Contract Outline 2014

CONTRACTS OUTLINE HAAGEN SPRING 14
Class 1: Jan 9, 2014

- White v. Benkowski
o P buys house with no water supply except from well on Ds
property. Problem arises when D cuts off water supply even
though K says will provide adequate water.
o Under K -> P has to pay $3 a month for service, of
maintenance, of repairs to pump
o Types of damages awarded:
Compensatory
Punitive -> there are no punitive damages in contracts
(one single exception, wrongful denial of an insurance K)
o Theory of obligation:
Expectation: there is an expectation of harm when promise
was made expect to have expectations realized
Reliance: relied on promise for basis to purchase house
claim
Gave money for the first month the money as harm.
Restitution claim.
o IN K we are most concerned with expectation in determining
damages.
Class 2: 1/13/14
o Compensation is limited to what can be proved consistently
under-compensation for breach
- Sullivan v. OConnor
o P agrees to pay $622 for nose job. Scheduled to have two
surgeries. Cost to her ($622 + 2 operations). Cost to OConnor
(professional services in two operations).
o K: He promised a perfect nose. In K you are liable for harm you
caused but you had some reason to anticipate it. (Not liable for
things you cannot prove or things that the other party may not
have taken into consideration).
o Party with most information is responsible to convey to other
party circumstances taken into consideration
o 3rd surgery does not work to fix other two.
o Calculating damages: expectancy
Puts her in position she would have been if not for the
breach
IN expectancy you are not entitled to your out of pocket
expenses (if it had gone well you would have spent that
anyway)
o Promise of a perfect nose is not enforceable there are K that
are unenforceable
Reliance claim:
Difference between where she is and where she was
before promise
Claim: put me back where I was before all of this

Can get: measure of what she lost in that time
(market value of time, market value to the degree we
can put of her recovery, of her pain, and out of
pocket expenses (+ surgeons fee))
Restitution: As a result of breach you got $622, give it
back.
o Entitled to what you can prove; however cannot collect on
inconsistent theories. You get whatever theory you prove.
Unless there is some very specific rule, you are entitled to any
damages that you can prove
CONSIDERATION
- Hardesty v. Smith
o Party autonomy. You get to decide what something is worth. So
what if it is a bad deal. You get to decide the value as long as
there is some consideration. Market gets to put value on things.
You as a party put value on things court is not going to
second-guess the value you put on something.
- Dougherty v. Salt
o Case where woman wants to give 3K to her nephew said she
received love from him as consideration.
o In form there was consideration; however, the mere form of
consideration does not create an agreement. There has to be
an actual exchange of goods and valuable consideration.
o Would have been valuable if they said that Charles got money if
he did something in the future (like get good grades) or you get
this if you come here and give me a hug.
It doesnt matter how valuable act it. Something in the
past is not exchange. Past consideration is NOT
consideration.
- Restatement definition of consideration:
An act other than a promise, or
A forbearance, or
The creation, modification or destruction of a legal relation,
or
A return promise
o Agreement must be given in exchange, must take one of these
forms.
o Consideration is substantive doctrine to police boundary between
gift and bargain. Tells us if something is enforceable as K,
other things are gifts/estates
Three functions:
Evidentiary (small function, easy to get consideration
(can be $1))
Cautionary small function (can make purchase on a

whim)
Channeling protects a certain kind of bargaining,
protects a lot of silly bargaining
Maughs v. Porter
o Promise was that if person won automobile then they got it
o Consideration: winner must go to field to watch the drawing
shows purported exchange for consideration. Coming to field
was purport of exchange, thus valid consideration.
Hamer v. Sidway
o Uncle makes promise of 5K in exchange for good behavior until
21 good and valuable consideration on both sides. Legal, valid,
enforceable contract.
Consideration is substantive requirement. If you do something which
formally looks like consideration but is substantively nothing, it is
impossible/you cannot perform/it is silly, then that could be merely a
form of a promise (like Helena) and not an actual promise.
Consideration is a substantive requirement. Parties get to
establish value.
If there is exchange and exchange has value, as long as it
purports to a certain form, as long as it is not an attempt to
defraud the court, then you have met the substantive
requirement and the parties get to establish value.
1/22/14
- UCC is binding:
o Section 1 304: Obligation of good faith
o Section 2-306: exclusive dealing arrangement. UCC infers that
duty of good faith requires that parties use best efforts to meet
requirement under an exclusive deal arrangement.
- Weiner v. McGraw Hill
o Holding: it was good consideration to leave his job and to accept
employment in return for their promise to fire him only for good
cause.
- Mutuality of obligation in order for there to be an enforceable K
there must be mutuality of obligation
o Only means SOME obligation, not the SAME obligation (doesnt
even have to be equivalent)
- Kamboj v. Eli Lilly
o Relinquishing a prior job to take a new job is insufficient
consideration however, if forbearance is specifically bargained
for detriment then there is an exchange and consideration is
present
- Mattei v. Hopper

o I agree to pay you for some service if I feel like it illusory
promise, has no content, cannot figure out if it is violated or not.
PROMISSORY ESTOPPEL
- Kirskey v. Kirskey
o Kirskey moves to Alabama from TN when her husband dies
brother-in-law promises her a cabin
o Debate: Is it a gift? (just came to accept gift court says); Brother
attempting to get her to move, induces an action on her part
- Ryers v. Trustees of Presbyterian Congregation of Blossburg
o Reliance a change of position
o People incurred expenses, paid $100 to church, put themselves
in worse position in reliance on what Ryers said. changed
position based on what he said
- Seavy v. Drake
o Dad promises to deed certain real estate in favor of the child.
Child makes improvements, pays taxes, makes expenditures.
o Court says there was promise to deliver deed and actions taken
in reliance upon that promise equity in consideration, have
reliance, change in position.
- Modern Contract law deals with reliance and change of position:
o Old approach: jam it into the world of consideration (first 3 cases)
o Pg. 123 Restatement 2nd of Contracts 90
1st restatement (pg. 100) -> must be a promise that must
induce an action of a definite and substantial reliance
2nd Restatement: must be a promise that is reasonably
expected to induce an action (just the sort of thing you
would expect)
Critical difference: under 1st if you have made out that you
have definite and substantial reliance then effectively you
have a K (promise is enforced)
- Instances where you have changed your position for the worse
because of reliance on a promise:
o Siegel v. Spear
P goes away for a couple of months puts furniture in
storage. D asks if he has insurance, says they will take
care of it for P. Furniture gets burnt down to the ground. D
never got insurance.
Harm: Promise induced him to be indolent, careless, to not
protect his interests
Court treats as if D became insurer. P gets whatever
reasonable insurance policy would have paid out less what
he would have paid.
o Wheeler v. White

D promises that he will get loan and if he cannot get the
loan he will make it himself. Problem promise is too
indefinite to constitute an enforceable promise. Too
uncertain to be enforced at law (cannot figure out how
harmed they were)
Under Restatement 1st 90 this is binding reasonable
reliance.
Court: promise too indefinite (cannot get specific
performance), P gets reliance damages (cannot get
expectations because cannot determine how much money
would have made), dont know terms of loan.
Instances where there is a promise, which the party making
the promise knew or should have known caused a change of
position AND it causes a change of position, then the other
party is entitled to compensation for that change of position.
o Hoffman v. Red Owl Stores
RULE: 1) as the promise one which the promisor should
reasonably expect to induce action or forbearance of a
definite and substantial character on the part of this
promise? 2) Did the promise induce such action or
forbearance? 3) Can injustice be avoided only by
enforcement of the promise?
Court does two things:
Takes injustice element of 1st restatement and reads
into the remedy of the 2nd restatement
Recovery grounded under theory of equity
o Elvin Associates v. Franklin
P tries to get D to be lead in Broadway play, incurs a lot of
expenses.
Theory of justified reliance, court awards damages.
D knew that P was likely to change position and that
P had to change position based on that promise.
Calculation: nature and quality of relationship/promise,
necessity of acting, awareness of necessity of acting
o Local 1330 US Steel Workers v. US Steel Corp.
Claim: D could not abandon town, promised they wouldnt
abandon the workers
Court: not reasonable for average worker to think that
people who made promise were in a position to do so
problems with promise, promisor, determining if there has
actually been an induced action as a result of the promise,
if there was a reasonable response to promise
Reliance is a contract related kind of claim. It is a separate
kind of claim that exists independent of a bargain claim.

UNJUST ENRICHMENT
- K implied in fact: enforceable, missing certain verbal exchanges, but
watching the way in which parties have operated we can determine
that there is a K
o May be implied out of past actions, nonverbal communication
- K implied in law same as quasi-contract. Law will impose an
obligation even though the parties themselves did not in fact ever
reach an agreement. Why? It would be unjust and improper for
someone to retain a benefit and not pay for it.
- Bloomgarden v. Coyer
o No unjust enrichment claim if you are rendering a service for
which you typically get paid, then it is reasonable for parties to
expect to pay
o Problem: P had history where he didnt expect to get paid
- Sparks v. Gustafson
o P and D own building. D does most of work. P dies. Executor
doesnt give D anything even though he put in a lot of effort,
time, work.
o Qs: What is relationship between parties? Was it type of thing
that they would do for one another without expecting
compensation?
o Legal test: was a benefit conferred with an expectation of
compensation in a situation in which it would be unjust to allow
that person to retain it?
- Gay v. Mooney
o P provides shelter and food for another relative. Intent was for P
to get paid for providing shelter
o Figure out market value fair market value of services and goods
rendered
- Kearns v. Andree
o P rendered services at Ds request. D was gonna buy the land
but then decided not to.
o P is entitled to fair market value of work done. Doesnt matter D
changed mind.
- Kelley v. Hance and Britton v. Turner
o Breaching party bringing claims breaching party cannot bring
claim in K because they repudiated K.
- Clear legal test for a bargain for consideration need an
exchange of good and valid consideration.
- Clear legal test for showing a Section 90 reliance promissory
estoppel when a person knows or should know that their
promise would induce someone to do something
MORAL OBLIGATION BENEFITS RECEIVED
- Mills v. Wyman
o D gets sick. P takes care of him. Ds father said he would pay,

