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Contracts

I. SOURCES AND DEFINITIONS OF CONTRACT LAW


A. What is a Contract? Promise?
A contract is formed in any transaction in which one or both parties make a legally
enforceable promise. A promise is a commitment or undertaking that a given event will
or will not occur in the future and may be express or implied from conduct or language
and conduct.
A promise is legally enforceable where it:
was made as part of a bargain for valid consideration;
reasonably induced the promisee to rely on the promise to his detriment; or
is deemed enforceable by a statute despite the lack of consideration.
B. Types of Contracts
Contract may be of the following types:
Express an agreement manifested by words
Implied-in-fact an agreement manifested by conduct
o Contract require some sort of intent, implied-in-law, forces a contract b/c of
requirements of justice (it would be inequitable not to).
Implied-in-law ("quasi-contract") not a true contract but an obligation imposed by a
court despite the absence of a promise in order to avoid an injustice.
o there an implied-in-law contract
1) benefit conferred,
2) appreciation,
3) accepts and retains if inequitable (unfair/unjust).
Elements in a Quasi-Contract include:
1. defendant received a benefit
2. an appreciation or knowledge of the benefit
3. under circumstances that would make it unjust for the defendant to retain the benefit
without paying for it.
Contract Implied in Fact:
1. defendant requested the plaintiff to perform work
2. the plaintiff expected the defendant to compensate him or her for those services
3. defendant knew or should have known that the plaintiff expected compensation

Baily v. West: There was no mutual agreement and intent to promise between the
plaintiff and defendant so as to establish a contract implied in fact for the defendant to
pay plaintiff for the maintenance of the horse. In a quasi-contractual theory, his
decision is still unsupported by competent evidence.
Bolin Farms v. American Cotton Shippers Association: Regardless of the outcome,
both parties assumed risks when they entered into the contract.
o Restatement 1 Promise=Undertaking however expressed either that something
shall happen or that something shall not happen in the future. It has something
reliable about it.

o Restatement 2 Promise=manifestation of intention to act or refrain from acting


in a specified way so made as to justify a promisee in understanding that a
commitment has been made
II. REMEDIES
Specific Performance
Monetary Damages
1. Punitive
2. Compensatory
Expectancy-what they would have had if the contract been fulfilled
Reliance-putting party in as good of a position if the contract had never
been made
Restitution-start any benefit that has already been confirmed by the party,
get back what you gave
Restatement 344
Expectation interest: interest in having the benefit of the bargain by being put in as good
a position as he would have been in had a contract been preformed
Reliance Interest: Interest in being reimbursed for loss caused by reliance on the
contract by being put in as good a position as he would have been in had the contract not
been made (ordinarily smaller b/c it does not include the injured partys lost profit) (if I
could turn back time damages)
Restitution Interest: Interest in having restored to him any benefit that he has conferred
on the other party (ordinarily smaller b/c it does not include the injured partys lost profit)
Restatement 347
Expectation interest: give the benefit of the bargain by awarding him a sum of money that will
put him in as good as a position as he would have been in had the contract been performed
Restatement 349
The injured party has a 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 with reasonable certainty the injured party would have suffered had the contract been
performed.
Restatement 345 Judicial Remedies Available
1. Awarding a sum of money due under the contract or as damages
2. requiring specific performance of a contract or enjoining its nonperformance
3. requiring restoration of specific thing to prevent unjust enrichment
4. awarding a sum of money to prevent unjust enrichment
5. declaring the rights of the parties and
6. enforcing an arbitration award
Restatement 359-360
Effect of Adequacy of Damages
1. Specific performance or an injunction will not be ordered if damages would be adequate
to protect the expectation interest of the injured party

2. The adequacy of the damages remedy for failure to render one part of the performance
due does not preclude specific performance or injunction as to the contract as a whole
3. Specific performance or an injunction will not be refused merely because there is a
remedy for breach other than damages but such a remedy may be considered in
exercising discretion under the rule stated in 357
Sullivan v. OConnor p.193 There was a breach of a contract. Next is the
measurement of damages: Since the Plaintiff had to endure pain and suffering as a
result of the Defendants breach, therefore the difference between the p & s she would
have experienced during the first, second surgeries, minus the p & s she was caused
by the breach or the third surgery. Damages should be awarded for any worsening of
the plaintiffs condition resulting from the breach. A breach of a patient-doctor
special agreement should have damages awarded which place the plaintiff back in the
position he occupied just before the parties entered upon the agreement, for the harm
suffered in reliance, upon that agreement. The p & s was wasted during the first two
surgeries, and because a third was required, due to the breach, this waste is
compensable to restore back to status quo. Rule: Reliance damages should be granted
when expectation damages are seen as excessive (because, for example, the defendant
was not liable for negligence) but restitution damages are seen as insufficient
(because the agreement ought to be at least minimally enforced).
Curtis Brothers Co. v. Catts p.200: Where no adequate remedy at law exists,
specific performance of a contract by defendants will be decreed on their refusal to
sell tomatoes grown on certain land as agreed where it leaves the company helpless,
except to whatever extent an uncertain market may supply the deficiency.
Hadley v. Baxendale p.206 (extension of compensatory damages) Foreseeable:
Arising naturally or reasonably supposed to be in contemplation at the time the
contract was made. One way to tell if the parties should have known: actual notice.
The defaulting party is only liable for consequences if they are such as, at the time of contract, he
ought reasonably to have contemplated as a serious possibility of real danger.
Factors Affecting Adequacy of Damages
In determining whether the remedy in damages would be adequate, the following
circumstances are significant:
1. the difficulty of proving damages with reasonable certainty
2. the difficulty of procuring a suitable substitute performance by means of money
awarded as damages, and
3. the likelihood that an award of damages could not be collected
UCC 2-715
Two American statements of the foreseeability test provides: Consequential damages resulting
from the sellers breach include a) any loss resulting from general or particular requirements and
needs of which the seller at the time of contracting had reason to know and which could not
reasonably be prevented by cover otherwise and b) injury to person or property proximately
resulting from any breach of warranty.

Restatement 351

1. Damages are not recoverable for loss that the party in breach did not have reason to
forsee as the probable result of the breach when the contract was made
2. Loss may be foreseeable as a probable result of the breach b/c it follows from the breach
a)in the ordinary course of events or b) as a result of special circumstances, beyond the
ordinary course of events, that the party in breach had reason to know.
3. A court may limit damages for foreseeable loss by excluding recovery for loss of profits,
by allowing recovery only for loss incurred in reliance, or otherwise if it concludes that in
the circumstances justice so requires in order to avoid disproportionate compensation.
Contracts for the Sale of Goods
Application of UCC
Article 2 of the Uniform Commercial Code covers all transactions for the sale of goods
other than securities (article 9) and leases (article 2A). It applies to any party; it is not
limited to merchants although individual provisions may be.
"Goods" Defined
Under the UCC, a "good" is any tangible thing that is moveable. [UCC 2-105(1)] In
addition to manufactured products, "goods" include:
growing crops or timber, unborn young of animals and other identified things
attached to land (other than minerals or the like or structures), regardless of who
severs them from the land provided that they can be removed without causing
material harm to the land
currency exchanged as a commodity (as opposed to the medium of payment for a
good)
minerals or the like or a structure or its materials to be removed from realty that are
to be severed by the seller
Good=things that are movable at the time of the contract.
1. Application: Spraying pesticide does it equal or not equal a thing that is movable
at the time of contract
When mixture of goods and services, it is a good if the dominant factor is
transaction for sale
2. Conclusion: Spraying pesticide is not a good.
Mixture of goods and services Dominant Rule: Is contract condition of service with goods
incidentally involved or transaction for sale, with services incidentally involved
III. BARGAIN RELATIONSHIP: CONSIDERATION
Consideration is a gatekeeper, designed to restrict certain acts. Consideration is a promise or
performance in the context of a bargain.
Restatement 71 defines consideration as:
1. Constitute consideration, a performance or a return promise must be bargained
for.
2. A performance or return promise is bargained for if it is sought by the promisor in
exchange for his promise and is given by the promise in exchange for that
promise.
3. The performance may consist of a) an act other than promise, b) a forbearance, or
c) the creation, modification, or destruction of a legal relation.

