Contracts Outline 3

Contracts I - Outline
I. Introduction to Contracts
A. Key Terms
a. A contract is a promise, or a set of promises, for breach of which
the law gives a remedy, or the performance of which the law in some
way recognizes as a duty.
b. A unilateral contract is a contract that arises on performance. It looks to
an acceptance by performance, except in the unusual case of a reverse
unilateral contract.
c. A bilateral contract looks to a promise on the part of the offeree.
d. Option Contract is seller agrees that property available for the buyer to
purchase at a specified price and within a certain time period and buyer
provides consideration – value given in exchange for performance, or a
promise to perform, by another party. Money is paid to keep the offer
open for a certain period of time and the counteroffer does not terminate
the power to accept, unless the buyer detrimentally relies on it.
e. Void Contract is one that is totally without any legal effect from the
beginning (an agreement to commit a crime)
f. Voidable Contract is one that one or both parties may elect to avoid or to
ratify (contracts of infants or mentally ill persons)
g. Unenforceable Contract is one in which is an agreement that is
otherwise valid, but that may not be enforceable due to various defenses
extraneous to contract formation, such as the statute of limitations or
Statute of Frauds.
h. A promise is some commitment for the future, some assumption of
liability lasting beyond the instant of agreement. The undertaking to act or
refrain from acting in a specified way at some future time.
i. Promises may be “express” – in words or “implied” – inferred from
conduct of circumstances of the transaction.
ii. A promise is legally enforceable if made as part of a bargain for
valid consideration; reasonably induced the promisee to rely on
the promise to his detriment; or is deemed enforceable by a
statute despite the lack of consideration.
iii. A promise which the promisor should reasonably expect to induce
action or forbearance of a definite and substantial character on the
part of the promisee and which does induce such action or
forbearance is binding if injustice can be avoided only by
enforcement of the promise – Restatement (Second) 90.
i. A duty puts the responsibility of duties (to perform or to abstain) on
persons entering into agreements for consideration whether they want
them or not
j. Performance is the fulfillment or accomplishment of a promise, contract
or other obligation according to its terms.
i. Specific performance is an equitable remedy whereby the court
requires the parties to perform their obligations pursuant to a
contract
k. A breach is a non-performance of a contractual duty which has become
due
i. A remedy will be enforced for the breach if a court does indeed
find a contract has been established. A validly formed contract
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must provide a basis for determining the existence of a breach

and for giving an appropriate remedy [Restatement § 33; UCC §
2-204].
ii. An anticipatory repudiation of obligations also serves to breach a
contract In contracts for the sale of goods, in addition to
repudiation: a seller breaches the contract by offering a tender or
delivery of non-conforming goods and also if a buyer breaches by
wrongfully rejecting goods, wrongfully revoking acceptance of
goods, or failing to make a payment when due.
iii. Specific enforcement of the promise is not always the primary
remedy for a breach of contract. Rather compensatory damages
may be issued instead where the financial loss caused by the
breach may be awarded. In other words, if the promisor offers the
promisee a price of $400.00 for a kayak and the next closest thing
is $450.00, $50 in compensatory damages will be issued.
iv. If a judgment issues the promisor to pay the compensatory
damages and he fails to do so voluntarily, an execution occurs
where a sheriff will under command of the court try to seize the
promisor’s property and sell it at a public auction to satisfy the
debt.
B. Three Types of Contracts

a. Express contracts are formed by language (words), oral or written
b. Implied-in-fact contracts are agreements manifested by conduct (actual
doing)
c. Implied-in-law contracts are Quasi-Contracts which are not true
contracts but an obligation imposed by a court despite the absence of a
promise in order to avoid an injustice. They are not based on the
apparent intention of the parties to undertake the performance in
question, nor are they promises. They are constructed by courts to avoid
unjust enrichment by permitting the plaintiff to bring an action in restitution
to recover the amount of benefit conferred on the defendant. It is a
contract implied in law.
C. Thoughts on Contracts
a. Objectively speaking, a contract would lead the other party to reasonably
understand that agreement was reached.
b. A party can not be coerced (duress) or tricked into entering contract
c. Contracts can be oral or written agreements
d. Contract is upheld when a promise is made and has legal consequences
in that the performance of the promise may be enforced in court by a
money judgment and sometimes by a decree ordering specific
performance.
e. Every contract for the sale of goods imposes an obligation of good faith
dealing on all parties in its performance and enforcement. [UCC § 1-203]
All parties, including non-merchants, are subject to UCC § 1-201(19)
which defines "good faith" as "honesty in fact in the conduct or transaction
concerned." Merchants are subject to an additional good faith standard,
set forth in UCC § 2-103(1)(b), which requires "honesty in fact and the
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observance of reasonable commercial standards of fair dealing in the

trade."
II. Intent to Contract

A. Mutual Assent - A prerequisite of a valid K that the parties possess a mutuality
of assent as manifested by the terms of the agreement and not by hidden intent.
Mutual assent is a requisite to the formation of a contract. It is ordinarily arrived
by a process of offer and acceptance. At times, however, mutual assent exists
even though it is impossible to identify the offer and the acceptance.
B. Things to Consider
a. Questions of fact are determined by juries, questions of law by judges.
b. Whether a person said 50 or 100 on a particular occasion is a question of
fact. Whether a reasonable person in the position of the P would conclude
that the D had made a commitment is question of fact unless the court
rules that reasonable person could reach only one reasonable conclusion.
c. Even where reasonable persons could reach different conclusions the
question is often held to be one of law when it involves the interpretation
of a writing
d. Objective theory of Contracts states that mutual assent should be
determined solely from objective manifestations of assent-what the
parties do and say rather than what either party subjectively intends,
believes or assumes. “What does the other party reasonably intend from
this contract?”
C. Examples of Mutual Assent
a. A makes an offer to sell B a vintage automobile for $200,000, specifying
all necessary terms. B, in turn states he accepts the offer. Mutual assent
has arisen through a process of offer and acceptance.
b. A and B are two ignorant persons who are unaware that society offers a
remedy for enforcement of contracts. They agree to exchange a horse for
a cow, the agreement is enforceable, their ignorance of legal sanctions
does not prevent their formation of a contract. This result is consistent
with the rule that a mistake as to a rule of law does not necessarily
deprive an agreement of legal effect.
c. A and B enter into an agreement regulating their commercial relations,
but further agree that their agreement creates no legal obligations, the
agreement is not enforceable because the parties did not intend legal
obligation. There are however cases which have upheld such
agreements, usually pension and employee benefit plans and bonuses.
These cases are supported by promissory estoppels which is a promise
that foreseeably induces substantial and definite acts of injurious reliance
by the promise or a third party is enforceable.
d. A invites B to dinner. B accepts the invitation and does not arrive at a
certain time. B does not have a cause of action. If B however was a
celebrity and A promises to pay a $1,000, A makes the promise. Both
parties are bound by a contract.
D. Cases
a. Lucy v. Zehmer – Defendant is intoxicated and signs over deed to
property claiming he did it in jest. If a person’s words and acts, judged by
a reasonable standard, manifest a certain intent, it is immaterial what the
real but unexpressed state of mind happens to be.
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b. Balfour v. Balfour - Wife of the defendant is seeking alimony after her

husband promised that he would send a specified amount per month. An
agreement is not a valid contract unless the parties intend that it can be
sued upon (i.e. intend that it be “attended by legal consequences.”
c. Sanchez – Employee was fired and claimed that the disclaimer was
conspicuous. Court agreed. The court must determine mixed questions of
law and fact where a disclaimer is not physically conspicuous and its
contents are ambiguous or not apparent to the modification of the
employment relationship
d. K.D. V. ETS- LSAT test taker scored higher on a second take on the
LSAT. LSAT has a registration form which cites that LSAT could void test
scores if they are higher than 150 points. An adhesion contract is
entered into by parties with unequal bargaining power; it is not
automatically void but the court will look to disregard provisions it finds
unfair and /or unreasonable
e. M.C.C. - Plaintiff wanted to cancel contract as the terms listed were in
Italian and he did not understand them. Parties who sign contracts are
bound by them regardless of whether they have read of understood them
III. The Offer

