Restatement (Second) of Contracts UCC

24 Offer Defined 2-201

25 Option Contracts 2-204 (Gateway),
29(1), (2) To Whom an Offer is Addressed 2-205 firm drenan/baird)
30(1), (2) Form of Acceptance Invited 2-206 (1)(a)-(b), (2) (Corinthian accept by promising to ship/shipment, klonick),
32 Invitation of Promise or Performance 2-207 (1),(2),(3)
35 The Offeree's Power of Acceptance 2-209 (mod w/o consideration if commercial reason, but not
36 Methods of Termination of the Power of Acceptance coercion)
38 Rejection 2-302 (relied on Jones v star credit, strike down unconscionable
39 Counter-offers 2-305 (in conjunction w 2-201)
41 Lapse of Time 2-306 (1), (2) (exclusive dealing and output contract, lue wedu Gordon,
42 Revocation by Communication from Offeror Received by Offeree best performance, but the bounds on under over demand)
43 Indirect Communication of Revocation 2-313, 314, 315, 316
45 Option Contract Created by Part Performance or Tender (warranties, opinion or facts, what kind of words, condition;
62 Effect of Performance by Offeree Where Offer Invites Either implied merchantability, vs particular purpose; waiver
Performance or Promise provision like w/ pogo stick)
69 Acceptance by Silence or Exercise of Dominion 2-501 (identification, important for 709
71 Requirement of Exchange; Types of Exchange 2-508 (right to cure)
73 Performance of Legal Duty 2-601 (perfect tender rule)
74 Settlement of Claims 2-602 (when can you wrongfully reject)
77 Illusory and Alternative Promises 2-606 (acceptance)
79 Adequacy of Consideration; Mutuality of Obligation 2-608 (revoke an acceptance, seller has remedies under 2-700s)
81 Consideration as Motive or Inducing Cause 2-609, 10, 11, 12 (adequate assurance, repudiation, retraction, instalment)
87(1), (2) Option Contract 2-615 (bolin farms, impracticability)
89 Modification of Executory Contract 2-703
90 Promise Reasonably Inducing Action or Forbearance 2-704 (finished or unfinished goods)
151 Mistake Defined 2-706 (resale remedy)
152 When Mistake of Both Parties Makes a Contract Voidable 2-708(1)(2) (marketplace remedies)
153 When Mistake of One Party Makes a Contract Voidable 2-709 (specific perf for seller)
154 When a Party Bears the Risk of a Mistake 2-710 (incidental for seller)
159 Misrepresentation Defined 2-711 (buyers general rights)
160 When Action is Equivalent to an Assertion (Concealment) 2-712 (cover)
161 When Non-Disclosure Is Equivalent to an Assertion 2-713 (market dmgs)
162 When a Misrepresentation Is Fraudulent or Material 2-714 (only w breach of warranty)
164 When a Misrepresentation Makes a Contract Voidable 2-715 (consequential damages for buyers)
168 Reliance on Assertions of Opinion 2-716(1) (specific performance)
169 When Reliance on an Assertion of Opinion Is Not Justified 2-719
202 Rules in Aid of Interpretation
205 Duty of Good Faith and Fair Dealing
208 Unconscionable Contract or Term
224 Condition Defined
225 Effects of the Non-Occurrence of a Condition
229 Excuse of a Condition to Avoid Forfeiture
IS THERE A VALID CONTRACT?
Formation
i. Common law or UCC?
ii. Express, Implied-In-Fact, Quasi
iii. Mutual Assent (offer, acceptance), Consideration (actual, substitute), No defense
iv. Essential terms? (price, duration, parties, subject matter) 2-305
v. Statute of Frauds? 2-201 over $500

MUTUAL ASSENT
Offer [24, 2-201, 2-204]
i. an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted
by the person to whom it is addressed
ii. Embry v. Haragadine (1907) p.177 [if a reasonable person would understand the oral promise to be agreement then valid contract]
iii. Lucy v. Zehmer (1954) p.179 [if party has reasonable belief that other party has requisite intent even when it actually doesnt, still a K]
iv. Wrench v. Taco Bell (2001) p.191 [disclosing idea with expectation of compensation can make implied-in-fact K]
v. Lonergan v. Scolnick (1954) p.199 [invitation for offers is not an offer]
vi. Southworth v. Oliver (1978) p.201 [price quote to definite group w/ explicit language bcuz RP would believe its an offer]
vii. Lefkowitz v. Great Minn (1957) p.208 [ad can be an offer when promise for exchange w/ clear, definite action and leaves nothing open for negotiation]
viii. Leonard v. Pepsico (2000) p.212 [ad which reasonable person wouldnt take seriously isnt an offer]
i. Promise, Undertaking, or Commitment [Embry, Lucy, Wrench, Scolnick, Southworth]
a. Language
i. Words sounding of Offer [Southworth], not something a reasonable person assume is a joke [Pepsico]
ii. Definiteness of terms [Skolnick and Lucy]
iii. Acceptance must be a mirror or its a counter offer [Southworth]
iv. # of people offered the deal [Scolnick] especially with land which is clearly unique; inventory problem
b. Surrounding circumstances
i. Social context [Lucy]
ii. Negotiations (more negotiations means more likely legit) [Southworth]
iii. Offer is preceded by a solicitation/invitation for offers [Skolnick]
c. Prior practice and relationship between parties
d. Method of communication (broad/narrow, ad)
e. Industry custom
ii. Certainty and Definiteness (w/ gap fillers)
a. Identified the offeree
b. Definiteness of subject matter (w/ reasonable accuracy)
i. Goods need quantity term but can be even requirement or output, can give reasonable range or collar
c. Price
d. Time for performance
iii. Communication to offeree
a. To have the power to accept offeree must have knowledge of the offer
iv. Is it real offer? Carbolic Smoke

Termination of Offers
v. Dickinson v. Dodds (1876) p.270 [promise to keep offer open an option only with consideration and acceptance]
vi. Humble Oil v. Westside Investment (1968) p.278 [option contract with consideration is irrevocable]
vii. A.A. Marchiondo v. Scheck (1967) p.284 [offer may not be revocable after performance has begun]
viii. Baird v. Gimbel Brothers (1933) p.292 [use of bid isnt bilateral K nor option since no obligation to use it; no Prom.Estop if no consideratn]
ix. Drennan v. Star Paving (1958) p.295 [detrimental reliance can make a bid binding; party that made mistake can bear loss]
x. Revocation by Offeror
a. Revocation by direct communication
b. Revocation by publication
c. Revocation by indirect communication: (i) definite inconsistent action, and (ii) offeree acquires reliable info of that [43]
d. Limits on ability to revoke:
i. Option Contract/Firm Offers [25, 87(1), 2-205]
ii. Detrimental reliance (where for example substantial preparation is needed to accept) [87(2)]
iii. Beginning performance (embarking on performance; mere preparation may still be just detrimental reliance) (45,62)
xi. Termination by offeree
a. Express Rejection [36, 38]
b. Counter-Offer as rejection
i. Minneapolis & St. Louis Railway v. Columbus Rolling-Mill (1886) p.307 [mirror image rule example]
ii. [CL] by mirror image rule [36, 39] (but not mere inquiry [39], nor rejection of option [37]);
iii. [UCC 2-207] which can reject all, part, or none.
c. Lapse of Time [36, 41]
xii. Termination by Law
a. Death or incapacity of a party [36]
b. Non-occurrence of condition [36]

Acceptance
i. Bretz v. Portland General Electric (1989) p.225 [objective acceptance manifestation test where itd be reasonably belief]
ii. La Salle National Bank v. Mel Vega (1988) p.229 [contract can only be accepted by the terms it requires]
iii. Hendricks v. Behee (1990) p.231 [notice of acceptance is essential, notice to agent is notice to principal]
iv. Carlill v. Carbolic Smoke Ball Co. (1893) p.233 [ad gimmick]
v. Corinthian v. Lederle Laboratories (1989) p.240 [shipment of non-conforming goods said to be accommodation cant cause acceptance]
vi. Industrial America v. Fulton Industries (1971) p.244 [offer can be accepted by full performance]
vii. Mary Glover v. Jewish War Vets of US (1949) p.247 [no reward contract when you give information without intention of accepting offer]
viii. Ever-Tite Roofing v. Green (1955) p.251 [offerer can be withdrawn before acceptance; beginning performance can be acceptance]
ix. Russell v. Texas Co. (1956) p.255 [exercise of dominion can be acceptance]
 x. Acceptance is a manifestation of assent to the terms of the offer viewed objectively; a receipt would reasonably believe there was a contract [Bretz]
xi. Who can accept? [29, 52]
a. Whoever is addressed or directed
b. Power of acceptance cant be assigned (unless for option K)
c. Offeree must know of offer and have intention to accept [Glover]
xii. How to accept?
a. Per terms of offer as specified by offeror (master of the offer) [30(1), Vega]
b. If not specified, invites acceptance by any reasonable manner [30(2), 2-206], but needs to notify offerer of acceptance [56, Hendricks]
c. If in doubt whether by promise or performance, either is ok [32], this can be a promise to ship or prompt shipment [2-206]
i. Part performance of a unilateral K makes an option K [45]
ii. Part performance when in doubt, or when known to be bilateral creates promise to complete performance [62]
iii. Shipment of non-conforming goods is simultaneous acceptance and breach, unless shipper notifies that it was just an accommodation
[Corinthian, 2-206(1)(b)]
d. For Unilateral Contract (acceptance only by perf.):
i. Not accepted until performance completed. Beginning performance makes offer irrevocable, but no obligation to complete
ii. Notice:
1. [CL] No notice for when beginning, but reasonable notice for completion unless waived or it would come to offerors
attention.
2. [UCC] if no notice when beginning may treat offer as lapsed [2-206(2)]
e. For Bilateral Contract (exchange of mutual promises):
i. Generally, acceptance must be communicated unless waived or when accepted by silence or exercise of dominion [69, Russell v. Texas]
ii. Any reasonable method unless offeror specifies; may be promise or prompt shipment [32]
iii. If promise and [CL] then Mirror-Image Rule;
iv. If [UCC] then Battle of Forms; rejection and counter-offer
1. Distinguish from implicit terms made explicit, grumbling acceptance, or request for clarification
v. Non-conforming goods can be acceptance and breach unless an accommodation. Rejection makes no breach.
vi. Effective as of Mailbox rule [63] (if any manner, then dispatch; if stipulated, then w/e in offer; if option then receipt)
1. Rejection then acceptance, whichever received first
2. Acceptance then rejection, mailbox rule applies unless rejection received first and caused reliance
3. Unauthorized method of acceptance may still work if received, just not by mailbox rule
Consideration
i. Kirksey v. Kirksey (1845) p.63 [gratuitous promise is not consideration]
ii. Hamer v. Sidway (1891) p.65 [waiver of any legal right is detriment good for consideration]
iii. Lagner v. Superior Steel Corp. (1932) p.69 [for gratuitous promise to be enforceable there must be valid consideration from bargained for exchange]
iv. In re Greene (1930) p.79 [intent will not substitute for actual, valid, not-nominal consideration]
v. Browning v. Johnson (1967) p.96 [dont need to have comparable value]
vi. Apfel v. Prudential-Bache Securities (1993) p.100 [value can be as defined by/to the parties]
vii. Jones v. Star Credit (1969) p.104 [gross disparity in value and lack of meaningful choice can show unconscionability]
viii. Levine v. Blumenthal (1936) p.111 [cant use a preexisting duty for consideration]
ix. Alaska Packers Assn v. Domenico (1902) p.113 [no consideration for modification when promise is coerced]
x. Angel v. Murray (1974) p.118 [preexisted duty rule doesnt apply to unforeseen circumstances]
xi. Rehm-Zeiher Co. v. Walker (1913) p.125 [allowing way to avoid all obligation causes lack of mutuality so no consideration]
xii. McMichael v. Price (1936) p.128 [mutuality found in output contract]
xiii. Wood v Lucy, Lady Duff Gordon (1917) p.131 [mutuality can be implied, here best efforts due to exclusivity]
xiv. Ricketts v. Scothorn (1898) p.140 [promissory estoppel]
xv. Allegheny College v. Natl (1928) p.146 [promise to give charity can be enforceable when there is consideration]
xvi. (1) Bargained-for exchange; (2) bargain is of legal value (benefit or detriment); (3) Mutuality
xvii. Bargained for [71, 81]
a. A gift is not bargained for and makes sham consideration
b. Interpreting whether Conditional Gift or Consideration (sham or not sham):
i. Look to cases: Conditional Gift (Kirksey, Greene) vs. Consideration (Thomas, Browning, Hamer, Langer, Pensy)
ii. Factors:
1. Family vs. business (likeliness there would be consideration)
a. Kirksey intrafamily; Langer business
2. Wilston Test/economic benefit
a. Langer Wilston Test where economic benefit makes us think more likely you have consideration, if theres
mixed motive but can identify a benefit perhaps theres a benefit (Ellen hypo, similar to Pensy)
b. Pensey no $, but is an economic benefit for disposal fee, business; Kirksey no economic benefit
3. Context (e.g. holidays)
4. Grossly disproportionate disparity of value
5. Policy choice (like anti-blackmail),
a. Greene family, mixed motives, rent went to landlord, disclosure of private facts (we dont want to enforce
blackmail, policy choice maybe); Thomas family, mixed motives, rent went to executor (agreement for upkeep
taken on)
6. Identifying a benefit (even if mixed motive),
7. Nature of gift (could it have been given over otherwise, or without noticeable detraction from gift)
a. Kirksey family, noneconomic benefit, nature of gift was land; Hamer family, noneconomic benefit, nature of
gift was money [Kirksey couldnt have given over the gift without her moving, but Hamer could give the gift
over without requiring the nephew to act a certain way]
c. Act or Forebearance by promisee must be of benefit to promisor (detriment must be price of exchange, doesnt have to be economic benefit) [71],
but doesnt have to of itself induce it [81]
d. Past or Moral consideration generally not sufficient
xviii. Legal value [71]
a. Court wont inquire into adequacy of consideration unless it seems inequitable/unconscionable
b. Possibility of value is enough (future value, even if it never comes into existence, like with options [87])
c. Nominal or false recital invalid
d. Legal Detriment can be doing something you dont have a legal obligation to do or refraining from something you have a legal right to do. (dont
need actual loss) [Hamer]
 i. Preexisting duty cant be consideration unless (a) new or diff., (b) a ratification (promise to perform a voidable obligation), (c) honest
dispute, (d) unforeseen circumstances, or (e) a UCC modification (in good faith, not extorted/coercive, [73, 89, 2-209]) [73]
ii. Forbearance to Sue/Settlement (claim must be reasonable and good faith belief of validity) [74]
e. Legal Benefit is anything which you were not legally entitled to expect or demand that confers a benefit
xix. Mutuality versus Illusory [77, 79]
a. Mutuality found even when still choice or discretion in:
i. Requirement or Output Contracts [2-306]
ii. Conditional Promises (even for satisfaction bcuz it limits to good faith and RP standard)
iii. Right to cancel or withdraw invalid if unrestrained, valid if limited (whenever vs w/i X days)
iv. Implied promises, such as Best efforts in exclusive agreements [2-306(2), Wood v. Lucy]
v. Unilateral contract where performance has begun
vi. Option contracts [87]
vii. Not illusory where (a) all alternatives some legal detriment [77], (b) substantial probability that invalid alternatives would be eliminated
and theres at least one alternative left that works [77], or (c) the actual selection of alternative has legal detriment and cures illusory
promise.
Substitute for Consideration (dont need it)
xx. Promissory Estoppel or detrimental reliance [87(2), 89(c), 90]
xxi. Good faith modification
a. [89] not fully performed, fair and equitable, not anticipated; NOT mistake or coercion
b. [2-209] legitimate commercial reason
c. Good reason: Angel unanticipated, actual cost increases
d. Bad reason Alaska cost of fishing was the same they were just leveraging the short fishing season to extract payment
Levine cost to lease remained the same, they threatened to leave without
xxii. Option Contract
a. [2-205, 87(1)]
b. [87(2)]
c. Part performance of unilateral K [45]