4. The performance or return may be given to the promisor or to some other person.
It may be given by the promise or by some other person.
A. The bargain theory of consideration:
1. provided a natural formality to channel human conduct and insure deliberation
2. protected and structured the important market transaction
3. expanded legal protection by supporting the executory exchange-a promise is a
promise- and shielding the creation or idiosyncratic bargainer form later claims
that the agreed exchange was disproportionate and 4) it permitted a fuller
development of remedies that protected the plaintiffs expectation interest.
Kirksey v. Kirksey: gift promise, reliance on a promise could constitute either
consideration or an independent ground for enforcement.
Hamer v. Sidaway: abandonment of the use of tobacco and other stimulants that the
nephew could have legally used was sufficient for consideration.
Bogigian v. Bogigian p.47-51: did not receive consideration and that both people did not
bargain for the release in exchange for any benefits flowing to Hazel for detriments
incurred by David.
Restatement 17 p.199
Requirement of a Bargain
1. Except as stated in Subsection2, the formation of a contract requires a bargain in which
there is a manifestation of mutual assent to the exchange and ac consideration.
2. Whether or not there is a bargain a contract may be formed under special rules applicable
to formal contracts or under the rules stated in Section 82-94
Requirement of Exchange; Types of Exchange
1. To constitute consideration, a performance or a return promise must be bargained for.
2. A performance or return promise is bargained for if it is sought by the promisor in
exchange for his promise and is given by the promise in exchange for the promise.
3. The performance may consist of
An act other than a promise, or
A forbearance, or
The creation, modification, or destruction of legal relation
4. The performance or return promise may be given to the promisor or to some other person.
It may be given by the promise or by some other person.
B. Mixed Motives and Nominal Consideration
Restatement 95 says that In the absence of statute a promise is binding without consideration if
a)it is in writing and sealed, b) the document containing the promise is delivered and c) the
promisor and promise are named in the document or so described.
UCC Section 1-107
Any claim or right arising out of an alleged breach can be discharged in whole or in part without
consideration by a written waiver or renunciation signed and delivered by the aggrieved party.

UCC Section 2-205


An offer by a merchant to buy or sell goods in a signed writing which by its terms gives
assurance that it will be held open is not revocable, for lack of consideration, during the time
stated or if no time is stated for a reasonable time, but in no event may such a period of
irrevocability exceed three months; but any such term of assurance on a form supplied by the
offeree must be separately signed by the offeror.
Restitution
UCC- Section 2-203 [B&E 33]
The affixing of a seal to a writing evidencing a contract for sale or an offer to buy or sell goods
does not constitute the writing a sealed instrument and the law with respect to sealed instruments
does not apply to such a contract or offer.
C. Consideration Exceptions: Moral Obligation Promise Plus Antecedent Benefit p.109
Moral Obligation
1. Expired Contracts/ unenforceable: legal obligations (Res. 82)
2. Material Benefit + Injustice (Res. 86)
Material benefit is not enough, b/c anything can be a material benefit.
Restitution is a broad-gauged and independent basis of liability designed to
prevent unjust enrichment. A person who is unjustly enriched at the expense of
another is liable in restitution to the other.
Petrie v. Levan (Handout): In order to prevent an unjust enrichment by the Petries at the
expense of Levan, nevertheless, the trial court should have reduced the judgment by the
cost of LeVan of the insurance premium. A person who confers a benefit upon another b/c
of a mistake is entitled to restitution if the mistake caused the conferring of the benefit.
The right of restitution: that the defendant was enriched by the receipt of a benefit, that
the enrichment was at the expense of the plaintiff and that it would be unjust to allow the
defendant to retain the benefit.
Mills v. Wyman p. 114:The services the defendant received were not bestowed at his
request. The court believes there must be some pre-existing obligation which has become
inoperative by positive law, to form a basis for an effective promise. Thus, the law leaves
the execution of it to the conscience of him who makes it.
Restatement 86:
1. A promise made in recognition of a benefit previously received by the promisor from the
promise is binding to the extent necessary to prevent injustice
2. A promise is not binding under Subsection 1
a. If the promise conferred the benefit as a gift or for other reasons the promisor has
not been unjustly enriched or
b. To the extent that its value is disproportionate to the benefit
Restatement 82 p. 220-221
Promise to Pay Indebtedness; Effect on the Statute of Limitations
1. A promise to pay all or part of an antecedent contractual or quasi-contractual
indebtedness owed by the promisor is binding if the indebtedness is still enforceable or
would be except for the effect of a statute of limitations

2. The following facts operates as such promise unless other facts indicate a different
intention:
A voluntary acknowledgement to the oblige, admitting the present existence of the
antecedent indebtedness; or
A voluntary transfer of money, a negotiable instrument, or other thing by the
obligor to the oblige, made as interest on or part payment of collateral security for
the antecedent indebtedness, or
A statement to oblige that the statute of limitations will not be pleaded as a
defense
i. Manwill v. Oyler p. 117 (legal obligation) The court says that if it held
moral obligation on every case, it would affect all promises even gifts, and
that something more than a moral obligation is necessary to make it
legally binding. The circumstances must be such as reasonable to be
supposed that the promise expected to be compensated in some way
therefore.
ii. Dementas v. Estate of Tallas Dementas was promised a sum of money
and the court found that there was no evidence the promise was bargained
for and that his services rendered with the expectation of being
compensated but were rendered gratuitously, so the past consideration was
the legal equivalent of no consideration.
Restatement 86 p.223-224 (material obligation)
Promise for Benefit Received
1. A promise made in recognition of a benefit previously received by the promisor from the
promise is binding to the extent necessary to prevent injustice.
2. A promise is not binding under Sub 1
If the promise conferred the benefit as a gift or for the other reason the promisor has not
been unjustly enriched; or
To the extent that its value is disproportionate to the benefit.
o Webb v. McGowin p. 121 The appellants injury is sufficient legal consideration
for the promisors agreement to pay. [A] moral obligation is sufficient
consideration to support a subsequent promise to pay where the promisor has
received a material benefit. The fact that the appellant [Webb] saved McGowin
from death or grievous bodily harm constituted a material benefit, one that could
easily be argued as infinitely more valuable than any financial compensation he
could have received. This case is different in that the consideration was not just a
mere moral obligation or conscientious duty on the part of McGowin. Here the
promisor received a material benefit, which constituted a valid consideration for
his promise.
o Harrington v. Taylor A humanitarian act of this kind, voluntarily performed, is
not such consideration as would entitle her to recover at law.
D. Promissory Estoppel
Definition:
1. Promise
2. Foreseeable reliance (has to look like it will happen)*

3. Actual reliance*
4. Legal Injury
5. Injustice* Has to be substantial.
The elements of equitable:
1. the party to be estopped must be apprised of the facts
2. he must intend that his conduct shall be acted upon or must so act that the party asserting
the estoppel has a right to believe it was so intended
3. the other party must be ignorant of the true state of facts
4. he must rely upon the conduct to his injury
Equitable estoppel is used more as a defense. Promissory estoppel is used as a tool to sue.
Ricketts v. Scothorn p.130-133While there was no stated consideration in this
agreement, the court found that Scothorn's reliance on the promise of the money
was so great that it created a promissory estoppel on any attempt to obviate
payment. However, the court uses equitable estoppel.
Restatement 90 p. 226-227
1. A promise which the promisor should reasonably expect to induce action or forbearance
on the part of the promise 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.
The remedy granted for breach may be limited as justice requires.
A charitable subscription or a marriage statement is binding under Sub1 without proof that the
promise induced action or forbearance.
Restatement 378
One who, by gratuitous promise or other conduct which he should realize will cause another
reasonably to rely upon the performance of definite acts of service by him as done by other
available means is subject to a duty to use care to perform such service or, while other means are
available to give notice that he will not perform.
Allegheny College v. National Chautauqua County Bank of Jamestown
Promissory estoppel doesnt apply, b/c there is consideration. There was a
bargained for exchange and the school was obligated to create the scholarship in
her name. The court says when the promissee subjected itself to the creation of a
memorial, implied at the request of the promisor, the result was the creation of a
bilateral agreement. A bilateral agreement may exist in an implied-in-fact
contract. If they would have taken the 1,000 and used it on something else, they
would have been a breach of the bargain. They accepted the money and had to
use it for the purpose. Both sides incurred duties as part of the bargain, she could
have gotten her money back, if they used it on something else.
Feinberg v. Pheiffer Co. p.141 The difference between equitable estoppel and
promissory estoppel is that the promisor at the time of making the promise intends
to fulfill it and there was no misrepresentation. Also, the court states that it is
impossible for a woman at 63 years of age to find suitable employment, like she
had and thus she relied on the payments. They finally cite Ricketts. The injury is
that she did not find other work and could not find a new job.

