Contracts I Outline, SLU, Teri Dobbins, Fall 2006 1

Topical Outline for Contracts I

TYPES OF CONTACTS (From BarBri)

I. EXPRESS CONTRACT – Promises are communicated by language, there is a bargained for

exchange. (e.g., I will agree to do this for you if you agree to give me this…)
II. IMPLIED CONTRACT – Parties’ conduct indicates that they assented to be bound. (e.g., person
fills their gas tank at a fuel station. There is a contract for the sale and purchase of gas
implied in the person’s performance of filling their tank.)
III. QUASI-CONTRACT (Not a contract at all) – One party is unjustly enriched at the expense of
another party so that the enriched party must pay restitution to the other party equal to the
unjust enrichment. (e.g., a person agrees to build a house for another party which then dies
while only part of the house had been completed. P can recover the benefit conferred on D
even though they are unable to sue on the contract.)

(SECTION 1) CONSIDERATION

Chapter 1 – Basis for Enforcement of a Promise

I. THE MEANING OF “ENFORCE” [Three Interests of Recovery for Breach of Promise]
United States Naval Institute v. Charter Communications, U.S. App. Ct. 2nd Circ. (1991)
(936 F.2d 692) p. 2
► D and P had a licensing agreement for publishing a book in which D would be the sole
distributor of the paperback edition of the book set for a specific release date; D shipped
early; P sought injunction to stop D but court refused; D’s early release was realized; P sued:
P can recover damages due to breach of contract and loss of sales in its hardback edition due
to D’s early release.
Rule: Damages for breach of contract are appropriate when used to compensate the injured
party for the loss caused by the breach; such damages are generally measured by the
plaintiff’s actual loss. The focus in determining recovery should be on P’s loss, not on D’s
gain.
▪ D is responsible for the loss of sales that P would likely have made during that month. P
cannot recover award of profits because they could not prove a case for copyright
infringement.
The Economics of Remedies
Sullivan v. O’Connor, (Mass. 1973) (296 N.E.2d 183) p. 8
► D promised to perform a nose job on P over the course of 2 operations; P was a
professional entertainer and her appearance increased her value as such; P underwent 3
surgeries during which her appearance was worsened and could not be improved through
further surgery; P can recover damages.
Rule: Since P relied on D for a promised result, P should be awarded damages based on a
reliance interest. P suffered an unfixable detriment in reliance upon D’s promise.
Note (A.B.): Calculation of P’s damages based on restitution interest:
▪ Reliance damages – gives plaintiff what plaintiff had before the contract or the promise
was made. P can recover for her loss in value of appearance because of the surgeries.
▪ Restitution damages – gives plaintiff back what plaintiff gave to defendant. Not enough
compensation for what P lost.

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▪ Expectancy damages – gives plaintiff the value of what plaintiff expected to receive from
the contract.
Expectancy, Reliance, and Restitution Interest, pp. 14-15 (See Problem on p. 16 –
Damage Illustration)
SUBTOPICS:
Specific Performance for Breach of Contract, p. 17
Punitive Damages for Breach of Contract, pp. 17-18
Arbitration, pp. 19-20
Contract Remedies in Practice, pp. 21-22
II. CONSIDERATION AS A BASIS FOR ENFORCEMENT, p. 22
Restatement (Second) § 71 p. 219
(1) To constitute consideration, a performance or a return promise must be bargained for.
(2) A performance or return promise is bargained for if it is sought by the promisor in exchange
for his promise and is given by the promisee in exchange for that promise.
(3) The performance may consist of
(a) an act other than a promise, or
(b) a forbearance, or
(c) the creation, modification, or destruction of a legal relation.
(4) The performance or return promise may be given to the promisor or to some other person. It
may be given by the promisee or by some other person.
Restatement (Second) § 74 p. 221
(1) Forbearance of the ability to assert a right, or surrender of a claim or defense, which proves to
be invalid is not consideration unless
(a) the claim or defense is doubtful due to the uncertainty of the facts or the law, or
(b) the forbearing or surrendering party believes the claim or defense may be fairly deemed
valid
(2) The execution of a written instrument surrendering a claim or defense by one who is under no
duty to execute it is consideration if the execution thereof is bargained for even though he is not
asserting the claim or defense and believes that no valid claim or defense exists.
(A) Fundamentals of Consideration, p. 22
Family Contracts: A Typical Category, pp. 26-27
Hamer v. Sidway, N.Y. App. Ct. (1891) (27 N.E. 256; 124 N.Y. 538) p. 27
► D promised to pay P, his nephew, if he refrained from smoking, drinking etc. until P
turned 21; P complied; D’s estate refused to pay; D breached and P could recover (there was a
bargained for exchange)
Rule: Any suspension or forbearance of a legal right at the request of another is sufficient
consideration to sustain a promise.
▪ Consideration does not mean that one party to a contract has to profit so much as it might
mean that one party may abandon or limit a legal right in the present or limits his legal
freedom of action in the future as an inducement for the promise of the first. In those
situations, the bargain agreed upon will be an enforceable contract – as opposed to an
unenforceable promise. (best statement of consideration)
▪ Since P gave up his legal right to do certain things on the belief that D would pay, D’s
promise will be enforced as a binding contract.

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(See notes fm. 9/5)