does not.
o Court says no consideration for promise. Fact that you violated
moral norms does not create a contractual duty.
Webb v. McGowin
o P goes to drop pine block, D is below so he holds on, falls, gets
hurt. D promises to pay $15 every two weeks for rest of Ps life.
Ps kids stop paying. Court says they have to.
o Repetition of payment or promise overcomes something that the
courts get very worried about in this context that someone
might rationally agree to do something decent and wouldnt
think through what theyd done
Harrington v. Taylor
o D was assaulting wife, she runs to neighbor. Fight ensues, wife
takes axe, P steps in and gets injured. D says she will pay P for
injuries. D only pays small amount for damages to hand.
o Court: D realized had gotten himself in trouble and made a
grandiose problem, court does not enforce.
Restatement 2nd 82(1)
o Promise to pay all or part of an antecedent contractual or
quasicontractual indebtedness owed by the promise is binding if
the indebtedness is still enforceable or would be except for the
effect of the SOL
o T1 legal obligation, T2- no obligation, SOL, T3 reinstated by
promise (why reinstate? Improve credit)
Edison v. Poppe
o Ds tenant builds well (cost $250, increased value of property), D
agreed to pay P for work. D does not pay.
o Court: Benefit conferred to D. D agreed to pay. Easily measured
benefit to landowner. Increased value substantitally
disroportion between promise and value received.
o Court says D has a duty: Restatement 2nd 86
A promise made in recognition of a benefit previously
received by the promisor from the promisee is binding to
the extent necessary to prevent injustice
Law in these cases: trying to provide a way to enforce promises that
have clear social utility even though they are made after the fact. If
there is a promise you get paid the value that was promised. 86
addresses concerns & issues when parties cannot bargain with one
another in real time.
TORT
- Nature and source of obligation:
o Doctor must operate at level required in the community once you
have triggered that with a K
o If you buy a product, as soon as that product is purchased and

sold, all owed to A comes with it if you are injured you are
entitled to tort damages that result from purchase and sale.
Without K tort duty isnt triggered
o Damages in K (expectancy, reliance, restitution) -> entitled to a
position that you would have been in if the promise had not been
made, or to get that part of the benefit which the other party
retains unjustly.
Mauldin v. Sheffer
o P an architect hires D as a mechanical engineer. D makes
blueprints that are physically impossible, thus P incurs a ton of
expenses.
o Cannot sue in K because downstream losses are too attenuated,
can sue in tort (as an engineer there is a professional duty of
reasonable care that D violated).
Hargrave v. Old Nursery
o P contracted D to provide vines for their winemaking business. D
represented that vines were free of disease. Turns out they were
diseased and unable to bear fruit.
o Difference between promissory fraud permitting you to sue in
tort and a regular contract fraud:
Depends on timing
If I enter into a contract with you with the full
intention of not fulfilling the contract for the purpose
of harming you, then I have committed a promissory
fraud
If D knew that vines were diseased when entered into
contract then tort.
If they intended to fulfill contract as is and then it
turned out they were diseased, then sue in K.
Foley v. Interactive Data Corp.
o Implied covenant of good faith and fair dealing comes from
UCC
o UCC only applies to sale of goods people try to apply the
covenant to every contract, has to be in the K and your rights are
limited by your K
Vanlente v. University of Wyoming Research Corp.
o Court: in an employment relationship, people ought to protect
themselves 0 you dont expect your employer to be looking out
for you
o Tort claim when K triggers independently created duties
(someone regulated by state) -> generally the duty of a seller of
products (you sell a defective product you trigger duty);
however, do not transform every breach into a tort merely
because you can articulate it as such. Has to be a SPECIAL

relationship, particular reason to believe mental solicitude is at
core of the relationship.
CONTRACT OBLIGATION ON FORM
- Purposes
o Evidence of contract use to promote claim or preclude from
using it at trial
o Facilitates transaction makes it easy if there is one form
everyone uses
o Form is cautionary
- 87 of Restatement 2nd: Option Contract
o has to be in writing, signed, provides for future exchange on
reasonable terms, and recites a purported consideration
o Dont need consideration, merely a purported consideration
- Vast majority of American jurisdictions no situations besides option
contracts or possibly firm offers in which mere form will be enough
- Obligation Arising from a Statutory Warranty
o Warranty exists in UCCbut even outside the commercial code it
exists generally as a rule of interpretation in contracts law
If you say something is such and such, AND it is not such
and such, THEN you have violated the warranty exists
separate from K in the sense that it doesnt have to be
expressed in K, but it is attached to the K
Opinion doesnt create warranty except when opinion is
statement of fact and reflects your own judgment as an
expert
o Have warranty because: 1) seller is lowest cost provider of
information, 2) facilitates communication
o Puts burden on lowest cost provider to say we didnt really
mean that -> circumvent warranty with disclaimer
Why? Entitled to rely on words of another person unless or
until you know they are wrong
o Implied warranty:
UCC 2-213
2-214: Warranty of merchantability if it purports to be a
motorcycle it is to be a motorcycle that is acceptable to the
marketplace as fair, average quality
Avoid by disclaimer: buyer beware
2-315: because warranty is there, if you tell salesperson
you are climbing K2 and he brings out the boots, then is
implied warranty unless you know he is wrong implied
for intended use and purpose
o Puts burden on person speaking to speak clearly and stand by
what they say unless they disclaim it.

o Kelly v. Buchanan
P buys boat for 75K, all advertisements say it is seaworthy.
It is not seaworthy. (LOOK BACK TO HOLDING HERE)
STATUTE OF FRAUDS
- 3 or 4 part analysis:
o Is the transaction within the statute?
Oral agreement stands absolutely equal with a written
contract unless the statute of fraud applies (unless
transaction is within the statute)
o Is there a writing sufficient to meet the terms of the statute and
has that writing been signed by the person against whom the
action is being brought
o Is there a doctrine that takes the transaction out of the statute?
o Is there some other reason to enforce the agreement despite the
agreement that falls within the statute, that there is no writing,
and there is no other satisfaction of it Equitable determination
that the agreement ought to be enforced in spite of the failure to
meet the statute.
- When courts construe whether or not it falls within the statute the
court construes with hostility. Generally interpreted narrowly
- Howard Schoor Associates v. Holmdel Heights Construction
o A special promise to pay for the debt of another must be in
writing.
o Where the consideration for a promise that all or part of a
previously existing duty of a third person to the promisee shall
be satisfied is desired by the promisor mainly for his own
advantage, rather than in order to benefit the 3rd person, the
promise is not within the Statute of Frauds.
o Writing needs to have essential terms --> meaning the basis for
the agreement, show purpose of agreement
Essential: parties, price, quantity
o If in form it is answering debts of another, but substantively it is
for you; outside statute gets knocked out on main purpose rule
--? Company owes him money, has big financial stake in
company, pays debt to get money formatively answers debts
but substantively for personal aid.
- Sterling v. Taylor
o Interest in land core type of statute of frauds conduct
o Identified party, property, price (maybe) enough?
o Court determining if there is enough evidence of an agreement in
writing at least if it is supplemented by reference to external
types of documents
- McIntosh v. Murphy - Oral agreement and statute of frauds
o Guy got hired to work in HI, moves to HI thinking he has a 1 year

contract and gets fired after 2.5 months.
o Enforceable under promissory estoppel, not under statute of
frauds
o Court thinks it is within the statute, but finds grounds to enforce
agreement under part 4 of analysis: equitable determination
o Can assert oral promise and reliance on oral promise to defeat
attempt to use statute as a defense to a bargain.
Dumas v. Infinity Broadcasting Corp.
o Once statute of frauds is not satisfied, it is unnecessary to
consider promissory estoppel as the decision would be the same.
o reasonable reliance if you want 5 year agreement it better be
in writing.
Statute in General
o Important in land dealings
o Operates at beginning of suit to cause dismissal for failure to
state a claim for which relief can be granted
o Channels parties to produce at least enough of a writing to
satisfy this initial inquiry BUT all you need to do is establish
enough of a writing or writings or records
REMEDIES
- Peevyhouse v. Garland Coal & Mining Co.
o D breaches, P entitled to damages
o Entitled to expectancy: difference between what they were
promise and what they got
o 29K was cost of completion, $300 was diminution in value of
their property)
o P gets $300. Policy: dont want to give them the use of contract
to get a breach that gives them a value far exceeding what it
should have been
Want party to pay exactly the harm they caused, but we do
not want them to pay more (assume parties make a market
agreement and are acting in a rational, market
transactional way)
- Rock Island Improvement Company v. Helmerich & Payne
o Cost of performance is the rule according to Rock Island.
- Groves v. John Wunder
o Debate over whether diminution of value or performance is the
right measure.
o Q of market misvaluing property.
- Radford v. De Froberville
o Court looks at particular circumstances
Uses common sense to measure in the case of individual P
what was lost in breach.
o Not like Peevyhouse: In that case they think that royalties for
coal mining were the common point, thus focus on that point.
Here they focus on reclamation, realize that him wanting the wall
built was the common point.
Morello v. JH Hogan
Freund v. Washington Square Press
o Poetry book, WSP said they were going to publish, did not.
o Court rules that royalties were speculative. Yes D breached K but
P can only recover damages only. Determination is not what D
saved but what consequences were to P. P only gets nominal
damages.
Warner v. McLay
o D breaches, Q as to how much P is entitled to recover
o P claims if it werent for breach, he would have profited 10%
o Rule: Breaching party is not an insurer of the profits of opposite
party.
o Need to create a basis for belief that if the promise had
not been breached, you would have been better off than
you are now. If you cannot lay that foundation, you
cannot collect
Handicapped Childrens Education Bd. Of Sheboygan County v.
Lukaszewski
o Hire lady, she leaves and takes another job, P then has to pay
someone 1K extra to fill the position. P gets difference in cost.
Cooper v. Clute
o Really complex cotton case with 10 7/8 and whatnot.
o Breaching party does not become the insurer of the innocent
party. If the innocent party speculates that price will go up and it
does not, then that is their own problem.
o What about under UCC 2-712 comes out the same because of
reasonability standard
Neri v. Retail Marine Corp.
o You have to perform if you agreed to it. (There are few
exceptions which we will discuss later, health is not one of them).
o Subsection 2 explains how this came out the way it did.
o P buys boat for about 12K, deposits 4K. Then gets sick and cant
make the rest of payments. P gets damages in amount of 4K
2K for lost profit 674 in incidental damages.
o 2-7908 when dealer has an unlimited supply of standardpriced goods, the resale to replace the breaching buyer costs the
dealer a sale, because if buyer hadnt breached the seller would
have made two sales.
What are limits on recovery?
o You are entitled to position you would have been had the
contract been kept, subject to a series of limitations
o Series of doctrines limiting recovery:

Forseeability
Mitigation
Certainty
Non-economic harms (punitive response)
o Hadley v. Baxendale Forseeability
NEED TO KNOW
Forseeability arising naturally = what happens most of
the time
Both parties have to know most of the time
Within contemplation of both parties as a natural that
is common expected occurrence
Shifts burden to party that is lowest cost provider -> party
that knows of special circumstances that could arise
P cannot recover because D was just a transporter, was
unaware about special industry in mills.
o Armstrong v. Bangor Mill Supply Corp.
Here, D worked for mill company, had more imputed
knowledge.
P can recover.
Justification for forseeability rule: permits accurate pricing
in a relatively cost-effective way of the transaction.
Permits the party who eventually breaches to know when it
makes sense to breach or whether to enter into the
transaction at all.
MITIGATION
o Can breaching party sue you for failing to mitigate? Yes, it is a
rule of causation.
A harm occurred, but you were in a position to limit that
harm and you did not do it, so the harm that you can
collect for in K is the difference between the harm that was
caused and that you could not have prevented it.
o Clark v. Marsiglia
P asks D to improve two paintings. Tells D to stop working
on 2nd painting, but D continues his work.
D must stop once P breached by telling him to stop.
D is awarded what he got for the work before the breach
Entitled to K price amount saved by non-performance
(gets $150 what it would have cost him to work on 2nd
painting)
When you are told to stop you must stop and attempt to
save the cost of completion unless in a commercially
reasonable situation a party situated like you would

complete the work and sell the completed work because
were you to do that then everyone would be better off.
o Schiavi Mobile Homes v. Gironda
D goes to buy mobile home, pays deposit, never buys the
mobile home. Ds dad says he will buy it but never does. P
then sells movile home for $1028 less than original price.
P did not mitigate. When K is breached, nonbreaching
party has an affirmative duty to take reasonable
steps to mitigate his damages
Have to go to reasonable expense and effort.
o Parker v. 20th Century-Fox Film Corp.
P gets guaranteed K to be in film. Film is never made. Is
offered another film role, does not take it.
Court: Did not have to accept new K to mitigate damages
-> D had to show new employment was substantially
similar, comparable to what had been deprived.
Employment was different and inferior.
CERTAINTY Why cant a new business collect if you breach?
- Evergreen Amusement Corp. v. Milstead
o P cannot collect on Ds breach even though they missed entire
drive-in season
o Court cannot speculate as to profits. Dont know how well they
are doing, what they would have made.
- NEW BUSINESS RULE: You have to be able to show with reasonable
certainty what damages you deserve. Have to demonstrate this is why
it was reasonably certain that this would make money.
- Lakota Girl Scout Council, Inc. v. Havey Fund-Raising Management
o If you can establish a reasonable basis for recovery you get your
expectation of damages. Reasonable basis is a highly mutable
concept.
Expectation bargain -> expectancy (also would sue for reliance maybe -> if
you can prove past/present harm you can get reliance damages even if you
cannot prove future damages)
Promissory estoppel -> reliance
Unjust enrichment -> restitution
-
Nurse v. Barns
o D promises to let P use iron mills for 6 months for 10 pounds.
Court gave damages in the amount of 500 pounds by reason of
loss of stocks laid in.
o Bargain claim
o Here, the lessor is creating waste. Lessor knows that in order to

run an iron mill you have to get in a stock and the lessor knows
that that stock may be wasted.
o Waste can be way out of line of the expected benefit of the
breaching party.
Chicago Coliseum Club v. Dempsey
o P contracts with D to box. There is a contract that D breaches.
o P can recover any money that gave D unjust enrichment claim
o Cannot sue for specific performance.
o Cannot sue in expectation.
o Can recover some expenses they incurred between the K and the
breach=> time after contract and before breach occurred.
o K does not allow you to recover for expenses involved in
enforcement.
Anglia Television Ltd. V. Reed
o P is allowed to get expenses incurred before the signing of the
contract, because D must have known that such expenditures
were being made. P was making movie, hired director, etc. D
backs out and movie doesnt get made.
Albert v. Armstrong
o In reliance on this contract we change our foundation and we
dont get these refiners foundation is useless within this time
period without the refiners. Cannot recover the value of the
foundation later.
o Yes he gets back that expense he is in a worse position than
he would have been had the promise Ive never been made. In
mitigation I have to remove the foundation.
Coppola v. Kraushaar
o Wedding is broken off because gown wasnt delivered on time. P
gets $10 he spent on dress, doesnt get damages for the loss of
wedding or whatever because it was too remote
Autotrol Corp. v. Continental Water Systems Corp.
o P and D are in joint venture. Cannot agree on product
specifications by deadline. D breaks contract and thus breaches.
P gets their out of pocket expenses.
o Fixed costs v. Variable costs (variable looks like they can recover
those) variable and out of pocket are essentially the same
thing; directly attributable to this specific transaction
o Fixed costs are not recoverable generally, but Posner says that is
not right here.
Because salary was not paid because this contract was
breached, they were entitled to recover the amount they
paid in salaries that were allocated to this project
Salaries are not entirely fixed if they hadnt breached,
they would have made a different contract and would have

put the work into that contract (these salaries are thus
sticky, not fixed)
Given that, you can get these overhead expenses.
LIMITED DAMAGES
- You cannot have a penalty in K. That is unenforceable. However, can
have fixed damages.
- Limitation of damage clause about hyper-enforcement
o Need reasonable apriori to figure out what our damages might be
o Damages must be difficult to prove at time of breach
o We have these clauses because they encourage breach when it
would be socially beneficial, calculates ahead of time exactly
what harm would be, makes clear what is at stake
- HJ McGrath Co v. Wisner
o D contracts with P to sell all of their tomatoes, D breaches by
selling tomatoes on open market.
o Had liquidated damages provision set at $300. Court says if you
know at the time of breach what the harm would be, then you
cannot enforce the liquidated damages.
o If you know at time of contracting that it will be easy to
determine the harm at time of breach, then you cannot
have a liquidated damage clause.
o Here, the $300 is a penalty.
- UCC 2-718(1): Damages for breach by either party may be liquidated
in the agreement but only at an amount which is reasonable in the
light of the anticipated or actual harm caused by the breach
o Anticipated OR actual
o Discretionary whether or not it was reasonable at time of K
- Truck Rent-A-Center v. Puritan Farms 2nd
o Court awards 50% of the rental payments
o Trucks arent fungible
o 50% changes depending on when the contract was breached, not
set like in McGrath
o Because Puritan breached they lost the ability to pay 47K for the
trucks instead of 88K in damages.
- Vanderbilt University v. Dinardo
o P hires D to be football coach, promises them 5 and only stays 4.
o P is entitled to liquidated damages. Said there would be
damages if he went to another school or resigned early.
o Court upholds the clause -> indicates that court is relatively
lenient with these clauses; part of a broader movement to accept
them as long as they are reasonable.
MONETARY REMEDIES WHEN THE THEORY OF OBLIGATION IS PROMISSORY
ESTOPPEL
- Reliance measures of damage
o Exist to ensure that if somebody promises something knowing

that you will change your position and that you are changing
your position to a detriment, that is socially bad behavior. Want
people to be socially responsible.
o Can protect yourself with a disclaimer if you are the promisor
Goodman v. Dicker
o P is promised a number of radios and a franchise from D. Got
neither. P had hired salesmen and solicited orders for radios.
o True measure of damages is the loss sustained by expenditures
made in reliance upon the assurance of a dealer franchise
people in the industry reasonable make such preparations.
Theory of fair dealing
o We create this obligation out of the duties that people have to
one another in common everyday intercourse and speech not to
cause harm (D could have disclaimed)
D & G Stout v. Bacardi
o Rule: in IN you get your opportunity costs but not your forward
looking expectations in reliance
o P had to sell company for half a million less than intended
because D bailed on promise. Lost all negotiating leverage.
o Devaluation is the reliance injury. Bacardi had to have known
what their promise was going to do for General.
Walters v. Marathon Oil Co.
o Holds exact opposite of Bacardi.
o P gets expectation interest in a reliance claim. Why? No
uncertainty, all gas that was there was sold (22K)
o In Bacardi, the court says that if you gave up a
job in order to take another and thereby lost
wages that you would have had = that we can
award. But, you do not get the wages you
hope to get under the agreement that was
signed that would be an expectation interest.
Marathon and Bacardi are not in conflict. They are
basically applying the same measure. Seeking to put you
back in the position you would have been had the promise
not been made. Includes out of pocket costs and
opportunities you lost as a result of the reliance on the
promise. Walters measure it by looking at what the
expectation would have been because it is the best
measure for what opportunities would have been available
to you
o In reliance we are looking at what are your out of pocket
expenses, what are your lost opportunity costs, and what part of
those losses are attributed to the promisor, to what degree does
justice require the enforcement
In order to value the opportunity costs we may have to

look at expectation
We are trying to put a value on your change of position
RESTITUTIONARY RELIEF AND THEORIES OF OBLIGATION

- We did work for you, expecting to be paid for that work. We should be
paid for the work that we have done.
- Quantum meruit becomes a construct: not actually the value of the
thing you conferred, it is a construct of what that value would be if
there were any value
- Susi v. Zara
o Zara is wrong. Susi was not in breach and therefore Susi is
entitled to:
Quantum meruit measure of their performance (benefit
they have given other party)
Susi can get what they were promised under the
agreement (X). Since they have been paid .5(x) they are
entitled to .5(x) the costs saved by nonperformance
Why wouldnt they do that? It wouldve cost them
more than .5x to finish the job recovery in
expectation could be negative
- City of Philadelphia v. Tripple
o Contractor entered into K for $35,000. Can they demand more
than that for the partial work they have done?
Yes.
You are entitled in restitution for the amount that the
opposite party unjustly retained.
- Johnson v. Bovee
o Minority position Puts a cap on the quantum meruit amount
you can get and that is the maximum contract amount. If you
have completed everything you were required to do under your
agreement then you may be limited simply under your
expectation measure
- Osteen v. Johnson
o No expectation damages, highly speculative
o Damages in restitution? She paid 2500, she gets 2500 -> work
company has already done
SPECIFIC PERFORMANCE where you have no remedy at law to be rewarded
damages.
- Kitchen v. Herring
o Breach of contract for sale of land; land is unit of production
value is a multiple of board feet per acre (stumpage, timber land)

o Why do they get the land? Common Law says so. proper
remedy for breach of a real estate contract is specific
performance
- Curtice Brothers Co. v. Catts
o When do we get specific performance for the sale of goods? In
unique or other appropriate circumstances. IN this case,
tomatoes are not unique, but it is another appropriate
circumstance. The harm would be such that you cant get
performance of the damages. The harm would be such that it is
extraordinarily difficult and uncertain to calculate.
- Curran v. Barefoot
o D sells lakehouse along with furniture, boat, etc.
o Do you get personalty? There is specific performance here.
- Stephans Machine & Tool v. D&H Machinery Consultants
o ??????? Dude needs machine?
- Laclede Gas Co. v. Amoco Oil Co.
o Long-term contract, there was no evidence P would be able to
get another contract
o Money damages wouldnt be enough. Appropriate circumstance
for specific performance.
- Limitations on availability of specific performance:
o Will not get specific performance if you have unclean hands
(unfairness, something that resembles fraud)
o Lack of mutuality of performance
o Indefiniteness of the agreement
o Impracticability of performance or difficulty in enforcement or
supervision
o Personal services
- Specific performance is awarded more liberally than it used to and
much less liberally than the drafters of the UCC thought it would be
ASSENT
- Both parties must intend to bind themselves legally to the same terms
must be in sufficiently complete terms
- Objective theory of assent: did a party communicate to an objective
observer that it intended itself to be bound
- Embry v. Hargardine. McKittrick Dry Goods
o Assent can be manifest in words and there is no particular formal
requirement.
o Conversation between Embry and McKittrick about employment.
Enforceable because conversation was unambiguous - Court
read his comments as responsive to Ps ultimatum. There was an
exchange of info constituting a mutual intent to be bound.
- Lucy v. Zehmer
o P wanted Ds farm. They were out drinking and they sign

