Final Contracts Outline (2nd Semester)

8/3/2019 Final Contracts Outline (2nd Semester)

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III. When (and how) Promises Become Enforceablerules, doctrines and techniques employed bycourts in determining whether agreement has been achieved to such an extent that legal consequencesshould follow.

1. MUTUAL ASSENTRaffles v Wichelhaus (292)1864 - contract was for goods to be carried aboard the ship called

Peerless there were two such ships, Ds were supposed to buy goods that arrived on the earlier one,

and refused to buy goods when they were brought on the second one. Judgment for defendants; Therewas no consensus on exactly what ship was being discussed, and thus no meeting of the minds.

R2C 20Effect of Misunderstanding (296)(1) There is no mutual assent if parties attachmaterially different meanings to their manifestations, and either (a) neither or (b) both parties knows thatthe other one has a difference interpretation. (2) However, As interpretation is true if (a) A doesnt knowBs meaning, but B knows As meaning; or (b) A has no reason to know Bs meaning, but B has reason toknow As meaning.

Embry v Hargadine-McKittrick Dry Goods (296)1907P had been requesting a decisionon reemployment from D, so a few days before end of the year he went to see D to say that, if he wasn'tgiven an answer on reemployment, he would quit then and there. D said, "Go ahead, you are all right. Getyour men out, and do not let that worry you." D is held to a reemployment contract; Even though theremust be a meeting of minds by an agreement of intentions in a contract, intentions are judged by

words/actions, here, a reasonable person would judge D's words as promising reemployment.Kabil Developments Corp. v Mignot (300)1977P negotiated oral contract with D, but D

said there was no contract. D objected to Ps VP testifying that he believed there was a contract. Held:Ps VPs testimony was allowable, for determining whether P believed there was a contract.

Wheeler v White (306)1965D promised P that D would get loan for P to construct building,or D would loan him the money himself. P started preparing to build, D wound up not being able to getthe loan, and P sued. The contract is held indefinite, but D is prevented by Estoppel from arguingthis, since he led P to start preparations (damages are only reliance costs, b/c no contract)2. OFFER AND ACCEPTANCE

Morrison v. Thoelke (309)1963 - Buyers of property sent a contract to sellers, who signedcontract and sent it to the buyers' attorney via mail. Before the letter reached the attorney, sellers calledattorney and repudiated the acceptance. Since the mail service allows delivery to be stopped, should the

postal service be considered an agent of the offeree, making acceptance binding upon receipt? Held: Therepudiation was invalid, and the buyers own the land. An acceptance in a bilateral contract is bindingupon being deposited in the mail, not upon receipt. Need to draw a line somewhere and mailing is it.

R2C 63Time When Acceptance Takes Effect(a) an acceptance in a manner invited byofferor is complete once it leaves the offerees possession (b) but an acceptance under an OPTIONcontract is not valid until RECEIVED.

Moulton v Kershaw (317)1884D sent out to P letter saying they were authorized to sell saltat a low price. P replies asking for 2000 pounds of salt. D then replies with withdrawal of original letter.P sues for breach of contract. Held: this was not a sufficiently definite offer, it was more of anadvertisement, and not a specific offer to sell a quantity of salt.

Petterson v Pattberg (320)1928 - D had a bond on P secured by a mortgage on land. D told Pthat if he paid off the mortgage early, he would write off the $780 bond. When P came to defendant's

house, defendant said that he had sold the mortgage and that the deal was off. Held The offeror canrevoke a unilateral offer at any time, even immediately before acceptance by the offereeeven ifthe offeror sees the offeree coming to accept. Here, offer was successfully revoked before acceptance.[Now R2C 45 says that once performance begins, the offer cannot be revoked, as an option contract hasbeen created.]

R2C 45Option Contract created by Part Performance or Tender - (1) where an offerinvites an offeree to accept by rendering a performancean option contract is created when the offereetenders or begins the invited performance, or tenders a beginning of it. (2) offerors duty of performance


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is contingent on completion or tender of the invited performance in accordance with the terms of theoffer.

Carlill v Carbolic Smoke Ball Co. (327)1892 - D puts out ad saying anybody who gets sickwhile using their product (designed to prevent getting sick) gets $100, and they have $1000 deposited toshow their seriousness. P gets sick and asks for money. D says they dont have to. Court says: yes, theydo have to pay. The statement about $1000 shows they were serious. Also, given the circumstances,

they dont have to receive written notice before performance of P for their promise to be binding.(for acceptance - person must buy smoke ball, use as directed, and THEN get sick)Sometimes, actor does not need to communicate acceptance; he will inform you if and only if hecompletes act successfully (i.e. if you put up a sign for a lost dog, offering a reward if he is found); itwould be absurd to expect an acceptance to be communicated before a person became ill.

Cobaugh v Klick-Lewis, Inc. (331)1989P hit hole-in-one on Ds golf course. D had left upa sign from earlier tournament saying that anybody who hit a hole in one won a car. Court holds that areasonable person would reasonably believe that they could accept the offer, because of the sign, byhitting a hole in one, and therefore there was an offer that was accepted when P hit the hole in one.

R2C 29- It is the manifested intent of the offeror and not the subjective intent thatdetermines the persons having power to accept the offer.

Allied Steel & Conveyors, Inc. v Ford Mo. Co. (338)1960 - D purchased machinery from P

and sent them an agreement that said it was not binding until signed by P. The agreement also said that Pwould be liable for injuries from P negligence and from D negligence during installation. While installingthe machinery, a P employee was hurt from a D employee's negligence. P, who later signed theagreement, claimed the agreement was not in effect at the time of injury. Held P accepted the contractwhen it began the installation, and the later signing was just a record of that agreement. An indication ofa method of acceptance did not exclude other methods of acceptance, and acceptance occurred whenP started performance.

Davis v Jacoby (341)1934 - Caro Davis was treated as a daughter by her uncle and auntWhitehead, so years later when the Davises were living in Canada and Mrs. Whitehead became ill, Mr.Whitehead wrote them and asked them to come look after him and Mrs. Whitehead. Mr. Whiteheadpromised that, if they were to come care for the Whiteheads, the Whiteheads would leave the Daviseseverything in their will. Mr. Davis said they would come after finishing up some business, and on the day

the business was taken care of they found out Mr. Whitehead had committed suicide. After arriving andcaring for Mrs. Whitehead, the Davises discovered everything had been left to nephews. Held Mr.Whitehead made a contract to create a will, and Mr. Davis accepted his offer with a promise to come carefor Mrs. Whitehead. In ambiguous cases such as this, the law is predisposed to find a bilateral(promise for promise) rather than a unilateral (promise for performance) contract. Further, here,the relationship was close that if Whitehead had a promise from the Davises, he would be satisfied thatthey would take good care of him.

R2C 31where it is unclear whether a contract is bilateral or unilateral, the court will err on theside of assuming it is bilateral.

R2C 36Termination of power of acceptance(1) An offerees power of acceptance may beterminated by (a) rejection or counter-offer by the offeree, or (b) lapse of time, or (c) revocation byofferor, or (d) death/incapacity of the offeror or offeree. (2) power of acceptance is also terminated by

the nonoccurrence of any condition of acceptance under the terms of the offer.Brackenbury v. Hodgkin (347)1917 - A mother asked a daughter in a letter to come live with

her and take care of her, and in return the daughter could have the house. After plaintiff daughter movedin the mother instigated arguments and finally deeded the house to a son. Held The mother owes thedaughter the land, because the mother's letter was an offer, in writing as required for land, and theplaintiff came and began performance on the offer. Acceptance was in deed (moving in with mother) andnot in words.

R2C 62Effect of Performance by Offeree Where Offer Invites either Performance orPromise(1) Where an offer invites an offeree to choose between acceptance by promise and acceptance


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by performance, the tender or beginning of the invited performance or a tender of a beginning of it is anacceptance by performance. (2) such an acceptance acts as a promise to render complete performance.

3. LIMITED AND INDEFINITE PROMISESDavis v General Foods Corp. (355)1937P wrote D saying P had recipe. D responded

saying they would look at it, with the use/compensation to be completely at their discretion. P sentrecipe, and sued when D used it without compensating her. Held - Ds letter was too vague to constitute

a promise. one of the commonest kind of promises too indefinite for legal enforcement is where thepromisor retains an unlimited right to decide later the nature or extent of his performance. Thisunlimited choice makes the promise merely illusory.

Obering v Swain-Roach Lumber Co. (358)1927 - Plaintiff lumber company signed a contractwith defendants, relatives and heirs of J. Henry Buhner, that if plaintiff bought Buhner's land plaintiffwould sell it to defendants and keep the lumber from it. Does this contract have mutuality? Held Yes;contract has mutuality becauseeven though the contract upon signing was binding on neither partybecause it was contingent upon an act by plaintiff, the moment plaintiff performed that act thecontent was binding on both parties. (may have been illusory at the start, but now it isnt, and you areobligated.)If a contract is dependent upon a future act of plaintiff, that act will provide an acceptance of

the offer and consideration.