Consideration and Pretenses (A.B.): (See p. 33)
A court will not inquire into sufficiency of consideration as long as the promise is not a pretense.
Peppercorn theory – no pretense to a promise will satisfy the consideration element or make an
unenforceable promise enforceable.
Gratuitous promise – such as a promise to make a gift, generally not enforceable if there is no
consideration.
Promise or Performance, (Note 4) p. 32
Gratuitous Promises: An Introduction, pp. 32-33
Fiege v. Boehm, Maryland App. Ct. (1956) (210 Md. 352; 123 A.2d 316) p. 34
► P agreed not to bring bastardy proceedings against D in exchange for the promise that D
would pay a certain amount in support etc.; D made payments until got a blood test
suggesting the child was not his; D brought bastardy proceedings and sued for breach: P can
recover even though the child was not D’s.
Rule: Forbearance to sue for a lawful claim or demand is sufficient consideration for a
promise to pay for the forbearance if the party forbearing had an honest intention to prosecute
litigation which is not frivolous, vexatious, or unlawful, and which he believed to be well
founded.
▪ Contract had sufficient consideration because P did not exercise P’s right to prosecute for
bastardy in exchange for D’s promise to pay. P made the claim in good faith and there was
no proof of fraud or unfairness.
Note (A.B.): It’s possible for P to have suits against other men as long as they are in good
faith – P or any other man should just not enter into agreement until knew for certainty the
paternity.
(See notes fm. 9/5)
(B) The Requirement of Exchange: Action in the Past, p. 39 [Promise for performance
previously done without reliance on the promise]
Restatement (Second) § 86 (Promise for Benefit Received), p. 227
(1) 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.
(2) A promise is not binding under Subsection (1)
(a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not
been unjustly enriched; or
(b) to the extent that its value is disproportionate to the benefit.
Feinberg v. Pfeiffer Co., Mo. App. Ct. (1959) (322 S.W.2d 163) p. 39 [for consideration
argument] & 91 [reliance argument]
► D had passed resolution promising to pay a set amount in pension per month upon P
retirement, setting no conditions requiring performance of P to receive the payments: Ct.
ruled there was not consideration based on past performance but that there was reliance
because she retired at the time she did in part because she would be able to receive the
pension
Mills v. Wyman, (Mass. 1825) (3 Pick. 207) p. 44
► D promised to pay P for medical care given to his son which was already given: not valid
consideration because there was no bargained for exchange before the treatment was given
Rule:

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▪ Promise not enforceable because there was no consideration, no bargained for exchange
between P and D, or even P and D’s son.
▪ P’s actions reflect past performance, performance which he originally did not expect to get
paid for.
▪ Even if D’s son lived it would not reflect consideration because there still was no bargained
for exchange of promise or performance.
Webb v. McGowin, Alab. App. Ct. (1935) (168 So. 196; 168 So. 199) p. 45
► P suffered permanent disability because by preventing D from suffering bodily harm or
death while performing a job function prescribed by his employer. D promised to pay P for
the rest of his life as compensation for saving his life and due to P’s permanent disability.
Payment was stopped following the D’s death; P sued his estate: P can recover because he
gave D a material benefit
Rule:
▪ Where the promisee cares for, improves and preserves the property of the promisor, though
done without his request, it is sufficient consideration for the promisor’s subsequent promise
to pay for the service.
▪ A moral obligation is a sufficient consideration to support subsequent promise to pay where
the promisor has received a material benefit, although there was no original duty or liability
resting on the promisor.
▪ Benefit to the promisor or injury to the promisee is a sufficient legal consideration for the
promisor’s agreement to pay.
▪ D gained a material benefit when P saved his life by risking his own, thus holding him
accountable for his promise to pay P.
The Zealous Advocate and the Ethics of “Technical” Defenses, p. 49
(C) The Requirement of Bargain, p. 50 [A bargained for exchange to constitute
consideration]
Kirksey v. Kirksey, Ala. Sup. Ct. (1845) (8 Ala. 131) p. 50 [Example of Gratuitous
Promise]
► P received letter from D, brother in law, stating that if P came to see D, D would take care
of P, P left residence and moved where D resided, after a couple of years, D evicted P from
his land; P no recovery
Rule: A gratuitous promise cannot be enforced.
▪ The court believed that D’s promise was a gratuity and lacked the requisite consideration to
sustain an enforceable contract. D intended to give it without anything in exchange from P.
Rewards, p. 64
(D) Promises as Consideration, p. 66
Types of Promises According to Dobbins (A.B.):
Conditional Promises: performance will become due only if a particular event, known as a
“condition,” occurs.
Illusory Promises: a promise that appears so insubstantial as to impose no obligation on the
promisor; an expression cloaked in promissory terms but actually containing no commitment by
the promisor. An illusory promise typically makes performance optional with the promisor. (i.e.
if a guarantor promises to make good on the principal debtor’s obligation “as long as I think it’s in
my commercial interest,” the guarantor/promisor is not really bound.
Uniform Commercial Code (UCC) Article 2 “An apparent promise which, according to its
terms, makes performance optional with the promisor no matter what may happen, or no matter

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what course of conduct in other respects he may pursue, is in fact no promise. Such an expression
is often called an illusory promise.”
Unilateral and Bilateral Promises (N.W.):
Bilateral Contract – a contract in which each party promises a performance, so that each party is
an obligor on that party’s own promise and an obligee on the other’s promise; a contract in which
the parties obligate themselves reciprocally, so that the obligation of one party is correlative to the
obligation of the other
Unilateral Contract – a contract in which only one party makes a promise or undertakes a
performance; a contract in which no promisor receives a promise as consideration for the promise
given
What Constitutes a Promise?, p. 68
Restatement (Second) § 76 (Conditional Promise)
(1) A conditional promise is not consideration if the promisor knows at the time of making the
promise that the condition cannot occur.
(2) A promise conditional on a performance by the promisor is a promise of alternative
performances within §77 unless occurrence of the condition is also promised.
Restatement (Second) § 77 (Illusory and Alternative Promises)
A promise or apparent promise is not consideration if by its terms the promisor or purported
promisor reserves a choice of alternative performances unless
(a) each of the alternative performances would have been consideration if it alone had been
bargained for; or
(b) one of the alternative performances would have been consideration and there is or appears
to the parties to be a substantial possibility that before the promisor exercises his choice
events may eliminate the alternatives which would not have been consideration.
Strong v. Sheffield, N.Y. App. Ct. (1895) (144 N.Y. 392; 39 N.E. 330) p. 69
► D endorsed husband’s promissory note to P for husband’s debt; P no recovery
Rule: A request followed by performance is sufficient, and mutual promises at the time are
not essential unless it was the understanding that the promisor was not to be bound, except on
condition that the other party entered into an immediate and reciprocal obligation to do the
thing requested.
▪ There was no consideration for D because there was no agreement for P to forbear for a
fixed or reasonable time but only an agreement to forbear for such time as P should select.
Notes (A.B.): D’s promise to pay is not enforceable because P’s promise was illusory. The
promise is illusory because P could have collected at any time. D’s promise to pay was given
in exchange for nothing. It was not a case of request to forbear, followed by forbearance in
pursuance of the request, because there was no promise on the part of D at the time.
Contracts for the Sale of Real Estate, p. 71
Meittei v. Hopper, Cal. Sup. Ct. (1958) (51 Cal.2d 119; 330 P.2d 625) p. 72 [agreements
giving one party leniency to decide what constitutes satisfactory fulfillment of a part of a
promise]
► D and P agreed to a deposit receipt to the purchase of land by P; D did not tender the deed
as provided in the deposit receipt. D argued that the clause allowing P to exercise judgment to
find satisfactory tenants was meant that it was conditional and no more than an offer to sell; P
can recover.
Rule: Deposit receipts are binding and enforceable contracts.
▪ Where the request is one of judgment, the promisor’s determination that he is not satisfied,
when made in good faith, has been held to a defense to an action on the contract.

