Contract A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance

e of which the law in some way recognizes as a duty. Restatement 2nd of ontracts, ! "ethods of #nforcement$ %pecific performance, money damages
I. Bases for Enforcement 1. Historical Bases

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2. ..

Covenant& used to enforce contracts made under seal. '(a) seal, %eal, or *.%.+ erosion of solemnity too common, seal no longer enforceable. a. Evidentiary function providing trustworthy evidence of the e)istence and terms of the contract in the event of a controversy. b. Cautionary function bringing home to the parties the significance of their acts. Debt used to enforce some types of unsealed promises to pay a definite sum of money. ,romisor 'debtor+- ,romisee 'creditor+ Assumpsit promisee see/s to recover damages for physical in0ury to person or property on the basis of a consensual underta/ing. "isfeasance having done something incorrectly1onfeasance not having done anything. 2nly enforced when promisee incurs a detriment in reliance on the promise. Consideration a promise or performance given in e)change for a promise a. Promise or Performance '!+ o benefit!detriment irrelevant if there is an e)change 3amer v. %idway nephew4s performance in refraining from certain legal activities is sufficient consideration for uncle4s promise to pay him 56,777. %ince the perfomance is consideration, no benefit8detriment needed. Restatement 2nd 9:'a+ ;f the re<uirement of consideration is met, there is no additional re<uirement of = a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee. '2+ Promise not to brin" claim #"ood fait$% can be considered if made in good faith >iege v. ?oehm >iege4s promise to support ?oehm4s child in return for ?oehm not filing bastardy proceedings against >iege is valid because ?oehm4s claim was made in good faith. Restatement 2nd 9@'!+'b+ >orbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless . . . the forebearing or

2.

Modern Bases

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b.

surrendering party believes that the claim or defense may be fairly determined to be valid. '.+ Illusory Promise no real commitment8no consideration %trong v, %heffield A promised to pay her husband4s debt to , 'promissory note+. ,4s promise to forbear collection until such time as he wants it is not consideration because there is no fi)ed time period. Restatement 2nd 2'!+ A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to 0ustify a promisee in understanding that a commitment has been made. ;llusory promises cannot be enforced unless$ 'A+ satisfaction clause & implied'in'la( 'public policy+ "attei v. 3opper ,4s promise to buy A4s land if satisfied is consideration because ,4s satisfaction is to be made in good faith , will bac/ out only if truly dissatisfied. %atisfaction duty of good faith. Restatement 2nd 276 #very contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement. '?+ implied'in'fact & implied term 'parties4 e)pectations+ no technical, real commitment (ood v. *ucy A gave , e)clusive right to mar/et ,4s fashion label in return for B profits. A argues that , gave no consideration for the e)clusive right, but t said that , implicitly promised to ma/e reasonable efforts in mar/eting A4s label. Reasonable effort is the implied term. Restatement 2nd 272'!+ (ords and other conduct are interpreted in the light of all the circumstances, and if the principal purpose of the parties is ascertainable it is given great weight. )iven in E*c$an"e '!+ promise not sou"$t no e)change, not bargained for nor sought for in e)change for promise. (hitten v. Creeley&%haw Creeley&%haw drafted an agreement in which she would leave (hitten alone given that he provided her with certain things. t said that the clause in which Creeley&%haw would leave (hitten alone is not condiseration because it was not bargained for or sought for by (hitten.

'2+

'.+

'@+

'6+

Restatement 2nd 9! '!+ Do constitute consideration, a performance or a return promise must be bargained for. '2+ A performance or return promise is bargained for if it is sought by the promisor in e)change for his promise and is given by the promisee in e)change for that promise. '.+ Dhe performance may consist of 'a+ an act other than a promise, or 'b+ a forbearance, or 'c+ the creation, modification, or destruction of a legal relation. '@+ Dhe performance or return promise may be given to the promisor or to some other person. ;t may be given by the promisee or by some other person. +$am e*c$an"es peppercorns consideration of trifling value ;t is a peppercorn if both parties /now it4s a sham. A peppercorn can be consideration when sought by person ma/ing e)change no e<uivalence re<uirement. Dhe things e)changed do not have to e<ual in value. Restatement 2nd 9:'b+ ;f the re<uirement of consideration is met, there is no additional re<uirement of = e<uivalence in the values e)changed. Already received a bargain for present or future performance must be in e)change for the promise. >einberg v. ,feiffer A promised to pay , a pension when she retired. t ruled that there was no consideration for that promise past service was not in e)change for the pension and subse<uent service was not sought for by A. Conditional promise to ma,e a "ift in order to get a gift, the promisee must do something 'condition+ no bargain. Eir/sey v. Eir/sey A offered , to stay with him- , then left her home and moved her family to live with A. A later told , to leave. t did not enforce promise because there was no consideration. A4s promise was a gift, and ,4s moving was the condition to receive the gift. -t$er entral Ad0ustment ?ureau, ;nc. v. ;ngram ,s were held to have given consideration for As4 covenants not&to&compete by giving As continued employment for a reasonable time. Dhe ct made an e)ception in this case to Restatement 2nd 9! no e)change re<uired, only continued employment for a reasonable time. t in this case did not follow bargain theory.

2.

.eliance a. +ta"e 1 '!F@7s+ ourts did not recognize reliance as a basis for enforcement. Eir/sey v. Eir/sey t did not recognize ,4s reliance on A4s promise no consideration, therefore no enforceable promise. b. +ta"e 2 Dhere was no precedence for changing the rules. ts used8stretched e)isting doctrines to cover certain situations to enforce promises. 1ot e)plicitly recognized as reliance. '!+ Ric/etts v. %cothorn A told , he would pay her 52,777 plus GH interest per annum so that she wouldn4t have to wor/. A w8o paying off the promissory note, and his e)ecutor refused to pay ,. t agreed that there was no promise or performance given in e)change, but enforce the promise using e/uitable estoppel if , relies on a mista/e or statement of facts by A, the ct estopps the A from asserting the mista/e or facts. 3owever, in this case, e<uitable estoppel is used for a promise, to estop A from saying there was no consideration. #<uitable estoppel usually is reliance on a factual representation. '2+ Allegheny ollege v. 1ational hautau<ua ounty ?an/ of Iamestown Iohnson promised to donate money to Allegheny ollege, gave them a 5!,777 initial donation and re<uired the school to set up a memorial fund in her name. %he later changed her mind and stopped paying the college. After her death, the college sued Iohnson4s e)ecutor for the remainder of Iohnson4s promised donation. t ' ardozo+ found consideration for Iohnson4s promise in the memorial fund she re<uired the school to establish. ardozo also mentioned that promissory estoppel was being recognized by other states. Dhe dissent said that Iohnson4s promise was a conditional promise to ma/e a gift. ardozo stretched the facts to find consideration donations to a charitable organization are gifts, but are enforced without consideration. c. +ta"e 0 Reliance is e)plicitly recognized under the new promissory estoppel doctrine. Restatement 2nd :7 '!+ A promise which the promisor should reasonably e)pect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if in0ustice can be avoided only by enforcement of the promise. Dhe remedy granted

0.