A. An offer is with minor exceptions, a promise to do or refrain from doing some
specified thing in the future. An offer is the manifestation of willingness to enter
into a bargain, so made as to justify another person in understanding that his
assent to that bargain is invited and will conclude it. R2K Section 24
B. A promise is a manifestation of intent that gives assurance that a thing will or will
not be done.
C. Preliminary negotiations are any communication prior to an operative offer.
Types of communication already discussed that were not offers amount to
preliminary negotiations.
D. Things to Consider
a. Expressions of opinion and words of reassurance are not promises and,
therefore not offers.
b. Offers can be cancelled by
i. Counteroffer or rejection
ii. Destruction of subject matter prior to acceptance
iii. Revocation
iv. Death/incapacity of offeror or offeree
v. Lapse of time
vi. Terms of acceptance not taking place
vii. Intervening illegality
c. An offer should identify the parties, describe the subject matter, list a time
for performance, and a price.
d. Offers are distinguished from preliminary negotiations:
i. A mere statement of intention or of hopes and desires does not
constitute an offer.
ii. A mere inquiry or an invitation to the other party to make an offer
does not constitute an offer.
iii. Advertisements, catalogs, circular letters (where the circular
indicates a fixed quantity, but the language used is not language
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of commitment. B as a reasonable person would believe that A

was not manifesting a intent to make offers to all of the individuals
whom the letter was sent because they would expose A to
multiple acceptances and therefore multiple breaches of contract),
invitations to make bids, expressions of opinions, and price
quotations are not offers. An advertisement for the sales of goods
is ordinarily not an offer. They are not considered offers because
they do not contain express language of promise, and do not spell
out the quantity term. Quantity, unlike terms, such as price, can
never be filled in by a court. Rarely, a quantity term can be implied
from the facts, e.g., where there has been a course of dealing.
iv. In an auction, the bidder is deemed to be the offeror. An auction
is “with reserve” which means the seller reserves the right to set a
minimum price on the property to be sold. The reserve price may
be secret. In an auction with reserve, each bid is an offer and the
auctioneer is free to reject offers. In an auction “without reserve”
the auctioneer may withdraw the goods only until the first bid is
made, provided it is made within a reasonable time. Thereafter,
the auctioneer must sell to the highest bidder before the fall of the
hammer. A bid terminates all prior bids, but a bidder’s retraction
does not revive any prior bids.
v. A price quotation is usually a statement of intention to sell at a
given unit price. Quantity is not specified and therefore there is no
offer.
vi. An indifferent offer is where the offeror does not make it clear how
the offeree must accept the offer is indifferent and the offer can be
accepted by promise or b commencing performance. In either
case, bilateral contract is formed.
E. Example Cases
a. Hawkins v. McGee – Patient’s hand was made worse after a doctor
promised that he could make the hand 100% perfect. Buyers’ damages
are measured in the difference between the value as would have been if
the warranty as to quality was true and actual value at time of sale,
including incidental consequences within contemplation of parties
b. McGee v. U.S. Fidelity – Doctor wanted to seek reimbursement for
paying damages to patient. Insurance did not provide coverage if results
promised outside of standard industry practice and the election of suit for
breach of contract vs. tort of malpractice resulted in McGee paying for the
settlement out of his own pocket)
c. Leonard v. Pepsico, Inc. – Plaintiff brought suit against PepsiCo for
refusing to comply with terms of an alleged contract which was seen on
television. An advertisement is not an enforceable offer when it could not
be considered by an objective, reasonable person as a true offer, rather
than as an obvious joke.
d. Hoffman v. Horton – The auctioneer missed a bid and closed the
auction. Where a bid is missed or made simultaneously with the falling of
the auctioneer’s hammer, the auctioneer may reopen the bidding at their
discretion.
e. United States v. Briggs – Briggs quotes Toombs estimated freight,
terminal, longshoring, and lightering costs. The defendant gives wholly
inaccurate charges expecting payment. If a party estimates costs and
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charges and the other party reasonably relies on the estimates, then the
estimator is collaterally estopped (issue precluded) from demanding
actual costs where the estimate was totally unrealistic.
f. Lonergan v. Skolnick – Scolnick sold his property before Lonergan had
a chance to respond to a letter asking for an immediate decision on the
property. There is no contract formed if a party knows or has reason to
know that the other party does not intend to enter into a binding
agreement without some further assurance.
g. Fairmount Glass v. Crunden-Martin – Crunden requested by letter of
Fairmount Glass Works the lowest price it could give on an order for jars,
which prices Fairmont gives to Crunden but whose order Fairmout then
refused to fill. Where there is a request for prices on an order, and the
vendor (supplier) quotes those prices to a vendee (purchaser), the vendor
offers to fill the order and is obligated to fill the order upon receipt within a
reasonable amount of time from the vendee’s acceptance.
IV. Intent to Memorialize and Indefiniteness

A. Things to Remember
a. Parties are bound by contracts without manifesting an intent to be bound
or consciously considering the legal consequences of their words and
deeds. They may, however, expressly or impliedly agree to exclude legal
consequences. If from their statements and conduct, or the surrounding
circumstances, it appears that the parties did not intend legal
consequences, there is no contract. However, if the parties from their
statements and conduct, or the surrounding circumstances, it appears
that the parties did not intend legal consequences, there is no contract. If
they do act under such an agreement, legal consequences sometimes
attach. If the parties agree that they are not bound unless they sign a
formal agreement, they will not be bound until that time. If they intend the
future writing to be a convenient memorial of their prior agreement, they
are bound whether or not such a writing is prepared or signed.
b. When determining whether a party wishes to be bound, consider the
language of the agreement, the context of the negotiation, the existence
of open terms, partial performance, and the custom in this kind of
transaction.
c. The question to ask: Did the parties intend a formal writing to be a
convenient memorial of their contract OR to be bound only when
and if a formal document was executed? There are four criteria to
evaluate.
i. Express reservation
ii. Partial performance
iii. Anything left to negotiate
iv. Agreement (usually written)
B. Examples of Offers
a. A says to B, “I will sell you my Mercedes for $51,000. B says, “I accept.”
Even though A does not use the word “promise,” A has made a promise
and B as a reasonable person invites the acceptance and that this
acceptance will conclude the deal.
b. A homeowner pays $1,000 to an insurance company in connection with
an application that asks for the company’s promise to pay A $250,000 if
A’s house is destroyed by fire. A is the offeror but has made no promise.
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Rather, A has requested a promise from B. When B makes the promise,

there is a contract. This is a reverse unilateral contract.
c. Doctor says “I promise to perform a Caesarean section.” This is a
reasonable promise. However, if a doctor says “You will be back to
normal in 3-4 days.” This is not an offer, it is a word of reassurance and
not a promise or offer.
d. A says to B “I am going to sell my car for $500.” This is not an offer but a
statement of intention.
e. A writes to B, “Will you sell me the property on Ann Arbor Drive for
$50,000?” This is not an offer but an inquiry, there are no promises,
simply seeking information.
f. In reply to an inquiry from B as to whether A would sell property for
$6,000, A answered “it would not be possible for me to sell unless I was
to receive $16,000 cash.” A was not making an offer nor a promise to B.
g. A wrote to B, I have “18,000 bu. of millet seed of which I am mailing you a
sample, I want $2.25 per bushel for this seed. This is not an offer. This is
a circular letter because though it has a fixed quantity, the language used
is not of commitment.
h. A newspaper ad states “1 black lapin stole, first come first served.” This is
an offer because the ad contained language of commitment to an
identifiable person and the ad stated a quantity. If it said ten stoles, it is
unclear because it does not state a quantity per person.
i. A says to B, “If you promise to walk across the Brooklyn Bridge, I will pay
you $100.” A has made an offer looking to a bilateral contract. If B makes
the promise, there is an acceptance. There would also be an acceptance
if B started to walk in A’s presence for in this situation B’s promise could
be inferred.
j. A says to B, “If you enter the Marathon and finish the race, I will pay you
$1,000. A has made an offer looking to a unilateral contract. B can accept
only by performing. B cannot accept by making a promise.
C. Example Cases
a. Texaco v. Pennzoil – Texaco (D) contended that there was insufficient
evidence for the jury to find that Pennzoil (P) had entered into a binding
agreement with Getty Oil when Texaco made its contract to purchase
Getty. It is a question of fact as to whether parties to an agreement
intended to be bound by an unexecuted (e.g., unsigned) contract.
Therefore questions of fact are judged by trial by jury.
b. Haines v. New York – An action was brought to require New York to
build a new sewage treatment plant for the benefit of additional users of
the system as a result of a contract executed in 1924. If the parties do not
specify duration, the court may determine the parties’ intentions (fact) to
determine the proposed contract term.
c. Wagenseller v. Scottsdale Memorial Hospital – Wagenseller allegedly
was fired for refusing to join her supervisor in committing acts of indecent
exposure during a camping trip. An employer may terminate an at-will
employee for good cause – or no cause at all – but NOT for cause
contrary to public policy!
d. BMC Industries v. Barth Industries, Inc. – BMC Industries (P) sued
Barth Industries for breach of contract when Barth failed to deliver
automated machinery. The trial court held that the U.C.C. did not apply to
the contract between the parties because it was a contract for services.
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On appeal, the court reconsidered the applicability of the U.C.C. Courts