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▪ Although these decisions do not expressly discuss the issues of mutuality of obligation or
illusory promises, they necessarily imply that the promisor’s duty to exercise his judgment in
good faith is an adequate consideration to support the contract.
Notes (A.B.):
▪ D’s obligation is perform his part of the agreement by making a good faith determination of
whether the leases are satisfactory. This obligation is enough to support the promise.
▪ Unless each party has assumed some legal obligation to the other, the contract is wanting in
consideration and is lacking in mutuality.
Contracts for the Sale of Goods, p. 75
Eastern Air Lines, Inc. v. Gulf Oil Corporation, U.S. Dist. Ct. Florida (1975) (415 F.Supp.
429) p. 76
► D supplied jet fuel to P based on a requirements contract for the fuel they would
reasonably need, D threatened to cut off P’s fuel supply if P did not agree to pay a higher
price than stipulated in contract; D argues there is not valid consideration because agreement
appears illusory to them: Court ordered P to be granted specific performance by D
Rule: A term which measures the quantity by the output of the seller or the requirements of
the buyer means such actual output or requirements as may occur in good faith, except that no
quantity unreasonably disproportionate to any stated estimate or in the absence of a stated
estimate to any normal or otherwise comparable prior output or requirements may be tendered
or demanded. (UCC §2-306(1))
▪ A requirements contract is binding on the seller, D, to provide a reasonable amount of
product to the buyer, P, consistent with commercial standards of fair dealing, and is binding
on the buyer, P, to act in good faith in making orders consistent with his requirements.
▪ Both parties identified and understood the risks involved in making the requirements
contract. The fact that the price went up drastically was one of the foreseeable risks that was
redistributed to D when P and D redistributed their respective pre-contractual risks. Since the
parties had relied upon each other over the years in light of the understanding of these risks, it
should not have been a surprise to D that he was contractually bound.
▪ Remedy is specific performance because money damages would not be sufficient; P would
suffer irreparable harm; there is nothing stopping D from performing because they have the
capabilities.
(See also notes fm. 9/26)
UCC § 2-306 (Output, Requirements and Exclusive Dealings)
(1) A term which measures the quantity by the output of the seller or the requirements of the
buyer means such actual output or requirements as may occur in good faith, except that no
quantity unreasonably disproportionate to any stated estimate or in the absence of a stated
estimate to any normal or otherwise comparable prior output or requirements may be tendered or
demanded.
(2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods
concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply
the goods and by the buyer to use best efforts to promote their sale.

Wood v. Lucy, Lady Duff-Gordon, N.Y. App. Ct. (1917) (222 N.Y. 88; 118 N.E. 214) p. 83
► D signed an agreement giving P exclusive right to market D’s with the condition that D
would not sell her name without P’s consent; P violated the agreement; P sued; D argued that
the agreement did not require a specific performance by P and, thus, there was no
consideration: P can recover.

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Rule: For an agreement to be enforceable merely requires that there be an attempt on the part
of the parties to fulfill the terms of the agreement. So long as P did make attempts to fulfill
the agreement—in this case by trying to market D’s name—then the promise is given value,
and the terms are enforceable.

(SECTION 2) RELIANCE & PROMISSORY ESTOPPEL

I. RELIANCE AS A BASIS FOR ENFORCEMENT, p. 86

Rickets v. Scothorn, Neb. Sup. Ct. (1898) (57 Neb. 71; 77 N.W. 365) p. 86
► D said would pay his granddaughter P money so she would not have to work; P quit job;
when D died the executor refused to pay P; P can recover.
Rule:
▪ D relied on P promise when quitting her job; she did this because D promised to pay her so
she wouldn’t have to work; this did not equate to a bargained for exchange and thus did not
constitute consideration. Consideration was not necessary under the reliance standard so long
as she incurred a material change due to her reliance on D’s promise.
▪ (Anna’s Notes) An estoppel in pais (or equitable estoppel) is defined to be a right arising
from acts, admissions, or conduct which have induced a change of position in accordance
with the real or apparent intention of the party against whom they are alleged.
Promissory Estoppel, p. 89
1) Family Promises
2) Promises to Convey Land
3) Promises Coupled with Gratuitous Bailments
4) Charitable Subscriptions
Restatement (First) § 90 (Promissory Estoppel), p. 91 of text
A promise which the promisor should reasonably expect to induce action or forbearance of a
definite and substantial character on the part of the promise and which does induce such action or
forbearance is binding if injustice can be avoided only by enforcement of the promise.
Restatement (Second) § 90 (Promissory Estoppel), p. 230 & p. 93 of text
(1) A promise which the promisor should reasonably expect to induce action or forbearance on the
part of the promisee or a third person and which does induce such action or forbearance is binding
if injustice can be avoided only by enforcement of the promise. The remedy granted for breach
may be limited as justice requires.
(2) A charitable subscription or a marriage settlement is binding under Subsection (1) without
proof that the promise induced action or forbearance.
Alternative Enforcement Methods when there is no Consideration (A.B.)
If there is no consideration to support the promise we want to enforce, then we can look at
alternative ways to enforce the promise. One of these ways is reliance; however, reliance doesn’t
necessarily create an enforceable contract.
Promissory estoppel is about enforcement of a promise. It allows for a promise to be enforced
without consideration if all the elements of promissory estoppel are met.
If court does not find injustice then it can choose whether or not to enforce the contract. If there is
consideration, the court has to enforce the contract.
Feinberg v. Pfeiffer Co., Mo. App. Ct. (1959) [Continued from Above] p. 91
► [See Above]