for breach may be limited as 0ustice re<uires. '2+ A charitable subscription or a marriage settlement is binding under %ubsection '!+ without proof that the promise induced action or forebearance. 6 elements for promissory estoppel$ !+ promise, 2+ action8forbearance, .+ inducement, @+ reasonable e)pectation, and 6+ in0ustice. >einberg v. ,feiffer the ct used the doctrine of promissory estoppel to enforce A4s promise to pay her pension because , relied on that promise she would not have retired if it were not for the pension. A J C %tout, ;nc. v. ?acardi ;mports, ;nc. , relied on A4s assurance that it would remain ,4s distributor if , turned down an offer to sell to a third party. t used promissory estoppel to enforce A4s promise. Dhe ct in that case also distinguished e)pectation and reliance damages. '!+ e*pectation dama"es lost e)pectations of future profit future wages not enforced by promissory estoppel for at&will employement. '2+ reliance dama"es loss attributable to an opportunity foregone in reliance on the promise. ' t held that ,4s loss in A J C %tout was reliance damages+ moving e)penses and forgone wages. Moral -bli"ation a. )eneral .ule "oral obligation is not a basis for enforcement. "ills v. (yman , too/ care of A4s son. Dhe son later died, and A promised to pay , for e)pense in caring for A4s son. A later reniged. , sued for enforcement. A claimed that there was no consideration not sought for, no e)change, and no reliance 'promissory estoppel not yet recognized in !F26+. t agreed that d had a moral obligation to pay ,, but said that there was no basis to enforce that promise. b. E*ceptions '!+ statute of limitations1 debt Restatement 2nd F2'!+ A promise to pay all or part of an antecedent contractual or <uasi&contractual indebtedness owed by the promisor is binding if the indebtedness is still enforceable or would be e)cept for the effect of a statute of limitations. '2+ Ban,ruptcy & Restatement 2nd F. An e)press promise to pay all or part of an indebtedness of the promisor, discharged or dischargeable in ban/ruptcy proceedings begun before the promise is made, is binding. '.+ Infancy Restatement 2nd !@ Knless a statute provides otherwise, a natural person has the

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capacity to incur only voidable contractual duties until the beginning of the day before the person4s eighteenth birthday. Material benefit (ebb v. "cCowin , was in0ured while saving the life of I. Creeley "cCowin, testator of the A. Dhe decedent had promised to pay , 5!6 every two wee/s for the rest of ,4s life. After decedent died, A refused to pay ,. Dhe A argued that , did not give consideration for decedent4s promise that his services to decedent 'basis for promise+ were already rendered. Dhe ct disagreed and ruled that moral obligation is a sufficient basis for enforcement 'sufficient consideration+ when promisor has received a material benefit, even though no original duty or liability on the promisor. Restatement 2nd FG '!+ A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the e)tent necessary to prevent in0ustice. '2+ A promise is not binding under %ubsection '!+ 'a+ if the promisee conferred the benefit as a gift or for other reasons the promisor has not been un0ustly enriched- or 'b+ to the e)tent that its value is disproportionate to the benefit. Dhis e)ception ' FG+ isn4t widely accepted.

@.

.estitution a. )eneral .ule a person who has been un0ustly enriched at the e)pense of another is liable for restitution. ts will recognize the e)istence of an implied contract. #)ample Cive something to someone by mista/e that person is un0ustly enriched must pay money 'or give gift+ bac/. an4t get restitution from minor, if 5 is already spent. otnam v. (isdom ,, a doctor, performed an operation on decedent while he was unconscious. , sued A, decedent4s e)ecutor, for restitution. t recognized an implied contract and held that A is liable to pay ,. ts commonly use implied contracts when doctors treat an incapacitated or incompetent person. 2ther synonyms for implied contract L constructive contract, contract implied in law, <uasi&contract, <uantum meruit, un0ust enrichment. b. Plaintiffs ($o usually cannot recover in restitution2 '!+ officious intermeddler someone who confers a benefit on someone else 0ust to try to get that person to pay for it. #)ample, p.96 /nowingly conferring a benefit to receive restitution is different from

'2+ '.+

ma/ing a mista/e. ;t is in0ust not to pay bac/ the person who made the mista/e. otnam v. (isdom un0ust enrichment. Dhe , was not an officious intermeddler because medical treatment is assumed to be desired by the patient. Dhe doctor is not a volunteer because he has an ethical obligation and is performing in his professional capacity. 3olunteer someone who confers a benefit on someone else with no e)pectation or want of restitution. Plaintiffs (it$ ot$er remedies plaintiffs who have other grounds8means for recovery. allano v. 2a/wood ,ar/ 3omes orp. ,endergast and A had a contract for a sale of one of A4s plots of land. ,endergast then contracted with , to plant shrubbery on ,endergast4s new plot of land. ,endergast died, and A cancelled its contract for sale. , had already planted the shrubs on the plot of land, and ,endergast hadn4t paid ,. , claimed A was un0ustly enriched 'shrubs on a plot of land without having paid for them+ and sued A for restitution. %uperior ourt of 1I ruled that , wasn4t entitled to restitution by A because there was another means for recovery could sue ,endergast4s estate for restitution.

II.

Contract 4ormation

A.

Assent ' assent to be bound by the promise. ourt will not enforce a promise unless promisor assented to be bound by the promise ' ontractual *iability is voluntary+- e.g. Centleman4s agreement contracts people don4t want to be bound by a promise with no contractual liability ma/e a promise in a conte)t which indicates you don4t want to be bound don4t hold me to this. ,erspective$ Aid promisor assent to be bound M sub0ective. Aid promisee thin/ promisor assented M sub0ective. (ould reasonable person thin/ promisor assented M ob0ective. Ceneral Rule ob0ective view matters what would a reasonable person thin/. #)ception when an unreasonable meaning which promisor attaches to his promise is /nown to the other party promisee /nows it4s a 0o/e M 1o contract no assent if they both /now it4s a 0o/e, even if a reasonable person would have thought it was real. *ucy v. Nehmer , offered to buy A4s farm for 567,777 and signed a contract written by the A. , later collected the 567,777, but A refused to sell. , then sued to enforce the contract. Dhe A said that it was only a 0o/e, that both parties were drun/. , said that he thought that the A assented- , even had his lawyer verify that the contract was valid. Dhe ct ruled on appeal that the contract was valid, that both parties assented 'in eyes of a reasonable person+.

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5.

Preliminary e"otiations & in<uiries, statements, invitations for offer gather information to determine if you want to ma/e an offer. 1o legal significance or contractual liability gives people the opportunity to weigh the options. ontractual liability is voluntary, discussing options has no conse<uence. -ffer by -fferor

1.

-ffer by -fferor ' Restatement sec.2@ An offer is the manifestation of willingness to enter into a bargain, so made as to 0ustify another person in understanding that his assent to that bargain is invited and will conclude it. Dhere must be a manifestation of a willingness to enter into a bargain, and the offer is conditional on acceptance. 2ffers are ris/y because they e)pose the offeror to contractual liability. 2nce an offer is made, the offeree can bind the offeror by accepting. ;t is often hard to distinguish between preliminary negotiations and an offer (hat would a reasonable person thin/O Restatement sec.2G a manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed /nows or has reason to /now that the person ma/ing it does not intend to conclude a bargain until he has made a further manifestation of assent. 2wen v. Dunison , wanted to buy A4s property and wrote a letter as/ing if A would sell it for 5G,777. A wrote bac/ and said that he couldn4t sell unless he received 5!G,777. , thought this was an offer and wrote bac/, stating that he accepted A4s offer. Dhe court ruled that A4s letter was not an offer, but merely an invitation to an offer. 3arvey v. >acey , wanted to buy A4s property and sent a telegram to A, (ill you sell us ?umper 3all ,enO Delegraph lowest cash price answer paid. A replied *owest price for ?umper 3all ,en :77 pounds. , thought that this was an offer and replied (e agree to buy = for :77 pounds. , later sued for specific performance when A refused to sell. Dhe ,rivy ouncil ruled that it wasn4t an offer. Dhe telegraph contained two <uestions$ !+will you sell, and 2+ what is the lowest price. A only replied to the 2nd <uestion$ only stated the lowest price- didn4t say that he would sell.

2.