Grouse v. Group Health Plan p.147 The court says that it would be unjust not to
hold Group Health to its promise. The say that the he was not only denied that
opportunity but resigned the position he already held in reliance on the firm offer
which respondent tendered him.
Walters v. Marathon Oil Co. Relied on the defendants promise to supply
gasoline and continuing negotiations, plaintiff purchased and made improvements
on a vacant service station site. After negotiations, the defendant refused to sign
the dealership agreement b/c of a newly announced moratorium on dealerships.
Court awarded plaintiff for loss of profit, saying that promissory estoppel was an
equitable matter and that this was necessary to complete justice.

IV.CONTRACT FORMATION
A. The Agreement Process: Manifestation of Mutual Assent p.230
In a bargain relationship, the two primary objectives of the parties
1. to reach agreement on a proposed exchange of economic or other resources and
2. then satisfactorily to complete the exchange.
When there is negotiation, there exists a willingness to deal with each other, defined their wants
in a rational way, and both parties will gain from the completed exchange.
Restatement 18 Manifestation of Mutual Assent
Manifestation of mutual assent to an exchange requires that each party either make a promise or
begin or render a performance
Restatement 21 Intention to Be Legally Bound
Neither real nor apparent intention that a promise be legally binding is essential to the formation
of a contract, but a manifestation of intention that a promise shall not affect legal relations may
prevent the formation of a contract.
Restatement 22 Mode of Assent: Offer and Acceptance
1. The manifestation of mutual assent to an exchange ordinarily takes the form of an offer or
proposal by one party followed by an acceptance by the other party or parties.
2. A manifestation of mutual assent may be made even though neither offer nor acceptance
can be identified and even though the moment of formation cannot be determined.
Embry v. Hargadine, McKittrick Dry Goods Co. This intention in express
contracts is embodied in the words which the parties have used and is to be
deduced therefrom. This rule applies to oral contracts, as well as to contracts in
writing and is the rule recognized by the courts of equity. So, McKittrick may
have not intended to employ Embry, but his words alluded to it. It is only
necessary that Embry as a reasonable man had a right to and did so understand
what his boss said.
Lucy v. Zehmer p.233 The court says that the law judges an agreement between
two persons from those expressions of their intentions which are communicated
between them.
B. Offer: Creation of Power Acceptance
Lonergan v. Scolnick p.245-249 The court says that there can be no contract
unless the minds of the parties have met and mutually agreed upon some specific
things. This is usually evidenced by one party making and offer which is accepted

by the other. Also, the language from the correspondence suggests that the
negotiations were purely preliminary.
Lefkowitz v. Great Minneapolis Surplus Store p.249 where the offer is clear,
definite, and explicit, and leaves nothing open for negotiation, it constitutes an
offer, acceptance of which will complete the contract. The court points to Johnson
v. Capital City Ford Co. where the ad relating to cars may constitute an offer,
acceptance of which will consummate a contract and create an obligation in the
offeror to perform according to the terms of the published offer.
The Lefkowitz test: clear, definite, explicit, and leaves nothing open for negotiation. The
Lefkowitz test is not nearly enough, b/c it could often be in an ad and in a price quote.
The Case of the Statute of Liberty Commemorative Coins The Mesaros made an
offer, and the Mint made an invitation for an offer, and never an acceptance.
The Case of the His and Hers Mercedes The opinion of the court recognizes that
there is ambiguity in this offer. He was told he won the Mercedes as to validate that
the offer was clear, definite, explicit.
Restatement 24 Offer Defined
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. Intent as to
finality!
Restatement 26 Preliminary Negotiations
A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is
addressed knows or has reason to know that the person making it does not intend to conclude a
bargain until he has made a further manifestation of assent.
Restatement 30 Form of Acceptance Invited
1. An offer may invite or require acceptance to be made by an affirmative answer in words,
or by performing or refraining from performing specified act or may empower the offeree
to make a selection of terms in his acceptance.
2. Unless otherwise indicated by the language or the circumstances, an offer invites
acceptance in any manner and by any medium reasonable in the circumstances.
Restatement 32 Invitation of Promise or Performance
In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to
perform what the offer requests or by rendering the performance, as the offeree chooses.

p.253-264 Leonard v. Pepsico Inc. cite Lefkowitz where only if it is clear and
definite and leaves nothing open for negotiation that an ad will constitute an offer,
since the acceptance of which will complete the contract. This is different since the
commercial made no specific mention of the steps to take to get the Jet and the
catalog never mentioned the jet as something that could be obtained.

Restatement 33 p.32 Certainty

1. Even though a manifestation of intention is intended to be understood as an offer, it


cannot be accepted so as to form a contract unless the terms of the contract are reasonable
certain.
2. The terms of a contract are reasonable certain if they provide a basis for determining the
existence of a breach and for giving an appropriate remedy.
3. The fact that one or more terms of a proposed bargain are left open or uncertain may
show that a manifestation of intention is not intended to be understood as an offer or as an
acceptance.
Southworth v. Oliver p.267-272 The court says that price quotations themselves
are not offers, but there are some circumstances that one must consider that may
constitute an offer. Also, the offer can be made to more than one person. The
strongest guide is that the particular expression is to be judged on the basis of
what a reasonable man in the position of the offeree has been led to believe and a
reasonable person would believe that he meant to sell the lands. Additionally, the
more definite the proposal, the more reasonable it is to treat the proposal as
involving a commitment. The court further references the objective test, in which
the defendants actions, not their intentions are to be understood.

Clover
Finality

Completeness

Court found no
contract.

Yes.

Yes offer.

Yes offer, all


terms laid out.
Lowest priceweak yes offer or
no.

Context

Want firm
offer Yes offer.

Audience

More than one


person solicited,
b/c of another
offer and form
letter. No offer.
I am asking
which leaves
room for
negotiation .
No=cuts against

Jargon

Mason jars

Bran p.266
Yes. How can
you have finality
without
quantity?
No quantity-no
offer.
Order to fill,
therefore a
reliance. Yes
offer.

Not
unreasonable.
Yes offer.
For immediate
acceptance-Yes
offer.

Not really any


jargon here, just
the language of
negotiation. No
offer.

Southworth
controversial
Yes.

Yes.
Yes. Hey whats
going on? Hey I
need to buy this?
Hey I have the
price. So, the
court sys, given
the context, prior
discussion
More than one/
more than one
item. No offer.
No offer. Could
be interpretive to
be a straight up
price quote.

there being an
offer.
Injustice: Judge Judy test. Are courts willing to bend the rules sometimes to accommodate for
injustice? Yes, reference Bran.
Auctions: Rules for auctions differ b/c of with reserve and without reserve (An auction is with
reserve until stated otherwise. Until the hammer has fallen, both the seller and buyer can take
back their offers)As a potential bidder, you could be less likely to take part in the auction if it
requires the time and resources.
Equitable Life Assurance Society of United States v. First National Bank p.276-284
Since it was with reserve, the seller of the property can withdraw the property from sale
at any time before the acceptance of the bid. They further state that since the auctioneer
has authority from the seller and must act in good faith. Since a mortgage can strip the
sheriffs authority of the sale, Equitable had legal authority and right to direct the sheriff
to cancel the sale.
The seller can withdraw at the auction if it is with reserve.
In most auctions the only important term left for agreement is price. The buyer should know that
there is some risk that the property will be withdrawn before being sold. The ad for action is not
an offer, it is merely a solicitation.
In an auction that is with reserve the seller cannot bid and the object will only be withdrawn if
there is no bid.
If it is a collateral contract, it binds the auctioneer but not the high bidder until the hammer falls.
C.Acceptance: Exercise of Power