R2C 77Illusory and Alternative Promises - A promise or apparent promise is notconsideration if by its terms the promisor or purported promisor reserves a choice of alternativeperformance, unless (a) each of the alternative performances would have been consideration if it alonewould have been bargained for, or (b) one of the alternative performances would have been considerationand there is or appears to the parties to be a substantial possibility that, before the promisor exercises hischoice, events may eliminate the alternatives which would not have been consideration.

R2C 78the fact that a rule of law renders a promise voidable or unenforceable does notpresent it from being consideration. (for examplean oral promise barred by the rule of frauds is still apromise and provides consideration for a written counterpromise.)

Wood v. Lucy, Lady Duff-Gordon (361)1917 - D, who gave her approval to apparel, made anagreement with P to have the exclusive right to place her endorsements on articles of clothing, subject toher approval. In return he would give her one half of all profits, take out any needed copyrights and

trademarks, and provide reports of sales. D breached the exclusivity and marketed her own designs,claiming the original agreement was void because, under it, P was not obligated to do anything. Held Theagreement might not have obligated P in so many words, but exclusivity of the agreement implied hewas to make his best efforts to sell her label, giving consideration to the agreement.

Omni Group, Inc. v. Seattle-First Natl Bank (365)1982Ds sold property to P with acontract that P would get an engineer's and architect's feasibility report and, if satisfactory, would notifydefendants. P didn't express whether it was satisfied or not. Ds refused to proceed with the purchase,claiming the contract was not valid because P's promise was illusory. HeldP, if satisfied, was obligatedto notify Ds of their acceptance, so their promise was not illusory. This falls into the strain of cases ininvolving promisor "satisfaction" and is therefore not an illusory promise. (there were two conditionsprecedent to Ps duty to buy property 1. Receiving report and 2. Report must be satisfactorytheywere bound to report their satisfaction)

Feld v Henry S. Levy & Sons. Inc. (370)1975 - D made agreement to sell all the breadcrumbs it produced to P, with six-month notification by either party for termination. D stopped producingbreadcrumbs and, after P refused to pay a higher price, dismantled the equipment and started selling theinput bread product to others. D maintains the contract did not require it to produce bread crumbs, only tosell those it produced. Held This is known as an "output" contract and under section 2-306 of theUCC there is sufficient mutuality to uphold the contract. The UCC also states that for exclusiveagreements the seller must use good-faith efforts to supply the productsomething that is a question offact here. Only a "genuine imperiling of the very existence of its entire business caused by theproduction of the crumbs would warrant cessation of production of that item."


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UCC 2-306Output, Requirements and Exclusive Dealings - (1) a term that measures thequantity by the output of the seller or the requirements of the buyer means such output or requirementswhich may occur in good faith except that no quantity unreasonably disproportionate to any statedestimate or in the absence of a stated estimate to any normal or otherwise comparable prior output orrequirements may be tendered or demanded. (2) a lawful agreement by either the seller or buyer forexclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the

seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.Corenswet, Inc. v Amana Refrigeration(373)1979agreement severable for any reason

with 7 days notice, for any reasongood faith requirement in dealings did not prevent them fromterminating without case, when the contract explicitly allowed for without cause termination.even if the termination was arbitrary and without cause it was ok. (giving business to somebody elsecould also be a good reason)

Sun Printing & Publishing Assn v Remington Paper & Power Co., Inc (376)1923 - P is anewspaper company who contracted to buy 16,000 tons of paper from D, a paper mill. The writtencontract stated that the price and term would be fixed for a short while, and then later to be agreed uponno less than 15 days prior the end of the term in effect, but in no case was the price to be higher than astandard market price. After the preset term had expired, and the next price and term was to be negotiated,the D claimed the contract was incomplete, and refused to make any deliveries at any price. P sued for

breach of contract. Held - When a contract is worded as an "agreement to agree", the parties arefree not to agree without being liable for breach of contract; contract was expressly written to allowboth price and term to be negotiable, and so the court would have been "revising" the contract if itattempted to "construe" it to a reasonable market price and some fixed term that was not negotiated by theparties

Empro Mfg. Co. v Ball-Co Mfg. Inc (380)1989 - Empro wanted to buy Ball-Cos assets.Empro sent Ball-Co a letter of intent to purchase their assets, but the letter required a later final agreementand other conditions (essentially, Empro left themselves outs; lots of missing terms, to be filled in later).Ball-Co bailed and started negotiating with another buyer. Empro filed for a temporary restraining order.The trial court dismissed Empros complaint, saying that the letter of intent had no legal force based on itsown insistence that its not a contract. Empro appealed to the Circuit Court. Heldcomplaint can bedismissed even if both parties intended to be bound. Held - not a binding agreement; Empro made

clear that it was free to walk, and there was no reason to think that Ball-Co wanted it to be a one-sided agreement.

R2C 33Certainty(1) even though a manifestation of an intention is intended to beunderstood as an offer, it cannot be accepted to form a contract unless the terms are certain. (2) the termsfor a contract are certain if they provide a basis for determing the existence of a breach and for giving anappropriate remedy. (3) the fact that one or more terms of a proposed bargain are left open or uncertainmay show that a manifestation of intention is not intended to be understood as an offer or as anacceptance.

Southwest Eng. Co v Martin Tractor Co. (385)1970Failure to agree on terms ofpayment does not defeat an otherwise valid agreement reached by parties.

UCC 2-204(3)- Even though one or more terms are left open a contract for sale does not fail forindefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for

giving an appropriate remedy.IV. IDENTIFYING THE BARGAIN

1. THE EFFECTS OF ADOPTING A WRITINGPAROL EVIDENCE RULE

3 types of parol evidence:Prior oralPrior writingContemporaneous oral


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Mitchill v Lath (387)1928 - P wanted to buy a farm from D, but P didn't like the ice house. Dorally promised that if P bought the farm, they would remove the ice house. P bought the farm, with awritten agreement, and started improving it, but D didn't remove the ice house. Is the agreement to buythe ice house valid? Held No; that oral agreement is obviously linked to, though legally separate from, thewritten agreement to buy the farm. Such an oral contract that modifies the written one is only valid if1) the agreement is a collateral one, 2) it doesn't contradict express or implied provisions in the

written contract, and 3) it relates to things one wouldn't expect would be in the written contract. Inthis case, the written contract seems to be full and complete, and one would expect anything relating to anice house to be included in the written contract.

Hatley v Stafford (394)1978Buyout provision in lease said land could be bought out for$70/acre; 10 months later, with immature wheat crop on land, D lessors enter land, cut wheat crop anddemand P lessee accept $70/acre buyout; lessor says that there was an oral agreement that buyout wouldonly be valid for 30-60 days after signing lease. D says that evidence of oral agreement should not beallowed. Held - it should be allowed. Evidence of oral modifications should only be disallowed if itcontradicts express/implied provisions; nothing in lease expressly or impliedly said that buyoutperiod should run indefinitely. Also, this wasnt a sophisticated transaction; parties made up agreementthemselves. Finally, contract would have been one sided if interpreted according to D (D could havebought $400/acre wheat for $70/acre).

Hayden v Hoadley (400)1920evidence showing that D had until October 1 to complete taskaccording to oral agreement was properly excluded; contract that was silent as to timeframe hadreasonable amount of time implied, so October 1 Parol Evidence would have contradicted contract.

R2C 209Integrated Agreements(1) An integrated agreement is a writing or writingsconstituting a final expression of 1+ terms of an agreement. (2) Whether there is an IA is to be determinedby the court as a questionpreliminary to determination of a question of interpretation or to application ofthe parol evidence rule. (3) where the parties reduce an agreement to a writing which in view of itscompleteness and specificity reasonably appears to be a complete agreement, it is taken to be an IA unlessit is established by other evidence that the writing did not constitute a final expression.

R2C 213Effect of Integrated Agreement on Prior Agreements(1)A binding IAdischarges prior agreements to the extent that it is inconsistent with them. (2) a binding completelyintegrated IA discharges prior agreements to the extent that they are within its scope. (3) an IA that is not

binding or that its voidable and avoided does not discharge a prior agreement. But an IA, even though notbinding, may be effective to render inoperative a term which would have been part of the agreement if ithad not been integrated.

R2C 214Evidence of Prior or contemporaneous Agreements and NegotiationsAgreements and negotiations prior to or contemporaneous with the adoption of a writing are admissibilein evidence to establish (a) that the writing is/is not an IA; (b) that the IA, if any, is completely or partiallyintegrated; (c) the meaning of the writing, whether or not it is integrated; (d) illegality, fraud, duress,mistake, lack of consideration, or other invalidating cause; or (e) ground for granting or denyingrescission, reformation, specific performance, or other remedy.

R2C 216Consistent Additional Terms (1) Evidence of a consistent additional term isadmissible to supplement an IA unless the court finds that the agreement was completely integrated. (2)An agreement is not completely integrated if the writing omits a consistent additional agreed term which

is (a) agreed to for separate consideration or (b) such a term as in the circumstances might naturally beomitted from the writing.