Distin"uis$ offers from preliminary ne"otiations ;n order to determine whether a person had made an offer, courts will loo/ at !+ precedent similar cases

2+ comparison drafting compare what was said to what should be said .+ other indicia buzzwords >airmount Class v. runden&"artin (oodenware o. , ' "+ wanted to buy mason 0ars and sent a letter to >airmount. >our letters$ !+ , as/ed for lowest price for !7 car loads M preliminary negotiations- 2+ A wrote bac/ and <uoted a price for immediate accpetance 'with a deadline and cash discount+ M offer- .+ , wrote bac/ to A and accepted the offer !7 car loads with specifications@+ A wrote to , and said that it couldn4t boo/ the order. Dhe ,

sued for breach. A claimed that there was no offer- that the term first&<uality goods was in the specification letter to >airmount, but wasn4t in the contract- and that there was an indefinite <uantity in the contract !7 car loads. Dhe court re0ects all of the arguments. Dhe term !7 car loads is specific to the trade. Dhe court found that the 2nd letter was an offer and that >airmount accepted and breached. raft v. #lder J Iohnston o. A advertised a sewing machine for 52G. , attempted to buy at the price, but the A refused. , sued for breach. Dhe court held that advertisements are not offers, but only invitations to negotiate. Ceneral Rule ads are not offers, but preliminary negotiations. ,olicy reason ltd P of products, unltd P of potential acceptances- too much contractual liability if enforced. *eft/owitz v. Creat "inneapolis %urplus %tore A placed an ad in newspaper. %pecific number of products >irst come, first served. , attempts to buy, but A refuses. A said there was a house policy that the product was for women only. , sued . A4s argument & 1o offer 'ad+, only a preliminary negotiation. ourt re0ects this, said the test$ clear, definite and e)plicit, and left nothing open for negotiation L offer. Dhis ad is different from raft because, here, there is a specific number of products. Rule clear, definite, etc= and there is a limit to ad which ma/es it clear that advertiser wants to be bound. Ads generally aren4t offers unless they are limited in some way for reasonable person to thin/ it4s an offer. A4s 2nd argument that house rule modified offer. t said that you can4t modify offer after acceptance.
D. Acceptance

1.

Means of Acceptance a. performance #6unilateral contract7% e.g. 3amer v. %idway no breach- 0ust no acceptance by no performance. Reward offer reward for performance acceptance by returning item- e.g. acceptance L performance. Knilateral contract b. promise #6bilateral contract7% e.g. >iege v. ?oehm acceptance by promise. #1% e*press!implied by (ords #2% implied by conduct ;nternational >ilter o. v. onroe Cin, ;ce J *ight o. !+ , made proposal to A to sell filter for 5!2:7 said it would become a contract when accepted by A and approved by ,4s e)ecutive officer, 2+ A sent acceptance letter, .+ ,4s e)ecutive officer stamped letter 2E 'approval+, @+ , sent A an ac/nowledgement, 6+ A tried to countermand offer revocation. , sues for breach, says there was a valid contract. Dhe court said that the first letter was an invitation to ma/e an offer, that the second letter was the offer 'made by A+, that the third letter was ,4s acceptance,

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0.

and that the fourth letter was ,4s notification to A of his acceptance. A4s 2 defenses$ offer wasn4t properly accepted by , 'approval wasn4t sufficient acceptance+ and that the ac/nowledgement letter was proper notification. Dhe court disagreed and ruled that the ,4s approval '2E+ was effective acceptance. Dhe court then said that notification wasn4t re<uired, but that, even if notification was re<uired, there was proper notification. -fferor 8 master of t$e bar"ain Restatement sec..7'!+ An offer may invite or re<uire acceptance to be made by an affirmative answer in words, or by performing or refraining from performing a specified act, or may empower the offeree to ma/e a selection of terms in his acceptance. Restatement sec..2 ;n case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer re<uests or by rendering the performance, as the offeree chooses. otification to -fferor of Acceptance & a. performance 8 notification not re/uired unless re/uested. Restatement sec. 6@'!+ (here an offer invites an offeree to accept by rendering a performance, no notification is necessary to ma/e such an acceptance effective unless the offer re<uests such a notification. b. Promise 8 notification re/uired unless (aived. Restatement sec.6G #)cept as stated in sec.G: or where the offer manifests a contrary intention, it is essential to an acceptance by promise either that the offeree e)ercise reasonable diligence to notify the offeror of acceptance or that the offeror receive the acceptance seasonably. (hite v. orlies J Dift A was moving offices and as/ed , for a <uote to renovate his new office. Dhe , couldn4t do it in walnut in only 2 wee/s, but said that he could do it in pine. , gave the A an estimate w8o specifying a finish date. A changed the specifications, and , assented to the changes at the same estimate. A sent , a letter that, if , will agree to finish in 2 wee/s, he could begin wor/. , did not respond to the ltr, but began wor/. Dhe ne)t day, A sent a countermand to ,. , then sued A for breach. A said there was no acceptance or notification of the acceptance. Dhe court said that the letter was A4s offer A wanted , to promise to do the wor/ 'upon agreement+ acceptance. Dhe court said that the , did not ma/e a promise to the A- he commenced performance 'said that his conduct was an implied promise+. onduct can imply a promise, but, in this case, it was not clear nor was it communicated to the A. 2 elements$ !+ conduct has to be sufficient to ma/e a promise, and 2+ notice of promise 'acceptance+ is needed.

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#ver&Dite Roofing v. Creen As signed a document w8 price info and wor/ details 'w8in the documents, provision said document had to be accepted by an authorized officer of #ver&Dite, or it became binding upon commencement of performance+. Dhis was A4s offer. ;n the meantime, #ver&Dite chec/ed A4s credit reportCreens wanted a promise that #ver&Dite was accepting the offer. #ver&Dite said that it accepted by commencing wor/ it loaded up its truc/s and drove to the Creens4 house. As refused to let the , wor/ they had hired another contractor. Dhe court said that , had accepted the offer by beginning the wor/. Dhe , began to perform by loading up its truc/ and driving to the A4s house that was a clear indication of A4s promise, as per the contract. Dhe ,4s notice to the As was showing up to their house. As had not revo/ed their offer before , accepted- therefore, the contract was valid. t said conduct can be an implied promise it has to be clear and notified to offeror. arlill v. arbolic %mo/e ?all o. Advertisement a reward '!77 pounds+ to anyone who buys the product, uses it . times daily for 2 wee/s, and contracts influenza. A put !777 pounds on deposit as a sign of sincerity. , used the product and contracted influenza. Dhe court held that there was a contract. A made an offer to the , not a mere puff clear, direct and e)plicit, and left nothing for negotiation. ,4s acceptance was the performance as re<uested in A4s offer purchase of product and proper use. Cetting influenza was a condition upon which A had to pay ,. 1o notice was re<uired 'performance+. ;f , performs the condition, no notification is needed. +ilence as Acceptance & Ceneral Rule silence alone is not acceptance. Allied %teel and onveyors, ;nc. v. >ord "otor o. , '>ord+ ordered machinery from A on 2 occasions !+, submitted order w8 form .G!F 'void+ A accepted and performed. Dhe order was the offer >orm has provision which would hold A responsible for in0uries caused by negligence of its employees. >orm .G!F indemnity said A would also be responsible for negligence of ,4s employees. E*ceptions2 a. ;f offeree ta/es services when it has the oppt4y to re0ect them and has reason to /now they were offered w8 e)pectation of compensation. %ec.G:'!+ 'a+ (here an offeree ta/es the benefit of offered services w8 reasonable oppt4y to re0ect them and reason to /now that they were offered w8 the e)pectation of compensation. b. (here offeree has stated or has given offeror reason to believe that silence is acceptance. %ec.G:'!+'b+ (here the offeror has stated or given the offeree

c.

d.

reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer. Aue to previous dealings, it is reasonable for the offeree to notify offeror only if he does not intend to accept. %ec.G:'!+'c+ (here b8c of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he does not intend to accept. 3obbs v. "assasoit (hip o. , and A had done business w8 each other @ or 6 times before in such a manner as , would send A eels/ins and A would pay for them. ;n one instance, A refused to pay, saying that he never accepted to pay for the eels/ins. Dhe ct found that based on parties4 prior business relationship, A4s silence was a reasonable acceptance to ,4s offer. 2fferee uses offered property. %ec.G:'2+ An offeree who does any act inconsistent w8 the offeror4s ownership of offered property is bound in accordance w8 the offered terms unless they are manifestly unreasonable. ?ut if the act is wrongful as against the offeror it is an acceptance only if ratified by him.4

E.