D. Acceptance by a Promise
LaSalle National Bank v. Vega p. 284 The trial court held that there was no genuine
issue of material fact that no contract was formed b/c the offer was made by Mel, the
offer could not only be accepted by execution of the document at issue but the trust, and
the document was not executed by the trust. Ruekergs presentation of the document he
had executed to Mel was not an offer b/c it did not give Mel the power to make a contract
by accepting it. When Mel executed the document and gave it back to Ruekberg he made
an offer which could be accepted by execution of the document by the trust. An offer
must govern the mode of acceptance required. Where an offer requires a written
acceptance, no other mode may be used. The trust not having executed the document,
there was not acceptance of the offer and so there was no contract.
Acceptance by performance is that you are actually doing
1. You have to objectively manifest an acceptance and

2. You have to do it in a manner invited or required by the offer.


3. And it has to be in the mirror image of the offer (you have to agree to exactly the same
thing)
You have to have the final say for it to be acceptance. You have to communicate notice. The
acceptance is binding when the communication has been made.
Hendricks v. Behee p.286-288 The court says that there is no contract until acceptance
of an offer is communicated to the offeror. Communication of acceptance of a contract to
an agent of the offeree is not sufficient and does not bind he offeror. Unless the offer is
supported by consideration, an offeror may withdraw his offer at any time before
acceptance and communication of that fact to him. To be effective, revocation of an offer
must be communicated to the offeree before he has accepted.
You can revoke an offer at anytime before acceptance. But, if you have bought the offer, then
you cant. Restatement 50. If the acceptance is binding when you put it in the mail, then once
you put it in the mail, you cant revoke.
The offeror is master of the offer. It is recognized that the offeror may stipulate the terms upon
which he or she is willing to bargain, and also prescribe the method by which the offeree may
accept.
No acceptance by promise, if the offer is withdrawn before you notify.
Ever-Tite Roofing Corp. v. Green- Reasonable time depends on the circumstances. The
court says that the contract commenced with the loading of the trucks with the necessary
materials in Shreveport and transporting such materials and the workmen to defendants
residence, before the defendant could object. Thus, the defendant breached the contract.
Restatement 54: no notification is necessary. The exception is an objective test: whether a
reasonable person would start performance. There is a general rule that when you begin
performance, you dont have to notify. Expectancy= profits +costs expanded or you get
the contract price minus the costs saved. When you have acceptance by performance, you
generally dont have to notify, but you have to notify.
E. Acceptance By Performance
Under Restatement 53, you cant accept an offer by performance, unless it says. You might prefer
a promise, rather than performance b/c there is more certainty, since you know that will take
place and it also provides the consideration of time.
The old rule was that you must complete the performance, or the offer can be withdrawn.
Carlill v. Carbolic Smoke Ball Co. p.297 The courts say that there was a promise that
existed. Thus, anyone that performed the stated conditions would have the offer accepted.
The court said that the language of the advertisement is specific and that no time is fixed.
Thus, it is for the defendant to decide what the advertisement means. The court asks what
a reasonable time is to get the flu based on the advertisement. The court decides that
within a reasonable time of using it, the plaintiff can recover. Thus, the defendants must
perform their promise. The court responds that anyone who buys the product and uses it
as directed and it defined that it is open to all people. She accepted when she performed
as stipulated.
Glover v. Jewish War Veterans of United States As far as private laws are concerned,
there can be no contract unless the claimant when giving the desired information knew of
the offer of the reward and acted with the intention of accepting such offer. This is based

on the Restatement of Contracts which states that it is impossible that there should be an
acceptance unless the offeree knows of the existence of the offer. A mere offer or promise
to pay does not give rise to a contract. That requires the assent or meeting of two minds
and therefore is not complete until the offer is accepted.
Industrial America, Inc. v. Fulton Industries, Inc. A unilateral contract may be
enforceable when the promisor has received the desired service even though the service
was primarily motivated by a reason other than the offer. This court holds that there was
no relative issue of fact as to the plaintiffs subjective reliance upon Fultons offer. Thus,
it follows as a matter of law, in the absence of any manifestation of intention to the
contrary, that the plaintiffs performance constituted an acceptance of the offer of Fulton
which was found by the jury to be an offer of guaranty outstanding and viable at the time
of the performance.

Even if there was partial motivation of Fulton is that he knew about it and had to pay him. The
concern is that you dont want to trap someone in a contract just by performance. You want to
make sure you have the knowledge, but in terms of your motive, it is not so important. It is easier
to prove knowledge, then motive, b/c knowledge is an objective fact. The motive only matters if
you manifest a contrary intention.

Problem: The case of the little league sponsors Little league reward for sponsoring
baseball team of 1,000. Baker did it, but did not know of reward. Is he entitled after
he finds out? No, had to know of the offer in order to accept. There was no
performance and acceptance of the offer, since there was no manifestation of intent.
Comment: Acceptance by Performance Under Restatement (Second)
Unless otherwise unambiguously indicated, an offer shall be construed as inviting acceptance in
any manner and by medium reasonable in the circumstances. The rule of construction operates to
give an offeree a choice among reasonable methods of acceptance and by expanding the power to
create a contract protects the offerees reasonable reliance.
The Second Restatement- by rendering a performance is inviting or required by the odder but
where the offeree also has power to accept by making a promise. To accept the offer, the offeree
must at least perform or tender part of the performance invited.
Restatement 45
1. Where an offer invites an offeree to accept by rendering a performance and does not
invite a promissory acceptance, an option contract is created when the offeree tenders or
begins the invited performance or tenders a beginning of it.
2. The offerors duty of performance under any option contract so created is conditional on
completion or tender of the invited performance in accordance with the terms of the offer.
Restatement 53
1. An offer can be accepted by the rendering of a performance only if the offer invites such
an acceptance.
2. Except as stated in Re. 69, the rendering of a performance does not constitute an
acceptance if within a reasonable time the offeree exercises reasonable diligence to notify
the offeror of non-acceptance.

3. Where an offer of a promise invites acceptance by performance and does not invite a
promissory acceptance, the rendering of the invited performance dose not constitute an
acceptance if before the offeror performs his promise the offeree manifests an intention
not to accept.
Restatement 54
1. Where an offer invites an offeree to accept by rendering a performance, no notification is
necessary to make such an acceptance effective unless the offer requests notification.
2. If an offeree who accepts by rendering a performance has reason to know that the offeror
has no adequate means of learning of the performance with reasonable promptness and
certainty, the contractual duty of the offeror is discharged unless
a) the offeree exercises reasonable diligence to notify the offeror of
acceptance or,
b) the offeror learns of the performance within a reasonable time, or
c) the offer indicates that notification of acceptance is not required.
Restatement 62
1. Where an offer invites an offeree to choose between acceptance by promise and
acceptance by performance, the tender or beginning of the invited performance or tender
of a beginning of it is an acceptance by performance.
2. Such an acceptance operates as a promise to render complete performance.
You have the chose of choosing to accept by a promise or performance. What if you start doing
one? Then it is the acceptance and must complete.
Offers Method of AcceptancePromise
Performance
Promise K
No
Performing No
Option K 45

Either
K
K required to complete 62

F. Acceptance by Conduct or Silence


Russell v. Texas Co. p.311 The court says that if circumstances indicate that the exercise
of dominion is tortuous the offeror may at his option treat it as an acceptance, though the
offeree manifests an intention not to accept. Since the plaintiff stated the terms of
acceptance, the actions of the defendant constitute an acceptance.
o Russell says, if you keep doing what you are doing, then you owe us money. The
defendants arent licenses, so their use of it would mean that they needed it for a
specific purpose. He could have sued in tort and claimed conversion, but he tried
to make it into a contract. It is clear there has to be notice and reasonable.
o Under Restatement 69, the use of the goods, albeit a wrongful use, can be
construed as an implied acceptance of the offer. In effect, Offeror can treat
Offeree as either a tortfeasor or a contract breaker.