Interform Co. v Mitchell (403)19782 interpretations of writing1. Textualisttreatthe writing as having a unique and quite compelling force. an integrated writing clear in meaning to thereasonable person constitutes the contract between the parties. 2. Intentionalista writing isintegrated when the parties intend it to be and it means what they intended it to mean. (UCCinterpretation)


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UCC 2-202terms in agreement may be explained or supplemented by (1) course of dealing orusage, or course of performance, and (b) by evidence of consistent additional terms, unless the court findsthe writing to have been intended also as a complete and exclusive statement.

Luria Bros. v Pielet Bros Scrap iron & Metal (405)1979 - Pielet contracted with Luria todeliver a large quantity of scrap metal but completely did not perform. Pielet claimed that they had an oralunderstanding beforehand that Pielet was depending upon another company for shipment and that they

may not come through, in which case Pielet would not be able to deliver. Written contract said sale wasunconditional. Held- parol evidence NOT admissible, where contract said unconditional andalleged oral argument allowed for non-delivery under certain circumstancesdirectly contradictoryAND would surely have been included had it been agreed to.

Long Island Trust co. v International Inst. for Packaging Educ, Ltd (406)1976P loanedD $25,000 for 90 days, and then later renewed the loan for another 30 days and loaned an additional$10,000. D claims the latter note is not enforceable, because one of the signators had discussed with theofficer of the bank that certain other guarantors had to sign note, and one guarantor was missing. HeldThe note could be unenforceable because of the oral agreementthere cannot be summary judgmentagainst the defendant. The note did not expressly state that it was an unconditional guarantee, andtherefore the oral agreement did not contradict it. (If Ds were "untrustworthy," "devious," or"negligent," would have made the parole agreement invalid.)

Lipsit v Leonard (413)1974 - P worked for D for 9 years in NY under written contracts(during which time D became incorporated), with D allegedly promising P that he would get equity in thebusiness. When they discussed equity, the terms were unacceptable by the plaintiff. P accuses D of breachof contract and fraud because D allegedly never intended to give P a stake in the company. Shouldsummary judgment be issued against the breach of contract complaint? HeldSummary judgment isvalid against the complaint of breach of contract, because 1) the oral discussions never reached thestage of an enforceable contract, and 2) the parole evidence rule would bar the oral discussionsbecause of the written employment contracts. However; the tort action should be allowed toproceed. New York law allows tort cases based upon fraud to go forward even if not grounded in breachof contract. However, the damages will not be based on expectation of the contract, but on restitutionthe "out of pocket rule."

Bank of America v Pendergrass (416)1935 - Ds signed promissory note with P

"payable on demand." When P tried to collect, Ds claimed P had promised them that they would beallowed to operate the ranch on which they farmed for 1932 without being bothered, that they made thepromise without intending to keep it, and that the P soon seized the land on which the mortgage was heldafter the note was signed. Held Parol evidence to prove a tort of fraud is inadmissable here. Parolevidence is allowed to prove independent facts, but this promise effectively extended the payment ofthe note for another year, directly contradicting the words of the written agreement.

LaFazia v Howe (418)1990 - Ds purchased a deli from Ps. Ps said that, as they dealt in cash,they didn't have records of income. They showed tax records, but said that the low numbers were notindicative of the actual income. Ds were convinced the deli would make money, so they bought it. Therewere clauses in the contract stating that the Ds was relying on their judgment, that no representations orwarranties were made, and that the agreement constituted the whole agreement. The business never wasprofitable, but Ds kept paying on the contract. They finally sold the deli and refused to pay the rest. Ps

filed a suit for the money, and Ds filed a counter-claim for misrepresentation. Held The Ds cannot claimmisrepresentation, because they understood and signed a contract that stated they had not relied onother representation, while represented by an attorney. This was more than a merger clauseit wasspecific that there was no other representation. If the non-reliance clause isn't true, then there is no wayfor two parties dealing at arms length to indicate no reliance.

Rio Grande Jewelers Supply v Data General Corp. (424)1984 - A buyer of a computersystem sued claiming negligent representation of the system's capabilities. The contract disclaimed allprior representations. Held The plaintiff cannot collect damages, because if a contract that is valid


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under the UCC and has a valid disclaimer of warranties under UCC 2-316, allowing the claim to goforward would effectively allow the contract to be rewritten and the UCC to be circumvented.

Hoffman v Chapman (425)1943 - Ps sold a house on Lot 4 at Kensington, on which D livedafter the agreement was made, but the draftsperson accidentally made up a deed conferring the entire lot,not just Lot 4. Ps sued in equity to have the deed modified.Should parole evidence be excluded from modifying the written agreement? Held No; fraud, accident

and mistake are exceptions to the parol rule.Is the agreement so vague that the contract must be void? Held No, a contract must be upheld if by itsexpress terms or implications the intent of the parties can be determined. Here, there was no mistakebetween the parties as to the identity of the property, there was only an incorrect description.Is there unilateral negligence on the part of plaintiffs that would allow the defendants to keep the land?Held: No, mere mistake does not necessarily indicate negligence, and the error of the draftpersonmodified the agreement to contradict the understanding of both parties, so it was not a unilateralmistake.2. INTERPRETING THE PROMISE

WWW Associates v Giancontieri (431)1990 - K contained a reciprocal cancellationprovision. Extrinsic evidence cant be considered in order to create an ambiguity in writtenagreement; Before such evidence can be considered, court must find an ambiguity in the written K.

Pacific Gas & Elec. Co. v GW Thomas Drayage & Rigging Co. (434)1968- Defendantcontracted to fix plaintiff's steam turbine, and the contract indemnified and insured the plaintiff againstdamage to property. Defendant damaged plaintiff's turbine during the work and plaintiff sued defendant.Defendant claimed the contract only referred to the property of third parties. Is the contract unambiguouson its face to disallow extrinsic information of the circumstances surrounding the contract? Held No.Even though extrinsic evidence may not be used if a contract is unambiguous, that extrinsicevidence of circumstances may be used to determine if the words of the contract actually areambiguous.

Columbia Nitrogen Corp v Royster (437)1971A finding of ambiguity is notnecessary for the admission of extrinsic evidence of the usage of the trade or the parties course of

dealing.UCC 2-202. Final Written Expression: Parol or Extrinsic Evidence. Terms with respect to

which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writingintended by the parties as a final expression of their agreement with respect to such terms as are includedtherein may not be contradicted by evidence of any prior agreement or of a contemporaneous oralagreement but may be explained or supplemented (a) by course of dealing or usage of trade (Section 1-205) or by course of performance (Section 2-208); and (b) by evidence of consistent additional termsunless the court finds the writing to have been intended also as a complete and exclusive statement of theterms of the agreement .

Robert Indus v Spence (438)1973- A contract is to be read in the light of thecircumstances of its execution, which may enable the court to see that the words are really ambiguous.

Federal Dep. Ins. Corp v W.R. Grace & Co (439)1989language is not renderedambiguous merely because parties disagree on its meaning. A self-serving offer to show that a partydid not understand the contract to mean what it appears to say will NOT suffice; an offer to show that

anybody who understood the context of the contract would realize it couldnt mean what an untutoredreader would supposed it meant WILL suffice.

Spaulding v Morse (439)1947 - Trust created- obligated D to pay yearly sum to pay for sonseducational expenses until sons entrance into a university, and then a higher yearly fee for 4 years. Onceson graduates high school, he is draftedD stops paying HeldD does not have to keep paying; eventhough a literal reading would show that the payments are supposed to continue until entrance into auniversity, as the main purpose of these funds was to pay for education, the proper interpretationis that D should not have to keep paying while the son is in the army, ignoring the literal language.


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R2C 212Interpretation of Integrated Agreement(2)A question of interpretation of anIA is to be determined by the trier of fact if it depends on the credibility of extrinsic evidence or on achoice among reasonable inferences to be drawn from extrinsic evidence. Otherwise, a question ofinterpretation of an integrated agreement is to be determined as a question of law.

Frigaliment Importing co. v BNS International Sales Corp (441)1960 - P and D contractedfor D to sell large amount of chicken to P there are young chickens and old chickens; P says

chicken means young chicken; D says it means any chicken. HeldD wins, it means any chicken.Reasoning: D was new to industry, didnt know trade usage of chicken to be young chicken;witnesses were unreliable; market price favored Ds argument; actions by P after first shipments of

chickens that made it seem OK for D to ship more old chickens.(P sues, so P has burden of proof - If D had sued, D would have had burden of proof, the case may havecome out the other waythis is not good grounds for an opinion)3. CONTRACTS WITHOUT BARGAINING

Livingstone v Evans (447)1925 - D offered to sell land to P for $1800. P wired back to sendthe lowest price, offering to pay $1600. D wired back that he could not lower the price. P then acceptedthe original offer, but D had already sold the land. Held There is an enforceable contract. Even thoughthe counter-offer by P amounts to a rejection (even though it was attached to an inquiry), D'sspecifically standing by the original price amounts to a reinstatement of the original offer.