9apse1 .evocation1 .e:ection of -ffers

1.

;ermination of -ffers & %ec..G '!+ An offeree4s power of acceptance may be terminated by 'a+ re0ection or counter&offer by the offeree, or 'b+ lapse of time, or 'c+ revocation by the offeror, or 'd+ death or incapacity of the offeror or offeree. '2+ ;n addition, an offeree4s power of acceptance is terminated by the non&occurrence of any condition of acceptance under the terms of the offer. A. 9apse 2ffer will cease to be open after a certain point.
.evocation by offeror

2.

#1% #2%

"ust be before acceptance 2fferor must give notice to offeree, which can be directly or indirectly communicated to offeree. #A% %ec.@2 An offeree4s power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract. e)press statement #B% %ec.@. An offeree4s power of acceptance is terminated when the offeror ta/es definite action inconsistent w8 an intention to enter into the proposed contract and the offeree ac<uires reliable information to that effect. reasonable information to offeree

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-ption Contract contract to /eep an offer to open. 2fferor says he4d /eep offer open for a certain period. Dhere must be consideration for that, otherwise it4s unenforceable. Doys, ;nc. v. >.". ?urlington o. 6&yr lease w8 A 'w8 renewal clause option to renew for 6 yrs+. , had to renew by 2&2:&F@. 1o fi)ed amt for rent- it would be determined by the prevailing rate. , gave written notice of intent to renew on 2&9&F@. A told , the prevailing rate. , was confused, and A gave a new offer to ,$ !st yr Q prevailing rate, last yr M prevailing rate- 6 yrs4 ave L prevailing rate. Dhis offer was valid until F8!8F@. , as/ed for more time 'until F&!6&F@+. , as/ed again for two more wee/s, but A didn4t respond until !!&!&F@, when A said it was renting to another party. A had . defenses$ no real offer only a proposal to enter negotiations '% t disgagreed+, , never e)ercised option 'Dr ct said 2&9&F@ ltr was acceptance+, , waived its right to renewal by actively pursuing other realty '% t said it was for the 0ury to decide, who said that , did waive+. Aic/inson v. Aodds 2n (ed., Iune !7, A offered to sell his house to , for F77 pounds w8 an option to leave offer open until >ri., Iune !2 R :am. ,4s agent told , that A was offering it to someone else. , tried to notify A of his acceptance. >ri '9am+, , told A he would buy- A said he already sold property. , sued A for breach. A said that offer was revo/ed$ t said A wasn4t bound to hold offer open no consideration to ma/e it binding 'no option contract+- ,4s agent told , that A did not have an intent to sell to , proper notice, reliable info from his agent. '%ec.@.+. S an use reliance to enforce an option contract w8 no considerationT. %ec.F9'!+ 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 ma/ing of the offer, and proposes an e)change on fair terms w8in a reasonable time- or 'b+ is made irrevocable by statute.

0.

.e:ection by offeree

" U %t.*. Railway !+, as/ed for a <uote, 2+ A answered gave price <uotes for a specified amt, .+, orders an amount less than that specified at <uoted price, @+A said it couldn4t fill order, 6+, sent a new order for 2/ tons A

didn4t fill. , sued for breach. Iury found for A , re0ected the offer by varying from the terms offered.
5. Deat$ of offeror & death terminates the offer. 2fferor is the master of the bargain and has the power to revo/e. 3e can4t revo/e after he dies- so offer is assumed to be revo/ed offer is terminated.

2.

0.

otice not re/<d -ption Contracts death does not terminate offer if contract is binding. #arle v. Angell ,4s aunt 'whom A is representing+ offered , to pay his e)penses plus 56,777 to come to her funeral. , said he would come if able and did in fact go. 3e later received a signed paper from his aunt recounting their conversation. A&e)ecutor refused to pay, and , sued to enforce. Aunt made an offer, but the offer terminated upon the aunt4s death. %ince ,4s performance was the acceptance, the offer terminated before acceptance- therefore, no contract. %ec.F9'2+ An offer which the offeror should reasonably e)pect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the e)tent necessary to avoid in0ustice. Reliance if offeror /nows offeree would rely on offer before acceptance, and offeree does rely on offer option contract. Possible .esponses to an offer A. Acceptance B. In/uiry!comment!silence C. .e:ection A. Counter'offer a counter&offer is an implicit re0ection plus another offer. Knless otherwise stated, a counter&offer is a re0ection. #ven if you intend to accept, but change terms, it is a counter&offer. "irror ;mage Rule acceptance has to be mirror image of offer- otherwise it is an offer. Mailbo* .ule & %ec.G. Knless the offer provides otherwise, 'a+ an acceptance made in a manner and by a medium invited by an offer is operative and completes the manifestation of mutual assent as soon as put out of the offeree4s possession, w8o regard to whether it ever reaches the offeror- but 'b+ an acceptance under an option contract is not operative until received by the offeror. A. Acceptance is effective upon dispatc$, not receipt so that offeree has dependable basis for /nowing when contract is made. ;f effective upon receipt, the time of acceptance would be uncertain b8c you don4t /now when

#1% #2%

offeror will receive it. 2fferor does not have a dependable basis for /nowing when offeree accepts. 1. =nless offer indicates ot$er(ise 2fferor can say that contract wouldn4t be binding until he receives acceptance e)ception to "ailbo) rule. 2. -ption contracts & 2fferee4s acceptance is effective upon receipt. 2fferor will want to hear of acceptance by a certain date. %ec.G.'b+ offeror can change the rule.
B. .evocation attempts

!. 2.

an4t revo/e offer after acceptance an4t revo/e an acceptance E*ceptions a. 2fferor allows offeree to get out of contract can waive a legal right. & waiver b. 2fferor relies on offeree4s waiving8revocation of acceptance offeree is estopped from claiming that acceptance was valid. Allow offeror to believe you haven4t accepted or if acceptance wasn4t received. estoppel c. *oss of letter, etc= & acceptance is effective upon dispatch whether or not it gets lost. 2fferor can add a stipulation to offer that acceptance will not be effective until he receives it. d. %cope of "ailbo) rule it is a narrow rule. ;t only tells us when acceptance is effective. ;t is not true for revocation, re0ection, etc= ;t is not only applicable to K.%. "ail 'mailbo)+ any type of communication is acceptable. Ksually, acceptance has to be in a medium re<uested by offeror or by any reasonable means it is reasonable if communication is as fast or faster than offeror4s.

4.

9iability despite failed ne"tiations

1. 2.

)eneral .ule there is not liability after failed negotiations need offer and acceptance for contractual liability. E*ceptions a. Assurances made durin" ne"otiations are enforceable. 3offman v. Red 2wl %tores , owned a ba/ery and wanted to open a supermar/et franchise from Red 2wl stores. A told , he4d only need 5!F,777 and made him do certain things in order to open franchise 'sell his store and move his family, etc=+ *ater, A told , he had to pay more 5. , couldn4t afford to open store and the deal fell through.