Ammons v. Wilson Co. p.316 All of the appellants previous orders has been accepted
and the goods shipped no later than a week from such orders while the appellee was silent
for 12 days after giving the orders here. Sent back for the jury to decide based on the

facts.This is a situation where it is implied in fact, but through their conduct, they have
created an implied in fact situation. You cant force someone to say something to get out
of a contract. They just received the shipments and there was no phone call to confirm.
You are not bond to order it and not bound to accept it, so that combined with the past
history made him think that everything was going to happen.
Restatement 19
1. The manifestation of assent may be made wholly or partly by written or spoken words or
by other acts or by failure to act.
2. The contract of party is not effective as a manifestation of his assent unless he intends to
engage in the conduct and knows or has reason to know that the other party may infer
from his conduct that he assents.
3. The conduct of a party may manifest assent even though he does not in fact assent. In
such cases a resulting contract may be voidable because of fraud, duress, mistake, or
other invalidating cause.
Restatement 69
1. Where an offeree fails to reply to an offer, his silence and inaction operates as an
acceptance in the following cases only:
a) Where an offeree takes the benefit of offered services with reasonable opportunity to
reject them and reason to know that they were offered with the expectation of
compensation.
b) Where the offeror has stated or given the offeree reason to understand that assent may be
manifested by silence or inaction, and the offeree in remaining silent and inactive intends
to accept the offer.
c) Where because of previous dealings or otherwise, it is reasonable that the offeree should
notify the offeror if he does not intend to accept.
2. An offeree who does any act inconsistent with the offerors ownership of offered property
is bound in accordance with the offered terms unless they are manifested unreasonable.
But, if the act is wrongful as against the offeror it is an acceptance only is ratified by him.
G. Mailbox Rule
Adams v. Lindsell p.320 Usually, until the plaintiffs answer was actually
received, there could be no binding contract between the parties and before then,
the defendants had retracted their offer, by selling the wool to other persons. But,
the delay in notification the acceptance that arises from the mistake of the
defendants and it therefore must be taken as against them that the plaintiffs
answer was received in course of post.
It is a default rule and the offeror can always require communication
before the contract is formed.
The last person to confirm will always be at an informational
disadvantage because she will not know whether her confirmation got
through.
Restatement 64 Acceptance by Telephone or Teletype

Acceptance given by telephone or other medium of substantially instantaneous two-way


communication is governed by the principles applicable to acceptance where the parties are in
the presence of each other.
Restatement 65 Reasonableness of Medium of Acceptance
Unless circumstances known to the offeree indicate otherwise, a medium of acceptance is
reasonable if it is the one used by the offeror or one customary in similar transactions at the time
and place the offer is received.
Restatement 66 Acceptance Must Be Properly Dispatched
An acceptance sent by mail or otherwise from a distance is not operative when dispatched unless
it is properly addressed and such other precautions taken as are ordinarily observed to insure safe
transmission of similar messages.
Restatement 67 Effect of Receipt of Acceptance Improperly Dispatched
Where an acceptance is seasonably dispatched but the offeree uses means of transmission not
invited by the offer or fails to exercise reasonable diligence to insure safe transmission it is
treated as operative upon dispatch if received within the time in which a properly dispatched
acceptance would normally have arrived.
Restatement 68 What Constitutes Receipt of Revocation, Rejection, or Acceptance
A written revocation, rejection, or acceptance is received when the writing comes into the
possession of the person addressed or of some person authorized by him to receive it for him, or
when it is deposited in some place which he has authorized as the place for this similar
communications to be deposited for him.
H. Nature and Effect of Counter-Offer
Minneapolis & St. Louis Railway Co. v. Columbus Rolling-Mill Co. : The court says
that no contract is complete without the mutual assent of the parties an offer to sell
imposes no obligation until it is accepted according to its terms. So long as the offer has
not been accepted or rejected, then the negotiation remains open. This was a counteroffer,
so not an acceptance.
Mirror image rule: The acceptance has to be the mirror image of the offer.
Restatement 39 Counter-Offers
1. A counter-offer is an offer made by an offereee to his offeror relating to the same
matter as the original offer and proposing a substituted bargain differing from that
proposed by the original offer.
2. An offerees power of acceptance is terminated by his making of a counter-offer,
unless the offeror has manifested a contrary intention or unless the counter-offer
manifests a contrary intention of the offeree.

Restatement 59 Purported Acceptance Which Adds Qualifications


A reply to an offer purports to accept it but is conditional on the offerors assent to terms
additional to or different from those offered is not an acceptance but is a counter-offer.
Restatement 60 Acceptance of Offer Which States Place, Time or Manner of Acceptance
If an offer prescribes the place, time, or manner of acceptance its terms in this respect must be
complied with in order to create a contract. If an offer merely suggests a permitted place, time or
manner of acceptance, another method of acceptance is not precluded.
Restatement 61 Acceptance Which Requests Change of Terms
An acceptance which requests a change or addition to the terms of the offer is not thereby
invalidated unless the acceptance is made to depend on an assent to the changed or added terms.
If you have to follow this, then it must be clear you are accepting no matter what.
I. Termination of Offer: Destruction of Power of Acceptance
Restatement 38 Rejection
1. An offerees power of acceptance is terminated by his rejection of the offer, unless the
offeror has manifested a contrary intention.
2. A manifestation of intention not to accept an offer is a rejection unless the offeree
manifests an intention to take it under further advisement.
Restatement 39 Counter-offers
1. A counter-offer is an offer made by an offeree to his offeror relating to the same matter as
the original offer and proposing a substituted bargain differing from the proposed by the
original offer.
2. An offerees power of acceptance is terminated by the making of a counter-offer, unless
the offeror has manifested a contrary intention or unless the counter-offer manifests a
contrary intention of the offeree.
Restatement 40 Time When Rejection of Counter-offer Terminates the Power of
Acceptance
Rejection or counter-offer by mail or telegram does not terminate the power of acceptance until
received by the offeror, but limits the power so that a letter or telegram of acceptance started
after the sending of an otherwise effective rejection or counter-offer is only a counter-offer
unless the acceptance is received by the offeror before he receives the rejection or counter-offer.
Restatement 42 Revocation by Communication From Offeror Received by Offeree
An offerees power of acceptance is terminated when the offeree receives from the offeror a
manifestation of an intention not to enter into the proposed contract.
Restatement 43 Indirect Communication of Revocation
An offerees power of acceptance is terminated when the offeror takes definite action
inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable
information to that effect.

Restatement 46: Revoking an Ad


Where an offer is made by advertisement in a newspaper or other general notification to the
public or to a number of persons whose identity is unknown to the offeror, the offerees power of
acceptance is terminated when a notice of termination is given publicity by advertisement or
other general notification equal to that given to the offer and no better means of notification is
reasonably available.
Hendricks v. Behee(MO 1990) p.360 No valid K was formed as the Oer notified to the
agent of the Oee in a timely manner before he was informed of the Oees signing of the
agreement.
Dickinson v. Dodds p.360 There is no requirement that an express or actual withdrawal
of the offer is mandated. To constitute a K, the two minds were at one, at the same
moment in time, there was an offer continuing up to the time of acceptance. If there was
no such continuing offer, then the acceptance comes to nothing. Pl did not accept and
therefore no binding contract existed between the parties. Two minds were not in
agreement at one time, the time of acceptance. This is an empty garden. This is not a
bargained-for exchange. P.164 explains the rule.
J. UCC Application: Offer, Acceptance, & Counteroffer
UCC 2-204 p. 33 Formation in General
1. A contract for sale of goods may be made in any manner sufficient to show agreement,
including conduct by both parties which recognizes the existence of such a contract.
2. An agreement sufficient to constitute a contract for sale may be found even though the
moment of its making is underminded.
3. Even thought one or more terms are left open in a contract for sale does not fail for
indefiniteness is the parties have intended to make a contract and there is reasonably
certain basis for giving an appropriate remedy.
This UCC is much more flexible approach. The common law needs an offer and acceptance to
have a contract. The UCCs main point is intention that both people know they are making a
contract. Parties may not agree to the terms, but still have a contract, b/c they want a contract.
The common law needs to know that exact second when the contract was formed. UCC
looks for some sort of agreement.
The difference between the Restatement and the UCC: UCC is the binding law and applies
to commercial transactions for the purchase and sale of goods. 49 states, LA is the only
exception, that have this.
Exam Tip: First question you should ask: Is this a contract for the sale of goods? If so, then
apply the UCC.
UCC 2-206 p. 34 Offer and Acceptance in Formation of Contract

