Metastructure

1) Has your client Made a deal?

2) Is it a deal the law will enforce?
3) What are the terms of the deal?
4) When is someone who made an enforceable deal excused from doing what she agreed to do?
5) How does the law enforce a deal?
6) When do you have rights and/or duties under a contract that you did not make?
7) Elements of a quasi-contract claim?

Has your client made a deal?

Determining Mutual Assent

1) §17: Requirement of a bargain- the formation of a contract requires a bargain in which there is a
manifestation of mutual assent
2) §18: Manifestation of Mutual Assent to an exchange requires that each party either make a
promise or being or render a performance
a. Objective Theory of Assent
i. Would a reasonable person in the position of the offeree understand from the
offeror’s words and conduct (manifestations)as an intent to be bound? (objective-
most important)
ii. Did the offeree in fact so believe? (Subjective- some evidence/marginally used)
3) Pol- Priority on Protecting Reliance (reliability in the market) over Actual Assent (subjective-not
being bound to something you didn’t agree to)
4) Lucy v Zhemer: P and D made contract, which D believed was a joke but did not demonstrate jest to
P. P had no reason to know of joke and K formed.
a. Hold: “Law imputes to a person an intention corresponding to the reasonable meaning of his
words and act. If words and acts, judged by reasonable standard, manifest an intention to
agree, it is immaterial what may be the real but unexpressed state of mind”
b. Rule: §18.c: if one party is deceived and has no reason to know of the joke the law takes
the joker at his word”
5) Leonard v Pepsico: P attempted to purchase Harrier jet, which appeared in a commercial, using
Pepsi points.
a. Hold: Reasonable viewer would not have interpreted this ad (or most ads) as conferring on
them the power of acceptance. Generally seen as invitations to bargain.
b. Rule: §26.b: Advertisements are not ordinarily intended or understood as offers to sell
(unlimited liability problem)
6) Smith v Boyd: D negotiated with two parties for the purchase of their home, and had both fill out a
standard purchase-and-sales-agreement form. D decided to take 2 nd offer and P sued for breach.
Was K formed from conversations, before written K signed by D?
i. §27: Manifestation of mutual assent are sufficient to form K even where parties
show intention to prepare written K. Must be judged by circumstances
1. Com. C: if offeree has reason to know offeror does not intend to be bound
until whole transaction reduced to writing, negotiations do not form K
b. Hold: The “practice of the trade or profession” in real estate and prior practice of the parties,
make it reasonable that D actions did not manifest an objective intent to contract before
written agreement executed.
7) Problems on Mutual Assent
a. P offers to sell car to E for 20,000 but he meant to say 22,000
b. §20: Effect of misunderstanding: no mutual assent if the parties attach materially different
meaning to their manifestation and
i. Neither party knows or has reason to know meaning attached by other
ii. Each party knows or has reason to know the meaning attached by other

Offer
1) §24: Offer Defined
a. 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
i. Creates Power of Acceptance in Offeree
ii. Elements: (E&E)
1. Offer must be communicated
2. Indicate a desire to enter into a K (specifies performances to be exchanged and
terms that will govern relationship)
3. Directed at some person or group: §29
4. Invite Acceptance (may or may not have specific mode and time for acceptance)
§30
5. Power of Acceptance: contract will arise w/o any further approval required
from offeror
a. Different from “invitation to deal”—look at words of K, omission of
key terms, # of people offer directed to, previous dealings, common
practices/trade usages

Cases

2) Lonergan v Scolnick: D sent form letter to P describing land. P replied to confirm he was in the right
spot. D replied yes, but if you wish to buy you will have to decide fast. D sold to 3 rd party.
a. Hold: No offer. Language used by D (you will need to hurry) demonstrates correspondence not
intended as an expression of a definite offer, and further expression of assent by D necessary
i. Words show no intent to enter into bargain
 b. Rule: §26: Preliminary Negotiations: Manifestation of willingness to enter into bargain is not
an offer if 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 afer he has made further manifestation of assent
3) Fairmount Glass Works v. Grunden-Martin Woodenware Co.: D made inquiry to prices of jars. P
replied stating specific quantitites, prices, delivery terms, and ”for immediate acceptance”. D
accepted. P- “output sold”
a. Holding: P letter was not price quote, but a definite offer to sell on terms indicated based on
terms “for immediate acceptance”, price, and context of letter. Intent determined from
“reading as a whole”
b. §26.c: Quotation of price is usually not an offer. Except when quotation indicates an offer via
via the terms of a previous inquiry, completeness of terms of the suggested bargain, and the
number of person to whom it is addressed
i. (Definiteness of terms can demonstrate intent)
c. UCC §2-204: Formation in General (applicable here because contract was for sale of goods)
i. K for goods may be made in any manner sufficient to show agreement
ii. Agreement sufficient to constitute a K for sale may be found even though the moment
of its making is undetermined
iii. Even though one or more terms are left open a contract for sale does not fail for
indefiniteness if the parties the intended to make a contract and there is a reasonably
certain basis for giving an appropriate remedy
1. Defines agreement to mean bargain in fact: derived from words spoken as well
as “from other circumstances, including course of dealing or usage of trade”
4) Leonard v Pepsico, Inc
a. P attempted to buy jet using Pepsi points based an ad he believed was an offer
b. Hold: No K, not “sufficiently definite”. Ads are presumed to be mere requests to consider and
examine and negotiate; and no one can reasonably regard them as otherwise unless the
circumstances are exceptional and the words used are very plain and clear
c. §26: 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 assent
i. b: Advertisements of goods by…are not ordinarily intended or understood as offers to
sell (too many people)
d. §29 To Whom Offer is Addressed:
i. The manifested intention of the offeror determines the person or persons in whom is
created a power of acceptance

Destroying the Offer

A. Rejection
1) §38: Rejection
a. Offeree’s power of acceptance terminated by rejection, unless offerror manifests contrary
intention
2) §39: Counter-Offers
a. Counter offer is both a rejection and a new offer
i. Destroys original offer
ii. Gives power of acceptance to original offeror
b. Types of NON-TRUE-COUNTER OFFERS (non-conforming responses)
i. Outright rejection w/ explanation: no new power of acceptance
ii. Request for Information or Suggestion for changes: (look at wording)—doesn’t
foreclose acceptance
1. §61: An acceptance which requess a change or addition to terms of offer is
NOT invalidated unless acceptance made to depend on assent to changed
or added terms
2. Ex: Would you take cash?—Before I decide, let me know if you would be
willing to throw in the living room furniture?
B. Lapse
1) §41: Lapse of Time
i. Offoree’s power of acceptance terminated at time specified in offer, or if not time, at
the end of a reasonable time
ii. Reasonable time depends on all the circumstances existing when offer and attempted
acceptance made (usage of trade, prior dealings, nature of K)
1. Com.b: Reasonable time: What time would be thought satisfactory to the offeror
by a reasonable man in position of offeree
2. Com.d: Direct/Face to face offer terminates at end of conversation
2) Minnesota Linseed Oil Co. v Collier White Lead Co.: P sent offer to sell Linseed oil to D. 3 days later
D tried to accept.
i. Hold: No K. Delay was too long, and manifestly unjust to the P bc D had opportunity to
take advantage of a change in the market (very volatile) Have to examine circumstances
ii. Reasoning: Linseed oil market is very volatile (commodity market) and delay gave D and
unfair economic advantage
1. Speculative Offer: Promisor does not intend to bear all the risk of the market
over extended period of time
C. Death or Incapacity of the Offeror
1) New Headley Tobacco Warehouse Co. v Gentry’s Ex’r: D gave option contract to P to extend lease
with condition that P build addition to warehouse. D died in September and P attempted to accept
offer in April.
a. Hold: No K. Option was not supported by consideration and thus revocable at any time, and was
automatically revoked upon death of offeror
b. §48: Death or Incapacity of Offeror or Offeree: Power of acceptance terminated when offeree
or offeror dies or is deprived of legal capacity to enter into proposed K
i. Pol: Reflects old view of K requiring “meeting of minds”. Inconsistent with objective
theory.
 D.1) Direct Revocation

1) §42: Revocatoin by COmunicaion From Offeror Received by Oferee

1) Offeree’s power of acceptance terminated when offeree receives from the offeror a
manifestation of an intention not to enter into the proposed K
i. Reasonable offoree would be aware that K no longer available
ii. Promise to keep offer open not binding unless supported by separate consideration (Option K
or Firm Offer-UCC)

D.2) Indirect Revocation

2) Rule: §43: Indirect Communication of Revocation

1) Offeree’s power of acceptance terminated when offeror takes definite action inconsistent with
an intention to enter into the proposed K and offeree acquires reliable info to that effect
i. Elements:
1. Action Clearly Inconsistent w/ intent to enter into K
2. Reliable Information of this action (not revoked until notified)
ii. Equal dignities rule: Offer made by general publication should be revoked by general
publication
3) Dickinson v Dodd: D delivered offer to purchase his house to P open until June 12 th. Thursday 11th, P
found out D offered to sell property to Allan. P attempted to get acceptance to D, but K with Allan
already formed
i. Hold: 1) option K w/o consideration is revocable at any time 2) once offeree “knows that the
property has been sold to someone else, it is too late for him to accept the offer

Preserving the Offer

1) Option Contracts
2) §25 Option Contracts
a. An option K is a promise which meets requirements for formation of K and limits promisor’s
power to revoke the offer (option needs own consideration-unless part of pre-existing K)
i. Promise to keep offer open is NOT enforceable, but is “offer to sell” unless revoked
before acceptance
3) §87 Option K: an offer is binding as an option K if it
a. 1) Is in writing and signed by offeror 2) recites a purported consideration 3) proposes an
exchange on fair terms within a reasonable time
b. An offer which the offeror should reasonably expect to induce action or forbearance on the part
of the oferee before acceptance and which does induce such action or forbearance is binding as
an option K to the extent necessary to avoid injustice (Promissory Estoppel)
i. Demonstrates greater level of flexibility for Consideration in Option Ks
4) Effect of Option Contracts
a. Promisor cannot revoke offer within specified period
b. Rejection or Counter-Offer does not terminate original offer
 c. Acceptance must be communicated to offeror within option period
i. Mail-box rule doesn’t apply to option K: actual receipt by offeror
5) UCC §2-205: Firm Offers
a. Offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance
that it will be held open is NOT revocable for lack of consideration. For time stated or a
reasonable time, not exceeding three months. Must be signed by offeror
Cases
6) Beall v Beall: D made option K (w/o consideration) to purchase land. P attempted to execute K, but
D refused stating option invalid due to lack of consideration.
a. Holding: Option K w/o consideration becomes “offer to sell” enforceable in equity unless
revoked before acceptance.
b. Rule: Option contract w/o consideration valid, unless revoked before acceptance
c. Rule: §37 Termination of Power of Acceptance Under Option K: not terminated by rejection or
counter-offer, revocation, or death or incapacity of the offeror, unless requirements are met for
discharge of a contractual duty
7) Board of Control of Eastern Michigan Univ. v Burgess: D signed option K to purchase D’s home for
“$1 and other valuable consideration”. No consideration ever paid. D rejected P’s tender of
purchase price for house
a. Hold: Signed option not an enforceable option. Sham consideration
b. Rule: “written acknowledgment of receipt of consideration merely creates a rebuttable
presumption that consideration has, in fact passed.” (common law rule)
c. Counter Rule: §87 (1): An offer is binding as an option contract if it: (a) is in writing and signed
by the offeror, recites a purported consideration for the making of the offer, and proposes an
exchange on fair terms within a reasonable time.
i. Pol: allow intentions of parties to perseveres despite technicalities of law
d. 87.2) Offer which offeror should reasonably expect to induce action or forbearance of a
substantial character by offeree before acceptance and does induce such action or forbearance
is binding as an option contract to the extent necessary to avoid injustice
i. Pol: Protect reliance interest. (From old tort law based on social policy)—Promissory
Estoppell
e. Counter Rule: §2-205 Firm Offers: “Offer by merchant to buy or sell goods in a signed writing
which by its terms gives assurance that it will be held open is not revocable, for lack of
consideration, during time stated or if not time for a reasonable time” no more than 3 months
i. Pol: facilitate commerce

