in good faith and
w/in reasonable time, w/only commercially reasonable substitutes
2. Note: cover damages are elective, Buyer does not have to cover. Even if
buyer chooses to cover can still sue under market damages if u would get
more that way.
ii. Market Damages §2.713
1. Market Price (at time buyer learned of breach) – K Price + Incidental and
Consequential damages
iii. Damages for Accepted Goods §2.714 (when buyer accepts non-conforming goods)
1. Value of Good had they Conformed – Value of Goods as Accepted +
Incidental and Consequential damages
iv. Incidental and Consequential Damages §2.715
1. Out of pocket expenses incurred by breach to deal w/seller’s breach.
2. Subject to foreseeability test: Did the seller at time of contracting have
reason to know of these damages AND mitigate?
v. Specific Performance §2.716
1. May be decreed by buyer if goods are unique or other circumstances.
2. If goods readily available on market—court will not impose this
c. Seller’s Remedies
i. Resale Damages §2.706:
1. If seller enters substitute transaction and resells, can recover K Price-Resale
Price + Incidental Damages, but seller MUST
a. Tell buyer re-selling
b. Re-sell in good faith and in commercially reasonable way
ii. Market Damages §2.708(1):
1. Damages may be based on hypothetical resale as alternative to actual resale
2. K Price-Market Value Price
iii. Lost Profits §2.708(2)
1. When remedy of K-Market damages does not give adequate recovery
2. Gross Profit + Reliance Expenses – Allowance for Payments Received
iv. Specific Performance §2.709
1. Seller can get entire price of goods if
a. Buyer accepted the goods
b. The risk of loss was passed to buyer, OR
c. Seller unable to sell goods, despite reasonable efforts

ALTERNATIVES to EXPECTATION DAMAGES

A. Reliance Damages

75
a. General Function: In some K situations, and several non-K situations, expectation damages
are not suitable and reliance damages appropriate. Situations include those where
i. P cannot show his lost profits w/sufficient certainty, but can show expenditures
ii. No legally enforceable K, but P entitled to some protection (ie: promissory estoppel)
iii. Wont put the P in a better position than he would have been in had the contract been
perfomed
iv. Sometimes reliance damages prove to be a better measure of damages bc they give u
more money if u made a bad deal
b. §349: As an alternative to the measure of damages stated in §347, the injured party has right
to damages based on his reliance interest, including expenditures made in preparation for
performance or in performance, less any loss that the party in breach can prove w/reasonable
certainty the injured party would have suffered had the K been performed

Reliance Damages=Damages Based on Reliance Interest (expenditures made in preparation

for performance or in performance) – Loss Had K Been Performed

c. Where Profits too Speculative: §349, Comment a

i. Lost profits may not be awarded when too speculative or uncertain.
ii. When proof of lost profits fails for certainty, court may award P compensation for
1. expenditures he made in preparing to perform the K, and
2. those he made in actually making part performance
c. Chicago Coliseum Club v. Dempsey (1932):
i. Facts: Dempsey signed a k to fight for Chicago. Chicago was a promoter of sports
matches and did all these things to get read for the anticipated fight. Dempsey
breaches k and performs elsewhere.
ii. Rule: what’s recoverable are such items of expense as were incurred btw the
dates of the signing of the k and the breach by the D as a necessary expense in
FURTHERANCE OF THE PERFORMANCE
1. Cts allow the breacher to present evidence that the profits would not have
been as great as u claim they would be, but if neither party can prove w/
precision what the profits would have been, ct gives injured party benefit of
the doubt
iii. Profit = Expected ticket sales – expenses
d. Rule Pre-contractual liability: “you can recover pre-k expenses when there’s a breach
provided that the expenditures would reasonably be in the contemplation of the parties as
likely to be wasted if the k was broken” – Anglia Television v. Reed
e. Won’t hold someone liable for paying reliance damages if these were not “reasonably
foreseeable” or u could have avoided them after hearing about the breach
f. Sullivan v. O’Connor (nose job case): the strength of the contract claim – when its
weak

76
 i. P a professional entertainer, contracts for a nose job. The dr. botches the nose job and
she sues. She wants lost expectancy damages bc claiming that her career depends on her
nose, he just want to pay her based on restitution – give her back all her out of pocket
expenses.
ii. Held: ct decides to give her reliance damages – the middle in btw what she wants and
what he wants to pay her. Lost expectancy would be difficult to calculate here and don’t
want that going to a jury. Also public policy reasons for not granting lost expectancy bc
don’t want drs charging a lot more money for something now. So reliance damages to put
her back to where she was pre-k. also big discrepancy btw his fee and what he would have
to pay for lost expectancy, and what kind of value do u really put on a good nose?