will use the “predominant factor” (purpose of the K) to evaluate the
applicability of the UCC in a K involving both goods and services.
e. Southwest Engineering Co. v. Martin Tractor Co., Inc. – Martin Tractor
(D) refused to fill Southwest Engineering Co.’s order alleging that the
mode of payment has not been decided and therefore no contract
existed. Once a K is found to exist, courts may supply (some) missing
terms
f. Walker v. Keith – Walker (P) rented property from Keith for ten years
with an additional ten year option rent to be fixed mutually by the parties,
said rental values reflect the comparative business conditions between
the periods. There is no K where essential terms like price are not
contained in an option K and no standards to judicially determine the
terms
g. Copeland v. Baskin Robbins – Copeland brought a breach of contract
action against BR on the theory that an enforceable contract was formed
by the parties’ agreement to agree on a mutual purchase arrangement. A
contract to negotiate an agreement can be formed and breached like any
other contract.
h. Oglebay Norton Co. v. Armco, Inc. – When Ogelbay Norton Co.
(Oglebay)(P) and Armco (D) could not enter on a shipping rate under their
long term contract, Oglebay sought a declaratory judgment from the court
that the contract rate was the correct rate or alternatively that the court
would set a reasonable rate. Reasonable price at time of delivery, set by
a third person or agency, can be the standard if parties intend to
conclude a K for sale of goods but do not settle the price.
i. Eckles v. Sharman – The trial court entered a direct verdict holding
Sharman (D) had as a matter of law, breached his contract because the
portions not agreed to by parties were not material. It is a question of fact
(not appropriate for directed verdict) where contract terms are materials
to the parties’ agreement.
V. Acceptance
A. Key Terms
i. The offer creates a power of acceptance. The acceptance creates a
contract and terminates the power of revocation that the offeror ordinarily
has. The acceptance must be a voluntary act. The offeree must know of
the offer and manfiest and intent to accept.
B. Acceptance by an act of dominion is exercising control over personal
property.
C. Acceptance effective when sent provided received within the time a
seasonably dispatched acceptance sent in a reasonable manner would
normally have arrived: R2K
D. An offer may be accepted only by the person or persons to whom it is made.
Thus, the offeree may not transfer (assign) the power of acceptance to another.
But an irrevocable offer (option contract) may be transferred if the transfer if
consistent with the rules governing the assignment of contracts.
E. Barring a lack of capacity (discussed later), offeree has power of acceptance
F. Mirror image: Acceptance mirrors offer exactly OR it is a counter-offer (a new
offer which could include additional or modified terms) (UCC 2-207)
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G. If an offer looks to a unilateral contract, the offeree must know of the offer in
order to accept. There is some dispute as to when this knowledge must occur. If
the offer looks to a bilateral contract, the rule that the offeree must know of the
offer may come into conflict with the objective theory of contract. If so, the
objective theory prevails.
H. Termination of Revocable Offers: To become a contract, a revocable offer must
be accepted before the power of acceptance created by the offeror is terminated.
i. Irrevocable contracts (option contracts) are made by consideration, by
statute, under one of the special rules relating to the revocation of a
unilateral contract, under the doctrine of promissory estoppels, and by
virtue of a sealed instrument
I. An offer expires after the lapse of time specified in the offer or, if no time is
specified in the offer or, if no time is specified, after a reasonable time has
elapsed.
J. If the duration of the power of acceptance is not stated, the offer is open for a
reasonable time.
K. The offer may stipulate that the power of acceptance will terminate on the
happening of a given event. If the event happens before the acceptance, the
power of acceptance terminates regardless of whether the offeree knows that the
event has occurred.
L. If the offeror dies after the making the offer but before the acceptance, the offer is
terminated even if the offeree was unaware of the offeror’s death. A minority view
states that the deal terminates the offer only if the offeree is aware of it.
M. If an offer has not been accepted, it may be terminated by a communicated
revocation. Under the majority view, a revocation is effective not on dispatch but
when received.
N. When an offer is made to a number of persons whose identity is unknown to the
offeror, as for example a reward offer in a newspaper, the offer may be revoked
by equal publication of the revocation.
O. A rejection or counter-offer terminates an offeree’s power of acceptance, unless
the offeror or the offeree manifests a contrary intention.
P. An illegal offer makes a proposed contract illegal and the offer is terminated
whether or not the offense is aware of the change.
Q. For a unilateral contract to arise, the traditional rule is that the offeree must
subjectively intend to accept. An offeree to a bilateral contract can accept if he or
she has no subjective intent to accept; all that is required is an outward
manifestation of intent to contract.
R. Acceptance by silence does not ordinarily give rise to an acceptance of an offer
or a counteroffer. However, if the offeror gives the offeree reason to believe
silence will act as an acceptance and the offeree subjectively intends by silence
to accept; or where that parties have mutually agreed that silence will operate as
consent; or where there is a course of dealing so that silence has come to mean
assent; or where the offeree (acceptance by dominion) accepts services with
reasonable opportunity to reject them, and should reasonably understand that
they are offered with expectation of payment.
S. At times when an offeree takes possession of offered goods but indicates that
the offered terms are not acceptable. This is conversion.
T. Unsolicited sending of goods may be treated as a gift.
U. Mailbox Rule
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i. A contract is formed upon the moment of dispatch of the

acceptance, assuming that it is properly sent (addressed, stamped
and deposited)
ii. If acceptance not properly sent, acceptance effective upon receipt
iii. Rejection arrives first, rejection controls, no contract is formed
iv. Contracting out of the mailbox rule: An offer may negate the mailbox
rule by providing that the acceptance will be effective only when and
if received.
v. Rule N/A to Option Contracts
vi. Rejection sent first, then acceptance – whichever arrives first is
effective
vii. Rejection arrives first and offeror detrimentally relies, then rule N/A
viii. Even if the offeree regains possession of the letter pursuant to
postal regulations, the letter of acceptance is effective
ix. Lost messages are governed by the mailbox rule. The majority
opinion is that the message as transmitted is operative unless the
other party knows or has reason to know of the mistake.
V. Examples of Acceptance
i. A makes an offer to B looking to a bilateral contract. B does not intend to
accept, but carelessly mails an acceptance. There is a contract under the
objective theory of contracts even though B did not intend to accept.
ii. A makes an offer to sell specific real property to B and states the offer is
open for 10 days. This is a revocable offer.
iii. A says to B, “If you run a marathon and finish, I promise to pay you
$1,000.” B starts to run the race. A attempts to revoke the offer. Under the
prevailing view relating to the termination of an offer looking to a unilateral
contract, B’s commencement of performance makes the offer irrevocable.
VI. Example Cases
A. State v. Malm – Plaintiff provided the police with information that led to the
identification, arrest, and conviction of a murder suspect, and subsequently filed
a motion to collect a reward that had not been offered until after she had come
forward. Acceptance must prospectively rely on the offer and reliance on the
offer contemplating performance.
B. “Industrial America”, Inc. v. Fulton Industries, Inc. – Industrial America, Inc
specialized in putting together business mergers for its clients. Performance of a
requested act constitutes acceptance regardless of the underlying motives for
performance. (But of course the actor must know of the offer and intend to
perform the requested act (R2K Sec. 20)
C. Carlill v. Carbolic Smoke Ball Co. – The Carbolic Smoke Ball Co. advertised a
record to any person contracting influenza after using the Carbolic Smoke Ball
but refused to pay such reward. An advertised reward to anyone who performs
certain conditions specified in the advertisement is an offer, and the performance
of such conditions is an acceptance which creates a valid contract.
D. Leonard v. Pepsico, Inc. – Leonard sought to enforce an alleged contract with
Pepsico to provide him a Harrier jet in exchange for Leonard’s seven million
Pepsi points. An offer for a reward becomes binding when the offeree performs
the requested actions to claim the reward but the same is not true when the offer
is an advertisement to receive offers.
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E. Gem Broadcasting, Inc v. Minker – Gem Broadcasting appealed the judgment

of the trial court awarding damages to Minker for the breach of contract implied in
fact. In a contract implied in fact, the acceptance element can be satisfied by a
tacit promise. A party can recover in quantum meruit even if no benefit is
conferred to the other party.
F. Wilhoite v. Beck – Lawrence, a second cousin lived with Beck for 20 years.
Where no gift presumption is present, a court may find an implied contract for
services.
G. Miller v. NBD Bank, N.A. – In a suit or proceeding in which an executor or
administrator is a party, involving mattes that took place during decedent’s
lifetime, any necessary party to the issue or record whose interest is adverse to
that of the estate is not a competent witness as to such matters against the
estate.
H. Hobbs v. Massasoit Whip Co. – Hobbs sent Massasoit Whip Co. eel skins
which it retained until they were subsequently destroyed. Under appropriate
circumstances, silence alone may constitute an acceptance, and a valid contract
is formed.
I. ProCd, Inc v. Zeidenberg – When Zeidenberg, a customer, bought and then
resold the data compiled on its CD-Rom software desk, ProCD sued for breach
of contract. A buyer accepts goods when, after an opportunity to inspect, he fails
to make an effective rejection.
J. Petterson v. Pattberg – Pattberg offered to discount Petterson’s estate on the
condition that it be paid on a certain date. Pattberg then sold the mortgage before
Petterson, an executor of the state, had paid him. Before performance of the act
requested, an offer to enter a unilateral K may be withdrawn at any time.
K. State v. Wheeler – Defendant sought specific performance of a prosecutor’s
initial offer. Absent some detrimental reliance by the defendant, the state may
withdraw from any plea agreement prior to the actual entry of a guilty plea.
L. Motel Services, Inc. v. Central Maine Power Co. – Motel Services brought suit
against CMP seeking to recover a promotional allowance it claimed CMP
erroneously paid to the Waterville Housing Authority. A unilateral contract is
formed where an offer requests not a promise to perform in accordance with its
terms, but complete performance.
M. Brackenbury v. Hodgkin – Hodgkin wrote her daughter and son-in-law, the
Brackenburys that if they would move to Maine from Missouri and take care of
her for the rest of her life, she would the Brackenburys her farm. The
Brackenburys moved to Maine but Sarah revoked her offer, and executed and
delivered a deed to the property to her son, Hodgkin who attempted to evict the
Brackenburys. Where an offer invites a continuing performance, an option
contract (a contract pursuant to which a seller agrees that property will be
available for the buyer to purchase at a specified price and within a certain time
period) is created when the offeree begins the invited performance.
N. Gardner Zemke v. Dunham Bush – Gardner Zemke filed suit against Dunham
Bush for breach of contract alleging that a warranty disclaimer on the back of an
acknowledgment form is not binding by silence. Conflicts between clauses sent
by both parties = objection on the part of both parties and Contract = terms
expressly agreed to and terms with confirmed agreement
O. Diamond Fruit v. Krack – Metal-Matic contended that it effectively disclaimed
responsibility to Krack for incidental damages caused by its defective tubing by
including such disclaimers in its sales receipt. U.C.C. 2-207 holds that the
11
exchange of differing purchase orders constitutes a binding contract only as to