Modes and Methods of Acceptance

1) Generally: (E&E): Substantive vs Procedural Terms
a. When offer clearly manifests mode of acceptance (procedure) is mandatory and exclusive
offeror’s intent must be deferred to and complied with exactly (offeror is king)
 b. If manner specified but does not reasonably appear intended as exclusive ay reasonable
method of acceptance is effective if consistent with prescribed mode and provides protection
to offeror equal to that of stated mode
c. If no mode specified: any customary or reasonable method under the circumstances
2) §30 Form of Acceptance Provided
a. Unless otherwise indicaed by language or the circumstances, an offer invites acceptance in
any manner and by any medium reasonable in the circumstances
i. Modern K law: assumes bi-lateral K (can be accepted by promise)
3) UCC 2-206: Unless clearly indicated otherwise…oferee may choose either way to accept (promise or
performance)
4) §50: Acceptance of Offer Defined
a. Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree
in a manner invited or required by the offer
b. Acceptance by performance requires at least part of what the offer requess be performed or
tendered
i. Mere Preparations-not acceptance
c. Acceptance by a promise requires offoree complete every act essential to the making of the
promise

A. Offeror’s Control Over the Manner of Acceptance

1) La Salle National Bank v Vega: D attempted to hire P as trustee over land interest. K stated “upon
trust’s execution, this K will be in full force”. P never signed document, no K.
a. Hold: “Full force upon execution” indicates that the only mode by which Mel’s offer could be
accepted was execution of the document by the trust. No execution=No acceptance=No K
b. Rule: Acceptance in any form other than the one prescribed by the offeror is ineffective as
acceptance. (Must comply w/o variation to the terms of the offer)
c. §50.1: Acceptance of an offer is a manifestation of assent to the terms thereof made by the
offeree in a manner invited or required by offer
d. Reasoning
i. Procedure exclusively specified
ii. Pol: Offeror is king/freedom of and from K. “An offeror has complete control over an offer
and may condition acceptance to the terms of the offer”
1. In this case, rule frustrated intent of K law- “effectuating intent of parties (bank
wanted to sell land)
2) Ever-Tite Roofing Corp. v Green: D hired P to fix roof. K stated “Agreement shall become binding
only upon written acceptance hereof, by the principal or authorized officer of the Contractor (P), or
upon commencing performance of the work.” K never signed, but P loaded trucks and headed to D’s
house, where another crew had already begun work, and forbade the P from working.
a. Hold: K was formed when P loaded up trucks (began performance). Performance began before
any notice of revocation by D, so K formed.
 b. Rule: §50.2: Acceptance by performance requires that at least part of what the offer requests
be performed or tendered and includes acceptance by a performance which operates as a
return promise.
i. §50-com b: “Mere preparation to perform, however, is not acceptance”
c. Reasoning
i. Method not prescribed
ii. Questionable whether prep or not: likely influenced court that D made no attempt to
contact D to say they wished to revoke
3) Davis v Jacoby: Mr. Whitehead made offer to P stating, ““if you can come, Caro, will inherit
everything”, and requesting that “you let me hear from you as soon as possible”. P wrote back
saying she would come. Mr. W committed suicide before P arrived
a. Hold: Offer made was for a “bilateral K” and thus could be accepted by promise. Valid K.
i. Reasoning: 1) Didn’t prescribe mode of acceptance and 2) “let me hear from you as soon
as possible”—indicated promissory acceptance OK 3) close relationship
b. Traditional Rule: K had to be classified as either unilateral of bilateral
i. Unilateral K: only one party makes a promise. Duty on only one side, and right on only
one side. Unilateral K can only be accepted by full performance.
ii. Bilateral K: both parties make promises (mutual promises). Duty and right on both sides.
Allows for promissory acceptance.
c. Restatement Rule: §32- “In case of doubt it is presumed that an offer invites the formation of a
bilateral contract by an acceptance amounting in effect to a promise by the offeree to perform
what the offer requests, or by rendering the performance, as the offeree chooses”
i. Assumption in favor of bilateral offer---acceptance by promise or performance (unless
clearly indicated otherwise)
d. UCC Rule: UCC-2-206: Unless otherwise indicated by language or circumstances an offer to make
contract shall allow acceptance in manner and mode reasonable under circumstances

B. Effectiveness of Promissory Acceptance

1) Hendricks v Beehee: P mailed offer to purchase their home to Smiths. Smiths signed agreement, but
didn’t notify P. P contacted Smith’s agent, before notification of acceptance and withdrew offer.
a. Hold: “Uncommunicated intention to accept offer is not an acceptance.” “When offer calls for
promise…notice of acceptance is always essential” NO K
b. §56: “Essential to acceptance by promise either that offeree exercise reasonable diligence to
notify the offeror of acceptance or that the offeror receive the acceptance seasonably”
i. Part performance—makes offer accepted (but no notification may still lead to discharge of
Promisor’s duty)
2) Adams v Lindsell: D mis-addressed offer to P for purchase of wool. P received offer on 5 th, and sent
acceptance back that night. D expected answer by 7 th and sold wool, received acceptance 9th.
a. Hold: K completed when response left oferee’s hand. Response was timely, therefore valid K
formed. Offeror bears burden of address mistake (§49)
 i. D’s must be considered in law making the same offer to P’s the whole time the letter is
travelling.
b. Rule: Mailbox Rule: §63: Acceptance made in a manner and by a medium invited by an offer is
operative and completes the manifestation of mutual assent as soon as put out of the offeree’s
possession, w/o regard to whether it reaches offeror
i. Inconsistent with objective theory
ii. “Mailbox rule” must be “activated” by offer
iii. 63(b)Applies so long as mode of acceptance is as fast/reliable or faster than that by which
the offer is made-----equivalence
iv. Doesn’t apply to “Option—Firm Offers”---exercising option only effective on recipet
v. P can reclaim at post office—and offer not binding (expection)
vi. Pol: offeror had opportunity to protect against risk by stating “effective on receipt”, so they
should bear the risk if they don’t do so (risk assignment)
c. §49: Effect of delay in Communication of Offer
i. If communication to offeree delayed,
C. period of acceptance not extended if offeree knows or has reason to know of the
delay, even if delay is due to fault of offeror.
D. However, if Delay is due to fault of offeror and offeree neither knows nor has
reason to know that there has been delay, a K can be created by acceptance within
period which would’ve been permissible if offer had been dispatched at time
arrival seems to indicate.

Internet and “Mail box” Issue

§64- acceptance given by telephone or other medium of substantially instantaneous 2 way comm. Is
governed by principles applicable to acceptances where the parties are in presence of each other

2-204(4)(a): K may be formed by interaction of electronic agents of the parties even if no individual was
aware of or review electronic agen’ts actions (clik-through-contracts)

C. Effectiveness of Acceptance by Performance

1) Generally: §30.2: “unless otherwise indicated by the language or circumstances, an offer (is treated
as inviting) acceptance in any manner and by any medium reasonable in the circumstances
a. Thus, in most cases acceptance may occur by Performance or Promise
2) Carlill v Carbolic Smoke Ball Co.: D ran ad promising to pay 100 to anyone who used smoke ball as
directed and contracted flu. D bought and used product, got flu, and attempted to collect
a. Hold/Rule: If offer is for the performance of a condition (unilateral K/offer), no notice required
except for notification of the performance of the condition.
b. §54: 1) Where an offer invites an offeree to accept by rendering a performance, no notification
is necessary to make such an acceptance effective unless offer requests such a notification
i. 2) Where offeree who accepts has reason to know that offeror has no adequate means of
learning of performance, K duty of offeror discharged unless:
 1. a) offeree exercises reasonable diligence to notify
2. b) offeror learns of performance within reasonable time
3. c) offer indicates notification of acceptance not required
c. Notice dispensed with impliedly
d. Pol: offeror indicates he wants performance not promise, so notice is unnecessary
e. What if P didn’t know about offer until after performance began?
i. §51: Unless offeror manifests contrary intention, an offeree who learns of an offer after he
has rendered part of the performance requested by the offer may accept by completing
performance
3) Marchindo v Scheck: D offered to sell real estate to specified buyer, and gave six day time limit for
acceptance. On 6th day D revoked offer, received that morning by broker (P), later that day P
received offeree’s acceptance. P sued for commission claiming breach of K.
a. Hold: Partial performance by the offeree of an offer of a unilateral K results in a contract,
conditional on full performance by offeree.
b. §45 (exclusive): 1) Where an offer invites an offeree to accept by rendering a performance and
does not invite a promissory acceptance, an option K is created when the offeree tenders or
begins invited performance
c. 2) offer’s duty of performance under any option K conditional on completion
1. Com f.  Preparations for performance.  What is begun or tendered
must be part of the actual performance invited in order to preclude
revocation under this Section. Beginning preparations, though they
may be essential to carrying out the contract or to accepting the
offer, is not enough
ii. §62 (non-exclusive): Where offer allows for acceptance promise or
performance –beginning performance constitutes acceptance---such acceptance
(beginning of performance) operates as implied promise to complete
performance
D. Acceptance by Silence of Inaction
1) Generally Rule: Silence or inaction alone are not sufficient to constitute acceptance, bc
a. General unfairness
b. Inconsistent with objective theory: offeror is not usually reasonable in assuming failure to
reject is intended by offeree as acceptance of offer
c. Exceptions: Usually entail Silence + Some other factor
i. Offeror provides service or goods and offeree having a reasonable opportunity to return or
refuse accepts benefits
ii. Prior dealings inicae it was reasonable for offeror to expect oferee to give notice of
rejection
2) Laredo National Bank v Gordon: P hired D as attorney on contingent fee. Later, P repeatedly asked
D to state fee if case was settled. D said 12,500 and no further negotiations ensued. After settling,
D refused to pay 12,500 fee, and said they never agreed to it
a. Hold: Under circumstances, P’s silence was equivalent to acceptance
 b. Rule: Generally offeree has a right to make no reply to offers, so silence is not acceptance. But
where relation between parties is such that offeror is justified in expecting a reply, or offeree is
under a duty to reply, the latter’s silence will be regarded as acceptance.
c. §69: Silence and inaction operate as acceptance only if:
i. Offeree takes benefit/ownership of offered goods/services with reasonable opportunity to
reject them and reason to know they were offered with expectation of compensation
ii. Offeror gives offeree option to accept by silence and offeree in remaining silent intents to
accpet
iii. Where bc of previous dealings or otherwise, it is reasonable that offeree should notify
offeror if he does not intend to accept (applicable to this case)
E. Electronic Acceptances
1) Uniform Electronic Trasactions Act: enable electronic commerce by validating and effectuating
electron records
a. However, still primarily governed by contract common law
2) Specht v Netscape Comm. Corp.: “clikwrap” agreement including arbitration agreement were in
terms of download. But, P could download by clicking link at top, without scrolling through
a. Hold: Exception to general rule (party that fails to read K does so at their peril) exists when
writing does not appear to be a K and terms are not called to attention of recipient” No K
F. Imperfect Acceptances
1) Egger v Nesbit: D made offer to sell title of land to P for 400. D “accepted” but asked for additional
papers in reference to the land.
a. Hold: No K. Acceptance coupled with any qualification or condition, will not complete K
i. Possible incorrect holding if paper to land were implicit in deal---matter of common usage
in land sale
b. Mirror Image Rule: § 59: A reply to an offer which purports to accept but is conditional on the
offeror’s assent to terms additional to or different from those offered is not an acceptance but
is a counter offer-(rejection and new offer)—(or could be rejection with an explanation—no
offer)
i. Exclusion: §61: Acceptance which requests a change or addition to terms of an offer is not
invalidated unless acceptance is made to depend on an assent to the changed or added
terms
1. Request for information
2. Suggestion for change
ii. Exclusion §60: If time, place, or manner of acceptance not exclusively stated (only
suggests), another method of acceptance doesn’t invalidate offer
c. Movement towards affect intent of parties—not strict mirror image
d. Pol: Intended to protect offeror to becoming subject to contract under terms other than those
the offeror wanted to deal on (offeror is king). Also: Admin. Conv. And Pres. Of Jud. Resources
2) Dorton v Collins & Aikman Corporation: P attempted to sue D for misrepresenting quality of carpet
sold to them over several transactions. D stated that “arbitration clause” included on back of sales
acknowledgment form prohibited P from going to court.
a. Hold: Arbitration agreement in acknowledgement forms were “proposals” for addition to K,
which were accepted unless DC on remand decides they were “material alterations” of K. 2-
207-2
i. Class issue: if acknowledgements forms were not acceptances, but confirmations then they
shouldn’t be able to override K agreement, unless expressly agreed to
b. Rule: UCC 2-207
i. 2-207(1): A definite and seasonable expression of acceptance or written confirmation,
within reasonable time, operates as acceptance DESPITE additional or different terms than
agreed upon, unless acceptance expressly made conditional on assent to add. Or diff. terms
ii. 2-207(2): Addit. Terms are proposals for addition, and become part of K between
merchants unless
1. Offer expressly limits acceptance to the terms of the offer
2. Terms materially alter K
3. Notification of objection to terms has already been given or is given within
reasonable time after they are received
iii. 2-207(3): Conduct by both parties which recognizes the existence of a K is sufficient to
establish a K for sale although writings don’t establish K. In such a case, terms are those on
which writings agreed and “gap fillers” from UCC
c. Pol: alter “mirror image rule” and facilitate business. Particularly “battle of forms” or
“boilerplate” contractual issues. Add/Diff terms not automatically a counter offer
d. Attempts to remedy last shot advantage.
e. Flow Chart
3) Klocek v Gateway: P bought computer from D’s store, shipped to his house. Included was note
stating: if you keep product for 5 days you agree to terms. One terms was “arbitration agreement”
a. Hold: Ct. concluded D showed no indication transaction in store conditional on subsequent
terms, so K concluded before box was opened. Therefore, No K, because sale allowed before
terms introduced and thus not expressly made conditional on assent to the additional or
different terms. §2-207 (1), and P not a merchant so terms not “proposals” under 2-207(2)
i. Keeping for 5 days not sufficient to show expressed agreement
b. Rule: UCC 2-207(1): focused on “unless” clause: “unless acceptance expressly made conditional
on assent to additional or different terms
c. Strict interpretation of unless clause: Must Be Expressly Conditional on Offeror’s ASSENT to
those terms. Clearly reveals offeree is unwilling to go forward with transaction unless he is
 assured of the offeror’s assent to the additional or different terms therin…Acceptance
predicated on offeror’s assent must be “Directly and distinctly stated or expressed rather than
implied or left to inference” (basically they must directly say this is a Counter Offer)
d. UCC Notes:
i. Knock out v Fall Out
1. Knock out: comes from com. 6: Different terms cancel each other out and are
supplied by UCC. (Majority Rule)
2. Fall out: if different term is a “material terms” than it falls out (just like additional
terms)
e. Warranty Disclaimer Problem
i. Common law: Buyer wants warranty but Seller doesn’t so no “mirror image” thus no K.
However, when Buyer accepts goods, he accepts K by performance and K formed w/o
warranty (last shot advantage)
ii. UCC 2-314: implied warranty of merchantability that goods are fit for the ordinary purposes
for which such goods are used
UCC 2-316: allows merchant to “disclaim” all warranties but has to be expressly consented
to by customer under 2-207(1) or else it does not become part of the K
1. “as is”, “as they stand” generally sufficient to disclaim warranties

