CONTRACTS- Professor Steve Schooner Fall 2004

I. ENFORCING PROMISES: BASIS OF LEGAL OBLIGATION

A. INTENTION TO BE BOUND
Promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in
understanding that a commitment has been made. 2
1. OBJECTIVE THEORY OF CONTRACTS
A. Mutual Assent: Voluntary agreement by both parties, usually reached through O and A; meeting of the minds
B. Objective Theory of Contracts
Intention to be Legally Bound (21)
Neither real nor apparent intention that promise be legally binding is essential to the formation of a K, but a
manifestation that a promise shall not affect legal relations may prevent the formation of a K.

TWENTY BISHOPS (Learned Hand): Even if a group of really honest people determine what A said when he signed
agreement, its not relevantonly relevant what document says

Objective intent important reasonable interpretation of words & actions (Eurice)

o Lucy v. Zehmer despite setting, past dealings between parties made it reasonable for buyer to believe that
the seller was serious and seller should have known this
o Leonard v. Pepsico no reasonable viewer could have understood that jet plane shown in ad was seriously
offered as a premium for purchase of s soft drink.

Exception dont want to uphold Ks in certain situations (e.g., fraud, duress, mutual mistake) (Park 100)
Note may be heightened standard of self-protection if better bargaining power (Eurice)

ADVAN Formality encourages personal resp., easy to enforce, definite & reliable terms, prevent hindsight regret
DISADV Power to words so favors sophisticated client, not always consistent w/ meeting of mind so may
compromise private autonomy

Ray v. William Eurice & Bros., Inc

Players : Engineer
: Builder
Facts
,experienced builders, signed every page of K w/o reading (had they read there were clear references to different
specifications); helped fill out form using the K
Court
Unilateral mistake of easy going hatchet and saw manner of
is bound to signed clearly expressed and unambiguous intent in writing
must pay the excess cost to put in position had completed bargain (expectation damages)
Rule
The test of a true interpretation of an offer or acceptance is not what the [arty making it though it meant or
intended it to mean, but what a reasonable person in the positions of the parties would have though it meant.
A party is bound to a signed document absent fraud, duress, and mutual mistake.
Note
Had both made a mistake, there would have been mutual mistake and likely no K.
Here may be held to higher standard b/c they are experienced builders
Park 100 v. Kartes
Players : Lessor
: Lessee
Facts
signed personal guaranty agreement: rep. said they were lease papers, said they had to sign, they were on the way to
daughters wedding (so had little time to read), PG had never been discussed before. did not read the papers, instead called
their attorney in front of who said he had okayed the lease papers.
Court
Rule
Note

argued not material rep. b/c PG are usually included and could say did not reasonably rely b/c should have read (lazy)
PG papers were signed under fraudulent means b/c a (1) material representation, (2) which was false, (3) was made w/
knowledge, (4) was relied upon by complaining party and (5) was the proximate cause of injury.
If a K is entered into under fraud or misrepresentation there is no mutual assent.
Rational exception to objective theory of K
An agent is a person who acts on behalf of 1 of the contracting parties; actions legally bind that party
Company agent vs. regular people (even though some mom and pop stores will be big business)
Fraud can be passive or affirmative behavior (affirmative here where he lied!)

B. OFFER AND ACCEPTANCE

Evaluate when:
a. Contract formation is in dispute
b. When terms included in K are in dispute
Promise v. offer: Offeree has power to bind offeror; nothing binding in promiseneed something exchanged

A. Bilateral Contracts
1. DEFINED: Exchange of promiseseach party makes promise of future commitment
2. OFFER:
a. Offer ( 24) Manifestation of willingness to enter into a bargain made so that the other person understands that his
assent is invited & will conclude the bargain
REQUIREMENTS
1. Communicated
2. Contains all significant terms/details
3. Indicates a desire to enter into a K
4. Directed at some person or specific group of people
5. Gives power of acceptance to offeree
6. Clear that a K will arise w/o any further approval being required?
EVALUATION (with obj. std.): language of offer, relationship of parties, common practice/trade usage
b. Preliminary negotiations ( 26)
No offer if recipient knows or has reason to know that person making it does not intend to conclude bargain
until he has made further manifestation of assent
Ex: Tentative expression of interest in transacting, an invitation to make an offer, or a request for information
that may lead to an offer (i.e., form letter, purchase quotation)
Exception when deception (bait and switch); read offer in best light to offeree (Izadi)
c. Option K: ( 25)
In writing, signed by offeror, purported consideration, proposes an exchange of fair terms in reasonable time (
87(1)). Nominal consideration is ok (dont need added caution)
Offeror can not revoke w/in time frame
3. TERMINATING POWER OF ACCEPTANCE ( 36)
a. Rejection or counter-offer by the offeree EFFECTIVE UPON RECEIPT
Rejection ( 38)
Counter-Offer ( 39, 59) (Normile)
b. Lapse of Time (b/c so subjective, buyer may specify a time limit)
Nature of transaction
Relationship of parties
Course of dealings, custom, or trade usage
Means of communication
Stability of the market
c. Revocation by Offeror EFFECTIVE UPON RECEIPT

Offer can be revoked at any time before it is accepted unless option K

Must be communicated (indirect revocation may be sufficient 43) (Normile)
o Offer terminated when offeror takes definite action inconsistent w/intention to enter into proposed K
o Offeree must have acquired reliable information to that effect
d. Death/Incapacity of Offeror/Offeree

4. ACCEPTANCE
a. Acceptance of Offer Defined ( 50)
1. Manifestation of assent to offer terms made by offeree in a manner invited or required by offer
3. Acceptance by a promise requires that the offeree complete all acts essential to the promise (bilateral)
b. Necessity of Acceptance Complying w/ Terms ( 58)
c. Time When Acceptance Take Effects (Mailbox Rule) ( 63)
If made in reasonable and invited manner, effective ONCE DISPATCHED
Doesnt matter if it ever reaches offeror
d. Option K
Acceptance effective upon receipt (no need to protect against revocation)
e. By Silence only when: ( 69)
Offeree takes advantage of offered services w/reasonable opportunity to reject them & knows he must
compensate for them
Offeror stated or gave offeree reason to understand that assent could = silence/inaction
Past dealings between parties made silence reasonable
Lonergan v. Scolnick
Players : Buyer
: Seller
Facts
read ad about property being sold and wrote letter requesting description; sent letter describing and said it was a form
letter; wrote back asking if escrow company would be suitable; s second letter informed that if he wanted the property
he had to act fast; received letter 1 week later and attempted to accept the offer; had already sold
Court
Ad = solicitation of offers for the property
s 1st letter = form letter
s 2nd letter = response to inquiry and clearly stated further assent necessary
should have known that more negotiations were necessary to seal the deal and that he was not in a unique position
(preliminary negotiation 26 not offer 24)
Rule
Before a K can be formed, there must be a meeting of the minds of the parties as to a definite offer and acceptance.
Izadi v. Machado (Gus) Ford, Inc.
Players : Buyer
: Seller
Facts
placed a newspaper ad selling Fords, had microscopic print limiting to 2 specific types of car; was misled by ad and sued
for a car under conditions of ad.
Court
Although ads are not usually considered offers, those that bait and switch may be considered offers. Binding offer may be
implied from the very fact that a deliberately misleading ad intentionally leads reader to the conclusion that one exists.
Rule
If an offer is conveyed by the objective reading of an ad, it does not matter that the advertiser may subjectively have
not intended for its chosen language to constitute a binding offer.
Note
Reasonable person test when looking at ad.
Normile v. Miller
Players : Buyer
: Seller
Facts
made offer to purchase property, replied w/ change (CO), neither accepted nor rejected, heard of sale to 3rd party;
then attempted to accept.
Court
Original offer and its terms were rejected when CO made ( 39 and 59). CO was not an option K b/c it did not include any
time restrictions like the original offer. failed to accept CO prior to revocation so later acts are irrelevant.
Rule
If a seller rejects an offer by making a CO, which is not accepted, the prospective purchaser does not have the power to
accept the CO after receiving not ice of its revocation.