those portions upon which the writings agree.
P. Hill v. Gateway 2000 - Hill brought a RICO suit against Gateway after
purchasing a mail order computer. Gateway moved to compel arbitration. The
request was denied and Gateway appealed. Terms sent in box, stating they
govern the sale unless returned with product, are binding on purchaser who does
not return the product.
Q. Klocek v. Gateway – Klocke purchased a computer from Gateway which
included standard terms with the computer, which provided that they would be
accepted by the purchaser if the computer was kept beyond five days and also
provided for arbitration of any claims arising from the agreement. Klocek sued for
breach of contract and of warranty. Gateway moved to dismiss, asserting that the
claims had to be arbitrated under the Standard Terms agreement. Terms
shipped with a computer do not become part of the sales contract where the
vendor does not expressly make its acceptance conditional on the buyer’s
assent to the additional shipped terms and where the buyer does not expressly
agree to the terms.
VII. Counteroffers and Battle of the Forms

i. Constructive Notice: Knowledge of a fact that is imputed to a person who
has a duty to inquire and could have learned of the fact through
reasonable prudence.
ii. Inquiry Notice: Communication of information that would cause an
ordinary person of average prudence to inquire as to truth.
B. Examples of Counteroffers
C. Example Cases
i. Specht v. Netscape – Specht downloaded from the Internet free
software, mere reference to the existence of license terms on a
submerged screen does not place consumers on inquiry notice or
constructive notice of terms. Where consumers are urged to download
free software, mere reference to the existence of license terms on a
submerged screen does not place consumers on inquiry notice or
constructive notice of terms.
ii. Beall v. Beall – Beall wanted to buy Beall’s land pursuant to an alleged
option contract. Beall refused to sell and Beall sought specific
performance (an equitable remedy whereby the court requires the parties
to perform their obligations pursuant to a contract) of the option contract.
If an option K lacks consideration, it transforms into an offer which the
offeror may revoke at any time!
VIII. Consideration
i. Consideration is value given by one party in exchange for performance,
or a promise to perform, by another party. It is a bargained-for exchange.
ii. A K is enforceable only if it is supported by consideration.
iii. For a promise to be supported by consideration, there must be three
elements
i. The promise must suffer legal detriment – that is do or promise to
do what the promise is not legally obligated to do or refrain from
12
doing or promise to refrain from doing what the promise is legally

privileged to do.
ii. The detriment must induce the promise. In other words the
promisor exchanges the promise at least in part for the detriment
to be suffered by the promisee.
iii. The promise must induce the detriment. This means that the
promisee must know of the offer and intends to accept.
iv. Consideration must have legal value (where legal value a party bears a
detriment or gains a value)
v. Past consideration and motive are not consideration
vi. A sham consideration is when a purported contract in writing says that a
consideration has been given but it has not been
vii. A nominal or token consideration is when parties are aware that a
gratuitous promise is unenforceable, and therefore in order to make it
enforceable, a small token sum to create the form of a bargain is made.
viii. Any detriment, however minor, will suffice as consideration
ix. Pre-existing duty (where a person performs or promises to perform a
legal obligation, or promises to refrain from doing or refrains from doing
what the person is not legally privileged to do, the person has not incurred
detriment) does not equal consideration
x. If an option K lacks consideration, it transforms into an offer which the
offeror may revoke at any time!
xi. To be legal enforceable, an executory promise (promise to give value in
the future) must be bargained for, with sufficient consideration (Kirksey)
xii. Consideration for an agreement may be recited in any part of the
agreement (Thomas)
xiii. Forbearance to assert a valid claim is consideration.
xiv. Promise to not assert a claim believed in good faith to be valid (but is
invalid) may serve as consideration for a return promise.
xv. Bargained for exchange
i. Exchange something – anything!
ii. Gifts does not equal bargained for does not equal
consideration
iii. Forbearance (not exercising a right) OK if benefits promisor
iv. Past consideration does not equal valid consideration
v. Moral consideration does not equal valid consideration
xvi. WHAT ACTS OR FORBEARANCES ARE SUFFICIENT
CONSIDERATION FOR A UNILATERAL CONTRACT
i. Any consideration that is not a promise is sufficient to satisfy the
requirement of §19(c) except the following:
ii. (a) An act or forbearance required by a legal duty that is neither
doubtful nor the subject of honest and reasonable dispute if the
duty is owed either to the promisor or to the public....
iii. (b) The surrender of...an invalid claim or defense by one who has
not an honest and reasonable belief in its possible validity...
Restatement (Second) 76.
xvii. Substitutes for Consideration
i. Promissory Estoppel - law will not find a valid offer or
consideration
13
ii. Modification under UCC - consideration lacking for some reason

iii. Detrimental Reliance - suffers a harm or loss, but no valid
contract but a promise not supported by consideration, just a
detriment, court does not find it an enforceable contract
xviii. Sufficient Consideration is the waiver of any legal right at the request of
another party.
xix. Valuable consideration is some right, interest, profit or benefit accruing
to one party and forbearance, detriment, loss, or responsibility given,
suffered or undertaken by the other (Hamer)
xx. Quantum Meruit is the concept that services was rendered to the
defendant by the plaintiff with the knowledge and consent of the
defendant and under circumstances that make it reasonable for the
plaintiff to expect payment. It is equity, not law and avoids unjust
enrichment by allowing recovery for labor and materials provided by one
party even when there is no contract. Permissible in situations where fee
contract is unenforceable due to innocent mistakes and would result in
unjust enrichment to the client and fees clearly excessive and violated
disciplinary rules = recovery under quantum meruit.
xxi. Assumpsit: Oral or written promise by one party to pay or perform for
another.
B. Example Cases
i. Hamer v. Sidway – Sidway’s (D) decedent promised to pay $5,000 to
Hamer’s (P) assignor if he would forbear from the use of liquor, tobacco,
swearing, or playing cards or billiards for money until his 21st birthday. In
general, a waiver of any legal right at the request of another party is a
sufficient consideration for a promise.
ii. Kirksey v. Kirksey – Kirksey (D) promised “Sister Antillico” a place to
raise her family “If you come down and see me.” To be legally
enforceable an executory promise (promise to give value in the future)
must be supported by sufficient, bargained-for consideration.
iii. Pennsy v. American Ash Recycling Corp. – Pennsy (P), subcontractor
on a paving job, used Ash’s (D) product to complete its job. The product
proved defective and was classified as hazardous waste. Ash refused to
remove and dispose the product and Pennsy sought to recover its costs
for doing so. Rule: Consideration exists when a promisor benefits, a
promise suffers a detriment, and the promise was not gratuitous, even if
the parties do not bargain the consideration.
iv. Gottlieb v. Tropicana Hotel and Casino – Gottlieb (P) contends that
Tropicana breached a promotional contract by refusing to pay the grand
prize she allegedly won. Rule: Minimal detriment to a participant in a
promotional contest is sufficient consideration for a valid contract.
v. White v. McBride – White (P) the attorney for Leigh and Kasper McGrory
sought to recover fees for his services from McBride, the executor of
Kasper McGrory’s estate. Rule: Where an attorney charge a fee that is
clearly excessive in violation of the disciplinary rules, the attorney is not
then permitted to recover attorney’s fees under a quantum meruit theory
of recovery (equitable doctrine allowing for labor and materials provided
by one party, even though no contract was entered into, in order to avoid
unjust enrichment by the benefited party).
14
vi. Thomas v. Thomas – Eleanor Thomas (P) was given by a choice by her
now-deceased husband to take upon his death either the use of their
dwelling house so long as she remain a widow or 100 pounds from his
personal estate. She chose the dwelling, but the executor of the estate,
Benjamin Thomas (D) refused to convey the dwelling, stating lack of
consideration to support the promise of the husband as his reason. Rule:
Motive is not sufficient consideration for a contract.
vii. Fiege v. Boehm – Fiege (D) promised to pay money if Boehm (P) would
refrain from instituting bastardy proceedings, but Fiege (D), after blood
tests, determined that Boehm’s (P) bastardly claim was invalid and
refused to pay. Rule: One party’s promise not to asset a claim which she
reasonably in good faith to be valid but which is in fact invalid may serve
as consideration for a return promise by another party.
IX. Pre-Existing Duty (part of consideration)