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Rule: Because P relied on promise in order to provide for her to be able to retire when she
did, she does not have to show that there was consideration. Injustice could not be avoided
without payment of the promised pension because she was too old to gain other employment.
Her reliance alone was sufficient to provide recovery.
Cohen v. Cowles Media Company, (Minn. 1992) (279 N.W.2d 387) p. 95
► P leaked information to D on the condition that D would not reveal P’s identity; D
revealed his identity anyway; D claimed because they were protected under the 1st
Amendment of the Constitution, P could not recover.
Rule: Court held that there would be injustice if P could not have a course of action when D
violated the agreement. Thus, D had violated the promise because P relied on it.
D & G Stout, Inc. v. Bacardi Imports, Inc., U.S. App. Ct. 7th (1991) (923 F.2d 566) p. 97
► P decided not to accept the offer of a competitor retailer to sell its liquor outlet stores so
long as D would agree to continue as its distributor; P agreed; over various communications P
was reassured the D would not end their relationship and that D was aware that if it intended
to do so P would accept competitors purchase offer; D asserted that it had no intention of
ending distribution with P; P did not accept competitor offer; D ended its agreement with P
shortly thereafter; P had to sell to competitor but at a lower price that it had originally offered
P: P sued for D’s violation of the reliance agreement even though there were no specific
timelines attached to the continuation of their relationship, for recovery of the reduction in its
sale price.
Rule: Since D understood that P would be rejecting the purchase offer based on its continued
relationship, P had a reliance claim against D. Without a formal contract, only a jury could
determine if recovery was justified. (Follows rule in Restatement (Second) § 90 (1) Above)

(SECTION 3) RESTITUTION AS AN ALTERNATIVE BASIS FOR RECOVERY

Restatement (Second) § 370 (Requirement that Benefit be Conferred)
A party is entitled to restitution under the rules stated in this restatement only to the extent that he
has conferred a benefit on the other party by way of part performance or reliance.
Restatement (Second) § 371 (Measure of Restitution Interest)
If a sum of money is awarded to protect a party’s restitution interest, it may as justice requires be
measured by either
(a) the reasonable value to the other party of what he received in terms of what it would have
cost him to obtain it from a person in the claimant’s position, or
(b) the extent to which the other party’s property has been increased in value or his other
interests advanced.
Cotnam v. Wisdom, Ark. Sup. Ct. (1907) (83 Ark. 601; 104 S.W. 164) p. 103
► P operated on deceased D after an accident without obtaining consent due to D being
unconscious; D died; P sued D estate to recover payment for the medical services rendered;
jury awarded P damages; D appealed.
Rule: An insane person, an idiot, or a person utterly bereft of all sense and reason by the
sudden stroke of an accident or disease may be held liable, in assumpsit, for necessaries
furnished to him in good faith while in that unfortunate and helpless condition.
▪ Court held that P was entitled to recovery without prior consent because of their profession
in health care and the inability of the D deceased to give consent due to incapacity.
▪ Court disagreed with the trial court that the ability of the D to pay could be used as a valid
means of determining the level of damages, as D could not have been assessed on his income

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—or ability to pay—at the time of the accident due to his incapacity; damages, therefore,
should be considered on a reasonable standard.
Callano v. Oakwood Park Homes Corp., N.J. Super. Ct. (1966) (219 A.2d 332) p. 108
► P was contracted by Pendergast (deceased) to install landscaping on a property he was
building; Pendergast died and the purchase of the property was cancelled with D builder; D
sold property to another buyer with landscaping already completed; P sued D for unjust
enrichment due to the increase in the value of the home with the landscaping: Trial Ct.
awarded P recovery; D appealed.
Rule: To recover for a quasi-contract, D must have received unjust enrichment which could
be remedied only by intervention of justice with recovery for the unjust enrichment. There
must also be some direct relationship between P & D or a mistake on the part of the party
who confers the benefit. Recovery on quasi-contracts was developed to secure justice where
no other remedy existed (p. 109).
▪ “A person shall not be allowed to enrich himself unjustly at the expense of another, and on
the principle of whatsoever it is certain a man ought to do, that the law supposes him to have
promised to do.” (p. 109).
▪ Court held there was an appropriate remedy in P’s ability to sue the Pendergast estate. To
bring cause against D would requite that there was no other more liable party. D did not
Pyeatte v. Pyeatte, (Ariz. 1982) (661 P.2d 196) p. 112
► P was D’s spouse when they agreed that P would pay D’s way through law school so long
as he would pay for her when she attended graduate school; D graduated and divorced P; P
sued for breach of contract: Trial Ct. awarded P $23,000; D appealed.
Rule: Unjust enrichment is generally not applicable in marital disputes. But, where one
partner has taken steps which benefit the other entirely, restitution may be justified. In other
words, where both spouses perform the usual and incidental activities of the marital
relationship, upon dissolution there can be no restitution for the performance of these
activities. Where, however, the facts demonstrate an agreement between the spouses and an
extraordinary or unilateral effort by one spouse which inures solely to the benefit of the other
by the time of dissolution, the remedy of restitution is appropriate.
Note: Could P have sued under promissory estoppel? Under restatement (second) §90, P
could make a good argument. What are the options for recovery? Market value or the extent
to which “property” has increased in value. Restitution under quasi-contract may be limited
to expectancy in this case probably awarded $30,000 because that is what she would have
received from D if she had received the degree. If under reliance, expectancy would be
$30,000 and if reliance, would be $90,000.
Restitution and Promissory Estoppel and basis of recovery (A.B.)
Promissory estoppel and restitution are equitable remedies but they have different criteria.
Quasi-contract cases involve either some direct relationship between the parties or a mistake on
the part of the person conferring the benefit. Application when plaintiff expected remuneration
from defendant or if the true facts were known to plaintiff, plaintiff would have expected
remuneration from defendant, at the time the benefit was conferred.
Two ways to measure benefit conferred or restitution: market value or the extent to which
property has increased in value. (Should the Callanos have been able to collect from Oakwood:
market value of shrubs or the extent which home increased in value?) Not usually going to get
better than expectancy.
If true facts known at time, per application of quasi-contract above, Ventura would have expected
to have been paid royalties.