DEFENSES
Mistake [151, 152, 153, 154]
i. Boise Junior College District v. Mattefs Construction (1969) p.457
ii. Beachcomber Coins v. Boskett (1979) p.465
iii. Sherwood v. Walker (1887) p.467
iv. Lenawee County Board of Health v. Messerly (1982) p.470
v. OneBeacon America Insurance Co. v. Travelers Indemnity Co. (2006) p.478
vi. Mutual mistake as to existing facts (unless party bore risk [154], not for mistakes in value) [152]
vii. Unilateral mistake (unless perhaps when extreme/obvious, clerical; not for mistakes in judgement) [153]
viii. MisunderstandingAmbiguous Language (Controlled by Subjective Intention of the Parties since objective manifestation seems to not be what was
intended)
(1) Neither party aware of ambiguity: No contract (unless they intended the same thing)
(2) Both parties aware: No contract (unless they intended the same thing)
(3) Only one party aware: Contract
Misrepresentation of Fact [159, 160, 161, 162, 164, 168, 169]
i. Laidlaw v. Organ (1817) p.488
ii. Vokes v. Murray (1968) p.491
iii. Assertions can be an act, a concealment, or non-disclosure when there was a duty to [159, 160, 161]
iv. A misrepresentation thats fraudulent or material, and justifiably relied on makes a K voidable [162, 164]
v. Opinions assert only beliefs, but can be reasonably interpreted as assertions by [168], but reliance on an opinion itself is only justified when theres a
fiduciary duty, special knowledge by asserter, or particularly susceptible to a specific misrepresentation [169].
Unconscionable [208, 2-302]
vi. Williams v. Walker-Thomas Furniture (1965) p.21
vii. allows a court to refuse to enforce a provision, entire contract, or modify to avoid unfair terms [2-302]
viii. Unconscionability is determined by the circumstances as they existed at the time the contract was formed.
ix. Substantive unconscionability (i.e., unconscionability based on price alone)
x. Procedural unconscionability (i.e., unconscionability based on unfair surprise or unequal bargaining power).
(1) Inconspicuous Risk-Shifting Provisions
i. Confession of judgment clauses, which are illegal in most states;
ii. Disclaimer of warranty provisions; and
iii. Add-on clauses that subject all of the property purchased from a seller to repossession if a newly purchased item is not paid for.
iv. ne print (boilerplate) in printed form contracts can be when inconspicuous or incomprehensible to the average person even if
brought to their actual attention
(2) Contracts of Adhesion (stricter for necessary goods than luxury items since buyer has no choice)
(3) Exculpatory Clauses (when against public policy, such as intentional wrongful acts)
(4) Limitations on Remedies not an issue unless inconspicuous, suggested remedy fails its essential purpose (which court can then ignore), or prima
facie unconscionable like consequential damages for personal injury in [2-719]
Other Defenses
xi. Absence of Consideration, Public Policy/Illegality, Lack of Capacity (minor, mental, intoxicated, duress/undue influence), Statute of Frauds (like [2-201]),

WHAT ARE THE TERMS OF THE CONTRACT?

Rules of Construction/Interpretation [202]
i. Pacific Gas & Electric v. G. W. Thomas Drayage & Rigging (1968) p.636
ii. Frigaliment Importing v. B.N.S. International Sales (1960) p.645
iii. Terms
a. Ordinary Meaning of Words (Plain Meaning vs. Contextual)
b. Construed as a Whole
c. Considered in light of the circumstances contracts general purpose intent
 d. Written Or Typed >> Form Contracts re inconsistency
e. Ambiguities construed against party preparing contract
iv. Course of Performance (repeated occasion for performance) can have great weight
v. Course of Dealing (previous transactions)
a. Trade Usage
Parol Evidence Rule [212, 2-202]
vi. When contract is written with intention to be the final expression, it is an integration and other expression (prior or contemporaneous) are inadmissible to
vary the terms of the writing.
a. Check for Zipper/Merger/Integration clause and No Oral Modification clause
b. Can bring evidence showing it wasnt final (the more complete the contract, the more it looks like an integration)
c. If complete then writing cant be contradicted or supplemented, if partial then cant be contradicted but can be supplemented by consistent
additional terms w/ evidence
Gap-Filler Terms
vii. Need to have quantity
viii. But can fill Price [2-305], Place of delivery [2-308], Time for shipment or delivery [2-309], Time for payment [2-310], Assortment [2-311]
Battle of the forms [2-207], not mirror image rule, Terms Included
ix. DTE Energy v. Briggs Electric (2007) p.312
x. Textile Unlimited, Inc. v. A..BMH and Company, Inc. (2001) p.320
xi. Nonmerchants: Terms of offer govern
xii. Both Merchants:
a. Additional Terms usually included unless materially alter, expressly limited, or already had or w/i reasonable time is rejected
b. Different terms sometimes treated as additional terms, sometimes by knockout rule. Doesnt use [CL] Last Shot Rule.
xiii. Conditional acceptance is a rejection/counter-offer, but subsequent conduct can make contract w/ the terms they agree on in their writings and the rest filled
in by UCC [2-207(3), Textile Unlimited]
Open Terms: Shrinkwrap and Browsewrap [2-204]
xiv. Hill v. Gateway 2000 (1997) p.325
xv. Klocek v. Gateway (2000) p.328
Warranties [2-313, 2-314, 2-315]
xvi. Express Warranties [2-313]
a. All Tech-Telecom v. Amway (1999) p.731 [economic loss doc., if only economic then K not tort, cant use promissory estop. when theres a K]
b. Applies if the (statement, description, sample, or model) is part of the basis of the bargain and seller could have relied on it (doesnt matter if made
intentionally or not)
c. Must distinguish warranties from mere statements of value/opinion/commendation
xvii. Implied Warranty of Merchantability [2-314]
a. Applies to a seller of that type of good
b. knowledge of defect irrelevant
c. must meet elements of [2-314], most notably fit for the ordinary purposes for which such goods are used
xviii. Implied Warranty of Fitness for a Particular Purpose [2-315]
a. Applies to any seller
b. When you have reason to know buyer is relying and does rely on sellers skill and judgement
c. Use for a specific purpose
xix. Exclusion or Modification of Warranties [2-316]
a. Merchantbility has to be explicitly named to be excluded and if in writing must be conspicuous [2-316(2)]
b. Warranty of Fitness must be disclaimed by a conspicuous writing only [2-316(2)]
c. Limitations can be unconscionable (like when they fail their essential purpose)
d. Disclaimers or limitation in warranties must be agreed on during bargaining process, excluding terms inside a shipment. However there are ways
around this like by:
i. having box indicate on outside that sale is subject to terms inside, or
ii. have a card that says to register theres further modification, or
iii. Clickwrap where you make the choice to click to agree to the terms or you can return it.
xx. Damages by [2-714]
Modification [89, 2-209]
xxi. Used to need new consideration, but modern view says dont need new consideration when (i) unanticipated circumstances and (ii) it is fair and equitable
[89]
xxii. UCC even more liberal, dont need consideration but do need good faith [2-209] and if within statute of frauds [>$500 by 2-201] then needs to be in
writing [2-209]
xxiii. No oral modification clauses: [CL] doesnt allow, but [2-209] does.
xxiv. Failed attempt at modification or rescission can still serve as a waiver [2-209(4)]
xxv. Cant retract a waiver that caused material reliance [2-209(5)]
xxvi. Parol Evidence Rule doesnt apply to later oral modifications

HAS PERFORMANCE BEEN EXCUSED OR DISCHARGED?

i. Performance: [CL] substantial performance, [237] versus [UCC] perfect tender rule and good faith [2-601, 1-201(2)]
Conditions (is the duty absolute or is failure of performance justified?) [224, 225, 229]
ii. Promise, Condition, Promissory Condition
a. Promise (offensive):
i. commitment to do or refrain
ii. failure to perform is breach
iii. may or may not excuse other party
b. Condition (defensive) (precedent, concurrent, subsequent):
i. promise modifier necessary to create duty or release from duty
ii. failure to perform not a breach
iii. usually excuses other party from related performance
c. Promissory Condition (offensive and defensive):
i. Express promise and condition
1. Dove v. Rose Acre Farms, Inc. (1982) p.742 [clear express conditions are followed even if they cause total forfeiture]
2. Satisfaction as Condition Precedent (needs to be honest and in good faith)
 ii. Condition implying a promise
1. Jacobs & Youngs v. Kent (1921) p.780 [literal fulfillment not implied by weighing purpose, desire, excuse, and cruelty of
strict adherence]
2. good faith and reasonable efforts when occurrence is in the benefitting partys control
3. Constructive Conditions of Performance (act causing breach of sales contract can also be nonfulfillment of implied condition
to pay so you dont have to pay)
4. Order of performance (where simultaneous performance possible then conditions concurrent, when one performance takes
longer then longer one is a condition precedent) [234]
iii. Interpreting whether Promise or Condition, Test: intent of the parties:
a. In re Carters Claim (1957) p.746 [Was a condition not warranty based on interpretation of consistency and intent of parties]
b. Words of agreement
c. Prior practice
d. Custom
e. If rendered by third-party performance then more likely condition than promise
f. Courts prefer promise, especially when substantial performance
iv. Unjust enrichment claim possible when contract unenforceable and there was some performance
v. Conditions Excused (duties become absolute either when conditions (i) performed or (ii) excused):
a. Excuse of Condition by Hinderance or noncooperation
b. Excuse of Actual breach, [CL] only for material breach
c. Excuse of Condition by unequivocal Anticipatory Repudiation (executory/unperformed duties on both sides) [2-610], or by no adequate assurance
[2-609].
i. Repudiation can be retracted unless other party cancelled, materially changed position in reliance, or considered repudiation final. [2-
611]
ii. When reasonable ground for insecurity and if commercially reasonable can suspend performance waiting for assurance [2-609]
d. Excuse of Condition by Waiver or Estoppel Waiver
i. In installment contracts: past waiver can by giving notice be revoked for future installments
Performance Discharged
vi. Impracticability [2-615, Bolin]

HAVE THE TERMS BEEN BREACHED?