Deficient Agreements: Insufficient, Inadequate, and Postponed Terms

Common thread between topics is it is clear the parties have reached some agreement “intent to be
bound”. Question is whether there is enough agreement to provide basis of enforcement. Either bc
parties attached materially different term, or couldn’t describe terms fairly, or whether parties delayed
agreement on some key parts of the deal.

A. Misunderstood, Incomplete, and Indefinite Terms

1) Raffles v Wichelhaus: (Misunderstood) Parties agreed P would sell D cotton, for 17.25, within a
certain time, from Bombay, delivered to England, by a ship called the “Peerless”. D delivered and P
refused bc cotton was delivered by a different ship named the “Peerless” from the one they
intended
a. Hold: BC there were two ships called the “Peerless” and each party believed delivery was to be
made by a different one, there was no “mutual assent/meeting of minds” therefore no binding K
b. Rule: §20 Effect of Misunderstanding
i. There is no manifestation of mutual assent if parties attach materially different meaning to
their manifestations and:
1. Neither party knows or has reason to know the meaning attached by the other
2. Each party knows or has reason to know the meaning attached by the other
ii. Manifestations of parties are operative in accordance with the meaning attached to them by
one of the parties if:
 1. That party does not know of any different meaning attached by the other, and the
other knows the meaning attached by the first party
2. That party has no reason to know of any different meaning attached by the other, and
the other has reason to know the meaning attached by the first party

Indefinite: How far should court go in resolving ambiguities and supplying missing terms in order to
provide a remdy for nonperformance?
2) Varney v Ditmars: (Common law: indefinite terms) D told P if he continued to work for him he
would get “fair share of profits”. P later fired and sued to collect $.
a. Hold: “fair share of profits” is too uncertain and indefinite to be enforceable.
b. Common Law Rule: all terms must be certain and explicit so that their full intention may be
ascertained. Terms must allow for court to determine proper remedy to be enforceable.
c. Pol: Not role of court to impose contractual obligations, role of court is to effectuate role of
parties, and if terms are too unclear than court has to step back
d. Dissent: Agreement should not fail for vagueness, so long as the parties seeking enforcement
can show there was intent to be bound, and then provide evidence to establish meaning
attached to ambiguous terms (fair share of profits).
3) Nora Beverages, Inc. v. Perrier Group of America: P and D entered negotiations for water bottle
production. Letter from D stated size, price, quantity, and delivery date terms, but negotiations
continued. P pulled out and went with another co. D’s complaint dismissed. P appealed.
a. Hold: Genuine issue of fact for TC under UCC and Common law. K doesn’t fail for indefiniteness.
b. UCC Rule: 2-204: Formation
i. K for sale of goods may be made in any manner sufficient to show agreement, including
conduct by both parties recognizing existence of K
ii. An agreement sufficient to constitute a K for sale may be found even though the moment of
its making is undetermined
iii. Even though 1 or more terms are left open a K does not fail for indefiniteness if parties have
intended to make a K and there is a reasonably certain basis for giving an appropriate
remedy
1. Com: more terms the parties leave open, the less likely it is they have intended to
conclude a binding agreement
c. Common Law/Restatement Rule: §33 Certainty
i. 33.1: Even though manifestation of intention is intended to be understood as an offer, it
cannot be accepted to form a K unless terms of K are “reasonably certain”
ii. 33.2: The terms of a K are reasonably certain if they provide a basis for determining the
existence of a breach and for giving an appropriate remedy
1. Com.b: Pol: K should be made by parties, not by courts, and hence remedies for
breach of K must have a basis in the agreement of parties
iii. Overall Contemporary View: if parties demonstrate intent to be bound, than indefinite or
incomplete terms may/should be implied/supplied by the court
d. Pol: Illustrate movement of courts away from strict rules about K terms, and instead to flexible
standards
 i. Highlights tension between: certainty and predictability vs. fairness and equity
ii. Partially due to long term complex relationships, instead of traditional 1 shot K
4) Note on UCC Gap Fillers
a. Gap fillers: default rules that supply the governing rule as to various aspects of the agreement
b. Pol: bring law into line with prevailing commercial practices and expectation
c. Purpose (fork)
i. In theory: gap fillers emulate what parties would have agreed to
ii. Actually: what a reasonable person in the position of the parties would have agreed to
assuming they were bargaining from relatively equal positions
1. It has been suggested UCC terms should be used as “penalties” to force parties to
reach agreement on more terms
B. Postponed Agreement
Is agreement struck too indefinite to enforce or should court supply missing term in order to
save the deal?
1) Walker v Ketih: (Traditional Rule) P leased lot from D for 10 years, with option for 10 more with
rent fixed by “actually agreed upon in the future based on comparative rental values at the time”.
a. Hold: Agreement to agree in the future is unenforceable. No K
b. Traditional Rule: :”To be enforceable and valid, a K to enter into a future covenant must 1)
specify all material and essential terms and 2) leave nothing to be agreed upon as a result of
future negotiations
i. Sub-Rule: Agreements to agree in a K prevents the formation of an enforceable K if that
postponed term is an important/material one (parties really haven’t “met” to form
binding K”
c. Reasoning: Ct. refused to enforce bc:
i. Agreements to agree in the future are unenforceable bc “by the very terms of the
agreements, (either party) may refuse to agree to anything the other party will agree to)
ii. Rent is a material terms term of a lease, and if paries do not fix it with reasonable
certainty it is not the business of courts to do so
iii. Pol: Cts. Should enforce agreements, not undertake Paternalistic task of rewriting what
would constitute a proper contract
2) Moolenar v. Co-Build Companies: (Modern Rule) P had 5 year lease (375/month), with 5 year
renewal option for sheep/goat grazing land, the price “Shall be renegotiated”. Leassor sold the land
to D (developer), during the original lease. P tried to renew but new owner D wanted
17,000/month.
a. Hold 1: Renewal Clause Valid. The renewal clause contains an Implicit term that the new rent
shall be fixed at its “reasonable” or “fair market” value. Therefore, it is specific enough to be
enforceable.
b. Rule: A document should be construed where possible to give effect to every term
c. Reasoning:
i. It will effectuate the intent of the parties better than striking out the clause altogether
ii. Renewal clauses have better claim for enforcement, bc consideration has already been
given for it
 1. Renewal clause is a factor that induced lessee into signing K
iii. Guidance from UCC 2-305: Parties can conclude a K even though the price is not settled.
The price is then “a reasonable price a the time of delivery if”:
1. Nothing is said as to price or
2. Price is left to be agreed by the parties and they fail to agree
d. Hold 2: P is entitled to have the rent established at its fair value as used for agricultural
purposes only, as it will most accurately reflect the intent of the original parties
e. Minority Rule (used in this case): “reasonable rent” is whatever will most accurately reflect the
intent of the original signatories to the lease
i. Pol: effectuating the intent of the parties
ii. Looks to conduct of parties and terms of the K
f. Majority rule: “reasonable rent” will be established at “fair market value”, which is the highest
(and best sue) rent which a responsible bidder is apt to offer
i. Pol: reflects economic efficient---best use of limited resources
ii. Would’ve led to a different outcome
g. Reasoning
i. Testimony indicated original lessor intended that P be able to use the land for agricultural
purposes
ii. 1 Purpose of renewal clauses is to insulate parties from chances in circumstances
iii. D (Co-Build) had actual notice of the renewal clause held by P, and thus a subsequent
change in zoning should not defeat that understanding

Is it a Deal the Law Will Enforce? Consideration

Section 1: Contract Law Reasons for Enforcing Agreements: Consideration and Consideration
Substitutes

Bargain and the Legal Concept of Consideration

1) Requirement of a Bargain
a. Except as stated in Subsection (2), the formation of a K requires 1) a bargain in which there
is manifestation of mutual assent to the exchange and 2) Consideration
b. Whether or not there is a bargain a K may be formed under special rules applicable to
formal contracts, stated in §§ 82-94 (exceptions)
2) Traditional Rule: detriment and benefit focused (no bargain)
3) §71 Requirement of Exchange; Types of Exchange (Modern Rule-“bargained for”)
a. To constitute consideration, a performance or a return promise must be Bargained For
b. 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
c. The performance may consist of
i. An act other than a promise
ii. A Forbearance
 iii. The creation, modification, or destruction of a legal relation
d. Performance or return promise may be given TO promisor or to 3 rd person. May be given
BY promisee or by some other person
4) §71 com.b: Bargained For
a. The consideration and the promise bear a reciprocal relation of motive or inducement
b. The consideration induces the making of the promise and the promise induces the
furnishing of the consideration
c. Motive/Inducement: judged by objective/reasonable standard. APPARENT MOTIVE
5) Purposes of Consideration
a. Channeling: provide an objective basis for a court to determine that the promise is
contractual, rather than generous impulse or informal expression of intent
i. Distinguish between gift and non-gift promise
ii. Formality funcion
b. Cautionary: make the parties aware that they have made a serious legal commitment
i. P aware they are “stepping into commercial realm”
ii. Limitation on free power of individuals to bind themselves as they wish
iii. Paternalistic Device—Pol: individuals should not bind themselves unless they receive
some benefit in return (or detriment on promisee)
c. Evidentiary: provide evidence of the existence and terms of a K
i. Legitimacy of the transaction: policing bargaining behavior
6) Reed v UND and North Dakota Assoc. for the Disabled: P was required to run in 10K as part of
hockey team conditioning. P signed release form---so he could run in race. During race P suffered
dehydration and severe damages to kidneys and liver
a. Hold: Valid consideration. P relinquished legal right in exchange for NDAD allowing him to
run in race.
b. Traditional Rule: if there is a bargain, ct. will enforce despite substantial difference in value
of consideration
i. Courts do not look into adequacy of consideration, simply its existence (exceptions)
c. Reasoning:
i. Surrender of legal right to sue for negligence constitutes valid consideration
ii. Precedent: payment of fee and surrender of right to sue in exchange for skydiving
constitutes valid consideration
iii. Possibility: could be unenforceable “exculpatory clause” based on Public Policy