A. Things to Know
i. Pre-existing duty is where a person performs or promises to perform a
legal obligation, or promises to refrain from doing or refrains from doing
what the person is not legally privileged to do, the person has not incurred
detriment.
ii. The pre-existing duty rule applies not only to a duty that exists under a
contract, but also to a duty that is imposed by law.
iii. An agreement to accept part payment in satisfaction of a debt is not a
detriment to support a promise by the creditor to discharge the entire
amount. The same is true even if there is a purported discharge.
iv. Accord and Satisfaction is the performance of an agreement between two
parties, one of which has a valid claim against the other, to settle the
controversy. Before such an event can occur there must be a good faith
dispute of the amount, and the creditor must specifically agree to accept a
lesser amount than their claim in full satisfaction of the debt (Kibler).
B. Cases to Know
i. Schwartzreich v. Bauman-Basch, Inc. – Schwartzreich’s employment
contract was renegotiated to prevent him from taking a new position.
Rule: Where an existing contract is terminated by the mutual consent of
the parties, a subsequent contract is binding even if no new consideration
is present.
ii. Angel v. Murray – Maher (D) asked for $10,000 more per year to collect
refuse even though his contact with the city to provide this service had not
yet expired. Rule: Where unanticipated circumstances or conditions have
occurred, the parties to a contract may voluntarily increase the amount of
compensation due even if no additional consideration is given,
iii. In re Morton Allan Segall, Attorney – Segall, an attorney, attempted to
settle several credit card claims for minimal amounts by contacting the
parties directly rather than through their attorneys. An attorney who is
himself a litigant may be disciplined when he directly contacts an
opposing party without permission from that party’s counsel.
X. Duress and Mutuality of Obligation
A. Key Terms
i. Physical Duress is coercive acts (to party or family or person of interest)
15
ii. Economic Duress is taking advantage of circumstances to drive an

unjust bargain
iii. Liquidated Damages is monetary compensation for a loss, detriment, or
injury to a person or a person's rights or property, awarded by a court
judgment or by a contract stipulation regarding breach of contract
iv. Illusory Promise is a legally unenforceable promise where the promisor
has complete discretion whether to perform or not.
v. Implied Promise is a promise inferred by law from a document as a
whole and the circumstances surrounding its implementation
vi. Mutuality of Performance is the requirement for a valid contract that the
parties be required to perform
vii. Mutuality of Obligation requires that both parties to a contract are
bound or else neither is bound.
B. Things to Know
i. Result = voidable (avoid the obligations of the K) or forced rescission of
the K
ii. In order for there to be a valid contract the parties must act freely.
iii. If one of the parties is forced to make the contract by violence or the
threat of violence, that is duress, and renders the contract voidable.
iv. Modifications to a K may be done for commercially reasonable reasons
and in good faith
v. Duress makes a K voidable if agreement obtained through a wrongful
threat precluding the exercise of free will
vi. Mutuality does not equal illusion which does not equal a contract.
vii. “Instinct with an obligation,” as an implied promise, may still form a valid K
viii. If mutuality of performance, one party’s ability to terminate obligation =
other parties’ ability to terminate
ix. Mutuality is key to an enforceable K. It is what distinguishes a promise
from an enforceable agreement.
x. The benefit (or detriment) of continued employment is sufficient
consideration to enforce a non-competition agreement
xi. Commercially reasonable reasons and good faith are bases for parties to
modify a contract.
xii. “Instinct with an obligation”: a writing can be an implied promise which is
imperfectly expressed but forming a valid K.
xiii. Parties remain mutually obligated to contract even if one party reserves a
discretionary power that can be exercised only in good faith
xiv. The benefit (or detriment) of continued employment is sufficient
consideration to enforce a non-competition agreement
C. Cases to Know
i. Roth Steel v. Sharon Steel – Roth Steel Products (P) contended that
certain contractual modification insisted upon by Sharon Steel
Corporation (D) were done in bad faith. A party seeking to modify a
contract must do so for commercially reasonable reasons and in good
faith.
ii. Austin v. Loral – Austin Instruments (P) threatened to withhold delivery
of precision parts unless Loral would raise the contract price. A contract
modification is voidable on the ground of duress when the party claiming
duress establishes that its agreement to the modification was obtained by
16
means of a wrongful threat from the other party which precluded the first
party’s exercise of free will.
iii. Ridge Runner Forestry v. Veneman – Ridge Runner Forestry (P)
brought suit against the Secretary of Agriculture to enforce a tender
agreement. A valid contract cannot be based upon an illusory promise.
iv. Wood v. Lucy, Lady Duff-Gordon – Wood in a complicated agreement
received the exclusive right for one year, renewable on an annual basis if
not terminate by 90 days notice to endorse designs with Lucy, Lady Duff-
Gordon’s name and to market all her fashion designs for which she would
receive one half of the profits derived. Lucy broke the contract by placing
her endorsements without Wood’s knowledge. While an express promise
may be lacking, the whole writing may be “instinct with an obligation” – an
implied promise – imperfectly expressed so as to form a valid contract.
v. Mezzanotte v. Freeland – Mezzanotte (P) made the land sale contract
contingent on his being able to obtain a second mortgage at terms
favorable to him. There is no want of mutuality where one party’s
discretion may be exercised only in good faith.
vi. Miami Coca-Cola v. Orange Crush – Miami Coca-Cola Bottling Co. (P)
could cancel its contract with Orange Crush at any time while Orange
Crush was bound to perform indefinitely. Where one party’s obligation
may be terminated at any time, mutuality of performance will allow the
other party to terminate at any time regardless of its contractual
obligation.
vii. Texas Gas v. S.A. Barrett – The trial court found Texas Gas could not
recover for breach as the contract was unenforceable due to a lack of
mutuality of obligation. Mutuality of obligation is essential to the
enforcement of a contract.
viii. Tigg v. Dow Corning Corp. – Dow Corning (D) was to purchase a
minimum number of units from Tigg but failed to do so. Dow argued on
appeal that the trial court erred in several of its instructions to the jury.
Court used 2-306 “good faith” requirement into a contract to make it
enforceable.
ix. Summits 7, Inc. v. Kelly – Defendant was plaintiff’s at-will employee and
signed a non-competition agreement. After her employment ended,
defendant began working for a competitor within the restricted geographic
area and during the restricted time. Plaintiff obtained an injunction against
defendant working for the competitor. Continued employment is sufficient
consideration to enforce a non-competition agreement.
XI. Moral Obligation and Consideration
A. Key Terms
i. Moral Consideration is an inducement to enter a contract that is not
enforceable at law, but is made based on a moral obligation and may be
enforceable in order to prevent unjust enrichment on the part of the
promisor. A contract, especially one founded partially on moral
consideration, is not voided merely because the services rendered were
worth less than the contractual amount agreed upon by the parties.
B. Things to Know
i. Adequacy of Consideration; Mutuality of Obligation If the requirement of
consideration is met, there is no additional requirement of
(a) a gain, advantage, or benefit to the promisor or a loss, disadvantage,
17
or detriment to the promisee; or(b) equivalence in the values exchanged;

or
(c) "mutuality of obligation." Restatement (Second) 79.
ii. Promissory Estoppel
iii. Generally, a promise made in recognition of a prior moral or legal
obligation is NOT enforceable … but EXCEPTIONS ARE:
i. Promises to pay liquidated debt (e.g., promissory note under
UCC Article 3-303)
ii. Promises to pay fixed amounts for services previously requested
… if new consideration and mutual assent
iii. Promises to pay fixed amount for services not requested (under
quasi-K)
iv. Promises to pay debts discharged or rendered unenforceable by
operation of law (bankruptcy, statute of limitations may bar this)
v. Promises to perform a voidable duty
vi. Statute of Frauds (writing requirement) when sufficient
memorandum makes the original K enforceable
iv. What are 20th / 21st Century methods to cover contingencies of moral or
legal obligations without actually paying full amounts?
i. Insurance
ii. Victim’s compensation funds (criminal law)
iii. Actions in tort (see also insurance)
v. When A Term Is Unenforceable On Grounds Of Public Policy
i. (1) A promise or other term of an agreement is unenforceable on
grounds of public policy if legislation provides that it is
unenforceable or the interest in it enforcement is clearly
outweighed in the circumstances by a public policy against the
enforcement of such terms.
ii. (2) In weighing the interest in the enforcement of a term, account
is taken of
a. (a) the parties' justified expectations,
b. (b) any forfeiture that would result if enforcement were
denied, and
c. (c) any special public interest in the enforcement of the
particular term.
iii. (3) In weighing a public policy against enforcement of a term,
account is taken of
a. (a) the strength of that policy as manifested by legislation
or judicial decisions,
b. (b) the likelihood that a refusal to enforce the term will
further that policy,
c. (c) the seriousness of any misconduct involved and the
extent to which it was deliberate, and
d. (d) the directness of the connection between that
misconduct and the term. Restatement (Second) 178.
C. Cases to Know
i. Sheldon v. Blackman – Wilkinson gave Sheldon (P) a promissory note
for past services rendered and stated that the value of subsequent
18
services could be claimed against his estate. If services rendered are