B. UNILATERAL CONTRACTS
1. DEFINED

Promise in exchange for actual performance

Ask if 2nd party bound at beginning (i.e., Would uncle sue nephew for breach in Hamer?)

2. UNILATERAL V. BILATERAL

1st Restatement provided that when doubt between 2, the law concluded that it was bilateral wanted to add
certainty when ambiguous. Thought they were doing offerees a favor, but, then the offeree is stuck (if cant
complete performance, he is liable for damages).
32 protects offerees by giving them the option

3. OFFER

26 Illustration 1 clothing merchant advertising overcoats is an invitation not an offer. If add words out they
go Saturday; First Come First Served might make the advertisement an offer. First people who are there can
make the argument that there was an offer. Otherwise, you have no power.

26 Illustration 2 Advertises that will pay $5 for every copy of a certain book; offer until revoked

4. ACCEPTANCE OF UNILATERAL OFFER

a. Classical View: Unilateral offer can be revoked any time before complete performance (Peterson)
b. Modern View
Acceptance by Performance 50(2): Acceptance by performance requires that at least part of what offeror
requests be performed or tendered & includes acceptance by a performance which operates as a return
promise

Option K Arising on Part Performance ( 45) (Cook)

(1) When an offer invites an offeree to accept by rendering performance and does not invite a
promissory acceptance, an option K is created when offeree tenders or begins the invited
performance. By commencing, offeree holds option open but not bound.
(2) The offerors 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. We are
paying for results not effort.
**Note: Preliminary preparations dont count

Peterson v. Pattberg
Players : Executor
: Holder of Mortgage
Facts
has a $5450 mortgage. made offer for to pay mortgage by 5/31 & save $780. showed up at s house. said he was
there to pay off mortgage. W/o opening door, said he sold. opened door. tried to give $ but refused to accept.
Court
Court adhered to the classical perspective, where acceptance of a unilateral K can only be accepted by complete performance.
Gathering up $ is only a preparation, not performance.
Dissent: if made performance impossible by interfering with it, he cannot take advantage of the failure (should count as an
acceptance). did everything necessary to accept, was only interfering with performance.
Rule
An offer to enter into a unilateral K can be withdrawn at any time prior to performance of the act requested.
Cook v. Coldwell Banker
Players : Former salesperson
: Employer
Facts
First offer to real estate agent for a bonus conditioned on her sales; later second offer saying employees could not recover
bonus until March of the following year; she terminated employment w/ real estate agency before s amended award date.
Court
accepted the 1st offer w/ substantial performance (actions before 2nd offer) of what was invited (sales) by in its original
offer
Rule
In a unilateral K, an offer may not be revoked when the offeree has accepted the offer by substantial performance.
Note
Substantial performance not required under 45 only beginning of performance

C. ENFORCING EXCHANGE TRANSACTION: DOCTRINE OF CONSIDERATION

Determines what promises are enforceable
Serves an evidentiary, channeling, and cautionary function
If we exchange promises, my promise is consideration for your promise and vice-versa.

1. BENEFIT/DETRIMENT (Hamer)

Classical contract theory

Benefit to promisor OR detriment to the promise

Detriment can be an act or legal forbearance must be legal right (e.g., not giving up illegal drugs)
Restatement 2d rejects benefit/detriment theory 79 (If consideration is met, no additional requirement of a gain,
advantage, or benefit to the promisor or a loss, disadvantage or detriment to the promise)

2. BARGAINED FOR EXCHANGE (Baehr)

More modern concept of consideration use this test first and then digress in benefit/detriment

Definition of Consideration 71:

(1) To constitute consideration, a performance or return promise must be bargained for
(2) It is bargained for if its sought by promisor in exchange for promise & given by promisee in exchange for
that promise
(3) Performance may consist of:
a. an act other than a promise, or
b. forebearance, or
c. the creation, modification, or destruction of a legal relation

Conditions to bargain are not consideration

o To evaluate ask:
(1) Does condition benefit the promisor?
(2) Is condition something promisor is bargaining for?
Willistons Tramp example (p. 69)
Man giving tramp money to walk to store & buy coat gift not consideration
Man not bargaining to see tramp walk to the store
Walking is merely a condition that the tramp must do in order to get coat
o Plowman: Going to office to get check = condition b/c company arguably not bargaining for this
o Kirskey: Sister moving to house only a condition; land owner does not benefit by her moving
o

Note: Forbearance to sue could be consideration must be evidence that deference to initiate actions was related to
other partys promise and that it was bargained for by other party (vs. Baehr)

3. ASPECTS OF CONSIDERATION:
a. Gifts (Doughtery)

Gift is not legally enforceable b/c no consideration

Gifts usually b/c of emotional ties and made in heat of momentno bargaining; can recant
Promise must be definite to be enforced (Restatement 2)
To make gift enforceable:
o Executed gift give cash now once given, law says cant revoke; not always an option
o Promise under seal; but seal has lost significance over time
o Testamentary gift write gift into will then consideration is legally irrelevant
Much effort; not payable until debts paid; new will revokes (codicil)
o Gift in trust set up trust fund that he can eventually take over; not responsible now

b. Past Performance(Plowman)

Promise made in return for past performance is NOT consideration

Self-contradictory: something already done was not induced by the promise

c. Adequacy of Consideration (Batsakis)

Adequacy of Consideration 79: If requirement of consideration is met, there is no additional
requirement of:
(a) Benefit to promisor or detriment to promisee
(b) Equivalence in the values exchanged; or
(c) Mutuality of obligation actress, not agent, can have escape clause

Recited or nominal (sometimes) consideration is not sufficient; often happens in gift

Adequacy of values exchanged is unimportant unless there is fraud, mistake, lack of capacity,
unconscionability, undue influence, coercion, duress, misrepresentation, or gross inadequacy

Illusory Promises 77: If the promise makes the performance entirely optional it is illusory and not
consideration