Consideration and Family Agreements: Distinguishing between Gratuitous and Non-Gratuitous

Promises

1) General Rule: Promise to make a gift in the future is not enforceable

a. Exceptions
2) Important Distinction: Promise that is a legal detriment vs on incidental detriment/condition of
gift
a. Incidental Detriment and Condition for the use of a gift are NOT consideration
 b. Judged by reasonable standard
3) Kirksey v Kirskey: D was widow of P’s brother. D sent letter to P stating that he would give D
and her family a place to live if she moved to his land. P abandoned home and moved 60-70
miles, lived for 2 years, and then kicked out.
a. Hold: Promise not enforceable. D’s promise was mere gratuity, and lacked
consideration.
b. Rule: “Conditions to a gratuitous promise” are not valid consideration
i. Test (not dispositive): Whether happening of the condition will be a benefit to
promisor
ii. Reasonable Person wouldn’t understand condition (action) to be consideration
c. Reasoning:
i. D’s promise wasn’t motivated by getting P to move
ii. Not reciprocal in nature
iii. One could make valid argument the other way (NOT CONCLUSIVE RESULT)
4) Hammer v Sidway: P promised D (his nephew) that if he wouldn’t drink, smoke, or play cards
until he was 21 he would give him 5000 that day. P fulfilled terms and tried to collect.
a. Hold: Promise enforceable bc P had to forbear a legal right
b. Rule: Forbearance of a legal right (or restriction of future legal right) at the request of
another party is sufficient consideration for a promise
c. Reasoning
i. P used to use smoke and drink but gave them up in reliance on promise (possibility
that wouldn’t have mattered—only giving up right to do, not something you
actually do)
ii. Sufficient P restrict lawful freedom upon faith of promise
iii. Doesn’t matter whether performance actually proved a benefit to the promisor
5) Schnell v Nell: P entered into K with 3 D”s to pay each 200 bc 1) his wife materially aided him in
acquisition of all assets 2) the love and respect he had for his wife and 3) in consideration of one
cent received b him from D’s. 4)D’s also agreed o abstain from collecting an real or supposed
claim’s on P’s estate arising from wife’s will. P later refused to pay.
a. Hold: Promise not enforceable for lack of consideration.
b. Rule: A Moral Consideration Only will not support a promise
i. The consideration based on the love of P’s wife are Past Consideration, and thus
invalid bc past events can’t induce promise (no reciprocal nature)
ii. The love of a wife does not constitute consideration
c. Rule: agreement to not sue, where such claim is legally groundless, is not legally binding
i. §74: Settlement of Claims (reasonable and honest belief)
1. Forbearance to assert or the surrender of a claim of defense which proves
to be invalid is NOT consideration UNLESS
a. Claim or defense is in fact doubtful bc of uncertainty as to the
facts or the law, OR
b. He forbearing or surrendering party believes that the claim or
defense may be fairly determined to be valid
 d. Nominal Consideration Rule: 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
i. Courts don’t ordinarily look into value of consideration BUT when value of
consideration is fixed (money) the doctrine doesn’t apply
1. Great disparity is a “red flag” which helps court determine if actual
consideration occurs
ii. Nominal and “intended to be so” (intent of parties a factor)
1. Consideration allowed so long as it is intended to be “real consideration”
iii. Might be different if coin (1 cent) had been a “particular coin” which had special
value (Family piece, ancient, extrinsic value apart from money value)

Consideration and K Modification

1) General Principles
a. Traditional Pre-Existing Duty Rule
i. A parties performance or promise to perform something they are already
obligated/bound to do, does not constitute good consideration
ii. New/Separate consideration required to modify K
b. Modern Rule: §89 Modification of Executory K: A promise modifying a duty under a K not
fully performed on either side is binding
i. If modification is fair and equitable in view of circumstances not anticipated by
parties when K was made
ii. To the extent provided by statute
iii. To the extent that justice requires enforcement in view of material chance of
position in reliance on promise
1. Enforced based on reliance— action or forbearance by another
2) Hooters v Phillips: D worked at Hooters from 1989-96. P signed arbitration agreement in 1994
stating: “in consideration of the Company offering you employment, you and the company each
aggress” to resolve claims based on rules of ADR as promulgated from time to time. P alleges sexual
harassment and wants to go to trial not arbitration.
a. Hold: Not enforceable promise. D’s promise was Illusory and not valid consideration.
i. Illusory Promise: words of promise which by their terms make performance entirely
optional with the “promisor”. “Unfettered” right to decided nature or extent of
performance”
1. Consideration/Promises from both sides must be “real and meaningful”
b. Rule: §77: Illusory and Alt. Promises: A promise or apparent promise is NOT
CONSIDERATION if by its terms the promisor or purported promisor reserves a choice of alt.
performance UNLESS
i. Each of the alternative performances would’ve been consideration if it alone had
been bargained for, OR
 ii. 1 of the alternatives would’ve been consideration and there is or appears to the
parties to be a substantial possibility that before the promisor exercises his choice
events may eliminate alternatives which would not have been consideration
c. Reasoning
i. While consideration for one party’s promise to arbitrate is the others to do the
same, this was NOT the case here
ii. P (Hooters) had right to “modify, in whole or part” the agreement at any time, w/o
notice
iii. P could cancel agreement at any time
iv. Several other procedural rights given only to Hooters (inadequacy of consideration)
3) Alaska Packers’ v Domenico: D hired Ps to work as fishermen. When P arrived they stopped
working unless salary increased. D agreed, but later refused to pay increased salary.
a. Hold: D’s promise is unenforceable for lack of consideration bc it as based soley on P’s
agreement to render the exact services, and none other, than they were already under K to
do
b. Pre-Existing Duty Rule: A promise to do what one is already obligated himself to do is
unenforceable for lack of consideration
c. Reasoning:
i. P’s had no “valid cause” to breach (ct. rejected bad nets argument)
ii. P already agreed to be fishermen for specified time-gave no NEW CONSIDERATION
iii. P’s did have any new responsibilities
iv. “Impossible” for D to find replacements under circumstances (short fishing season,
location of boat, etc.)
4) Angel v Murray: Maher entered into 5 year K to dispose of waste. 3 years later he requested
10,000/year raise bc of 400 new dwellings (unexpected). P agreed, and D (citizen) filed suit for
illegal payments.
a. Hold: Valid K modification. Modifications of performance Ks should be enforced when
modification is due to unexpected difficulties as long as parties voluntarily agree
b. Rule: §89: A promise modifying a duty under a K not fully performed on either side is
binding if it is
i. Fair and equitable in light of circumstances not anticipated when K was formed
ii. Voluntary
iii. Promise modifying K is made before K fully performed on either side
c. Rule: UCC 2-209(1): an agreement modifying a K needs no consideration to be binding”
i. Must meet test of “good faith”: in the case of a merchant means honesty in fact and
the observance of reasonable commercial standards of fair dealing in the trade.
ii. No coercion
d. Reasoning
i. No doubt city voluntarily agreed to modify the K
ii. 3 years into K so not fully performed on either side
iii. 400 unites “went beyond any previous expectation”
1. Increase was substantial
 iv. Circumstances were beyond Maher or D’s control, “and thus unanticipated”
5) Pre-Existing Duty vs Modern Rule (Rest. And UCC)
a. Changed emphasis from “was their consideration” to “was there duress”
i. Better measure to see if goals of K modification were reached
ii. Addresses true concerns of party
iii. Got rid of problems involved in “recission theory”—had to be released (even
momentarily) from old K before entering into new K

Consideration Substitutes

1) Promise + Prior Benefit Conferred

a. Ex: A helps B out during difficult period. After recovery grateful B tells A “I promise to
repay”
i. Under Traditional K theory promise enforceable: “past consideration” is not god
consideration—no mutuality of promises
ii. Modern:
2) Promise + Un-bargained For Reliance

Restitution
1) Unjust Enrichment: cause of action that gives rise to the remedy of Restitution
2) Quasi K: implied-in-law agreement that rests on theory of unjust enrichment
a. Pol: prevent unjust enrichment
b. Remedy is Restitution
3) Restitution
a. A person who has been unjustly enriched at the expense of another is required to make
restitution to the other”
b. Unjust Enrichment:
c. Enrichment: economic benefit (benefit received or cost avoided)
d. Unjust: 1) Intent to charge (not gratuitous) 2) not imposed (request, emergency, acceptance)
i. Rule: One who w/o intent to act, confers a measurable benefit upon another, is entitled
to restitution if:
1. He gives the other an opportunity to decline the benefit, or
2. Has reasonable excuse for failing to do so
ii. IF the other refuses to receive the benefit, he is not required to make restitution unless:
the actor justifiably performs for the other a duty imposed upon him by law
1. Rest: “officious intermeddler”- interference in affairs of others not justified by
the circumstances---NO RESTITUTION
e. Purpose of Restitution: independent theory of liability in cases when no K has come into
existence, either bc:
i. Something went wrong or failed to happen in process of formation, or
ii. Parties simply did not attempt to make a K
 1. Also plays a role when Valid K breach---See Damages Section
iii. Goal: Restoration of Enrichment
iv. Focus of Remedy: disgorgement of the value of what was received