B. Restitution Damages
a. General Function: P’s restitution interest defined as the value to the D of the P’s
performance. Restitution damages may be awarded to P both in suits of K and quasi-K.
i. Goal: prevention of unjust enrichment
b. Restatement §371 : if a sum of money is awarded to protect a party’s restitution
interest, it may as justice requires be measured by either:
i. The reasonable value to the other party of what he rec’d in terms of what it would
have cost him to obtain it from a person in the claimant’s position or, (FMV)
ii. The extent to which the other party’s prop has been increased in value or other
interests advanced
c. §373: (Restitution When Other Party is in Breach)
i. Subject to the rule stated in Subsection (2), on a breach by non-performance that
gives rise to a claim for damages for total breach or on a repudiation, the injured
party is entitled to restitution for any benefit that he has conferred on the other party
by way of party performance or reliance
ii. The injured party has no right to restitution if he has performed all of his duties
under the K and no performance b the other party remains due other than payment of
a definite sum of money for that performance
d. Calculation of Value:
i. Cts will decide how much to award based on how egregious the breaching party’s
conduct is.
ii. Can’t get restitution if all that’s left is payment (Campbell)
e. As a Remedy for Breach of K
i. When party is in process of performing a K, and other party commits a material
breach of K, the aggrieved party has right to rescind the K, and recover restitution
damages for the breach.
1. Even though the rescission purports to dissolve the K, the P’s suit is really
on that K (not quasi K)
ii. Most common situation which restitution damages award in on-the-K actions is
where P expectation damages cannot be estimated w/sufficient certainty
f. Untited States for use of Susi Contracting v. Zara
i. used the k price to fix the basic price here. Construction contract for
runway case – In construction contracts, the promisee upon breach has the
option to forego any suit on the contract and claim only the reasonable value of
performance (quantum meruit) – Under this form of recovery, the contract price
does not limit recovery. – The contract may be important evidence of the value of
the performance to the D, as may also the cost of the labor and materials. – The
court calculated restitution not by how much the D’s wealth was increased by the

77
 P’s actions but by the amount for which such services and materials could have been
purchased form one in the P’s position at the time they were rendered.
ii. Rule: it is well settled that one who is wrongfully discharged and prevented from
further performance of his K may elect as a general rule to treat the K as rescinded,
may sue upon a quantum meruit as if the special contract of employment had never
been made and may recover the reasonable value of the services performed even
though such reasonable value exceeds the K price”
g. Not Limited to K Price
i. According to most courts, not limited by K price. If work done by P prior to D’s
breach has already enriched D in amount greater than K price, entire enrichment
may be recovered by P.
1. Note: Reliance usually limited to K price
C. Specific Performance
a. Less favored than monetary damages but granted when those damages are inadequate
b. Usually given for land bc its considered to be unique
c. Cts hate giving sp bc don’t want to make ppl do things and don’t want to monitor and watch
that its done properly
d. Kitchen v. Herring (1851):
i. Held: in actions for land, bc its unique sp is proper
e. Curtice Brothers v. Catts (1907):
i. P was a tomato cannner and had a k with D who was a farmer to buy his tomato
crop, D threatens to breach and p sues for sp- p set up his whole business relying on
this contract so really needed the tomatoes and not damages
ii. It would damages his reputation to not have these tomatoes canned- this is
bigger than figuring out lost profits
iii. Grant SP here bc the remedy at law is inadequate in this market. If this farmer
breaches, the whole operation of the canning factory is shut down bc w/o the
tomatoes there’s nothing to can.
f. Pratt Furniture Co. v. McBee (1987):
i. D contracted w/ p to make chairs for p. then D breached by entering another k w/
someone else- couldn’t complete both ks. P wanted an injunction to prevent d from
making the tables
ii. Holding: affirmd 2-716 UCC: allows sp where “the goods are unique or in other
proper circumstances”
1. Chairs aren’t unique
D. Clauses: Liquidated Damages:
a. Putting a clause in your contract on damages liability if there’s a breach later on.
b. Reasons for doing this: easy to know what damages are if k breaks down, good if difficult
to prove damages, incentive to perform, avoid calculating and proving damages
c. Cts look at the time of contracting to see if u made this bc damages for the breach are
uncertain and u really tried to estimate a fair sum for liquidated damages
d. Cts will allow you to limit your liability as long as its not unconscionable in clauses
e. Cts really don’t like to enforce liquidated damages clauses bc: think bargaining process
might be deficient, coerce parties into performing etc
f. Cts want to see that the damages are proportionate – want to prevent coerciveness- don’t
want ppl stuck in a k bc they feel like its too expensive to breach
g. How to make a proper liquidated damages clause (according to Dunbar):
i. Damages are btw the upper and bottom level of actual damages
ii. Parties seriously negotiate
iii. Provide extensions for unforeseeable complications if theres a time limit
iv. Say “liquidated damages”
v. State why parties put this clause in k