OLD UCC 2-207. Additional Terms in Acceptance orConfirmation. (use for exch. of printedforms)(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within areasonable time operates as an acceptance even though it states terms additional to or different from thoseoffered or agreed upon, unless acceptance is expressly made conditional on assent to the additional ordifferent terms.(2) The additional terms are to be construed as proposals for addition to the contract. Between merchantssuch terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of theoffer; (b) they materially alter it; or (c) notification of objection to them has already been given or is givenwithin a reasonable time after notice of them is received.(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish acontract for sale although the writings of the parties do not otherwise establish a contract. In such case the

terms of the particular contract consist of those terms on which the writings of the parties agree, togetherwith any supplementary terms incorporated under any other provisions of this Act.

NEW UCC 2-207Terms of Contract; Effect of Confirmation- Subject to 2-202, if (i)conduct by both parties recognizes the existence of a contract although records do not establish a contract,(ii) a contract is formed by an offer and acceptance, or (iii) a contract formed in any manner is confirmedby a record that contains terms additional to or different from those in the contract being confirmed, theterms of the contract are (a) terms that appear in the records of both parties, (b) terms, whether in a recordor not, to which both parties agree, and (c)terms supplied or incorporated under any provision of this Act.

Richardson v Union Carbide Indus Gases Inc. (452)2002- Two parties exchange documentswith conflicting indemnity clauses. Three approaches to conflicting terms. 1) Majority position is thatthe conflicting terms fall out and are replaced with UCC terms. 2) Minority view: Offerors termscontrol. 3) Terms of the offer prevail over the different terms of the acceptance only if the latter are

materially different, this is the least common approach. Held: This court sides with the majority knock-out rule. Old 207-2: counterform with different indemnity clause materially altered first form so itwasnt valid. Old 207-3: Parties acted like there was a contract for a long time, so there was a contractas far as terms on which the parties agreed; they didnt agree on indemnity so it wasnt part of

contract.ProCD Inc v Zeidenberg (458) - 1996D bought database from P and made it available online

for less than P charged. There was a license, readable only by opening product, which prohibited this useof the product. D said license wasnt enforceable b/c it wasnt visible on outside of package. Held:Shrink-wrap licenses are enforceable unless their terms are objectionable on grounds applicable to


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contracts in general. We treat licenses as ordinary contracts accompanying the sale of contracts and aretherefore governed by common law of contracts and UCC. Also, buyer could have returned productw/o using it; had opportunity to reject, and did not.

Hill v Gateway 2000 (463)1997computer arrives with warranty saying its termsgovern unless computer returned within 30 days. Held:this is valid. Even though Ps didnt read terms, itis still valid because they could have. a contract need not be read to be effective.

R2C 69Acceptance by Silence or Exercise of Dominion(1) where an offeree fails to replyto an offer, his silence and inaction operate as an acceptance only when (a) an offeree takes the benefit ofoffered services w/ reasonable opportunity to reject them and reason to know that they were offered withthe expectation of compensation; (b) the offeror has stated or has given the offeree reason to understandthat assent may be manifested by silence or inaction, and the offeree in remaining silent and inactiveintends to accept the offer; (c) where because of previous dealings or otherwise, it is reasonable that theofferee should notify the offeror if he does not intend to accept. (2) (probably irrelevant, see p 467)

Hobbs v Massasoit Whip co. (467)1893 - P sent D eel skins; D never paid, never gave noticethat he didnt intent to accept the skins. Held: D must pay for skinsthey had done business this waybefore

relatedUNSOLICITED GOODSmany states say that these are treated as gifts,with no obligation on part of recipient to pay

Martin v Little, Brown & Co. (471)1981- P tipped D to plagiarism of Ds book, offered tosend copy of infringing book; D accepted offer. When P learned D was pursuing lawsuit, he filed suit toget 1/3 of the recovery. Heldno compensation should be awardedhis offer was a gift, unsolicited.as a general rule, volunteers have no right to restitution (lots of good language in this case)

Collins v LewisP boards Ds cows for 38 days, then D sells them. HeldD owes P;D knew P was boarding cows, and he got a benefit by Ps actions, and by Ds letting P board cows.

Seaview assn of Fire Island v WilliamsD owned homes in town for which P wasHOA. D didnt pay any fees under widely known assessment policy, where fees went toward townsoperating expenses. HeldD had sufficient notice of the arrangement and had to pay; theybenefitted knowingly from Ps services.

Morone v Morone (477)1980 - An unmarried couple had been living together since 1952,with the woman performing "domestic duties and business services", expecting to be paid for her

services. The man, moreover, orally told her that he would in return take care of her and share the netprofits of his business with her.-Can there be an implicit contract between an unmarried couple living together?Held No, because ifpeople are living together there is oftentimes an assumption that work will be performedgratuitously. Allowing implied contracts raises the risk of misunderstanding and allows for fraud.-Can there be an explicit contract between unmarried people living together? Held Yes; nothing aboutliving together precludes an explicit agreement from being put into place, as long as sexual servicesdoesn't form part of the consideration.4. MISTAKE, MISREPRESENTATION, WARRANTY, AND NONDISCLOSURE

Laidlaw v Organ (482)1817 - D knows of end of War of 1812 when he makes contract to buytobacco (knowing that this end of the war will raise prices)P, other side of the deal, does not have thisinfo. Holding: D was under no duty to disclose this information to P. D didnt give him false

information, or lead him to believe the information didnt exist, he just didnt reveal it. BUT:Jackson v Seymour (483)1952 - Someone came and looked at D's 31 acres of land and they

discussed $275 for it, but didn't strike a deal. Later D needed money, so she went to her next-door brotherP, to whom she was close, and he bought the land, which she had never seen, for $275. Later he found outit had $2000 of timber, which he cut and sold. Held The contract should be rescinded because ofconstructive fraud. There was inadequate consideration, a confidential relationship of the parties (notat arm's length), the vendor was in pecuniary distress, and there was a mutual mistake. The lawtherefore declares the contract fraudulent because of its deception, without any moral guilt of the


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fraudfeasor. If there had been intent to defraud, there would have been actual fraud. Inadequacy ofconsideration in itself is not enoughit's important that the two were not dealing at arm's length.

Sherwood v Walker (490)1887 - P buys cow, presumed barren, from D. While the cow isbeing held for P to pick up, it is shown to be pregnant, and D refuses to take the money or deliver. P sues.Held: This is a mistake of the nature of a thing, because a barren cow is substantially different from abreeding one, and parties would not have made the contract except for the fact that the cow was

barren. The jury should have been instructed that if the contract was based on the assumption that thecow was barren, and she was not barren, the D should have a right to rescind. The DEGREE of mistakeis importantthe difference between a barren cow and a fertile cow was enough that it cut to the wholesubstance of the agreement

Beachcomber Coins v Boskett (496)1979 - If both parties know that there is apossibility that a fact may not be true, this uncertainty is reflected in the contract, which cannot berescinded if it turns out that the fact was, in fact, not true. (restatement 502)

Elsinore Union Elementary School Dist. V Kastorff (500)1960 -D made honest clericalerror in submitting bid to P school, but total included no allowance for plumbing. P accepted his bid, thelowest, and asked if it was correct; he conferred with his clerk in the hall and reported that it was. The dayafter his bid was accepted, defendant informed the school board of the mistake, but it voted to hold him tothe amount. Held The contract may be rescinded because of a clerical error. The amount given without

plumbing costs was unintended by D and unexpected by the P, as P expected the bid to include plumbing.HeldD's error was not through negligence, even though he conferred in the hall and replied that thatthe figure was correct, because he had not yet had time to go examine his paperwork. this is aUNILATERAL mistake, not a bilateral oneonly D was mistaken; Unilateral mistake is tolerated herebecause the mistake was corrected (or attempted to be corrected) quickly (School district, at the timeof acceptance of BID, did not know or have reason to know that the contract was mistaken)No injury, really, has been done to the school district; he asked to be released almost immediately, andthey voted not to release him (injury, if anything, was loss of expectation) (furthercontract wasnt binding until it was signed)However: if school, in expectation of saving $10k, immediately went and spend $10k on band uniforms,which they wouldnt have done anyway, THEN Kastorff would be liable

Tribe v Peterson (508)1998 - P purchased his first horse from Ds. P asserted that Ds expressly

guaranteed that horse would never buck and brought suit for breach of warranty when the horse buckedhim from the saddle, shattering his left wrist. Ds said they guaranteed no such thing. P lost a jury trial onhis claims. Held: D wins - "In order for an express warranty to exist, there must be some positive andunequivocal statement concerning the thing sold which is relied on by the buyer and which is understoodto be an assertion concerning the items sold and not an opinion. . . . A representation which expressesthe seller's opinion, belief, judgment or estimate does not constitute an express warranty."