4) Quasi-K cases: Restitution in cases when no K interaction occurred

5) Schott v Westinghouse Electric Co.: D created a suggestion program for employees, stating if
suggestion adopted awards would be given. P submitted an idea, which was reject, and then
resubmitted. On 2nd try D told P they were already doing a similar study, independent of his
suggestion.
a. Hold: Yes. P has stated a valid cause of action in unjust enrichment
b. Rule: Quasi-K may be found in the absence of any expression of assent by the party to be
charged and may indeed be found in spite of party’s contrary intention
c. Reasoning:
i. Unjust: requested by the D
ii. Enrichment: Possibility that P’s suggestion would save company costs
iii. P made suggestion ungraciously (wanted reward)
iv. Type: 1)Restitution when a benefit conferred on the strength of a promise without
consideration (no consideration bc promise was illusory) or 2) Restitution in cases when
no K interaction occured
6) Cable Vision of Breckenridge v Tannhauser Condo. Assoc: P provided cable TV to 33 of D’s
properties, which D paid for. Later P stopped billing all but 3 condos at request of D. D attached
their own amplifier so all condos still received service despite cancellation.
a. Hold: P have valid claim for unjust enrichment. D breached K implied in law.
a. Rule: To recover for unjust enrichment a P must show:
i. A benefit was conferred on the D by P
ii. Benefit was appreciated by the D
 iii. It would be inequitable for it to be retained w/o payment
1. Application doesn’t depend on existence of K, but on need to avoid unjust
enrichment, notwithstanding the absence of actual agreement
b. Reasoning
i. P conferred benefit by saving D from having to pay for cable (cost avoided)
1. Benefit: “any form of advantage”
ii. P never intended to allow D to retain benefit without payment: common practice to pay for
cable TV, D did so pay previously (non-gratuitous)
iii. Restitution appropriate to avoid unjust enrichment to D
iv. Damages based on K rate—what D would’ve paid for all condos to have service
7) Moral Obligation: Restitution when a promise is based on Prior Benefit
a. Promisor received benefit and made moral obligation/promise afterwards to pay
b. Traditional Rule: “past consideration” is not good consideration
i. Pol: don’t want people forced to pay for benefits “thrust” upon them without there
consent
ii. Traditional Exceptions: (now in §82)
1. Revival of debt obligation where recovery has been barred by statute
2. Promise o pay obligation that has been “discharged” under bankruptcy
3. Promise of infant to pay obligation, upon reaching adult age
c. Modern Rule: §86 Promise for Benefit Received: 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, if (rephrased in the affirmative)
i. Promisor has been unjustly enriched by a benefit previously received
ii. Benefit was not given as a gift (com. D- recipient/promisor has burden of showing benefit
was gratuitous)
iii. Promisor SUBSEQUENTLY makes a promise in recognition of the benefit
8) Harrington v Taylor: D’s wife was about to cut his head open with an axe when P intervened and
axe struck her had, mutilating it badly. Subsequently, D promise to pay P damages.
a. Hold/Rule: A humanitarian act of this kind, voluntarily performed, is not consideration as
would entitle her to recover at law (Traditional Rule)
9) Mills v Wyman: P paid for care of D’s son when he returned home sick from sea voyage. After
payments had been made by P, D sent letter promising to reimburse P for taking care of his son. D
never paid P.
a. Hold: No K. K lacks valid consideration bc moral consideration is not legal consideration.
b. Rule: Moral consideration is only sufficient when there was:
i. Pre-existing obligation which had become inoperative under law and
1. Good consideration given at some previous time
ii. Which is voluntarily revived
c. Reasoning:
i. No intent to charge (gratuitous promise)—can’t recover under unjust enrichment
ii. No mutuality of promises—benefit wasn’t bargained for (past consideration)
 iii. D received no benefit and was relieved of no legal duty, so promise was a naked promise,
which is not enforceable under common law
iv. Need consideration to separate enforceable and unenforceable promises
10) Webb v McGowin: P threw his body at falling pine block to save it from injuring D. P seriously
injured. D later promised to pay P 15/two weeks for rest of P’s life. D’s estate refused to cont. pay.
a. Hold: K valid. Benefit to promisor and/or injury to promisee + Subsequent Promise= Valid
Consideration
b. Rule: Moral obligation as consideration allowed when: 1) promisor has received material
benefit from the past act of the promisee (even though there was no original duty or
liability)2) promisor subsequently promises to pay for said “material benefit”
c. Material Benefit Rule (§86): Promise made for benefi previousy received is binding to the
extent necessary to prevent injustice
i. Not binding if:
1. Promisor conferred benefit as gift or promisor as not been unjust enriched
2. To the extent that its value is disproportionate to the benefit
d. Reasoning:
i. If time had allowed, same agreement would have been reached
ii. Saving of life was clearly a “material benefit”
11) Reliance and Promissory Estoppel
a. Basic Elements: (Promise + Detrimental Reliance)
i. Promise + Reasonable expectation by promisor that it will induce reliance (objective)
ii. Inducement of action or forbearance
1. (must be justified/reasonable)
2. (cause and effect relationship)
iii. Injustice can be avoided only be enforcement
iv. Limit on relief: (based on nature and extent of promisee’s reliance)
b. §90 Promise Reasonably Inducing Action or Forbearance
i. A Promise which the promisor should reasonably expect to induce action or forbearance
on the part of the promisee or a 3rd person and which does induce such action or
forbearance is binding if injustice can be avoided only by enforcement of the promise.
Remedy may be limited as justice requires
1. Promisor only liable for reliance which he does (subjective) or should
(objective) foresee
ii. Exception: Charitable subscription or marriage settlement is binding without proof of
action or forbearance
12) Ricketts v Scothorn: D wrote P (grand-daughter) note stating he would give her 2,000 at 6% per
anum, bc “none of his grand-daughters had to work and neither should she”. P quit her job. 2 years
later D died after having paid only 1 yrs. Int. note.
a. Hold: Valid claim for promissory estoppel
b. Rule: When promisee changes his position to his disadvantage in reliance on the promise, a
right of action does arise
 c. Reasoning:
i. D unquestionably made promise to pay
ii. P had job before, and suffered detriment by quitting job
iii. Statement “none of my other grand-daughters work” made it reasonable that gift would
induce P to quit job
1. Not a condition but a likely consequence
iv. “It would be grossly inequitable to permit the promisor, to resist payment on the ground
that the promise was given without consideration” (injustice avoided)
13) Katz v Danny Dare: P worked for D. D wanted to get P to retire so D offered 10,000/year pension, P
initially rejected (wanted to work), but after 13 months accepted 13,000 per year. D later breached
by only sending 250 instead of 500 bi-weekly check.
a. Hold: Valid claim for promissory estoppel, DESPITE the fact that P could have been fired at
anytime
b. Rule: Forbearance doesn’t have to be legal right
i. Voluntarily retiring constitutes “detrimental reliance” even if employee was “at will” and
could be fired summarily
c. Reasoning
i. P was not fired but voluntarily retired based on promise
ii. P gave up about 10,000 per year (23,000 salary – 13,000 retirement package)-detriment
iii. Conceded that D intended that P rely on its promise and P did rely
iv. Payments continued for 3 years
v. 13 month bargaining period (indicates benefit to D)

Reasons Not to Enforce Agreements: Illegality and Pub. Pol.

1) §178: When a term is unenforceable on Grounds of Public Policy

a. A promise or other term f an agreement is unenforceable on grounds of public policy if 1)
legislation provides that it is unenforceable or 2) the interest in its enforcement is clearly
outweighed in the circumstances by a public policy against the enforcement of sucht erms
b. In weighing the interests in the enforcement of a term, account is taken of
i. The parties’ justified expectations
ii. Any forfeiture that would result if enforcement were denied, and
iii. Any special public interest in the enforcement of the particular term
c. In weighing a public policy against enforcement of a term, account is take of
i. The strength of that policy as manifested by legislation or judicial decisions
ii. The likelihood that a refusal to enforce the term will further that policy
iii. The seriousness of any misconduct involved and the extent to which it was deliberate,
and
iv. The directness of the connection between that misconduct and the term
2) §181 Effect of Failure to Comply with Licensing or Similar Requirement: If a party is prohibited from
doing an act bc of his failure to comply with licensing, registration, or similar requirement: a promise
 in consideration of his doing that act or of his promise to do it is unenforceable on grounds of public
policy IF:
a. The requirement has a regulatory purpose, and
b. The interest in enforcement of the promise is clearly outweighed by the public policy behind
the requirement
3) Sources of Public Policy (Corbin)
a. Legislation- Statutes and Constitutions
i. Regulations and ordinances (but given less weight)
b. Common Law Precedent
i. Must determine if same public policy is still present (change time)
c. Prevailing practices and notions of the community as to what is in the interest of the general
welfare (Common Good)
i. Change in time/values is key issue
4) Rationales for not enforcing
a. Deterrence: Discourage problematic beavhior
b. Not appropriate use of court’s time and resources: “no polluted hand shall touch the pure
fountains of justice”
i. “In pari delicto”
5) RR v MH: P hired D to be surrogate mother. K stated “natural father (P) would be given full legal
parental rights upon birth.” P agreed to pay mother 10,000 + costs. D later changed her mind and
decided she wanted to keep child, but didn’t return previous payments (4,000).
a. Hold: No K. The statutory prohibition of payment for receiving a child through adoption
suggests that, as a matter of policy, a mother’s agreement to surrender custody in exchange
for money should be given no effect in deciding the custody of the child.
b. Rule: K’s which violate pub. Pol. Intent behind statues will not be allowed
i. Payment for relinquishing custody rights before birth not valid on pub. Pol. Grounds
c. Reasoning:
i. Mass. Statute barred relinquishment of custody/adoption rights until 4 th day after birth
ii. Ct. interpreted policy behind statute to be given substantial weight to allowing mother
to have time after child’s birth to reflect on wishes for child
iii. Stautory prohibition of reciving a child through adoption by payment
iv. Pol interest in preventing desperate mothers from being “forced” into using their body
for pregnancy
v. Above polices outweigh Freedom of K and Ability to use body in any method of choice
6) Hanks v Power Ridge Restaurant Corp.: (Exculpatory Clause) P seriously injured while snowtubing
on at D’s resort. P had signed “exculpatory clause” stating P would not hold D liable “for an and all
claims arising from use of Power Ridge, including negligence”
a. Hold: The exculpatory clause here violates public policy and is unenforceable
b. General Rule (corbin): The general rule of exculpatory agreements is that a party may agree
to exempt another party from tort liability if that tort liability results from ordinary
negligence. Courts do not enforce agreements to exempt parties from tort liability if the
liability results from that party's own gross negligence, recklessness, or intentional conduct
 c. Rule: In determining whether an exculpatory agreement violaes public policy, no exact
formula exists, therefore determination must be made by considering the totality of the
circumstances in any given case against the backdrop of current societal expectations
d. Six-Factor Analysis (corbin): Six factors guide courts in deciding whether a pre-injury
exculpatory agreement violates public policy: (1) the transaction concerns a business of a
type generally thought suitable for public regulation; (2) the party seeking exculpation is
engaged in performing a service of great importance to the public, which is a matter of
practical necessity; (3) the party holds himself out as willing to perform the service for any
member of the public who seeks it; (4) as a result of the essential nature of the service,
the party invoking exculpation possesses a decisive advantage of bargaining strength
against any member of the public who seeks his services; (5) in exercising a superior
bargaining power, the party confronts the public with a standardized adhesion contract and
makes no provision whereby a purchaser may pay additional reasonable fees and obtain
protection against negligence; (6) as a result of the transaction, the person or property of
the purchaser is placed under the control of the seller, subject to the risk of carelessness by
that party or that party’s agents
e. Reasoning
i. Pub. Pol. Inerests Against: 1) Societal expectation that family oriented recreational
activities will be reasonably safe, 2) P lacked knowledge to discern and ensure that land
was in a reasonably safe condition 3) unequal bargaining power (K of adhesion) 4) P
was under care and control of Ds and at risk of D’s carelessness 5) clause wasn’t limited
to ordinary negligence (any and all) INEREST IN TORT LIABILITY
7) Valle Medical Specialists v Faber: (Restraint of Trade—Non-Compete) D (DR.) entered into
employment K containing non-compete clause with P. D left P’s practice and began practicing
within area, time, and type of P’s office.
a. Hold: Unenforceable. Restrictive covenant was too broad and outweighed by public policy
concerns.
b. Rule: Restraint of trade must be reasonable based on the circumstances
i. Unenforceable if: (balancing test)
ii. 1) restraint is greater than necessary to protect the employer’s legitimate interests, or
2) if that interest is outweighed by the hardship to the employee and the hardship to
the employee and the likely injury to the public
c. Reasoning:
i. P has legitimate interest in retaining customer base
ii. 3 year period unreasonable bc pulmonologist patients have to have treatment every 6
months, so 6 months would make them decide whether or not to transfer
iii. Unreasonable bc not limited to “pulmonolgy” but all practice
iv. 3 miles of ANY office unreasonable bc restriction covered more than 235 sq. mi.
v. Significant public interest in allowing patients to get treatment for doctor of their
choice—best medical care
Unconscionability
1) Generally
a. Unconscionability: The use of a significant imbalance in bargaining power to receive
unreasonably one sided contractual terms
b. Factors/Elements:
i. Procedural Unconscionability: an absence of meaningful choice on buyer’s part
ii. Substantive Unconscionability: K terms that are “unreasonably favorable” to one side
c. UCC §2-302: Unconscionable K or Clause
i. If the court, as a matter of law, finds the K or any clause of the K to have been
unconscionable at the time it was made the court may refuse to enfoce he K, or it may
enforce the remainder of the K w/o the unconscionable clause, or it may so limit the
application of ay unconscionable clause as to avoid any unconscionable result
ii. When it is claimed or appears to the court that the K or any clause thereof may be
unconscionable the paries shall be afforded a reasonable opportunity to present
evidence as to is commercial setting, purpose and effect to aid the court in making the
determination
1. Com. B: Basic Test: “is whether, in light of the general commercial background
and the commercial needs of the particular trade or case, the clauses involved
are so one-sided as to be unconscionable under the circumstances existing at
the time of making the K”
2. Aim: to prevent “oppression and unfair surprise”
d. UCC §2-208: Unconscionable K or Term
If a K or term is unconscionable at the time K is made a ct. may refuse to enforce the K, or
may enforce the remainder of K w/o unconscionable term, or limit application of any
unconscionable terms as to avoid any unconscionable result
i. Disparity in 1) bargaining power or 2) value of consideration alone is not sufficient to
void K for unconscionably (strong evidence)
ii. Key: Did more powerful party abuse its power (procedural)----- to impose unfair
contractual terms (substantive)
2) Williams v Walker-Thomas Furniture Co.: P had continuous dealing with D where she purchased
items on credit. Credit K contained “cross collateralization” clause, where D kept some balance on
all items until completely eliminated. P bought stereo, and later could make payments. D reposed
goods.
a. Hold: Ct. has authority to deem K unenforceable if it was unconscionable at time it was
made. Needs remand to review possible Unconscionability. (likely)
b. Rule: UCC 2-302: Ct. may refuse to enfrce or limit enforcement of K it finds
Unconscionability at time K was formed
c. Unconscionability: 1) Procedural Unconscionability and 2) Substantive Unconscionability
i. Procedural (Absence of meaningful choice factors): 1) disparity in bargaining power, 2)
“unfair surprise”—manner in which K entered into, 3) reasonable opportunity to
understand terms in light of education or lack there of
 d. Reasoning:
i. Found UCC-302 to be persuasive authority
ii. Ct. found method around traditional “duty to read” where party didn’t actually assent
bc of 1) lack of choice and 2) little to no understanding of terms they were signing
3) Discover Bank v Superior Court.: P sent members a “change of terms” agreement prohibiting class-
wide arbitration in a “bill stuffer”. D alleged new terms unconscionable bc class-wide arbitration
was only cost-effective measure to sue P for fraudulent fee collecting.
a. Hold: Yes, such one-sided, exculpatory Ks in a K of adhesion, at least to the extent they
operate to insulate a party from liability that otherwise would be imposed under law, are
generally unconscionable
b. Rule: §208 Rest.:
c. Reasoning:
i. Procedural Uncons.: Found where agreement was in “bill stuffer” and would be
deemed to accept if he did not close his account (adhesion)
ii. Substantive: effectively deprived D of remedy by closing off only cost efficient measure
to pursue “fee collection” claims
1. One-sided: P would never really sue all its customers in class action (no limit on
them)

