Marnitia Walker

Chapter 4: Reaching an Agreement

The objective, outward expression of a party’s intent to be bound in an agreement, as opposed to that
party’s subjective mental assent to the agreement, is all that matters when determining the existence of
a valid and enforceable contract.

Embry v. Hargadine, McKittrick Dry Goods Co.

 Regardless of the parties’ subjective or actual intent, if a reasonable man could infer from their
conduct intent to enter into a binding and enforceable contract, is a binding and enforceable
contract presumed to exist?
o if a reasonable man could infer from their conduct intent to enter into a binding and
enforceable contract, a binding and enforceable contract is presumed to exist. Intent
only matters in contract formation if it is communicated in some way between all
parties to a contract or manifested by the parties’ conduct.

Lucy v. Zehmer
 Whether the actual mental assent of the parties to an agreement is necessary to form a valid
and enforceable contract.
o The objective, outward expression of a party’s intent to be bound in an agreement, as
opposed to that party’s subjective mental assent to the agreement, is all that matters
when determining the existence of a valid and enforceable contract. If the words or
actions of one of the parties has only one reasonable meaning, any undisclosed
intentions have no bearing on the existence of a valid and enforceable contract unless
they reflect an unreasonable meaning that is actually disclosed to the other party.

Restatement § 2d
§17 Requirements of a Bargain
• (1) except as stated in subsection (2), the formation of a contract requires a bargain in
which there is a manifestation of mutual assent to the exchange and consideration

• (2) Whether or not there is a bargain a contract may be forced under special rules
applicable to formal contract or under the rules stated in §§82-94
◦ Meeting of the minds
‣ The element of agreement is sometimes referred to as a Meeting of the Minds
§18 Manifestation of Mutual Assent
• Manifestation of mutual assent to an exchange requires that each party either make a
promise of begin or render a performance
§ 19. Conduct As Manifestation of Assent
1. The manifestation of assent may be made wholly or partly by written or spoken words or by
other acts or by failure to act

2. The conduct of a party is not effective as a manifestation of his assent unless he intends to
engage in the conduct and knows or has reason to know that the other party may infer from his
conduct that he assents 3. The conduct of a party may manifest assent even though he does not in
fact assent. In such cases a resulting contract may be voidable because of fraud, duress, mistake,
or other invalidating cause
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Nebraska Seed Co. v. Harsh

 Acceptance of a proposal to begin bargaining cannot create a contract, even if the proposal
was sent to specific persons, rather than to the public generally
 Is a contract created when someone accepts the terms of an invitation to negotiate a contract?
o When a person invites another to make an offer it is merely a proposal to begin
bargaining and not an offer that can be accepted. An agreement is not made simply
because the person receiving the invitation accepts the terms of the proposal. Even
when proposals are made to specific persons, rather than to the general public, they are
only invitations to bargain.

Lefkowitz v. Great Minneapolis Surplus Store, Inc.

 Where the offer is clear, definite, and explicit, and leaves noting open for negotiations, it
constitutes an offer, acceptance of which will complete the contract
 An advertisement constitutes a binding offer if it is clear, definite, and explicit, and leaves
nothing open for negotiation.
 Is an advertisement a binding offer if it is clear, definite, and explicit, and leaves nothing open
for negotiation?
o An advertisement constitutes a binding offer if it is clear, definite, and explicit, and
leaves nothing open for negotiation. Whether an individual newspaper advertisement
constitutes an offer, as opposed to merely an invitation to make an offer, depends on
the parties' intentions and the surrounding circumstances. Additionally, once an offer
is made, the offeror can unilaterally modify the terms of the offer before acceptance.
However, after acceptance, the offeror may not impose additional or arbitrary
conditions on the offer.

Leonard v. PepsiCo
 A consumer's agreement to the terms of an advertisement that was intended to be humorous
does not create a valid and enforceable contract.
 Is a valid and enforceable contract created when a consumer agrees to the terms of an
advertisement that was intended to be humorous?
o Generally, an advertisement presumably does not constitute an offer, even when a
price for an item is provided therein. The advertisement must contain a commitment
or an invitation to take further action. Simply including an order form is not sufficient
to transform an advertisement into an offer. However, when an advertisement is
“clear, definite, and explicit, and leaves nothing open for negotiation,” it is an offer for
which acceptance will create a contract. An advertisement that is detailed suggests that
an offer is being made. However, the lack of limiting words, such as “first come, first
served,” suggests that the advertisement is too indefinite to be considered an offer

§22 Mode of Assent: Offer and Acceptance

1. The manifestation of mutual assent to an exchange ordinarily takes the form of an offer or
proposal by one party followed by an acceptance by the other party or parties

2. A manifestation of mutual assent may be made even though neither offer nor acceptance can
be identified and even though the moment of formation cannot be determined
§24 Offer Denied
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• 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
§26 Preliminary Negotiations
• A manifestation of willingness to enter into a bargain is not an offer if the person to whom
it is addressed knows or has reason to know that the person making it does not intend to
conclude a bargain until he has made a further manifestation of assent
§29 To Whom an offer is addressed
1. The manifested intention of the offeror determines the person or persons in whom is
created a power of acceptance

2. An offer may create a power of acceptance in a specified person or in one or more of a

specified group or class of persons, acting separately or together, or in anyone or everyone who
makes a specified promise or renders a specified performance
§33 Certainty
1. Even though a manifestation of intention is intended to be understood as an offer, it cannot
be accepted so as to form a contract unless the terms of the contract are reasonably certain

2. The terms of a contract are reasonably certain if they provide a basis for deterring the
existence of a breach and for giving an appropriate remedy

3. The fact that one or more terms of a proposed bargain are left open or uncertain may show that
a manifestation or intention is not intended to be understood as an offer or as an acceptance

UCC § 2-204. Formation in General.

(1) A contract for sale of goods may be made in any manner sufficient to show agreement,
including conduct by both parties which recognizes the existence of such a contract.
(2) An agreement sufficient to constitute a contract for sale may be found even though the
moment of its making is undetermined.
(3) Even though one or more terms are left open a contract for sale does not fail for
indefiniteness if the parties have intended to make a contract and there is a reasonably certain
basis for giving an appropriate remedy.

UCC § 2-206. Offer and Acceptance in Formation of Contract.

(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.
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(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.

UCC § 2-305. Open Price Term.

(1) The parties if they so intend can conclude a sale even though the price is not settled. In such a
case the price is a reasonable price at the time for delivery if

 (a) nothing is said as to price; or

 (b) the price is left to be agreed by the parties and they fail to agree; or
 (c) the price is to be fixed in terms of some agreed market or other standard as set or
recorded by a third person or agency and it is not so set or recorded.

(2) A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.
(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.
(4) Where, however, the parties intend not to be bound unless the price be fixed or agreed and it
is not fixed or agreed there is no contract. In such a case the buyer must return any goods already
received or if unable so to do must pay their reasonable value at the time of delivery and
the seller must return any portion of the price paid on account.

UCC § 2-308. Absence of Specified Place for Delivery.

Unless otherwise agreed

 (a) the place for delivery of goods is the seller's place of business or if he has none his
residence; but
 (b) in a contract for sale of identified goods which to the knowledge of the parties at the
time of contracting are in some other place, that place is the place for their delivery; and
 (c) documents of title may be delivered through customary banking channels.

UCC § 2-309. Absence of Specific Time Provisions; Notice of Termination.

(1) The time for shipment or delivery or any other action under a contract if not provided in this
Article or agreed upon shall be a reasonable time.
(2) Where the contract provides for successive performances but is indefinite in duration it is
valid for a reasonable time but unless otherwise agreed may be terminated at any time by either
party.
(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.
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UCC § 2-310. Open Time for Payment or Running of Credit; Authority to Ship
Under Reservation.
Unless otherwise agreed

 (a) payment is due at the time and place at which the buyer is to receive the goods even
though the place of shipment is the place of delivery; and
 (b) if the seller is authorized to send the goods he may ship them under reservation, and
may tender the documents of title, but the buyer may inspect the goods after their arrival
before payment is due unless such inspection is inconsistent with the terms of
the contract (Section 2-513); and
 (c) if delivery is authorized and made by way of documents of title otherwise than by
subsection (b) then payment is due at the time and place at which the buyer is to receive
the documents regardless of where the goods are to be received; and
 (d) where the seller is required or authorized to ship the goods on credit the credit period
runs from the time of shipment but post-dating the invoice or delaying its dispatch will
correspondingly delay the starting of the credit period .

Empro Mfg. Co. v. Ball‐Co. Mfg., Inc.

 Both parties’ objective manifestations of intent to be bound must be shown for a binding
contract to be formed.
 Is a letter of intent binding if the agreement in the letter is subject to various conditions
including a more formal and definitive agreement?
o In contracts, intent is objective, and for a contract to be binding, both parties must
objectively manifest an intention by which to be bound. Letters of intent, although
indicative of parties’ intentions to be bound in the future, generally are not binding.

§27 Existence of Contract where written memorial is contemplated

• Manifestations of assent that are in themselves sufficient to conclude a contract will not be
prevented from so operating by the fact that the parties also manifest an intention to prepare and
adopt a written memorial thereof; but the circumstances may show that the agreements are
preliminary negotiations
Arnold Palmer Golf Co. v. Fuqua Indus., Inc.
 To create an enforceable contract, both parties must have a clear understanding of the terms
of an agreement and intent to be bound by its terms.
o To create an enforceable contract, both parties must have a clear understanding of
the terms of an agreement and intent to be bound by its terms. When determining
whether a writing reflects a genuine intent by the parties to be bound, the entire
document and relevant circumstances surrounding its adoption must be considered.
Extrinsic evidence may be introduced to support the existence of intent to be bound
by the parties.

Copeland v. Baskin Robbins U.S.A.