) 0.

, sued A, but there was no franchise agreement 'no breach+. , said A bro/e assurances given during negotiations. A said that assurances lac/ed definiteness no agreement on terms of franchise agreement. , wanted to enforce by promissory estoppel 'sec.:7+. Aefiniteness isn4t re<uired. Dhe ct enforce if 0ustice re<uires. t enforced assurances reliance damages 'moving e)penses, lost profit on sale, out of poc/et losses+. ?reach of contract e)pectation damages 'lost future profits8foregone wages, etc=+. Dhis case is an e)ception. ts are reluctant to find contractual liability based on preliminary negotiations. b. Contract to ne"otiate 9etter of intent hannel v. Crossman A wanted to rent out space in a mall to ,. , as/ed for more time, and A as/ed , to write a ltr of intent, which both parties signed. ', would proceed w8 leasing and A would withdraw store from m/t and only negotiate that lease+. A later signed a lease w8 "r. Cood ?uys. , sued A for an in0unction to get A to lease to ,. Dhere was no lease signed, but there was a promise to negotiate 'in good faith+. t loo/ed at whether there was a manifestation to be bound, definiteness and consideration. t said there was enough evidence for A4s assent to go to trial- it found the letter of intent to be definite- and ct said that there was consideration A used ltr of intent to obtain financing.

). Definiteness #reasonable certainty% & %ec. ..'2+ Dhe terms of the contract are reasonably certain if they provide a basis for determining the e)istence of a breach and for giving an appropriate remedy.

1.

2.

E*istence of breac$ Varney v. Aitmars A&architect hired , and promised to pay , a fi)ed salary and a fair share of the profits. t said fair share is too indefinite to enforce can4t determine the proper amount. ' t said , might be entitled to restitution+. Appropriate remedy a. Cts (ill measure definiteness (!in conte*t of t$e promise 'e.g. fair share can use industry std8custom to measure+. b. Implied terms cts can add implied terms. t can infer a reasonable time, e.g. '(ood v. *ucy, "attei v. 3opper+. c. Policy consideration cts are hesitant to find indefiniteness b8c contractual liability is voluntary. Wou should be bound if you voluntarily enter into a contract. p.26!, 1ote P! auses of ;ndefiniteness even e8o indefiniteness, parties usually have assented to be bound. Doys rental agreement at prevailing rate. A said it wasn4t definite- ct found it was definite. A also said it had agreed w8 , to renegotiate. t said that the parties would renegotiate the prevailing rate. 1o assent to be bound by

first agreementO t said they did assent to be bound they were only to discuss one term which was definite.
III. ;$e .e/uirement of a >ritin" for Enforceability

A.

Introduction to t$e +tatute of 4rauds 1. +tatute specifyin" class of promises ($ic$ need to be in (ritin" 2. E*amples & a. ori"inal based on !G99 #nglish statute b. modern 1I, A, and K sec.2&27! .. ;ypical +cope G promises most states re<uire to be in writing '"W *#C%+ a. Marria"e agreement upon consideration of marriage. #). >riar *awrence ma/es promise to Iuliet to give her a sleeping potion if she marries Romeo marriage is consideration. %hadwell v. %hadwell promise of money if nephew marries certain person. X;f only mutual promises to marry each other, not enforceable. %tatute of >rauds is only applicable to .rd parties '%ec.!2@ A promise for which all or part of the consideration is either marriage or a promise to marry is w8in the %taute of >rauds, e)cept in the case of an agreement which consists only of mutual promises of two persons to marry each other. b. ?ear an agreement not to be performed w8in one year from the ma/ing thereof. ;f it could not possibly be performed w8in one year it must be in writing+. *ifetime employment 'tenure+ doesn4t have to be in writing could die w8in a year. Aistinction b8n complete performance and early termination. #arly termination offeror allows contract to be terminated- it has to be in writing if it can4t be completely performed in one year. #arly termination doesn4t count. %ec.!.7'!+ (here any promise in a contract cannot be fully performed w8in a year from the time the contract is made, all promises in the contract are w8in the %tatute of >rauds until one party to the contract completes his performance. #). contract for 6yrs w8 an e)cuse for nonperformance 'termination+. oan v. 2rsinger oral agreement to be apartment mgr until ,4s completion of law school 'matriculation+ or is obliged to discontinue his study. 3e is fired 6 w/s later. Aid contract have to be in writingO 1o, , could have been forced to leave school w8in a year. 'Aissent disagreed+. c. 9and promise to buy or sell land has to be in writing. d. E*ecutor promise by e)ecutor to pay out of his own estate has to be in writing. e. )oods K sec.2&27! %ales of Coods M 5677 has to be in writing. Coods tangible and moveable doesn4t include land, house or services.

B.

C.

+uretys$ip special promise to answer for the debt, default or miscarriage of another person. #). %tudent wants to be car from dealer- dealer as/s student to 0oin someone on debt to promise to pay if student doesn4t 'surety+. Dhis promise must be in writing. *angman *angman, %towe owned property, which was sub0ect to mortgage 'debt+, and gave it to K.Va. Dhey gave K.Va. a deed that included 5G77,777 mortgage on property provision that stated K.Va. too/ obligation. K.Va. didn4t sign it. "ortgagee was to be paid by profits- it wasn4t. %towe made some pmts- then property went into default. "ortgagee demanded pmt from *angman. *angman as/ed K.Va. for reimbursement 'debt&assumption clause in deed+. K.Va. said it didn4t sign and that suretyship promise has to be in writing. t said it wasn4t a suretyship promise K.Va. made the promise to %towe8*angman, not to lender8mortgagee. Crantee who assumes e)isting mortgage is not a surety. made no promise to mortgage. X%uretyship promise to lender to assume someone else4s debt. @. Policy & legal formality non&substantive re<4mnt law imposes to ma/e something legitimate. a. Purposes 1. evidentiary to prevent people from lying- proves contract 2. cautionary signature is binding- forces people to review promise8contract. b. =nintended Conse/uences allows people to get out of promises they4ve made. "ost promises don4t have to be in writing. "ore people rely on the G types of promises '"W *#C%+ they re<uire more caution and evidence. .e/uisites of >ritin" and +i"nin" 1. Material!essential terms 2. Party to be c$ar"ed must $ave si"ned. #<ual Aignity Rule 'only in 2 or . states+ both parties must sign. .ecovery (!o a >ritin" 1. .estitution reasonable amt of services already rendered 'can recover even if contract isn4t valid or has been terminated+. #). oral agreement to shovel snow for .yrs- shovel ! or 2 times offeror cancels. Recover by restitution not officious intermeddler or volunteer. %ec..96 A party who would otherwise have a claim in restitution under a contract is not barred from restitution for the reason that the contract is unenforceable by him because of the %tatute of >rauds unless the %tatute provides otherwise or its purpose would be frustrated by allowing restitution.

f.

2.

0.