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(SECTION 4) THE BARGAINING PROCESS AND ITS ELEMENTS

Chapter 2 – The Bargaining Process

I. THE NATURE OF ASSENT
Two Theories of Contracts:
(a) the ‘actual intent’ theory—or ‘meeting of the minds’ or ‘will’ theory, p. 119
(b) the ‘objective’ theory, p. 119
Lucy v. Zehmer, Vir. Sup. Ct. of App. (1954) (84 S.W.2d 516) p. 120
► D agreed to sell farm to P while the two parties were at a bar; D wrote a contract on a
restaurant order ticket and he and his wife signed it; P attempted to execute the agreement; D
refused to follow through with the promise; P sued; D claimed the agreement was in jest: P is
entitled to specific performance of the contract.
Rule: The words and acts of the parties should be used to determine their intentions, “his
undisclosed intention is immaterial except when an unreasonable meaning which he attaches
to his manifestations is know to the other party.” (p. 123).
Intent to be Bound (Freedom to Contract and Freedom from Contract), p. 125
“Gentlemen’s Agreements”, p. 127
“Formal Contract Contemplated”, p. 128
II. THE OFFER, p. 130
Restatement (Second) § 24 (Offer Defined), p. 205 (Not actual wording)
An offer is a manifestation of willingness to enter into a bargain, so that the other party is justified
in believing that their assent to that bargain is invited and that it will be concluded with assent.
Owen v. Tunison, Maine Sup. Jud. Ct. (1932) (131 Me. 42; 158 A. 926) p. 130
► P sent message to D asking if he would sell his store for $6000; D responded by saying he
could not sell his store for less than $16,000 cash; P replied with a message saying he would
accept D’s offer to sell; D thereafter refuse to transfer deed and sell his store; P sued for
breach of promise: P cannot recover.
Rule: “There can have been no contract for the sale of the property desired, no meeting of the
minds of the owner and prospective purchaser, unless there was an offer or proposal of sale.”
(p. 131).
▪ According to the court, the specific language of the correspondence did not constitute an
offer; the letter in response to P offer was merely in invitation to open negotiations for a
possible sale.
Harvey v. Facey, Privy Council of Jamaica (1893) (A.C. 552) p. 133
► P sent a telegraph to D asking if D would sell P Bumper Hall and asking for the lowest
price…; D responded with lowest price of 900 Pounds; P telegraphed accepting the price and
attempted to secure the purchase; D refused; P sued for specific performance: P was not
entitled to performance because the contract was not concluded
Rule: There was no language which specifically stated D would sell to P in their reply to
plaintiff’s inquiry. They responded merely to the second question—of the lowest price it
might accept—and did not specifically say they would sell to P. No contract was implied to
sell to P at the price quoted in the response.

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Fairmount Glass Works v. Crunden-Martin Woodenware Co., Ken. App. Ct. (1899) (51
S.W. 196) p. 134
► P wrote D asking inquiring on prices for a certain amount of glass containers; D responded
with prices and quoted product could be shipped by a certain date; P responded requesting the
order be shipped; D replied that output had been sold and it could not fulfill the order; P sued
for breach of contract; Trial Ct. held for plaintiff; D appealed: P can recover.
Rule: Based upon the specific language of the correspondence, it was reasonable for P to
expect D to fulfill the order once it submitted it based upon P’s past correspondence with D.
▪ “Appellee’s letter was plainly an inquiry for the price and terms on which appellant would
sell it its goods, and appellants answer to it was not a quotation of prices, but a definite offer
to sell on the terms indicated, and could not be withdrawn after the terms had been accepted.”
(p. 136).
Advertisements as Offers, p. 137
Lefkowitz v. Great Minneapolis Surplus Store, (Minn. 1957) (86 N.W.2d 689) p. 138
► P went to store to purchase a Lapin Stole which had been advertised in the newspaper by
D; advertisement said first come first serve as the condition for the purchase; when P went to
store and requested the Stole, D refused to sell it to him because of the “house rule” that the
offer was intended for women only; P sued for breach: P can recover.
Rule: Since the advertisement had only set the condition of first come first serve, D was in
error because they had added an extra condition after the contract had been complied with.
▪ “where the offer is clear, definite, and explicit, and leaves nothing open for negotiation, it
constitutes an offer, acceptance of which will complete the contract…” (p. 139).
Mistaken Bids, p. 142
Restatement (Second) § 153 (When Mistake of One Party Makes a Contract Voidable)
Where a mistake of one party at the time a contract was made as to a basic assumption on which
he made the contract has a material effect on the agreed exchange of performances that is adverse
to him, the contract is voidable by him if he does not bear the risk of the mistake under the rule
stated in §154, and
(a) the effect of the mistake is such that enforcement of the contract would be
unconscionable, or
(b) the other party had reason to know of the mistake or his fault caused the mistake
Restatement (Second) §154 (When a Party Bears the Risk of a Mistake)
A party bears the risk of a mistake when
(a) the risk is allocated to him by agreement of the parties, or
(b) he is aware, at the time the contract is made, that he has only limited knowledge with
respect to the facts to which the mistake relates but treats his limited knowledge as sufficient,
or
(c) the risk is allocated to him by the court on the ground that it is reasonable in the
circumstances to do so.
Elsinore Union Elementary School District v. Kastorff, Cal. Sup. Ct. (1960) (353 P.2d 713)
p. 143
► D made an offer which had been figured in error to P for a construction contract; D
notified P the day following acceptance of the bid that it was in error; P accepted the offer
anyway; D refused to comply; P found another contractor and started construction on the
school; P then sued D for breach and asked for recovery of the difference between what D’s
bid and that which it finally had to accept from another contractor: P cannot recover.