Hinson v Jefferson (511)1975 - P purchased land from D, where both parties understood thepurpose of the purchase was to construct a residence there, as the deed gave restrictions on the type ofresidence. Before construction health officials discovered that the area was subject to flooding and deniedplaintiff a deed for a septic system, making the property worthless for the intended use. HeldA contractcan be rescinded through break of implied warranty when the object in question is not fit for theintended purpose, and that shortcoming was not known by either party and could not have been

discovered through a reasonable inspection. This is an exception tocaveat emptor. Although previousmutual mistake cases were really "embryo implied warranty cases," the circumstances go beyond a meremistake to address the implied usability of the object for some purpose.

Johnson v Healy (517)1978 - P bought a one-family house from D builder, who said that"there was nothing wrong with it." Over the next few years, damages were done to the sewage systembecause the foundation was unstable, dating back to an improper fill placed there before D purchased lot.HeldA D is liable even for an innocent misrepresentation, extending the developing warrantyliability and consistent with trend of limitingcaveat emptor. Held The damages should be the cost ofthe repairs.


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Cushman v Kirby (523)1987 - Ps bought a house from the Kirbys. At the second time theylooked at the house, they saw a water treatment system in the basement and asked about the water. Mrs.Kirby said that the water was fine, just a little hard. Mr. Kirby was silent. It turns out the water wassulphur water (different from hard water), which smelled and tasted terrible. Treatment would only bringit to a tolerable level of drinking, so Ps paid $5,000 to be connected to city water. HeldMrs. Kirby madea fraudulent misrepresentation because she gave impression that she had made a full disclosure

when she did not. HeldMr. Kirby made a fraudulent misrepresentation because he was silent whenMrs. Kirby spoke her misrepresentation, and he as a seller had a duty to the buyers. Held Damages arecost of hooking up to city water, as remedy for fraudulent misrepresentation is the amount thatwould be needed to bring P level expected had there been no fraud.5. Changed Circumstances justifying Nonperformance

Taylor v Caldwell (529)1863 - Ps and Ds had a contract by which Ds agreed to let Ps useSurrey Gardens and Music Hall for 4 days for a concert for 100 pounds a day. Parties inaccurately call ita letting and a rent, but Ds maintain possession, and contract was just to give P the use of it on thosedays. The existence of the music hall, in a state fit for concert, is essential for fulfillment of the contract.It burns down. Held:When entering into the contract both parties must have contemplatedbuildings continued existence. In the absence of any express or implied warranties the partiesshould be excused if performance is impossible. (If person has contract to write a book, and they die,

their heirs are not required to finish the book)Tompkins v Dudley (532)1862 - P trustees of a school district sued D, who had promised to

build a school house, for the money they had advanced him. D had promised to have the building finishedby 1 October 1857, but by then he had about $60 worth of work left, including some painting and somewindow hanging. On 5 October 1857 the schoolhouse burned down, before acceptance by Ps and beforedelivery of the key. Held D is liable for the structure. When someone contracts to perform, they arenot liable if an unforeseeable catastrophe makes performance impossible, unless, as is here, theyunconditionally agree to perform by a certain date. The liability should lie on the person who hadtaken responsibility for it. Or: Rule of Law and Holding: When a party is prevented by the act of Godfrom discharging a duty created by the law, he is excused; but when he engages unconditionally, byexpress contract, to do an act, performance is not excused by inevitable accident or other unforeseencontingency not within his control. (Contractor is in better position to deal with risk of fire; he is in

control of property in the way that owner is not)Garman v. Hoover (534)1928 - Ps agreed to build a house for Ds for $8,300, and the

partially completed house burned down after $5,600 in progress payments had been made. Ds had aninsurance policy for $8,000 on the house and collected $5,609.10. Ps spent $7,968.59 building anotherhouse for D, and sued for the contract price without deducting the $5,600 progress payments. Held Dshould deduct the progress payments, as they were not payments for successive stages but insteadadvance payments for the completed house.

Carroll v Bowersock (535)1917 - P contracted to put in a new reinforced concrete floor in Dswarehouse. After P removed the old floor, put in concrete footings, built wooden forms for building aconcrete support, and installed reinforcing rods, the warehouse burned down without fault to either party.HeldP is due payment for the work according to the contract that benefitted the Drestitutionwhich includes cutting the old floor away and the completed concrete footings. P cannot recover

parts/labor for construction of the columns/forms, because these were temporary structures that did notgive benefit to D.

R2C 264Prevention by Government Regulation or OrderIf the performance of a duty ismade impracticable by having to comply with a domestic or foreign governmental regulation or order,that regulation or order is an event the non-occurrence of which was a basic assumption on which thecontract was made.

Louisville & Nashville R.R. Co. v. Crowe (543)1913 - P gave railway a strip of landthrough his farm in return for annual rail passes between Kentucky and Tennessee for the rest of his life.When the Supreme Court outlawed such passes, the railroad would only give P some free trips between


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lines and denied further liability. Held: The equitable thing to do would not be to give the land back,because of public interest reasons, but to require RR to pay P for the value of the annual tickets,taking into account the rides P has already taken.

Isle of Mull (543)1921 - The Isles Steamship Co., a British corporation, chartered thesteamship The Isle of Mull for five years to P for GBP 1350/month. The British government assumedcontrol of the steamship for the war, and paid the owner around GBP 2361/month. Is the P owed the

difference? Held No, when the government took control of the vessel, the contract was "whollydischarged," and the owner gets the profit just as the owner would have had to live with any loss.

Kel Kim Corp. v. Central Markets, Inc (543) - 1987 - P leased a supermarket from Ds for 10years with two 5-year renewal options. The contract said that P would maintain $500,000 single-personinsurance and $1 million per-accident insurance. The contract contained aforce majeure clause thatexcused performance "by reason of labor disputes, inability to procure materials, failure of utility service,restrictive governmental laws or regulations, riots, insurrection, war, adverse weather, war, Acts of God,or other similar causes beyond the control of such party ...." The insurance carrier gave P notice that itwouldn't renew insurance coverage, and P was unable to find alternate insurance. Ds gave notice ofdefault and ordered P to vacate the premises within 30 days.Should P be excused from performance because of impossibility? Held No, impossibility is a narrowdefense regarding the destruction of the object of the contract. P should have made allowance to

find insurance.Should P be excused from performance because offorce majeure (clauses excusing nonperformance dueto circumstances beyond the control of parties)? Held No,force majeure clauses should be narrowlyinterpreted, and losing insurance is substantially different than the kinds of day-to-day commercialoperations listed.

Bunge Corp. v Recker (545)1975D farmer made an agreement, one of a series ofagreements, with P for 10,000 bushels of No. 2 yellow soybeans for $3.35/bushel. The contract was forany soybeans, as long as they were grown in the continental US. Severe winter weather struck Missouri,and in January, when the market price for beans were $4.98, P visited D and saw that the beans in thefield could not be harvested. P extended the deadline until April, at which time the price of beans was upto $5.50.Held D cannot claim a UCC 2-613 act of God defense, because the contract was for any old beans,

not the particular ones damaged in the field.Held The defendant might be able to reduce damages by fixing the breach date in January and using thelower bean market price, claiming that the plaintiff had extended the due date in bad faith under UCC 2-613, but D would have to raise that defense and it would have to be triedthe damages cannot be reducedif the bad faith defense has not been raised and tried. (why the different result in Snipe?)

Snipes Mountain Co v Benz Bros (547)1931 - P grower contracted to sell 100 tons ofpotatoes, it being understood that they were being grown by P. Natural causes caused a small yield, and Pcould only deliver 64 tons. P sued for payment of the 64 tons, and D counterclaimed for damages for theundelivered 36 tons. HeldP is excused from producing the 36 tons, because there was an impliedcondition in the contract that P would be able to produce all 100 tons. As this was understood by bothparties, the contract can be modified to specify, "potatoes grown on the following described premises."Everybody involved in contract contemplated that all of the potatoes would be grown by P; the fact

that this wasnt included in the contract was MUTUAL MISTAKE.American Trading & Prod. Corp. v. Shell Int'l Marine, Ltd. (548)1972 - D chartered Ps

vessel to transport cargo from Texas to India for ~$400,000, which was calculated based on the AmericanTanker Rate Schedule (ATRS) for transport through the Suez Canal. Because of war the Suez Canal wasclosed, forcing the vessel to navigate the Cape of Good Hope, arriving in India 30 days late and taking atrip twice as many miles. P sued D for an extra ~$130,000.Held The closing of the Suez Canal does not provide an excuse of impossibility, because the contractdid not stipulate an exclusive route, and the price calculation at most indicated that the Suez Canal wasthe most probable route.


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Held There is no excuse of commercial impracticability (Restatement 454 (1932)), because the extracosts incurred were only 1/3 of the total price. The alternate route was well recognized. Moreover, thecaptain knew of instability in region far enough in advance to have diverted and avoided some expenses.