78
 h. H.J. McGrath Co v. Wisner (1947):
i. Facts: farmer in k with cannery co – liquidated clause in k that entitle cannery co to
$300 if a breach occurred. Therefore, when farmer breached by not delivering all
the tomatoes he was supposed to, the clause kicked in
ii. Rule: 2 Prong Test for determining if liquidated damages clause is enforceable:
Restatement §339
1. Agreed damages must be a “reasonable forecast of just compensation
for the harm that is caused by the breach”
2. “the harm that is caused by the breach is one that is incapable or very
difficult of actual estimation”
3. comment b: its not just compensation if the magnitude of the breach is
not accounted for when setting the liquidated damages sum
iii. Holding: ct here held against the clause bc u could reasonably figure out what the
damages were going to be and ct didn’t like that u paid one sum regardless of how
much u breached the contract
i. Better Food Markets v. Americna Dist Telegraph Co. (1953): ct upheld a liquidated
damages clause that said a security system company would only be liable for $50 when the
food store was robbed even though over 35 k stole. Ct held that it was too difficult to fix an
actual damage amt in this case bc u cant predict nature and extent of loss. Winnie says this
is the right result but wrong reasoning - > not liquidated damages but limitation of
remedies!!
E. Promissory Estoppel:
a. a promisee can recover for a broken promise when the promisor reasonably should expect
the promise to induce relianc, the promisee relies, and justice requires enforcement of the
promise
b. some cts grant reliance, others grant lost expectancy
c. Restatement 2nd §90:
i. “the remedy granted for breach may be limited as justice requires”
d. Goodman v. Dicker (1948):
i. ct awarded reliance damages to the P, a prospective franchisee of Emerson radios,
who incurred expenses preparing for the franchise after a distributor represented that
the p would get the franchise and an initial delivery of radios.
ii. Ct refused to grant the p lost profits, bc “true measure of damages is the loss
sustained by expenditures made in reliance upon the assurance of a dealer franchise”
iii. In prom estoppel, usually don’t get expected profits bc u havent done anything to
deserve those profits
e. Walters v. Marathon Oil Co (1981) Rare Awarding of Lost Profits
i. Facts: marathon broke a promise to supply oil to walters after they had improved a
gas station in reliance on this promise. Marathon claimed that walters didn’t suffer
reliance damages bc the increase in market value of their land more than made up
for the cost of improvements.
ii. Held: awarded “lost profits” -> on theory that walters forewent the opp to
invest and make the profits elsewhere. Awarded damages on basis of number of
gallons previous owners had pumped, amt of gas marathon promised walters and
amt of profit walters would have made on each gallon
iii. But/for the broken promise, walters would have made this profit elsewhere
iv. “OPPORTUNITIES FOREGONE” theory: what the employee lost in reliance,
not really what the employee would have earned
EMMANUEL TIPS:

Offer:

79
 A. ask yourself has the party exhibited a willingness to be bound w/o further action on his/her own
part?
B. Common Exam Situations:
a. Quotations: price quotations are usually invitations, but may be offers if they are specific
enough (quantity, price, to whom the offer is made etc.)
b. Advertisements: these are usually considered invitations unless they include sufficient
promissory language -> ie : language “while they last” is not indicative of intent to be
bound
c. Solicitation for Bids: usually invitations w/ responding bids considered offers
i. Only way its an offer is if there are words of commitment -> “ a commitment to sell
to the highest bidder by a certain date”
C. Exam Writing Tip: questions involving offers should be viewed from the perspective of the
reasonable offeree (an objective standard) – so gray area fact patterns- argue both sides

Acceptance:
A. must be unequivocal
B. however, may be implied through conduct – ie: u ship goods, pay for items
C. manner of acceptance must comport w/ offer or be reasonable if offer doesn’t specify
D. if offeror is indifferent as to manner of acceptance, offer can be accepted by performance or promise
(under UCC u can ship or promise to ship as seller)

Unilateral Ks:
A. offeror is requesting performance of an action – most common are offers of an award or reward
B. offeree has to know about the offer- so doesn’t count if u do something w/o knowing there was a
reward for what you weredoing
C. Revocation: acceptance of offer prevents revocation by offeror
D. Restatement: offers are temporarily irrevocable if the offeree has commenced but not yet completed
performance - HOWEVER, make sure they have started to perform and not just done mere
preparations to perform

Acceptance Varying From Offer:

A. Battle of the forms: where sellers and buyer’s purchase orders have diff terms
B. No deal: 2 forms must agree on basic terms (price, quantity and delivery date) well enough that they
form a k. if they don’t, then no agreement, unless subsequent actions of parties is enough to form a
contract-> ie: if someone ships something
C. Material Term: additional or diff term in the second form is merely a proposal for addition to the
contract.
a. Term doesn’t become part of k if:
i. One or both of the parties is not a merchant
ii. Term materially alters the deal (arbitration clauses, disclaimers of warranties etc)
b. if term in second form directly conflicts with term in first form -> “knock out rule”
c. after knock out, relevant codes come in to gap fill (things like implied warranty of
merchantability)

Duration of the Power of Acceptance:

A. mailbox rule: acceptance effective upon dispatch in mail
B. counter-offer: effectively terminates the power to accept – acts like an outright rejection
C. for offers sent by mail, time runs from the moment offer is rec’d
D. if offer doesn’t specify when offer lapses, it expires w/in a reasonable amt of time.
E. Revocation:

80
 a. u can’t accept if offer was properly revoked:
i. ie: “deal sis offer” = inequvivocal statement
ii. indirect communication: u find out from a reliable source that the deal is off before u
accept bc u know the land was sold to someone else.