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Rule: Rescission of a contract can be made if there was a mistake of fact which was material
to the contract so long as it was not due to neglect of a legal duty, if performance of the
contract would be unconscionable, and if P can be put back in status quo without
enforcement; D must have promptly alerted P of the mistake and offered to restore any cost
incurred by D as a result of its reliance on P promise. (See p. 147).
III. THE ACCEPTANCE, p. 151
Restatement (Second) § 54 (Acceptance by Performance: Necessity of Notification to
Offeror), p. 213
(1) Where an offer invites an offeree to accept by rendering a performance, no notification is
necessary to make such an acceptance effective unless the offer requests such a notification.
(2) If an offeree who accepts by rendering a performance has reason to know that the offeror has
no adequate means of learning of the performance with reasonable promptness and certainty, the
contractual duty of the offeror is discharged unless
(a) the offeree exercises reasonable diligence to notify the offeror of acceptance, or
(b) the offeror learns of the performance within a reasonable time, or
(c) the offer indicates that notification of acceptance is not required.
Restatement (Second) § 51 (Effect of Part Performance without Knowledge of Offer), p. 213
Unless the offeror manifests a contrary intention, an offeree who learns of an offer after he has
rendered part of the performance requested by the offer may accept by completing the requested
performance.
Restatement (Second) § 56 (Acceptance by Promise; Necessity of Notification to Offeror), p.
214
Except as stated in § 69 (Acceptance by Silence or Exercise of Dominion) (p. 218) or where the
offer manifests a contrary intention, it is essential to an acceptance by promise either that the
offeree exercise reasonable diligence to notify the offeror of acceptance or that the offeror receive
the acceptance seasonably.
International Filter Co. v. Conroe Gin, Ice & Light Co., Tex. Comm. of App. (1925) (277
S.W. 631) p. 151
► P proposed to sell its water filter product (industrial grade) to D at a set price for water
softening; correspondence of offer requested that D approve the offer and then pended
approval of P executive officer in Chicago; D approved proposal on the same date submitted
in writing thereto; P executive officer approved the agreement with an “OK” notation on the
letter; P then sent letter requesting a sample of D water prior to shipment as noted in the
original offer; D sent a countermand two times thereafter; P sued for breach of contract; Trial
Judge found for D; P appealed to Ct. of Civil Appeals; Court affirmed; P appealed again; D
argued that acceptance of the contract was required to make it enforceable: P can recover on
the basis that acceptance was not required.
Rule: The important issue is the meeting of the minds. In this case, the notation of “OK” was
a valid acceptance; only if there was an valid belief that changes to a contract could be made
in the belief that the contract was not complete and could be amended could they change the
stipulations of the contract or reject it. So long as there is a meeting of the minds in the
validity of the contract, it is valid. (My interpretation)
White v. Corlies & Tift, NY App. Ct. (1871) (46 N.Y. 467) p. 156
► P gave D an estimate for reconstruction of D’s offices; D changed specifications and sent
to P for assent under his estimate; P assented to changes and returned to D; D sent P note
saying upon agreement you can begin at once and that someone from D would contact P; P
made no reply to note and purchased lumber; D countermanded the next day; trial court
order for P; judgment reversed and new trial ordered

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Rule: Where an offer is made by one party to another when they are not together, the
acceptance of it by the other must be manifested by some appropriate act. Acceptance does
not have to be aware to the offeror to bound him; he is not bound, however, if that
manifestation of acceptance is not, in a proper way to be in the usual course of events,
communicated to the offeror in some reasonable time.
▪ The P determined to accept, but a mental determination not indicated by speech, or put in
course of indication by act to the other party, is not an acceptance which will bind the other.
Nor does an act, which in itself, is no indication of an acceptance, become such, because
accompanied by an unevinced mental determination.
▪ P did no act which indicated an acceptance of it to D. P purchased stuff for the work but, it
was stuff as fit for any other like work. He began work upon the stuff but as he would have
done for any other like work.
Restatement (Second) § 30 (Form of Acceptance Invited)
(1) An offer may invite or require acceptance to be made by an affirmative answer in words, or by
performing or refraining from performing specified act, or may empower the offeree to make a
selection of terms in his acceptance.
(2) Unless otherwise indicated by the language or the circumstances, an offer invites acceptance
in any manner and by any medium reasonable in the circumstances.
Restatement (Second) § 50 (Acceptance of Offer Defined; Acceptance by Performance;
Acceptance by Promise)
(1) Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in
a manner invited or required by the offer.
(2) Acceptance by performance requires that at least part of what the offer requests be performed
or tendered and includes acceptance by a performance which operates as a return promise.
(3) Acceptance by a promise requires that the offeree complete every act essential to the making
of the promise.
Restatement (Second) § 60 (Acceptance of Offer Which States Place, Time or Manner of
Acceptance)
If an offer prescribes the place, time or manner of acceptance its terms in this respect must be
complied with in order to create a contract. If an offer merely suggests a permitted place, time or
manner of acceptance, another method of acceptance is not precluded.
Restatement (Second) § 62 (Effective of Performance by Offeree Where Offer Invites Either
Performance of Promise)
(1) Where an offer invites an offeree to choose between acceptance by promise and acceptance by
performance, the tender or beginning of the invited performance or a tender of a beginning of it is
an acceptance by performance.
(2) Such an acceptance operates as a promise to render complete performance.
Ever-Tite Roofing Corporation v. Green, (La.App.1955) (83 So.2d 449) p. 158
► D wanted P to re-roof their home and signed a document that set out the work in detail and
the price in monthly installments, the document was also signed by P’s sales representative
who did not have authority to bind P, the document created a provision where the agreement
would only become binding upon written acceptance by an officer of P or upon commencing
performance of the work, P had to conduct credit reports that was necessary for D to finance
contract and D knew this, more than a week later the reports were completed and P loaded
trucks and sent workmen to D’s residence where they found that others had commenced the
work; P can recover
Rule: Since the contract did not specify the time within which the offer was to be accepted—
within which the work was to have been commenced—a reasonable time must be allowed.
A reasonable time is contemplated where no time is expressed. In this case, the delays to D’s
application were not unusual. Also, the commencement began with the loading of the trucks

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and transporting materials to D’s home.Actual commencement or performance of the work

therefore began before any notice of dissent by D was given P. The proposition and its
acceptance became a completed contract
Notice in Unilateral Contracts, p. 160
Restatement (Second) §61 (Acceptance Which Requests Change of Terms)
(1) Where an offer invites an offeree to choose between acceptance by promise and acceptance by
performance, the tender or beginning of the invited performance or a tender of a beginning of it is
an acceptance by performance.
(2) Such an acceptance operates as a promise to render complete performance.
Restatement (Second) §63 (Time When Acceptance Takes Effect)
Unless the offer provides otherwise,
(a) an acceptance made in a manner and by a medium invited by an offer is operative and
completes the manifestation of mutual assent as soon as put out of the offeree’s possession,
without regard to whether it ever reaches the offeror; but
(b) an acceptance under an option contract is not operative until received by the offeror.