Hamer v. Sidway
Players : Assignor of nephew
: Executor
Facts
Uncle orally promises, in front of relatives, nephew $5K if nephew doesnt drink, smoke, and gamble before 21st birthday.
Uncle set aside when nephew turns 21 b/c he does not want him to waste it.
Letter shows previous promises keptserious!
Court
Uses the benefit-detriment test, finding forbearance of legal right as a detriment to promise. SOL issue avoided b/c trust was
set up at appropriate time.
Rule
A waiver of any legal right at the request of another is sufficient consideration for a promise.
Note
Must forebear legal right.
Baehr v. Penn-O-Tex
Players : Lessor
: Creditor of Lessee
Facts
leased filling stations to 3rd party that owed money to , began collecting filling station rent, requested rent payments
from them, s agent promised rent to once threatened suit, never received rents. Argued that her delaying action was
forbearance (sued 6 months after 1st letter)
Court
Using bargained for exchange test, found was not bargaining for this forbearance and was no evidence that the forbearance
had any connection w/ s promise
Rule
While forbearance to bring suit may be consideration, there must be some showing that forbearance was bargained for
and was not merely conveniently granted unilaterally by one party.
Dougherty v. Salt (1919 )
Players : Minor and guardian
: Executor
Facts
, age 8, received from his aunt, a promissory note for $3000 payable at her death or before. Note was on a printed form,
which contained the words value received. handed note that said You have always done for me, and I have signed this
note for you. sued s estate for payment.
Court
Stating value received is not adequate consideration b/c it was not bargained for.
Rule
A note that is not supported by consideration is unenforceable.
Note
Return promise/consideration must be more definitecan just say for acting in a good way.
Batsakis v. Demotsis
Players : Lender
: Borrower
Facts
During WWII, , a Greek resident lends D, also a Greek resident 500,000 drachmae, at the time worth $25. In return for loan,
requires to sign a promissory note for $2000 payable at end of war. After war, sues to collect $. claims that there
was no consideration.
Court
Absent fraud, mistake, lack of capacity, undue influence, or duress, adequacy of consideration does not matter.
Rule
Mere inadequacy of consideration will not void a K.
Plowman v. Indian Refining Co.
Players : Employees
: Employer
Facts
promised to pay 18 employees a monthly sum equal to of their working wages for life + health insurance. s were
retained on pay roll, but they didnt render any further services and their only obligation was getting checks.
Court
Consideration based on past relationship, good will, and condition of picking up checks (not a benefit to ) is not adequate.
Also, there was no corporate authority to make K.
Rule
Past services are not sufficient consideration to support the enforceability of a K.
Note
If detriment already performed, it could not be in exchange for the promisecontradictory!!

II. OBLIGATION IN THE ABSENCE OF EXCHANGE

Always want to try contract 1st to receive expectation damages
PE will recover reliance damages and restitution claims recover restitution damages

A. PROMISSORY ESTOPPEL
1. DEFINITION
Definition/Required Elements 90
(1) Promise 2
May be implied by conduct (Wright)
(2) Promisor reasonably expects to induce action or forbearance (reliance)
Does promissory benefit from reliance?
Did she want reliance?
Do not confuse promisors motive w/ what you reasonably expect he would do
Look at promisor not promisee
(3) Promisee relies on promise
Show a change in position b/c of promise need not be detrimental (Katz)
Must be after promise (vs. Hayes, Plowman)
(4) Injustice only avoided by enforcement of the promise
2. USE OF PROMISSORY ESTOPPEL
PE does not create a K, it merely prevents the promisor from challenging validity of the agreement
Reliance as a substitute for consideration (unbargained for)
o Detriment in K is bargained for vs. in PE
Reliance Damages put injured party in position they wouldve been in if no promise had been made
Some states, ex GA (Allegheny) have codified PE
3.

PROMISES WITHIN THE FAMILY

a. Classical Contract (Kirskey)
Affection, altruism (relationship of parties) is usually the source
Unwilling to award person relying on promise when no consideration seen as unfair
b. Promissory Estoppel (Greiner; Wright)
2 and 90(1)
No need for consideration, reliance substitutes for it

4. CHARITABLE SUBSCRIPTIONS (Alleghany College; King)

2, 90(1), 90(2)
In general charities are sympathetic, especially in comparison to wealthy heirs

Charitable Subscription vs. Charitable pledge.

Subscription promise to do something in future (Alleghany)
Pledge is a bailment possession changes but legal title does not change (King)

If can find donative intent, may be more likely to try to find a remedy (King)

90(2): Charitable subscription or a marriage settlement is binding w/o proof that promise induced action or
forbearance (many courts do not accept this, see King)

5. PROMISES IN A COMMERCIAL CONTEXT (Katz; Shoemaker)

2 and 90(1)
PE originally confined to non-commercial sphere (besides employee benefit cases) now commercial promises
is its principal application.
Kirksey v. Kirksey (1845)
Players : Sister
:Donor of land
Facts
Brother-in-law promises widow place to raise family if moves to land; she sells property, moves, lives for 2 yrs, he evicts her.

Court
B/c there was no bargained for consideration and moving was just a mere condition, there is no K
Rule
To be legally enforceable an executory promise must be supported by sufficient, bargained-for consideration.
Note
This was an old case and court may have found for b/c didnt want women to have land.
Greiner v. Greiner
Players : Mother
: Son
Facts
Mom promises son land b/c she wanted him to move back, he moved back, lives few yrs, fixes up, she wont give him deed
Court
There is no K b/c there is no consideration, but PE applies: (1) Definite promise for land (2) Mother could expect Frank would
move if she offered (3) Frank moved and made improvements (4) Up and moved entire family and gave up homestead
Rule
Promises reasonably inducing definite and substantial actions are binding if injustice can be avoided only by
enforcement of the promise.
Note
Definite and substantial no longer necessary seen as redundant
Can argue against injustice b/c he wasnt doing anything before
Wright v. Newman
Players : Father (Wright)
: Mother (Newman)
Facts
not bio father of s son, acted as father (gave surname and signed birth certificate) even though he knew that he was not
so his actions were knowing and voluntary; continued support for 10 years; did not good look for bio father; now denying
child support
Court
Duty to support enforceable b/c of PE: (1) implied promise through voluntary conduct (2) he saw she was not looking for real
father (3) she did not look for real father for financial or emotional support (4) injustice to her and son
Concurrence: PE requires reasonable reliance, not that promisee has gone through every avenue in order to avoid detriment
(i.e., she didnt have to look for the father 1st)
Dissent: Questions reliance b/c ties have been severed and several years passed by w/o any support; may be no injustice b/c
she could maybe find real dad
Rule
A promise, either express or implied by conduct, which the promisor should reasonably expect to induce reliance and
induces reliance is binding if injustice can be avoided only by enforcing.
Note
GA codified PE; some policy questions re: decision
Allegheny College v. National Chautauqua County Bank
Players : College
: Bank
Facts
Woman pledged $5000 to college after death if college set up a fund for ministry in her name.
Court
When there is adequate consideration (exchange was the money for the establishment of the memorial to her), an enforceable
K is formed. Not a condition b/c it was seen as required and beneficial.

Rule
Note

Dissent: Gift stated that consideration was her intent in Christian education; even if her gift had the condition that the fund be
named after her, no acceptance b/c they never acted (36) and it was a unilateral contract.
When promisor requires that the promisee do anything in exchange for the promise, there is adequate consideration
present when dealing w/ charitable contribution.