agreement that D would sell P his farm for 50K. D thinks it was a
joke.
o Because it looked like a K objectively and the person seeking to
assert the K believes he has bound himself and thinks that the
other party intended it as well, the fact that D thought it was a
joke doesnt matter.
Morrow v. Morrow
o Court says no agreement: this would be a gift, would be
gratuitous, would not be an exchange.
Tilbert v. Eagle Lock Co.
o Even get intent in the face of we dont intend to be bound.
Raffles v. Wichelhaus
o Two ships named Peerless and they are both in trade between
London and India
o No objectively reasonable way to determine which of the ships
they meant
Assent is determined objectively, but objectively doesnt permit us to
determine between two terms which are both objectively reasonable.
o Can determine based on language, body position, body
language, history, social convention.
OFFER
- An offer is an expression by one party of assent to certain definite
terms, provided that the other party involved in the bargaining
transaction will likewise express assent to the same terms
- Lefkowitz v. Great Minneapolis Surplus Store
o P responds to ad which offers 3 coats (first come first serve) for
$1. Similar ad next week.
o Court: Cannot enforce ad for coats, worth is too speculative
o Black stole is different though because it wasgiven a precise
monetary amount. It was worth $139.50, he was promised $1
so he gets $138.50 in damages.
o Cannot change rules of offer after acceptance
- Ford Motor Credit Co v. Russell
o Why not enforceable?
We can import into the offer other kinds of information.
Here, the buyers knew that they might not be able to
qualify for this particular rate. In this situation they not
only knew it but the did not get that rate.
o How to avoid problem? Limited quantities on ads.
- Courteen Seed Co. v. Abraham
o Problem: telegram does not say we offer or this is an offer

o Rule: if you use terms inconsistent with an offer, then you dont
have an offer
o We want to look at language (is the language of offer), we look at
context (is this a situation in which both parties would have
understood this to be an offer)
- UCC 2-204 and 2-311:
o Every single term does not need to be there, if there is a way to
determine the missing term is there we can still have an offer
Industry standards, good faith and fair dealing
If applying good faith we can supply the missing term then
we can still have an offer
Only one term must be there -> Quantity
- Southworth v. Oliver
o Did D intend to make offer? No.
o Why was there an offer?
Doesnt matter what subjective understanding is.
Subjective understanding of offeror does not matter.
Offerees undersoot that the 1st party to except will get the
property (even though 3 of these letters were sent out)
As long as letter has terms that are sufficiently definite and
subjectively offers assent to terms, and the other party
assents to the terms there is an agreement
ACCEPTANCE
- Ardente v. Horan
o D makes offer, what is problem? P makes counter offer by placing
terms on acceptance.
o If you have an offer and then you counter-offer, the effect of the
counter ofer is to destroy the offer and transform the counteroffer into a new offer.
o Any time you add any language you are running the risk that you
are making a counter-offer.
- Eliason v. Henshaw
o Offeror is master of the offer. An offer to sell flour that contained
a condition of acceptance that it be returned by wagon. Wagon
never returned so offer wasnt accepted under offerors terms.
- UCC 2-206(1)(a)
o unless otherwise unambiguously indicated
o If you successfully unambiguously indicate then because you are
the master of the offer you will successfully prevent acceptance.
o Acceptance can be based on whatever conditions you want.
- Allied Steel and Conveyors, Inc. v. Ford Motor Co.
o D says must be signed and returned with an acknowledgment
copy before it is accepted; D wants paper trail.
o P never signs anything just signed and went and did the work.
Can accept by action.

Cannot have acceptance by silence; however.
Cant give offeree an affirmative duty to respond
unless you had an arrangement from prior conduct
that you had to give notice if you didnt want delivery
prior dealing could make silence an appropriate
form of acceptance
- White v. Corlies
o Party that wants work done is the offeror -> the merchant
o Merchant makes an offer that they will pay D X amount if they do
this work and the contractor the contractor remains silent,
does not say anything
o Offer was- you can do certain work, you can start upon
agreement
o The contractor says nothing but they start buying materials
o Offeror then revokes the offer because they hadnt heard
anything Can they revoke the offer?
At the time the offer was revoked, the offeror had no idea
that it had been accepted SO here they are in a legal
relationship and they did not even know.
Policy implications if this happens over and over
again you find yourself in a bunch of legally binding
relationships
How could merchant get around this? Put it in writing. Say
acceptance must be in writing, give a place, date and time
when it is due by.
Merchant didnt protect himself because they did not
unambiguously indicate the form of acceptance, and
SO the contractor is allowed to accept in any way
reasonable under the circumstances.
o Notice of the acceptance must come to the attention of the other
party in the normal course of business
If in the normal course of business they could just hold the
stuff there for an extended period of time, then that is not
acceptance.
DURATION OF OFFERS
- Restatement 2nd 36 0> Methods of termination of the power of
acceptance
o An offerees power of acceptance may be terminated by
Rejection or counter-offer by the offeree
Lapse of time
Revocation by the offeror
Death or incapacity of the offeror or offeree
o In addition, an offerees power of acceptance is terminated by

the non-occurrence of any condition of acceptance under the
terms of the offer
Bilateral contract: promise for a promise, acceptance in the form of a
promise
Unilateral contract: a promise for a completed action
o When would you do this?
Services Services if we have a promise for a promise,
I promise to pay you and you promise to mow my lawn;
you mow of my lawn -> I can sue you for the difference
between the thing you promised (mowing all my lawn) and
the thing I got (3/4 of my lawn mowed) if I structure this
as I promise to pay you when you complete the job, I
have a great deal more leverage; there isnt any time for
you to pay
Akers v. JB Deberry -> how do we see services revoked?
o Ps offer D their resignation; worried that she wasnt going to trust
the,
o D rejects resignation but tries to accept it at a later date
o She cannot accept the resignation later because the rejection
nullified the offer
o Rule: In a face to face interaction when you are no longer face to
face (when convo ends), the offer expires by lapse of time
Vaskie v. West American Insurance Co.
o D says they would pay P 25K if he released them from all claims.
Offer was made in December and he accepts in January after SOL
runs out.
o Court says: mere lapse of time is not necessarily enough, but
reasonable trier of fact will determine if it was a reasonable
amount of time.
Caldwell v. Cline
o Offeror said offer was good for 8 days.
o Offer was sent back within 8 days of receipt, but not within 8
days of the letter being sent
o Rule: Offer not officially made until offeree receives it (Offeror is
lowest cost provider, could avoid this problem)
o An offerees power of acceptance is terminated by his making of
a counter-offer unless the offeror has manifeste a contrary
intention or unless the counter-offer manifests a contrary
inention of the offeree.
Dickinson v. Dodds
o Knew or should have known or reasonably should have known. If
there is reasonably appropriate form of communication it ends
the power of acceptance. Cant accept if you know another party

has already accepted.
What constitutes a lapse of time varies according to the circumstances.
Marsh v. Lott
o Underlying transaction is the sale and purchase of real estate
worth $100,000; The seller sells him an option contract, which
gives him $.25
Then the seller attempts to revoke
o Marsh and Lott is about two different agreements: one of them
has not been consummated (purchase and sale), one of them
has (option contract)
o An option contract is an option not to revoke (second contract)
o Is .25 a valid consideration? Yes, but once you have done it you
cannot revoke
You are allowed to enter into consideration in exchange
that seems appropriate to you
o As long as it is a reasonable amount of time, and a reasonable
exchange within the transaction, and recites a purported
consideration (this tells us that the option contract is separate
from the agreement of sale)
o An offer is binding as an option contract if it:
Is in writing and signed by the offeror, recites a purported
consideration for the making of the offer, and proposes an
exchange on fair terms within a reasonable time.
Is made irrevocable by statute
A firm offer is a specific kind of an option, but it is an option that
doesnt even require a purported consideration
o When would someone want to make a firm offer?
When you want to create an incentive for someone to
come back and buy something
Make a situation where someone calls around to try to get
other offers but doesnt take it because they are sure that
the initial offer is still there.
Only merchants can make firm offers (cant last more
than 3 months, dont need consideration)
Anyone can write options
UCC 2-205
o An offer by a merchant to buy or sell goods in a signed writing
which by its terms gives assurance that it will be held open is not
revocable, for lack of consideration, during the time stated or if
no time is stated reasonable time, but in no event may such
period of irrevocability exceed three months; but any such term
of assurance on a form is supplied by the offeree must be
separately signed by the offeror

-
Davis v. Jacoby
o Revocation was by death by suicide offeror dies (works as a
method of revocation)
o Why doesnt it work here? Offer was already accepted. Since the
promise was reasonable under the circumstances he had lost the
power to revoke via suicide.
o Anyone reasonable to the circumstances could accept.
Brackenbury v. Hodgkin
o Mother promises to devise her property to her son an daughterin-law under promise they take care of her
o She didnt die so she revokes this offer.
o Court says mom created an option contract -> as soon as you
take any action inconsistent with the intent fully to perform and
not accept, then you can revoke
Court equitably estops the offeror from revoking as long as
the other party is taking all the actions necessary to
complete performance.
Option ends if the son deviated, starte doing other things,
performed in a way inconsistent with the intent to accept
Petterson v. Pattberg
o Agreement: underlying mortgage and agreement to forgive
mortgage
o There is a legal right and there is an offer outstanding that if you
do X, Y, and Z, I will take your payment in full and complete
according to satisfaction of all debts
o How can they revoke? Lapse of time, suicide, if they revoke.
o Couple of pieces to the issue here:
Brackenbury style unilateral contract piece if you make a
payment then you accept
Is there a kind of reliance interest or a protected interest
when you have induced someone to invest?
o The guy came with money and the lender said I dont want it,
offer withdrawn, I sold the mortgage
Can you do that?
If they started to perform then they have to be given
the opportunity to perform
GENERAL: All of the duration of offer stuff is about the circumstances
under which this asymmetric relationship is or can be or is prevented
from being destroyed. As a normal rule, the offeror can revoke at any
time prior to acceptance. Unilateral contracts situations present
certain equitable concerns we dont want to have oppressive
behavior.
What these cases are about are these groups of reasons under 36 of
what terminates or limits the power to revoke. Or when revocation is
automatic.
UNILATERAL CONTRACTS
- Garber v. Harris Trust & Savings Bank
o P claims that credit card agreements with D were binding and
that D could not alter terms unilateral agreement between P
and D.
o How does court come up with theory that protects credit card
company?
Each time they use the credit card is another contract. If
they use a credit card it is an acceptance of their offer to
provide credit.
Transforms an agreement into multiple agreements
Bilateral agreement leads to issuance of card
1st contract remains in effect -> credit card company
cannot retrospectively change terms, unless you
agree to the modification by continuing to use credit
nd
2 agreement is quasi-unilateral acceptance by card use
Each use of card is a separate contract
Cardholders can withdraw as they plea and no one can do
anything about it
o To combat this credit card company could have disclosed
terms subject to change, the more specificity the better
o Ps harms hope, expectation, desire to continue to borrow at
favorable rate
o Ds harm real and immediate, they will lose money
o Policy concern for court: harms are real for bank, speculative for
P
- James Baird Co. v. Gimbel Bros.
o Deal to build a building for the satte of PA.
o Is there an agreement between P and D?
P argues he accepted Ds offer by acting upon it in sending
his own offer.
T1 bid, T2 included in generals bid, T3 revocation, T4
acceptance
Offer clearly accepted at T4.
Terms of the alleged contract were not explicit
o It does not look like we have a contract. Does not look like we
have an option. But maybe we have a reliance.
o Issue: is there reasonable reliance before revocation?
o Need to look at my brief on this one.
- Drennan v. Star Paving Co.
Traynor here takes a different position:
Uses reliance and promissory estoppel
You know in course of business that by making a bid