Breach
i. When theres an absolute duty to perform and theres failure to perform per the contract:
Breach by Perfect Tender Rule [2-601]
ii. Right to reject ends after acceptance [2-606], but acceptance can sometimes be revoked [2-608]
iii. Exceptions:
a. Installment Contracts (Rejection of that installment only when substantially impairs and cant be cured; Whole contract only when substantially
impairs value of the entire contract) [2-612]
b. Sellers right to cure when within original time [2-508(1)]
c. Sellers right to cure beyond original time when reasonable belief nonconforming goods where fine [2-508(2)]
Breach by Anticipatory Repudiation [2-610, 2-611]
i. Albert Hochster v. Edgar De La Tour (1853) p.854 [if clear notice of repudiation you can sue immediately even before performance is due]
ii. H.B. Taylor v. Elizabeth Johnston (1975) p.859 [anticipatory breach must be affirmative and clear]
iii. AMF, Inc. v. McDonalds Corp. (1976) p.867 [right to assurance and can use nonassurance as repudiation per 2-609]
iv. Can be treated as immediate breach
Breach of Warranty
v. No longer caveat emptor, theres remedies for breached warranties

vi. Promissory estoppel claim?

a. Foreseeable reliance, actual reliance, injustice
b. Is it within the Statute of Frauds?
c. If so, is there a sufficient writing?
d. If not, does it satisfy the exception (definite and substantial reliance)?
e. Damages: limited, amount necessary to prevent injustice (except for land)

WHAT REMEDIES ARE AVAILABLE?

i. Sullivan v. OConnor p.28
ii. John Hancock Mutual Life v. Cohen (1958) p.877 [Anticipatory breach cant be immediately sued if all youre waiting for is future payments]
iii. Amern Mechanical v. Union Machine (1985) p.883 [can award actual loss instead of CP minus market P]
iv. Lowy v. United Pacific Insurance Co. (1967) p.787 [substantial performance, divisible]
v. New Era Homes Corp. v. Forster (1949) p.888 [restitution or contract price minus past payment minus cost to finish]
vi. Bernstein v. Nemeyer (1990) p.894 [restitution damages proper to prevent breaching party from unjust enrichment]
vii. Glendale Federal Bank, FSB v. US (2004) p.897 [reliance damages proper]
viii. Locks v. Wade (1996) p.904 [lost volume seller]
ix. Monetary Remedies/Damages: Compensatory Damages [347] (can be Expectation, Reliance, Consequential, and/or Incidental)

Sellers Remedies [2-703]

x. Nonmenetary
a. Right to withhold goods [2-702]
b. Right to recover goods [2-702]
c. Right to demand assurance [2-609]
xi. Damages
a. Buyer accepted but hasnt paid or nonacceptance and unable to resell then action for full price (best but hard to get) [2-709, 2-501]. Can identify
goods by [2-501, 2-704]
b. Buyer refuses to accept goods or anticipatorily breaches [2-706, 2-708, 2-710]
i. Diff btwn contract price and market price
 ii. Diff btwn contract price and resale price
iii. For Lost Volume Seller (where breach isnt what enables the resale and it would have sold anyways), you get lost profits: contract
price with breaching buyer minus cost to the seller [Locks v. Wade]
Buyers Remedies [2-711]
xii. Nonmonetary
a. Cancellation [2-711(1)]
b. Replevy identified goods on prepayment per [2-502], or inability to cover per [2-716(3)]
c. Specific Performance per [2-716(1)]
xiii. Damages
a. Seller doesnt deliver or buyer rejects goods or buyer revokes acceptance
i. Diff between contract price and market price [2-713]
ii. Diff between contract price and cover (reasonable K, good faith, w/i reasonable time) [2-712]
b. Seller delivers nonconforming goods that buyer accepts
i. Warranty damages [2-714], barred unless reasonable notification [2-607(3)]
c. Seller anticipatorily breaches
i. Diff between contract price and Market price at time buyer learned of breach [2-713]
d. Consequential Damages: goods for resale, goods necessary for manufacturing [2-715(2)]
Mitigation:
xiv. [CL] duty to mitigate, cant recover for what you could have had
xv. [UCC] no duty, but only get full price after trying to mitigate.
Restitution (Unjust Enrichment) [370-377]
xvi. When K unenforceable, or no K, or a quasi-K
xvii. Measure of damages is usually the value of the benefit conferred
xviii. Losing Contracts: where normal contract expectation isnt adequate
xix. Breach by Plaintiff (e.g. Attny disappears, still wins, can get value of his services minus amt spent on his replacement)
xx. When contract unenforceable, quasi-contract remedy
Rescission (original K is voidable and rescinded)
xxi. Mutual mistake of material fact
xxii. Unilateral mistake if the other party knew or should have known of mistake
xxiii. Unilateral mistake if hardship to mistaken party is so extreme it outweighs other partys expectations under K
xxiv. Misrepresentation to a material factor that was relied upon
Reformation (writing is changed to conform to the intent of the parties)
xxv. Mistake
xxvi. Misrepresentation

ANY THIRD-PARTY RIGHTS OR RESPONSIBILITIES?

Assignment
i. Allhusen v. Caristo Construction Corp. (1952) p.1080 [when language is clear in K you can forbid right to assign]
ii. Owen v. CAN Insurance/Continental Causualty Co. (2001) p.1083 [nonassignment clause unenforceable unless it materially changes K or duties]
iii. Continental Purchasing Co. v. Van Raalte Co. (1937) p.1090 [when assigned, non-assigning party becomes liable to the assigned]