Is setting up the fund consideration for the money or is it just a condition of a consideration-less gift?
Could have argued for PE: promise is $5000, she could reasonably expect them to rely, college incurred detriment by
publishing news of gift in reliance on her promise; injustice is that the kids have no scholarship.
King v. Boston College
Players : Estate administrator
: Charity
Facts
s husband was promisor and BU was promisee. In a letter to BU, s husband wrote I name the BU library the repository
of my correspondence, manuscripts, and other papers. He also wrote, In the event of my death, all such material deposited
w/ the University shall become from that date the absolute property of BU.
Court
Evidence of donative intent (look at letter, circumstances and relationship between 2 parties) w/ bailor-bailee relationship and
letter. PE applies b/c there was reliance on the promise: BU index papers, hired staff, held convocation etc.
Rule
Where donative intent is sufficiently clear, the court will give effect to that intent to the extent possible w/o abandoning
basic K principles such as reliance.
Note
Look at intent of promisor
Katz v. Danny Dare
Players : Employee
: Employer
Facts
worked for for 25 yrs, injured on job, work fails, asks to retire, they negotiate for 13 mos., pension plan, retires,
comes back later to work part time, reduces payment of pensions. argues that was going to be fired anyway, so he
didnt give up anything by retiring, therefore no injustice, no reason to give pension.
Court
No K but PE can apply to promise of pensions: (1) promise, (2) expected him to quit, (3) he quit in reliance, (4) can not return
to full-time employment. Focus on s promises rather than s reliance
Rule
PE does not require the relinquishment of a legal interest.
Note
Look at what actually happened (voluntary retirement) rather than what could have happened (get fired)

Vs. Feinberg resigned for a lesser amount b/c of pension (reliance)

Vs. Plowman: after fired given pension (no reliance)
Vs. Hayes after announced retirement, offered pension (no reliance)
Shoemaker v. Commonwealth
Players : Mortgagor
: Mortgagee
Facts
obtained a mortgage on their home from and mortgage agreement provided that they were required to carry insurance on
the property; when insurance expired, alleged sent letter stating it would purchase insurance and add to premium; based
on this letter and further phone conversation w/ , assumed that had obtained insurance and did not learn otherwise till
after their house burned down
Court
Evidence sufficient to create a genuine issue of material fact re: reasonableness of reliance. (1) Promise in letter and on
phone, (2) reasonable expectation, (3) did not get insurance, (4) their home burned down.
Rule
PE applies

B. LIABILITIES FOR BENEFITS RECEIVED: THE PRINCIPLE OF RESTITUTION

1. DEFINTION:
a. Unjust (AND) Enrichment:
Unjust intended to charge and not imposed on recipient
Enrichment economic or intangible benefit
Retention of benefit conferred by another, w/o offering compensation in circumstances where
compensation is reasonably expected (focus on receiver)
Remedyvalue of what was given to recipient (disgorge benefit)
b. Implied-in-Fact Contract:
(1) Agreement and consideration (request) based on parties conductno written/oral exchange
(2) Expectation damages are imposed b/c true K
(3) Argue a dealsometimes difficult
c. Implied-in-Law: (Quasi-Contract) (Credit Bureau; Commerce; Watts)
(1) No agreement and usually no consideration (no request)
(2) Construct K to prevent unjust enrichment
(3) Elements:
a. A benefit conferred on by
b. Appreciation or knowledge by of the benefit
c. Acceptance or retention of the benefit by under circumstances making it inequitable for the
to retain the benefit
(4) Restitution damages for unjust enrichtypically value of services received (not incidental injuries)
d. Posner Interpretation
Award damages when transaction cost is ; skeptical of awarding damages when transaction cost is
Good analytic tool to use when faced with a restitution
E.g., in Credit Bureau, cost of a voluntary bargain was high b/c his life was at risk and he was mentally
incapable of bargaining; so, restitution appropriate
2. RESTITUTION IN THE ABSENCE OF A PROMISE: RESCUE/FAMILY RELATIONS
a. Classical Treatment:
Gratuitous act done for benefit of another does not give rise to duty to pay (person must have requested
services)
b. Restatements on Restitution:
Provides recovery for person who confers benefit to save anothers life, health, or property
More moderate b/c allows recovery w/o a bargain, but must satisfy
RESTATEMENT 116
(Benefits to a persons well-being)
A person who has supplied things or services to another,
although acting w/o the others knowledge or consent, is entitled
to restitution if:
(a) he acted unofficiously and with intent to charge
(b) thing/service was necessary to prevent the other from
suffering serious bodily harm or pain
(c) the person supplying them had no reason to know that the
other would not consent to receiving them
(d) it was impossible for the other to give consent

RESTATEMENT 117
(Benefits to a persons property or credit)
A person who, although acting w/o others knowledge or consent,
has preserved things belonging to another from damage or
destruction, is entitled to restitution if:
(a) He was in lawful possession or custody of the thing
(b) Reasonably necessary that services should be rendered before
it was possible to communicate w/ owner by reasonable means
(c) He had no reason to know that owner didnt want him to act
(d) He intended to charge for such services
(e) The things have been accepted by the owner

c. Applied to.
1. RESCUE (Credit Bureau)
Used b/c hard to show meeting of the minds if lack of mental capacity
Courts have limited to professional servicesintent to charge (not w/in family)
The greater the urgency, the more likely that an un-requested action is justified
Hypo: What if doctor is a passer-by?

2. OWNERS LIABILITY (Commerce)

(1) Furnisher of services exhausted remedies vs. party w/ whom they contracted (sub v. general)
(2) Owners benefit was conferred w/o paying consideration to anyone (owner vs. everyone)
3. FAMILY RELATIONS:
benefited from s services in a way that was unfair (Watts) (not all courts follow)
3. PROMISSORY RESTITUTIONMORAL OBLIGATION EXPRESS PROMISE AFTER BENEFIT CONFERRED

a. Classical View & Promises to Pay Past Debts: (Mills)

Moral obligation substitutes for consideration if there is a revival of original obligation:

(1) There is a bargained for pre-existing legal obligation
(2) Obligation became inoperative by positive law
(3) A subsequent promise to pay that makes the obligation legally binding again

Examples of valid obligations that became inoperative (p. 223)

o Debts barred by a SOL ( 82)
o Debts incurred by minors who later promise to pay ( 85)
o Debts discharged in bankruptcy ( 83)

Cant use moral obligation as substitute for consideration always b/c its too subjective a test:
1. Inconsistent and unpredictable holdings based on jury and judge perspective of morality
2. Legislature not judges should dictate what is moral

b. Material Benefit RulePromise for Benefit Received ( 86) (Webb)

Expands scope of moral oblig. as sub for consideration dont need preexisting obligation

Promise for Benefit Received 86:

1. A promise made in recognition of a benefit previously received by the promisor from the
promise is binding to the extent necessary to prevent injustice.
2.A promise is not binding:
a. If promisee conferred benefit as gift or for other reasons; or
b. To the extent that its value is disproportionate to the benefit

Not accepted by all jurisdictions (see Harrington on p. 233)

May not be accepted if extreme emotionconsideration no longer as a cautionary function (subsequent
payment, like in McGowin shows otherwise)

c. Promise may be given by a 3rd Party ( 71(4))

The performance or return promise may be given to promisor or some other person by the promisee
or some other person. (Mills father could sue)
Credit Bureau Enterprises, Inc. v. Pelo
Players : Credit bureau
: Debtor
Facts
argued w/ wife, left home, checked into hotel. telephoned wife and threatened to buy gun and harm himself. taken to
private hospital by police. While hospitalized, was pressured to sign a release form, under duress, agreeing to pay for his
hospitalization. Probate court found seriously mentally impaired. Hospital referee later found was bi-polar and so could
not involuntarily hospitalize him. Hospital sought payment from , but he refused. Hospital turned account over to Credit
Bureau Enterprises/, who sued.
Court
Under implied-in-law contract, had to pay for services because the services were of medical benefit to him, were provided
in good faith, and were not gratuitous
Acted unofficiously with intent to chargepatient came to hospital and hospital was private
Services necessary to prevent from suffering serious bodily harmmagistrate found probable cause; later finding not
relevant to previous services
Persons servicing had no reason to know would not consent to receiving them, if mentally competent; and people want
to be helped (questioned since forced to sign)
Impossible for the other to give consent, or, if too young or mentally impairedhe was unable to consent because he was