that someone will include that bid in their bid.
Included and accepted in normal course of business.
The general is not bound at all, they can use any other
paving company
Star Paving is bound to not revoke their offer until you
accept the offer or you tell us someone else has accepted
to do the work or you deviate from the intention to accept
o What we have here is exceeding to an industry practice. The
practice is to delay, delay, delay, have bids submitted at the last
minutebut if your bid is wrong it screws up everything. You
cannot correct your bid. Bids are final you will lose that. SO
there is a harm.
There is another industry norm. General contractors is
likely to partake in bid chiseling after there bid is accepted.
Once they have the contract they go and ask
thesubcontractor to shave a little bit off, goes to
competitors and does the same. If the general does that
then the general is no longer relying.
As long as the person is moving across the Brooklyn bridge
at a normal, appropriate place, intending to complete, you
have to leave the offer open. You have to be given a
reasonable opportunity to complete. But as soon as the
party attempting to accept starts wandering around lower
Manhattan and starts bid chiseling, then there is no longer
an intent to accept.
o Hand is saying in Baird that if you want to bind somebody you
must bind yourself.
o Traynor is saying that there is a different situation: We are not
gonna bind you to accept Gimble Bros. bid, but we are going to
allow you to operate in accordance with that bid as long as that
is what you keep doing. However, as soon as you deviate form
it, you destroy the option to complete, creating the unilateral
contract.
CA rule is MAJORITY rule. flexible approach to notion of irrevocability
When we have a problem like this what do we appeal to? Consideration
(turn it into an agreement that has a certain level of flexibility, impose
transaction costs OR we can recognize the way in which parties do
operate - impose costs on each other do things last minute) Traynor
has resorted to an emerging contract principle that if you have a
unilateral contract (that is a contract formed by a completed action =
acceptance) what do we do in this period? Take advantage of the
development of unilateral which permits us to think about an option
such as irrevocability, the option to have a reasonable time to
complete performance
BARGAINING AT A DISTANCE
- Mailbox Rule: default rule when negotiating at a distance, a default rule
that can be changed by the parties
o Offer effective when received if you dont receive an offer you
cant respond to one, just makes sense
o Acceptance is effective when:
Offeror gets the acceptance offeree would be stressed
out that it may not have been received by offeror
Could be upon dispatch offeree would know its
acceptance was effective when dispatched even if it is
never received
o The offer effective when received and the acceptance being
effective upon dispatch is 2/3 of the common law mailbox rule
revocation effective upon receipt.
- Under CISG offer cannot be revoked once it has been dispatched;
however, acceptance is effective upon receipt.
o Say if we have T1 offer sent, T2 offer revoked, T3 offer
received, T4 acceptance dispatched, T5 revocation received.
So we have a problem here, acceptance is good even though
revocation was sent before the acceptance was dispatched.
o Because of this, jurisdictions have changed common law rule to
ensure that there was some point in real time where both parties
intended to bind themselves.
- Adams v. Lindsell, Morrison v. Theolke
o Mailbox Rule
o Acceptance is effective on dispatch; cannot repudiate
acceptance once mailed
- Worms v. Burgess
o Option contract optionee dispatched notice, but optioner never
received it
o Court sees conflicting principles:
Optionee relied on mailbox rule
o Court rejects mailbox rule and applies restatement 64(b) -> an
acceptance under an option contract is not operative until
received by the offeror
- Mailbox rule is extremely offeree friendly on the ground that you take
Posners analysis that the offeror is the lowest cost-avoider (burden is
so minimal that if you want to establish a different rule you have to
draft it in there
AGREEMENT TO AGREE
- How to differentiate an agreement to agree from an agreement
o Whether the parties intended to be bound
- P. 557 -> Definiteness; UCC 2-204(3)
o Transaction wont fail for indefiniteness if parties have intended

to make a contract and there is a reasonably certain basis for
giving an appropriate remedy just needs to be complete
enough
Arnold Palmer Golf Co. v. Fuqua Industries, Inc.
o P and D agree that D would buy portion of golf company, would
use Ps name to market it, and then would split profits
o There was a memo of intent -> subject to approval of board of
directors of Fuqua. Subject to preparation of the definitive
agreement
D did not have to go ahead with it, there was no final
agreement
o When we are trying to police this line between agreement to
agree and an agreement we are looking to see if the thing has
gotten so close to agreement that it is in essence an agreement
Once you are in an agreement you must behave in good
faith and fair dealing in the interpretation of the agreement
BUT up until you are in an agreement there is NO
requirement of good faith
We have this awkward tensioncould Fuqua torpedo
this? Well yes if we are still in the agreement to
agree stage, then he has no duty. If it has become
an agreement then he has to behave in good faith
and fair dealing.
o Extraordinarily difficult line to police, because you can do this
even where there are open terms
Critical line: is there an agreement or are we in a pre-agreement
stage?
o If you are in a pre-agreement stage you have no duty except not
to act tortuously
o If you have an agreement with open terms, it is possible that you
slid into a situation where there are binding obligations
We look to nature of open terms (if they are material it is a
big problem, if they involve genuine fiduciary duties it is a
big problem)
But if they can be determined through an appropriate
reference to something else, then there is an agreement
INTRODUCTION TO CONTRACT FORMATION IN THE FORM CONTRACT SETTING

- If you do a lot of transactions of a certain type, you would want to
mass-produce the contract. You want to develop a form for your
transactions. As you develop your form, you give it to your lawyers to
draft for you, what are they going to do?
o Anticipate everything that could possibly go wrong and put in
disclaimers, etc. Provide all kinds of outs. Give yourself rights to
delay. Require payment under certain kinds of situations, etc.

Load the form with protective terms -> very little cost.
What happens when both parties are engaged in the same production
of mass-produced contracts?
o Documents are never going to create an agreement. You will get
an agreement on the basis of the last document sent +
acceptance by action.
2-207 of UCC is shifting of the traditional common law rule of contract
formation
o 1) a definite and seasonable expression of acceptance or a
written confirmation which is sent within a reasonable time
operates as an acceptance even though it states terms
additional to or different from those offered or agreed upon,
unless acceptance is expressly made conditional on assent to the
additional or different terms.
If you made the initial, your terms will apply unless the
response is not an acceptance or the response expressly
limits assent to its own terms
You can have an acceptance that is definite and binding
but that expresses terms (cannot materially alter the
terms)
If you have definite and seasonable expression then you
have a contract under the first terms terms.
o 2) the additional terms are to be construed as proposals for
addition to the contract. Between merchants such terms become
part of the contract unless:
a) the offer expressly limits acceptance to the terms of the
offer
b) they materially alter it
c) notification of objection to them has already been given
or is given within a reasonable time after notice of them is
received
o (3) Conduct by both parties which recognizes the existence of a
contract is sufficient to establish a contract for sale although the
writings of the parties do not otherwise establish a contract. In
such case the terms of the particular contract consist of those
terms on which the writings of the parties agree, together with
any supplementary terms incorporated under any other
provisions of this Act.
If you do not have definite and seasonable expression,
then you go to subsection 3.
Even though you cannot have an agreement based on the
writings, if the parties are acting if there is an agreement
then there is an agreement
o Under an agreement formed under subsection 1, what is in the

agreement?
If offer sales agreement says 1, 2, 3, 4 and purchaser
agreement says 1, 2, 3, not 4, 5. Then the contract is for
1, 2, 3, 4 unless they are merchants. If the parties are not
merchants, subsection 2 does not apply.
If they are merchants, we look at subsection 2.
We are going to have an issue with (4)what about
(5)?
Does 5 constitute a material alteration?
o If not material term and offeror does not object
to it (whether or not it is material). If 5 is
material term Subsection 2, does not apply
Does 4 stay in?
If we are not in subsection 2, then the terms of the offer
are the terms of the contract.
o Subsection 3 Doesnt matter if you were first or second, or
expressly conditioned. If you start exchanging goods and acting
like you have a contract, then terms of contract are those terms
on which documents agree and any terms not already part of the
agreement, which would become part of the agreement (ie:
warranties)
CISG was created as a default for transactions dealing with goods
where the contracting parties are from different states. It is the
default, which means if you dont want that to control you have to
explicitly exclude it.
Stemcor v. Trident
o Issue: whether there should be arbitration of not.
o Response to offer (acknowledgment form) has an arbitration
clause; however the offer form does not.
o If term is in offer, definite, and seasonable, term is in
o If term is not in offer and you have definite and seasonable
acceptance, if both are merchants, term is in. If you do not have
a merchant, term or rejection on offerors part.
o Arbitration clause falls out unless the response was a counteroffer
Hill v. Gateway
o Hills purchase computer, in box there is a paper with a bunch of
terms saying that if there is a problem it will be arbitrated.
o Computer doesnt work, Hills bring suit.
o Court: You have to arbitrate. Finds the reason behind it in the
incompleteness of the transaction, signals that there has to be
something else. You must have at least accepted that you would
look at them and if you have looked, you could return it if the
terms were unacceptable.