E/uitable Estoppel 'Ric/etts v. %cothorn+ if you represent a fact and person reasonable relies on fact, you are estopped from claiming that fact was a mista/e. #). a seller who doesn4t sign offer to buy house but tells buyer he signed. ?uyer relies- seller tries to bac/ out using %tatute of >rauds. ontract isn4t valid, but ct will estop the seller from using %tat. of >rauds. Promissory Estoppel promise w8o consideration other party relies. ,romisor is estopped from claiming that there4s no consideration. Kse reliance instead of consideration. an use promissory estoppel if promisor says it is not enforceable b8c of %tatute of >rauds 'not consideration+. "onarco v. *o Creco 1atale U armela lived on a farm and as/ed hristie *o Creco 'son+ to stay on farm- they said they would leave farm to him upon their death '/eep in 0oint tenancy last one to die will leave it to hristie in will+. hristie got room U board U an allowance. hristie wor/ed for 27yrs 1atalie died left farm to his grandson armen "onarco ',+. (ill probated ct gave farm to armen. , brought action for an accounting and partition of property. armen and hristie claimed the property should have gone to armela 'by the agreement+. , said agreement wasn4t valid not in writing '%tatute of >rauds+. S al. promise to be<ueath something had to be in writingT. hristie could recover by restitution for the monetary value of his labor. armen "onarco said only e<uitable estoppel can be used reliance on the contract being signed valid under %tatute of >rauds. t disagreed said promissory estoppel should be used b8c people rely on the enforceability of the promise 'not really the misrepresentation of the facts+. ;f it is not enforced, it is un0ust to the one who relied on the promise. %ec.!.: '!+ A promise which the promisor should reasonably e)pect to induce action or forbearance on the part of the promise or a third person and which does induce the action or forbearance is enforceable notwithstanding the %tatute of >rauds if in0ustice can be avoided only by enforcement of the promise. Dhe remedy granted for breach is to be limited as 0ustice re<uires. '2+ ;n determining whether in0ustice can be avoided only by enforcement of the promise, the following circumstances are significant$ 'a+ the availability and ade<uacy of other remedies, particularly cancellation and restitution- 'b+ the definite and substantial character of the action or forbearance in relation to the remedy sought- 'c+ the e)tent to which the action or forbearance corroborates evidence of the ma/ing and terms of the promise, or the ma/ing and terms are otherwise established by clear and convincing evidence.- 'd+ the reasonableness of the action or forbearance- 'e+ the e)tent to which the action or forbearance was foreseeable by the promisor.

X%ome cts have re0ected b8c the common law rule undermines the %tatute. "ost states have accepted promissory estoppel for %tatute of >rauds '%tatutes supersede common law+. %ome cts have <uestioned the policy in "onarco promissory estoppel b8c it contradicts the %tatute. (hy re<uire some promises to be in writing if you can use reliance to enforceO
I3. Policin" t$e Bar"ain A. +tatus of t$e Parties & Capacity

1.

Infancy a. Contract can incur only voidable contractual duties. %ec.!@ Knless a statute provides otherwise, a natural person has the capacity to incur only voidable contractual duties until the beginning of the day before the person4s eighteenth birthday. an avoid legal relations 'liability+ created by contract. %ec. 9 A voidable contract is one where one or more parties have the power, by a manifestation of election to do so, to avoid the legal relations created by the contract, or by ratification of the contract to e)tinguish the power of avoidance. ontract only voidable by infant, not void. ;nfant can enforce the contract. b. .estitution 1. )eneral rule infant is liable for restitution. 2. Infant doesn<t $ave to ma,e restitution if sub:ect matter is unavailable. 'Restitution %ec.G2, cmt b An infant to whom a person has transferred a non& necessary in the course of a contract is not under a duty of restitution to the transferor upon failure to pay for it, if the sub0ect matter or its product is not available at the time when restitution is sought. ;f infant has already paid, he can sue for recission, to get his money bac/. 0. If sub:ect matter is a necessary1 infant (ill be liable for restitution if $e is emancipated. #mancipated under age of ma0ority, but living independently from his parents. Dhis is to ensure that minors will get necessaries- if not emancipated, it is assumed that the parents will provide necessaries. c. ;orts Dorts, %ec.F:6; 6-ne ($o is an infant is not immune from tort liability solely for t$at reason.7 %pecific intent might be negatived by infant4s incapacity to form intent. Eiefer v. >red 3owe "otors, ;nc. Eiefer, bought a car at age 27 and decided to return it 'to rescind the contract+. >red 3owe "otors, ;nc. refused to give Eiefer his money bac/. Eiefer sued 3owe. t allowed Eiefer to rescind 3owe 'A+ said emancipated minor should be liable for contracts 'reduce age of ma0ority to 27+.

?.

t said emancipation does not affect minor4s capacity said *egislature should determine age of ma0ority. 2nd argument by A sued for deceit said , misrepresented his age 'signed contract w8 provision that stated , was at least the age of ma0ority+. t found no intent to defraud, no deceit. Wou can be liable for tort if you misrepresent your age. Aissent said car is a necessary. 2. Mental Illness!Defect a. ;raditional test unable to understand. %ec.!6'!+'a+ A person incurs only voidable contractual duties by entering into a transaction if by reason of mental illness or defect 'a+ he is unable to understand in a reasonable manner the nature and conse<uences of the transaction. b. Modern ;est unable to act reasonably %ec.!6'!+'b+ he if unable to act in a reasonable manner in relation to the transaction and the other party has reason to /now of his condition. 2rtelere v. Deachers4 Retirement ?d G7&yr&old Crace 2telere had a nervous brea/down. %he had 597,777 reserve in retirement fund w8 two options to receive 5$ !+ 5.968month upon death, remainder goes to family, 2+ 5@678month upon death, family receives nothing. %he elected option P2 died months later. 3er husband sued to rescind the contract, said his wife lac/ed mental capacity. 2 stds of mental capacity !+was mind so affected so you can4t understand contract cognitive test '%ec.!6'!+'a+ traditional test+- 2+ 3usband4s claim if person can4t act reasonably in the transaction and other party has reason to /now of person4s condition modern test '%ec.!6'!+'b++. t remands for trial loo/ at modern test and determine if "rs. 2telere had capacity. Aissent she acted reasonably in her in<uiry of her options. 3usband <uit 0ob, so they needed the money. undic/ v. ?roadbent , agreed to sell his property to A in a one page document. ,4s atty adapted to !! page document, and , later amended to increase the price paid to A. A delivered property. , didn4t pay and sued to rescind the contract. *and valued about twice of contract price. , said "r. undic/ lac/ed mental capacity and should be able to void. t used tradtional test , was able to understand the contract. ,4s evidence doctor4s testimony 'poor 0udgment, confused, incapable+. t said , was competent no record of mental incompetence, friends and family didn4t /now. t doesn4t have to believe e)pert witnesses. , too/ it to his attylater raised selling price. Knder new std, other party would have to /now of person4s mental problem. Conventional Controls on +ubstance 1. ;ypes of .emedies t of *aw 0udge and 0ury- t of #<uity chancellor, no 0ury. ?oth cts had same 0urisdiction over disputes,

2.

but each had diff4t powers8diff4t remedies. t of *aw legal remedies. t of #<uity e<uitable remedies. a. 9e"al 8 dama"es b. E/uitable #1% +pecific Performance #2% In:unctions #0% .ecission #5% .eformation ' 'change written contract to meet oral agreement+ 9imitations on E/uitable .emedies & )rounds for Denyin" +pecific Performance!In:unction a. Dama"es ade/uate & ct would not award specific performance or an in0unction if damages would be an ade<uate remedy. %ec. .6:'!+ %pecific ,erformance or an in0unction will not be ordered if damages would be ade<uate to protect the e)pectation interest of the in0ured party. %ec. .G7 ;n determining whether the remedy in damages would be ade<uate, the following circumstances are significant$ #1% the difficulty of proving damages with reasonable certainty, #2% the difficulty of procuring a suitable substitute performance by means of money awarded as damages, and #0% the li/elihood that an award of damages could not be collected. #)amples Kni<ue or rare goods 'e.g. original painting+ or a contract to buy land. b. E*c$an"e inade/uate cts won4t enforce specific performance, etc... if the e)change was unfair 'une<uitable+. %ec..G@'!+ %pecific performance or an in0unction will be refused if such relief would be unfair because 'c+ the e)change is grossly inade<uate or the terms of the contract are otherwise unfair. X,eppercorn e)changes the ct usually doesn4t care about the e<uality of the e)change. %ec.9:'b+ ;f the re<uirement of consideration is met, there is no additional re<uirement of 'b+ e<uivalence in the values e)changed. Dhis is the rule of law, not the rule of remedies. "cEinnon v. ?enedict , promised to give A interest&free loan and advice 'to get customers+ in e)change for As4 not improving the land close to ,4s house. , wanted the ct to stop A from ma/ing improvements. ;ssue whether cts can enforce a specific performance. (hat are the grounds for denying specific performanceO 'a+ damages would not be ade<uate because the land was 0ust devalued by an indeterminable amount, and 'b+ the