mentally incapable.
Requiring patient to pay for medical services which the patient received in a private hospital does not violate DP or
constitutional right to K.
Commerce Partnership v. Equity Contracting Co.
Players : Property owner
: Sub-contractor
Facts
owned a building and contracted w/ general contractor for improvements. was the stucco and surfacing sub for the project
and completed its work. GC did not pay and later filed for bankruptcy. In answer, asserted it had paid GC in full.
Court
In a subs quasi contract against an owner, sub must have exhausted all remedies against GC and still remain unpaid and
owner must not have paid consideration for work (thus, unjust enrichment). Here, Equity did not prove that Commerce had
not made payment for benefits conferred.
Rule
Where an owner has given consideration for the subs work by paying out the contract price for the work, an unpaid
subs claim that the owner has been unjustly enriched fails.
Note
B/c no prior dealing must be implied in law not implied in fact
Watts v. Watts
Players : Cohabitant
: Cohabitant
Facts
Unmarried cohabitation, woman did housework, brought property into relationship, contributed to income, they acted as
married, helped w/ business; started own business with sister-in-law; after ended she wants compensation for her services b/c
he didnt share interests equally. She argues for implied in law or fact.
Court
One party (man) was unjustly enriched. Evaluate unjust enrichment by using 3 part test:
1. Benefit conferred on by
2. Knowledge of benefit by D
3. Acceptance by D under inequitable circumstances
Court is not swayed by argument that it was an illicit relationship, b/c both parties took part.
Rule
Unmarried cohabitants may raise claims of unjust enrichment following termination of their relationship where 1
party attempts to retain an unreasonable amount of the property acquired through the efforts of both.
Mills v. Wyman
Players : Caretaker
: Father of son
Facts
takes care of s grown son while on his death bed. After the fact, promises in writing to reimburse but he doesnt.
Court
There was no pre-existing obligation (son was not a minor) or request by father, and no consideration (he did not bargain for
the care of his son). Held, was morally obligated to pay, but b/c there was no consideration the promise was unenforceable.
Here, no moral obligation that can substitute for consideration. In very few limited cases, a promise based on a previous
obligation can be binding: SOL has run, debt cancelled in bankruptcy, etc.
Rule
A moral obligation is insufficient as consideration for a promise.
Note
Classical K law
May have been different had son been younger; also later letter shows Dad had prescribed actions.
Webb v. McGowin (1936)
Players : Injured rescuer
: Pedestrian
Facts
injured saved life of (decedent of McGowin) from a falling block at a lumber company. McGowin promised to give him
$15 every two weeks for life. He pays until he dies and estate stopped paying.
Court
Ds promise is a moral obligation that can substitute for consideration, therefore it is enforceable. acting in scope of
employment, so not a gift, saving life is a material benefit, so fits into Rest. 86
Rule
A moral obligation is a sufficient consideration to support a subsequent promise to pay where the promisor has
received a material benefit.
Note
Compare to Harrington:
Facts: Axe cuts off womans hand while she saves mans life. Abused wife had him on the floor and was going to strike
him w/ axe. Husband promises to pay for damages and then refuses to pay.
Rule: Humanitarian act voluntarily performed is not consideration to entitle her to recover.
1. Intent not that clear (vs. McGowin where he had already started paying)
2. No relationship between 2 parties (vs. employee-employer in Webb; can argue that for everything employee does
while on the job he expects to be paid)
Rule

III. OBLIGATION IN THE ABSENCE OF COMPLETE AGREEMENT

A. LIMITING OFFERORS POWER TO REVOKE: PRE-ACCEPTANCE RELIANCE
Situations where were on the way to a K but dont yet have full agreement (ex: cases w/ prime & subs)
1. CLASSICAL THEORY (Baird)
36: An offer is revocable at any time prior to acceptance
45: Option K created to deal with unfairness of revocation with unilateral contracts
2. EXTENDING PROMISSORY ESTOPPEL TO PRE-ACCEPTANCE RELIANCE
When person relies on offer and begins preliminary preparations before acceptance, then offer is revoked

Irrevocable Option K created if: ( 87(2))

1. Offer
2. Offeror should reasonably expect to induce substantial reliance by offeree before acceptance
Knows lowest bid will most likely be chosen
3. Which does induce such reliance
4. Is binding as an option K to extent necessary to avoid injustice (offeror cant revoke)

Extends PE to situations where offeree relies on OFFER before accepting (90 when promises)

Sub-Prime Contracts: Option K created so sub cant revoke bid until prime wins job and accepts subs bid. Applies
PE b/c prime has reasonably relied on subs bid and would suffer loss of sub backed out
o 45 vs. 87
45 for part performance of unilateral K (offeree has option of completing performance)
87 is for preliminary negotiations (prime & sub not bargaining for use of bid, so bid is
preliminary preparation)

o Policy Implications of binding sub and not prime

1. Way the industry operates law evolved to effect practice
2. General and prime should have some flexibility deference b/c of the uniformly accepted reality
of last minute business. Do not want to lock people into sloppy bargains
3. Theoretically sub takes no action in reliance on the potential that it might get K (strongest
argument vs. this would be that sub did not bid on another job incredibly difficult to prove)
o

Exceptions:
1. Revocable clause: Offer can be revoked in a clause if offer says so realistically you probably
wouldnt rely on such an offer for fear that it would be revoked
2. Obvious mistake: if subs bid is clearly erroneous, sub not bound b/c its not justifiable for prime
to rely on it; prime cannot later argue PE prime had duty to inquire
3. Bid shopping: inequitable conduct of prime by using bid shopping removes primes right to
argue PE later do not want to protect prime

PE will not be extended in these cases if elements arent met (Berryman) but can be applied to promises of
franchisee and franchises (Pops Cones)

Baird v. Gimbel Bros.

Players : General contractor
: Sub contractor
Facts
Sub submits bids to 20-30 primes conditional on award of main job, realizes it has underestimated the cost (after had
submitted bid to Penn DOT and before the award of K), sub tells prime of problem and that it is revoking bid with second;
awarded K, prime sues for breach of K
Court
was not bound by original bid:
(1) Not a unilateral K b/c not promise for performance, so cant apply 45 using bid acceptance
(2) PE cant apply b/c offer was made not a promise. PE should only be used for donative promises.
Rule
PE should not be applied where there is an offer for exchange and the offer is not intended to become a promise until a
consideration is received.
Note
Minority vs. Drennan
Drennan v. Star Paving

Players

: General contractor
: Sub contractor
Facts
Sub () made a bid to be part of project to build a school under (prime), prime uses subs bid to get job, immediately after
prime gets job, goes to sub who says bid was wrong and offers much higher bid (2x), prime has to find new sub, prime sues
for difference
Court
Where a sub submits a bid to prime who then relies on bid in making his own bid (and who reasonably believes bid is not a
mistake), there is an option K which is irrevocable once prime relies (applying PE analysis from 87(2)).
Rule
PE argument under 87(2) should be applied where there is an offer and preliminary preparations based on that offer.
Note
Owner required bid to include names and bids of all subsstrengthens PE argument b/c shows that contractor relied on
specific estimate sub specifically identified to owner
Berryman v. Kmoch
Players : Owner
: Real estate agent
Facts
offered (real estate agent) option K for land based on (never paid) consideration; sells land to third party. finds out
about revocation through bank; tries to exercise option under PE b/c reliance on offer.
Court
(1) W/o consideration, there is no option K
(2) When pre-acceptance reliance is not foreseeable, PE may not be used for an option K ( could not foresee that would
rely by getting other investors for land) ( 87(2))
Rule
An agreement that lacks consideration may be enforceable based on PE when (1) the promisor reasonably expected the
promise to rely on the promise; and (3) a failure to enforce the promise would result in perpetuation of fraud or result
in other injustice.
Note
Real estate agent who wrote up the option K would know that b/c purported consideration there was no enforceable K.
Pops Cones v. Resorts International Hotel, Inc.
Players : Franchisee
: Lessor
Facts
(franchisee) and (franchisor) negotiate to enter into a franchise. assures that they will get lease (flexible
interpretation of promise). knows s lease is running out (expectation). moves out of old location and closes business
(reliance), and has no revenue while waiting (injustice). They are later told they are not going to get the lease.
Court
PE for reliance damages.
Rule
87(2) applies to franchises