Firm Offers and Option Contracts:

A. start with deciding whether the UCC applies when an offeror promises to “keep a promise open”
B. UCC Transactions:
a. Involving sale of goods
b. Merchant: if the offeror is a merchant, may extend an irrevocable firm offer, w/o
consideration, as long as the writing is signed
c. Time Limit: firm offers are only irrevocable for three months max w/o consideration. so
even if u say u will leave offer open for 9 months, u may choose to revoke anytime after the
third month has passed, but if u don’t revoke then your offer still stands
d. Non-merchant: non-merchants who make promises to hold offers open w/o consideration
aren’t held to promise
C. Non-UCC Transactions:
a. Apply to sales of realty and services
b. U need consideration for irrevocability, HOWEVER, consideration can be non-monetary-
therefore, it can be like fake consideration (Restatement adopts this view too)
D. under both UCC and non-UCC, acceptance for option k is only valid upon acceptance by offeror, not
upon dispatch- so mailbox rule doesn’t apply to option ks

Temporary Irrevocability:
A. where party has commenced performance of a unilateral k (ie: u start walking across bridge)
B. where subk submits bdi to general k -> if general k is relying on this, the bid is irrevocable from the
time necessary for general k to receive the job and accept sub k’s bid

Indefiniteness:
A. 4 Essential Elements when Analyzing an Agreement:
a. parties to k
b. subject matter of k
c. time for performance
d. price
B. UCC:
a. Agreement is not void if it expresses an intention by both parties to be bound and there
is a reasonably certain basis for giving an appropriate remedey
b. Same general rule applies in Non-UCC contexts
c. Non-Essential Terms in Real Estate Transactions: type of deed, type or title or type of
warranty, dates of tendering of down payment and completion of transaction
C. Most Common Omitted Terms in Sales of Goods Cases: manner of payment, place of delivery, total
k price, type of warranties:
a. If k doesn’t specify, delivery is at sellers place of business, and cash payment is due
b. If k doesn’t specify price, ct will fix a reasonable price as long as it knows that parties
intended to be bound
c. Past performance: indicative of parties intent to be bound now
d. Open terms: cts will enforce ks with these as long as they can figure out what parties had in
mind

Misunderstanding:

81
 A. Ambiguous Term: if neither party at fault in misunderstanding, and neither knew what other was
thinking, then k void.
B. However, if k term is ambiguous but one party should know the meaning understood by other party,
a k is formed based on other party’s thinking
C O N S I D E R A T I O N

Consideration:
A. Consideration: legal detriment suffered by promisee in exchange for promisor’s promise
B. 4 Main Ways in Which Consideration Issue Arises:
a. Promises to Make Gifts: D promises to make a gift to relative or charity. No consideration
so usually not enforceable
b. Promises to pay for past services: past consideration - > most commonly p is a good
Samaritan
i. Services weren’t performed w/ reasonable expectation of compensation
ii. Don’t be fooled if:
1. Person promises immediately after being saved to pay
2. Savior is a retired dr
3. Relative of the saved party promises after the fact to pay the savior
4. promise to pay is made in writing and/or promised “in consideration” for
services rendered
iii. however, these scenarios are distinguishable from parties who would reasonably
expect compensation (ie: an ambulance)
c. Pre-Existing Duty: p promises to pay (or perform services) that p is already legally
obligated to do, so D’s return promise is not supported by consideration
i. Contract Modification: distinguish btw UCC and non-UCC:
1. Non-UCC: if P promises to do what P already promised to do under the k,
and there are no unanticipated circumstances, Ds new promise (eg – more
money) given in return is not supported by consideration (Alaska Packers)
a. Substitute Performance by P: however, if P changes his own duty
in response to D’s promised modification, then D’s promise is
supported by consideration.
i. Common scenario: a party who is owed money on a later
date agrees to accept a lesser amt in exchange for a promise
of immediate tender of payment. The creditor has rec’d
consideration for the promise to take less
b. Unanticipated Circumstances: if the modification is a response to
new circumstances unanticipated by the parties when they made
their original deal, most cts will find that modification is binding
2. UCC:
a. “an agreement modifying a k within Article 2 needs no
consideration to be binding”
d. Settlement of Claim: if a party who has a contractual claim for money agrees to take less in
a “settlement” the promise to take less is supported by consideration so long as the other
party disputed in good faith the amt or validity of the cliam
i. Ie: Contractor performs work for client for 5k subject to Client’s satisfaction. When
job is complete client says he doesn’t like the work but they will call deal square if
contractor takes 4500 for work. Contractor agrees – contractor cannot sue later for
full payment
ii. Invalid Claims: this is true even if the claim is invalid, so long as the holder of the
claim believes in good faith that the claim is valid