C.

e)change was inade<uate because the , benefitted much more than the A, and the A was in an oppressive position. Duc/willer v. Duc/willer 1iece promised to ta/e care of "orrison until she died and, in e)change, the aunt would change her will to leave the farm to her niece. After they signed this contract, the niece <uit her 0ob. %oon afterward, the aunt diedhowever, she had neglected to change her will. 1iece wanted to enforce the promise against the e)ecutor of the estate. #)ecutor wouldn4t honor the promise. Dhe e)ecutor argued that$ '!+ the aunt wasn4t of sound mind, '2+ enforcement of the promise would be unfair because the wor/ that the niece actually performed wasn4t worth the value of the farm. Dhe ct loo/ed at the promise when it was made, saying that it was a fair promise. 1o one /new how long the aunt would live. t4s general policy is not to loo/ at the effect after the promise is made, but only to loo/ at the contract at the time when it was made. 0. Public Policy a. )eneral .ule it is generally good to enforce promises because they benefit society. %ec. !9F '!+ A promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unreasonable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms. b. E*amples there are specific /inds of promises that cts will not enforce on the grounds that they violate public policy$ #1% %ec.!F: A promise is unenforceable on the grounds of public policy if it is unreasonably in restraint of marriage. #2% %ec.!:2 A promise to commit a tort or to induce the commission of a tort is unenforceable on grounds of public policy. ?lac/ ;ndustries, ;nc. v. ?ush during Eorean (ar '!:67s+, the gov4t had to buy e<uipment for the war. ?lac/ ;ndustries was a middleman between the government and ?ush. ?ush breached his promise and argued that the contract should be void on the grounds of public policy because ?lac/ ;ndustries was receiving e)cess profits from the gov4t during wartime. ?ush hoped to create a new public policy e)ception, but the ct refused to accept it, as it wasn4t one of the recognized categories$ '!+ bribery, '2+ contract to do an illegal act, and '.+ contract which contemplates collusive bidding on a public contract. Be$avior of t$e Parties 1. Duress promise induced by improper threat which leaves the other party no reasonable alternative. %ec.!96 '!+ ;f a party4s

2.

manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim. '2+ ;f a party4s manifestation of assent is induced by one who is not a party to the transaction, the contract is voidable by the victim unless the other party to the transaction in good faith and without reason to /now of the duress either gives value or relies materially on the transaction. a. Improper t$reat %ec.!9G'!+ A threat is improper if 'a+ what is threatened is a crime or a tort, or the threat itself would be a crime or a tort if it resulted in obtaining property, or 'd+ the threat is a breach of the duty of good faith and fair dealing under a contract with the recipient. b. o reasonable alternative Modification a. -ri"inal A"reement b. +ubse/uent promise by one party 'e.g. to pay more money+ Is t$e subse/uent promise enforceable@ #1% >as promise induced by Duress@ & o. ;f so, it is not enforceable. #2% Pre'E*istin" Duty .ule & o. %ubse<uent promise is unforceable if there is a pre&e)isting duty w8o new consideration. Arzani v. ,eople 1W wanted to build highway, contracted with EU", who hired subcontractor Arzani to do the paving. Arzani hired the laborers. *abor Knion told Arzani they wanted 5.278hr more in wages or they would stri/e. Arzani told EU", who promised to share the cost of the increased wages '5.,777 total- EU" would pay 5!,677+. EU" breached the promise, and Arzani sued. EU" said they didn4t have to pay because there was no new consideration for the subse<uent promise. Arzani had a pre&e)isting duty to do the paving wor/- thus, the promise is unenforceable. %ec.9. ,erformance of a legal duty owed to a promisor which is neither doubtful nor the sub0ect of honest dispute is not consideration- but a similar performance is consideration if it differs from what was re<uired by the duty in a way which reflects more than a pretense of bargain. #0% Cancellation .ule & ?es. ;f parties4 actions show intent to cancel original contract, then the new contract is enforceable. %chwartzreich ?auman& ?asch contracted w8 %chwartzreich to wor/ for 5:78w/. ?? told % it would pay him 5!778w/ if he re0ected another offer of 5!!68w/ 'new contract+. ?? later discharged %. Iury awarded damages for

0.

5!778w/. Dhe ct said that the parties cancelled the original contract and formed a new one. #5% Modern Modification .ule & ?es. 'an e)ception to pre&e)isting duty rule+ if modifications are reasonable to unforeseen circumstances, the subse<uent promise is enforceable. %ec.F: A promise modifying a duty under a contract not fully performed on either side is binding 'a+ if the modification is fair and e<uitable in view of the circumstances not anticipated by the parties when the contract was made- or 'c+ to the e)tent that 0ustice re<uires enforcement in view of material change of position in reliance on the promise. (at/ins J %ons v. arrig arrig hired (at/ins to build cellar, and they agreed on a price. (at/ins hit roc/ and said that it would cost : times what they originally thought. arrig agreed to pay more. After wor/, arrig refused to pay. (as arrig4s subse<uent promise enforceableO *ower ct referred the case to referee, who said that the oral agreement superseded the written agreement 'cancellation+. A said the first contract wasn4t cancelled no new consideration for subse<uent promise. 13%. t said that the promise was enforceable because it was a modification and not an entirely new promise. "odifications should be enforceable as long as the change is needed to meet changing circumstances. Misrepresentation statement which purports to be fact, but is in fact not. ?asic Rule$ a contract induced by misrepresentation is voidable. %ec.!G@'!+ ;f a party4s manifestation of assent is induced by either a fraudulent or a material representation by the other party upon which the recipient is 0ustified in relying, the contract is voidable by the recipient. a. Elements #1% Misstatement of facts1 not an opinion!puffin". ,uffing L general statement about the worth of an ob0ect. an4t void based on opinion or puffing. %ec.!G2'!+ A misrepresentation is fraudulent if the ma/er intends his assertion to induce a party to mainfest his assent and the ma/er 'a+ /nows or believes that the assertion is not in accord with the facts, or 'b+ does not have the confidence that he states or implies in the truth of the assertion, or 'c+ /nows that he does not have the basis that he states or implies for the assertion.

5.

Eit$er material or fraudulent. %ec.!G2'2+ A misrepresentation is material if it would li/ely introduce a reasonable person to manifest his assent, or if the ma/er /nows that it would be li/ely to induce the recipient to do so. #0% .eliance $as to be :ustified. b. Concealment act w8 the intent of preventing the other party from learning the truth. oncealment is treated li/e misrepresentation. t will interpret actions as ma/ing a misrepresentation. ;t is a basis to void the contract. c. 6Bare7 on'disclosure no concealment- 0ust don4t say anything. Rule$ contract is valid- there is no liability for a bare nondisclosure. %winton (hitinsville ?an/ sold %winton a house. 2yrs later, %winton discovered termites and learned that A /new of termites at the time of the sale 'nondisclosure+. Dhe ct said there was no misrepresentation. , had the ability to in<uire as to the condition of the house. 1o concealment bare nondisclosure. 0 e*ceptions2 #1% +tatutory e*ceptions #2% Half'trut$s say enough to lead one to believe something treated as a misrepresentation voidable contract. Eannavos Annino made a !& family house into F apartments and then later advertised to sell it. Dhe house wasn4t zoned for multi&family dwelling. Annino /new this, but didn4t tell Eannavos. Eannavos boughtthe house and was later given notice that the home was being illegally used 'against zoning laws+. Eannavos sued. Annino claimed it was a bare nondisclosure and thus no liability. , could easily find out the applicable zoning law 'public record+. Dhe ct said it was a half&truth and that it was more than a bare nondisclosure. Dhe ad said the house could be used for renting out 'to get income+. Dhis implied that this was permission. t said , could have found out the truth, but relied on A4s implication. #0% Confidential relations if 2 people operate w8 a relationship on trust and one party relies on the other to disclose the facts, a nondisclosure is actionable. Dhis is not an arm4s length transaction as in a business8commercial contract. Mutual Mista,e contract is voidable if you were induced to ma/e a promise by mutual mista/e.