B. IRREVOCABILITY BY STATUTE: THE FIRM OFFER

1. OTHER IRREVOCABLE OFFERS
Offer revocable any time prior to acceptance 36

Offer can be made irrevocable by

(a) Consideration (must be specifically for option; nominal usually ok if all else looks fair) 87(1)
(b) By part performance 45
(c) Under doctrine of PE 87(2)
(d) By statute 2-205..

2. UCC APPROACH 2-205 CERTAIN TIMES WHEN OFFER CAN NOT BE REVOKED EVEN THOUGH NO CONSIDERATION
a. Purpose: To give effect to the deliberate intent of a merchant to make a firm offer binding
b. Elements
1. Offer (24) must be by a merchant (2-104(1))
2. Offer must be to buy or sell goods (2-105(1) )
o Not service contracts, real estate transactions, leases, employment contracts, marriage contracts,
child support, covenants-not-to-compete, etc.
o To determine if contract involves the sales of goods (Princess)
Did dispute arise over goods or services?
What is the predominant factor, thrust, or purpose?
4th Cir (1) Language of K, (2) nature of business of supplier, (3) value of materials
3. Offer must be in writing, 1-201(46),
4. Offer must be signed, 1-201(39), and
5. Offer must give assurance that it will be held open/irrevocable (dont apply if no suggestion)
**If an offer meets the terms of 2-205, and is a firm offer, how long does it stay open?
For the time stated
If no time stated for a reasonable time,
But in no event may the period exceed 3 month (qst.if applies to stated or reasonable time; do both
analyses)
3. TERMINATION AND ACCEPTANCEC
Terminated by lapse of time, death (not revocation or rejection)
Acceptance effective upon receipt
4. COMPARED TO OPTION K
Similar to option K under classical theory, but no consideration necessary if elements are met
If this doesnt apply then try to find an option K

C. QUALIFIED ACCEPTANCE: THE BATTLE OF FORMS

Use this when 1 or more forms used and sales of goods
Need offer and acceptance
Dictates how to deal with different or additional terms in written agreements or oral agreements followed by a
written manifestation of the agreement
Statutory and common law principles

1. CLASSICAL CL VIEW (Princess)

a. Mirror Image Rule:
Acceptance must be precise mirror image of offer
If includes different/additional terms, it is a rejection and counteroffer
DRAWBACK: no K even when parties want to be bound
b. Last Shot Rule:
Last form that precedes manifestation of completion dictates terms; performance = acceptance
DRAWBACK: often favors the seller (PO and than confirming form by seller is last)
Roth Lith additional terms makes reply a CO (falls into last shot rule)
2. BATTLE OF THE FORMS
a. Use of Forms
Pre-printed, boilerplate forms exchanged back and forth (ex: POs, order acknowledgements)
ADV: Certainty (fewer errors), convenience and speed, saves money, limits authority of negotiators
DISADV: May not represent the agreement, people dont read them
b. What is the purpose of the 2-207?
Do away w/ CL rules: mirror image and last shot rules
Determine if K and what the terms are
c. When should it be used?
Exchange of writings or
Oral agreement w/ written confirmation as acceptance (not CO b/c already agreed; if have not already agreed
go back)
d. Are Goods Involved? (vs. Princess) Look at predominant purpose of Kservices w/ incidental goods or goods w/
services attached to it?
Source of complaint
Predominant purpose
4th Circuit test: Language of Contract; Nature of Business of Supplier; Intrinsic Worth of Materials
e. What are the provisions?
(1) Determining if there is a K 2-207(1)
Apply to exchange of writings OR an written confirmation of oral agreement
Offer = look at Restatements b/c not defined in UCC
Acceptance =
a. DEFINITE (specific) includes all essential terms (price, payment terms, sm)
b. SEASONABLE (timely)
c. NOT CONDITIONAL interpreted literally
If 2 written confirmations following oral agreement both are acceptances
Ex: Order Acknowledgment
(2) Determining Terms of K 2-207(2)
1 or no merchant = proposals
2 merchants (2-104(3)) included unless any exception met AND term not specifically assented to:
a) Offer limits acceptance to terms of offer (Brown Machine)
b) Addition materially alters the K (Falconer)

c) There is a notification of objection to the terms either before or w/in reasonable time
(3) Look at Conduct if No Writing to Determine if K and Terms 2-207(3)
Only look at this if there is no K
Conduct by both parties which recognizes K is enough to establish K even if writings dont establish
Terms of K are those which writings agree (no more last shot rule), throw out differences, and use
UCC gap fillers for rest
f.

When does a term materially alter the K?

Material not well-defined
Comment 4 Standard Provisions that are material alterations
o Clause negating a warranty where one would normally exist (Dale Horning)
o Clause requiring a level of guarantee not normally required by the trade
o Clause giving seller exclusive authority to cancel should buyer not meet any invoice
o Clause requiring that complaints are made in a typically short order

Comment 5 Standard Provisions that are NOT material alterations

o Clause allowing slightly larger leeway when merchant encounters problems beyond his control &
any provisions for that occurrence
o Clause fixing a reasonable time for complaints
o Clause fixing reasonable interest on overdue invoices or fixing reasonable credit terms
o Clause reasonably limiting remedy per trade stds (consequential damagesDale Horning)

Results in Surprise:
o Objective knowledge: Custom in industry/trade usage and previous dealing between parties
o Subjective knowledge (e.g., did party read contract?)

Results in Hardship
o Must have legal right to do so before (Dale Horning)
o Unbargained for burdens
o Limiting remedy is often seen as causing hardship

g. What is done when the terms are different not just additional? Not mentioned in UCC, 3 options:
(1) Different terms never become part of agreement
2-207 doesnt deal w/ different terms, so leave them out
First shot ruleofferors terms will always control
(2) Treat different terms as additional terms:
See comment 3
Different terms will almost always be material and not mutually assented to
Therefore, they would not be included in contract
(3) Knock Out Rule:
Conflicting terms cancel one another out
UCC provides gap fillers if necessary
Princess Cruises v. General Electric
Players : Ship owner
: Ship repairer
Facts
Princess gave GE a PO for work to be done. GE sent a quotation w/ some different terms. Princess gave permission to
proceed, did not object to confirmatory letter, and paid for services. After work done, Princess boat was out of commission
for a while and lost money.
Court
Under common law, an offer w/ different terms is considered a CO (mirror image rule). Terms of CO apply b/c that was the
last form (last shot rule).
Rule
When predominant purpose of maritime or land-based K is the rendering of services rather than the furnishing of
goods, the UCC is inapplicable and courts must draw on CL doctrines.
Brown Machine v. Hercules (written exchange of form)
Players : Seller
: Buyer
Facts
P (seller) sends proposal to D (buyer) for sale of machine, D sends PO (offer) w/no indemnity provision & limits acceptance