worth less than what bargained /agreed upon, but K is founded (in part)
on moral consideration, then K is still valid (not void).
ii. Estate of Lovekamp – Serrato (P) filed a claim on the estate of
Lovekamp (D) to enforce an oral agreement. Past consideration, if
imposing no legal obligation at the time it is furnished, is merely
gratuitous and will not support a valid and enforceable contract.
iii. Banco do Brasil, S.A. v. State of Antigua and Barbuda – The State of
Antigua and Barbuda (D) sought dismissal of a breach of contract claim
by raising the affirmative defense of the statute of limitations. The statute
of limitations can be revived under the General Obligations Law when a
party provides written acknowledgment of a debt and the written
statement does not contradict the party’s prior intention to pay.
iv. Harrington v. Taylor – In gratitude for Harrington’s efforts in saving his
life, Taylor (D) promised to pay her for her injuries. Gratitude for a
gratuitous act is insufficient consideration to enforce a promise.
v. Webb v. McGowin – Webb (P) saved the now-deceased J. McGowin
from grave bodily injury or death by placing himself in grave danger and
subsequently suffering grave bodily harm. J. McGowin, in return,
promised Webb (P) compensation. McGowin’s executors (D) refused to
pay the promised compensation. Where the promisor receives a material
benefit, a moral obligation is sufficient consideration to support a
subsequent promise to pay
XII. Promissory Estoppel
A. Promissory Estoppel is a promise that is enforced if the promisor should
reasonably expect that it will induce action or forbearance on the part of the
promise, and odes in fact cause such action or forbearance, and it is the only
means of avoiding injustice. P.E. foreseeably induces substantial and definite
acts of injurious reliance by the promise or a third party is enforceable. There are
three elements:
i. A (usually gratuitous) promise
ii. Foreseeable reliance
iii. Actual reliance
iv. Injustice absent enforcement
B. Things to Know
i. Essentially a substitute for consideration created to avoid the harsh
results of allowing the promisor of a donative promise to repudiate after
the promisee has acted in reliance on the promise.
ii. Promises enforced by estoppel will be enforced as if they are part of the
contract, but it is a limited enforcement. The harm is the lost reliance and
therefore reliance damages are awarded
iii. Promissory Estoppel works well—if at all—in cases of gratuitous
promises (no bargain for exchange)
iv. Filling gaps created by consideration doctrine with promissory estoppel is
problematic
v. Look to apply K law FIRST where there is a promise, then you can argue
there is a K, in which case standard K law applies
C. Cases to Know
i. Feinberg v. Pfeiffer – Pfeiffer (D) promise to pay Feinberg (P) an annuity
when Feinberg retired, and Feinberg relied on this promise to her
19
detriment. 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
if injustice can be avoided only by enforcement of the promise.
ii. Shoemaker v. Commonwealth Bank – The Shoemakers (P) assumed
that Commonwealth Bank had obtained insurance for their home and
sued when, after a fire had destroyed their home, they discovered that it
was not insurance. To establish a promissory estoppels action cause of
action, a party must prove that (1) promisor made a promise that he
should have reasonably expected would induce action or forbearance of
the part of the promisee, (2) the promise actual took action or refrained
from taking action in reliance on the promise, and (3) injustice can be
avoided only by promise.
iii. Salsbury v. Northwestern Bell Telephone – Northwestern Bell
Telephone Co. wrote a letter pledging $15,000 to a college supported by
Salsbury (P). After the college folded, Salsbury still sought payment of
$15,000. A charitable subscription binds the subscriber even without the
proof of consideration or detrimental reliance.
iv. Drennan v. Star Pavin Co. – Drennan (P) sued Star Paving Co. to
recover damages when Star (D) could not perform the paving work at the
price quoted in its subcontracting bid. Reasonable reliance on a promise
binds an offeror even if there is no other consideration.
v. Werner v. Xerox Corp. – Werner (P) contended that he detrimentally
relied on representations by a Xerox Corp. (D) employee in creating
machines and incurring expenses, and thus Xerox (D) was bound by
promissory estoppel to pay all damages arising thereform. Reasonable
and detrimental reliance = grounds for promissory estoppel.
vi. Deli v. University of Minnesota – Deli (P), a gymnastics coach sued the
University of Minnesota, seeking damages for emotional distress
allegedly incurred as a result of the athletic director’s breach of an oral
promise not to view a videotape that contained a sexual encounter
between Deli and her husband. In an action based on promissory
estoppels, a plaintiff may not recover emotional damages unless he
pleads and proves the existence of an independent tort
Reformation
3 elements
1. Agreement between the parties
2. Agreement to put the agreement into record
3. A variance between the prior agreement and the record
- Hoffman v Chapman
XIII. Defenses
A. Key Terms
i. Duress is any wrongful act or threat that is the inducing cause of a
contract constitutes duress and is grounds for avoiding the contract.
Where the coercion involves economic pressure rather than a threat of
personal injury or the like, however, duress is usually not present unless
the party coerced can show that there was no reasonable alternative but
to assent. Harm or detriment, or apprehension of this harm (violence,
20
imprisonment wrongful seizing or withholding, abuse of legal rights,

breaches or threats thereof)
i. Economic Duress is when someone is under threat of economic
harm, severe economic loss
ii. Physical Duress is when someone is under threat of physical
harm, can include a limited amount of third parties
ii. If misrepresentation contains an actionable tort, avoidance is allowed,
but all of the elements of tortious misrepresentation are not required for
avoidance.
iii. Mistakes can prevent the formation of contracts.
iv. Scrivener’s Rule is if original intent differs from error in transmission,
then parties may reform the K to reflect the intended bargain. Mistake IS
a defense to formation for one party if the OTHER party was aware of the
mistake regarding an essential term - or should have known of the
mistake in transmission.
v. Unconscionability is a situation in which a contract, or a particular

contract term, is unenforceable if the court determines that such terms
are unduly oppressive or unfair to one party to the contract.
i. If a contract or term thereof is unconscionable at the time the
contract is made a court may refuse to enforce the contract, or
may enforce the remainder of the contract without the
unconscionable term, or may so limit the application of any
unconscionable term as to avoid any unconscionable result.
Restatement (Second) 208.
vi. Rescission is the canceling of an agreement and the return of the parties
to their positions prior to the formation of the contract.
i. Rescission is NOT always granted where there is a mutual
mistake
ii. Cannot be ordered to relieve a party who as assumed the risk of

loss in connection with the mistake.
iii. When both parties are innocent, equity may be used to determine
which blameless party assumes the loss
vii. Material Fact is a fact without the existence of which a contract would not
have been entered.
viii. Material Mistake is a mistake as to factual assumption upon which an
action or contact is based, and which may be an adequate defense to a
criminal prosecution or a cause for voiding or reforming a contract.
ix. Mistake of Fact is an unintentional mistake in knowing or recalling a fact
without the will to deceive.
x. Dragnet clause is when “collateral covering several loans under a single
security agreement”
“Dragnet clauses” have been upheld as conscionable between an

i.
auto dealer and lender
xi. Mutual mistake is a mistake by both parties to a contract, who are in
agreement as to what the contract terms should be, but the agreement as
21
written fails to reflect that common intent; such contracts are voidable or
subject to reformation.
xii. Fair dealing is an implied warranty that the parties will deal honestly in
the satisfaction of their obligations and without an intent to defraud,
xiii. Fiduciary duty is a legal obligation to act for the benefit of another,
including subordinating one’s personal interests to that of the other
person.
xiv. Implied covenant is a promise inferred by law from a document as a
whole and the circumstances surrounding its implantation.
xv. Implied covenant of good faith and fair dealing is an honest intention
to abstain from any unconscientious advantage over another and parties
will deal honestly in the satisfaction of their obligations and without intent
to defraud
xvi. Adhesion contract is a contract in which one entered into between

parties with unequal bargaining power, terms disproportionately in favor
of the drafting party and courts may exercise a variety of pretexts to
disregard unfair/unreasonable terms
B. Things to Remember
i. Legal Capacity: Infants (minors, those under 18 cannot contact)
a. Void or voidable promises
b. Avoidance or ratification
c. Restitution after disaffirmance (sometimes parents will be
held accountable)
d. Necessities
e. Torts connected with Ks: normally not liable but if
misrepresent may have to remedy
ii. Duress
i. Wrongful conduct :
a. Violence / threats
b. Imprisonment, threats
c. Wrongful seizing / withholding – a wrongful threat to detain
or the wrongful detention of property of another amounts to
duress if it coerces the assent of the other to an unfair
transaction and the coerced party had no reasonable
alternative but to assent.
d. Abuse of legal rights
e. Breach – A threatened breach of contract constitutes
duress if the breach would result in irreparable injury
because of an absence of an adequate legal or equitable
remedy or other reasonable alternative such as a
substitute supplier. In addition, however, the breach or
threatened breach must be a violation of the duty of good
faith and fair dealing.
f. Coercion by 3rd Party - If the wrongful pressure is applied
by a third person, the transaction can be avoided if the
other contracting party knows of the coercion or the other
party does not give value. If the other party gives value
22
without notice of the wrongful conduct, the coerced party