1. Unless otherwise unambiguously indicted by language or circumstances


a) an offer to make a contract shall be construed as inviting acceptance in any manner and
by any medium reasonable in the circumstances; (differs from the common law, b/c the
common law needs to be the mirror image, basically says they are going to be more
flexible on performace)
b) an order or other offer to buy goods for prompt or current shipment shall be construed as
inviting acceptance either by a prompt promise to ship or by the prompt or current
shipment of conforming or nonconforming goods, but such a shipment of nonconforming
goods does not constitute an acceptance if the seller seasonably notifies the buyer that the
shipment is offered only as an accommodation to the buyer.
2. Where the beginning of a requested performance is a reasonable mode of acceptance an
offeror who is not notified of acceptance within a reasonable time may treat the offer as
having lapsed before acceptance.
Corinthian Pharmaceutical Systems, Inc. v. Lederle Laboratories An offer is
the manifestation of willingness to enter into a bargain, so made as to justify
another person in 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. The court says that Corinthians made an offer. The court says that Lederle did
not accept the offer. The automated computer cannot constitute acceptance.
Lederles acceptance was merely an accommodation, which does not constitute
acceptance as outlined in 2-206.
UCC 2-207 p.35-37
The purpose: For the terms that arent included, that the UCC will jump in and take care of it.
This is different than the common law. The critical thing is a definite and seasonable expression
of acceptance. UCC is about the sale of goods, it does not have to involve merchants.
Leonard Pevar Co. v. Evans Products Co. p.329 Section 2-207 recognizes that a buyer
and seller can enter into a contract by three methods:
1. agree orally and send confirmation memo
2. without oral agreement exchange writings which do not contain identical terms, but
nevertheless constitute a seasonable acceptance
3. conduct of the parties may recognize the existence of a contract despite the previous
failure to agree orally or in writing
1. If the additional terms did not alter the agreement, then they will be incorporated. But,
there is no Offer plus Acceptance. CO can only be expressly accepted.
2. Evans says that he made a counter-offer and that Pevar accepted when he paid for the
goods. The court cites Roto-Lith as an example of Evans claim. However, this is old law
and the Code now says that before a counteroffer is accepted, the counter-offeree must
expressly assent to the new terms.
3. Parties conduct indicates that they recognizes the existence of a contract. If Court finds
that they did not enter into an oral agreement, then Section 2-207(3) will apply. CO can
only be expressly accepted. If no O+A BUT: Conduct Showing a K. They actually
shipped the goods and sent notification.

. If no O+A BUT: Conduct Showing a K then in 2-207(3) the gap filler, and the terms that the
parties agree upon under the UCC. They did not agree about the disclaimer warranties, so they
get knocked out.
Textile Unlimited, Inc. v. ABMH and Company Inc. p.336 The district court
found that the Textile would suffer harm if the arbitration were not stayed and that
they correctly raised questions for preliminary injunctions. Textile did not give
specific and unequivocal assent to the supplemental conditions and thus a contract
containing the new terms that ABMH attempted to pin on Textile were not formed
under 2-207. This is to avoid parties from obtaining all the terms simply because
it fired the last shot in the exchange of forms. Thus, the disputed additional terms
are trimmed and the supplements proposed by ABMH including arbitration clause
are not valid.
You need to get some kind of expressed acceptance in your counter-offer.
2-207(3) kicks in where there is not a contract, but the parties act like there is a contract.
Hill v. Gateway 2000 p. 342 The Court says that a contract need not be read to be
effective; people accept the risk that the unread terms may in retrospect prove
unwelcome. Ultimately, the Court says that shoppers have three ways to discover
what kind of warranty/support is offered?
1. ask vendor to send a copy before deciding whether to buy
2. consult public sources that may contain information
3. inspect the document after the delivery.
The Hills chose the last option, so they accepted Gateways offer, including their arbitration
clause. The Seventh Circuit held that the terms do indeed govern the parties' relationship,
validating Gateway 2000's "approve or return" device. The court, in reaching this conclusion,
held that the offer of Gateway required acceptance by retaining the computer after receipt of the
terms. As such, the parties' contract was not formed until the consumer retained the computer for
a period of 30 days, and the terms provided with the computer bound the parties

Klocek v. Gateway p.345 Therefore, because the seller did not specifically accept
the additional terms and because the purchaser did not willingly accept the
additional terms, the purchaser was deemed to have accepted the first offer to sell,
which did not constitute the additional terms. In other words, the purchaser did
not purchase subject to the shrink-wrap license.

K. Irrevocable Offer: Option Contracts


Restatement 25 defines an option contract as An option contract is a promise which meets the
requirements for the formation of a contract and limits the promisors power to revoke an offer.
Restatement 87:
An offer is binding as an option contract if
1. it is in writing and signed by the offeror, recites a purported consideration for the making of
the offer, and proposes an exchange on fair terms within a reasonable time
2. is made irrevocable by statute

An offer which the offeror should reasonably expect to induce action or forbearance of a
substantial character on the part of the offeree before acceptance and which does not induce such
action or forbearance is binding as an option contract to the extent necessary to avoid injustice.
In the Mailbox rule normally acceptance is effective upon dispatch. However, concerning option
contract, the notice must be received.
Humble Oil & Refining Co. v. Westside Investment The mere fact that the
parties may choose to negotiate before accepting an offer does not mean that the
option contract is repundiated. Humble was simply making a counter offer.
Additional under an option contract, the act necessary to raise a binding promise
to sell is not an acceptance of the offer, but rather the performance of the
condition of the option contract. If this is true, then the rule peculiar to offers to
the effect that a conditional acceptance is in itself in every case, a rejection of the
offer, is not applicable to an option contract supported by a consideration and
fixing of time limit for election. Thus, Westside should have kept the option open
and could not act in derogation of the terms of the option.
In an option contract, the seller cannot revoke the offer, until the limits of the contract have
expired.
Marchiondo v. Scheck p.376 Partial performance of the consideration may make
such an offer irrevocable and where the broker manifests his assent to the offer, by
entering upon performance the offer becomes irrevocable during the time stated
and binding upon the principal under the terms. If you start performance, that is
reliance, so they have to keep the offer open within the terms of the offer. Once
partial performance is begun pursuant to the offer made, a contract results. This
contract has been termed a contract with conditions of an option contract. The
court specifically references Restatement 45: (The broker has begun
performance)
1. Where an offer invites an offeree to accept by rendering a performance and does not
invite a promissory acceptance, an option contract is created when the offeree begins the
invited performance or tenders part of it.
2. The offerors duty of performance under any option contract so created is conditional on
completion or tender of the invited performance in accordance with the terms of the offer.
Restatement 37 Termination of Power of Acceptance Under Option Contract
Notwithstanding the power of acceptance under an option contract is not terminated by rejection
or counter-offer by revocation or by death or incapacity of the offeror, unless the requirements
are met for the discharge of the contractual duty.

James Baird Co. v. Gimbel Brothers, Inc. p.381-383 Hand finds there was no
contract between the parties because putting in a bid could not be construed to
constitute an acceptance of the Hand says that 90 doesnt apply because the
defendant was bargaining for an acceptance, not a bid.We are making this offer
and if you get the contract, then we guarantee we accept. But, there was no need

to keep that contract open. It could be revoked under the Baird test. Offers can be
revoked as long as there has been no acceptance.
When is there an acceptance? When purchaser sends back acceptance. Can withdraw bid anytime
before acceptance. When the general con. Notifies the subs there is an acceptance. They could
have gone forward with their bid and if they are the winning bid, then they suck up their costs or
withdraw from any chance of winning this.
General principle: You dont have to have an acceptance bid, in order for the bid
to be enforceable. Part of the generals bid is the subs bid, then they are relying on
the bid. If you are a sub, you prefer the Baird dynamic.
Drennan v. Star Paving Co. p383-389 The court finds that the defendant
reasonably induced reliance on the part of the plaintiff. The court says there is no
evidence that the df. offered to make its bid irrevocable in exchange for plaintiffs
use of its figures in computing his bid. Nor is there evidence that would warrant
interpreting plaintiffs use of df. bid as the acceptance thereof, binding plaintiff on
condition he received the main contract, to award the subcontract to df. There was
no option supported by consideration nor a bilateral contract binding on both
parties. The contract was silent as to revocation, so you have to reasonably infer
the facts. The very purpose of Restatement 90 is to make a promise binding even
though there was no consideration. Also, the df. mistake mislead the pfs. As to the
cost of the paving. Thus, the loss resulting from the mistake should fall on the
party who caused it.
SKB Industries, Inc. v. Insite p.389-391 Even though there was no binding
contract, there was significant evidence of promissory estoppel. It was foreseeable
that SKB and Insite would suffer damages if SKB refused to perform the bid,
there was no evidence that the bid was to be revoked at any time, so there was
consideration for promissory estoppel. There is no evidence that they intend for
their offer to be able to revoke, therefore you can revoke the offer at any time.
Firm Offers UCC 2-205
An offer by a merchant to buy or sell goods in a signed writing which by its terms gives
assurance that it will be held open is not revocable, for lack of consideration, during the time
stated or if no time stated for a reasonable time, but in no event may such period of irrevocability
exceed three months; but any such term of assurance on a form supplied by the offeree must be
separately signed by the offeror.
V. STATUTE OF FRAUDS
If you fit with one of the categories: one year provision, sale of land, surety, executor contract,
then writing and signed by party to be charged or exceptions or no enforcement.
Restatement 110 p.231 Classes of Contracts Covered
1) The following classes of contracts are subjected to a statute, commonly called the Statute
of Frauds, forbidding enforcement unless there is a written memorandum or an applicable
exception:

a) a contract of an executor or administrator to answer for a duty of his decedent (the


executor-administrator provision);
b) a contract to answer for the duty of another (the suretyship provision);
c) a contract made upon consideration of marriage (the marriage provision);
d) a contract for the sale of an interest in land (the land contract provision);
e) a contract that is not to be performed within one year form the making thereof (the one
year provision)
Restatement 130 Contract Not to Be Performed within a year
1) Where any promise in a contract cannot be fully performed within a year from the
time the contract is made, all promises in the contract are within the Statute of
Frauds until one party to the contract completes his performance.
2) When one party to a contract has completed his performance, the one year
provision of the Statute does not prevent enforcement of the promises of other
parties.
A. One Year Clause
In most states, no action shall be brought upon any agreement that is not to be performed within
the space of one year from the making thereof, unless the agreement shall be in writing and
signed by the party to be charged therewith or some other person thereunto by him lawfully
authorized. However, the parties must be extremely clear that the contract is not to be
performed within the year.

North Shore Bottling Co. v. C. Schmidt & Sons, Inc. p.169 The Court says that the
Statute is only to apply to contracts that are to be performed in a year. The agreement
asserted by the pl. does not fall within the ban of the Statute of Frauds. The parties
contemplated its possible termination by action , unquestioning within the df. power to
take at any time, discontinuing its beer sales in the NY area. The long term distributorship
in the plaintiff or a termination should the def. decide to discontinue beer selling. The
first contingency is not performable within a year, the second is. The existence of one of
the two contingencies performable within a year is sufficient to take the case of the
statute.

B. Contracts for the Sale of Goods


UCC 2-201-4 Sale of goods: Provides that a contract that is enforceable under this section is not
rendered unenforceable merely because it is not capable of being performed within one year or
any other applicable period after its making.
UCC 2-201 says that goods manufacturer for the buyer even if not manufactured by the seller are
not within UCC 2-201 if 1) they are not suitable for sale to others in the ordinary course of the
sellers business and 2) the seller before notice of repudiation is received and under
circumstances which indicate that the goods are for the buyer has made either a substantial
beginning of their manufacture or commitments for their procurement.

UCC 2-201 governs leases of goods. Other statutes deal with insurance, small loans, and retail
installment sales.
According to Section 125 a promise to transfer to any person any interest in land is within the
statute of frauds. All versions of the statute of frauds purport to cover oral agreements to convey
an interest in land.
Crabtree v. Elizabeth Arden Sales Corp. p.177 In this case there is an unsigned memo
which influenced an initialed payroll change by the manager, reference the same
transaction. Thus, there was a memorandum, that was violated based on the specific
terms of the agreement.
UCC 2-201 requires some writing sufficient to indicate that a contract for sale been made
between the parties and signed by the party against whom enforcement is sought or his
authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a
term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of
goods shown in such writing. The only term that must appear is the quantity term, which need
not be accurately stated.
Crabtree wants to fall within the Statute of Frauds, so it can be enforceable. There has to be a
connection to show they are the same subject manner or transaction. The key is that we need (2
years to make good) or else it is an at-will contract. As long as you have a quantity term, you get
past the Statute of Frauds.
Electronic Writings
The UETA and E-Sign make is clear that a contract may not be denied legal effect solely b/c it is
in electronic form or because an electronic signature or electronic record was used in its
formation. Clicking on an icon may be sufficient to create a legally binding contract.
Restatement 125 Contract to Transfer, Buy, or Pay for an Interest in Land
1) A promise to transfer to any person any interest in land is within the Statute of Frauds.
2) A promise to buy an interest in land is within the Statute of Frauds, irrespective of the
person to whom the transfer is to be made.
3) When a transfer of an interest in land has been made, a promise to pay the price if
originally within the Statute of Frauds, ceases to be within it unless the promised price is
itself whole of in part an interest in land.
4) Statute in most states except from the land contract and one-year provisions of the Statute
of Frauds short-term leases and contracts to lease, usually for a term not longer than one
year.

C.Effect of Noncompliance
A majority of cases have held that such a contract is not void in the strict sense that no
contract has come into being at all, but is merely unenforceable at the option of the party
against whom enforcement is sought.
Thus, the defense can be waived

A contract can be enforceable if the party against whom enforcement is sought admits in
his pleading, testimony, or otherwise in court that a contract for sale was made but the
contract is not enforceable under this provision beyond the quantity of goods admitted.
DF Activities Corporation v. Brown p. 184 Whether a sworn denial ends the case or the
plaintiff may press on, and insist on discovery. Holding: Yes. Reasoning: The court lets the
lady just send an affidavit. The court says there is no point in keeping the suit alive. A
plaintiff cannot withstand summary judgment by arguing that although in pretrial discovery
he has gathered no evidence of the defendants liability, his luck may improve at trial. (Frank
L. Wright Chair)
Restatement 139 Enforcement by Virtue of Action in Reliance
1. A promise which the promisor should reasonably expect to induce action or forbearance
on the part of the promissee 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. The remedy granted for breach is to be
limited as justice requires.
2. In determining whether injustice can be avoided only by enforcement of the promise, the
following circumstances are significant.
a) the availability and adequacy of other remedies, particularly cancellation and restitution;
b) the definite and substantial character of the action or forbearance in relation to the
remedy sought
c) 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
d) the reasonableness of the action or forbearance
e) the extent to which the action or forbearance was foreseeable by the promisor.
Restatement 140 Defense of Failure to Perform
The Statute of Frauds does not invalidate defenses based on the plaintiffs failure to perform a
condition of his claim or defenses based on his present or prospective breach of the contract he
seeks to enforce.
UCC 2-201 is more about establishing a contract instead of establishing the terms of the contract.
Statute of Frauds exceptions (if you dont have a writing that is signed by the party):

Testimony

Full performance

Special manufacture 2-201(3a)


1. special and not suitable for sale
2. seller has beginning of manufacture or made commitments to procurement

Promissory estoppel
o Protecting the reliance interest
2-201(3)a there is no way to mitigate the loss and also the manufacture is evidence of a
contract.
If something doesnt apply to the Statute of Frauds, then it does not have to be in writing.
MO. 432.010, Statute of Frauds.
Converage:

One year

Sale of interest of lands

Surety

Executory
Marriage (contracts)

Requirements: Writing and signed by party to be charged


Testimony: must be admitted, under sworn testimony
Full performance, UCC 2-201(c)3: this will generally be enforceable on the theory that you dont want one person to get stuck.
Reliance-promissory estoppel (various by state)
MO. 400.2-201

Sale of Goods at a price greater or equal to $500


Requirements: Writing and signed by party to be charged, but terms can be open/ wrong, but not above quantity listed. After-thefact memo 2-201 (2) (this is when a confirmation is sent, and you are supposed to let them know if you have difficulties with it.
Full performance2-201 (C) allow some fishing through discovery, can allow person to depose to ask. (but see DF activities)
Reliance UCC 2-201(3)(a) is the manufacturer exception and it is critical that you incure some kind of injury.