Krell v. Henry (555)1903 -P advertised a room with windows perfect for viewing the King'sprocession, and D came and looked at the room and asked the housekeeper about it. In letters, Henryagreed to rent the room for GBP 75 for two days (not the nights). The King fell ill and did not process, so

P sued for the GBP 50 balance and D counter-claimed for his GBP 25 deposit.HeldIf it appears that a contract depended on the existence of something, the contract shall beconsidered to have an implied contract regarding the existence of the thing. Allowing paroleevidence to be introduced, it's clear that the King's procession was the foundation of the contract, eventhough the letters making up the contract didn't state that. The criteria are: 1) The thing was thefoundation of the contract. 2) The thing was prevented. 3) The event preventing the thing wasunforeseen.-how do we know the room was to be rented for the procession? Because the price was outrageous.(contract signed on 20th; king falls ill on 22nd; procession canceled on 23rd; was supposed to be on the 24th-why not modify contract so that buyer is bound for next coronation?

-too uncertainnot sure when it will be. Plaintiff may not be out of town for the next coronation.Lloyd v. Murphy (560)1944- On August 4, 1941, Ps leased to D for five years land on

which to sell new automobiles, do repairs, and sell gasoline. In early 1942 the government ordered a holdon new car sales, then allowed limited sales using a system of priorities. D, who continued selling newcars elsewhere, breached the contract claiming commercial frustration, in which "Performance remainspossible but the expected value of performance to the party seeking to be excused has been destroyed by afortuitous event, which supervenes to cause an actual but not literal failure of consideration...."Held There was no commercial frustration. 2 requirements for commercial frustration 1) The risk ofthe frustrating event must be reasonably unforeseeable (as the purpose of a contract is to give abusinessman some certainty), but here the risk of war and the government's previous actions made newcar sale restrictions foreseeable. 2) The value of the lease has not been destroyed, because the sale ofautomobiles have not been made impossible, only restricted. Defendant, after all, continues to sellautomobiles on other property.

Weyerhaeuser Real Estate Co. v. Stoneway Concrete, Inc. (561)1981 - P leased

mineral rights to D for nine years to strip mining of sand and gravel. The contract said that paymentwould be made even if D didn't get any minerals from the land, and required a one-year notice beforetermination even if getting minerals from the land became uneconomical. Both parties expected up to atwo-year wait to obtain permits, but because of an unexpected public outcry over the environmentaleffects of strip mining the permits were not granted after five years.HeldD may break the lease because there was frustration of purpose. While both parties expected aslight delay, it was totally unexpected that permits would be impossible to obtain.Dissent It doesn't make sense to say that it's expected that permits be difficult to obtain, yet say that it'sunexpected that permits would be impossible to obtain.

Chase Precast Corp. v. John J. Paonessa Co. (562)1991 - State of MA, through thedepartment of public works (DPW), hired D to install concrete barriers in place of a grass median. Dcontracted with P to supply the concrete barriers. The DPW/D contract contained a standard provision

allowing the department to eliminate portions of work it found unnecessary. The D/P contract held nosuch provision. After a public outcry against the project, D stopped work amid frustration of purpose(commercial impractibility) in which "a party's principal purpose is substantially frustrated without hisfault" by the occurrence of some event removing a basic assumption on which the contract was made,under Restatement (Second) of Contracts 265 (1981). P sued for anticipated profit.Held D is relieved of further performance because the circumstances were unforeseen and D didn't takeon the risk of a reduction in the quantity of barriers. Even though there was no clause in the D/Pcontract removing assumption of risk from D, P had supplied barriers before and knew about the


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standard clause as was in the DPW/D contract, and about the "Unit Price Philosophy" in theconstruction industry which only the quantity of work actually accepted is paid for.

R2C 265Frustration of PurposeWhere, after a K is made, a partys principal purpose issubstantially frustrated without his fault by the occurrence of an event, the non-occurrence of which was abasic assumption on which the K was made, his remaining duties to render performance are discharged,unless the language/circumstances indicate the contrary.

V. Policing the Bargain1. Competency and Other Limitsnot discussed in class2. DURESS AND COERCIVE RENEGOTIATION

Batsakis v. Demotsis (591)1949 - D, in Greece during WWII, needed money so she asked Pfor 500,000 drachmas (US$25 at the time), and she signed a contract with P saying he had given herUS$2,000 and that she would pay back US$2,000 with 8% per annum interest. Must D abide by the$2,000 plus interest in the contract even though P only loaned her the equivalent of $25?Held Yes; inadequacy of consideration does not void a contract. In effect, P paid D $25 to sign sayingshe owed him $2000, and the document in that agreement amounts to valuable consideration.

Embola v. Tuppela (594)1923 - D's $500,000 Alaskan gold mine was sold by hisguardian while he was insane. He told the P, after loaning him $270, that if he would loan D $50 more, ifhe won his mine back in court he would give plaintiff $10,000. After winning back his mine, Tuppela

(apparently incompetent again) asked his trustee to pay P the money. Was the contract unconscionablebecause of the disparity of sums?Held No; D was of a sound mind at the time and considered the contract fair and to his advantage. Theuncertainty of the payback event supports the adequacy of the consideration. (like a lottery ticket)

Alaska Packers' Ass'n v. Domenico (601)1902 - A group of fishers contracted to work on aship for the season, some for $50 and some for $60 (plus more for each fish caught). Out at sea, they gottogether and demanded $100 or they would stop working and return to San Francisco. As the companyhad invested a lot of money into the enterprise, and there was no way to get other workers in time, thesuperintendent signed a new contract with them, while stating that he had no authority to do so. Is therevalid consideration for a new contract with a higher price for work someone is already obligated to do, ifthe contract is made in the presence of necessity?Held No. One cannot introduce consideration by one's own wrong of refusing to perform on a

contract. The new contract cannot be legally enforced, even if the party requesting better terms relied onthe new contract, because that would allow that party to profit from breach of the first contract.

Schwartzreich v. Bauman-Basch, Inc. (605)1921- P was a coat designer for Dmaking $90/week. P got an offer for $110/week and told D, who said that he would raise his pay to$100/week if he would stay, because he had to get a sample line on the road soon. They tore up the oldcontract and made a new one. D later discharged P, who sued. Is the second contract enforceable?Held Yes. Two parties can mutually rescind a contract and make another one, even at the sametime. Once the first contract is rescinded, their mutual promises provide consideration for thesecond contract. [Later decisions have upheld the result but not the reasoning, deciding that rescindingand creating a new contract cannot occur at the same time if the second has better terms to one party,because that raises doubt as to the mutuality of the rescission, and the rescission of the first and thecreation of the second circularly rely on each other.]

Austin Instrument, Inc. v. Loral Corp. (606)1971 - The Navy contracted with D for $6million for production of radar sets, so D subcontracted to P for parts. D was awarded another Navycontract and solicited more bids, and selected P for some of the 40 parts. P then said that, unless D wouldaccept increased prices for the first subcontract and assign all 40 parts to P for the second subcontract, itwould cease production. D checked all its other suppliers and no one could even start supplying in time,and the Navy's contract had all sorts of sanctions for late delivery, so D agreed. Three days after the lastshipment from P, D filed an action to recoup the raised prices on a theory of duress.


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Held This is a classic case of duress. D couldn't renounce the P contract because it needed the partsfor the Navy contract, and couldn't get them elsewhere. It was justified in waiting to file suitbecause of the likelihood that P would again cease production.Dissent The Appellate division already determined that there was no damage to D, so this court shouldnot change that factual decision. D also should have checked other suppliers in addition to the ones withwhich it was familiar.

Smithwick v. Whitley (609)1910- duress exists only where the unlawful act ofanother has deprived one of free will.

Wolf v Marlton Corp (609)1959- Duress is tested, not by the nature of thethreats, but rather by the state of mind induced thereby in the victim.

R2C 89Things not anticipatedA promise modifying a duty under a contract not fullyperformed on either side is binding (a) if the modification is fair and equitable in view of circumstancesnot anticpated by the parties when the contract was made; or (b) to the extent provided by statute; or (c) tothe extent that justice requires enforcement in view of material change of position in reliance on thepromise.

Hackley (D) v. Headley (P) (623)1881- P hired D to cut logs and take them to the river. Whenit came time for D to pay P ~$6000, D disputed the measurement standard used and said he would onlypay P $4000. P would have been financially ruined had he not taken the money, so he said he would sue

D but took the money and gave D a receipt. Has duress occurred if the leverage of the compromisedepends on the particular circumstances of the plaintiff?Held No. Duress is when "one by the unlawful act of another is induced to make a contract or performsome act under circumstances which deprive him of the exercise of free will." duress is determinedsolely by the actions of the D. Here D had nothing to do with P's dire financial condition, and not payingthe full amount on time would have not been duress had P been financially well off. (It's not duress if theone doing the threatening has a right to perform the action.) [P sued again and won, saying instead ofduress that D tried to pay less than he knew he owed.] BUT SEE

Capps v. Georgia Pacific Corp. (625)1969- P found a lessee for D's land and wasowed ~$150,000 (5% of the lease price). D only paid P $5,000 and, since P would have received nothing,gave a receipt for the $5,000. HeldDuress exists when a threat depends on the financial condition ofthe plaintiff, reversing the holding inHackley v. Headley. Concur If one party induces another to make a

deal based upon the other party's dire financial conditions, many business transactions might be subject toa charge of duress. It would be better to simply say that a receipt for a payment less than what it'sacknowledged is owed is invalid without consideration.