to terms of offer, P sends Order Acknowledgment (acceptance) w/indemnity clause, D buys machine, someone gets hurt, sues
P, P demands indemnity, D says no
Court
Indemnification clause not part of K b/c D limited acceptance to terms in offer and indemnity would materially alter K. B/c
Ds assent to one unrelated term does not mean he assented to all additional terms.
Rule
Reply that does not make acceptance conditional on the others assent is acceptance rather than a CO.
Dale Horning v. Falconer (oral agreement followed by written confirmation)
Players : Sub contractor
: Glass manufacturer
Facts
P (buyer) made oral contract by phone for Ds delivery of glass to P w/o discussion of remedies/warranties, P sent
confirmation w/ nothing about damages, D sent form limiting Ps reimbursement for consequential damages, glass defective,
P lost money b/c it had to meet its subcontract, testimony indicated D adhered to industry custom, P trying to get D to pay for
additional consequential costs (additional burden on P by sub)
Court
Under UCC, Ds boilerplate terms limiting liability on consequential damages is not part of K b/c they constitute a material
alteration that was not mutually assented to would cause hardship.
Surpriseno, b/c it is customary in industry for sellers to include such limitations on consequential damages
Hardshipyes, b/c would shift burden of liability to P and should therefore be part of negotiation
Rule
Where both parties to a K are merchants, additional or different terms added by one of the parties become part of the
K unless they materially alter (surprise OR hardship) the prior agreement.

D. ELECTRONIC CONTRACTING
Applying CL principles of K formation and UCC principles to a modern, technologically advanced world
In these cases, customer doesnt see terms until after paid and accepted delivery

Why not take objective theory (Ray v. Eurice)?

o No signing of K Eurice brothers signed and initialed papers
o Simple and efficient law

Timing is important (K formation 2-205 vs. K alteration 2-207)

o If original terms, mere acceptance is ok
o If additional terms would have had to expressly agree
If paying is K, additional terms are effort to change K, not ongoing negotiations
Modifications of contract are enforceable only if NEW consideration

Shrinkwrap terms of the contract or license are intended to become effective as soon as the buyer uses the product
or merely unwraps it

Click Through requiring a buyer to click through a series of terms to complete the transaction
o Look at format of clause
o If say no, then not bound to any terms even though they knew they were entering a K!!!

Hill v. Gateway
Players : Consumer
: Computer vendor
Facts
purchased a computer from over the phone. sent computer to , along with documents listing terms of agreement. Little
chance that knew of these terms b/c never discussed on phone. could have avoided by sending back computer.
Court
B/c 2-207 applies only when 2+ form, not applicable. Seller made an offer by mailing the computer and consumer accepted
it by keeping the computer. K formed after the customer received the goods in the mail and had a chance to inspect the items
and the terms. Consumer could have found out terms before: (1) ask vendor to send copy before deciding whether to buy, (2)
consult website of vendor, (3) inspect documents after product deliveryHills!!
Rule
Terms sent in a box w/ a product that state they govern the sale unless the product is returned w/in 30 days are binding
on a buyer who does not return the product.
Note
UCC should apply b/c oral agreement and written confirmation ok (Comment 1). If correct, 2-207 would not apply to any
consumer transactions clearly not trying to remove consumers from statute.
Uphold bias of last shot rule b/c sellers have forms and buyers do not have form.
Klocek v. Gateway
Players : Consumer
: Computer vendor
Facts
purchased a computer from which included Std. Terms and Conditions w/ computerterms stated if kept beyond 5 days
arbitration clause and other terms would take effect. sued .
Court
Held that 2-207 applied and that the consumer was the offeror. B is usually the offeror unless price quotation is extremely
detailed. K was formed over the phone when the computer was purchased. s reply was not expressly conditional so it is an
acceptance. New terms do not apply because only 1 merchant and no express assent.
Rule
Terms shipped w/ computer dont become part of K where vendor does not expressly make its acceptance conditional
on the buyers assent to additional, shipped, terms and where the buyer does not expressly agree to the terms.
Note
Key is new judge, facts are not necessarily distinguishing

E. POSTPONED BARGAINING: THE AGREEMENT TO AGREE

When parties intend to be bound but havent agreed on all the terms yet (future agreement for 1 or more terms or
formal agreement contemplated)
First must look for offer/acceptance
1. CLASSICAL VIEW (Walker)
No contract comes into existence until all its material terms have been settled
Willistons view: If parties really wanted a K, they would have negotiated it for themselves
2. MODERN VIEW (Quake)
a. UCC (goods): Uphold K where parties intended to be bound; once agree to agree must negotiate in good faith
Formation in General 2-204 AGREEMENT TO AGREE
(3) Even though 1 or more terms are left open a K for sales does not fail for indefiniteness if parties
intended to make a K and there is a reasonably certain basis for giving an appropriate remedy.
Open Price Term 2-305
(1) If parties intend to be bound, contract exists even w/o settled price. Price will be fixed at reasonable
price at time of delivery if:
a. Nothing is said as to price
b.Price is left to be agreed upon and parties fail to agree
c. Price is to be fixed by 3rd person or market and isnt fixed
(2) Price to be set by either party indicates that he is to set it in good faith
(3) When price is to be settled in a manner other than agreement of the parties and 1 party causes it not to
be set, the other party can get out of K or set the price himself in good faith
(4) If parties dont intend to be bound w/o fixed price, there is no K. Parties must undo any portion
theyve performed (i.e., they cannot come to a resolution)
b. RESTATEMENTS
Existence of K Where Written Memorial Contemplated 27 FORMAL K CONTEMPLATION
If there are manifestations of assent sufficient to create a contract, the simple indication that the parties
were going to put things in writing wont keep the agreement from being binding unless circumstances
show that the agreements were only preliminary negotiations (26)
Certainty 33
(1) Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted
so as to form a K unless the terms of the K are reasonably certain
(2) The terms of K are reasonably certain if they provide a basis for determining the existence of a breach
and for giving an appropriate remedy.
(3) The fact that 1 or more terms of a proposed bargain are left open or uncertain may show that a
manifestation of intention is not intended to be understood as an offer or as an acceptance
3. ANALYSIS: Look at the language of the agreement itself, statements or actions during negotiations, trade usage, and
course of dealings or performance

NO K Parties do not intend to be bound until all details are settled

o Type of agreement requires formal agreement (maybe because of SOF)
o Involves large sums of $
o Proposed K is complex
o Requires many details; missing some important term
o Is unusual for which standard form is not available
o Parties were unwilling to proceed w/ any performance until the formal document was prepared and signed
(formal writing contemplated)

K Writing is merely a formality (may be bad PP b/c could inhibit negotiation)

o Writing not required to be enforceable for this type of agreement
o Involves small sum of $

o
o
o
o

Proposed K appears relatively simple

Has all important details
Contemplated formal k is a standard-form document, which contains the necessary details
Parties have proceeded to perform