 The breach of an agreement to negotiate a future contract may create a viable legal cause of
action.
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 Does the breach of an agreement to negotiate a future contract give rise to a viable legal
cause of action?
o There is a difference between a so-called “agreement to agree,” which the law does
not recognize as an enforceable contract, and an agreement to negotiate an
agreement, which has been deemed enforceable by most jurisdictions that have
considered the issue. An agreement to negotiate differs from an agreement to agree
because it does not obligate the parties to actually form a contract. It merely
obligates them to negotiate in good faith. In essence, an action for breach of an
agreement to negotiate may be likened to promissory estoppel. In each case, a party
may expend time and money in reliance on a promise by the other party to negotiate
in good faith. Recognizing a cause of action for breach of a promise to negotiate is
further supported by public policy. Because the nature of modern negotiations is
often time-consuming and expensive, parties to a negotiation need legal assurance
that their investment in the negotiation will not be unjustly undermined by the other
side. That said, the appropriate measure of damages for breach of an agreement to
negotiate should not be based on the plaintiff’s lost expectations because such
damages are impossible to determine without knowing what the final terms of the
agreement would have been. The appropriate measure of damages should instead be
based on expenditures made by the plaintiff in reliance on the defendant’s
negotiating in good faith, such as out-of-pocket expenses incurred to negotiate and
lost opportunity costs to the extent they can be proven.

Dickinson v. Dodds
 An offer may be revoked by the offeror without an express or actual statement of revocation
communicated to the offeree provided there has been no meeting of the minds and the
offeree is aware of conduct by the offeror demonstrating intent to revoke the offer.
 Whether an offer may be revoked by the offeror without an express or actual statement of
revocation communicated to the offeree.
o An offer may be revoked by the offeror without an express or actual statement of
revocation communicated to the offeree provided there has been no meeting of the
minds and the offeree is aware of conduct by the offeror demonstrating intent to
revoke the offer. A “meeting of the minds” occurs when both parties to the contract
have the same understanding of and mutually assent to the terms of an agreement at
the same time. It is sufficient to form a valid contract.

§25 Option Contracts

• An option contract is a promise which meets the requirements for the formation of a contract
and limits the promisor’s power to revoke an offer

§35 The Offeree’s Power of Acceptance

1. The offer gives to the offeree a continuing power to complete the manifestation of
mutual assent by acceptance of the offer
2. A contract cannot be created by acceptance of an offer after the power of acceptance has been
terminated in one of the ways listed in §36
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§36 Methods of Termination of The Power of Acceptance

1. An offeree’s power of acceptance may be terminated by
A. Rejection or counteroffer by the offeree or
B. Lapse of time, or
C. Revocation by the offeror, or
D. Death or incapacity of the offeror or offeree

2. In addition, an Offeree’s power of acceptance is terminated by the non-occurrence of any

condition of acceptance under the terms of the offer

§37 Termination of Power of Acceptance Under Option Contract

• Notwithstanding §38-49, the power of acceptance under an option contract is not terminated
by rejection or counteroffer, by revocation, or by death or incapacity of the offeror, unless the
requirements are met for the discharge of a contractual duty

§42 Revocation by Communication from Offeror Received by Offeree

• 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

§43 Indirect Communication of Revocation

• An offeree’s power of acceptance is terminated when the offeror takes defiance action
inconsistent with an intention to enter into the proposed contract and the offeree acquires
reliable information to that effect
Ardente v. Horan
 A valid acceptance that is capable of forming a valid contract must be definite and
unequivocal and must not impose additional conditions or limitations on the offer, unless
such conditional language is clearly independent of the actual acceptance.
 Whether conditional acceptance of an offer creates a valid contract.
o A valid acceptance that is capable of forming a valid contract must be definite and
unequivocal and must not impose additional conditions or limitations on the offer.
An acceptance that contains such conditional language may still be valid, however,
if the actual acceptance is clearly independent of the conditional language.

§61 Acceptance Which Requests Change of Terms

• An acceptance which requests a change or addition to the terms of the offer is not thereby
invalidated unless the acceptance is made to depend on an assent to the changed or added terms

§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 completed 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

§64 Acceptance by Telephone or Teletype

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• Acceptance given by telephone or other medium of substantially instantaneous two-way

communication is governed by the principals applicable to acceptances where the parties are
in the presence of each other

§65 Reasonableness of Medium of Acceptance

• Unless circumstances known to the offeree indicate otherwise, a medium of acceptance is
reasonable if it is the one used by the offeror, or one customary is similar transactions at the
time and place the offer is received

§66 Acceptance Must Be Properly Dispatched

• An acceptance sent by mail or otherwise from a distance is not operative when dispatched,
unless it is properly addressed, and such other precautions taken as are ordinarily observed to
insure safe transmission of similar message

Carlill v. Carbolic Smoke Ball Co.

 A general advertisement of an award constitutes an offer that is capable of being accepted
and binding the offeror in a valid contract, provided at least contemporaneous notice and
some considerations are present.
 Does a general advertisement of an award constitute an offer that is capable of being
accepted and binding the offeror in a valid contract, provided at least contemporaneous
notice and some considerations are present?
o A general advertisement of an award constitutes an offer that is capable of being
accepted and binding the offeror in a valid contract, provided at least
contemporaneous notice and some considerations are present. While most
acceptances are not valid unless notice of acceptance is communicated to the offeror,
acceptances of offers contained in general advertisements should be treated
differently as it is unlikely the advertisers expected any advance notice beyond
notice that an advertised condition had been fulfilled

§54 Acceptance by performance; Necessity of Notification to Offeror

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 the notification of acceptance is not required

White v. Corlies & Tifft

 To form a binding contract, acceptance by performance must be sufficient to manifest or
communicate the acceptance to the offeror.
 To form a binding contract, must acceptance by performance be sufficient to manifest or
communicate the acceptance to the offeror?
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o If an offeree accepts an offer made when the parties are not together, acceptance
must be manifested to the offeror. Although the acceptance does not have to be
actually received by the offeror to create a binding contract, the acts constituting
acceptance have to be sufficient that once perceived by the offeror, they would be
understood as acceptance of the offer. For example, a writing mailed to the offeror
communicating acceptance would form a contract once the writing was mailed.
Therefore, commencement of performance that is intended to constitute acceptance
of the offer must, from the perspective of the offeror, be distinguishable as the start
of performance. If the start of performance cannot be distinguished from other work
unrelated to the contract, then it is insufficient to constitute acceptance of the offer,
and no binding contract is formed. Preparatory steps, such as the purchase of
materials or preparation of those materials, do not clearly communicate to the
offeror that performance has been commenced, because those materials could be
purchased for many other purposes unrelated to the agreement between the parties.
Without a perceivable indication that performance of the subject agreement has
commenced, acceptance by performance cannot occur and no binding contract is
formed

§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 a 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 incites acceptance
in any manner and by any medium reasonable in the circumstances

§32 Invitation of Promise or Performance

• In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to
perform what the offer requests or by rendering the performance, as the offeree chooses

Petterson v. Pattberg
 Any offer to enter into a unilateral contract may be withdrawn before the act requested to be
done has been performed.
 May an offer for a unilateral contract be revoked if the offeror knows of the offeree’s
imminent intention to accept?
o An offer to enter into a unilateral contract may be withdrawn before the act
requested to be done has been performed, even if the offeror knows of the offeree’s
intention to accept and revokes at the very last second before acceptance.

§45 Option Contract Created by Part Performance or Tender

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 beings
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 invited performance in accordance with the terms of the offer
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§62 Effect of Performance by Offeree Where Offer Invites Either Performance

or 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

Hobbs v. Massasoit Whip Co.

 Conduct which looks like acceptance is acceptance.
 Can silence be taken as acceptance of an offer if the parties had a prior history of similar
dealing that would indicate that the party would decline the offer if it did not want to accept?
o Silence can be taken as acceptance of an offer if the offering party makes a
reasonable assumption that the offer is accepted. Conduct which looks like
acceptance is acceptance.

§69 Acceptance by Silence of Exercise of Dominion

1. Where an offeree fails to reply to an offer, his silence 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 hem and reason to know that they were offered with the expectation of
compensation
B. Where the offeror has stated 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 ownership 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

Nguyen v. Barnes & Noble, Inc.

 A website user lacks sufficient notice to a company’s terms of use if, despite the presence of
conspicuous hyperlinks to the terms of use, the website neither provides notice to users nor
prompts users to affirmatively demonstrate assent
 Does a website user lack sufficient notice to a company’s terms of use if, despite the
presence of conspicuous hyperlinks to the terms of use, the website fails to provide notice to
users or prompt users to affirmatively demonstrate assent?
o A website user lacks sufficient notice to a company’s TOU if, despite the presence
of a conspicuous hyperlink to the TOU on every page of the website, the website
provides no notice to users and does not prompt users to take affirmative action to
demonstrate assent to the TOU. Generally, there are two types of internet contracts:
(1) click-wrap agreements and (2) browse-wrap agreements. A click-wrap
agreement requires a user to click on an “I agree” box after being presented with a
list of terms and conditions. Conversely, a browse-wrap agreement, like the one used
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by Barnes & Noble, is accessed via a hyperlink on a webpage that directs a user to
the appropriate content. No affirmative action is required by the website user to
agree to the terms of use. However, one of the requirements of a contract is the
mutual manifestation of assent. Constructive assent is frequently present in click-
wrap agreements. Conversely

In order to establish an enforceable contract, there must be a manifestation of mutual assent,

consideration, an offer, and an acceptance.

The first issue it was there an offer to enter into a contract between the seller and the buyer.
An offer is the manifestation of willingness to enter into a bargain. The elements of an offer
according to Restatement 2d §24 are (1) communication to an intended offeree from an identified
offeror; (2) intent to be bound objectively, and (3) clear and definite terms.

Options as a Contract

An option is a promise to keep an offer open for a specific amount of time. Typically options are
not enforceable as contracts because they lack the element of consideration, however, an option
may be enforceable as a contract if there is an underlying offer and one of the following
disjunctive rules is satisfied: (1) The option is written under seal ; (2) a nominal fee, which is
reasonable in regard to the subject of the contract, is paid by the offeree or; (3) the option is
recited where in fact nothing has been paid but the parties act as if consideration has been paid .
However, depending upon the state laws governing the parties the way in which an option may
be enforced, or if an option is enforceable at all vary. Due to insufficient facts to determine the
jurisdiction of the parties, in this instance there will be the presumption that an option is
enforceable, so long as the parties agree that the offeror intends to be bound for a specific
amount of time, as it is in the State of Louisiana.