Breach

Material Breach and Substantial Performance

1) §237: Effect on Other Party’s Duties of a Failure to Render Performance
Except as stated in §240 (part perf. Or agreed equivalents) it is a condition of each party’s
remaining duties to render performances to be exchanged under an exchange of promises that
there be no uncured material failure by the other party to render an such performance due at
an earlier time
a. Effect: it prevents performance of non-breaching parties duties from becoming due, at
least temporarily, and discharges hose duties if it has not been cured during the time in
which performance can occur
2) Types of Breach
a. Total/Material: Promisee may 1) withhold performance, 2) terminate, 3) claim full
damages for breach
b. Material but not total: (could become material in time if not cured) 1) Suspend
performance, 2) Await Cure, 3) Claim compensation for any loss suffered
c. Not Material (Substantial Performance): 1) Claim compensation for any loss suffered
3) Material/Total Breach: promisee’s expectations completely dashed, Lost Essence of Bargain
a. §241 Circumstance Significant in Determining Whether a Failure is Material
 i. Extent to which the injured party will be deprived of the benefit he reasonably
expected
ii. Extent to which the injured party can be adequately compensated for the part
of that benefit of which he will be deprived
iii. The extent t which the party failing to perform or to offer to perform will suffer
forfeiture
iv. Likelihood that party failing to perform or to offer to perform will cure his
failure, taking account of all circumstances, including reasonable assurances
v. Extent to which the behavior of the breaching party comports with standards of
good faith and fair dealing (willfulness)
4) Breach Under the UCC
a. §2-601Buyer’s Right on Improper Deliver: “perfect tender rule”
i. If goods or the tender of delivery fail in any respect to conform to the K, the
buyer may
1. Reject the whole, or
2. Accept the whole, or
3. Accept any commercial unit or units and reject the rest
b. §2-508 Cure by Seller
i. If within K time for deliver: seller may notify buyer of his intention to cure and
then make conforming delivery
ii. Where buyer rejects and seller had reasonable grounds to believe goods would
be accepted with or without money allowance the seller may if he seasonably
notifies the buyer have a further reasonable time to substitute conforming
tender

c. (E &E): Breach is so central to the K that it substantially impairs its value

i. Value
ii. Proportion to performance as a whole
1. Must consider entirety of exchange and decide if defect is a significant
part of the consideration bargained for by performance
5) Gibson v City of Cranston: P hired as chief admin. for school district. D failed to provide P with
evaluations as stipulated in K and restricted P from Committee reviewing improper pyames to
committee member. P quit and sued for breach of K by D.
a. Hold: D’s breaches were NOT material as they didn’t “go to the essence of the K”. P
cannot recover.
b. Rule: Material breach of employment K must be so important that it makes continued
performance by P virtually pointless
c. Rule: §241 Factor of Material Breach:
i. Non-breaching party deprived of benefit reasonably anticipated
ii. Non-breaching party can be adequately compensated for benefit of which
deprived
iii. Extent of forfeiture for breaching party
 iv. Likelihood breaching party will cure failure
v. Extent breaching party comports with “good faith and fair dealing”
d. Reasoning:
i. P’s job included vast array of functions, of which P’s complaints were only a
small part
ii. 7 of 9 committee members gave feedback in some form
iii. D (committee) had scheduled meeting to evaluate P’s performance (cure)
6) Jacobs & Youngs v Kent: P hired D to build house for 77,000. Construction K included clause
stating all pipe to be “Reading Pipe”. D completed building, but P learned much of the pipe used
was not Reading pipe. D sued for remaining 3,483. 46 due on K---P refused to pay
a. Hold: P’s breach was NOT material. Installatoin of the pipe was NOT a condition to K,
but a promise. (condition to K would result in discharge of P’s duty to pay)
P substantially performed and thus D can only recover difference in value between
pipes, which would be effectively nothing.
b. Rule: When breaching party substantially performed the non-breaching party is entitled
to the cost of completion UNLESS the cost of completion is grossly and unfairly out of
proportion to the good to be attained
c. Reasoning:
i. P’s error was not willful (unintentional and trivial)
ii. Difference in market value of pipes was very small (insignificant) while cost of
replacement would require tearing apart much of the house---extremely costly
(economic waste)
1. 2 ways to measure damages in case of substantial performance
a. Cost of completion—usual/normal rule
b. Difference in value—when cost of completion would result in
unreasonable forfeiture and economic waste
7) OW Grun Roofing & Construction Co. v Cope: D entered into K with P to install new roof of
uniform color for $648. Completed roof was not of uniform color, D failed to cure defect, and
evidence showed uniform color roof can be achieved only by installing a completely new roof.
a. Hold: P-full recovery. No substantial performance. A roof which lacks uniformity in
color does not serve substantially the same purpose as a roof of uniform color
b. Rule: Substantial Performance Requires:
i. D in good faith intended to comply with K
ii. Has substantially complied with K in the sense that defects are not so pervasive
as to constitute a deviation from the general plan contemplated for the work
(significance of breach)
iii. Deviations are not so essential that object of parties in making the K (Intent)
and its purposes cannot w/o difficult be accomplished by remedying hem
c. Reasoning:
i. In matter of homes and their decoration, more than in other fields, mere taste
and preference may be controlling, and homeowner cannot be compelled to
accept something else
 1. P bargaining for mental satisfaction and look of house, not just a
serviceable roof----therefore D did not substantially perform
ii. Recovery of “some damages” under “substantial performance” won’t remedy
problem bc only adequate fix is a whole new roof

Divisible Ks and Part Performance

1) §240: Part Performance as Agreed Equivalents
If the performances to be exchanged under an exchange of promises can be apportioned into
corresponding pairs of part performances so that the pairs of each pair are properly regarded as
agreed equivalents, a party’s performance of his part of such a pair has the same effect on the other’s
duties to render performance of the agreed equivalent as it would’ve if only that pair of performances
had been promised.
Com A: “reduces risk of forfeiture”. Breach of one part doesn’t precluded obtaining consideration for
another portion of the K.
2) Must Determine if K is divisible or if it is “contract in its entirety”
a. Look at intent of parties (purpose of K—series vs individual)
b. Look at substance of K and how K was made

Anticipatory Breach and Adequate Assurances

Repudiation: A definite and unequivocal manifestation of intention on the part of the repudiator that
he will not render the promised performance when the time fixed for it in the K arrives

Restatement
§250: When a Statement or an Act Is a Repudiation: A repudiation is
a) A statement by the obligor to the oblige indicating that the obligor will commit a breach that
would of itself give the obigee a claim for damages for total breach under §243(Material Breach)
(Express repudiation)
b) A voluntary affirmative act which renders the obligor unable or apparently unable to perform
without such a breach (Implied Repudiation)
a. Nature of Statement: In order to constitute a repudiation, a party’s language must be
reasonably interpreted to mean that the party will not or cannot perform. Mere
expression of doubt is not enough.
§251: When a Failure to Give Assurance May Be Treated as a Repudiation
1) Where reasonable grounds arise to believe the obligor will commit a breach by nn-performance
that would itself give rise to obliges claim for total breach, the oblige may demand adequate
assurance of due performance and may, if reasonable, suspend any performance for which he
has not already received the agreed exchange until he receives such assurances
 2) Obligee may treat oblior’s failure to provide assurances within a reasonable time as a
repudiation

§253: Effect of Repudiation

1) Where obligor repudiates a duty before he has committed a breach by non-performance and
before he has received all of the agreed exchange for it, his repudiation alone gives rise to a
claim for damages for total breach
2) Were performances are to be exchanged under an exchange of promises, one party’s
repudiation of a duty to render performance discharges the other party’s duties t render
performance
§255 Nullification of Repudiation
1) Repudiation or failure to give adequate assurances is nullified by a retraction of the repudiation
if it comes to the attention of the injured party before he materially changes his position in
reliance on the repudiation or indicates he considers the repudiation final

UCC
§2-610 UCC: Anticipatory Repudiation
When either party repudiates the K with respect to a performance not yet due the loss of which will
substantially impair the value of the K to the other, the aggrieved party may
a) Await performance by repudiating party for a commercially reasonable time
b) Resort to any remedy for breach (2-703 or 2-711)
c) In either case suspend his own performance or proceed in accordance with the provisions of this
Article on the seller’s right to identify goods to the K notwithstanding breach or to salvage
unfinished goods (2-704)
§2-609 Right to Adequate Assurance of Performance:
1) When reasonable grounds for insecurity arise with respect to the performance of either party
the other may in writing demand adequate assurance of due performance AND until he receives
such assurance may if commercially reasonable suspend any performance for which he has not
already received the agreed return
2) After receipt of a justified demand—failure to provide assurances within a reasonable time NOT
EXCEEDING 30 DAYS is a repudiation of the K
§2-611 Retraction of Anticipatory Repudiation
1) Until repudiating party’s next performance is due he can retract his repudiation unless the
aggrieved party has since the repudiation cancelled or materially changed his position or
otherwise indicated that he considers the repudiation final

Cost of Cover Rule: UCC 2-708: Difference between the K price and “the market price at the time and
palce for tender”
Duty of Innocent Party to Mitigate Damages Innocent party in case of an anticipatory repudiations
owes a duty to mitigate the damages arising from the repudiation. If she fails to do so, she is not
entitled to recover the damages she could have otherwise avoided.

1) Hockhester v De La Tour: D hired P to accompany him on tour starting June 1. Laater, D wrote to P
saying he changed his find, and refused to pay P. P brought suit for breach of K, and D argued he
couldn’t breach until June 1 when K was to start
a. Hold: P can recover. No need to wait until June 1 to seek remedy.
b. Rule: A repudiation by the promisor dispenses with the condition precedent to the
promisee’s promise to perform, and thus can sue immediately for breach of K
c. Rule: P may wait til time act K was to be performed or sue immediately upon repudiation
i. If they wait they leave themselves open to 1) retraction and 2) claim for failure to
mitigate damages
d. Reasoning
i. In a K for future performance there is a relationship created b/w parties, that they
impliedly promise that in the meantime neither will do anything to prejudice the other
inconsistent with that relation
ii. Pol: Unreasonable to make P wait for a job the other party has told them they no longer
have. Option to sue now or wait until actual breach should be given to innocent party
iii. Pol; Both parties benefit, bc P can get a new job which mitigates damages D would
otherwise have to pay
2) Truman L. Flatt and Sons v Schupf: P entered into K in which D agreed to sell P land for 160,000
conditioned on P getting city to rezone land. P wrote letter, later, saying no chance of rezoning and
that D but D would buy land as zoned for 142,500. D rejected and then P wrote back stating
intention to purchase land at initial price 160,000, but D refused to sell.
a. Hold: 1) Letter was not repudiation as a matter of law (should’ve gone to jury) 2) Even if it
was repudiated P had retracted its repudiation
b. Rule: Repudiating party may retract repudiation unless 1) aggrieved party has materially
changed his position in reliance on repudiation 2) has indicated to the repudiating party he
considers the repudiation final
c. Reasoning
i. D admitted they had not discussed, considered or entered into another agreement to
sell property (no change in position)
ii. D’s gave no notice to P that they considered offer for 142,500 a final repudiation
iii. Pol: Allowing aggrieved party to treat K as terminated w/.o notice would effectively
eliminate doctrine of retraction
3) Norcon Power Partners v Niagara Mohawk Power Corp. (Adequate Assurances): 1989 D entered
into25 year K to purchase electricity from P, with “avoided cost credit system” based on market
rate. 1994 D sent P letter showing P was likely to owe $610 million to D and wanted “adequate
assurance” that P could fully perform (pay). P sued seeking injunction declaring D had no right to
seek “adequate assurances” and to prevent D from terminating K
 a. Hold: P had right to seek “adequate assurances” and failure to provide them was a
repudiation.
b. Rule §2-609: When reasonable grounds for insecurity arise with respect to performance of
either party the other may demand adequate assurance of due performance and until he
receives such assurance may suspend performance (right to withhold—then breach if not
assured)
i. Failure to provide, within a reasonable time not exceeding 30 days, such assurance of
due performance is a repudiation of the K
c. §251 Rest: modeled after UCC 2-609:
d. Reasoning
i. Ct. analogized to UCC bc sale of electricity so closely mirrors sales of goods, only
difference is electricity not tangible
ii. Mitigates damages (eliminates some of the catch-22 when unsure if others actions
constitute a repudiation)
iii. Particularly persuasive in long-term K (like this) where potential consequences of failure
to perform could be enormous