cannot avoid the contract.
g. Voidable – a contract signed because a shotgun is pointed
at one’s head is consented to if one has a general idea of
what one is signing. Or void – it will be void because of
duress if it is in no sense the consensual act of the party. If
one does not have any idea of the contents of the writings,
one is in no consenting.
ii. Undue influence – unfair persuasion
iii. Misrepresentation
a. Requirements:
i. Scienter (knowledge) not required
ii. Deception
iii. Reliance
iv. Justification
v. Injury – Even if a party gets something as valuable
as, or more valuable than, the performance
promised, a party may avoid the contract. Injury is
not usually a requisite.
vi. Promissory fraud and statement of intention
vii. Cures - if after a misrepresentation is made but
before the deceived party has voided the contract,
the facts are brought into line with the presentation,
the contract is no longer voidable. And remedies
are if the misrepresentation and ensuing deception,
reliance and injury constitute a tort, the deceived
party must elect between either a tort action or the
exercise of the power of avoidance followed by a
restitutionary action
viii. Restoration of "status quo ante" – Where restitution
is sought a law in a non-UCC case, the plaintiff
must, before suing, offer to restore any tangible
benefits received under the contract. Plaintiff eneed
not have done so if what has been received has
p[erished because of its defects, I worthless, or
consists of money that may be offset. However, in
an equitable action, no prior offer to restore is
required. An equity action is available if something
other than or in addition to, a money judgment is
sought; e.g. cancellation of a deed.
ix. "Fraud in the factum" (With regards to facts to
which they are brought about)
iv. Mistake
a. Fact vs. judgment vs. law – For avoidances the mistakes
must relate to a basic assumption as to vital existing facts.
Risks of mistakes in judgment are quintessential
contractual risks from which the court will not relieve a
party.
23
b. Mutual mistake – Where the parties are mistaken about a

basic assumption upon which they base their bargain, the
transaction can be avoided.
c. Mistake vs. Uncertainty – Where the parties are uncertain
or consciously ignorant of a vital fact there is no right of
avoidance.
d. Injuries – The orthodox view is that release of a personal
injury claim can be avoided if there are unknown injuries
but not if there are unforeseen consequences of known
injuries.
e. Measurements
f. Palpable vs. impalpable (what you can't touch) mistakes
g. Performance – Recovery may be had for payments,
overpayments, deliveries of returnable goods, and
conveyances of excessive land made in the mistaken
belief that the performance was owed under a contract
with another, even if the mistake is negligent and
unilateral, but there must be a mistake rather than
uncertainty.
h. Defenses to avoid or recover
i. Reformation and remedies – available when (1) there must
have been a prior agreement, there must have been an
agreement to put the agreement in writing, and because of
a mistake, there is a variance between the prior agreement
and the writing.
v. Gross inequality in bargaining + unreasonably biased K terms = voidable
K
C. Cases to Know
i. Nelson v. Rice – Nelson’s estate (P) sold two oil paintings at an estate
sale to Rice for $60, believing the paintings to be relatively worthless. The
paintings later sold for over $1 million at auction. Nelson sued to rescind
or reform the sale based on mutual mistake. A contract will not be
rescinded where one party bears the risk of loss due to conscious
ignorance of elemental facts.
ii. Lenawee County Board of Health v. Messerly – When the Lenawee
County Board of Health (P) found a defective sewage system shortly after
the Pickleses purchased rental property from Mr. and Mrs. Messerly (D)
and sought a permanent injunction proscribing human habitation, the
Pickleses sought rescission of their contract on the grounds of mutual
mistake. A court need not grant rescission in every case in which there is
a mutual mistake that relates to a basic assumption of the parties which
the contract was made and which materially affects the agreed
performances of the parties.
iii. White v. Berenda Mesa Water District – White (D) made a mixed
mistake of fact and judgment in submitting a bid to the Berenda Mesa
Water District (P). Rescission may be had for a mixed mistake of fact and
judgment where it would otherwise be unfair to enforce the contract.
iv. Hoffman v. Chapman – The Hoffmans (D) purchased part of a lot from
the Chapmans (P) who accidentally deeded the entire lot. If there is clear,
24
convincing and strong evidence of a mutual mistake, the courts will

reform an instrument to reflect the true intent of the parties.
v. Williams v. Walker-Thomas Furniture Co. – Williams (D) made a series
of purchase, on credit, from Walker-Thomas Furniture Co. (P) but
defaulted on her payments. Where, in light of the general commercial
background of a particular case, it appears that gross inequality of
bargaining power between the parties has led to the formation of a
contract on terms to which one party has had no meaningful choice, a
court should refuse to enforce such a contract on the ground that it is
unconscionable.
vi. Knapp v. American General Finance – The Knapps (P) brought an
action to void a loan contract executed with American General Finance. A
person who executes a contract is generally bound by its terms and
cannot avoid the contract by alleging failure to read or comprehend its
contents, a contract may be voided for being unconscionable when gross
inequality in bargaining power is coupled with contractual terms that are
unreasonably favorable to the stronger part. A fiduciary duty exists when
one party acts for another ‘s benefit while subordinating their own
personal interests to that of the other party. In every contract there is an
implied covenant of good faith and fair dealing.
vii. Brower v. Gateway 2000, Inc. – Purchasers of Gateway (D) computers
brought a class action suit to determine the validity of a standards terms
and conditions agreement containing an arbitration clause. In order to find
a contract clause “unconscionable” requires some showing of an absence
of meaningful choice on the part of one of the parties together with
contract terms which are unreasonably favorable to the other party.
XIV. Illegality and Public Policy
A. Key Terms
i. In Pari Delicto is a doctrine that a court will not enforce an illegal contract
in an action for losses incurred as a result of the breach of that contract.
ii. Indivisibility Theory is when elements are interdependent and common
to each other, and the consideration, so that the entre fulfillment is the
basis of the parties’ agreement.
B. Things to Know
i. Using one’s access and influence to advocate on another’s behalf
enforceable NOT contrary to public policy
ii. When privileged info gets disclosed voluntarily from a client to an attorney
in the presence of third parties, it ceases to be privileged.
iii. Contracts not inherently illegal but breaking law will not be voided if
equities favor enforcement.
iv. In pari delicto (mutual wrongdoing) defense not available to corporate
insiders sued for giving false inside information.
v. Contract granting marital rights for unmarried couples may be against
public policy.
vi. Parties enter into illegal contracts at their own risk. The law will leave
them where their own acts left them. A participant in a chain or pyramid
scheme may not sue for recovery of invested monies
C. Cases to Know
i. Hewitt v. Hewitt – The court of appeal held that Hewitt (P) could enforce
a contract for the division of property between unmarried people on the
25
basis such agreements do not contravene public policy. Contracts

granting marital rights to unmarried couples are unenforceable as being
against public policy.
ii. Troutman v. Southern Railway Co. – Troutman (P) used his access to
high government officials to present Southern Railway’s (D) case in a
dispute it was having with the International Commerce Commission. A
contract to use one’s access to present another’s case to high officials is
not unenforceable as contrary to policy.
iii. In re James H. Himmel, Attorney – Himmel negotiated a settlement
between his client and her former attorney relieving the former attorney
from liability for conversion of her client trust account, and failed to report
the former attorney’s conduct to the appropriate disciplinary authorities.
Information voluntarily disclosed by a client to an attorney, in the
presence of third parties who are not agents of the client or attorney, is
not privileged information.
iv. Northern Indiana Public Service Co. v. Carbon County Coal Co. –
Northern Indiana Public Service Co. (P) brought an action against Carbon
County Coal Co. (D) seeking to void a supply contract. A contract not
inherently illegal but in breach of a law will not be voided if the equities
favor enforcement.
v. Bateman Eichler, Hill Richards, Inc. v. Berner – Bateman Eichler, Hill
Richards, Inc. (D) sued for giving false information, contended that it had
an in pari delicto defense against the falsely tipped plaintiffs. The defense
of in pari delicto is unavailable to corporate insiders sued for giving false
inside information.
vi. Singleton v. Foreman – Foreman (D) agreed to represent Singleton (P)
in her divorce but required an illegal contingency fee plus his legal
retainer. A contract will be treated as indivisible when its entire fulfillment
is the basis of the parties’ agreement, and its various elements are
interdependent and common to one another and to the consideration.
vii. Cochran v. Dellfava – Cochran (P), a losing investor in a chain scheme,
sued for recovery of her investment. A participant in a “chain scheme”
may not sue for recovery of invested monies.
XV. Statute of Frauds
A. Key Terms
i. Statute of Frauds – A statute that requires specified types of contracts to
be in writing in order to be binding.
B. Things to Know
i. The exceptions to the Statute of Frauds is MYLEGS
i. Contracts in consideration of marriage.
ii. Contracts which cannot be performed within one year.
iii. Contracts for the transfer of an interest in land.
iv. Contracts by the executor of a will to pay a debt of the estate with
their own money.
v. Contracts for the sale of goods above a certain value.
vi. Contracts in which one party becomes a surety (acts as
guarantor) for another party's debt or other obligation.
i. The Statute of Frauds requires writing for an agreement not to be
performed w/in one years from making thereof, but does not render
26
unenforceable an oral K that fails to specify the time for performance

even if it will likely take more than a year.
C. Cases to Know
XVI. Parol Evidence Rule
A. Key Terms
B. Things to Know
C. Cases to Know
XVII. Restatement of Contracts