82
 1. Ie: I agree to pay you $30 for saving my life- this was past consideration so
this is really unenforceable. U try to collect on that money, I tell u know, u
tell me u won’t sue so long as I agree to pay you $10, I agree to this. I must
now pay u that $10 even though I didn’t have to pay you the $30 originally.
Illusory Promises:
A. Total discretion by one party: when one party has total discretion on whether to perform – no k bc
no commitment (ie: k with seller to buy as many skirts as u want -> if seller doesn’t want to sell u
any u can’t sue bc k was totally in your discretion)
B. Where Illusory K’s will be enforceable:
a. Divisible K: if there is a long-term agreement in which the seller’s promise is illusory, but
buyer places individual orders, the seller’s promise will be interpreted as an offer for a series
of unilateral ks, and each order will be an acceptance of unilateral k (which seller is bound
to fill) ie: if u say u will sell someone something for a year’s time, if they place a specific
order, u have to full that order, but u can cancel after that even if the year hasn’t run
b. Implied Promise by a Party:
i. Exclusive Distributorships: where buyer has exclusive rights to resell seller’s
product, buyer has an implied duty to use reasonable efforts to sell the product.
This implied duty furnishes consideration for seller’s return duty to sell to buyer
(Lady Duff Case)
ii. Requirements Contracts: buyer promising to only buy from seller is the
consideration for seller’s return promise to supply buyer (even though no quantity
specified)
1. Good Faith Quantities: quantity measured by actual quantity that occurs in
good faith
a. However quantity requested can’t be disproportionate to stated
estimate, and if no estimate, can’t exceed normal or otherwise
comparable prior output
iii. Personal Satisfaction of Party: promise to pay conditioned upon your personal
satisfaction. This is NOT illusory bc if dissatisfied must be in good faith
iv. Notice of Cancellation: if you can cancel a k at any time provided u give notice,
this is the consideration
C. Adequacy of consideration: cts usually don’t care so a big imbalance won’t matter unless its really
gross
D. Once a gift has been completed, can’t be rescinded by donor
PROMISES BINDING WITHOUT CONSIDERATION:

General Tip: if u think fact pattern has an enforceable k that is not supported by consideration, start out by
saying that consideration is lacking and why it is, then say why the k’s enforceable regardless of this flaw

Modification:
A. UCC: a modification for a k for goods is enforceable even if it isn’t supported by consideration
B. Traps:
a. Modification of an agreement for services – such a modification normally has to be
supported by consideration, and a modification in which only one party’s duty changes (and
there are no unanticipated circumstances) doesn’t qualify
b. A modified agreement that violates the SoF – wont be invalid bc of lack of consideration,
will be invalid bc of lack of writing – ie: sale of goods over 500
c. No “oral modifications” – in both UCC and non-UCC NOMs clauses will be enforced
i. However, these clauses can be waived: so if u orally modify something where there
is an NOM clause and other person consents to this, they can’t later come back and

83
 say “no oral modification” bc they waived- so now recover under PE-> reliance
damages

Assignment:
A. If the fact pattern involves an assignment of rights/duties, consideration isn’t required bc it’s a
present transfer of rights, not a promise

Guaranty:
A. when one person guarantees anothers debt, timing of the guanraty is important:
a. if the guaranty is given at the same time the debt is being created there is no problem of
consideration bc the guarantor is bargaining for the loan.
b. When the guaranty is given after the underlying debt has been created, see if there is
independent consideration. if not, most cts hold that the guaranty is enforceable if its in
writing and includes a recital of consideration = even if no consideration is actually paid
Promissory Estoppel:
A. in the absence of consideration, a k is enforceable if the promisee forseeably and reasonably relies
upon the promise to her detriment
B. Scenarios where Actual Reliance Occurs:
a. Intra-family promises: when one family member promises something to the other the latter
may materially change his position in reliance, making the promise enforceable under pe
(Squib case- grandfather promised granddaughter money to change her job and she quit)
b. Oral promise to convey land: oral promise to convey land may become enforceable by the
promisee’s reliance (eg – promisee gives up a job and moves onto the property plus
improves it)
c. Subcontractor’s Bid: if a sub’s bid is relied upon by the general k when he submits his
overall bid to the customer, the sub k is promissorily estopped from revoking the bid for the
time necessary for the general to receive the job and accept the subs bid.
i. u can only revoke as the sub if the general has not yet submitted his bid, and
therefore, has not relied on your bid
ii. sub-bid is only necessary to extent necessary to avoid injustice. So you will only be
able to recover as the general the difference btw the sub who breached and the next
lowest sub’s bid – NOT expectancy damages
C. make sure reliance is justified. Ie: reasonable. Make sure there has been an express or implied
promise
D. promise to donate money to charity is generally not supported by consideration. most cts will
enforce even if there hasn’t been detrimental reliance but promise must be made in writing
MISTAKE:

Mistakes as to Existing Fact:

A. mistake as to the facts as they existed prior to the contract – where parties are operating under
a mistaken assumption about the future events

Mutual Mistake:
A. must be made by both parties prior to contracting.
B. 3 main requirements:
a. Mutuality: both parties wrong about assumption
b. Materiality: assumption must be “basic” to the bargain and mistake must have a
“material effect” on the agreed-upon exchange. Watch for these Situations:

84
 i. Real Estate transactions: mistaken acreage count where amt specified can’t be
conveyed
1. if it was a lg amt or otherwise significant, prob a basic assumption of the
k. and vice versa
ii. Purchase of a unique good:
1. Where parties are mistaken to origin/creator of art- these are basic
assumptions
c. Allocation of Risk:
i. make sure parties didn’t implicitly/ explicitly allocate the risk to the party who is
now trying to avoid the k – f so then mutual mistake doesn’t work
ii. cts will reasonably allocate risk when they can
iii. Situations where cts will find implied allocation of risk:
1. Minerals in land – risk that there will be valuable minerals on land
allocated to seller (case where buyer steps in oil while walking around
property)
2. Building Conditions: in construction k, risk of undiscovered,
unfavorable building conditions is normally allocated to the contractor
Unilateral Mistake:
A. Where only one party has made a mistake, he is excused from performance only if the other
party knew or should have known of the mistake
a. Most common scenario: the unduly low bid by the sub to the general:
i. if general should have realized a computational error was prob made, sub will be
discharged
PAROL EVIDENCE AND INTERPRETATION:

A. Overall Rule: “evidence of a prior oral or written agreement may never be admitted to contradict
any final writing (integration), and may not even supplement a final writing that was intended to
constitute the complete agreement (total integration)
B. Focus on Exceptions;
a. Clarification of ambiguity: evidence is admissible to properly define an ambiguous term
even one contained in a total integration. Ambiguity may be either apparent on the face of
the contract (patent) or derive from underlying circumstances (latent)
i. Ambiguities are construed against the party who prepared the k
ii. Make sure that purpose of introducing evidence is not to add or change the
meaning
b. Custom:
i. Customs are allowed in to aid in interpreation of k
ii. 3 types of customs that can be introduced for interpreation reasons:
1. “course of dealing”: evidence about a pattern of performance btw the 2
parties under past contracts
2. “course of performance:” evidence of parties behavior under current k
3. “usage of trade:” evidence of a generally accepted practice or method of
dealing in a given industry or field
c. Existence of a condition and/or formation defect:
i. Pe can be introduced as proof of a condition not included in the writing, as well as
proof that k never legally came into existence
C. 2 Types of Integration:
a. Partial integration: writing represents entire written k of parties, but not complete
agreement. Consistent verbal understandings is ordinarily admissible
i. Look for shorter, more informal writings

85
 b. Total integration: when the agreement is the whole agreement it CANNOT be
supplemented by evidence of prior agreements
CONDITIONS, BREACH, AND PERFORMANCE:

Analyzing Conditions:
A. When a party’s performance appears to be dependent upon the occurrence of a condition or event
B. Condition: event that must occur (unless occurrence is excused) before a party’s performance is due
C. First, confirm that there is a condition
D. Second, What is the type of condition? Express or constructive
a. Express: express conditions are conditions that are agreed to by the parties
i. Strict compliance is usually req- substantial performance is not enough
ii. Satisfaction of a party: “satisfaction clauses” -> usually talking about subjective
satisfaction – like u don’t have to pay for something unless its completed to your
reasonable satisfaction.
1. Limited to dissatisfaction being in “good faith”
b. Constructive Condition: “implied in law”
i. ct is saying “had the parties thought about this, they would have made party’s
performance conditional upon something”
ii. this is a conclusion based on fairness
iii. look for things where if the condition were not inferred, the party would end up w/
so bad a deal that she never would have entered into it
iv. substantial performance is enough
E. Third, has the condition been satisfied?
a. If there are multiple conditions, they all have to be satisfied

Strict Compliance and Substantial Performance:

A. Express Conditions:
a. Cts will get out of strict compliance which is usually required if an excessive forfeiture
would result (Chelsea Bays Case)
B. Constructive Conditions:
a. Material breach/substantial performance:
i. Condition is satisfied if there was “substantial performance” by the party who had to
satisfy the condition. Condition will only be deemed unsatisfied if there was a
material breach on the pt of the party who had to satisfy the condition.
ii. 3 Factors making a breach material:
1. how much were u deprived of your expected benefit?
2. If money damages will suffice, breach is prob not material (as opposed to
being relieved from performance)
3. Willful breaches are usually material
b. Order of performance: u cant be in breach unless performance became due
i. Service ks: In service ks, unless otherwise specified, total performance must be
done before any payment is due
c. Sale of Goods:
i. Perfect Tender Rule: UCC: if goods differ at all from k even in a non-material
way, buyer can reject them (send back and refuse to pay)
ii. Non-breaching party has several options: If the shipment has conforming and
non-conforming goods may either:
1. Reject whole shipment
2. Reject the part that’s bad and keep part that’s good
3. Accept entire shipment and sue for damages

86
 iii. Exceptions to Perfect-Tender Rule:
1. Cure: seller usually has a right to try to “cure” the nonconformity after
rejection (except in late deliveries)
2. Revocation of Acceptance: if buyer accepts, can only revoke the
acceptance if the non-performance is substantial
3. Installment ks: as long as the non-conforming installment doesn’t impair
the rest of the installments, u can’t reject the k just bc of the one non-
conforming installment
Excuse of Conditions:
A. Hindrance: u cant willfully prevent the occurrence of a condition or else the condition is excused
B. Waiver: if u begin performance after u know the condition precedent to your performance has not
occurred, u may be held to have waived the benefit of the condition. U have to knowingly and
intentionally declined to take the benefit

Requests for Assurances of Performance:

A. If u have reason to believe other party won’t perform, u may demand assurances that they will be
able and willing to perform. And u can suspend ur own performance until u get this. Failure to
provide such assurances are a breach
ANTICIPATORY REPUDIATION AND OTHER ASPECTS OF BREACH