The manifestation of unqualified assent to the terms of an offer in a manner invited or requested
by the offeror. Acceptance must be performed within a reasonable may be in the form of a
promise, performance, forbearance, or in rare cases by silence. In order for an acceptance by
silence to be valid one of the following elements must be met: (1) the offeree received the
benefit with a reasonable opportunity to reject and reason to know the offeror expected to be
compensated; (2) the offeror requested/stipulated acceptance by silence by the offeree; or (3)
there was a prior established relationship between the party’s making acceptance by silence
appropriate. The mirror image rule states for an acceptance to be valid it must be a clear and
unequivocal assent to the exact terms by the offeror without any modification.

● Mirror Image Rule:

The mirror image rule states for an acceptance to be valid it must be a clear and unequivocal
assent to the exact terms by the offeree without any modification. Must be mirror image of the
offer and must not add, remove, or change any terms

● Telephone Rule
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If the method of communication utilized is by phone, the telephone rule applies. The telephone
rule states that if an offer is made over the phone the offeree must accept over the phone or the
offer is presumed to be rejected.

● Mailbox Rule
If the method of communication is by postal mail, the mailbox rule applies. The mailbox rule
states acceptance of an offer is valid upon dispatch of the mailing or letter and rejection or
revocation of an offer is valid upon receipt of the letter or mailing.
Exceptions does not apply to unilateral contacts because offers for unilateral contracts can only
be accepted by performance. (Unilateral is one that invites acceptance only by performance)

a mere request is different from a counteroffer. A party may make a simple request that does
not create a new condition and therefore is not a counteroffer because the requesting party’s
assent is not contingent upon the request.
an offer terminates, or lapses if the offeree does not timely respond to the offer

An option is a promise to keep an offer open for a specific amount of time. Typically options are
not enforceable as contracts because they lack the element of consideration, however, an option
may be enforceable as a contract if there is an underlying offer and one of the following
disjunctive rules is satisfied: (1) The option is written under seal ; (2) a nominal fee, which is
reasonable in regard to the subject of the contract, is paid by the offeree or; (3) the option is
recited where in fact nothing has been paid but the parties act as if consideration has been paid.

Chapter 5: Discerning the agreement

Raffles v. Wichelhaus
 There is no contract if there is a mutual misunderstanding by both parties as to the meaning
of a term of an agreement.
 Whether a mutual misunderstanding of the parties invalidates a contract.
o There is no contract if there is a mutual misunderstanding by the parties as to the
meaning of a term of the agreement.
o Where there is a latent ambiguity as to meaning, parties may offer parol evidence to
explain the terms.

Oswald v. Allen
 No contract exists between two parties if their understandings of the agreement differ.
 Does a contract exist between two parties if their understandings of the agreement differ?
o No contract exists between two parties if their understandings of the agreement
differ. If the terms of the agreement are ambiguous and the parties each have a
different understanding of the agreement there is no contract unless one of the
parties knew of the other’s understanding. The parties’ mental assent is not required,
but a court cannot find a contract if there is no sensible basis for choosing between
the parties' different understandings.

§200 Interpretation of promise or agreement

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Interpretation of a promise or agreement or a term thereof is the ascertainment of

its meaning

§201 Whose Meaning Prevails

1. Where the parties have attached the same meaning to a promise or agreement or a term
thereof, it is interpreted in accordance with that meaning

2. Where the parties have attached different meanings to a promise or agreement or a term
thereof, it is interpreted in accordance with the meaning attached by one of them it at the
time the agreement was made A. That party did not know of any different meaning
attached by the other, and the other knew the meaning attached by the first party; or
B. That party had no reason to know of any different meaning attached by the other, and the
other had no reason to know the meaning attached by the first party

3. Except as stated in this section, neither party is bound by the meaning attached by the other,
even though the result may be failure of mutual assent

§202 Rules in Aid of Interpretation

1. Words and other conduct are interpreted in the light of all the circumstances, and if the
principal purpose of the parties is ascertainable it is given great weight

2. A writing is interpreted as a whole, and all writings that are part of the same transaction
are interpreted together

3. Unless a different intention is manifested

A. Where language has a generally prevailing meaning, it is interpreted in accordance with
that meaning B. Technical terms and words of art are given their technical meaning when
used in a transaction within their technical field

4. Where an agreement involves repeated occasions for performance by either party with
knowledge of the nature of the performance and opportunity for objection to it by the other,
any course of performance accepted or acquiesced in without objection is given great weight
in the interpretation of the agreement

5. Wherever reasonable, the manifestations of intention of the parties to a promise or

agreement are interpreted as consistent with each other and with any relevant course of
performance, course dealing, or usage of trade

UCC § 1-303. Course of Performance, Course of Dealing, and Usage of Trade.

(a) A "course of performance" is a sequence of conduct between the parties to a particular
transaction that exists if: (1) the agreement of the parties with respect to the transaction
involves repeated occasions for performance by a party; and (2) the other party, with
knowledge of the nature of the performance and opportunity for objection to it, accepts
the performance or acquiesces in it without objection.
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(b) A "course of dealing" is a sequence of conduct concerning previous transactions

between the parties to a particular transaction that is fairly to be regarded as establishing a
common basis of understanding for interpreting their expressions and other conduct.
(c) A "usage of trade" is any practice or method of dealing having such regularity of
observance in a place, vocation, or trade as to justify an expectation that it will be
observed with respect to the transaction in question. The existence and scope of such a
usage must be proved as facts. If it is established that such a usage is embodied in a trade
code or similar record, the interpretation of the record is a question of law.
(d) A course of performance or course of dealing between the parties or usage of trade in
the vocation or trade in which they are engaged or of which they are or should be aware is
relevant in ascertaining the meaning of the parties' agreement, may give particular
meaning to specific terms of the agreement, and may supplement or qualify the terms of
the agreement. A usage of trade applicable in the place in which part of the performance
under the agreement is to occur may be so utilized as to that part of the performance.
(e) Except as otherwise provided in subsection (f), the express terms of an agreement and
any applicable course of performance, course of dealing, or usage of trade must be
construed whenever reasonable as consistent with each other. If such a construction is
unreasonable: (1) express terms prevail over course of performance, course of dealing,
and usage of trade; (2) course of performance prevails over course of dealing and usage of
trade; and (3) course of dealing prevails over usage of trade.
(f) Subject to Section 2-209, a course of performance is relevant to show a waiver or
modification of any term inconsistent with the course of performance.
(g) Evidence of a relevant usage of trade offered by one party is not admissible unless that
party has given the other party notice that the court finds sufficient to prevent unfair
surprise to the other party.

UCC § 2-208. Course of Performance or Practical Construction.

(1) Where the contract for sale involves repeated occasions for performance by either party with
knowledge of the nature of the performance and opportunity for objection to it by the other, any
course of performance accepted or acquiesced in without objection shall be relevant to determine
the meaning of the agreement.
(2) The express terms of the agreement and any such course of performance, as well as any
course of dealing and usage of trade, shall be construed whenever reasonable as consistent with
each other; but when such construction is unreasonable, express terms shall control course of
performance and course of performance shall control both course of dealing and usage of trade
(Section 1-205).
(3) Subject to the provisions of the next section on modification and waiver, such course of
performance shall be relevant to show a waiver or modification of any term inconsistent with
such course of performance.

Weinberg v. Edelstein
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 A contract will not be enforced when the terms of the contract at issue are vague.
 Must a contract be enforced when the terms at issue are vague?
o No. When the terms of a contract relating to a covenant therein are at issue, those
terms must be defined in order to determine the enforceability of the covenant. A
covenant is construed strictly against the party seeking its enforcement. A covenant
will not be enforced when the items at issue in the covenant and the items sold by
the defendant overlap. In the current matter, the two leases will be read together,
with the goal to give effect to both and not harm the terms of either.

Frigaliment Importing Co. v. B.N.S. International Sales Corp.

 If the parties to a contract subjectively, but in good faith, construe an ambiguous term
differently, courts may look to external factors to determine the proper interpretation of the
term.
 If the parties to a contract subjectively, but in good faith, construe an ambiguous term
differently, may courts look to external factors to determine the proper interpretation of the
term?
o Yes. If the parties to a contract subjectively, but in good faith, construe an
ambiguous term differently, courts may look to external factors to determine the
proper interpretation of the term. To aid in the interpretation, courts may consider
the plain meaning of the term, the negotiations between the parties, trade usage,
other contract provisions, market factors, and the course of dealing between the
parties. With respect to trade usage, when one party is not a member of the trade, the
other party must show either (1) actual knowledge or (2) that the usage is so
pervasive that the party’s acceptance of it may be presumed.

Sun Printing & Publishing Association v. Remington Paper & Power Co.
 To constitute a binding contract, the terms of each element of the contract must be
sufficiently specific.
 Is a sales contract calling for parties to agree on the price and length of time the price will
apply in the future binding if the parties do not subsequently agree on the terms?
o No. To constitute a binding contract, the terms of each element of the contract must
be sufficiently specific. An agreement to agree where the terms of the contract are
not clear and not actually agreed upon is not sufficient to bind a party.

§34 Certainty and choice of terms; effects of performance or reliance

1. The terms of a contract may be reasonably certain even though it empowers one or both
parties to make a selection of terms in the course of performance
2. Part performance under an agreement may remove uncertainty and establish that a contract
enforceable as a bargain has been formed

3. Action in reliance on an agreement may make a contractual remedy appropriate even though
uncertainty is not removed

§204 supplying an omitted essential term

• When the parties to a bargain sufficiently defined to be a contract have not agreed with
respect to a term which is essential to a determination of their rights and duties, a term
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which is responsible in the circumstances is supplied by the court

New York Central Iron Works Co. v. U.S. Radiator Co.