Other
Bailey v. West (1969) p.11 [no mutual intent to contract, just volunteer, so no implied K]
Bolin Farms v. American Cotton Shippers Assn (1974) p.18 [regardless of changing circumstances we uphold fair contract]
CHAPTER ONE: Introduction
Bailey v. West (1969) p.11
Facts: West () bought race horse, Bascoms Folly, which ended up being lame. When return of the horse was rejected by the
seller, it was shipped to the farm of Bailey () where it remained. sent bills for feed and board of the horse. refused payment
saying he was not the owner of the horse.
Rule: There was no mutual agreement or intent to contract between the and to establish a contract. Thus, there is no contract
implied in fact.
Implied-in-fact Contract: requires Mutual Agreement, intent to promise. That he sent multiple bills to people and that the
bill of lading was for a different location, we question the contract. We look at the promisors actions and promisees actions.
Is Kellys action a manifestation that most people would construe as in effect I promise to pay.
Bill of Lading: What you give to a shipper whos shipping goods, you sign upon receipt to confirm shipment
Agent: someone that can act/bind the principal. Can result from express authority or apparent authority.
Quasi-Contract: Less a contract, more unjust enrichment. Requires a benefit conferred, appreciation of the benefit,
acceptance/retention would be unfair to retain the benefit without payment, must be voluntary (willing buyer and willing
seller).
We wont protect you for situations where it would have been easy to get a contract. We wont read in a contract for a
violinist walking up to people and playing expecting money. Itd be easy to just ask first, say what youre offering, and they
say yes or no. Occasionally when contracting/bargaining is hard to do then we may sometimes allow.
Bolin Farms v. American Cotton Shippers Assn (1974) p.18
Facts: s, cotton farmers, entered into a contract with to sell cotton at an agreed price. The parties entered into the contracts
between January and March of 1973. Between the time that the parties entered into the contracts and the time of the harvest, the
price of cotton skyrocketed. s wish to annul the contracts.
Rule: When two knowledgeable, competent parties enter into a contract, the contract stands regardless of changed circumstances
that might make the contract less attractive to one of the parties, at the time of performance.
Owens quote emphasizes formalist approach to terms of contract, even in light of gross change in price of cotton.
Forward Contract: contract for a fixed price (quantity, w/e) agreed today for deal to be fulfilled later. This can offset the
risks of either side to have the deal established and to lock in a price. Hedging the risk of future fluctuations in price.
Holding an asset you want it to rise = Long in it (like an airline that will hold oil so that when they lose because of increased
price, they hedge their risk by still making money of increased price)
Thinking it will fall = Shorting it
Williams v. Walker-Thomas Furniture Co. (1965) p.21
Facts: Appellants, who all purchased household items from Walker-Thomas furniture, alleged that the installment contracts that
were entered into with were unconscionable and should therefore, be unenforceable.
Rule: Where the element of unconscionability is present at the time a contract is made, the contract should not be enforced.
Cross-collateralization Clause: Credit is shared among multiple pieces of furniture, so $50 toward a $25 stove and $100
fridge becomes partial payment for the stove and partial credit towards the fridge. No single item becomes purchased due to
the shared credit, and the store argues it can repossess all items if theres no payment. Having title gives them immediate right
to replevin, to induce them to pay them back first so they can keep their basic items.
The ACLU took this case to establish more pro-consumer precedent. Settlement might have been better for client, but not
helpful for precedent.
Absence of meaningful choice: No Dickering potential contract of adhesion, unequal bargaining power. One can choose not
to engage in a deal with a vending machine, and a vending machine has all the power and sets the prices. Here however,
perhaps given her poor background, we should say that for policy reasons we should consider that she needed furniture as a
necessity.
Procedural Unconscionability has to do with unfairness in bargaining process
Substantive Unconscionability has to do with unfairness in the resulting terms
You cant for example waive our right to sexual harassment claims. But, why? You can waive class action lawsuit ability like
in the iTunes terms and conditions. Why is waiving something like right to claims here bad, especially since otherwise its
just a claim that you can choose to settle.
Danaher, J. (dissent): Why is he incorrect to say legislature should correct this policy concern?
Sullivan v. OConnor (1973) p.28
Facts: P, a professional entertainer, secured a jury verdict against D, a surgeon, for breach of contract in respect to an operation
upon the Ps nose.
Rule: Expectation interests, restitution interests and reliance interests are used in measuring damages to put the promisee in the
position in which she would have been had the promise been performed.
CHAPTER TWO: The Bases of Contract Liability
I. Consideration
When Is an Act or Promise Bargained for and Given in Exchange
Kirksey v. Kirksey (1845) p.63
Facts: Kirskey, was the sister-in law of Kirksey. After s husband died, offered to put up on his land. gave up her
land and moved to s property, but approximately two years later made leave his property.
Rule: A mere gratuitous promise is without the consideration necessary for enforcement as a contract.
Gift promises arent enforceable (mere gratuity). No consideration therefore not enforceable.
Bargained for mutual inducement. See Restatement (Second) of Contracts 71, especially 71 (4). Read restatement
notes.
Why is it we dont enforce gifts? Shouldnt they all just be an enforceable contract? Practically, gifts will usually be to family
and friends, and it might just be in addition to concerns of fraud and expense, we just dont need to bring contract law into
these matters. The family and friends can enforce it more efficiently themselves, dont need the mechanism of the court and
the law.
Hamer v. Sidway (1891) p.65
Facts: P sued D for beach of contract and D contended that the promise was not supported by consideration.
Rule: In general, a waiver of any legal right at the request of another party is sufficient consideration for a promise.
Hamer (creditor), and Sidway (the executor of the estate). Uncle promised $5,000 to nephew if he refrained from alcohol and
other prohibited acts until age 21.
Very hard to tell the difference between a conditional gift and consideration. You can look at if there was a benefit to the
promisor.
 Here, the child was induced to abandon his legal right, in Kirksey she had to move. Hard to distinguish. Here the Uncle
benefited from knowing the child wasnt doing bad things, where in Kirksey there was benefit for the brother to not have a
sad relative (ignoring preference issue).
You cant be induced by something you dont know about, and past consideration doesnt matter since they cant induce you
now.
Hypothetical: Ellen offers all people on her show a free cruise, but they have to promise to go to the place. Is that
consideration or just a condition of the gift? Reliance isnt enough for consideration (will start you off for promissory
estoppel, but not ideal).
In Kirksey the promisor landowner broke the promise, reneging on his gift, while perhaps we feel differently when in
Hamer its the executor of the estate going back on the potential gift.
Performance & Unilateral? or Promise & Bilateral? Here the uncle promised to pay in return for performance by the
nephew. The contract arose after he offered this to the nephew. This would be different then offering that if he made it to 21
w/o doing that hed get the money, were there was no acceptance until he turned 21 and his status of being 21 and not having
done the prohibited acts was or wasnt true. There wed say the contract happens once hes 21 trading a promise of money for
promise of agreement. If the child broke a promise he could be sued, if he just didnt perform then he couldnt be.
Lagner v. Superior Steel Corp. (1932) p.69
Facts: The , Langer (), retired from the , Superior Steel Corp. () and received a letter stating he would receive a pension of
$100 per month for life. After 4 years of payment the company ceased payment.
Rule: For a gratuitous promise to be enforceable, there must be valid consideration resulting from a bargained for exchange.
Retiree with pension promised so long as he doesnt work for competitor. Cant be a promise of pension paid for past actions,
because you cant induce past labor. The inducement would have to be the promise of a covenant not to compete in exchange
for promise of money. As a business deal its likely we are less likely to assume a gift.
Intent to Contract
In re Greene (1930) p.79
Facts: The Claimant, Leila Trudel (Claimant), received monthly payments and a lump sum insurance policy deriving from an illicit
affair with a married man. When the man was deceased and payment ceased the Claimant tried to enforce the agreement arguing
actual consideration was present in the agreement.
Rule: In order for a contract to be valid there must be valid consideration. The desire on the part of the parties of a promise to
include consideration in the agreement, will not substitute for actual consideration.
Bankruptcy is a federal matter under federal statute, the appeal for the bankruptcy matter will be in the district court
Married man died, adulteress claims certain agreements ($1k/m, $100k life insurance policy to her w/ paid premiums, rent for
4 years)
Promise to marry isnt enforceable, as breach would never be forced. The rise of the engagement ring was arguably a bond to
be used in the event the man broke the promise to marry. Prof. tried to argue for a bond that could get interest instead of a ring
for his wife. She didnt like it.
Rejected because exchange for $1 is only nominal and not a good consideration. Can release from promise to marry (even if
doubtful) count as the consideration? (not if we say imaginary claim). Why is nondisclosure of the fact of their affair in
exchange for money different than a regular non-disclosure
Maybe instead of blackmail its a screw over the creditor and wife case, by moving over assets to the adulteress
Why shouldnt nominal consideration work? Would the court have allowed nominal payment to count if it wasnt enforcing a
potentially nefarious situation? Is there morality being injected into this decision?
Mixed Motives and Adequacy of Consideration
Browning v. Johnson (1967) p.96
Facts: Browning () and Johnson () entered into a contract to cancel a sales contract between the two men in exchange for
$40,000. claimed the contract was not supported by consideration.
Rule: When a unilateral contract includes one party incurring a detriment in exchange for the other partys promise, the
consideration is sufficient even when it may not be of comparable value to the promise.
Contract #1: Browning had contract to sell his practice and equipment to Johnson
Contract #2: Browning backed out on contract #1, offered $40k to Johnson to give up the contract pf sale
Trial court said contract #1 was invalid
Q: If I promise to release you from a contract that was invalid, is that enough for consideration? Is the release from an
obligation you dont actually have an inducement?
The consent to release from a claim, even though the possibility exists that such a claim isnt enforceable, is still a valuable
consideration. The release has value, even if the result wasnt valuable, so long as it could be true.
See Section 74
o Example:
M1 and Woman have sex,
M2 and woman also have sex,
she gets pregnant.
They both settle for paternity. Valid? They cant both be the father! Still the consideration is valid as
the release from risk of having to pay has value.
We have a confusing mixture of objective and subjective beliefs in section 74
o Example
Man and woman have oral sex
She honestly believed she can get pregnant this way
She gets pregnant (elsewhere)
She sues for paternity
Can he settle?
o Similarly, if the woman in XXXXXX honestly believed that a promise to marry was enforceable, would that
subjective belief be enough for us to say its consideration?
o The more implausible the claim seems, the more we judge (almost on an objective standard) the subjective belief
o Confusion in section 74 sine it uses or (to be subjective or objective)
Promise in Hamer to pay $5k to nephew, and then release for contract #2 to pay him the $5k and interest later, though we
question contract#1. Seems like its a release case like Browning here where contract #1 doesnt matter as long as some court
might have enforced it, so contract #2 should be easier to enforce even
 Apfel v. Prudential-Bache Securities (1993) p.100
Facts: , Prudential-Bache Securities (), purchased the s Apfel and anothers (s) idea for selling and issuing bonds when the
idea was in the public domain. lacked a property right in the system. seeks to avoid the contract.
Rule: A contract is enforceable and has valid consideration even if the idea surrounding the contract is not novel.
Underwriter evaluates an IPO, buys all the equity, then offers it to the public, they make the difference between what the
public pays and what they paid. Underwriter will be more disciplined in evaluating the value, which the original owner would
have a conflict of interest selling their own equity/debt
Here theyre underwriting bonds
Equity is shares of stock, a residual claimant of the firm. If they go bankrupt, you get paid last.
Debt: Issuing a bond is a way of issuing debt. If bankrupt, you get paid first.
Municipal Bond
No patent or IP protection for method, but they did have a contract that was followed through with for a couple of years
Rejection on the ground that it wasnt valuable was in error as it predicated value on novelty. Just because it wasnt novel
enough for IP protection, doesnt mean there was no value present, and that value is enough for consideration.
Value could be in not having to expend other resources, or having a profit-making idea sooner
Jones v. Star Credit (1969) p.104
Facts: s, various welfare recipients (s), agreed to purchase a home freezer for $900. The s paid $619.88 towards the purchase.
The , Star Credit Corp (), claimed that charges relating to the extension of time for payment results in a $819.81 still being due.
The maximum retail value of the freezer is $300.
Rule: Section 2-302 of the Uniform Commercial Code, (UCC) authorizes a court to find, as a matter of law, that a contract or a
clause of a contract was unconscionable at the time it was made, and upon so finding the court may refuse to enforce the contract,
excise the objectionable clause or limit the application of the clause to avoid an unconscionable result.
Welfare recipients bought a freezer from a salesman, bought on credit, paid $620 towards their purchase of a total $1235,
maximum value of freezer was really only $300.
Unconscionable? See UCC 2-302
o Comment 1: The principle is one of prevention of oppression and unfair surprise and not of disturbance if
allocation of risks because of superior bargaining power.
o Is the amount paid over the market value price essentially a gift? Is this answer in this case dependent on just the
fact that they were poor? What if a rich person made the same deal?
o Substantive Unconscionability:
The price itself is certainly not surprising, they agreed to the terms and they were well aware of the
price
Should we have different rules of contract for poor people? Can poor people not sign contracts then?
So we should look at the
o Procedural Unconscionability:
Pressure tactics were involved
Preexisting Duty Rule
Levine v. Blumenthal (1936) p.111
Facts: The , Blumenthal () asks to have a rent increase abated and the Levine, () agreed orally. sues for difference, due in
the second year.
Rule: A preexisting duty cannot count as consideration for the purposes of contract formation.
Womans apparel store lease, price agreed at $2100 year 1, $2400 year 2, depression hit right afterwards
Business said theyd pay $175/mo instead, and there was a promise that theyd pay that amount and lessor says ok pay me
what you can
Business pays $175 and then leaves not paying last months rent; Lessor sues for difference in monthly rent and last months
rent
Its hard to tell the difference between good and bad modifications:
o Bad modifications would be a holdup:
duress, we wont pay/continue unless
taking advantage of switching costs, you will pay more to stay with them because to go back and find
someone else would cost you more
enforcing these will cause people to not enter agreements in the first place
o Good modification would be:
Helping people continue long-term contracts
Better for both parties to continue a deal when confronted with changes
Whats the difference between Levine and Angel?
o 400 unit increase would cost more, he might say in light of this increase you can find someone else to take the
trash but until you pay more I wont take the trash at all. Is this switching-cost issue or efficient resolution?
o Should this be a rule or a standard?
Alaska Packers Assn v. Domenico (1902) p.113
Facts: Sailors who agreed to work for company refused to adhere to the original contractual terms and demanded increased
compensation. The companys representative agreed to the higher compensation in a new contract.
Rule: There can be no consideration for a modified contract that arises from a coerced promise for increased compensation for
performing what one is already obligated to perform.
Hiring sailors for salmon season; in Federal Circuit because the breach happened on the water so Admiralty Law applies
Contract 1: promise to release for promise to release
Contract 2: promise to pay higher price for promise to work
With a pre-existing duty rule would that not apply the principle if people are smart enough to have releases first and then
recontract? This would just make a holdup a two-step process that will still make people not want to contract. So this is called
a modification. Looks at substance, not the form.
Angel v. Murray (1974) p.118
Facts: The , the city of Newport (), agreed to pay more than it was contractually obligated to pay for refuse collection, in
modification of the original contract. The trial court held there was no consideration for the increased payments because the ,
Maher (), was already obligated to collect the refuse.
Rule: The preexisting duty rule will not be applied when there are unforeseen circumstances and the opposing party agrees to
compensate for those unforeseen circumstances.
Unanticipated, actual cost increase
 Discretion, Mutuality, and Implied Obligations
Rehm-Zeiher Co. v. Walker (1913) p.125
Facts: Buyer to a transaction leaves clause in contract which allows him to avoid all obligation to make purchases if for any
unforeseen reason he wishes to avoid delivery.
Rule: Without mutuality of obligation, there is no consideration and the contract is unenforceable.
Walker is the whiskey distiller, predecessor to Johnny walker
Walker promised to sell whiskey to Rehm-Z, with a written contract with a gradual increase in number of cases and price by
year
Price of whiskey went up, Rehm wants those cheap cases to resell and make their money. He doesnt need actual delivery, but
for a forward contract like that he would ask for the difference in the price hed pay versus amount hed make reselling
Is this a gift? The ability to break the contract for any unforeseen reason is something you could always argue for or against,
where its always possible the price goes way up or down (like Bolin)
McMichael v. Price (1936) p.128
Facts: The , McMichael () and the , Price (), signed an agreement for the sale of all the sand can sell in exchange for a
discount from the market price for ten years. refused to buy and sues for breach.
Rule: Where the consideration on one side is an offer or an agreement to sell and on the other side an offer or agreement to buy, the
obligation of the parties to sell and buy must be mutual.
Wood v Lucy, Lady Duff Gordon (1917) p.131
Facts: was a fashionable woman and designer capable of increasing the sales of certain goods by her endorsement. entered into
an exclusive agreement with allowing him to place her endorsement and market s designs and keep half of the profits.
claimed she broke the contract by placing endorsements without his knowledge and keeping all the profits too herself.
Rule: Mutuality or a return promise may be implied from the circumstances surrounding the contract and the nature of the whole
writing.
Lady Duff Gordon, fashionable person, indorses goods
Wood is a designer
Q: exclusive dealing exchange for best efforts?
Well that would work for consideration as a dealing, but this is promise of best efforts is an implied term.
Do we want to read in implied terms and intensions about making the contract? Maybe they didnt want to rely on best
efforts. Cardozo reads in best efforts to save the contract.
II. Promissory Estoppel: Promise Plus Unbargained for Reliance
Ricketts v. Scothorn (1898) p.140
Facts: executed a promissory note for $2000 payable with 6% annual interest. sought to enforce the note and alleged that the
consideration for the note was her promise to quit her job as bookkeeper and to stop working for a living. would rely on the
interest as a means of support.
Rule: Equitable estoppel bars a party from asserting lack of consideration where reliance was induced by the party asserting there