-
Step-Saver Data Systems v. Wyse Technology

o TSL sent software and on the box they posted terms that TSL
claimed were bindings on the outside of the box
MISREPRESENTATION, CONCEALMENT, and DUTY TO DISCLOSE

- Why have the misrepresentation doctrine:
o Market efficiency
o Social concerns
- Misrepresentation
o Deliberate looks a lot like fraud, has most of the same
characteristics
Fraud has to be pleaded with particularity,
misrepresentation may be more general
o Reckless this and negligent are both torts
Fraud is a quasi-criminal kind of act
As we get into reckless/negligent kinds of
misrepresentation, we introduce policies sounding in tort
into our policing mechanisms
Recklessly misrepresenting facts causes injuries that
fall below socially acceptable standards and there is
a powerful reason to police those
If people act tortuously they are going to distort the
market and we have inefficient transacting
o Negligent = See above
o (Innocent)
- Duty to Disclose
o Why? Want lowest cost avoider to give up the information
(counter to most commercial behavior where you want to protect
yourself, not necessarily others)
o Dont have to disclose things that are open and notorious
o Duty to disclose material facts going to the heart of the
transaction where those facts are not reasonably discoverable by
the other side because the non-disclosure would lead to a variety
of inefficiencies
- The land treats buyers and sellers differently:
o General presumption that you as a seller have invested as much
as you think is appropriate in information gathering
o Different from a buyer who may not have access to the
information
- Basically we are dealing with appropriate ways to ensure relatively
appropriate markets
- Bates v. Cashman
o P had negotiated that there was a right of way, which was a
substantial factor of value in the real estate representation
was innocent but failed to show that the right of way was owned
by someone else
o Court allows renunciation of contract because of
misrepresentation
Restatement 2nd 552(c) -> gives damages between what
you get and what you paid
Holcomb v. Hoffschneider
o Double representation true representation was the property
they walked on was what they were going to buy. There was a
false representation though about the acreage of the lot.
o Agent couldve protected himself by disclaiming the
representation or communicating the acreage in a reasonable
range, not so specific saying it was 6.6 acres when it was 4.
Gibb v. Citicorp Mortgage
o Statement in this case we are selling this property with its
defects
o D knows there is serious termite damage, concealed the
information
o Citicorp sells the property as is when it has covered up the
damage and affirmatively represents that there is a limit to a
certain kind of damage which they know to be false
Weintraub v. Krobatsch
o House is infested with roaches
o Sellers kept the light on whenever they showed the buyers the
house kept the roaches away
Any time you make an affirmative representation about something,
then we are in the world of fraud/misrepresentation Affirmative
representation MUST be true
Things get harder when you make implicit representations like in
Gibb when they point out the termite damage, that was an implicit
representation that that was the only termite damage
Concealment is also a kind of representation if you put up fresh paint
and imply there is nothing behind it
Realtor: there is an implicit representation that they checked the
acreage
When we get to duty to disclose, then we are at the lowest level of
certainty about what it is that you are representing
o If you are in an environment in which the other party expects you
to be selling then they may have an affirmative duty to ask the
question
o Unless the disclosure is a matter where we expect what you are
doing is a kind of affirmative representation, then without that
disclosure we think that you are representing that there is no
problem or issue that should or could have been disclosed

-
Everything can be effectively disclaimed as long as you are effectively

communicating that the other party is taking on the risk.
All of these cases are about effective communication. Are you
communicating that there is not a problem? If what you do is
effectively communicating that you are not communicating, the duty to
disclose in the interest of effective, perfect marketsdisappears.
We are shifting the burden of the communication but it is not a shift
that is rendered complete, you can put it right back. It is just that the
default rule on misrepresentation and duty to disclose cases is that you
have disclosed unless you make it clear that you havent.
POLICING DOCTRINES
- Default Rule:
o Duty to disclose is a default rule
o You can contract around it (disclose by very effective, complete
forms of denial that you are saying anything)
- Prohibition:
o Fraud (not default rule because you cant contract around it)
- Policing:
o Substance: a transaction that is substantively so wrong we are
not going to bring the aid of the state to support this
substantively bad activity
o Process: calls into question the entire basis of contracting
Capacity could be a process problem other party is not in
a position to enter into a contract
Duress is a process problem no voluntary assent to
common terms
All misrepresentation cases are process problems
INEQUALITY OF EXCHANGE
- Black Industries v. Bush Case about rubber in Korean War
o Here we had a middleman who doesnt do shit and bills someone
to do work for them, takes change between the K price and
whatever it sells it for (almost makes as much as the company
actually making the rubber)
o You can make contracts where someone does a little work and
makes a ton of money because of freedom of contract free
market claims about how to fix this problem
o The people here are experienced businessmen that are operating
at arms length in a normal business relationship
o Black and Bush establishes a base-line situation: parties can set
bad prices, parties can make bad deals, contract law is not here
to protect you against mistakes or misjudgments you are to
protect yourself at least as long as we think you are operating in
a commercial situation in which there are not market fixes

o MUST FIND A DEVIATION SIGNIFICANTLY BELOW STANDARD FOR
POLICING FUNCTION TO KICK IN
- Jackson v. Seymour
o P owns farm, brother owns neighboring farm, P entrusts brother
to sell farm. When he gets the land it becomes apparent that
there is valuable timber on land
o Court characterizes this as constructive fraud:
There is no misrepresentation, there are no false
statements, but something about this transaction looks
sufficiently bad to the commonwealth of Virginia that they
say it has fraud-like characteristics
Brother is a businessman, she is not
Gross inadequacy of the price
Special relationship between brother and sister
He looked after her farm, should have had
knowledge?
She was very dependent on him
o Rescind contract and restore the parties to the status quo.
o Create a trust in the assets the brother received
o What happened to the 275? She has to give the 275 back to the
brother
o Court says it is acting in equity means the court is doing
justice. Brother hasnt done anything wrong; however, justice
requires he give the land back for the 275 and that he accounts
for the profits from the property consistent with their
understanding of what he was gonna do in the first place (protect
the sisters interests)
UNCONSCIONABILITY
- Something that shocks the conscience, so unfair that we dont think it
should be allowed to stand
- In order to show incapacity you have to show that the person was one
of these classes: infants, persons lacking mental capacity.
- In order to have misrepresentation you have to show that there was
some form of false statement made
- In order to make out duress you have to show there was a threat that
was improper
- Ryan v. Weiner
o P is old man with a 9th grade education, alcoholic, late on
mortgage payments. D makes him sign documents that screw
him over. P did not read any of the documents because he is
illiterate.
o Unconscionable because D had reason to understand that P did
not understand what he was doing.
o If you can see that the other party suffers from a variety
of disabilities that would lead you to believe they may not

understand, then at a dead minimum you have to
disclaim
o D cannot pretend to be friend and not explain. If the party does
not even have the capacity to understand disclaimer, they may
not be able to contract.
CAPACITY
- If you dont have the capacity to enter into a contract, you cannot
enter into a contract.
- Two classes of persons who are thought not to have capacity to
contract:
o Infants anyone under 21
Person under 21 can enter only into a voidable contract
such a person can disaffirm their obligations at any time up
until the age of 21
Exception: Necessaries -> dont have capacity to contract
out of the need that you need the capacity to contract?
Law makes a bright-line rule here.
o Mental disease or defect
Person does not have the ability to enter into a nonvoidable contract.
Contracts are not void, they are voidable by the protected
party fine until party who the law protects objects
Individual determination when one does not have capacity
based on mental disease you can have capacity to enter
into certain kinds of agreements, but not others.
Up to the degree that there has been a change in position,
then the seller or the other party to the agreement will be
protected and the part of the agreement that has already
been completed will be enforced IF justice requires it
o Bright-line rule in case of children and highly flexible,
individuated rule in the case of mental disease or defect
Individuated discussion goes to the nature of the
transaction and creates the possibility of the enforcement
of an agreement to the degree that the exchange was on
fair terms
- Dillman & Associates v. Capitol Leasing
o Lessee leases equipment which doesnt work -> clause in
agreement that the lessor is not responsible for performance
(giving you equipment that may not work and you have no
recourse)
o UCC 2-316: p. 654 disclaimer of warranties
- Intralease Automated & Scientific Equipment Corp. v. RME Enterprises
o Only thing substantively wrong is something the UCC explicitly
allows disclaimer of warranties
o Original lease disclaimed any warranties unless the lessor was

the manufacturer. However, before they delivered a 3rd party
said they had to sign a new lease before they delivered the
incinerators disclaimer of all warranties, regardless
o Here the leasing company is violating good-faith and fair dealing.
Every contract imposes a contract of good-faith and fair dealing
in its interpretation an execution.
The second lease is not a good faith interpretation of the
original lease this lease is no good.
By putting the lessee under that type of pressure is making
them agree to something that strips them of their benefits
under the agreement
o Cant throw it in second lease as a modification and basically
force guy to sign
IN order to establish unconscionability you have to show something is
wrong with both the substance and the process
Davis v. Kolb
o Substantive problem: timber is worth a lot more and they arent
being compensated for it
Really bad price
No risk to other party
o If you see a really bad substantive price it raises questions about
the process by which you entered into an agreement
o Problems with process:
Agent misrepresented his level of experience
By hiding inexperience, agent caused the other party to
rely
No fraud because agent thought that amount was what the
timber was worth
Jones v. Star Credit Corp.
o Problem: price of the freezer if 3x the market price
o P is on welfare, has limited financial resources
o Freezer had a fair market value/max retail value of $300. P
defaulted after paying $600.
o Plenary authority can fashion a remedy consistent with justice.
Chalk v. T-Mobile
o D waived class action lawsuits so neither they nor their
customers could fashion class action lawsuits. Problem with
defective wireless card worth ~ 20 bucks.
o Court: if you cant bring this as a class action then you will
destroy the ability of any class actions and no one could ever
bring a class action
Protects people who are vulnerable or could be taken
advantage of. Protects against predatory behavior.

o You piece it together as unconscionability if that normal
commercial behavior starts to produce results which look unfair
and look like they are triggering one or the other concerns like
duress, misrepresentation, fraud, capacity, etc. But unlike those,
there is no test for unconscionability. It is a piecing together of a
lot of naughtinesses court has plenary authority to fashion a
remedy
POLICING THE STANDARD FORM CONTRACT
- Standard form contracts save time and money; we want to police
surprising clauses
o Economically and socially useful
- Contract of adhesion: argument that contract suspicious if no
opportunity for negotiation -> however, the offeror is the master of the
offer; can cram terms down your mouth
o These types of contracts can be used to hide terms, to cause
people not to realize what they are doing, to create an
asymmetrical imposition of costs
- CL approach Restatement 2nd 211 (page 680)
o Standardized agreements
o Clause 1: Default rule is that these are enforceable agreements
(what you would expect out of basic construct of contracts) if
you sign on to one of these things, you are bound UNLESS
Unless there is something that you would not reasonably
expect to be in there (clause 3)
o Determining when a term is surprising:
If term is in bold, all caps, not buried, etc. then it is
surprising
If attention is called to it
No person would have signed the clause unless there was a
process problem (similar to unconscionability)
Too long, too poorly written, in a surprising place,
uses obscure language, in fine print
*Sort of clause they would not have signed as a
matter of law (no reasonable person would have
signed it)
o Court can construeambiguous terms strictly against the draftor
- Fairfield Leasing Corporation v. Techni-Graphics
o Dispute over whether or not the company could waive jury trial
in the contract they signed (contract of adhesion)
Any trial right can be waived if D knowingly and
intentionally waives
o Here, D could not waive jury trial because term was
inconspicuous. you cannot waive a constitutional guarantee
without knowingly waiving it
o Court elevates the right (constitutional) and then asks why you
would give up such a right finds answer in obscure way in
which clause was written
C & J Fertilizer v. Allied Mutual Insurance Co.
o D insures burglary but only if there is visible evidence of burglary
on exterior of building
o Why was this surprising?
Definition of burglary needs to be disclosed because
definition in K conflicts with laymen and legal definition of
burglary
o P said he wanted to be protected against theft and that he
wouldnt have signed it if he knew what D meant. P had high
school education, court says diminished capacity needs to be
protected
Markline Co. v. Travelers Insurance Co.
o Same fact pattern as above P insured, but burglary requires
visible marks
o P stated that he had wanted comprehensive coverage
o P is a store owner rather than a farmer
o Restatement 2nd of Contracts Section 237 p. 678
Irreconcilable with above case, other than by jurisdiction
Case could go either way tension in this area of law
If you are not going to enforce the clauses, you are going
to throw the actuarial assumption of the insurance co. off
and they will misprice the policy
If you do what Mass does here then you are defeating the
reasonable expectations of the insurers
Caspi v. The Microsoft Network
o D trying to enforce a forum selection clause
o Clause: not surprising, good purpose (reduces cost of offeror)
o Problem: P claims D concealed clause, was put in smaller font.
o Reasonable notice court says forum selection is a judicially
protected right
Specht v. Netscape Communications Corp.
o D had arbitration clause in K. P claims there wasnt reasonable
notice because download did not require an agreement to terms
first.
o We should require computer companies to produce a standard
agreement online that we can check and go to generally
Suggested response because nobody reads these things
The response insulates the computer companies from any
challenge under these problems
o Very few of these standard agreements provide surprising
clauses. They usually dont have oppressive, one-sided terms.