 Definite terms will not be implied when a contract does not expressly contain them, but each
party to a contract is required to perform under the contract in good faith and reasonably.
 Can definite terms be implied in a contract when it does not expressly contain definite terms.
o No. When a party enters into a contract for goods in a rising market, that party is
ordinarily entitled to any profits he may accrue as a result of the favorable contract.
However, good faith and fair dealing are implied in every contract. Parties to a
contract are also required to act reasonably in carrying out the terms of the contract.
Using a contract as speculation when the market is rising constitutes abuse of the
terms of the contract.

Eastern Airlines v. Gulf Oil Corp.

 (1) Under Section 2-306 of the Uniform Commercial Code, a contract that measures the
quantity of goods in terms of a buyer’s good-faith requirements is valid, as long as the
demanded quantity is not unreasonably disproportionate to any stated estimate or
comparable prior demands.
 (2) Under Section 2-615 of the Uniform Commercial Code, a mere showing of
unprofitability, without more, will not excuse performance of a contract.
 (1) Is a contract that measures the quantity of goods in terms of a buyer’s good-faith
requirements valid, as long as the demanded quantity is not unreasonably disproportionate to
any stated estimate or comparable prior demands?
 (2) May a party avoid performance under a contract where pricing conditions in the market
have made the contract less profitable?
o (1) Yes. Historically, requirements contracts were found to be invalid because they
were indefinite or lacked mutuality of obligation. However, over time, an
understanding developed that if a purchaser had an ongoing business, then a
requirements-contract arrangement would not be indefinite or lack mutuality,
because the quantity of goods required under the contract could be estimated by
looking at the objective quantity of goods required to operate the purchaser's
business. Section 2-306 of the Uniform Commercial Code (UCC) recognizes this
understanding and provides that a contract measuring the quantity of goods in terms
of a buyer’s good-faith requirements is valid, as long as the demanded quantity is
not unreasonably disproportionate to any stated estimate or comparable prior
demands.
 Under the UCC, good faith means conducting the transaction honestly and
observing reasonable commercial practices based on the parties' course of
performance and general course of dealing, as well as general industry
practices.
o No. Section 2-615 of the UCC codifies the doctrine of impracticability, which like
the common law doctrines of frustration and impossibility, is strictly construed to
require a showing of great injustice before excusing a party’s performance.
Accordingly, recent cases interpreting Section 2-615 of the UCC strictly construe the
doctrine and will not excuse performance on a mere showing of unprofitability.
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Wood v. Lucy, Lady Duff‐Gordon

 (1) A contract may be enforced when there is no evidence of a promise, exchanged as
consideration, in the explicit terms of the contract.
 (2) A promise to use reasonable efforts may be implied from the entire circumstances of a
contract.
 (1) Can a contract be enforced when there is no evidence of a promise, exchanged as
consideration, in the explicit terms of the contract?
 (2) Whether a promise to use reasonable efforts may be implied from the entire
circumstances of the contract.
o (1) Yes. A promise, exchanged as consideration, may be implied and enforceable,
even though it is not provided in the explicit terms of the contract.
o (2) A promise to use reasonable efforts may be implied from the entire
circumstances of a contract. Once successfully implied, that promise may constitute
sufficient consideration to create a valid and enforceable contract.

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.

Carnival Cruise Lines v. Shute

 A forum selection clause is not fundamentally unfair solely because the clause was not
negotiated.
 Is enforcement of a forum selection clause against a party who had no opportunity to
negotiate the clause fundamentally unfair?
o No. A forum selection clause is prima facie valid and enforceable even if the parties
did not negotiate the terms of the clause as long as it is fundamentally fair.

Caspi v. Microsoft Network

 A court will invalidate a forum selection clause that parties have been given reasonable
notice of only if the clause is a result of fraud or overweening bargaining power,
enforcement of the clause would violate public policy, or enforcement of the clause would
seriously inconvenience trial.
 Is a forum selection clause that parties have been given reasonable notice of valid if the
clause is not a result of fraud or overweening bargaining power, enforcement of the clause
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would not violate public policy, and enforcement of the clause would not seriously
inconvenience trial?
o A court will invalidate a forum selection clause that parties have been given
reasonable notice of only if (1) the clause is a result of fraud or overweening
bargaining power, (2) enforcement of the clause would violate public policy, or (3)
enforcement of the clause would seriously inconvenience trial.

§211 Standardized Agreements

1. Except as stated in subsection (3) where a party to an agreement sign or otherwise manifests
assent to a writing and has reason to believe that like writings are regularly used to embody
terms of agreements of the same type, he adopts the writing as an integrated agreement with
respect to the terms included in the writing

2. Such a writing is interpreted wherever reasonable as treating alike all those similarly
situated, without regard to their knowledge or understanding of the standard terms of the
writing

3. Where the other party has reason to believe that the party manifesting such assent would not
do so if he knew that the writing contained a particular term, the term is not part of the agreement

Step‐Saver Data Systems, Inc. v. Wyse Technology

 Under the Uniform Commercial Code, additional terms that materially alter an agreement
must be assented to by both parties in order to be binding, and a unilateral course of conduct
is not sufficient to establish both parties’ assent to the additional terms.
 If one party to an agreement unilaterally incorporates materially different additional terms
into the parties’ agreement over several transactions, does this bind the other party to those
terms?
o No. Under the Uniform Commercial Code (UCC), additional terms to the parties’
agreement that materially alter the agreement are not incorporated without proof that
both parties assented to those additional terms. If acceptance of the contract was
made conditional on the other party’s acceptance of the additional terms, then
acceptance is ineffective without such acceptance and no contract is formed.
However, if acceptance is not conditional, then the contract is formed and the
additional terms are treated as proposals for incorporation into the parties’
agreement, unless the additional terms materially alter the agreement. A conditional
acceptance must be clearly and expressly stated.

UCC § 2-207. Additional Terms in Acceptance or Confirmation.

(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:
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 (a) the offer expressly limits acceptance to the terms of the offer.
 (b) they materially alter it; or
 (c) notification of objection to them has already been given or is given within 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 writings of the parties do not otherwise establish a contract. In
such case the terms of the particular contract consist of those terms on which the writings of the
parties agree, together with any supplementary terms incorporated under any other provisions of
this Act.

UCC § 2-316. Exclusion or Modification of Warranties.

(1) Words or conduct relevant to the creation of an express warranty and words or conduct
tending to negate or limit warranty shall be construed wherever reasonable as consistent with
each other; but subject to the provisions of this Article on parol or extrinsic evidence (Section 2-
202) negation or limitation is inoperative to the extent that such construction is unreasonable.
(2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or
any part of it the language must mention merchantability and in case of a writing must be
conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by
a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it
states, for example, that "There are no warranties which extend beyond the description on the
face hereof."
(3) Notwithstanding subsection (2)

 (a) unless the circumstances indicate otherwise, all implied warranties are excluded by
expressions like "as is", "with all faults" or other language which in common
understanding calls the buyer's attention to the exclusion of warranties and makes plain
that there is no implied warranty; and
 (b) when the buyer before entering into the contract has examined the goods or the
sample or model as fully as he desired or has refused to examine the goods there is no
implied warranty with regard to defects which an examination ought in the circumstances
to have revealed to him; and
 (c) an implied warranty can also be excluded or modified by course of dealing or course
of performance or usage of trade.

(4) Remedies for breach of warranty can be limited in accordance with the provisions of this
Article on liquidation or limitation of damages and on contractual modification of remedy
(Sections 2-718 and 2-719).

Union Carbide Corp. v. Oscar Mayer Foods Corp.

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 Terms added to the contract through an acceptance that materially alters the contract will not
become part of the contract if those terms would cause unreasonable surprise unless consent
to the terms can be inferred.
 Can a party to a contract between two merchants be required to honor terms that were not
contained in the offer, but added with the acceptance of the offer, when those terms would
materially alter the contract?
o No. Under the Uniform Commercial Code (UCC), an enforceable contract exists
even though the acceptance of an offer adds terms to the offer. If the contract is
between two merchants, the additional terms will become part of the contract if the
offeror would be unlikely to object to them because they do not constitute material
alterations to the contract. However, if the additional terms would be a material
alteration, the contract is still enforceable, but the additional terms are not. A
material alteration is one for which consent cannot be presumed. In other words, a
material alteration cannot be enforced if it would result in “unreasonable surprise.”
An unreasonable surprise will result in hardship. Even if an unreasonable alteration
results in unreasonable surprise, it can be enforced if consent to the alteration can be
inferred. Consent will be inferred from silence or a failure to object to the alteration.
A party cannot claim unreasonable surprise when the alteration is present in a
succession of invoices. The party seeking enforcement of the material alteration has
the burden to prove that it was reasonable to infer consent from the other party’s
silence or failure to object. If an offeror wishes to protect against material alterations
found in an acceptance it can restrict acceptance strictly to the terms of the offer.
ProCD v. Zeidenberg
 Shrink-wrap licenses included within a product’s packaging are enforceable unless their
terms are objectionable on grounds applicable to contracts in general, such as violating a
positive rule of law or being unconscionable.
 Whether a “shrink-wrap license” provided within a package and not printed on the outside
constitutes an enforceable contract
o Shrink-wrap licenses included within a product’s packaging are enforceable unless
their terms are objectionable on grounds applicable to contracts in general, such as
violating a positive rule of law or being unconscionable. Shrink-wrap licenses have
long been held enforceable when printed on the outside of product packaging, and
there is nothing in the Uniform Commercial Code (UCC) which prevents this rule
from extending to a license just because it is included inside the packaging. Under
UCC Section 2-204(1), “a contract for sale of goods may be made in any manner
sufficient to show agreement, including conduct by both parties which recognizes
the existence of such a contract.” Based on this, a vendor may invite acceptance by
its conduct, and may state limitations on the type of conduct which will constitute
acceptance. In this situation, a buyer may accept by performing whatever acts the
vendor states will be treated as acceptance.
Hill v. Gateway 2000 [lecture only]
 Under the Uniform Commercial Code, a purchaser may be bound to terms included in
product packaging if the purchaser has an opportunity to review the agreement and reject it
by returning the product.
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 Can a purchaser be bound under the Uniform Commercial Code to an agreement that is
included in the product packaging and provides the purchaser time to review the agreement
and reject it by returning the product?
o Yes. A consumer may be bound by terms of an agreement included with a product
once the consumer has had an opportunity to open the package, review the terms and
reject the terms by returning the product
o
Klocek v. Gateway [optional reading]
 Additional or different terms provided in the acceptance do not become terms of the contract
unless acceptance is made expressly conditional upon acceptance of the additional terms, or
the non-merchant offeror expressly agrees to the additional terms.