was no requisite consideration.
Offer caused granddaughter to quit her job
Question if she relied on the promise, or if it was induced by the intention when the grandfather made the arrangement
o Reliance would result in promissory estoppel
o Induced would result in a contract, but that had she not quit it would have been a breach, and the promise to quit
was given in exchange for promise of cash (mutual inducement, extraction)
Indifference by grandfather to granddaughters performance of her quitting: neither should you vs neither can you
Restatement (Second) of Contracts 90
o 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 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.
o A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise
induced action or forbearance.
Promissory Estoppel
o a promise
o reasonably expectation of reliance
o actual reliance
o enforce to avoid injustice
Remedy is limited
Injustice is incredibly hard to argue and varies by many factors including judges
Allegheny College v. National Chautauqua County Bank (1928) p.146
Facts: Mary Yates Johnston, now deceased, responded to a request from , Allegheny College, for contributions by promising to
give $5,000 payable thirty days after her death. Johnston, while still living gave $1,000, but later gave notice to that she was
repudiating her promise.
Rule: A promise to contribute to a charity may be enforceable where there is consideration.
Drive to raise funds for college, she agrees to pay 30 days post death $5k for special fund
Cardozo and Holmes fight it out, Holmes created inducement, and Cardozo doesnt like Holmes
Cardozo goes through a lengthy discussion of promissory estoppel, but actually says there is consideration here to show that
Holmes consideration must be stupid because he can find even something that she said explicitly was a gift can be a
consideration and not a gift.
Cardozo says the reciprocal promises are the promise of college to promote, and the promise to pay
Cardozo says this is a bilateral promise, dissent says a unilateral
o Cardozo - College promise is implied when they accept and set aside the money for the fund, and cashing the
check binds them to promote. Two implications.
o He calls this a subscription and acceptance instead of offer and acceptance. Subscription is more passive, as
there was no active offer but rather acting on an implication. Subscription is also a word used for charities, so he
explains promissory estoppel cases with charities to show that for charities in contract law we can have a
weakening of the law for them here too.
CHAPTER THREE: Agreement
I. The Agreement Process: Manifestation of Mutual Assent
Ascertaining Assent: The Objective Test
Embry v. Haragadine, McKittrick Dry Goods Co. (1907) p.177
 Facts: The , Embry (), worked for the , Hargadine, McKittrick Dry Goods Co. (). The s contract expired in December and
he met with s President to renew it for a year. The President said go ahead, youre all right; get your men out and dont let that
worry you. The contract was terminated a few months later. The brought suit based on breach of contract.
Rule: If a reasonable person would understand the oral promise to be an agreement for employment, then it is a valid contract.
Plaintiff worked for company, didnt have contract for a bit, spoke to president and said unless he gets another contract hes
going to quit, president said go ahead. Which plaintiff took to mean he was contracted.
A promise? Acceptance? Or just saying not to bother him
Judge actually reversed a jury tril about a finding that seems best dealt with by a jury
Objective Theory of Contract we dont require a meeting of the minds (not going to take a tour through the cranium of the
parties) and what they thought. We care about their actions and statements they made in that context:
o Evidence against
Ambiguity in what was said even
Rushed when he said it
Fewer the terms, the less likely an offer
Lucy v. Zehmer (1954) p.179
Facts: The , Zehmer (), writes a contract to sell land on a napkin and when the , Lucy (), tries to enforce it, claims he was
only joking.
Rule: If a party to the contract has a reasonable belief that the other party has the requisite intent to enter into the agreement when
he does not, the contract is still enforceable.
Drinking, joking about buying land, wrote an acceptance thinking a joke; court ignores capacity problems
Lucy wants to force the sale of land for specific performance
Look at offer evidence and no offer evidence
o Offer
They quibbled over grammar
Wrote a memorandum
They had prior discussions
Dickering over price solicitation to get to final price
o No Offer
At a bar (dont generally do land transaction in a bar)
Alcohol was involved
Wife wouldnt sign until there was confirmation this was a joke
Would a reasonable person think an offer was made?
Once an offer is accepted you can either perform or pay damages
o Difference between revocation and breach
Rarely, but its possible for a court to interpret a letter of intent to be a contract. This is relevant for a tortious interference of
contract claim which requires that there already be a contract.
Implied-In-Fact Agreement
Wrench v. Taco Bell Corp. (2001) p.191
Facts: Wrench, LLC () entered into discussions with Taco Bell Corp. () over the possible use of s Psycho Chihuahua
cartoon character. When introduced advertisements using a chihuahua, sued, claiming that had breached an implied-infact
contract.
Rule: When a party requests another party to disclose an idea and understands that the other party discloses it with an expectation
of compensation for the use of the idea, an implied-in-fact contract is created.
Facts are construed as most favorable to Wrench during the motion for summary judgement
Copyright over Taco Bells use of Psycho Chihuahua
Wrench is a wholly owned limited liability company
Alfaro doesnt have the authority to bind the marketing department
Question of implied contract
Wrench asserts a contract implied in contract (like in Bailey v. West)
o Conduct on Wrenchs part was sharing the idea, an implied offer to sell, the terms of which were set out in original
proposal
o Conduct on Taco Bells part was using the idea, acceptance
o Taco Bell would say that we shouldnt imply contract by conduct, we shouldnt force acceptance by silence when
accepting the proposal wouldve been easy
Wrench would say that they had to disclose and be in a vulnerable position (like Prudential Bache)
Question also of copyright preemption
o Argument that case should be a copyright case not a state contract case due to copyright preemption
o They were trying to protect through contract an idea not just embodiment, so trying to do in contract what couldnt
be in done just in copyright
We want to imply-in-fact a contract to help protect peoples disclosure of ideas
What is an Offer?
Lonergan v. Scolnick (1954) p.199
Facts: Lonergan, responded to an ad placed by , Scolnick for land the was interested in selling. corresponded with
through a series of letters. sold the land to a third party.
Rule: An invitation for offers does not operate as an offer to create an enforceable contract.
Is there an offer?
o Ad: Joshua Tree vic. 40 acres, need cash, will sacrifice
Lacks price
Didnt designate an offeree, and a reasonable person wouldnt think a person would bind themselves to
breaching multiple people wanting the same land that he can only sell once
Out of the blue, no prior negotiations
o Inquiry: Letter from buyer to seller
Havent even identified the property yet
o Seller sends noted response to buyer inquiry
Just a form letter, that he could be sending this to multiple people and closer to an ad then an offer
o Buyer sends follow-up with info of bank and escrow
Form letter isnt good
 Southworth v. Oliver (1978) p.201
Facts: The , Oliver (), began negotiations with the , Southworth () and a third party. When negotiations became complicated
the rescinded the offer to avoid disagreement. claims the offer was valid and accepted.
Rule: There is a valid offer if a price quotation is addressed to a definite group [this is a change] and includes explicit language
such as price, exact location, terms and sale date because a reasonable person would believe that the Seller is making an offer to
sell.
Acceptance has to mirror the offer
He seems to have made a counter-offer, excluding the permits, which doesnt seem like acceptance
Is it an offer of each individual thing? Or the bundle? This could be construed as a single paper with multiple offers, and a
reasonable rancher might interpret this differently. Custom of the business would need to be considered.
Lefkowitz v. Great Minneapolis Surplus Store (1957) p.208
Facts: advertised the sale of three fur coats and three fur stoles for $1.00 a piece. The advertisement said first come, first serve.
arrived at s store wishing to buy the garments. refused, saying the sale was only for women.
Rule: An advertisement may be considered an offer when it promises something in exchange for clear, definite action, and leaves
nothing open for negotiation. Otherwise, an advertisement is an invitation for an offer.
Ads to many people arent usually considered offers, inventory problem concern
Two offers
o First ad
Terms were uncertain, court doesnt want to enforce
o Second ad (specifying the exact kind and price of coat)
No inventory issue if they specify the number and first come first serve
Exception of when advertised to limit group of people with limited terms
House rules (subject to terms to follow, availability, etc.) dont apply as they werent put into the offer
John Leonard v. Pepsico (2000) p.212
Facts: PepsiCo (), advertised Pepsi related paraphernalia, which one could obtain by getting Pepsi points by drinking Pepsi.
The commercial featured a youth arriving at school in a Harrier Jet and said the Harrier Jet was 7,000,000 Pepsi points. tried to
obtain the Harrier Jet by sending fifteen Pepsi points and a check for the amount of money needed to obtain the Harrier jet.
refused to deliver the harrier jet.
Rule: An advertisement, which a reasonable person would not take seriously and refers to other material, is not an offer.
Harrier jet pepsi point case
Pepsi asked Fed.Ct. to opine on if there was a contract (declaratory judgement will come up often in Patent cases)
When is the offer? In the ad or in the order form? Is the collection of points a performance issue like in Lefkowitz?
Court says is a was in jest, and not an offer. Different than Lucy because he wasnt funny? But shouldnt Pepsi be bound like
Zeemer? Well there are more terms in Lucy.
Ad exception needs to be
o clear
o Definite (no limitation)
o Explicit
o Leaves nothing open for negotiation
Modes of Acceptance
1. Who Decides What Counts as Acceptance?
L.R. Bretz v. Portland General Electric Co. (1989) p.225
Facts: contracted with Portland General Electric Co. () to inquire about the possibility of buying stock in the s subsidiary,
Bear Tooth Coal Company for $2,000,000.00. After some correspondence between the two parties and a change in the agreed price,
decided not to go through with the contract.
Rule: Whether or not a document or documents creates a contract, is determined by whether or not the recipient would reasonably
believe he had a contract after seeing it in the context of prior negotiations.
Offeror is the master of the offer, gets to decide what counts as acceptance of the offer
Offer is initially by letter
Still negotiation in responses
He agreed to sell coal from the property he didnt actually owned
La Salle National Bank v. Mel Vega (1988) p.229
Facts: The , LaSalle National Bank () and , Vega (), both signed a contract for the sale of land. The contract called for the
signature of the s Trustees which was never completed.
Rule: A contract can only be accepted by the terms and provisions that the contract requires.
Real estate sale contract for sale to the trust
Buyer = Bank (trust), Seller = Vega
o Plaintiffs council worked for the trust, and made the document
o Endorsement of offer letter by Vega Vega is the offeror (placed the power of acceptance in some other
party)
o Acceptance when trustee signs the document
What if theres ambiguity in the offer?
o Usually we construe it against the drafter, as the drafter could have just written more/better or the offeror for
not making requirements since hes the master
o Sometimes, like in Vega or like when buying a car, the drafter of the document is the seller and not the
offeror
Hendricks v. Behee (1990) p.231
Facts: The , Behee (), offered to purchase property from Mr. and Mrs. Smith (the Smiths). To cement his offer, paid a deposit
of $5,000, which he placed in escrow with the , Hendricks (). Later, a dispute arose as to whether the dealings between and
the Smiths lead to a binding contract. The Court awarded $997.50 for his services and returned the rest to . This action is the
appeal of that award by the Smiths.
Rule: This case stands for the proposition that, when forming an agreement through an agent, the knowledge of the agent is crucial
to the acceptance and manifestation of assent in an agreement.
2. Acceptance by Performance and Acceptance by Promise
Carlill v. Carbolic Smoke Ball Co. (1893) p.233
Facts: The , believing s advertisement that its product would prevent influenza, bought a Carbolic Smoke Ball and used it as
directed from November 20, 1891 until January 17, 1892, when she caught the flu. brought suit to recover the 100, which the
Court found her entitled to recover. appealed.
Rule: This case considers whether an advertising gimmick (i.e. the promise to pay 100 to anyone contracting influenza while
using the Carbolic Smoke Ball) can be considered an express contractual promise to pay.
Initial Q: Is there consideration?
o Promise to pay $100 inducing (youd think purchasing the product but court says) by the use of the smoke ball
Acceptance?
o Its not getting the flu, thats just a condition on the contract
o R2ndC 224 Condition Defined
o ex: A condition that buyer must obtain financing. What if buyer cant get financing? Is there breach?
o Ex: From Stock Purchase Agreement, a section on buyers obligations as Conditions Precedent to Buyers
Obligations
Corinthian Pharmaceutical Systems v. Lederle Laboratories (1989) p.240
Facts: The , Corinthian Pharmaceutical Systems, Inc., () and the , Lederle Laboratories (), had an ongoing business
relationship, whereby would place orders of DTP vaccine from and would be invoiced for the vaccine after the fact. Upon
learning of an impending price increase, placed a large order of DTP and confirmed this order in writing with the office of .
partially filled s order, and refused to fill the rest of the order, citing the price increase and lack of proper acceptance of s offer
as reasons for doing so.
Rule: This case stands for the proposition that an offer is not accepted by shipment of non-conforming goods.
Lederle (Wholesaler of DTP vaccine) and Corinthian (distributor of vaccine)
Performance here is both acceptance and breach
Simple application of 2-206, especially 2-206(1)(b)
2-206(1)(b)
o Conforming or non-conforming goods
o The shipment of non-conforming goods still counts as acceptance as long as its not egregiously non-conforming
(there is a degree of difference where something is not a non-conforming good and just a different counter-offer)
as well as breach. If a material difference it could be remedied either by contract (cured by terms of contract) or
might warrant damages.
o A shipment of non-conforming goods can be relabeled to instead be an accommodation or favor so 2-206(1)(b)
wont cause liability (?). You would have to send notification to the buyer stating youre not accepting/relabeling it
as an accommodation or favor.
Industrial America, Inc. v. Fulton Industries, Inc. (1971) p.244
Facts: In response to an ad in the Wall Street Journal, , acting as the business merger broker for Bush Hog, Inc. (B-H), contacted
in an attempt to broker a deal between the two companies. When B-H and decided to negotiate without the use of s services,
brought suit, seeking the recovery of his brokers fees.
Rule: This case stands for the proposition that an offer can be accepted by full performance.
Was the reason he put buyer and seller in touch because of Fultons promise to pay? Doesnt he already get paid by B-H to do
this already? Whats the inducement?
You have to have knowledge of the offer, but once you show knowledge, we dont ask how/why you did
o Link with Thomas, and Glover, see R2ndC 81 Consideration as Motive or Inducing Cause
You dont need to be primarily motivated, only partly
As long as one of many considerations/reasons why promises were made is induced, thats fine. Here,
we dont care that he also cared about double dipping in payment as long as there was another real
reason
o Need knowledge, dont need to be solely motivated by offer
Mary Glover v. Jewish War Veterans of US (1949) p.247
Facts: , Mary Glover, brought suit, regarding her entitlement to a reward that had been offered by , Jewish War Veterans of the
United States, after she gave police information leading to the arrest and conviction of an individual who had murdered a Jewish
Pharmacist.
Rule: There is no contract and thus no acceptance of an offer of reward if an individual gives desired information, without the
intention of accepting such an offer.
For forbearance as consideration, we look for voluntary action, not talking when compelled by police investigation
Ever-Tite Roofing Corp. v. G.T. Green (1955) p.251
Facts: The -Appellant, Ever-Tite Roofing Corp. (), contracted with -Appellee, Green (), to renovate his home. When
arrived at the job there was another company doing the work.
Rule: An offer proposed may be withdrawn before its acceptance and no obligation is incurred thereby. The power to accept is
limited by the terms of the contract or at the end of a reasonable time.
Seller prepared the offer form, but buyer is the offeror (like Vega)
Seller agent cant bind roofing company, likely to make sure they can actually do the work or at that price
Says offer can be accepted by written acceptance or commencing performance
GT denies Ever-Tite option to work when they get there
Q: Has GT revoked the offer or have they breached? (Has there been acceptance?)
When they said commencing performance of the work, how do we define work?
How we determine definition for contractual language:
o Look to text (under definitions) in contract
o Look to oral conversation (though concerned with fabrication)
o Course of performance (how parties have understood this term in this contract over time)
o Course of dealing (any/all contracts generally between these two parties)
o Trade usage (how people in the trade generally understand it)
Ambiguity is construed against the drafter, here against the buyer
The mistake of sending people out when you already went with another company, and the obvious and easy fix of just calling
them up to say they went with another company makes the court go against them. Easy way of withdrawing offer is used
against them.
Question also whether its ambiguous as to the form of acceptance, this affects whether it would fall under 45 or 62 (option or
not).
3. Acceptance by Conduct or Silence
Russell v. Texas Co. (1956) p.255
Facts: After acquired a mineral lease to s property, it began making extensive use of both that property and adjacent lands also
owned by . To recover for his property damages, gave a license to use the land, which incorporated a daily fee for use.
ignored the license contending that it was not a term of its mineral lease, and that it did not accept it as a new agreement. brought
suit for enforcement of the license.
Rule: In this case, the court found that s exercise of dominion over the land, through its continued use of both Section 23 and the
adjacent areas, constituted an acceptance of s offer.
They were exceeding easements when trucking gas over the land
Revocable License
69 (2), continued ownership is inconsistent with the offerors ownership right of that property, and so they are bound by
contract (not tort) unless terms are unreasonable.
o Tort here for trespass would just be compensatory = here very little if anything
o Contract here would be expectation damages = set decent amount in contract
Termination of Offers
Dickinson v. Dodds (1876) p.270
Facts: gave a written offer to to sell a certain property and that stated the offer was to be left over until Friday 9 oclock am.
left acceptance with Dodds mother-in-law at 7pm Thursday evening upon learning that had been offering the property to
another. attempted to deliver the acceptance personally to on Friday morning who refused stating that he had already sold the
property.
Rule: Promises to keep an offer open until a certain time will be only a promise unless made by binding by consideration and
acceptance necessary to form a binding agreement.
Seller made an offer with expiration, making an irrevocable option contract
Guy tries to give acceptance, but doesnt get to him (Mrs forgot to give to him), he tracked him down to give him, but was
told offer was already given to someone else
Nudum Pactum
o in Latin literally means 'Bare or Naked Promise.'
o In common law, it refers to a promise that is not legally enforceable for want of consideration.
o No consideration means it was a gift, so not binding
Cf. R87(2) which allows you to create a contract without consideration when theres reliance
Q: can you have an indirect revocation of offer?
o Reasonable notice that there was an action inconsistent with the offer (like finding out from a trustworthy source
that the land was sold)
Humble Oil & Refining Co. v. Westiside Investment Corp. (1968) p.278