Money Damages
1) §344 Purposes of Remedies
a. Expectation Interest: Injured parties interest in having the benefit of his bargain by
being put in as good a position as he would have been in had the K been performed
b. Reliance Interest: Injured parties interest in being reimbursed for loss caused by reliance
on the K by being put in as good a position as he would have been in had the K not been
mad, or
c. Restitution Interest: Parties interest in having restored to him any benefit that he has
conferred on the other party

Expectation Interest: Compensatory Damages

1) §347 Measure of Damages in General
Subject ot limitation in §350-53 the injured party has a right to damages based on expectatoin
interest as measured by
a. The loss in value to him of the other party’ performance casued by its failure or
deficiency, pl;us
b. Any other loss, including incidental or consequential loss, casued by the breach, less
c. Any cost or other loss avoided by not having to perform
i. Formula: (Loss in Value +Other Loss) – (Cost Avoided + Loss Avoided)
1. Loss in value= What P got – What P was promised
2. Other Loss= Incidental Damages
3. Cost Avoided= Money saved by not having to complete performance
 4. Loss Avoided (mitigation)= reselling of materials/finding new job
2) UCC 2-712 “Cover” Buyer’s Procurement of Substitute Goods
a. After a breach, the buyer may “cover” by making in good faith and without
unreasonable delay any reasonable purchase of or K to purchase goods in sub. For those
due from seller
b. Buyer may recover from seller the difference between “cost of cover” and K price +
incidental or consequential damages, but less expenses saved
c. Failure of buyer to effect cover does not bar him from any other remedy
i. §2-715.2: Consequential damages limited from to those which buyer could not
have reasonably prevented by cover (mitigation)
3) Generally
a. Standard method of measuring promise damages
b. Designed to give aggrieved party the “benefit of their bargain”
c. Usually the most generous
4) Hawkins v McGee: P hired D for surgery on his had. D “guaranteed” he would make hand 100%
perfect. Operation went horribly and P ended up with deformed and restricted hand. TC
allowed jury to award damages for “pain and suffering”
a. Hold: TC instruction was erroneous bc it allowed for pain and suffering
b. Rule: Not purpose of K law to award punitive damages
c. Rule: The measure of the vendee’s damages (D) is the difference b/w the value of the
goods as they would had been if the warranty as to quality had been true, and the
actual value at the time of the sale, including gains prevented and losses sustained, and
such other damages as could be reasonably anticipated by the parties as likely to be
caused by the vendor’s failure to keep his agreement, and could not by reasonable care
on the part of the vendee have been avoided
d. Reasoning
i. K law designed to put P in position he would’ve been if D kept his K (not to
punish)
ii. P only entitled to difference in value of good had and hand in current state
5) Leingang v Mandan Weed Board: D hired P to cut weeds on large lots. P learned D was
improperly assigning large lots by assigning some to another contractor. P sued for breach. D
argues TC should’ve subtracted % of overhead cost from P’s damages
a. Hold: P entitled to damages for full amount of detriment caused, and constant overhead
expenses are not deducted from K price
b. Rule: Damages are only reduced by expenses “actually saved” because K did not have
to be performed
i. Fixed costs not subtracted from damages
c. Reasoning
i. Cost saved must be tied directly to breach
ii. Fixed Costs (overhead) have to be paid regardless of whether D breached, so
subtracting them from damages would be making P pay them twice
 iii. “Net profits” approach used by TC was improper and not necessary bc evidence
clearly showed exact costs (not estimate needed)
d. Exception: Lost Volume Seller
i. LVS: can out-supply market (need to include overhead expenses in damage
calculation)
ii. LVS and mitigation: don’t deduct loss avoided by resale bc seller could’ve made
sale anyways
6) Groves v John Wunder Co.: P leased land to D. K stated D was to remove sand and gravel on
property and leave property “at a uniform grade”. D willfully breach and left ground broken and
rugged. Cost to complete work= 60,000 but Increase in Property Value of Work= 12,160
a. D arg: “dimunition in value”-----P arg: cost of completion
b. Hold: P entitled to cost of completion—“substitute services”—60,000
c. Rule: Absent “economic waste” the method for calculating damages is the “reasonable
cost of completion”
d. Reasoning:
i. No “economic waste” because no work had been done
1. Particularly applicable only when remedy would requiring undoing work
or tearing down structure (not improvement K)
ii. D’s breach was willful
iii. Tort v K damages
1. Tort: compensation for deterioration in value caused by tort
2. K: damages valued from peak of “accomplishment” not “value”-
iv. Could view as restitution problem: P paid in advance and was seeking
reasonable FMV of benefit conferred (60,000)

Limitation on Money Damages

1) Unforseeability
2) Certainty
3) Avoidability/Mitigatoin
4) Causation

Unforseeability

1) Direct Damages: damages that directly tie to benefit of bargain (cost of sub. or lost gains under
K)
a. Easily attributable
2) Consequential Damages: Loss that do not flow directly and imediatley from the injurious act but
that result indirectly from the act
a. Further losses in other transaction that were dependent upon the K
3) §351 Unforseeability and Related Limitations on Damages
a. Damages are not recoverable for loss that the party in breach did not have reason to
foresee as a probable result of the breach when the K was made
 b. Loss may be forseeable as a probable result of a breach bc it flows from the breach
i. In the ordinary course of event, or
ii. As a result of special circumstances, beyond ordinary course of events, that
party in breach had reason to know
4) UCC 2-715: Buyer’s Incidental and Consequential Damages
a. Consequential damages resulting from the seller’ breach include
i. Any loss resulting from general or particular requirement and needs of which
the seller at the time of contracting had reason to know and which could not
reasonably be prevented by cover or otherwise, and
ii. Injury to person or property proximately caused by breach of warranty
1. Tacit agreement test rejected
5) Hadley v Baxendale: P ran mill, which had to stop bc of broken crank. P hired D to have crank
delivered of repairs, and told D mill was stopped and shaft must be delivered immediately.
Delivery was delayed due to negligence by D. P sued for lost profits from delay.
a. Hold: No consequential damages. Lost profits cannot reasonably be considered a
consequence of breach of K.
b. Rule: Non-breaching party receives dmages which may fairly and reasonably be
considered either 1) arising naturally from breach of K or 2) such as may reasonably be
supposed to have been in contemplation of both parties, at the time they made the K
as the probable result of the breach
c. Rule (Exception): if special circumstances under which K were actually communicated
by Ps to Ds and thus known to both parties, damages resulting from breach would be
the ordinary damages under these special circumstances so known and communicated
i. Traditional Rule: Express/Tacit Agreement
d. Reasoning
i. Pol: unfair to hold D liable for special circumstances if he didn’t know of them,
and couldn’t raise price in response to additional liability
ii. In this case judge though alt. reasons could explain why P were sending shaft
and mill stopped
1. Mill had another shaft (weak)
2. Mill shut down for other reasons
iii. Needed actual statement to D of consequences due to their delay
6) Manoucheri v Hein: P bought x-ray machine from D. D delivered weaker x-ray machine to P. P
realized and notified D. D said he would cure, but failed to do so. P sued for direct and
consequential damages.
a. Direct Damages:
i. Hold: Cost of new machine is appropriate measure of damages, when goods as
delivered cannot be “repaired” to function as they promised
ii. Rule: Measure of direct damages is usually cost b/w goods as warranted and
value of goods as accepted ---approximated by cost of rapir
1. However, where goods are irreplaceable court may use other
reasonable measures to calculate damages (cost of new machine)
 b. Consequential Damages
i. Hold: Consequential damages were appropriate
ii. Rule (Mitigation): P has duty ot mitigate but is not precluded from recovery
when he has made reasonable but unsuccessful effort to avoid loss
1. §350(g) Efforts Expected: In some situations, it is reasonable for the
injured party to rely on performance by the other party even after
breach. This may be true, for example, if the breach is accompanied by
assurances that performance will be forthcoming. In such a situation the
injured party is not expected to arrange a substitute transaction
although he may be expected to take some steps to avoid loss due to a
delay in performance.
iii. Rule (Foreseeability): P did not need to expressly state to D how much income
he would earn from machine, so long as the consequence of lost income was
reasonably forseeable
1. §351(2.b): Damages awarded as a result of special circumstances, that
the party in breach had reason to know
iv. Rule (Certainty): (ct. implied) requirement of proof must be viewed in context
of amount at stake (sliding scale of certainty)
c. Reasoning:
i. Avoidability: P asked D to fix machine, and D said he would. It was reasonable
for P to rely on D’s statement and D cannot assert his own failure as reason for
mitigation of damages
ii. Forseeability:
1. D knew his customer and how x-ray machine was to be used (contrasted
to mass-produced anonymous buyer)
2. P testified to conversation with D about how much he charged for x-rays
3. Reasonable for person in D’s position to assumed P (Dr. ) would earn
money from x-ray machine

Certainty
1) §352 Uncertainty as a Limitation on Damages
a. Damages are not recoverable for loss beyond an amount that the evidence permits to be
established with reasonable certainty
i. Requirement of certainty.  A party cannot recover damages for breach of a contract
for loss beyond the amount that the evidence permits to be established with
reasonable certainty
ii. The requirement does not mean, however, that the injured party is barred from
recovery unless he establishes the total amount of his loss. It merely excludes those
elements of loss that cannot be proved with reasonable certainty
2) Elements: P must prove
a. Injury
b. Amount of loss
 i. Proximate Cause
3) ESPN v Baseball: P breached K with D by showing NFL instead of MLB games without D’s approval.
D damages it “belived to exceed millions” as a result of lost 1) exposure, 2) promotional
opportunities, 3) prestige, 4) sponsorships (consequential)
a. Hold: No liability for consequential damages. D unsupported allegation inadequate to
sustain a claim for damages
b. Rule: P seeking compensatory damages has burden of proof and must present court with a
proper basis for ascertaining damages. (more than conjecture/guesswork)
i. Sub-Rule: When existence of damage certain but amount uncertain; less proof ended
but P must show “stable foundation for reasonable estimate of damages”
ii. Sub-Rule: For “goodwill, business reputation, or future profit” P must show
1. Fact of loss with certainty
2. Amount of loss “reasonably certain in amount” and “directly traceable” to
breach (proximate cause)
c. Reasoning
i. D didn’t cite single lost promotional opportunity, sponsor, or advertising dollar
ii. Testimony refused to state exact loss number or reasonable basis for evaluating losses
iii. No evidence of decrease in ratings or box office sales
4) Hollywood Fantasy Corp. v Gabor: D breached K by not showing up to P’s “fantasy vacation”
business as guest celebrity. P sued for 1) 250,000 for loss of profits from ten future events (P went
out of business), 2) 1,000,000 from not being able to create TV blooper show and 3) 200,000 in lost
investment
a. Hold: P cannot recover for future lost profits or TV show losses because they were not
proved with reasonable certainty
b. Traditional Rule: “profits which are largely speculative such as those dependent on the
success of an untried enterprise, even when that hope is realistic, is not enough for recovery
of lost profits”
i. Exception: “firm” reasons for expectations of profits (higher level of certainty)
ii. Modern Rule: No “per se” ban but Need strong evidence to provide reasonable basis
for determining damages
c. Hold: P can recover for “out-of-pocket” (reliance) expenses of 57,500
d. Rule: P may recover out-of-pocket expenses he made in reliance upon D’s promise
i. §349: Reliance
1. As an alt. to the measure of damages stated in §347 (Expectation) the injured
party has a right to damages based on his reliance interest, including
expenditures made in prep. For performance or in performance, less any lsos
that the party in breach can prove with reasonable certainty the injured party
would have suffered had the K been formed
a. Not as generous as Expectation (profit not included)
b. This instance was one where expectation couldn’t be proved, but
reliance could
e. Reasoning:
 i. Expectation/Consequential: 1) only one prior vacation which lost money, 2) no future
packages scheduled, 3) only 2 people had bought tickets, 4) P had not sold right to TV
pilot or showed any objective data supporting TV claim
ii. Reliance: P testified to printing costs, marketing costs, and miscellaneous expenses
they made based on D’s promise to participate
1. Small amount—testimony sufficient