A. §. 2: A manifestation of intent by the promisor that justifies the promisee in
understanding that a commitment has been made.
B. § 3: Agreement as a manifestation of mutual assent
C. §§ 19 20: Stress the accountability principle by holding a party liable for
deliberate manifestations by words or conduct, made with reason to know that
they will create a reasonable impression of assent.
D. § 24: An offer is a manifestation of willingness to enter into a bargain, so made
as to justify another person in understanding that his assent to that bargain is
invited and will conclude it.
E. § Rejection constitutes a termination of an offer before the expiry by lapse of
time; A counteroffer is treated as a rejection of the original offer and the
substitution of a new offer by the original offeree. Death or mental incapacity
before acceptance terminates an offer, however, after the acceptance, there is
no change, however in mental incapacity, a voidable contract exists, offeror can
void it. Revocation allows for the offeror to revoke the offer until the point of
acceptance.
F. § 39: A counteroffer is defined as an offer by the offeree to the offeror.
G. § 45: Offer calls for performance as mode of acceptance, then offeror lose the
right to revoke once performance has been tendered or begun. However,
offerree must complete the performance in the required time.
H. § 62: Offer does not mandate acceptance by performance, it can be accepted by
performance or promise. The commencement or tender of performance
constitutes an implied promise to complete the performance within the time
called for by the offer.
I. .§ 63: Mailbox rule does not apply, and acceptance is only effective upon receipt,
if the offer is irrevocable (valid option).
J. § 90 Promise Reasonably Inducing Action or Forbearance
Where injustice can only be avoided by enforcement
i. 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
K. §178 – Where a K is unenforceable on the grounds of public policy
L. §208 – Unconscionavle K or term
If a K or term is unconscionable at the time the K is made the court may
refuse to enforce the K, or may enforce the remainder of the K w/o the
unconscionable term, or limit the application of the term to avoid an
unconscionable result.
XVIII. The Uniform Commercial Code
27
A. UCC 2-103 - "Good faith" in the case of a merchant means honesty in fact and
the observance of reasonable commercial standards of fair dealing in the trade.
B. UCC 2-106 – Passing of title from seller to buyer for a price.
C. UCC 2-201 (Statute of Frauds)
i. A contract for the sale of goods for the price of $500 or more is not legally
enforceable unless there is some record. This record can be satisfied in:
i. Proper Writing
ii. The party charged admits in his pleadings, testimony or otherwise
in court that a contract was made
iii. Partial Performance
iv. Signed letter of confirmation between merchants
ii. (1) Except as otherwise provided in this section a contract for the sale of
goods for the price of $500 or more is not enforceable by way of action or
defense unless there is some writing sufficient to indicate that a contract
for sale has been made between the parties and signed by the party
against whom enforcement is sought or by his authorized agent or broker.
A writing is not insufficient because it omits or incorrectly states a term
agreed upon but the contract is not enforceable under this paragraph
beyond the quantity of goods shown in such writing.
iii. (2) Between merchants if within a reasonable time a writing in
confirmation of the contract and sufficient against the sender is received
and the party receiving it has reason to know its contents, it satisfies the
requirements of subsection (1) against such party unless written notice of
objection to its contents is given within 10 days after it is received.
iv. (3) A contract which does not satisfy the requirements of subsection (1)
but which is valid in other respects is enforceable
D. UCC 2-202
i. If conduct by both parties recognizes the existence of a contract although
their records do not otherwise establish a contract, a contract is formed
by an offer and acceptance.
E. UCC 2-203
i. Every contract must have good faith (honesty) in obligation of
performance or enforcement
F. UCC 2-204
i. General terms of a contract
G. UCC 2- 205
i. An offer by a merchant to buy or sell goods in a signed record 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 state for a
reasonable time, but in no event may such a period of irrevocability
exceed three months, but any such term of assurance in a form supplied
by the offeree must be separately signed by the offeror.
ii. “Where the beginning of a performance is a reasonable mode of
acceptance, the offeree is bound when the offeree starts to perform
provided that the beginning of performance unambiguously expresses the
offeree’s intention to engage himself.”
H. UCC 2-206
i. Shipment of Goods:
I. UCC 2-207
28
i. Exchange of differing purchase orders = binding contracts on portions

upon which writings agree
ii. (Rejects Mirror Image) Provides that a definite expression of acceptance
sent within a reasonable time operates as an acceptance even though it
states terms additional to or different from those offered, unless
acceptance is expressly made conditional on assent to the additional
terms.
iii. Additional terms are to be construed as proposals for addition to the
contract. Between merchants such terms become part of the contract with
three exceptions.
J. UCC 2-209
i. (1) An agreement modifying a contract within this Article needs no
consideration to be binding.
ii. (2) A signed agreement which excludes modification or rescission except
by a signed writing cannot be otherwise modified or rescinded, but except
as between merchants such a requirement on a form supplied by the
merchant must be separately signed by the other party.
Gap fillers are the UCC 3-300 section
K. UCC 2-302 – Unconscionable Contact or Clause
i. (1) If the court as a matter of law finds the contract or any clause of the
contract to have been unconscionable at the time it was made the court
may refuse to enforce the contract, or it may enforce the remainder of the
contract without the unconscionable clause, or it may so limit the
application of any unconscionable clause as to avoid any unconscionable
result.
ii. (2) When it is claimed or appears to the court that the contract or any
clause thereof may be unconscionable the parties shall be afforded a
reasonable opportunity to present evidence as to its commercial setting,
purpose and effect to aid the court in making the determination.
L. UCC 2-305
i. (2) A price to be fixed by the seller or by the buyer means a price for him
to fix in good faith.
ii. (3) When a price left to be fixed otherwise than by agreement of the
parties fails to be fixed through fault of one party the other may at his
option treat the contract as cancelled or himself fix a reasonable price.
M. UCC 2-306
1) No quantity can be tendered or demanded that is unreasonably disproportionate to
a stated estimate.
2) In the absence of an estimate, no quantity can be tendered or demanded that is
unreasonably disproportionate to any normal or otherwise comparable prior output or
requirements.
3) (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.
N. UCC 2-308
i. The seller’s place of business is the place of delivery.
O. UCC 2-309
29
i. (3) Termination of a contract by one party except on the happening of an

agreed event requires that reasonable notification be received by the
other party and an agreement dispensing with notification is invalid if its
operation would be unconscionable.
P. UCC 2-310
i. Payment due at the time buyer who receives goods.(payment or authority
to ship)
Impracticability is when contract performance becomes this when an vent
the parties assumed something that would not happen but did happen
counter offer is offeree rejection
Insurance, victim comp, actions in tort, others are 20/21st century methods
to cover contingencies of moral or legal obligations without actually
paying full amounts.
Discharge of contractual duties when among other things, receission,

cancellation, etc.
2-725 Statute of Limitations
Frustration is when parties are mistaken as to a future vent and the

occurrence of the event is the basis
30

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Contracts I - Outline

must provide a basis for determining the existence of a breach

B. Three Types of Contracts

observance of reasonable commercial standards of fair dealing in the

II. Intent to Contract

b. Balfour v. Balfour - Wife of the defendant is seeking alimony after her

III. The Offer

of commitment. B as a reasonable person would believe that A

IV. Intent to Memorialize and Indefiniteness

Rather, A has requested a promise from B. When B makes the promise,

On appeal, the court reconsidered the applicability of the U.C.C. Courts

i. A contract is formed upon the moment of dispatch of the

E. Gem Broadcasting, Inc v. Minker – Gem Broadcasting appealed the judgment

exchange of differing purchase orders constitutes a binding contract only as to

VII. Counteroffers and Battle of the Forms

doing or promise to refrain from doing what the promise is legally

ii. Modification under UCC - consideration lacking for some reason

IX. Pre-Existing Duty (part of consideration)

ii. Economic Duress is taking advantage of circumstances to drive an

or detriment to the promisee; or(b) equivalence in the values exchanged;

services could be claimed against his estate. If services rendered are

detriment. A promise which the promisor should reasonably expect to

imprisonment wrongful seizing or withholding, abuse of legal rights,

v. Unconscionability is a situation in which a contract, or a particular

ii. Cannot be ordered to relieve a party who as assumed the risk of

“Dragnet clauses” have been upheld as conscionable between an

xvi. Adhesion contract is a contract in which one entered into between

without notice of the wrongful conduct, the coerced party

b. Mutual mistake – Where the parties are mistaken about a

convincing and strong evidence of a mutual mistake, the courts will

basis such agreements do not contravene public policy. Contracts

unenforceable an oral K that fails to specify the time for performance

XVII. Restatement of Contracts

i. Exchange of differing purchase orders = binding contracts on portions

i. (3) Termination of a contract by one party except on the happening of an

counter offer is offeree rejection

Discharge of contractual duties when among other things, receission,

2-725 Statute of Limitations

Frustration is when parties are mistaken as to a future vent and the

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