A. occurs before performance is required party to k does/says something that indicates that she will
not perform as required. The other party’s obligations are discharged, and that party may
immediately sue for breach of contract
B. Words or Action to Indicate AR:
a. Look for reasonably clear statements or voluntary action which renders performance
impossible
i. breach must be clear – performance must be made impossible and/or that statement
of intention not to perform is reasonably clear
1. Temporary inability not enough: performance isn’t impossible just
improbable. So other party’s duty isn’t discharged, just suspended
a. u can demand assurance of performance
2. statement of unhappiness not enough
C. Retraction:
a. The repudiator can retract it
b. Loss of Right to Retract:
i. other party materially and reasonably relies on the repudiation (ie: procures an
alternate substitute)
ii. other party sues for breach
iii. other party says that she regards the repudiation as final
D. Immediate Suit for Breach:
a. if u learn of a repudiation, u can immediately sue for breach even if damages have not yet
accured
STATUTE OF FRAUDS:

A. when u come across an oral agreement, always ask whether it should be in writing

Guaranty or Surety Agreement:

A. party’s agreement to pay the debt of another party (“answer for the debt of another”) in case that
party defaults

87
 a. however, when the guarantor’s main purpose for entering into the guaranty agreement is to
benefit herself, the guaranty doesn’t have to be in writing
Land Contract Provision:
A. any transfer of land has to be in writing
B. Land k must include the price
C. Exception for part performance and detrimental reliance:
a. Where one party, usually the buyer, detrimentally relies on the oral agreement in a way that
is “unequivocally referable to the agreement” – conduct would not have been undertaken had
the oral k not existed. Ie: u move and make modifications to a house on an oral promise that
u will get the deed to it in a year
D. Construction contract not covered: don’t need it in writing if its to build osmethign n the land
One Year Provision:
A. Whether it would be impossible for the contract to be “fully performed” within a year of the time it
was made. If so, k must be in writing
B. Lifetime employment and other indefinite promises: “lifetime employment” is not w/in the
statute – employee might die w/in the year and cts look at this as being full performance
C. Discharge: if a k can be discharged rather than fully performed w/in a year, doesn’t fall within a
duty
Sale of Goods or Personal Property:
A. $500 - has to be in writing for sale of goods over $500
B. if its for services not under SoF
C. oral modifications must be in writing if over $500
D. 3 Exceptions to UCC Cases:
a. acceptance or payment: if buyer accepts the goods or pays for them, the buyer can’t assert
the statute as to the accepted or paid for goods
b. admitting that contract was made
c. Written confirmation btw merchants
E. if party has really relied to his detriment on oral agreement, cts will apply pe bc of reliance that will
bar SoF
REMEDIES:

Specific Performance:
A. most imp equitable remedy for test purposes
B. when reading the fact pattern, think can money damages be adequate to protect the injured party? – if
they would u cant get specific performance EXCEPT:
a. unique goods: rare or unusual object that’s the subject of the contract
b. speculative damages: where damages would be hard to measure. This is especially likely
where k involves a new business or a new contract
c. land contract:
i. if suit is brought by seller:
1. some states allow sp to be ordered on behalf of seller
2. others permit the seller to recover only the difference btw the contract price
and the market price, which is often zero
d. employment contract:
i. usually not enforced for sp bc want to prevent involuntary servitude or to prevent
employers from have recalcitrant workers
C. Liquidated Damages Available:
a. Doesn’t bar remedy of sp

Expectation Damages:

88
 A. Standard measure of damages for breach of k
B. Put p in position she would have been in had contract been performed
C. Calculation Formula: K price – benefits to P she didn’t have to pay
D. Always discuss these where k is valid and one party materially breached
E. Substitute performance: get any money back that u advanced to first contractor and then get the
cover price for what u had to pay the second contractor
F. Reimbursement: K price – cost of completion

Reliance Damages:
A. If expectation damages don’t work and if there’s no enforceable contract .
B. Usually seen in pe

Restitution Damages:
A. Value to the D of the P’s performance
B. Unjust enrichment
C. Can be awarded in a suit on the contract or a suit brought in quasi contract

Quasi-Contract:
A. When aggrieved party isn’t entitled to damages on the basis of breach of k – “off the contract”
B. Recovery will be “reasonable value of services rendered”
C. Common situations:
a. Contract never formed: may be able to recover if party had a reasonable expectation of
payment (inapplicable to services in emergency situations)
b. Contract rendered unenforceable: ks where parties are excused from performing for some
reason. Most common cases: impractability, impossibility, frustration of purpose -> ie: u
would be able to recover the reasonable value of your services rendered up until that time
that something was declared impossible
i. Building destroyed before completion: if it was for the building of a new structure,
contractor cannot recover in quasi-contract for any services rendered before it was
destroyed bc risk is assumed to be allocated to him. If you are talking about a builder
repairing a structure, contractor may recover for value of work up till the time where
building was destroyed.
D. Partial performance then Breach:
a. The breacher usually tries to use this to mitigate what it owes to the non-breaching party.
Comes up a lot w/ contractors who have no substantially performed but have provided
owners w/ something of value.
b. Formula: Reasonable value of work done – (deposit rec’d + your damages to the
nonbreaching party)
Consequential Damages:
A. Additional damages when expectancy isn’t enough to compensate
B. Foreseeability: were these additional loses either: (Hadley v. Baxendale)
a. Reasonably foreseeable
b. Foreseeable based on the ps special requirements of which d had notice