FAULTY FORMATION
A. Insufficient Agreement: Indefinite, Incomplete and Deferred Terms: Defective
Formulation and Expression of Agreement
Restatement 20 Effect of Misunderstanding
1. There is no manifestation of mutual assent to an exchange if the parties attach materially
different meanings to their manifestations and a) neither party knows or has reason to
know the meaning attached by the other or b) each party knows or each party has reason
to know the meaning attached by the other.
2. The manifestations of the parties are operative in accordance with the meaning attached
to them by one of the parties if a) that party does not know any different meaning
attached by the other, and the other knows the meaning attached by the first party or b)
that party has no reason to know of any different meaning attached by the other and the
other has reason to know the meaning attached by the first party.
Raffles v. Wichelhaus p.393-396 There is no binding contract unless both sides
agreed to the same thing. It does not appear that the plaintiff had any goods on
board the other Peerless. Also, there is nothing to show that a particular Peerless
was meant, so the plaintiff had one ship in mind and the def. other. Therefore,
there is no consensus and no binding contract. Apparently, the court accepts the
argument of the defense that the contract was too ambiguous to uphold.
Konic International Cor. v. Spokane Computer Services Inc. The court says
there is a failure of communication between the parties and references Raffles.
Even though the parties manifest mutual assent to the same words of the
agreement, there may be no contract b/c of material differences of understanding
as to the terms of the exchange. This doctrine should only apply when:
1. when the parties have different understandings of their expression of agreement,
2. the doctrine does not apply when one partys understanding b/c of that partys
fault is less reasonable than the other partys understanding
3. parol evidence is admissible to establish the facts necessary to apply the rule.
Therefore, no contract was formed!

In situations like Konic, any reliance by either party on the arrangement will be protected
only if the other party has received and retained a measurable benefit.
Indefinite Agreements
Restatement 33 Certainty p.204
1. Even though a manifestation of intention is intended to be understood as an offer, it
cannot be accepted so as to form a contract unless the terms of the contract are reasonably
certain.
2. the terms of a contract are reasonably certain if they provide a basis for determining the
existence of a breach and for giving an appropriate remedy.
3. The fact that one or more terms of a proposed bargain are left open or uncertain may
show that a manifestation of intention is not intended to be understood as an offer or as an
acceptance.
Varney v. Ditmars p.400-405 UCC doesnt apply, since it is an employment
agreement. The court says about the statement that it was vague, indefinite and uncertain
and the amount cannot be computed from anything that was said by the parties or by
reference to any document. It also affected so many other facts that are in themselves
indefinite and uncertain that the intention of the parties is pure conjecture. There is no
contract as long as the essential element is open to negotiation.
Generally today, this will be enforceable. Fair implies some notion of what is equitable and what
is just. Injustice is a flexible concept fudge factor. Fair is what the employer thought it meant
and here the employer thought it meant nothing. Trend is been going away from strict common
law and then determine what the parties actually meant.
Cardozo dissents: If the intent is present it cannot be said from the mere form of the promise that
the estimate of the reward is inherently impossible. He says that the plaintiff failed to supply the
data essential to computation and the profits were not to be included as an element of damages.
He does not believe it is the case of damage to the extent of his loss of salary. Thus, the evidence
would find that the plaintiff was discharged without cause and he is entitled to damages
measured by his salary for the unexpired term. Most courts would follow this dissent.
Lefkowitz v. Great Minneapolis Surplus Store
4. Finding that the parties clearly manifested an intention to be bound any requirement of
reasonable certainty is satisfied if the agreement provides a basis for determining the
existence of a breach and for giving an appropriate remedy.
5. In Hall c. Busst: majority found this to be too uncertain to be the basis of an enforceable
contract. Dissent says: If parties, intending to make a concluded contract of sale, agree
that the sale shall be at a fair valuation of the property sold, they have fixed the price by
reference to an ascertainable fact-the fair value.
6. There was indefiniteness, since the first thing that was sold was up to 100 dollars.
Incomplete and Deferred Agreement
UCC 2-305 Open Price Term
1. The parties if they so intend can conclude a contract for sale even though the price is not
settled. In such a case the price is a reasonable price at the time for delivery if
a) nothing is said as to price, or
b) the price is left to be agreed by the parties and they fail to agree, or

c) the price is to be fixed in terms of some agreed market or other standard as set record by
a third person or agency and it is not so set or recorded.
2. A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.
3. When a price left to be fixed otherwise than by agreement of the parties fails to be fixed
through fault of one party the other may at his option treat the contract as cancelled or
himself fix a reasonable price.
4. Where, however, the parties intend not to be bound unless the price be fixed or agreed
and it is not fixed or agreed there is no contract. In such a case the buyer must return any
goods already received or if unable so to do must pay their reasonable value at the time of
delivery and the seller must return any portion of the price paid on the account.

Metro-Goldwyn-Mayer Inc v. Scheider p.407-408 The Courts say that the


judgment should be affirmed. Although both parties agreed to several of the
terms, the only term that was missing was the start date for filming the television
series. This term was supplied by the trial court based on customs and practice in
the industry. The court will find and enforce a contract even though the parties
have expressly left these other elements for future negotiation and agreement if
some objective method of determination is available, independent of either partys
mere wish or desire.
Joseph Martin Jr Delicatessen, Inc. v. Schumacher The court says that the
mere agreement to agree, in which a material term is left for future negotiations is
unenforceable, especially when it is rent and when specific performance is sought.
The language of the lease speaks of annual rates to be agreed upon. So, the fair
market value is not enough. The contract is not binding b/c they made no
reference to a fair market value, they just said that it had to be agreed upon. The
majority says that Metro Corp. v. May Oil Burning Corp is not applicable to real
estate contracts.
Oglebay Norton Company v. Armco, Inc. p. 413 Court sets price for past by
looking at industry and trade usage. Mediation for the future terms, if that doesnt
work, the court will set the price. Furthermore, the ct. had the power to set the
rates. According to UCC 2-305, where the parties intend to conclude a contract
for the sale of goods and the price is not settled, the price is a reasonable price at
the time of delivery if the price is to be fixed in terms of some agreed market or
other standard as set or recorded by a third person or agency and it is not so set or
recorded. The ct. determined the reasonable price and it had the power to do so.
Also, the cts order for specific performance was necessary because the
undisputed dramatic changes in the market prices of great lakes shipping rates and
the length of the contract would make it impossible for a court to award P
accurate damages due to Ds breach of the contract. The order to mediate and
negotiate rates each season will neither add nor subtract significant contractual
responsibilities.

Landlord/tenant situation, then you have cases involving goods. They are not required
In an indefinite and insufficient agreement:
R 33: Two Questions:

1. What is the intent of the parties?


2. Reasonably certain terms
a. Provide a basis for determining a breach and what the remedies for that breach
would be.
Compare this to UCC 2-204 (3) which seems similar to this
1) intent + 2) basis for a remedy
Substance
Fair-Varney
Undecided
MGM- looked to industry custom
Process
To be agreed upon
Negotiate in good faith
Course of dealing industry custom etc.
Third party or internal process: courts will always enforce it (breaks down)
Substance or Process?
Resaonable or Fair Market Price. You could argue that that is a substantive term.--> enforce
Finality Scale
More final at top and less final at bottom
Specified in K
Process in K
Process in relationship (performance or past dealing)
Process in industry (trade usage)
Process in overall economy
Substantive notions of fairness
Nothing
Remedies Where Agreement Incomplete or Indefinite p. 434-435

Hoffman c. Red Owl Stores Inc. p. 435-443. From the facts, it is evident that P bought
the grocery store expecting it to be a temporary experience gaining venture and the trail
court was correct in assigning a new trial for this damage amount. Affirmed.1) Open
terms or 2) Preliminary promise (based on assurances) or agreement (parties havent got
to a full contract)

Copeland v. Baskin Robbins U.S.A The courts do not want to provide a remedy for breach of
an agreement to agree, because the court may not imply what the parties will agree upon. (Autry

v. Republic Productions). However, the courts say that the appropriate remedy is the partys
reliance damages. Baskin Robbins is entitled to summary judgment b/c it has shown that
Copeland cannot establish reliance damages. There are public policy reasons for protecting
parties to a business negotiation from bad faith practice by their negotiations. Today the stakes
are higher and negotiations are more complex. However, in this case the plaintiff cannot recover
for lost expectation (profits) because there is no way of knowing what the ultimate terms of the
agreement would have been or even if there would have been an ultimate agreement. It was an
agreement to negotiate further.