NEGOTIATE IN GOOD FAITH Expressly commit to this or their actions suggest

o Parties acted like the K was very likely to be settled
o Promise not to negotiate w/ other people
o Bad faith: Deliberately use distress of other party
Raise new objections regarding settled terms
Remain obstinate w/ ulterior motive of killing the deal for more lucrative option
OTHER
o Formal writing needed to fully express covenants?
o Where in negotiation process agreement was abandoned
o Reasons for abandonment
o Extent of assurances given by party that now disclaims contract
PRICE: Determining certainty of formula (Walker):
o Too vague (comparative business conditions) or is it sufficient so that we could come up w/ a number?
Unclear whether comparative values were local or national
o Jackson v Pepper certain formula
o Did parties intend to decide or have court imply amount?
o Area of possible agreement (limited area for rent in Walker)

Walker v. Keith
Players : Lessee
: Lessor
Facts
rented property for $100/ month for a 10-year term w/ an option to extend for an additional 10 yr term w/ same terms and
conditions except rental will be fixed in such amount as shall actually be agreed upon by the lessor and lessee w/ the monthly
rental fixed on the comparative basis of rental values as of the date of the renewal. Parties couldnt agree on rent, lower court
stepped in and fixed rent.
Court
Option provision too uncertain to be unenforceablerent is most material part of a lease and no definite and objective
standard to compute price/rent. Also, parties did not just overlook, they could not agree. Agreement to agree is not necessarily
sufficient to make K. court did not want to intervene
Rule
When a material term is undecided and there is no certain way to decide it, the K is unenforceable.
Note
Formalist view; others courts would resolve this dispute and pick a rent
Quake Construction v. American Airlines
Players : Contractor
: Owner
Facts
bid on project for ; was told verbally that it won the K and received a letter stating it was awarded and formal contract
coming. Letter had a start date and included cancellation provision; terminated ; said letter of intent was binding K
Court
Letters of intent are only enforceable if parties intend them to be binding, if ambiguous the jury should decide intent as matter
of law. Letter of intent might be good faith attempt to enter into negotiations; apply UCC 2-204 and 27
Rule
Need more information on intent to decide.
Note
Schoon Says: Must consider the breadth of a construction contract its huge and no one would reasonably consider a letter to
contain all applicable provisions.

IV. THE STATUTE OF FRAUDS

A. BACKGROUND

Compliance with SOF is necessary not sufficient need offer, acceptance and consideration
o K falls w/in statute + K is not in writing not enforceable
o K does not fall w/in statute no requirement for K to be in writing
Not one SOF; descriptive term that covers any statute requiring writing for legal efficacy
If an agreement does not meet SOF, may still use PE or restitution

ADV: Easier to enforce; prevent perjury; eliminate memory problems; minimize casual K
DISADV: May not enforce honest claim

B. THREE PART ANALYSIS

1. Is K within or covered by a SOF? (Is there a statute that requires this bargain be reduced to writing?)
2. If the K is covered by a SOF, is there a sufficient memorandum to comply w/ the statutory writing requirement?
Is writing sufficient to meet the basic standard of summarizing or reflecting the parties bargain?
Important part: Does the writing reflect the non-performing partys agreement or assent?
3. If it is covered by SOF and writing is not sufficient, is there an exception to the SOF (Is there an escape hatch
somewhere in that statute which permit court to avoid an injustice based upon the SOF?)
1. Ks COVERED BY SOF
Restatement 110. Classes of Ks Covered, including: STATES PREVAIL OVER THESE
1. Ks that cannot be performed w/in 1 year (time between making and end of performance)
If any conceivable way that can be performed in 1 yr then does not have to be in writing
Hypo: Employment K for life No; employee can die in < year
Hypo: 9 mo. academic K starting in 5 mos. Yes; impossible to complete w/in 1 year from today
2. Agreement in consideration of marriage (not marriage K, bounty K where marriage is consideration)
Ex: Mom pays sons girlfriend to marry him, prenuptial agreement
3. Ks for the sale or lease of an interest in land
Ex: rental agreement, real property
But, lease only need to be in writing if year or longer
4. Agreements not to be performed during lifetime of promisor
Ex: testamentary promise, wills, etc.
5. Surety K Promise to pay the debt or default of another must be in writing
6. Miscellaneous consumer Ks determined by state
Ex: Must agree in writing to vehicle repairs, loans
7. Modifications to Ks
Usually if original K covered by SOF, modification must also be in writing
8. K for sale of goods for > $500 (UCC 2-201) ($500 = total price)
UCC 2-201. Formal Requirements; Statute of Frauds.
(1) K for sale of goods over $500 must be in writing and signed by party against whom enforcement is sought
2. WRITING REQUIREMENT
a. Restatements
General Requirements of a Memorandum 131
a. Must identify the subject matter of the bargain
b. Must indicate that a K was made (e.g., with regard to agreement/K/bargain)
c. Must state essential terms (e.g., quantity, delivery date, price, etc.)

Can be a series of writings though should be basically same transaction (ex: faxes, stack of napkins, etc.) 132

May be signed writing not made as memo of the K 133

Signature may be any symbol made or adopted w/ an intention to authenticate the writing 134

b. UCC
Must show a K has been made 2-201
Show quantity of good 2-201
Must be signed 2-201; 1-201(39)
Need not be written 1-201(46) (ex: audiotape)
c. Other
Can be a subsequent writingdoes not need to have been made at time K made (oral agreement followed by
memorandum ok)
If writing is lost, ok if credible evidence that establishes there was writing at the time
Signature from non-enforcing party
3. EXCEPTIONS
Formal Requirements; Statute of Frauds UCC 2-201
(2) Between merchants, writing in confirmation of K is binding where receiving party knows or has reason to
know contents UNLESS party objects within 10 days.
o Agency issue may arise (e.g., handing to 8 year old is probably not OK
o Avoid problems of only being able to enforce writings against the sender
(3)

K doesnt have to meet requirements of (1) to be enforceable IF

a. Goods are customized, not re-sellable, & maker has either begun manufacture or made
commitments before notice of repudiation is received
b. If party admits in court that the K was made
c. Where payment has been made and accepted OR goods have been delivered and accepted

Buffaloe v. Hart
Players : Buyer
: Seller
Facts
selling movable barns to (over $500) wants to buy them to flip them. gives s wife a check for $5,000 (first
payment). She accepts it, then 3 days later sends back ripped up check w/o her name on it.
Court
Found didnt meet UCC 2-201 b/c hadnt signed the check. But, met 2-202(3)(c) b/c the payment had been made and
accepted. Accepting payment under this rule, receipt not delivery!!! Shows meeting of the minds!!
Rule
A K is taken out of the SOF if there is sufficient evidence of part performance.
Note
Mr. Hart is liable as an agenta spouse is an agent unless there is reason to show that they do not agree (i.e., divorce papers)
Had decided he didnt want to buy, the check would be sufficient as a memo up to the amount in writing b/c vs. him
Bazak International v. Mast Industries, Inc.
Players : Buyer
: Seller
Facts
made oral agreement to buy textiles from ; had come to its office and send 5 PO to s other office; confirms receipt
in writing, didnt object, but never delivered textiles and never signed fax
Court
Falls under Merchant Exception: POs qualify as confirmatory writing under 2-201(2), therefore breached K. Writing only
needs to reflect a real prior agreement that was made, does not need to explicitly say confirming. Taken as a whole the Pos
here seem confirming: handwritten notes on form re: date and highly specific detail, form terms clearly not relevant
DISSENT: POs are mere offers, not evidence of a K
Rule
PO signed by the buyer, sent to the seller, and retained w/o objection fall within the merchant exception, satisfying the
statutory requirement of a writing even w/o sellers signature.