Mitigation of Damages
1) Mitigation: non-breaching party cannot continue to perform after being told that other side will
breach and then charge for full K price
a. Breaks causal link b/w breach and damage
b. Usuall P must have through bad faith or unreasonable action/inaction aggravated her
damages (failed to minimize losses—ook out for own economic welfare)
2) §350 Avoidability as a Limitation on Damages (mitigation)
a. Damages are not recoverable for loss that injured party could’ve have avoided without
undue risk, burden, or humiliation
b. Exception: Injured party not precluded from recovery by the rule stated above to the
extent that he has made reasonable but unsuccessful efforts to avoid loss
3) Exceptions
a. Reasonable discretion in declining alternatives: substitute employment must be
Comparable or Substantially Similar
b. Lost Volume Seller: If P (LVS) could’ve made 2 nd sale regardless of D’s
breach/repudiation than 2nd sale is not “substitute” for the first and doesn’t mitigate
damages (P gets full profits from sale)
4) Parker v Twentieth Century-Fox Film Corp.: D cancelled production of “Bloomer Girl” and
repudiated P’s agreement to play leading role. D offered role in “Big Country” as substitute. P
refused. D argues refusal of “Big Country” is failure to mitigate.
a. Hold: P’s failure to accept substitute role, not applied in mitigation bc “big Coutry” was both
different and inferior employment
i. General Rule: Damages for wrongfully discharged employee: Amount of salary agreed upon
for the period of service, (-) less the amount which the employer proves employee has
earned or with reasonable effort might have earned from other employment
b. Pol: By refusing alt. employment P “has broken chain of causation”
i. Exception: Before projected earnings from other employment can be applied in mitigation;
the employer must show that the other employment was comparable or substantially
similar, to that of which the employee has been deprived
1. D’s failure to seek other available employment of a different or inferior
kind may not be resorted to in order to mitigate damages
c. Reasoning
i. Differences: 1)Female lead vs Actual Lead, 2) LA vs Australia, 3) Musical (sing, dance, and
act) vs Dramatic Film
 ii. One week to accept could indicate D’s offer was not made in “good faith” but simply an
attempt to decrease losses from earlier breach
d. Dissent:
i. Need to take in facts, circumstances, and testimony to decide how substantial difference is
ii. Weighing of evidence is a JURY question and court shouldn’t have made decision as a
matter of law

Restitution: As an Alt. Measure to Expectation

1) Restitution: designed to restore to one party the value of a benefit unjustly conferred to another
2) §371: Measure of Restitution Interest
If a sum of money is awarded to protect a party’s restitution interest, it may as justice requires be
measured by either:
a. Reasonable value to the other party of what he receives, in terms of what it would’ve cost
him to obtain it from a person in the claimant’s position (Market Value of Benefi/Service)
i. Preferred Measure
b. Extent to which the other party’s property has been increased in value or his other interests
advance (Increase in Value)
i. Expenses not directly tied to benefit are excluded (cost of service likely to be less
than damages)
3) §373 Restitution When Other Party is in Breach
a. On a claim that gives rise to “MaterialBreach”, the injured party is entitled to restitution for
any benefit he has conferred on the other party by way of party performance or reliance
4) §374 Restitution in Favor of the Party in Breach
a. Net Benefit Rule: The party in breach is entitled to the restitution for any benefit that he
has conferred in excess of the loss that he has caused by his own breach
5) K Price as a “CAP” on Damages
a. Ex: What if painter underbid job for 500 when market value of job is 600---should Painter
be able to recover full 600 under restitution claim (FORK)
i. Cap: would create windfall for contracting party (give benefit of bargain outside of
true K claim)
ii. No Cap: gives incentive to breach K
6) Coast Steel Erectors v Blair: D breached by not paying for crane use. P sued for work already done
on construction K. TC found amount due to P under K was 37,000 but P would’ve had to spend
over 37,000 to complete project, so no damages
a. Hold: TC incorrect. P can recover value of benefit conferred under quantum meruit
(restitution) claim and loss avoided not deducted from restitution claim
b. Rule: P can forego any suit on K and claim on reasonable value of performance (benefit
conferred). P’s choice under which theory to sue under.
c. Rule: Recovery for restitution is value of benefit conferred undiminished by any loss which
would’ve been incurred by complete performance
d. Reasoning
 i. D was breaching party—by breaching D lost right to retain benefits of advantageous
bargain (P would’ve lost money on construction deal) by breaching
ii. Value Measure: Amount for which such services could’ve been purchased from one in
the P’s position at the time and place the services were rendered
7) Britton v Turner: P entered into 1 year service K with D to be paid on completion. P left 9.5
months into K. P sued for restitution. D argues P’s full performance was a condition precedent to
receiving payment.
a. Hold: P can recover bc restitution is claim outside of K
i. Recovery despite not substantial perf. Or divisible K
b. Rule: Net Benefit Rule: Where a K is made of such a character, a party actually receives
labor or material and thereby derives a benefit and advantage over and above the damage
which has resulted from the breach of the K by the other party, the labor actually done, and
the value received furnish a new consideration and the law thereupon raise a promise to
pay to the extent of the reasonable worth of such excess
c. Reasoning
i. P did 9.5 months of work and showed evidence of increased value of D’s land
ii. D showed no damages due to breach so nothing subtracted
1. D would’ve had $95 windfall if P couldn’t recovery (K law avoids windfalls)

Agreed Remedies: Liquidated Damages

1) Liquidated Damages Clause: A contractual provision that determines in advance the measure
of damages if a party breaches the agreement.
2) §356 Liquidated Damages and Penalties
a. Damages may be liquidated BUT ONLY 1) at an amount that is reasonable in the light
of the anticipated or actual loss caused b the breach and 2) The difficulties of proof of
loss.
A term fixing unreasonably large liquidated damages is unenforceable on grounds of
public policy as a penalty (K law designed for COMPENSATION no PENALTY)
3) UCC 2-718 Liquidation or Limitation of Damages
a. Damages may be liquidated BUT ONLY at an amount 1) which is reasonable in light of
anticipated or actual harm caused by the breach, 2) difficulties of proof of loss, and 3)
inconvenience or nonfeasibility of otherwise obtaining an adequate remedy
Unreasonably large liquidated damages: VOID as a penalty
4) Reasonability and Uncertainty are factors balanced against each other
a. Higher levels of uncertainty/predictability should be given more leeway in
reasonability of damages estimate
b. True Concern: Did parties INTED compensation or penalty?
5)
6) O’Brian v Langley School: P enrolled daughter at school and signed Membership K. K included
liquidated damages clause stating P liable for “full Tuition” if withdrawal not made by June 1.
P withdrew after June 1 but refused to pay full tuition (liquidated damages clause)
 a. Hold: TC erred by not allowing P to challenge validity of liquidated damages clause
b. Rule: Party attempting to prove invalidity of LDC bears the burden of showing either 1)
damages resulting from breach were susceptible of definite measurement 2)
stipulated amount grossly in excess of actual damages
i. §365: Liquidated Damages and Penalties
c. Reasoning
i. P assented to clause and thus presumption in favor of non-moving party
7) Kvassay v Murray: P agreed to sell 24,000 cases of baklava to D. K included LDC stating if
buyer repudiates P gets damages at $5 per case. D breached after 3,000 cases
a. Hold: Reasonability of LDC best determined by looking at “actual lost profits” not
“estimates” so remand needed.
i. 16.5%-41% increase over projected profits likely unenforceable, but actual
losses are better measure when available
b. Rule: UCC 2-718: LDC must be reasonable in light of 1) anticipated or actual harm
caused by breach, 2) difficult of proving loss, 3) difficulty of obtaining adequate
remedy
c. Reasoning
i. P’s business was a NEW BUSINESS so reasonability of anticipated harm should
be given more leeway (can’t accurately state expected harm)
ii. Actual loss better measure of determining inequality (highly important when
actual damages capable of definite assessment)
8) Vines v Orchard Hills, Inc: P entered K to buy condo from D for 78,800. K had LDC stating D
would retain all monies paid as liquidated damages. P paid 7,800 (10%) as down payment. P
breached and attempted to recovery 7,800 under restitution, bc D’s property subsequently
doubled in value over next 6 years (no actual loss—thus unjust enrichment)
a. Hold: Subsequent increase in value doesn’t factor into D’s losses. Damage to non-
breaching party (D) must be calculated at time of breach. That evidence not available
so remand for further review/evidence.
b. Rule: §374(2) Net Benefit w Liquidated Damages: Party in breach not entitled to
restitution if liquidated damages are reasonable in light of anticipated or actual loss
caused by breach and difficulties of proof of loss.
c. Reasoning
i. P assented to LDC so he carries “Substantial Burden” in proving non-breaching
party was unjustly enriched (higher burden-but no substantial effect)
ii. Key evidence missing: value of property at time of breach (not 6 years later)
iii. Neither party argued LDC unreasonably as Estimate so P must prove LDC gross
out of proportion AT TIME OF BREACH

Specific Performance
1) Specific Performance used when legal (money) damages are insufficient to make P whole and D
must then look to Equities (specific performace)
2) Forms:
a. Prohibitory Injunction: restrains D from taking a particular action (often an indirect means
of getting D to do what they promised to do) (restricting alternative)
b. Mandatory Injunction: Specific Performance: directs D to do a certain act
3) When will court exercise discretion and Order Specific Performance: factors/guidelines 359-69
4) §359: Effect of Adequacy of Damages:
a. No SP when money damages would be adequate to protect expectation interest of injured
party
5) §360 Factors Affecting Adequacy of Damages
a. Difficult of proving damages with reasonable certainty
b. Difficult of procuring a suitable substitute by means of money damages (Uniqueess)
c. Likelihood damages can’t be collected (Insolvency)
d. Factors from Cases:
i. Damages difficult to prove
ii. Injunction cost low
iii. Abscenece of liquid market
6) §364 Effect of Unfairness: (slightly lower standard than procedural or substantive unconsc.)
a. SP or injunction will be refused if such relief would be unfair bc:
i. K was induced by mistake or unfair practices
ii. Relief would cause unreasonable hardship or loss to party in breach or 3 rd person
iii. Exchange is grossly inadequate or terms of K otherwise unfair
7) UCC §2-716:
a. SP may be decreed where the goods are unique or in other proper circumstances
i. Other: Inability to cover/Requirements contract (Campbell’sTomato Soup Example)
8) Van Wagner Advertising v S&M Enterprises: P leased exterior wall of building to sub-lease for
advertising. Building was sold to D. D sent P a letter stating termination of agreement (breach). P
seeks specific performance.
a. Hold: P cannot receive specific performance bc he has an adequate remedy at law, due to
the ability of the court to value his damages
b. Rule: What matters most, in measuring for money damages, is the volume, refinement and
reliability of the available information about substitutes…
i. SP is when court can’t obtain (at reasonable cost) enough info about substitutes to
permit it to calculate an award of money damages---w/o unacceptably high risk of
inaccuracy
c. Reasoning:
i. “At some level al property is interchangeable with money”
ii. P had other properties the court could use to value his loss (substitute)
iii. SP would disproportionately harm D and benefit P bc of D’s plans to develop their
property after significant investment
9) Walgreen Co. v Sara Creek Property Co.: P had 30 year lease with D’s mall including a clause
prohibiting mall from allowing other pharmacies. D informed P they were going to breach by
letting “Phar-Mor” join---P sued for injunction.
a. Hold: Proper SP/Injunction case. D enjoined from allowing Phar-Mor in.
b. Rule: SP may be/is appropriate where cost of gathering information/proving damages
would exceed the costs of the injunctive remedy
c. Reasoning:
i. Damages very difficult to prove bc of nature of business loss (goodwill) and length of
time 30 years
ii. Injucntion cost low: Not difficult for court to monitor/enforce
iii. This situation similar to non-compete and SP for sale of real property