Competition in marketplace entities benefit more by
having reasonable terms
Entities encouraged to stay away from line so that they do
not lose their arbitration, limitation of damage clauses, etc.
by engaging in overreaching.
Standard form contracts start with central proposition that standard
form agreements are enforceable. The voluntariness does not go to
the terms it goes to withdrawal you dont have to accept them.
Because you cannot bargain over terms, there is an uneasiness about
the process. So, the court imports into this area a whole series of
other ideas unconscionability (surprise).
o Q of whether there has been duress, misrepresentation, violation
of duty to disclose, whether there is limited capacity, whether
there is a term that is substantively shocking to the conscience
(such as we have no theory for why it would be there/why it
would be accepted)
Most terms however are relatively standard (forum selection,
arbitration)
o Heavier weight is on process matters has there been disclosure,
are terms presented in a way that makes it a voluntary
agreement
POLICING CONTRACT MODIFICATIONS

- Modification is acceptable if each party gives consideration of the
modification
- Modification without consideration
o CL response: Alaska Packers Association v. Domenico
Group of fishermen agree to employment K to go to Alaska
company has lots of money invested, season is very
short, Salmon fishery
K was for $60 a person base salary, after they get to AK
the fishermen threaten to strike if they dont get more
money
Court rules in favor of Alaska Packers Association
If you have an obligation under an agreement and
you then modify the agreement so you get paid more
for doing the same thing, it is invalid as a
modification without consideration
Preexisting duty rule if you have an agreement and
them modification occurs without consideration then the
modification is not enforceable can be contracted
around pretty easily
o Schwartzreich v. Bauman-Basch

Employee has K at $90 per week. Gets an offer to work
elsewhere at $110 per week. D then agrees that P would
stay for $100 a week.
Issue: P is already under contract, consideration is not
clear.
Company president suggested P get paid more (not like
fishing case where employee did)
Two parties make an agreement to destroy the K, end
previous agreement, P wins.
Common law rule: If agreement is destroyed then new
contract is fine doesnt do much to police improperly
coerced modifications
o UCC 2-209
An agreement modifying a contract within this article
needs no consideration to be binding
o Modification without consideration is binding
UNLESS you breach the duty of good-faith
o Was there improper duress? Was there
coercion? Was there misrepresentation? Was
this an unconscionable taking advantage of
another party to the agreement?
HERE we police it through the duty of good-faith and
fair dealing
Policy reasons for 2-209:
In your interest that other party may be happy with
relationship
Creates flexibility may not want to ad additional
considerations
You are not put into the inflexibility of a consideration
negotiation, and you are not required to leave the
contract and put yourself at the risk of destroying the
good-faith an fair dealing that we associate with it
o Requires us to directly police all of the other policing doctrines
but with the added element that it is policing them in the
environment of good-faith and fair dealing
o Angel v. Murray
Waste-disposal company goes to Newport and says we
want more money to dispose of waste form Newport.
Why can they get more money? A lot more trash than they
expected, unanticipated difficulties.
City of Newport wants to pay the extra money to the trash
company. Why? If they just tore up the contract then the
city loses its leverage in good faith and fair dealing.

Collector could hold city to even higher contract price in
new contract.
Angel breaches because changed circumstances, fully
aware of duty of good faith and fair dealing, the trash
collector cannot perform.
o Flowers v. Diamond Shamrock Corp.
Settlements are in essence a modification
When you have an executory agreement that you want to
settle, you reach an accord, execute under accord, which is
called a satisfaction
ACCORD AND SATISFACTION -> completed agreement in
substitute of the original obligations
Facts: P and D have a deal where D was supposed to pay P
market value for gas they extracted. D sent checks to P,
checks wee cashed.
Checks declared paid in full by cashing check.
However, D did not pay market value, but value
based on K with 3rd party. P later disputes they
hadnt been paid in full.
Accord and satisfaction substitutes underlying agreement
and extinguishes it for the underlying period.
Problem?
D had known or had reason to know that there was a
dispute. P theoretically if they had thought there
was a dispute would have gotten an accountant, etc.
to protect themselves but they dont think there is a
dispute.
D has control of gas information asymmetry. Party
with info has duty to disclose, never puts P on notice
that there is a dispute.
o Calls into question validity of the accord which
permits P to challenge on the basis of
underlying agreement
o Con Ed of New York v. Arroll
D doesnt pay bill, only pays what he thinks is fine
according to service he gets from Con Ed
Accord and satisfaction can be for any amount; Con Ed
cannot cash checks and still sue with success
Issue: Con Ed has a lot of customers and checks are
processed in mass
Con Ed could protect itself:
o Not accept checks with accord and satisfaction
language

o Can put clause in agreement that requires
disputes be in writing to different address
(usual course for utility companies)
Thus there is no accord by sending to
wrong address and cashing check
doesnt constitute satisfaction
o CL Rule: Destroy agreement and substitute a new one
o Modern approach: introduce levels of flexibility. Permit
agreement absent consideration. Police directly, using all
policing doctrines. Under good faith and fair dealing.
PAROL EVIDENCE
- Parol Evidence Rule:
o Never applies unless there is a written agreement
o Bars evidence of an oral agreement that was made prior to,
contemporary with
Also bars written agreements (all prior or
contemporaneous written agreements)
o Bars negotiations, dictionaries
o Substantive rule of contract to give priority not as a way of
understanding what the parties intended but in order to give
priority to certain kinds of forms of the memorialization of
understanding.
- Way to circumvent it:
o Only certain kinds of writing create a vindication of the parol
evidence rule -> complete writings (complete understanding of
the parties) and integrated writings
If the writing does not purport to be complete
If the writing declares it is complete and integrated, that
too is not dispositive on the court (evidence that it could
be)
Partially integrated agreements -> parol evidence rule
applies to part of it and not another part (If partially, then
we include prior or contemporaneous evidence to the
degree that they fall within the integrated portion)
- When can you introduce parol:
o If it is ambiguous
o Cannot bring in evidence to contradict any term of the
agreement (can use to supplement or explain a term)
o What do you introduce to establish there is an ambiguity?
Blue states permit evidence to establish that there is an
ambiguity I would like to provide evidence that there is an
ambiguity evidence can only go to the question if there
is an ambiguity(accept that there is a dictionary/common
or an industry definition)

Red states: where they have grave doubts about the
quality of evidence that is going to be produced, they bar
evidence of ambiguity
How to determine if agreement is integrated:
o Is it the sort of agreement people do in an integrated way?
o Does the agreement appear complete? Look at four corners of
doc
You can introduce evidence to show that it is not integrated
(not done as often as with ambiguity)
o Why does it make sense?
Channeling function encourages everyone to come to a
final conclusion, saves a lot of judicial time, it is in
everybodys interest to reach closure on every form
Permits people to sell agreement
Mitchill v. Lath
o D owns farm, wants to sell. P wants to buy farm but wants ice
house taken down. Ds make K to buy land but dont take
icehouse down even they had oral agreement to do it.
o How does court decide if icehouse has to come down?
Three part test:
Agreement must in form be a collateral one
(collateral means not integrated, external)
Must not contradict express or implied provisions of
written contract
Must be one that parties would not ordinarily be
expected to embody in the writing, or, put in another
way, an inspection of the written contract, read in
the light of surrounding circumstances, must not
indicate that the writing appears to contain the
engagements of the parties and to define the object
and measure the extent of such engagement
Here, Icehouse provision contradicts the price term.
Similarly, it is the type of term you would expect to be in
the K.
o Because of the four corners rule it looks like the ice house was a
clause that should have been in there, unless the other contract
had consideration.
o Classic case of the parol evidence rule under the four corners
rule to prevent the enforcement of an agreement that is clearly
agreed to for a substantive law, channeling reason.
If it looks like a complete, integrated agreement then we
enforce the writing. You lose out on the contemporaneous,
oral agreement.
Masterson v. Sine (CA. 1968)
o P sold ranch to D (family member); sale included option to

repurchase. P went into bankruptcy, creditors want to exercise
option. D claims there was an oral agreement that option only
applied to P (not successors in interest)
o Option is not ambiguous not the type of clause we would
expect to have written in
o Judge is concerned with situations where people do not fully
express every part of an agreement wants to vindicate the
parties
If parties have improperly expressed themselves and they
are able to introduce evidence that explains what they are
trying to do, then he will let the evidence come in for what
its worth
You will get in front of a judge any evidence of ambiguity
Judge Traynor says it is a mistake not to listen to the
evidence
Latent ambiguity here
Get to introduce evidence of what you intended to
say when what you intended to say is consistent with
the words.
o Step1: evidence comes in for ambiguity
o Step 2: it comes in for the fact
o Step 3: trier of fact decides preponderance of the evidence
Parol Evidence Rule:
o Enforce the terms of the writing (subject to if the writing on its
face is integrated or not)
o Unless the writing is not an agreement where exception arises
Hield v. Thyberg
If there was fraud
Baker v. Bailey
o If you had sufficiently compelling evidence in MT that there was
an ambiguity could you get it in? suggests NO. In California;
however, you can always get it in at least to show an ambiguity.
Gold Kist v. Carr
o Carr claims he had an exclusive agreement with Gold Kist to haul
peanuts
o Language of writing explicitly says there is not an exclusive
agreement.
o Clause appears unambiguous on its face
o D still argues that negotiations indicated agreement would be
exclusive
When he got the writing though, P told D that the term
does not mean exclusive