The process of interpretation is when the court is to determine the meaning of the terms that are
to be enforced. Restatement §201 (2)(a). Whose meaning prevails include: (2) “Where the parties
have attached different meanings to a promise or agreement or a term thereof, it is interpreted in
accordance with the meaning attached by one of them if at the time the agreement was made. (A)
that party did not know of any different meaning attached by the other, and the other knew the
meaning attached by the first party…”

In enforcing a contract, the court must interpret the terms of the agreement to determine the
appropriate remedy. Courts will interpret a contract according to its plain meaning. Unless the
parties clearly intended a specialized meaning. Often however terms may be ambiguous. The
process of interpretation generally involves the application of rules of construction and the
clarification of terms

Essential terms
(1) The contracts subject matter
(2) Price or other consideration
 A contract may be formed even if the price is left open. If a price
term is omitted or the parties are to fix a price by later agreement
or some external standard or event, and the price is never fixed,
then the price is a reasonable price at the time the goods are
delivered. If the seller is to fix the price, then she must do so in
good faith
(3) Quantity of goods or other things to be sold
(4) Contracts duration
(5) Timing of each party’s performance
 Unless specified otherwise, payment for the goods is due at the
time and place the buyer is to receive the goods, goods are to be
shipped or delivered within a reasonable time after the contract is
formed, the place for delivery of the goods is the sellers place or
business or the place where the goods are at the time of contracting
if the goods are identified as the parties know them to be there
 A term is indefinite if it is left open or uncertain. A term is omitted if it does not appear in
the contract. If the indefinite term is essential, then the court will likely void the contract
for indefinites.
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Misunderstanding
If the parties both assigned the same meaning to an ambiguous term, then a court will interpret
the contract based on the meaning. However, if the parties understood different meanings, and
one party knew of the other’s understanding, then a court will interpret the terms against the
party who knew of the other’s meaning. If the parties assigned different meanings to the term,
and neither knew of the other’s understanding the court will void the contract for lack of mutual
assent.

With ambiguous terms a misunderstanding can occur when words have one than one meaning
and a question arises as to which, if any, was the meaning agreed to by both parties.

The additional terms are to be construed as proposals (requests) for addition to the contract.

Between merchants such terms become part of the contract unless:

Exceptions to merchant acceptance:

● Notification of objection to them has already been given or is given within a reasonable
time after notice of them is received.
● There are material changes to the terms (unreasonable surprise)

● The offeror expressly limits acceptance to the terms of the offer

Last Shot Rule (only for merchants):

If the parties perform without ever reaching agreement on the terms, but act as if there was a
contract, then whatever is in the final document exchanged between the parties is the final
binding contract

Chapter 6: Written Manifestations of Assent (Parol Evidence Rule & Statute of Frauds)

THOMPSON v. LIBBEY
 When the written agreement is intended to be the entire agreement, parol evidence cannot be
introduced to establish terms of the agreement and parol evidence cannot be introduced to
establish whether or not the contract is intended to be the entire agreement.
 Can parol evidence be introduced to establish terms of a written contract that is intended to
constitute the entire agreement or to prove that the written contract is not intended to
constitute the entire agreement?
o No. Parol evidence is not admissible to contradict or change the terms of a valid,
written contract. When the written agreement provides certain terms intended to
constitute the entire agreement, parol evidence regarding the agreement is
inadmissible. However, when the writing does not provide the entire agreement on
its face, parol evidence may be permitted. Whether the entire agreement is provided
by the written contract cannot be established by parol evidence. The writing’s
completeness must be determined by reviewing the contract itself

MASTERSON v. SINE
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 Even when it is unclear whether a written contract is intended by the parties to be complete,
evidence of a separate oral agreement may be admissible to prove the terms of the contract if
the oral agreement is something that would naturally be made as a separate agreement by the
parties given their actual situation and circumstances when drafting the written contract.
 Whether evidence of a separate oral agreement is admissible to prove the terms of a written
contract when it is unclear whether the written contract is intended by the parties to be
complete.
o Even when it is unclear whether a written contract is intended by the parties to be
complete, evidence of a separate oral agreement may be admissible to prove the
terms of the contract if the oral agreement is something that would naturally be made
as a separate agreement by the parties given their actual situation and circumstances
when drafting the written contract. Generally, evidence of oral collateral agreements
should always be admitted unless it is likely to mislead the trier of fact

Parol Evidence Rule

§209. INTEGRATED AGREEMENTS
(3) An integrated agreement is a writing or writings constituting a final expression of one or
more terms of an agreement.

(2) Whether there is an integrated agreement is to be determined by the court as a question

preliminary to determination of a question of interpretation or to application of the parol
evidence rule.

(3) Where the parties reduce an agreement to a writing which in view of its completeness and
specificity reasonably appears to be a complete agreement, it is taken to be an integrated
agreement unless it is established by other evidence that the writing did not constitute a final
expression.

§210. COMPLETELY AND PARTIALLY INTEGRATED AGREEMENTS

(3) A completely integrated agreement is an integrated agreement adopted by the parties as a
complete and exclusive statement of the terms of the agreement.

(2) A partially integrated agreement is an integrated agreement other than a completely

integrated agreement.

(3) Whether an agreement is completely or partially integrated is to be determined by the court as

a question preliminary to determination of a question of interpretation or to application of the
parol evidence rule.

§213. EFFECT OF INTEGRATED AGREEMENT ON PRIOR AGREEMENTS

(PAROL EVIDENCE RULE)
(1) A binding integrated agreement discharges prior agreements to the extent that it is
inconsistent with them.

(2) A binding completely integrated agreement discharges prior agreements to the extent that
they are within its scope.
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(3) An integrated agreement that is not binding or that is voidable and avoided does not
discharge a prior agreement. But an integrated agreement, even though not binding, may be
effective to render inoperative a term which would have been part of the agreement if it had not
been integrated.

§214. EVIDENCE OF PRIOR OR CONTEMPORANEOUS AGREEMENTS AND

NEGOTIATIONS
Agreements and negotiations prior to or contemporaneous with the adoption of a writing are
admissible in evidence to establish
(a) that the writing is or is not an integrated agreement.

(b) that the integrated agreement, if any, is completely or partially integrated.

(c) the meaning of the writing, whether or not integrated.

(d) illegality, fraud, duress, mistake, lack of consideration, or other invalidating cause.

(e) ground for granting or denying rescission, reformation, specific performance, or other
remedy.

§216. CONSISTENT ADDITIONAL TERMS

(1) Evidence of a consistent additional term is admissible to supplement an integrated agreement
unless the court finds that the agreement was completely integrated.

(2) An agreement is not completely integrated if the writing omits a consistent additional agreed
term which is
(a) agreed to for separate consideration, or

(b) such a term as in the circumstances might naturally be omitted from the writing.

UCC §2-202. FINAL WRITTEN EXPRESSION: PAROL OR EXTRINSIC

EVIDENCE

Terms with respect to which the confirmatory memoranda of the parties agree or which are
otherwise set forth in a writing intended by the parties as a final expression of their agreement
with respect to such terms as are included therein may not be contradicted by evidence of any
prior agreement or of a contemporaneous oral agreement but may be explained or supplemented

(a) by course of dealing or usage of trade (§1-205) or by course of performance (§2-208)

and
(b) by evidence of consistent additional terms unless the court finds the writing to have
been intended also as a complete and exclusive statement of the terms of the agreement.
PACIFIC GAS AND ELECTRIC CO. v. G. W. THOMAS DRAYAGE & RIGGING CO.
 Marnitia Walker

 If a preliminary consideration of all credible evidence offered to prove the intent of the
parties still leaves contractual terms fairly susceptible to at least two rational interpretations,
extrinsic evidence relevant to prove either of these meanings is admissible.
 Whether extrinsic evidence is admissible to prove the meaning of contractual terms when
the intent of the parties to the contract is ambiguous.
o If a preliminary consideration of all credible evidence offered to prove the intent of
the parties still leaves contractual terms fairly susceptible to at least two rational
interpretations, extrinsic evidence relevant to prove either of these meanings is
admissible. The meaning of words used in a contract varies immensely based on the
verbal context and surrounding circumstances associated with contract formation, as
well as the linguistic education and experience of their users and readers. This
includes the linguistic education and experience of judges. However, judges act
improperly when they refuse to consider extrinsic evidence relevant to show the
intent of the parties in drafting contract language, as no contractual rights or
obligations are formed minus the intent of the parties.

TRIDENT CENTER v. CONNECTICUT GENERAL LIFE INSURANCE CO.

 Under California law, a contract must be interpreted in light of any relevant evidence of the
parties’ intent, including evidence extrinsic to the written agreement itself, even if the
agreement is clear and unambiguous on its face.
 Under California law, must extrinsic evidence be admitted interpreting the terms of an
agreement whose terms are clear and unambiguous?
o Yes. The California Supreme Court Case Pacific Gas & Electric Co. v. G.W.
Thomas Drayage & Rigging Co., 442 P.2d 641 (1968) established that any relevant
extrinsic evidence pertaining to the intent of the parties must be admitted. Although
traditional contract principles do not permit admission of extrinsic evidence to
interpret the terms of a clear and unambiguous contract, Pacific Gas established a
different rule in California by holding that it is not possible to determine contractual
intentions merely from the words of the contract itself, and therefore any relevant
evidence regarding the parties’ intent must be admitted. As long as a party claims
that there was a different understanding as to the terms of the contract, the court
must consider extrinsic evidence to determine the intent of the parties.