Marton Remodeling v. Jensen (627)1985 - D hired P to remodel his house on a "time andmaterials" basis. D claimed the resulting total of ~$6500 was too expensive and sent a $5000 check with"...full and final satisfaction of ... claims ..." written on it. P responded that the amount was not enough,but then wrote "not full payment" below and cashed the check. Held The check was an accord andsatisfaction as it was noted "paid in full" and covered a single, unliquidated claim that was a bona fidedispute. HeldOne cannot get around an accord and satisfaction by writing "not full payment" onthe check, because the law favors an accord and satisfaction as a means of compromise and if acreditor can reserve rights on an accord and satisfaction, it would decrease its utility.

UCC 3-311. ACCORD AND SATISFACTION BY USE OF INSTRUMENT.

(a) If a person against whom a claim is asserted proves that (i) that person in good faith tenderedan instrument to the claimant as full satisfaction of the claim, (ii) the amount of the claim wasunliquidated or subject to a bona fide dispute, and (iii) the claimant obtained payment of theinstrument, the following subsections apply.

(b) Unless subsection (c) applies, the claim is discharged if the person against whom the claim isasserted proves that the instrument or an accompanying written communication contained aconspicuous statement to the effect that the instrument was tendered as full satisfaction of theclaim.


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(c) Subject to subsection (d), a claim is not discharged under subsection (b) if either of thefollowing applies:

o (1) The claimant, if an organization, proves that (i) within a reasonable time before thetender, the claimant sent a conspicuous statement to the person against whom the claim isasserted that communications concerning disputed debts, including an instrumenttendered as full satisfaction of a debt, are to be sent to a designated person, office, or

place, and (ii) the instrument or accompanying communication was not received by thatdesignated person, office, or place.

o (2) The claimant, whether or not an organization, proves that within 90 days afterpayment of the instrument, the claimant tendered repayment of the amount of theinstrument to the person against whom the claim is asserted. This paragraph does notapply if the claimant is an organization that sent a statement complying with paragraph(1)(i).

(d) A claim is discharged if the person against whom the claim is asserted proves that within areasonable time before collection of the instrument was initiated, the claimant, or an agent of theclaimant having direct responsibility with respect to the disputed obligation, knew that theinstrument was tendered in full satisfaction of the claim.Denney v. Reppert (634)1968 - Facts: Some guys robbed a bank. The bank put out a $500

reward for the capture of each robber. The robbers got caught, and a whole bunch of people fought overwho should get the money. The robbers were apprehended by three cops. They were helped by the bankemployees because they disclosed a lot of important details about the crime. There were also theReynoldses, who also gave some information. The Bankers Association asked the court to determine whoshould get the reward. The people who didnt get the reward appealed. The issue was who was entitledto the reward? Rule:When a reward is offered for performing some act, anyone can collect it exceptsomeone acting within the scope of their employment or official duties. Analysis: The court findsthat the bank employees were basically just doing their jobs, so they get nothing. Two of the officersdont get anything because they were also just doing their job within their own jurisdiction. But Reppertwins out because he was making an arrest that he wasnt bound to make as part of his official duties.3. Scrutiny of Limited Commitment

Sheets v. Teddy's Frosted Foods, Inc. (640)1980 - D had hired P indefinitely as a quality

control director. P alerted D to substandard quality of frozen food products that violated the ConnecticutUniform Food, Drug and Cosmetic Act, and in return D fired P. Should D's motion for strike based uponinsufficient complaint be sustained? Held No; Although contracts terminable at will do not require ashowing of just cause, an employer can be "responsible for damages in tort for a demonstrablyimproper reason for dismissal, a reason whose impropriety is derived from some importantviolation of public policy." The employee's job and expertise was to check quality, so the employer can'tmake him choose between termination and criminal sanction.

McDonald v. Mobil Coal Producing, Inc. (646)1991- McDonald was terminated from Mobil,and he sued alleging that the employee handbook, which indicated that open communication was betterthan unionizing, overrode the original at-will contract. The handbook contained a welcome letter thatindicated that its contents would be in effect until changed, and also contained the sentence, "It is not acomprehensive policies and procedures manual, nor an employment contract." Held (The "nor an

employment contract" disclaimer was not conspicuous, so it isn't valid.) "Mobil's subjective 'intent' tocontract is irrelevant, if Mobil's intentional, objective manifestations to McDonald indicated assent to acontractual relationship." Whether the objective manifestations of assent were sufficient is a mixedquestion of law and fact that must be determined through further proceedings.

Kari v. General Motors Corp. (652)1977 - An employee handbook talked aboutseverance pay but stated in two sections that the handbook did not constitute a contract . Held Thehandbook was not a contract as it contained no promise and no expectations of the employee toperform so as to rely on the promise. There's hardly any way the defendant could have indicated morethat this was not a contract other than by not mentioning the severance plan.


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Dore v Arnold Worldwide (653)2006- Employment contract specifying 'at will' employmentdid not create relationship terminable only for cause; there was no implied-in-fact contract providingthat he would only be terminated for cause4. Standardized Terms, Unconscionable Inequality, and Good Faith

Weisz v Parke-Bernet Galleries (658)1971 - Weisz and Schwartz bought paintingspurportedly by Raoul Dufy for ~$3,000 and ~$9,000, respectively, and then found out they were fakes.

Ds catalog contained a disclaimer stating that, although attempts had been made to verify authenticity,there was no warranty of such. The auctioneer also announced the disclaimer at the start of the auction.Held Weisz was not held to the disclaimer, because he didn't know about it.Held The Schwartz' are not bound by the disclaimer, because even though they knew about it thereputation of Park-Bernet and the form of the catalog gave an air of authenticity and implied thatwarnings should be taken lightly. [The judgment for Weisz was reversed because the display in thecatalog was prominent and auctions have in general an implication ofcaveat emptor.]

Henningsen v. Bloomfield Motors, Inc. (664)1960 - P purchased a new car from D. At tendays and 468 miles the steering wheel spun while Ps wife was driving and the car was totalled. The salescontract contained, in small print, a merger clause and a paragraph limiting the warranty toreplacement of defective parts to 90 days or 4,000 miles, whichever was shorter. They sued to recoverfor personal injuries, and Bloomfield said that the warranty disclaimer precluded suits for personal

injury. Is the warranty disclaimer valid? Held No, warranty disclaimer is not valid. 1) The disclaimerwas in a small font in the midst of other text that made it hard to find, and there is no evidence thatthe plaintiff ever read it. 2) As public policy, the dealership had unequal bargainingpower inrelation to the customer, so the warranty wasn't really bargained forthe salesperson didn't have theauthority to change the clause if he would have wanted to. 3) Even if the warranty disclaimer werevalid, it was ambiguous to a normal person because it made it seem like it was only limiting a warrantyfor parts, not for personal liability.

Richards v. Richards (671) - 1994Mrs. Richards wanted to ride with her husband as he drovea truck for Monkem Co. They said that she could if she would sign a "Passenger Authorization" form thatauthorized her to ride in a particular vehicle, as well as purported to release Monkem from liability fromany future injury in any Monkem vehicle or on any Monkem property. Mr. Richards had an accident,pinning Mrs. Richards in the truck, so she sued. Is the exculpatory contract valid?

Held No, the exculpatory contract is void as against public policy. The point of tort law is tocompensate people for their injuries and provide a deterrance for harmful behavior. Courts disfavorexculpatory contracts but do not categorically deny them. This contract had three problems, none ofwhich alone would have invalidated the contract: 1) the exculpatory purpose is not evident from thetitle of the agreement; 2) the release is overly broad and all-inclusive, allowing riding in one vehicle butrelieving liability for all vehicles;, and 3) it is a standardized form that did not give plaintiff any roomto negotiate terms.

Broemmer v. Abortion Services of Phoenix (676)1992 R2C 211 (STANDARDIZED/ADHESION CONTRACTS) - P was a 21-year-old unmarried high school student who went to get anabortion. The clinic provided her with a consent-to-operate form, a medical history form, and anagreement to arbitrate specifying that the arbitrators would be doctors, all of which the plaintiff filled outwithin five minutes. No one explained the contents of the form to her. During the operation she suffered a

punctured uterus and sued for malpractice.Is the agreement to arbitrate an adhesion contract?Held Moeller: Yes. An adhesion contract isone offered to consumers with no opportunity to bargainwithout which the consumer cannot get the goods or services. It was offered on a take-it-or-leave-itbasis, it was particularly advantageous to the clinic, no one explained the terms or indicated that she couldrefuse, and the terms were not negotiable.Is the adhesion contract enforceable?Held No. The courts like agreements to arbitrate, as they remove the load on the courts, but only if bothparties agree to them. Adhesion contracts are not enforceable if they exceed the reasonable


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expectations of the plaintiff or if they are unconscionable. Here it wasn't clear that P was waiving aright to a jury trial, and the high school girl still isn't quite sure what arbitration is. As it was beyond herexpectations that the right to jury trial would be denied, the issue of unconscionability need not beaddressed.