Said that they have the right to hold them to certain
performance standards
o Court finds it is not ambiguous. Says the term is perfectly clear.
Evidence that they would introduce would contradict directly the
clear understanding of the terms.
o No obligation means no obligation.
o Carr is trying to bury or contradict a term of the agreement
there is no way to use we have to use you to explain we dont
have to use you
Greenfield v. Philles Records, Inc.
o You agree to the natural consequence of the words you used
when you use comprehensive language, the language will be
enforced
Pacific Gas and Electric Co. v. GW Thomas Drayage & Rigging
o Traynor is opening up the possibility that the usages of the
parties that might be eccentric and might be known only through
an explication of their particular intents.
o Contention -> that you have to be open to hear at least enough
to know whether it is plausible that there is an ambiguity or an
uncertainty or a different usage.
Even in this world, parol evidence rule can operate
Traynor hears your evidence and he says give me a break,
you are a little bit like the Eskimo Pie crowd. Nobody
thinks that except you. Then you dont get the evidence in
to interpret the contract. You get to make the argument as
to whether there is an ambiguity or an uncertainty or one
of the other exceptions, but if you fail on that you dont get
it into evidence to interpret
Hield v. Thyberg
o Claim that there is no contract, but rather it is a play prop. Can
always make a claim that the written agreement is not the
agreement and that it is just something else cannot exclude
evidence on that because the writing cannot declare its own
validity, need clear and convincing evidence
PRINCIPLES OF INTERPRETATION
- Multiple possible meanings
o Ambiguity, resolve by
Definitions within contract
Plain meaning or common usage (dictionary)
Special meanings of the parties
Context in which the word is placed
Anything else that is probative
o Parties attach different meanings

Where one party knows the meaning attached by the other
party. The other party does not know the first meaning
attached, we use the meaning known by both parties
term consistent with both understandings
Neither party knows the other partys meaning. No
agreement, a misunderstanding, unless one party should
have known the other partys meaning (based on external
indicators)
One resolution: agreement construed against the drafter
o Inconsistent terms:
Construe all terms as consistent if possible if you can
give meaning that gives coherent meaning to the whole
contract then that is what you provide
Specific prevails over general
Language in one section will not be imported into another
if you cannot construe as consistent
Berke Moore Co v. Phoenix Bridge Co
o Top of bridge deck = surface, K terms are consistent with the
estimate that was given
o Rule: mutual understanding at time of contracting reigns.
Restatement Second Section 201 Whose Meaning prevails (p.
778).
Section 2-208 pg. 787
Express terms prevail over course of performance
express terms would likely indicate what they
intended
Course of performance prevails over course of deal course of performance is a good indicator over how
they interpreted the terms
Course of dealing prevails over usage of the trade
course of dealing is less good but still relatively good
indicator; usage of trade is good background
information
o Issue with usage of trade
industry/community standards: whose usage?
Highly variable.
o What constitutes a legitimate usage of trade?
-> of sufficient regularity and consistencies
o UCC applies to sale of goods What if it is a sale of goods mixed
with services? The predominant part prevails. Thus if it is mostly
goods, UCC applies. If services prevail than CL.
Turner Holdings Inc. v. Howard Miller Clock
o How does court go about determining that Howard Miller has to
pay?

Howard is the least cost avoider he could have made it
clear what he meant by under consideration.
Why? Because he is arguing for a deviation from the
regular, usual understanding of under consideration
Why does usual understanding prevail? Makes transactions
easier.
If you want your meaning to be weird then you need
to articulate that.
Nakuli Paving and Rock Co. v. Shell Oil
o Haagen reads Nanakuli there is a contract and a woeful party
with limited understanding and limited knowability as taking the
shorthand. Court looks to see if express term is entirely clear
(even though it does initially on its face, there is a possibility of
interpreting it and the interpretation includes what did the
parties do in this contract in interpreting the term)
Dead minimum in course of performance
Dead minimum in course of dealing
Haagen the trade, you know sometimes courts do
things -> within discretion of court to determine what the
trade is one party looks like they are relatively
vulnerable to changes in practice or behavior and all that
royal dutch shell needed to do on the express term was to
say posted price, no price protection.
FILLERS
If the parties have not specified the term, is there somewhere else we
can look to specify that term?
Haynes v. City of NY
How does court resolve it?
o Starts with purpose (why was K actually
formed?
NY wants clean water, villages are
dirtying the water, basically NY bribes
them not to do it (build water treatment
plant)
o Term on the contract? Doesnt say. Seems like
perpetuity.
Look for a linguistic limitation City says
they will treat this, why can you drag in
language about said system
Cannon of interpretation interpret
all terms consistently as possible
o You dont write K forever, you dont likely imply
that people intended to do something that is
totally unreasonable (enter into a contract
forever)
GAP
-
o How does purpose come in here?

The villages gave up their right to pollute
(consideration) -> cannot dump raw
sewage in river. (Clean Air Act)
RULE: what a city would do if they were protecting an
important interest
o Says perpetual is unreasonable.
o Says until the Clean Water Act would be
inconsistent to intention of parties because
they didnt anticipated the Clean Water Act
(couldnt have been the limitation)
o Political Realism here.
o NY doesnt have to extend lines because it will
overload the system.
o Tries to reach equitable rule.
o Parol evidence rule -> appears to be a lack of
inegration
Partial integration, evidence is coming in
to deal with the nonintegrated term:
length and also extended duties
o UCC deals with open terms in 2-204(3) p. 811
Analysis:
If parties intended to contract
An appropriate remedy can be supplied
Even though one or more terms are left open a contract
for sale does not fail for indefiniteness if the parties have
intended to make a contract and there is a reasonably
certain basis for giving an appropriate remedy.
o Output K must have reasonable basis for determining the
output if output is not within reasonable approximation with what
the output would be, then it would fail in duty for good faith an
fair dealing
o Open term can be filled in any way reasonable under the
circumstances
UCC fills the gaps -> find reasonable basis
Keppy v. Lilienthal
o Court finds term here by looking at circumstances showed that
intended K duration was about 3 years -> implied intent is the
rule
Haslund v. Simon Property Group
o Haslund wins , parties intended to be bound, intended to be
bound by 1% of something.
o Yes they intended to be bound. Yes they have a price term.
Court looks at evidence of trade usage. Looks at testimony

GOOD FAITH
- Fortune v. NCR
o NCR fires him because they owe him a lot of money. Not in good
faith.
- City of Midland v. OBryant
o Says that in certain classes of employer-employee relations,
there is no duty of good faith
o Duty of good faith and fair dealing can be very, very narrow
reading of what you do in the circumstances
- Souters test for good faith:
o Does the agreement ostensibly allow to or confer upon the D a
degree of discretion in performance tantamount to a power to
deprive the plaintiff of a substantial proportion of the
agreements value?
o If the ostensible discretion is of that requisite scope, does
competent evidence indicate that the parties intended by their
agreement to make a legally enforceable contract?
o Assuming an intent to be bound, has the defendants exercise of
discretion exceeded the limits of reasonableness?
o Is the cause of the damage complained of the defendants abuse
of discretion, or does it result from events beyond the control of
the plaintiff?
- This concept is a kind of gap filler. It fills in the gap about the proper
use of discretion allowed in the K and if it is a contract, then discretion
must be rendered reasonably given the nature of the agreement.
CONDITIONS
- A condition is an event , not certain to occur, which must occur before
a duty arises
o IF condition is not met, there is no duty
- A promise is a statement of an intent to be bound to enter into an
enforceable legal arrangement with regard to that promise, IF you
receive some counter-promise
o If you breach a promise, damages result
- If you breach a material promise, the other party has the right to cease
performance.
- If there is a failure of a condition -> the duty does not arise.
- Condition precedent a condition that precedes a duty. If you have a
condition precedent to any duty arising, then that condition must be
met.
- Condition subsequent condition that when they occur end a duty
o Burden of proof claiming the duty is no longer due. (party
alleging the duty no longer exists has the burden of proof.)
- Promissory Condition one in which the party takes on the duty of
ensuring that a condition will be met
o That means that if it isnt met, they have breached the promise
and we have no duty. Triggers damage and duty has not arisen.
When do we use a condition: to control risk, include risk of proof
dont want to be in relationship with party that cant complete
Jacob & Youngs v. Kent
o Court: we interpret a provision not to trigger a disproportionate
forfeiture.
Condition can be trivial and have it be enforced
Kent however cannot get it enforced Court says the
condition was met by substantial performance. It isnt that
the contract was substantially performed, but that the
condition could be met by substantial performance of the
condition.
Interpretation of the meaning of the condition.
Here we interpret the condition as having been
complied with even though not precise or perfect.
o We start with the principle that conditions must be strictly
complied with.
o Then move to disproportionate forfeiture which causes us to look
at what the parties intent was regarding the condition.
If the parties intent was that it be strictly complied with,
then the intent is strict compliance.
o BUT because this is an environment in which strict compliance is
almost never achieved, then there is at least an inquiry whether
substantial performance of the condition is all that the parties
expected and so in equity, exercising its equitable powers, the
court will excuse the condition.
o Once condition is excused, then some sort of damage analysis
occurs
R2nd 237 (d)
Glaholm v. Hays
o There is a condition: vessel to sail from England on or before
certain date.
Overcomes presumption that it is a promise
o Determination based on intent of parties
o Factors of determining intent:
Language Is language consistent with promise language,
promise, determination, obligation or condition
language ,condition if
You look at nature of the kind of thing you are dealing with
is this one of those situations where it looks like one
party doesnt want to have a duty unless something is met
Howard v. Federal Crops INS Corp.

o When party knows or should know the meaning given to the
agreement given by the other party, whose meaning controls?
The party that did not know controls.
D was more likely to know (insurance company knows what
insurance company writes), P is a farmer would not know
that.
Construed strictly against insurer. reason to believe that
there was a different ability to interpret (D had better idea
than P.) If interpretation is interpretation given by
insurance company we would get a disproportionate
forfeiture.
To the degree that the insurance company has been
harmed we can compensate for it in damages. It will
increase the cost of their inspection, we can deal with that
in damage. And at least all together this is enough to
survive SJ.
- Gibson v. Cranage
o Condition of satisfaction must be satisfied with painting of dead
daughter before he pays
- Forman v. Benson
o Look at context a contract in a certain business. Here the
parties are impliedly saying that they are operating in
accordance with the standard in that industry. A party who has a
condition satisfaction cannot be outside the slot of commercial
standards
If outside the range they are not operating pursuant to the
condition
EXCUSE AND AVOIDANCE OF EXPRESS CONDITIONS
- Dupont
o P should not be held remediless for D making the test impossible
P believes they wont breach on a ground that goes to Ds
own individual interest
Dont think they will act in bad faith
o When there is an express condition, there will be an implied
condition that the parties will act in good faith in an effort to
have this work out. The good faith means they will act in
accordance with the common purposes of both parties here in
having this agreement work. If one party uses its discretion in
the operation of the business to defeat the condition then we
have an abuse of discretion. If one party has abused its
discretion then it would be unfair to insist on the condition.
o Schlottman turns on this idea that every condition carries with it
the implied condition that the party will not use its discretion
unfairly to defeat the expectations of the other party.

-
Hanna v. Commercial Travelers Mutual Accident Association

o Condition cannot be met here, claim of impossibility
What is harm to insured vs. harm to insurance company in
having to wait many years to investigate
Court uses balance of the equities

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