Statue of Frauds

§110. CLASSES OF CONTRACTS COVERED

(1) The following classes of contracts are subject to a statute, commonly called the Statute of
Frauds, forbidding enforcement unless there is a written memorandum or an applicable
exception:
(a) a contract of an executor or administrator to answer for a duty of his decedent (the
executor-administrator provision).

(b) a contract to answer for the duty of another (the suretyship provision).

(c) a contract made upon consideration of marriage (the marriage provision).

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(d) a contract for the sale of an interest in land (the land contract provision).

(e) a contract that is not to be performed within one year from the making thereof (the
one-year provision).

(2) The following classes of contracts, which were traditionally subject to the Statute of Frauds,
are now governed by Statute of Frauds provisions of the Uniform Commercial Code:
(a) a contract for the sale of goods for the price of $500 or more (Uniform Commercial
Code §2-201).

(b) a contract for the sale of securities (Uniform Commercial Code §8-319).

(c) a contract for the sale of personal property not otherwise covered, to the extent of
enforcement by way of action or defense beyond $5,000 in amount or value of remedy (Uniform
Commercial Code §1-206).

(3) In addition, the Uniform Commercial Code requires a writing signed by the debtor for an
agreement which creates or provides for a security interest in personal property or fixtures not in
the possession of the secured party.

(4) Statutes in most states provide that no acknowledgment or promise is sufficient evidence of a
new or continuing contract to take a case out of the operation of a statute of limitations unless
made in some writing signed by the party to be charged, but that the statute does not alter the
effect of any payment of principal or interest.

(5) In many states other classes of contracts are subject to a requirement of a writing.

BOONE v. COE
 Damages cannot be recovered for breach of a contract within the statute of frauds if no
benefit is conferred on the breaching party.
 Can damages be recovered for breach of a contract within the statute of frauds if the
breaching party does not benefit from the breach?
o No. Under the statute of frauds, certain contracts, including those for the lease of
land for more than one year and those not to be performed within one year must be
in writing to be enforceable. Verbal leases of land for one year have been
determined to fall within the statute. However, when a contract within the statute of
frauds is breached, damages cannot be recovered by the aggrieved party if no benefit
is conferred on the breaching party.

§125. CONTRACT TO TRANSFER, BUY, OR PAY FOR AN INTEREST IN

LAND
(1) A promise to transfer to any person any interest in land is within the Statute of Frauds.

(2) A promise to buy any interest in land is within the Statute of Frauds, irrespective of the
person to whom the transfer is to be made.
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(3) When a transfer of an interest in land has been made, a promise to pay the price, if originally
within the Statute of Frauds, ceases to be within it unless the promised price is itself in whole or
in part an interest in land.

(4) Statutes in most states except from the land contract and one-year provisions of the Statute of
Frauds short-term leases and contracts to lease, usually for a term not longer than one year.

§129. ACTION IN RELIANCE; SPECIFIC PERFORMANCE

A contract for the transfer of an interest in land may be specifically enforced notwithstanding
failure to comply with the Statute of Frauds if it is established that the party seeking
enforcement, in reasonable reliance on the contract and on the continuing assent of the party
against whom enforcement is sought, has so changed his position that injustice can be avoided
only by specific enforcement

C.R. KLEWIN, INC. v. FLAGSHIP PROPERTIES, INC.

 A contract does not fall within the statute of frauds’ one year provision unless, by the
specific terms of the contract, it is impossible for performance to be completed within one
year.
 Is an oral contract unenforceable under the statute of frauds if it does not expressly state the
period of time in which the contract is to be performed?
o No. The one-year provision of the Statute of Frauds requires contracts for which
performance will not be completed within one year to be in writing in order to be
enforceable.
o Therefore, unless the terms of the contract expressly and specifically provide that the
contract is not to be performed within one year, the contract does not fall within the
one-year provision of the Statute of Frauds. The mere lack of a term defining when
performance is to be completed will not bring the contract within the Statute. A
contract that does not define when performance is to be completed could
conceivably be completed within one year.
 The determination of whether a contract falls within the Statute is to be
determined based only on the terms of the contract. To the first certified
question, asking whether an oral agreement without a fixed duration falls
outside the Statute, the answer is yes. To the second certified question asking
whether a contract is unenforceable if the required performance is merely
anticipated to take more than one year, the answer is no.

§130. CONTRACT NOT TO BE PERFORMED WITHIN A YEAR

(1) Where any promise in a contract cannot be fully performed within a year from the time the
contract is made, all promises in the contract are within the Statute of Frauds until one party to
the contract completes his performance.

(2) When one party to a contract has completed his performance, the one-year provision of the
Statute does not prevent enforcement of the promises of other parties.
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RILEY v. CAPITAL AIRLINES, INC.

 The statute of frauds will void a contract that has not been reduced to writing if it cannot, by
its terms, be performed within one year.
 Is a contract that has not been reduced to writing enforceable when the contract, by its terms,
cannot be performed within one year?
o No. Alabama’s statute of frauds requires, in pertinent part, for all agreements to be in
writing that, by their terms, will not be performed in one year from the time that it is
made. An Alabama statute does remove a contract from under the statute of frauds
when the seller specially manufactures the goods at issue for the buyer and those
goods are not suitable to be sold to others in the normal course of the seller’s
business. However, those goods must be entirely manufactured, and the delivery
date must be scheduled for one year after the date of entering into the contract.
Additionally, it is settled law that partial performance will not remove a contract
from under the statute of frauds. A party may recover money reasonably expended
in anticipation of performance of a contract even though the contract is voided by
the statute of frauds. In the current matter, the parties entered into a five-year
contract. It must be determined whether this contract falls under the statute of frauds.
The contract does not fall under the Alabama statute removing this case from under
the statute of frauds.

UCC §2-201. FORMAL REQUIREMENTS; STATUTE OF FRAUDS

(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.

(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.

(3) A contract which does not satisfy the requirements of subsection (1), but which is valid in
other respects is enforceable
(a) if the goods are to be specially manufactured for the buyer and are not suitable for
sale to others in the ordinary course of the seller’s business and the seller, before notice of
repudiation is received and under circumstances which reasonably indicate that the goods are for
the buyer, has made either a substantial beginning of their manufacture or commitments for their
procurement; or

(b) if the party against whom enforcement is sought admits in his pleading, testimony or
otherwise in court that a contract for sale was made, but the contract is not enforceable under this
provision beyond the quantity of goods admitted; or(c) with respect to goods for which payment
has been made and accepted or which have been received and accepted (§2-606).
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§139. ENFORCEMENT BY VIRTUE OF ACTION IN RELIANCE

(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 the action or forbearance is
enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by
enforcement of the promise. The remedy granted for breach is to be limited as justice requires.

(2) In determining whether injustice can be avoided only by enforcement of the promise, the
following circumstances are significant:
(a) the availability and adequacy of other remedies, particularly cancellation and
restitution.

(b) the definite and substantial character of the action or forbearance in relation to the
remedy sought.

(c) the extent to which the action or forbearance corroborates evidence of the making and
terms of the promise, or the making and terms are otherwise established by clear and convincing
evidence.

(d) the reasonableness of the action or forbearance.

(e) the extent to which the action or forbearance was foreseeable by the promisor.

§143. UNENFORCEABLE CONTRACT AS EVIDENCE

The Statute of Frauds does not make an unenforceable contract inadmissible in evidence for any
purpose other than its enforcement in violation of the Statute
SCHWEDES v. ROMAIN
 A real estate contract cannot be enforced when it has not been reduced to writing and when
the party seeking performance has not partially performed.
 Can a real estate contract be enforced when it has not been reduced to writing and the party
seeking enforcement has not partially performed?
o No. Four things must be present in a transaction in order for the contract to be
enforceable: (1) legally capable parties, (2) their consent, (3) a lawful object, and (4)
consideration. Regarding consideration, an oral promise to pay is not sufficient. A
real estate contract, specifically, is voided by the statute of frauds unless it is reduced
to writing. With any contract, an agent of one of the parties thereto cannot legally
bind that party to the contract unless his authority to do so is reduced to writing.
Partial performance of a contract may bring it out from under the statute of frauds,
but it must be performance of the contract, not merely an act done in contemplation
of eventual performance of the contract. Also, a party seeking to enforce the
agreement may not rely on partial performance that was completed by others, even
any partial performance completed by the other party. Obtaining financing and
making studies of the property at issue under the contract have been held to be
insufficient partial performance under this rule. Any contract within the purview of
the statute of frauds cannot usually be enforced through reliance on promissory
estoppel. The one exception is when application of the statute of frauds would
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operate to perpetuate a fraud. Regarding remedies for breach of contract, specific

performance cannot be awarded unless the contract was valid. In the current matter,
there is no note or other writing evidencing the real estate contract at issue.

§131. GENERAL REQUISITES OF A MEMORANDUM

Unless additional requirements are prescribed by the particular statute, a contract within the
Statute of Frauds is enforceable if it is evidenced by any writing, signed by or on behalf of the
party to be charged, which
(a) reasonably identifies the subject matter of the contract,

(b) is sufficient to indicate that a contract with respect thereto has been made between the
parties or offered by the signer to the other party, and

(c) states with reasonable certainty the essential terms of the unperformed promises in the
contract.

§133. MEMORANDUM NOT MADE AS SUCH

Except in the case of a writing evidencing a contract upon consideration of marriage, the Statute
may be satisfied by a signed writing not made as a memorandum of a contract.