Allied Steel and Conveyors, Inc. v. Ford Motor Co., U.S. App. Ct. 6th (1960) (277 F.2d 907)
p. 162
► D and P had an agreement with a provision created by P that D was responsible for the
negligence for P and D’s employees during installation, the provision stated that the
agreement was not binding until accepted and that acceptance should be executed on
acknowledgment copy which should be returned to buyer, D began the work before the
acknowledgment copy was signed and returned to P, one of D’s employee’s sued P for
injuries incurred during that time; P can recover
Rule: If an offeror merely suggests a permitted method of acceptance, other methods of
acceptance are not precluded. If the offer requests a return promise and the offeree without
making the promise actually does or tenders what he was requested to promise to do, there is
a contract if such performance is completed or tendered within the time allowable for
accepting by making a promise. In such a case a tender operates as a promise to render
complete performance.
▪ Acknowledgment copy was a suggested, not required method.
▪ The offer was accepted when D, with P’s knowledge, undertook the work requested. It
is well settled that acceptance of an offer by part performance in accordance with the terms of
the offer is sufficient to complete the contract.
Shipment of Goods as Acceptance, p. 165
Corinthian Pharmaceutical Systems, Inc. v. Lederle Laboratories, U.S. Dist. Ct., S.D.
Indiana (1989) (724 F.Supp. 605) p. 166
► P made a number of purchase orders for DTP, the largest single order during this period
was 100 vials, product liability increased so D had to make a substantial increase for self-
insurance, D’s notice of DTP’s price increase was sent to D’s sales rep but not to customers
respectively, D’s customer letter for the increase of price and P got the info before it was
made known to public and 1,000 vials and P sent confirmation of the order, D sent invoice to
P for 50 vials of DPT priced $64.32 each saying it is an accommodation, enclosed letter of
price when the shipment was made, but in light of the magnitude of price increase, D decided
to make an exception and ship a portion of the order at the lower price, the balance owed
would have been $171.00/vial to be shipped on June 16 and the order was cancelable before
June 13; P can’t recover specific performance

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Rule: A shipment of non-conforming goods does not constitute an acceptance if the seller
seasonably notifies the buyer that the shipment is offered only as an accommodation to the
buyer.
▪ The shipment of non-conforming goods is treated as a counteroffer because it was an
accommodation and P may accept or reject the counteroffer under normal contract rules
UCC § 2-206 (Offer and Acceptance in Formation of Contract), p. 34
(1) Unless otherwise unambiguously indicated by the language or circumstances:
(a) an offer to make a contract shall be construed as inviting acceptance in any manner and by
any medium reasonable in the circumstances;
(b) an order or other offer to buy goods for prompt or current shipment shall be construed as
inviting acceptance either by a prompt promise to ship or by the prompt or current shipment
of conforming or non-conforming goods, but such a shipment of non-conforming goods does
not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is
offered only as an accommodation to the buyer
(2) Where the beginning of a requested performance is a reasonable mode of acceptance an
offeror who is not notified of acceptance within a reasonable time may treat the offer as having
lapsed before acceptance

Silence Not Ordinarily Acceptance, p. 170

Restatement (Second) § 69 (Acceptance by Silence or Exercise of Dominion), p. 218
(1) Where an offeree fails to reply to an offer, his silece and inaction operate as an acceptance in
the following cases only:
(a) Where an offeree takes the benefit of offered services with reasonable opportunity to
reject them and reason to know that they were offered with expectation of compensation.
(b) Where the offeror has state or given the offeree reason to understand that assent may be
manifested by silence or inaction, and the offeree in remaining silent and inactive intends to
accept the offer.
(c) Where because of previous dealings or otherwise, it is reasonable that the offeree should
notify the offeror if he does not intend to accept.
(2) An offeree who does any act inconsistent with the offeror’s owndership of offered property is
bound in accordance with the offered terms unless they are manifestly unreasonable. But if the
act is wrongful as against the offeror it is an acceptance only if ratified by him.
Hobbs v. Massasoit Whip Co., (Mass. 1893) p. 171
[MENTIONED IN CLASS, NOT ASSIGNED]
► Seller P sued when buyer D failed to pay for delivery of goods P had routinely delivered to
D several times before (4 or 5 times) even though there was no formal contract between them;
P can recover.
Rule: The court held that because D was no stranger to P, and because there was a history
between the parties in such deliveries where performance had been rendered in the past,
silence coupled with D’s retention of the delivery could be found by a jury to constitute an
acceptance.
American Bronze Corp. v. Streamway Products, (Ohio App. 1982) (467 N.E.2d 1295) p. 171
[MENTIONED IN CLASS, NOT ASSIGNED]
► For over 20 years, buyer P had called in its purchase orders to seller D and followed up
with written orders; P sued with D refused to fill three orders; trial court denied claim; P
appealed; P can recover