Facts: The , Humble Oil & Refining (), after paying valid consideration, entered into an option contract with the , Westside
Investment Corp. (), for the purchase of land. Per the terms of the contract, had the option to purchase by giving notice at any
time prior to 9:00 a.m., on June 4, 1963. gave timely notice of its intent to purchase the property and asked that some terms in the
contract of sale be amended. contended that this request for amendment was tantamount to a conditional acceptance, which is
also considered to be a rejection of an offer on its face.
Rule: When valid consideration is given for an option to purchase (i.e. option contract), the contract is irrevocable for as long as the
option is available.
Buyer and seller, two contracts:
o Option contract for price of land, with consideration by payment
o Buyer asked seller to do more for exercising the contract (pay utilities), not part of original offer, a counter-
offer
o Buyer then goes back and says they accept original offer
Issue: Whether counter-offer destroys the original offer
Court says you can ignore the May 2nd letter and there is a contract
Could unwind even the option contract by rescission (Browning)
Things to learn from here:
o Option w. Consideration is the strongest kind of option
o Counter-offer destroys offer
o Option contract doesnt care about rejection
o Option contract supported by consideration makes the counter-offer have no effect
o Exception: if there was rejection and then reasonable reliance by the offeror, waiver argument
Three kinds of option contracts (Make the offer irrevocable):
o Promise to hold offer open in exchange for money (Humble Oil, standard stock option)
o 2-205, 87(1) type: option without consideration, though 87(1) says purported consideration like
o 87(2) Reliance
A.A. Marchiondo v. Scheck (1967) p.284
Facts: brought suit herein to recover his brokers fees, based on the fact that he had communicated s offer to his client, and
had received an acceptance, before revoked its offer.
Rule: This case stands for the proposition that an offer may not be revocable after performance has begun.
Example of part performance creating option contract
Baird Co. v. Gimbel Brothers, Inc. (1933) p.292
Facts: used a bid submitted by , in creating a bid. seeks to enforce s bid.
Rule: A general contractor cannot enforce a bid made by a subcontractor as a bilateral contract when the general contractor is under
no obligation to use the subcontractors bid if awarded the job and the general contractor did not accept the subcontractors bid
before it was revoked. A general contractor is also unable to enforce the subcontractors bid based on promissory estoppel when
there is no consideration.
General Contractors, when making competing bids for projects, with solicit bids from subcontractors so as to influence what
the GCs overall bid will be
GC had a bid bond that obligated them to that to keep serious offers on the table
GC made an overall bid based on
 Acceptance could be submission of GC bid to do the project, with acceptance of SC bid being a condition, but this is NOT
what happened.
GC could have required all bids be irrevocable
SC was the one to make the mistake though when they put together their linoleum bid, and yet because of how offer and
acceptance works its putting the GC on the hook
So acceptance with GC-SC would be after the overall bid was accepted, where GC would sya they accept afterwards to SC,
though in this case this second step acceptance would have happened after revocation by the SC
Drennan v. Star Paving Co. (1958) p.295
Facts: subcontractor submitted a low bid for paving portion of a project, which was relied upon by , the general contractor.
Later, refused to perform the work for the price it had bid saying that they had made a mistake in the bid and could not do the
work for less than an amount which was nearly twice as much. found another contractor willing to do the work but sought
damages for the difference from s bid.
Rule: A party that can reasonably expect another party to rely on a price offered to do work cannot revoke that offer on the basis of
mistake. With knowledge of other parties reliance, the party that makes the mistake will bear the loss that it caused the other party
in reliance.
Similar facts to Baird, except now for a school, and pavement instead of linoleum
SC said they cant do it for that amount of money
GC got goods from someone else, and tried to get SC to pay the difference in cost
Ct. says this isnt irrevocable, there was no explicit promise to hold the deal open
90, promissory estoppel, requires that theres a promise, but theres no promise here
45 says for a unilateral offer, part performance creates an option
So trying to use the two, 90 tells us reliance matters, and 45 allows us to implicitly hold a promise to hold it open, and tries
to combine these ideas. Trying to use these two to create 87(2).
o Isnt it weird to assume theres reliance on a new implied promise to hold it open?
One awarded the contract GC has bargaining power as they have exclusive right to do the work, so a SC might want the
option contract before too.
Subsequent bid shopping destroys the option contract. Is it rejection of the option, or of the offer and the option?
need to really go over this whole case
o http://www.keglerbrown.com/publications/ethical-challenges-of-bid-shopping/
II. Special Problems in the Agreement Process
Counteroffers, Form Battles, and UCC 2-207
Minneapolis & St. Louis Railway Co. v. Columbus Rolling-Mill Co. (1886) p.307
Facts: offered to sell 2000 to 5000 tons of 50 lb iron rails, to , which was to be accepted by December 20, 1879, to be valid. On
December 16, 1879 wrote ordering 1200 tons of rails. responded that the order could not be taken at the agreed upon price
and sued for performance.
Rule: This case illustrates the Mirror Image Rule. When an offer is made, the acceptance must mirror the offer to be valid.
Dec. 8 Offer was for 2k-5k tons
Dec. 16 Acceptance was that price for 12k tons counter-offer destroys offer
Dec. 19 goes back and says same deal for 2k tons
There was rejection of the offer by counter-offer, so no acceptance
Related Hypo #1
o Buyer sends purchase order for 100 units; arbitrate Georgia Offer
o Seller sends acknowledgement for 100 units; arbitrate Chapel Hill Counter-offer
o Seller ships
o Buyer accepts goods
Common law mirror image rule, last form rule would say that whoever acted last, thatd be the terms of the agreement
that govern, even if no one read them
2-207(1) before the unless clause: would treat this as an acceptance
2-207(2) just talks about additional terms, not additional or different terms, like in (1), but courts tend to treat
additional or different the same, but some courts use the knockout rule which throws them both out.
o 2-207(2)(b) makes it strange to argue both that the term isnt a material alteration, but still worth litigating,
however this should be considered in light of differences at the time the contract was made versus once
something is actually litigated
Hypo #2
o Buy 100 units; arbitrate Georgia; no deal unless arbitrate Georgia
o Sell units; arbitrate Chapel Hill; acceptance conditional
o Shipment
o Acceptance by the buyer
Here the second step isnt acceptance by 2-207(2)(a) by the offers specifically limiting it
Is the shipment then accent to the terms by the seller to arbitrate in Georgia? 2-207 doesnt say verbal accent, but courts read
the term express assent
If the purpose of the statute is to avoid the problem of last form rules then you have to read express into express assent
Textualists will argue the statute as is, but others will argue what the objectives of the statute is, and statutory interpretation
DTE Energy Technologies, Inc. v. Briggs Electric, Inc. (2007) p.312
Facts: DTE Energy Technologies, Inc. () sold generators to Briggs Electric, Inc. (). After placed the order and
acknowledged it, sent its Standard Terms and Conditions for Sale that included a forum-selection clause. Disputes over the
contract arose and sought to hold to the forum-selection clause.
Rule: The Uniform Commercial Code (U.C.C.) does not provide for the enforcement of a forum-selection clause when the clause is
contained in fine print, is considered an additional term, and materially alters the parties contract.
Purchase order offer; all relevant terms
Acknowledgement that included arbitration forum selection clause different terms 2-207(1)
Expressly conditional
Once youve made it expressly conditional and there is no reply, if you have shipment and payment, the shipment and
payment make a contract by conduct under 2-207(3) and fall back on the agreed upon writing and 2-207 fills in any other
 terms. Disagreements about where to arbitrate causes there to be no arbitration in the end because thats what happens when
theres contract by conduct. Default rule will fill things in but theres no arbitration default rule in the UCC.
Textile Unlimited, Inc. v. A..BMH and Company, Inc. (2001) p.320
Facts: The , Textile Unlimited, Inc. () and the A.BMH and Company, Inc. (), had a business relationship, whereby would
buy goods from via purchase order and would respond with an invoice which, coincidentally, contained additional terms,
including an arbitration clause.
Rule: This case stands for the proposition that Section:2-207 of the Uniform Commercial Code (U.C.C.) does not apply when
additional provisions will be prejudicial to one of the parties, who was not privy to the terms before the execution of an agreement.
2-207 after unless, (i) did you say it was a dealbreaker, and (ii) was it responded to with express assent
No contract under 2-207(1) because seller shot himself in the foot making it expressly conditional, and buyer didnt respond
with express assent, but also a conditional
No acceptance until shipment and payment, so its under 2-207(3)
Shrinkwrap and Browsewrap
Hill v. Gateway 2000 (1997) p.325
Facts: Hill, purchased a computer from , Gateway 2000, Inc. Included in the box with the computer was a list of terms. The list
of terms included a provision requiring that disputes be resolved exclusively through final and binding arbitration.
Rule: Additional terms included in a box shipped by the seller do become part of the contract between the parties, even if the
purchaser is unaware of the additional terms and the purchasers acceptance of the terms is by not returning the item purchased.
Easterbrook, J. economics focus like Posner
You order computer by phone, it arrives, you open it, follow along terms say if you keep this computer for 30 days you agree
to arbitration
Easterbrook enforces the arbitration, and says not to be governed by 2-207 bcuz its a single form.
This is an oral agreement followed by written agreement accepted by performance. Memo would be additional form.
Question is if 2-207(2) applies in this context, and why not?
o Between merchants would seemingly say the terms arent binding, but Easterbrook says the offer is
Klocek v. Gateway (2000) p.328
Facts: Klocek, purchased a computer from Gateway, Inc. Inside the box containing the instruction manuals was a copy of s
Standard Terms and Conditions Agreement. The agreement stated that it is accepted by the purchaser if the purchaser keeps the
computer longer than five days. One of the provisions in s agreement requires arbitration.
Rule: Terms received with a product do not become part of the contract unless the non-merchant buyer expressly agrees to them.
CHAPTER FOUR: Formation Defenses
I. Mistake
Boise Junior College District v. Mattefs Construction Co. (1969) p.457
Facts: The , Boise Junior College District (), brought suit against the , Mattefs Construction Co. () in an attempt to collect on
a bid bond.
Rule: Rescission is an equitable remedy when both parties enter into a contract under a mutual mistake.
Rescission for material clerical mistake
Unconscionability, interesting that the court favors lousy contractors who make very little profit of the deal, than high value
contractors who are able to make more profit
Beachcomber Coins, Inc. v. Boskett (1979) p.465
Facts: The , Beachcomber Coins, Inc. (), a coin dealer bought $500 in dime, minted in 1916 at the Denver mint, from the ,
Boskett (). After learning the coin was counterfeit, the sought to have the contract rescinded.
Rule: Sometimes, when dealing with mutual mistake cases, the parties can actually agree as to the thing and still both be mistaken.
In this case, both parties agreed as to the coin and its value and both parties were mistaken.
T.C. Sherwood v. Walker (1887) p.467
Facts: This is the case of the not-so-barren cow. Sherwood () contracted to buy a cow believed to be barren, at a low price from
Walker and others (s). Later, the parties realized the cow was with calf. The wanted to enforce the contract while s wanted
rescission.
Rule: In a mutual mistake case, it is important that the mistake goes to the essence of the agreement.
Not-so-barren cow. Sold for meat, happens to actually be with calf.
Dissent: they bought some chance of it being a breeder, so factored into price and they traded risks
Majority: nobody knew
Sherwood has been limited to its facts, but used to distinguish whether the mistake was to the essence of the agreement
Lenawee County Board of Health v. William and Martha Messerly (1982) p.470
Facts: The Appellees/vendees, Mr. and Mrs. Pickles (Appellees), purchased a 600 square-foot tract of land with rental property
upon it, from the Appellants/Vendors, Mr. and Mrs. Messerly (Appellants). Shortly after buying the property, the Lenawee County
Board of Health (BOH) brought suit against the Appellees and Appellants of the property and condemned it because there was a
defective sewage system on the property.
Rule: While mutual mistake can serve to void a contract, the determination of rescission must be undertaken on a case-by-case
basis, taking into consideration the full terms of any agreement.
Why is nondisclosure not fraud?
OneBeacon America Insurance Co. v. Travelers Indemnity Co. of Illinois (2006) p.478
Facts: OneBeacon America Insurance Co. () was the general insurer for vehicles owned by Leasing Associates, Inc. (LAI). One
of LAIs lessees was insured by and was in an accident that led to paying a $5 million settlement. sought reimbursement
from based upon language in the insurance policy and sought reformation of the policy to reflect the intent of the parties not to
cover lessees.
Rule: When a contracts written language does not reflect the intent of the parties and there is no public policy reason to keep it as
written, a court will reform the contract.
Case of Reformation
Evidence from course of conduct
II. Fraud and Nondisclosure
Laidlaw v. Organ (1817) p.488
Facts: Organ entered into a contract to purchase tobacco from Laidlaw at an agreed upon price. Prior to completion of the sale,
learned of the end of the War of 1812, but did not disclose that information to , when asked if knew any information that would
affect the terms of their agreement, at the close of the sale. brought suit to recover the tobacco, at the agreed-upon price, and
countered that dealt in bad faith.
 Rule: This case is among the beginning of a line of cases that explores the duties of good faith and disclosure in contractual
negotiations.
Seller of cotton and tobacco, buyer knew war ended and bought from seller, seller asked if there was anything he should
know, buyer was silent. Misrepresentation?
There was no lie, no affirmative assertion, just omission
Vokes v. Murray (1968) p.491
Facts: entered into s school of dancing, in pursuit of her dream of becoming an accomplished dancer. While s dancing
abilities did not increase, her expenses in pursuit of the dream did, when encouraged her to enter into several different contracts,
and pay out cash in excess of $30,000 for lessons and dance-related trips. When realized she had no dancing ability, she sought
rescission of the contracts and return of her money, based on fraud.
Rule: In order to bring a cause of action to rescind based on fraud, the facts must justify the allegations.
Bad dancer case
51 yr old widow with no family
Is being a bad dancer objective? Misrepresentation of fact or opinion?
The result in this case is an outlier, we normally assume people are skeptical of seller claims
CHAPTER FIVE: Performance
I. Determining Scope and Content of Obligation
Interpretation
1. Basic Principles
Pacific Gas & Electric Co. v. G. W. Thomas Drayage & Rigging Co. (1968) p.636
Facts: contracted with to remove and replace the upper metal cover of s steam turbine. agreed to indemnify against all
loss resulting from injury to property. After the cover fell and injured s turbine, sued to recover damages, and sought to
offer evidence that the indemnity clause was only to cover damages to third parties.
Rule: Extrinsic evidence is admissible to explain the meaning of a written agreement if the offered evidence is relevant to prove a
meaning to which the language of the instrument is reasonably susceptible.
Def. agreed to perfrom the work at its own risk and expense and to indemnify
They meant the term to apply only to third parties, not to all liability.
Is this term ambiguous? Can they bring in external evidence?
Traynor: Words have no meaning, judge cant decide what it means without evidence.
Formalist Approach: This would call all words in contract into question. Should stick with Plain Meaning rule.
o Once you cant even trust in your contract whether the words for adopting the plain meaning rule would mean,
companies will instead choose NY as a forum for plain meaning, and CA for contextual approach
Frigaliment Importing Co. v. B.N.S. International Sales Corp. (1960) p.645
Facts: The parties entered into two contracts for the sale of chickens. The parties did not specify what types of chickens would
satisfy the contract. After received a shipment of stewing chickens, which are of lesser quality than young chickens suitable for
broiling and frying, initiated this suit.
Rule: Where a party to a contract is not a member of the trade and the usage of a term, common to the trade, is challenged, the
party that is in the trade has the burden of proving that the party not in the trade had actual knowledge of the usage or that the usage
is so generally known in the community that his actual individual knowledge of it may be inferred. To interpret a disputed term in
a contract, the court will consider (in order of importance): (1) the language of the contract, (2) the preliminary negotiations, (3)
trade usage, (4) legal standard, (5) course of performance, and (6) maxims.
What is chicken?
Younger chicken more expensive, theyre more tender
How they attempt to interpret Chicken
o Look at the text. Ambiguous.
o Conversations. They used English word for chicken perhaps to avoid ambiguity of German word, and so chicken
meant young chicken. Ambiguous still.
o Course of Performance. Two sequences of contracts. They took old chickens the first time.
o Course of Dealing. Could have been used if they had other contracts to base terms off of.
o Trade Usage/Custom.
Does a new entrant to a trade have to know the terms used within the group? How does this affect
trade? This would be a barrier of entry to hold people to terms they dont know. It should have to be
actually understood or so pervasive as to be known.
Here there was disagreement.
Case was difficult to decide based on weighing ambiguity in term, instead decided on burden of proof grounds.
II. Warranties and Representations of Fact
Express Warranties
All Tech-Telecom, Inc. v. Amway Corp. (1999) p.731
Facts: All-Tech Telecom, Inc. (), sued Amway Corporation () for damages sustained due to a botched transaction. The court
granted summary judgment in favor of on the counts of intentional and negligent misrepresentation and promissory estoppel.
appealed.
Rule: A party may not use the doctrine of promissory estoppel to get a judgment for actions that would lead to a judgment for
breach of warranty but cannot be proven.
Company bought credit card based pay phones, seller went out of business
All-Tech tries to get on claim on breach of warranty for misrepresentations regarding estimated revenue, product quality, and
technical support
Statements of opinion do not create warranties, can be just puffery
Posner makes the argument that allowing Contract and Tort claims for misrepresentation would be duplicative
o Contracts should be certain
o Juries shouldnt be involved
o You can ask for and adjust to get warranties directly
o This seems to be the rule for business vs business contracts. But would we really be so happy to apply this to
consumers?
Promissory Estoppel? Cant do through promissory estoppel what you couldnt do in contract. No attempt at trying the same
thing again.
 Implied Representations and Warranties
Limitations of Warranties and Remedies
III. Conditions
Express Conditions
1. Nature and Effect
Dove v. Rose Acre Farms, Inc. (1982) p.742
Facts: Mark Dove () appeals from a judgment of the Decatur Circuit Court in favor of Rose Acre Farms () in a trial before the
court without a jury. appealed from a judgment denying him recovery.
Rule: Terms of a contract, which are clear and understood by all the parties must be enforced, even if such enforcement results in a
total forfeiture by the party who does not strictly comply with all the terms of the contract.
Strict boss institutes bonus program
Cant be late or absent, even if sick or ill
He got sick and missed 2 days, benefitted from the incentive of the bonus until then
*Theres always a tradeoff between risk and incentives, people will only take higher risk if appropriately compensated for that
When the court finds a condition unduly harsh, they will look for ambiguity in the language to let them off, provided
substantial performance