Promissory Estoppel Model Rule

Under promissory estoppel, reliance interest may be obtained by the promisee in the instance that
promisee relied upon the promisor to their reasonable detriment, even without consideration. In
order for promissory estoppel the following elements must be met: (1) The promise made by the
promisor may reasonably induce the action or forbearance of the promisee and in fact does
induce the reasonable action or forbearance of the promisee; (2) the only way for injustice to the
promisee to be avoided is by the promisor upholding the promisee and (3) there was no contract
present.
(a) Promissory estoppel requires that the promisor reasonably expect the promise to
induce an act or forbearance from the promise
(b) The promisee must reasonably rely on the promise by performing a definite and
substantial act or forbearance
(c) The promisee must suffer a substantial detriment in reliance on the promise for
promissory estoppel to apply. Any benefit received by the promisee is irrelevant
(d) The promisee’s remedy in case of promissory estoppel is generally limited to
actual loss suffered in reliance on the promise, thus the remedy may not
encompass the full value of the promise

Parol Evidence Rule

Fully Integrated Contracts

Under UCC §2-202 the Parol or Extrinsic Evidence Rule states if you have a written contract
and it is fully integrated, meaning it looks complete on its face, then certain kinds of evidence
will not be considered that vary or negate terms in the written within the “four corners” of the
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contract. Evidence that is written or oral negotiations made prior to the signing of the contract
that are contradictory to the terms of the contract will not be considered and oral negotiations
made concurrently with the signing of the contract will not be considered. After a contract has
been signed and agreed upon the Parol or Extrinsic Evidence Rule does not apply. However,
there are limitations to the parol or extrinsic evidence rule that may allow for the aforementioned
evidence to be considered.
In general, an agreement is integrated if it
(1) Consist of a writing or series of related writings forming one transaction
(2) Embodies the final expression of the party’s intent concerning the contracts subject
matter
A completely integrated agreement is the full and final expression of the party’s intent regarding
the contracts subject matter. The parol-evidence rule excludes extrinsic evidence of prior or
contemporaneous oral or written agreements or negotiations that are within the scope of the
completely integrated agreement. The court may not use extrinsic evidence to contradict or
supplement (add to) the contract.
A partially integrated agreement is final but incomplete statement of the parties’ intent regarding
the contract’s subject matter. The parol-evidence rule excludes extrinsic evidence of prior or
contemporaneous agreements or negotiations that are inconsistent with the partially integrated
agreement. The court may use extrinsic evidence to add terms to the contract but not contradict.
Written contracts often contain a so- called merger clause meant to invoke the parol evidence
rule, a typical merger clause provides that
(1) There are no representations, promises, or agreements between the parties except
those stated in the contract, or perhaps that
(2) All prior negotiations or correspondence between the parties is merged with and
superseded by the contract. Generally, a merger clause is strong, but not conclusive,
evidence that the contract is completely integrated.
Exceptions:
● Integration
If a contract is not fully integrated, meaning the writing is not complete on its face, then extrinsic
evidence, oral or written, may be admissible to supplement, “fill the gaps”, of the contract so
long as it is not contradictory to the terms of the contract.
(1) Establish the extent to which the agreement is integrated
(2) Clarify the meaning of an ambiguous term
(3) Support a defense to enforceability or establish whether a valid contract was formed,
(4) Grant or deny a remedy
(5) Establish a subsequent modification to the contract

● Vices of consent
Undue influence or unconscionability give rise to a relatively null contract.

● Interpretation Issues
If there is an issue regarding the interpretation of the contract giving rise to a concern of
ambiguity extrinsic evidence, oral or written, may be admissible to provide a working
interpretation of the terms of the contract.
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Statutes of Frauds Model Rule

Requiring a Writing

A statute requiring certain contracts to be in writing and signed by the parties bound by the
contract. The purpose is to prevent fraud and other injury.

A contract must be written if:

● In consideration of marriage

● An agreement greater than a year to preform

● The transfer or purchase of land
● Executor of a Will
● Goods (greater than $500
● Personal property (greater than $5,000)
● Suretyship (a legally binding agreement that the signee will accept responsibility for
another individual's contractual obligations)

Parole contemporaneous evidence is inadmissible to contradict or vary the terms of a valid

written instrument.

Extrinsic evidence is only admissible to prove intent when there is an ambiguity in the terms of
the contract

Ambiguity is not necessary to admit usage evidence

Under the statue of frauds, certain contracts are unenforceable unless the terms are set forth in a
writing signed by the party to be changed
(1) Suretyship
 Falls under statue of frauds if one person promises to answer for
the duty of a third party to the contact. Under main purpose rule a
contract does not fall under statue of frauds if the surely or
guarantor makes the promise for his or her economic advantage
(2) Land contracts
 Falls under statue of frauds if it contemplates a transfer of an
interest in land other than a lease or easement of less than one
year’s duration
 Part-performance exception
 Takes clear, definite, visible, and reasonably continuous
possession of the real property with apparent intent to carry
out the contract
 Either pay at least part of the purchase price or make
improvements to the land.
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 If the taking of possession is reasonably explicable with reference

to facts other than the existence of a sales contract, part
performance will not apply
(3) Contracts that cannot be performed in one year
 Falls under statue of frauds if by its terms the contract cannot be
fully performed by any party or all parties within one year. Does
not include contacts of indefinite or uncertain duration
(4) Contracts for the sale of goods for $500 or more
 Falls under statue of frauds if the price is $500 or more. There are
4 exceptions
 If the goods are specially manufactured
 If the party against whom enforcement is sought admits
there was a contract
 If there has been part performance
 The contract is between merchants
(5) Executor- administrator contracts
 Falls under statue of frauds if the executor or administrator of a
deceases person’s estate promises to answer personally for a duty
of the deceased person
(6) Marriage contracts
 Falls under statue of frauds if consideration for the contract
involves marriage or a promise to marry unless the contract
consists solely of mutual promises to marry. Also applies If a third
party makes some promise to the marrying parties in consideration
of marriage.

Chapter 9: The Doctrine of Consideration

JOHNSON v. OTTERBEIN UNIVERSITY

 A contract promising to pay a sum of money to the promisee and instructing the promisee to
use the money in a particular way is unenforceable for lack of consideration.
 Is a contract promising to pay a sum of money enforceable because it requires the promisee
to use the money in a particular way?
o No. An executory contract promising to give something is not based upon
consideration. A promise to pay a gift of money may be revoked at any time. A
promise must advantage the other contracting party and disadvantage the promising
party in order for it to be consideration. Consideration may be a promise and may
create a contract based upon mutual promises.

HAMER v. SIDWAY
 A party's agreement to incur a detriment constitutes adequate consideration.
 Does a party's agreement to incur a detriment constitute adequate consideration?
o Yes. A party's agreement to incur a detriment constitutes adequate consideration.
Adequate consideration sufficient to form a valid and enforceable contract may
consist of either a right, interest, profit, or benefit accrued to one party, or some
forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the
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other. It does not matter whether one party actually received a benefit or whether the
thing that forms the consideration is of any substantial value to either party.
Adequate consideration does not depend so much on a promisor’s benefit from a
contract as it does on the promisee’s voluntary limitation of his legal rights or
freedoms in exchange for the promise

KIRKSEY v. KIRKSEY
 A promise to provide free land for a residence that is fulfilled for a finite amount of time and
then revoked is gratuitous and thus unenforceable despite inducing the promisee to move
residences in reliance on the promise.
 Whether a promise to provide free land for a residence that is fulfilled for a finite amount of
time and then revoked is gratuitous and thus unenforceable after revocation.
o Yes. Although Ormand believes the loss and inconvenience Antillico suffered in
moving to Kirksey’s residence constitutes sufficient consideration to support a
binding and enforceable contract, the rest of the justices believe Kirksey’s promise is
gratuitous and thus unenforceable. A promise to provide free land for a residence
that is fulfilled for a finite amount of time and then revoked is gratuitous and thus
unenforceable. This is true even if the promise induces the promisee to move
residences in reliance on the promise.

§24. OFFER DEFINED

b. Proposal of Contingent Gift. A proposal of a gift is not an offer within the present definition;
there must be an element of exchange. Whether or not a proposal is a promise, it is not an offer
unless it specifies a promise or performance by the offeree as the price or consideration to be
given by him. It is not enough that there is a promise performable on a certain contingency.

§71. REQUIREMENT OF EXCHANGE; TYPES OF EXCHANGE

(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.

§81. CONSIDERATION AS MOTIVE OR INDUCING CAUSE

(1) The fact that what is bargained for does not of itself induce the making of a promise does not
prevent it from being consideration for the promise.
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(2) The fact that a promise does not of itself induce a performance or return promise does not
prevent the performance or return promise from being consideration for the promise.

MOORE v. ELMER
 Past consideration is not sufficient for enforcement of a contract unless the parties agreed
prior to performing that compensation therefore would be provided at a later time.
 Is past consideration sufficient for enforcement of a contract?
o No. The agreement must contain an understanding that payment for the services
performed will be supplied. That which is done as a favor cannot be later turned into
consideration by request.

MILLS v. WYMAN
 A promise based on a moral obligation but made without legal consideration does not
constitute an enforceable contract unless it is tied to a preexisting legal obligation.
 Whether a promise based on a moral obligation but made without legal consideration
constitutes an enforceable contract
o A promise based on a moral obligation but made without legal consideration does
not constitute an enforceable contract unless it is tied to a preexisting legal
obligation. A promise may be tied to a preexisting legal obligation if the original
legal obligation was based on consideration. For example, when one promises to
assume the debt of another who cannot pay, this promise is enforceable because of
the consideration originally provided by the initial debtor to the lender.
BOOTHE v. FITZPATRICK
 A promise made upon a past consideration is enforceable if the defendant receives a
valuable pecuniary benefit at the expense of the plaintiff.
 Is a promise made upon a past consideration enforceable if the defendant receives a valuable
pecuniary benefit at the expense of the plaintiff?
o Yes. A promise made upon a past consideration is enforceable if the defendant
receives a valuable pecuniary benefit at the expense of the plaintiff. This is true even
if the consideration passes from the plaintiff to the defendant without the defendant’s
request. On the other hand, a purely moral obligation pursuant to which a defendant
receives no direct pecuniary benefit is not legally enforceable.