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Rule: P had the reasonable expectation that the orders would be filled as the history of the
parties’ business relationship suggested; silence could service as acceptance if there was not
notified rejection.
IV. TERMINATION OF THE POWER OF ACCEPTANCE, p. 172 (4 ways to terminate acceptance)
(A) Lapse of an Offer, p. 173
Restatement (Second) § 41 (Lapse of Time), p. 210
(1) An offeree’s power of acceptance is terminated at the time specified in the offer, or, if no time
is specified, at the end of a reasonable time.
(2) What is a reasonable time is a question of fact, depending on all the circumstances existing
when the offer and attempted acceptance are made.
(3) Unless otherwise indicated by the language or the circumstances, and subject to the rule stated
in § 49, an offer sent by mail is seasonably accepted if an acceptance is mailed at any time before
midnight on the day on which the offer is received.
(B) Revocation, p. 175
See Restatements 40 & 42 below
Option Contracts, p. 175
Restatement (Second) § 25 (Options Contract) Defined, p. 205
An option contract is a promise which meets the requiremtns for the formation of a contract and
limits the promisor’s power to revoke an offer.
Dickinson v. Dodds, App. Ct., Chancery Division (1876) (2 Ch. Div. 463) p. 176
► D made an offer to sell land to P with a date which the offer would no longer be available,
D sold to someone else before P accepted; P can’t recover
Rule: So long as the offeree is aware at the time he accepts the offer that the offeror has
revoked the offer then the contract is not enforceable.
▪ There was an offer made and P acknowledged that he required time to decide whether or not
to enter into an agreement. Unless both parties had then agreed, there was no concluded
agreement then made for it was in effect and substance only an offer to sell.
▪ There was no consideration given for the undertaking or promise, to whatever extent it may
be considered binding, to keep the property unsold until P decided to accept.
See Restatement § 43 (Indirect Communication of Revocation), p. 211
An offeree’s power of acceptance is terminated when the offeror takes definite action inconsistent
with an intention to enter into the proposed contract and the offeree acquires reliable information
to that effect.
Restatement (Second) §46 (Revocation of General Offer)
Where an offer is made by advertisement in a newspaper or other general notification to the public
to a number of persons whose identity is unknown to the offeror, the offeree’s power of
acceptance is terminated when a notice of termination is given publicity by advertisement or other
general notification equal to that given to the offer and no better means of notification is
reasonably available.
UCC § 2-205 (Firm Offers), p. 34
An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance
that it will be held open is not revocable, for lack of consideration, during the time stated or if no
time is stated for a reasonable time, but in no event may such period of irrevocability exceed three
months; but any such term of assurance on a form supplied by the offeree must be separately
signed by the offeror.
“Firm Offers” Under the Code, p. 180

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Ragosta v. Wilder, Ver. Sup. Ct. (1991) (156 Vt. 390; 592 A.2d 367) p. 181
► D considered selling some real property and P mailed letter offering to purchase it along
with a check and made arrangements for the necessary financing, D returned the check and
made a counter-offer stating that if P showed up with money at anytime up until a certain date
at a specific location, P received the counter-offer and called D to confirm the acceptance,
later P changed the date previously discussed for acceptance and D called revoking the offer,
P sued for specific performance; P can’t recover
Rule: Where an offer invites an offeree to accept by rendering a performance and does not
invite a promissory acceptance, an option contract is created when the offeree tenders or
begins the invited performance or tenders a beginning of it. What is tendered or begun must
be part of the actual performance invited in order to preclude revocation.
▪ D received no consideration for the offer or the promise to keep the offer open unless sold to
another buyer. D retunred the check which would have constituted consideration for the
promise to keep the offer open because D probably did not wish to make a firm offer. Thus,
the promise was not enforceable and D could revoke at any time before P accepted.
▪ Whatever detriment that P suffered to obtain financing was not in exchange for D’s promise
to keep the offer to sell open. No bargained for exchange.
▪ P was merely engaged in preparation for performance which they began even before an
offer was made by D.
Restatement (Second) § 45 (Option Contract Created by Part Performance or Tender), p.
211
(1) Where an offer invites an offeree to accept by rendering a performance and does not invite a
promissory acceptance, an option contract is created when the offeree tenders or begins the
invited performance or tenders a beginning of it.
(2) The offeror’s duty of performance under any option contract so created is conditional on
completion or tender of the incited performance in accordance with the terms of the offer.
(C) Death of an Offeror, p. 184
Restatement (Second) § 48 (Death or Incapacity of Offeror or Offeree), p.
An offeree’s power of acceptance is terminated when the offeree or offeror dies.
(D) Rejection, p. 186
Restatement (Second) § 38 (Rejection), p.
(1) An offeree’s power of acceptance is terminated by his rejection of the offer, unless the offeror
has manifested a contrary intention.
(2) A manifestation of intention not to accept an offer is a rejection unless the offeree manifests
an intention to take it under further advisement.
The “Mirror Image” Rule, p. 186
UCC § 2-207 (Additional Terms in Acceptance and Confirmation), p. 35
(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
(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; or
(c) notification of the objection to them has already been given or is given with a reasonable
time after notice of them is received.
(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a
contract for sale although the writing of the parties do not otherwise establish a contract. In such

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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.
The Battle of the Forms: Opening Skirmish, p. 188
Rejection of an Irrevocable Offer, p. 190
Restatement (Second) § 37 (Termination of the Power of Acceptance under an Options
Contract), p.
The power of acceptance under an option contract is not terminated by rejection or counter-offer,
by revocation, or by death or incapacity of the offeror, unless the requirements are met for the
discharge of a contractual duty. Notwithstanding §38-49.
(E) The “Mailbox Rule”: Contracts by Correspondence, p. 190
Restatement (Second) § 63 (Time when Acceptance Takes Effect), p.
Unless the offer provides otherwise,
(a) an acceptance made in a manner and by a medium invited by an offer is operative and
completes the manifestation of mutual assent as soon as put out of the offeree’s possession,
without regard to whether it ever reaches the offeror; but
(b) an acceptance under an option contract is not operative until received by the offeror.
Restatement (Second) § 40 (Time When Rejection or Counter-offer Terminates the Power of
Acceptance), p.
Rejection or counter-offer by mail or telegram does not terminate the power of acceptance until
received by the offeror, but limits the power so that a letter or telegram of acceptance started after
the sending of an otherwise effective rejection or counter-offer is only a counter-offer unless the
acceptance is received by the offeror before he receives the rejection or counter-offer.
Restatement (Second) § 41 (Lapse of Time), p. 210 (See above also)
(1) An offeree’s power of acceptance is terminated at the time specified in the offer, or, if no time
is specified, at the end of a reasonable time.
(2) What is a reasonable time is a question of fact, depending on all the circumstances existing
when the offer and attempted acceptance are made.
(3) Unless otherwise indicated by the language or the circumstances, and subject to the rule stated
in § 49, an offer sent by mail is seasonably accepted if an acceptance is mailed at any time before
midnight on the day on which the offer is received.
Restatement (Second) § 42 (Revocation by Communication From Offeror Received by
Offeree), p.
An offeree’s power of acceptance is terminated when the offeree receives from the offeror a
manifestation of an intention not to enter into the proposed contract.

Brett A. Hueffmeier