Big Question: What if youre just idiosyncratic? You really value that people are always on time?
o You really want to put the risk of being late on others, thats what matters to you
o reasonable
*We institute Doctrinal Devices to deal with:
o construe to avoid forfeiture (even by looking hard to discover ambiguity)
o robust waiver doctrine (waiver by estoppel, your actions relinquished your rights under the condition)
o waiver by promise (a promise was made which you relied on, almost like promissory estoppel)
In re Carters Claim (1957) p.746
Facts: Edwin J. Schoettle Co. () submitted action to a judge for arbitration disputing the claim presented by Lester Kardon ()
against the escrow fund for $69,998.42 as a liability of the seller under the agreement. appeals the dismissal of his motion to
correct the arbitrators award.
Rule: Resolution of whether a provision is a condition or a warranty depends on the interpretation of the language in the agreement.
A Subsidiary has assets and liabilities, but a parent company owns at least a majority of the stock
A Wholly Owned Subsidiary is one where the parent company owns 100% of the subsidiary
A Holding company is one whose only asset is stock on other companies
Deal is for $2.1M for buying company and subsidiaries, with ~$187k set aside with escrow agent to indemnify the buyer
against the liabilities of sellers by reason of any and all provisions of this agreement
Seller Financing
o Instead of sending over $2.1M, you borrow $2.1M from the seller and offer a loan commitment, and have
conditions to make sure everything works out
o This is to keep the seller involved once the deal is done
Here they already closed the deal, they are indemnified against the warranty conditions, but conditions can be waived which
would happen here since the deal is over
o Warranty promises for no material change, can provide right to sue
o Conditions precedent is for no less favorable, would be waived here if already done
o Standards are different, so we have to figure out where this issue falls
Constructive Conditions of Exchange
Jacobs & Youngs, Inc. v. George E. Kent (1921) p.780
Facts: Jacob & Youngs, built a house for Kent for a price of $77,000, and sued to recover the balance due of $3,483.46.
specified that all pipe in the house must be Reading pipe, but inadvertently, installed pipe that was not Reading pipe. When
discovered this defect, he demanded that the work be redone, which would have required the demolition and reconstruction of
substantial parts of the house, but refused.
Rule: The measure of damages for a trivial and innocent omission is not the cost of replacement but the difference in value.
Cardozo reads substantial performance as a sort of default rule where the Reading pipe requirement wasnt specified with the
type of language that was enough to say non-Reading pipe meant he didnt have to pay.
CHAPTER SIX: Breach of Contract and Permissible Remedial Responses
I. Right to Suspend Performance or Cancel Upon Prospective Inability or Breach
Albert Hochster v. Edgar De La Tour (1853) p.854
Facts: Hochster () entered into a contract with De La Tour () to accompany and assist on a three-month trip. Before the trip
was scheduled to begin, informed that he no longer needed him. sued, and the court, Lord Campbell, C.J., ruled in favor of
the .
Rule: A party who receives clear notice of repudiation of a contract before performance is due may bring suit immediately, before
the performance is due.
H.B. Taylor v. Elizabeth Johnston (1975) p.859
Facts: and s are both horse breeders. and entered in an agreement to breed s mares with s Stallion. then sold the
stallion and shipped it to Kentucky. and made several attempts to breed the mares with the stallion but the breeding never came
to pass.
Rule: For there to be anticipatory breach as a matter of law, one party must state, clearly, that they will not perform the contract or
make such performance impossible, not, merely, difficult.
AMF, Inc. v. McDonalds Corp. (1976) p.867
Facts: McDonalds (), contracted with AMF Inc. () to build automated cash registers for its stores. After the prototype kept
breaking down and and could not agree on performance and reliability standards for the new cash registers, canceled the
order.
Rule: One acts in accordance with the Uniform Commercial Code (UCC) when, upon finding reason to doubt the other party will
perform a contract, one communicates the wish for assurance, even if it is not a written request for assurance. If assurance is not
given, one has the right to back out of the contract.
II. Compensatory Damages
An Introduction to Money Damages
 Sullivan v. OConnor p.876
Breach or Repudiation by Payor
John Hancock Mutual Life Insurance Co. v. Cohen (1958) p.877
Facts: was the beneficiary of an insurance policy issued by John Hancock Mutual Insurance Co. (). The policy was such that
received payments from the time the policy was issued for the next twenty years, with a final payment of $5000.00. stopped
payments and paid the $5000.00 after fifteen years, because, claimed, that there was a mistake and both insured and intended
the policy to be for fifteen years.
Rule: The doctrine of anticipatory breach does not apply to a unilateral contract by an insurance company to pay a specified
amount of money at a specified time
Frustrates the Hoichester rule (repudiation can make breach, you can immediately sue for damages)
Exception, this rule doesnt apply if all that were waiting for is a payment of money. You have to wait until they have to pay.
The doctrine of anticipatory breach does not apply to a unilateral contract by an insurance company to pay a specified amount
of money at a specified time
o You could prevent this issue by either selling your right to the future payment, modify the contract, or have an
acceleration clause in the K
American Mechanical Corp. v. Union Machine Co. of Lynn, Inc. (1985) p.883
Facts: American Mechanical Corp. (), made a contract with Union Machine Co. of Lynn, Inc. (), to sell its real estate and
equipment for $135,000.00. repudiated the contract, knowing the s mortgage lender, Saugus, would foreclose on . At the
foreclosure sale, s real estate and equipment sold for $90,000.00.
Rule: In cases where it is clear to both parties, in a sale of real estate, what the actual losses will be, the court may use actual losses
of the injured party, when the other repudiates a contract rather than the contract price minus the fair market value of the real estate.
Lowy v. United Pacific Insurance Co. (1967) p.883
Facts: Lowy () appeal from a judgment in favor of United Pacific Insurance Co. () for damages for breach of contract.
Rule: When a person agreed to something for another for a sum of money to be paid on full performance, he is not entitled to any
part of the money until he has done what he agreed, unless performance has been excused, delayed or prevented by the other party.
New Era Homes Corp. v. Forster (1949) p.888
Facts: and had a contract where would build a house for . The contract said that would be paid a certain amount of the
total price at different stages of the construction when completed. When if came time for the third portion to be paid, refused to
pay. stopped work and sued
Rule: Merely having a payment schedule in a contract does not make the contract divisible.
Bernstein v. Nemeyer (1990) p.894
Facts: s and formed a partnership to renovate apartment buildings. , as part of the partnership contract, agreed to lend the
partnership any money it needed to cover operating costs beyond what profits would cover. s defaulted on their agreement and s
lost their entire investment.
Rule: Restitution damages are damages that keep the breaching party from enjoying unjust enrichment. In cases when the
breaching party does not enjoy unjust enrichment, restitution damages are not proper.
LLP, agreement for negative cash flow guaranty after $1,050,000 real estate investment
Under expectation damages theyd get $0, negative guaranty wasnt going to help them turn a profit anyways
Reliance damages would be their >$1M. But if we let them get their investment back immediately, itd be a risk free
investment holding debt not equity. Debt gets paid first, equity second. On an investment (esp. an equity investment) you
cant just give people reliance damages.
Restitution is like disgorgement, reliance is more like tort
Restitution looks to what the breaching party got, not what the injured party lost
R2ndC 371
Glendale Federal Bank, FSB v. US (2004) p.897
Facts: In a breach of contracts case, appellant government appealed the award by the United States Court of Federal Claims to
appellee bank of $ 381 million in "wounded bank" damages. The bank cross-appealed the trial court's denial of another $ 527.5
million in reliance damages.
Rule: The trial court had held that the Federal Savings and Loan Insurance Corporation had entered into regulatory capital
contracts with three savings and loan "thrifts" and that the enactment of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 and the regulations imposed thereafter, had breached those contracts. The government noted that the
bank-invented notion of "wounded bank" damages was basically the increase in the cost of funds the bank allegedly incurred as a
result of its having been wounded by the government's breach. Those losses were said to have occurred because three years after,
and as a result of, the breach, the bank fell out of capital compliance; depositors and others became nervous about placing funds
with it; the bank was required to pay more interest to attract depositors; and it was required to pay higher fees for deposit insurance.
The appellate court found that reliance damages in this case were appropriate. Additionally, the appellate court found that the award
of reliance damages in the amount of $ 381 million was appropriate. Furthermore, the denial of the bank's claim for additional
damages was also appropriate.
Winstar cases: Banks could lend more money if they could count something against their reserve requirements anymore
What should the damages be?
Courts kept saying, no matter how many times you litigate the damages are $0
Court shot down expectancy for being implausible and hard to compute, but more open to reliance damages
How to compute? Usually if a bank fell below its reserve requirement itd get it from another bank. How much would it have
cost them to get the money from the other banks might be one way to compute, but the argument is for more.
EXAMPLE OF where reliance damages are used,
o Normally when expectation dmgs are $0 you try for restitution, here the expectation is $0, but reliance is the amt
requested.
Locks v. Wade (1996) p.904
Facts: and entered into a contract in which would rent a jukebox for two years. repudiated the contract and never
installed the jukebox.
Rule: Where there is a breach of contract to lease a piece of personal proper, supply of which is readily available, the damages
should be the profits the lesser, which would have been made on the contract even if lesser is able to lease the property to someone
else for the same price.
CHAPTER EIGHT: Third-Party Interests
I. Assignment of Rights
Allhusen v. Caristo Construction Corp. (1952) p.1080
 Facts: is a general contractor who hired, Kroo Painting Company (Kroo) to work on one of s projects. The contract included a
clause forbidding Kroo from assigning payment to another party without written permission from . Kroo assigned payment to
without getting permission.
Rule: When the language is clear, a party can forbid assignment of payment on a contract
Difference between power to assign vs. promise not to assign (which you could sue for damages)
Owen v. CAN Insurance/Continental Causualty Co. (2001) p.1083
Facts: A settlement agreement was obtained between and , an insurance company, for a tort claim against s client. The
agreement contains a non-assignment clause. sought a declaratory judgment to declare the clause is unenforceable.
Rule: A non-assignment clause in a contract is unenforceable unless it materially changes the contract or gives the non-assigning
party duties or aspect of compensation the non-assigning party did not bargain for.
Structured settlement: insurance company will give lump sum for annuity from a structured settlement company thats better
at giving constant benefits to simplify it for them and get it off their books
Tort victim didnt want annuity, needed money asap, so she sold her right to collect
They wanted an Article 9 thing to get rid of antiassignment claim since it doesnt apply there to tort claims
Continental Purchasing Co. v. Van Raalte Co. (1937) p.1090
Facts: is an assignee of Ethel L. Potter (Potter). is Potters employer. Potter signed a contract with , assigning all of her
income to in order to pay off a debt. Instead, gave $1.50 of Potters wages to her, because she had no other income.
Rule: When a contract is assigned and the non-assigning party agrees to the assignment, the non-assigning party becomes liable to
the party to which the contract was assigned.
REVIEW
Consideration
o Rule: 71- Bargained for Exchange
Application (How are these cases related):
Hamer
Kirksey
In re Greene
Langer
Prudential Bache Sec.
o Rule 74(1) - Settlement
Application:
Hamer
In re Greene
Browning