WEBB v. MCGOWIN
 When a promisee confers upon a deceased promisor a benefit that is material and substantial
and is conveyed upon the person of the promisor and not merely his estate, the promisee is
entitled to recognition and compensation from the promisor’s estate either by an executed
payment or an executory promise to pay.
 A moral obligation is a sufficient consideration to support a subsequent promise to pay
where the promisor has received a material and substantial benefit.
 Whether the conferring of a material benefit or undertaking of a detriment by a promisee is
sufficient consideration to enforce a promisor’s subsequent promise to pay based on the
benefit or detriment.
 Whether a moral obligation is sufficient consideration and will support a subsequent
promise to pay.
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o Yes. When a promisor receives a material benefit from a promisee, the promisor is
morally bound to compensate the promisee for services rendered. If the promisor
subsequently promises to make payment on the basis of that moral obligation, that
promise is valid and enforceable. Such moral obligation constitutes valid
consideration for a subsequent promise if the promisor received a real pecuniary or
material benefit.
o Yes. A moral obligation may be sufficient consideration to support a promise to pay
if the promisor received a material benefit. This does not mean that such an
obligation will be created by a merely courteous or generous act. The benefit must
be both material and substantial. If a benefit of this class was conferred to the
promisor, not the promisor’s estate, the promisor has the right to compensate the one
who conferred that benefit. The promisor may do so by making payment or an
executory promise to pay. This is especially true when the party suffered injuries to
her person or property when she performed the service giving rise to the moral
obligation.

§86. PROMISE FOR BENEFIT RECEIVED

(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.

HARRIS v. WATSON
 For policy reasons, a promise to pay additional money during times of danger does not
constitute adequate consideration to support a contract and will not be upheld.
 For policy reasons, will a promise to pay additional money during times of danger constitute
adequate consideration to support a contract and be upheld?
o No. If sailors were allowed to exploit the captain in times of danger, the sailors
might be willing to let the ship sink unless their demands are met. For policy
reasons, this cannot be allowed

STILK v. MYRICK
 A contract for services cannot be modified without the payment of additional consideration.
 Can a contract for services be modified without the payment of additional consideration?
o No. A contract for services cannot be modified without the payment of additional
consideration. An employee’s second promise to do the work the employee has
already contracted to do furnishes no extra consideration and thus does not modify
the existing contract
ALASKA PACKERS’ ASS’N v. DOMENICO
 If parties enter a new agreement under which one party agrees to do no more than he was
already obligated to do under an existing contract, the new agreement is unenforceable for
lack of consideration.
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 If parties enter a new agreement under which one party agrees to do no more than he was
already obligated to do under an existing contract, is the new agreement enforceable?
o No. A contract that obligates a party to perform what he or she has a prior existing
duty to perform under an earlier agreement is not enforceable because it lacks
consideration. A party cannot benefit from his or her own bad faith by refusing to
perform a contract in order to coerce another party relying on that performance into
a new agreement that requires no additional performance in exchange for more
beneficial terms. Therefore, a promise to pay a party to perform what he or she is
already obligated to do is not enforceable.

BRIAN CONSTRUCTION AND DEVELOPMENT CO. v. BRIGHENTI

 When an unforeseen, burdensome condition arises during the performance of a contract, the
promise of additional compensation in return for the promise to do the additional work is a
separate, valid agreement.
 Does additional compensation constitute sufficient consideration to support a subsequent
agreement made by parties to a contract that changes the work to be done under the
contract?
o Yes. When an unforeseen, burdensome condition arises during the performance of a
contract, the promise of additional compensation in return for the promise to do the
additional work is a separate, valid agreement. The parties’ mutual promises
constitute valid consideration as each party is subjected to legal benefit and
detriment on account of the promises.

§89. MODIFICATION OF EXECUTORY CONTRACT

A promise modifying a duty under a contract not fully performed on either side is binding
(a) if the modification is fair and equitable in view of circumstances not anticipated by
the parties when the contract was made; or

(b) to the extent provided by statute; or

(c) to the extent that justice requires enforcement in view of material change of position
in reliance on the promise.

UCC§2-209. MODIFICATION, RESCISSION, AND WAIVER

(1) An agreement modifying a contract within this Article needs no consideration to be binding.

NEWMAN & SNELL’s STATE BANK v. HUNTER

 Something that does not have value cannot constitute consideration.
 Can something that does not have any value constitute consideration?
o No. When things given have no value, they cannot constitute consideration.
Similarly, collateral provided if it has no value, cannot constitute consideration

§79. 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, or detriment to
the promisee; or
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(b) equivalence in the values exchanged; or

(c) “mutuality of obligation.”

DYER v. NATIONAL BY-PRODUCTS, INC

 Forbearance from filing an unmeritorious legal claim that the party in good faith believes is
valid constitutes sufficient consideration for a settlement agreement.
 Does a party’s forbearance from filing an unmeritorious legal claim that the party in good
faith believes to be valid constitute consideration for a settlement?
o Yes. Forbearance from filing an invalid legal claim can constitute consideration for a
settlement if the party in good faith believed that the claim was legitimate. Public
policy favors the settlement of claims. This means that a compromise in which one
party agrees not to bring even a doubtful claim will be valid consideration
o The Restatement (Second) of Contracts § 74 (1979) also takes this view;
forbearance from bringing an unfounded claim is only valid consideration if the
claim is doubtful or the party genuinely believes the claim is valid. The party’s
good-faith belief is judged based on the information available at the time of
settlement.

 Consideration Model Rule

Legal Rule
 Consideration is defined as the bargained for exchange between the parties and the
benefits they receive. Consideration may be in the form of a promise, performance,
forbearance, or the modification, creation, or destruction of a legal relationship.
Consideration is a basic element of a contract and without consideration the contract may
not be enforceable. The consideration received must also be given in exchange for the
current promise, performance, forbearance, or modification, creation, or destruction of a
legal relationship. Therefore, past consideration, which is a benefit that was received in
the past, cannot be considered as consideration for a new promise and therefore is not
enforceable as such.

● Past Consideration:
Past consideration, which is a benefit that was received in the past, cannot be considered as
consideration for a new promise and therefore is not enforceable as such. Consideration
received by both parties must be new or current.
Exemptions: A new consideration for both parties exempt a “pre-existing duty”
If the offeror’s promise is made in recognition of a benefit already conferred by the offeree,
then the promise is not consideration

● Preexisting Duty:
The preexisting duty rule states that a preexisting duty, one where a party was already
contractually bound to preform, may not be used as a form of consideration in exchange for a
new consideration because, would leave the party providing the new consideration at a deficit.
 Marnitia Walker

However, if there are new considerations created for all parties involved the preexisting duty rule
no longer applies. In these instances, the new conditions created would be the modification of a
legal relationship which is a valid form of consideration. Additionally, if the legal obligation
outweighs

A modification to an existing contract is generally unenforceable without some new

considerations, there are some exceptions, however. (1) Alteration of duties, a modification to an
existing contract is enforceable if both parties alter their duties, (2) Unforeseen circumstances, a
modification to an existing contract is enforceable if the modification is fair and equitable in
light of circumstances that were unforeseen by the parties at the time of the contract, and (3) sale
of goods, in a contract for the sale of good governed by Article 2 of the UCC, a modification to
an existing contract is enforceable, even if only one party’s performance is modified. Any
modifications must be made in good faith.

Adequacy
Exchanges of value generally make for adequate consideration. The values exchanged do not
have to be equivalent or even roughly equivalent.

Nominal Consideration
A nominal amount of consideration cannot form a contract if the bargain is a mere pretense

Illusory Promise
If a promisor receives a choice of alternative performances, that promise is not sufficient
consideration unless each of the alternative performances would be sufficient for consideration if
offered alone. A promise that allows the promisor to choose an alternative that does not
constitute sufficient consideration is an illusory promise

Settlement of claims
A Party’s agreement not to bring suit to enforce a claim or assert a defense will constitute
consideration for a settlement agreement, provided that (1) the claim or defense is valid or
subject to good-faith dispute, or (2) the party believes that the claim or defense may be valid. In
contrast, if the surrendering party knows that the claim or defense is invalid, an agreement to
surrender the claim or defense is unenforceable.

Statutory substitute
In some states, in particular cases, a signed writing may form a contract under a statutory
provision even without consideration.

Implied-in-fact contract
A court may imply a contract, even if the parties never entered one, if
(1) One party provides another with valuable services, property, or money
(2) The recipient has reason to know of this
(3) The circumstances reasonably indicate the services, property, or money was provided
with the exception of compensation,
(4) The recipient manifests assent, as by knowingly using or retaining the benefit of the
services, property, or. Money or failing to object under circumstances in which
 Marnitia Walker

silence would sufficive as acceptance of an offer. Recovery is generally the

reasonable value of the services, money or property provided.
It may be that the parties clearly intended to form a contract, but they inadvertently drafted the
agreement in a way, that read literally, gives one party sole discretion whether to perform at all.
A contract like this would be void for lack of consideration. However, if it is reasonable to do so,
courts may imply an obligation on the party of the party who seems to have none

Consideration has also been used to refer to the element of exchange without regard to legal
consequences.
“consideration” refers to an element of exchange which is sufficient to satisfy the legal
requirement

“Bargained for.” In the typical bargain, the consideration and the promise bear a reciprocal
relation of motive or inducement: the consideration induces the making of the promise and the
promise induces the furnishing of consideration. But it is not enough that the promise induces the
conduct of the promisee or that the conduct of the promisee induces the making of the promise;
both elements must be present, or there is no bargain. Moreover, a mere pretense of bargain does
not suffice, as where there is a false recital of consideration or where the purported consideration
is merely nominal. In such cases there is no consideration, and the promise is enforced, if at all,
as a promise binding without consideration under §§82-94
a. “Bargained for.” Consideration requires that a performance or return promise be
“bargained for” in exchange for a promise; this means that the promisor must manifest an
intention to induce the performance or return promise and to be induced by it, and that the
promisee must manifest an intention to induce the making of the promise and to be induced by it.