R2C 211Standardized Agreements- (1) except as stated in (3), where a party to anagreement assents to a writing, and has reason to believe that like writings are typically used, he

adopts the writing as an integrated agreement. (2) such a writing is treated, wherever reasonable, astreating everybody equally regardless of their knowledge/understanding of the standard terms in thewriting. (3) where the other party has reason to believe that the party manifesting such assentwould not do so if he knew that the writing contained a particular term, the term is not part of theagreement.

UCC 2-302. Unconscionable contract or Term. (and remedies)(1) If the court as a matter of law finds the contract or any term of the contract to have beenunconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce theremainder of the contract without the unconscionable term, or it may so limit the application of anyunconscionable term as to avoid any unconscionable result.(2) If it is claimed or appears to the court that the contract or any term thereof may be unconscionable theparties shall be afforded a reasonable opportunity to present evidence as to its commercial setting,

purpose, and effect to aid the court in making the determination.Waters v Min Ltd. (691)1992P was injured when she was 12 years old, and she received a

settlement with which she bought an annuity contract. She met D Beauchemin, who introduced her todrugs and became romantically involved with her. He convinced her to sell the contract, worth $189,000in cash or $694,000 at term, for only $50,000 to Ds, who then forgave Beauchemin's debt. P was notrepresented by legal counsel, although D were.Held The sale was unconscionable, and Ds must repay the annuity with $18,000 interest. Traditionally,unconscionability meant "such as no man in his senses and not under delusion would make on the onehand, and as no honest and fair man would accept on the other." Later it was restated as when "the sumtotal of its provisions drives too hard a bargain for a court of conscience to assist." Unconscionability isdecided on a case-by-case basis, taking into account oppression, unfair surprise, gross disparity inconsideration, high pressure sales tactics, and misrepresentation. Here D introduced P to drugs,

exhausted her credit cards, initiated negotations, was an agent to the negotiations, and profited from theresult. P, unlike Ds, wasn't represented by counsel. The payment was 1/4 the present worth of the annuity.

Williams v. Walker-Thomas Furniture Co. (693)1965 - From 1957-1962 defendantWilliams purchased household items from plaintiff on an installment basis, with an "add-on" clause in thecontract that until all the sum total of all items were paid for, the plaintiff could repossess all goodspreviously purchased. Williams purchased a stereo for ~$500, already owing $164 on a prior purchase,and when she defaulted plaintiff tried to repossess all items she had purchased since 1957. D had neverhad the contract explained to her, and many times had signed the contract without being given a copy.Held The contract was unconscionable. The court can find purchases unconscionable (both undercommon law and under the UCC 2-302) if there is 1) a lack of meaningful choice on the part of oneparty and 2) contract terms that are unreasonably favorable to the other party. Reasonableness andfairness are determined in light of the circumstances existing when the contract was made.

Brower v. Gateway 2000 Inc. (700)1998 - Gateway includes standard terms and conditionswith computer which are binding 30 days after delivery. Dispute resolution provision sets out that alldisputes are subject to arbitration at a specific forum. The forum has a high upfront cost ($4000), $2000of which is non-refundable. P also must bear cost of Gateways legal fees if they dont win.Held: That is unconscionable because it is effectively a complete bar to litigation. Under NY lawunconscionability requires a showing that the contract is both procedurally and substantivelyunconscionable, there must be some showing of an absence of meaningful choice on the part of one ofthe parties together with contracted terms that are unreasonably favorable to the other.


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R2C 205. Duty of Good Faith and Fair DealingEvery contract imposes upon each party aduty of good faith and fair dealing in its performance and enforcement.

Martin v. Joseph Harris Co. A legally sophisticated seller may not take advantageof a buyers lack of legal expertise about warranties to shift, by cryptic language, the risk of loss forlatent undiscoverable defects.

Market Street Assocs. Ltd. Partnership v. Frey (708)1991 - Market Street enters into sale

and leaseback arrangement with Frey. They sell and the pension trust leases back for 25 years, PensionTrust must finance costs of expenses for construction and improvements provided the cost is at least$250,000. Pension trust agrees to give reasonable consideration to providing financing, and shouldnegotiations fail Penney can rebuy at the original price sold plus 6%/year. Approached regarding thispiece of land, on which a drugstore will lease if Market Street builds them a store, which is customary.They call and ask for the loan, and Frey does not reply. Frey then says well review it and get back toyou. Negotiations dont really go anywhere. Market Street rights a letter formally requesting $2 millionin funding that does not mention the lease. They are continually unresponsive and dont write back.They send a second letter requesting financing, and the next day they get a letter turning down theoriginal request for financing, because Frey is not interested in making loans for less than $7 million.Market Street then notifies Frey that they are buying back according to contract. Frey refuses to sell,Market Street sues.

Held: Posner says that Market Street doesnt need to tell Frey about the contract, as they both havea copy. Good faith doesnt mean you have to be your brothers keeper, especially when your brotheris the GE pension trust, whose lofty indifference to small transactions (under or equal to seven million)is the signifier of its grandeur. You dont have to be forthcoming, so long as you dont lie ormisrepresent. The dispositive question is were they trying to trick Frey. The only way for that tocome out as yes is for you to read facts as favorably as possible to Frey, which we dont because Freywants summary judgment.

VI. The Maturing and Breach of Contract Duties1. THE INTERDEPENDENCE OF PROMISES

Kingston v. Preston (721)1773 - P contracted with D to work for him for a year and a half,then he would go into partnership with the D's nephew, D would go out of business, P would give securityof GBP 250 per month until it reached GBP 4000, and would take over D's business. P worked the said

amount of time, and then sued the defendant for not turning over the business. Held Lord Mansfield: Theplaintiff must first give the defendant the security. There are three types of agreements:1) Mutual and independent, where either party may recover damages from the other for injuriesfrom breach.2) Conditional and dependent, in which the performance of one depends on the prior performanceof another.3) Mutual conditions to be performed at the same time, if one party was ready and offered toperformand the other refused, he who is ready may maintain an action against anotherHere the giving of the security was a condition precedent to the D handing over the business. (2)

R2C 234 - Order of Performances - (1) Where all or part of the performances to beexchanged under an exchange of promises can be rendered simultaneously, they are to that extent duesimultaneously unless language or circumstances indicate otherwise.

R2C 238 - Effects on Other Parties Duties of A Failure to Offer Performance - Where all orpart of performances to be exchanged under an exchange of promises are due simultaneously, it is acondition of each partys duties to render such performance that the other party either render or withmanifested present ability to do so, offer performance of his part in a simultaneous exchange.

Price v. Van Lint (724)1941 - D promised to loan P Price $1500 by February 1, 1940 to buildon land, and the P in return promised to provide a mortgage to D as security. D placed $134 in P's accountso that P could buy the land, and both parties knew that the money would have to go to Amsterdam and itwould take a while for the deed to get back. D told other lenders that D would lend the money, so theyprovided lumber. D decided not to lend the money, so P was delayed in finishing the building and


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opening it as a nightclub. Were P's promise to provide a mortgage and D's promise to lend the moneyindependent, and thus there can be no recovery, or dependant, in which case D must loan the money evenwithout the mortgage. Held The loans were independent, and D owes damages for breach for notproviding the loan in time. Mutual promises by default should be considered dependent unless languageindicates otherwise. But where there are mutual promises to pay money or to provide some act, andthe time of performance of one occurs or could occur after the other, they are independent. Here

both parties knew that it was likely the deed wouldn't get back from Amsterdam in time to have themortgage be given to P before the loan was given, so the promises are independent.Held P must pay the $35 cost of the attorney presiding over the substitute loan to P, but not the $46 fromthe outrageously 60% high-interest loan not anticipated by the parties. D likewise couldn't hvaeanticipated the extra $21.30 for roofing materials in installments because of the absence of the lentmoney. The $5/day loss in profits is speculative and should not be allowed, but the $62.50 in rent lost canbe corraborated.

Conley v. Pitney Bowles (730)1994 - P, who worked for D, was injured in an automobileaccident. For benefits under the Employee Retirement Income Security Act (ERISA), his employmentcontract required P to exhaust administrative remedies before suing for denial of disability benefits. Thecontract also required a written notice of any denial to be sent to P, explaining the exhaustionrequirement. The D letter to P did not explain the exhaustion requirement.

Is the letter containing an exhaustion requirement a condition precedent to Conley following theexhaustion requirements?Held Yes. When a contract contains multilateral conditions and one is to occur in time before theother, the first is a condition precedent to the other . Here, the denial of benefits letter (listing appealinstructions) would have been sent prior to Conleys exhaustion obligations. Because the letter did nothold up PBs side of the bargain, Conley did not have to hold up his.Does public policy require Conley to exhaust the administrative remedies nonetheless?Held No, the freedom to contract is a more important public policy.Should Conley b

Documents

Final Contracts Outline (2nd Semester)