Things to learn from here:

o Option w. Consideration is the strongest kind of option
o Counter-offer destroys offer
o Option contract doesnt care about rejection
o Option contract supported by consideration makes the counter-offer have no effect
o Exception: if there was rejection and then reasonable reliance by the offeror, waiver argument

Option Contract Review

Humble Oil
o irrevocable offer, immune to counter offers and rejections (remains available in spite of these), unless you can somehow
prove waiver, which will require some reliance on the rejection by the offeror. Or you could always pay rescission.
REVIEW
Two questions you have to ask about 2-207:
o Is there a contract?
o What are the terms?
o (also policy???)
Is there a contract?
o (1) Conflicting Memos, not expressly conditional, 2-207(1) before unless
Sellers acknowledgment works as acceptance
2-207(1) says theres a contract
2-207(2) asks if theres material alterations
o (2) Oral agreement followed by confirmation
2-207(1) says confirmation is acceptance (even tho already oral agreement)
2-207(2) then says
o (3) Conflicting memos expressly conditional
Either youll get express accent terms are terms of acceptance
You dont get express accent no contract by 2-207(1), but yes contract by conduct under 2-2-07(3) with gap
filler/default rules.
2-207
Routes Terms
1. Conflicting memos, additional, 2-207(1) before 1. 2-207(2) additional
unless 2-207(2)(b) material alterations
2. Conflicting memos, different terms, 2-207(1) before 2. Either 2-207(2) additional = different
unless or
3. Oral agreement plus confirmation, 2-207(1) before knock-out rule
unless 3.

1. Conflicting memos, second memo expressly 1. Verbal/Written acceptance (unequivocal assent

conditional second set of terms) by contract formed under
common law of counter-offer,
 or
No assent no contract by 2-207(1), but by 2-
207(3) could have a contract formed by conduct for
gap fillers + agreed upon terms
1. Oral agreement, confirmation w/ there is no
agreement unless agree to terms on this form.
-There is already an oral agreement, so either this is a
proposal for modification, or an additional kicker
thats a repudiation of the agreement. 2-207 seems to
sound like a written confirmation is acceptance, even
after theres acceptance in the oral agreement.
(Mistake in drafting?)
2-207 (1), (2), (3)
o You could also treat the form as a confirmation. 2-207(1) say written confirmation counts as acceptance.
o Acceptance also could be under 2-207(2)(b) like Klonick v Gateway.
2-209
o If treating contract under 2-206 you then need to treat arbitration as a modification (legitimate commercial reason) under
2-209
Plain Meaning Rule
o (Judge Decided) vs.
Contextual Approach
o (external evidence)
Parole Evidence Rule

Sample Q:
71 Mutual Inducement, sham consideration is no consideration (e.g. In re Greene). Issue now to analyze whether this is a sham
o Sham because:
Happened on birthdays, so looks like a gift (Pennies holiday looked like gift too)
Family matter
Language I accept this promise for a gift and thats unnecessary, but if you really want to (signals he wasnt
seeking inducement), and I feel bad
o Not a Sham because:
Running a business together (commercial context)
Never exchanged presents before
Assuming it isnt a sham, second promise is a modification
o Does Jill have a preexisting duty?
89 neither party fully performed, fair and equitable
2-209 legitimate commercial reason for the modification
Argue that this is a coercive, illegitimate modification:
He made non-refundable purchases, deposits, etc.
Big differential in value
Release under 74? Contestable
Promise to work (2nd), promising something new because the first promise is not enforceable, so its not
a modification and has fresh consideration. Should be like note after Hammer v Sidway, and treat the
whole thing as settlement of a claim under 74.
Promissory Estoppel, reliance, perhaps reasonable, try to enforce initial thing under 90. (promisory estoppel
looks different by ___ so maybe here too by modification it should be weaker. See Drennan.)
Conditions
Express Conditions
II. Condition vs. Promise vs Promissory Condition
Condition
A condition gives you the right not to perform
It facilitates a defensive remedy, and can be a powerful remedy
ex: If theres a fire, insurer will pay for the claim. (Insureds payments arent conditional)
ex2: buyer agrees to buy the property if it passes inspection.
Promise
 Promise with respect to goods is usually a warranty
You can sue for damages but cant withhold performance, purely offensive remedy
Promissory Condition
Joins the defensive and offensive remedy, the right to withhold performance and right to sue for damages
ex: Ship rice, purchase transport, make sure he leaves before April 1. You could say
[Condition] Ill only pay for shipping if done before April 1 st, if you dont leave by then we have no K
[Promise] Ill pay for shipping if you promise to leave before April 1 st
[C+P] Ill pay for shipping provided that you leave before April 1 st and you promise to pay damages if
you dont
III. Default Rules
(1) Order of performance [ex: get hair cut then pay after]
(2) Withhold performance material performance [if you substantially perform I have to pay, constructive condition]
Language such as: provided that, in the event that, if that, or similar
Can transfers risk through conditions which may be ideal for several reasons:
o Better insured (larger organization is in better position to take the risk)
o Motivation (can motivate a builder to do a better job by holding the risk against them)
We balance motivation versus forfeiture (youre just using this to get out of the contract

Aside: AUTHORITY: the opposing party must prove that the boss was responsible for the appearance of authority
- Express actual authority: spelled out by boss in directions of the agent
- Implied actual authority: inferred from boss directions to the agent
- Apparent authority: boss manifestations to third persons that agent has authority