Mitigation:
A. Has non-breaching party attempted to mitigate damages in a situation where the loss was partially or
totally avoidable – if she didn’t, any damages that would probably have been avoided by such an
attempt are non-recoverable
B. Look for : terminated employees who don’t try to find a suitable replacement job, disappointed buyer
or recipient of services
Liquidated damages:

89
 A. Reasonableness: must be a reasonable estimate as of the time of contracting or time of loss

Damages in Sales Contracts:

A. Buyer’s Damages:
a. Standard “contract/market” differential: if B returns defective goods (or never gets the
shipment of goods) and doesn’t purchase replacement goods elsewhere, entitled to diff btw
contract price and market price at time of breach
b. Cover: if buyer returns defective goods or purchases them elsewhere, entitled to difference
btw contract and cover prices
i. cover price must be reasonable
c. if market price (or cover price) and contract price are the same, there are no damages to
collect -> only get consequential or incidental ones
d. Breach of warranty: if buyer accepts defective goods can get diff btw goods rec’d and
conforming goods at time of acceptance
e. Specific performance: buyer can only get these when goods are unique
B. Seller’s Damages:
a. can seller be compensated for lost profits?
b. “Lost Volume Seller”: S who has lots of the same goods – he has lost a sale so entitled to
same profits – would have had two sales instead of one
c. “limited Supply”: if seller resells all the available goods of the type that is the subject of the
contract then he is not a lost-volume seller and cannot collect lost profits for the breach
C. in case of BOTH B and S make sure to deduct costs B and S didn’t incur as a result of not having to
complete his performance
Punitive Damages:
A. usually not recoverable in k, except when the breach is independently a tort – as in fraud- then pd
may be recoverable
IMPOSSIBILITY, IMPRACTACABILITY, FRUSTRATION

Issues Common to All 3:

A. Basic Assumption: applies only when the parties made the k on the basic assumption that the
contingency in question would not occur. 3 subissues to see if this test is met:
a. Assumptions shared by both parties: both parties must share this assumption
b. Forseeability: the more foreseeable the contingency was, the less likely it is that the
contingency represents the failure of a basic assumption – if something is foreseeable it
won’t lead to discharge
i. Things like increase in costs are usually foreseeable unless there was a labor-wide
strike
ii. Weather conditions- is this weather typical for that time of year?
c. Risk Allocation: make sure risk wasn’t implicitly allocated to one of the parties by the k
Frustration of Purpose:
A. purpose must be totally frustrated
B. illness usually doesn’t work for frustration of purpose bc u get better
Impossibility:
A. performance must be totally impossible and event creating impossibility must have been
unforeseeable at time of formation
B. Destruction: not always an excuse
a. Did parties allocate risk? If yes, can’t use this
b. Impossibility can’t be due to a fault of the person claiming it
c. If risk was with person claiming impossibility, won’t be excused if u can replace the subject
matter on a commercially sensible basis

90
Impractacability:
A. Increased expense: must be extreme (5x anticipated cost)
B. Also, wont work if increase would make performing only slightly unprofitable
Consequence of Excuse:
A. If parties are excused, k damages aren’t awarded bc there hasn’t been a breach
B. However, will get quasi-contractual remedies for value of work performed or benefits rendered
MISCELLANEOUS DEFENSES: ILLEGALITY, DURESS, MISREPRESENTATION, UNCON,
LACK OF CAPACITY:

Capacity:
A. Only the minor can disaffirm
B. If a minor sues for rescission, her recovery will be offset by the value of the benefit she rec’d

Illegality:
A. Make sure both parties are aware of the purpose of the k. if only one party is aware, that party won’t
be able to claim illegality, only the other party who didn’t know of illegal purpose will be able
B. Severable: if some provisions of k are illegal, but others are legal, argue that the illegal provisions
are severable provided:
a. K is divisible
b. Illegality doesn’t affect entire agreement
c. Party seeking performance hasn’t engaged in serious misconduct
Unconscionability:
A. Usually involves a k with a consumer
B. Look for party having substantially weaker bargaining power and the clause seems substantively
“unfair” to you
C. Needs to be uncon at time k was made
D. For a price to be uncon must be very excessive (2-3 times market price)
WARRANTIES:

A. Express warranties: descriptions of goods/services to be furnished.

B. Implied warranties: a k providing that goods are to be sold “as is” serves to impliedly disclaim all
implied warranties (warranty of merchantability and warranty of fitness for a particular purpose).
Doesn’t exclude express warranties
DISCHARGE OF CONTRACTS:

Discharge of Obligation Through Accord and Satisfaction:

A. Both parties agree to perform differently than originally agreed
B. Accord: agreement to accept a lesser obligation than the one which existed under the original k.
watch for a substituted performance by both parties
C. Consideration: need new consideration by both parties
D. Satisfaction: (performance) need “satisfaction” of the new obligation. If the accord has been
breached by one of the parties, the other party can sue on the original obligation.

91