#2%

a.

b.

c.

d.

e.

Mista,e of facts 'not a poor prediction+ %ec.!6! A mista/e is a belief that is not in accord with the facts. ,rediction L you /now that you don4t /now the facts. %tees v. *eonard , hired A to build bldg, and it fell down twice. A refused to perform because the soil was composed of <uic/sand. A agreed to the specifications and to build, but said that they misunderstood because they didn4t /now the <uality of the soil. Dhe ct said that the contract wasn4t voidable. Dhe A should have investigated the soil. A predicted that the soil was of good <uality. %herwood v. (al/er A agreed to sell , a cow 'Rose 2d of Aberlone+ for 5F7. Dhey both thought she was sterile. %he was actually pregnant and worth 5967 to 5!,777. A refused to deliver the cow to ,, and , sued. A claimed mista/e. Dhe ct allowed the contract to be voided. ?oth parties were mista/en because they thought she was sterile, but she actually was pregnant. 1ot a prediction, but a mista/e. (ood v. ?oynton , found a stone and showed it to A '0eweler+, who paid 5! for it. ;t turned out to be an uncut diamond worth 5977. , sues A for rescission. Dhe contract is not voidable. Dhe ct said that both parties predicted that the stone was only worth 5!. Mutuality mista/e must be made by both parties to ma/e contract voidable. Ceneral Rule unilateral mista/e 'where only one party is mista/en+, the contract is not voidable. Basic assumption ta/ing certain facts for granted to be true when you don4t /now that they4re true. "ista/e must be a basic assumption about some fundamental aspect of the transaction. %ec.!62'!+ (here a mista/e of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed e)change of performances, the contract is voidable by the adversely affected party unless he bears the ris/ of mista/e under the rule stated in %ec.!6@. Material effect mista/e, though a fundamental aspect, may not have been severe the contract is not truly affected. "ista/e must be so severe that the contract cannot fairly be carried out. Affected party does not bear t$e ris, of mista,e %ec.!6@ A party bears the ris/ of a mista/e when #1% the ris/ is allocated to him by agreement of the parties, or #2% he is aware, at the time the contract is made, that he has only limited /nowledge with respect to the facts

A.

B.

to which the mista/e relates but treats his limited /nowledge as sufficient, or #0% the ris/ is allocated to him by the court on the ground that it is reasonable in the circumstances to do so. =nilateral Mista,e mista/e by one party a. ;raditional rule unilateral mista/e won4t void the promise. %winton bare nondisclosure. "ista/e %winton probably believed that there weren4t termites unilateral mista/e 'ban/ /new that the house had termites+. 2ne party4s mista/e is not enough to ma/e contract voidable. 2therwise, it would be unfair- it wouldn4t encourage people to be careful. ;t would discourage people from entering into contracts and ma/es enforcement uncertain. b. Modern .ule e)ception to bare nondisclosure. %ec.!6. (here a mista/e of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed e)change of performances, the contract is voidable by him if he does not bear the ris/ of the mista/e under the rule stated in %ec.!6@, and 'a+ the effect of the mista/e is such that enforcement of the contract would be unconscionable, or 'b+ the other party had reason to /now of the mista/e or his fault caused the mista/e. E*culpation Clauses in Ad$esion Contracts a. +tandard 4orm Contracts #1% Advanta"es lessons of e)perience, reduces uncertainty, saves time and trouble, simplifies planning and administration, and ma/es ris/s calculable. #2% Disadvanta"es difficult for consumer to get what he wants. b. Ad$esion Contracts standard form contract that can4t be changed ta/e it or leave it. 2 aspects of adhesion contracts$ not all standard form contracts are adhesion contracts, and there is nothing per se illegal or unenforceable about adhesion contracts. c. E*culpation terms clause which releases one party from liability under a particular circumstance. d. Avoidin" terms in Ad$esion Contracts #1% +trict Construction ;nterpret unclear language in the contract against the drafter. %ec. 27G ;n choosing among the reasonable meanings of a promise or agreement or a term thereof, that meaning is generally preferred which operates

#2%

#0%

against the party who supplies the words or from whom a writing otherwise proceeds. Calligan tenant fell on the lawn and sued the landlord for negligence. A claimed that there was an e)culpation clause in the lease. Dhe ct held that the A was liable because the location of the in0ury was not mentioned in e)culpation clause 'only sidewal/s8common areas+. Ade/uate otice %ec.2!!'!+ ...where a party to an agreement signs or otherwise manifests assent to a writing and has reason to believe that li/e writings are regularly used to embody terms of agreements of the same type, he adopts the writing as an integrated agreement with respect to the terms included in the writing. >ailure to read a contract is not a defense. Elar Elar chec/ed parcel in parcel room and the parcel was lost 'it allegedly had 5!,777 worth of furs in it+. Elar sued. A said that the tic/et stub included an e)culpation clause that the parcel room would only be liable for up to 526. Dhe ct said limiting liability is legitimate- however, the A must show that it has given ade<uate notice of the special contract and that it received the assent of the customer. ;t wasn4t even clear that the stub was a contract. Public Policy -<Calla"$an tenant fell on pavement and was in0ured and wanted to sue the landlord, who said that the lease had an e)culpation clause relieving him of liability. Dhe , argued that the clause violated public policy. t generally uphold e)culpation clauses unless they are against public policy or a social relationship mitigates enforcement. Dhe ct said that the clause is clear and that the , was given ade<uate notice 'had oppt4y to read lease+. 2ther cts have upheld e)culpation clauses in leases. ts have refused these clauses in for common carriers, telegraph companies, and in the master8servant relationship. Dhe ct said leases are a private concern 'not public policy+, that the leases aren4t really one&sided 'benefits to both parties lower rent+ and that there wasn4t really a housing shortage or at least it wasn4t permanent'if there was, it4s the *egislature4s 0ob to deal with it+. Dhe dissent said that it does violate public policy b8c there is no incentive for landlords to be careful and that there is no bargaining e<uality b8n the

d.

e.

parties. Hennin"sen , bought a car 'w8 an e)culpation clause in the contract+. Dhe steering mechanism failed, and the ,4s wife is in0ured. , sued A ' hrysler and ?loomfield "otors+ for breach of implied warranty of merchantability 'fit for ordinary use must pay damages for foreseeable in0uries+. A said they weren4t liable for the in0uries b8c the e)culpation clause was limited to replacement of parts and that there were no implied warranties. Dhe ct said that an ordinary person wouldn4t understand what no implied warranties meant. ;t also said that it used public policy to refuse this clause to protect ordinary people against the loss of their rights through the unilateral acts of the manufacturer. %ee also %ec.!9F'!+. =nconscionability cts can stri/e down an unconscionable provision. %ec.27F ;f a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable term, or may so limit the application of any unconscionable term as to avoid any unconscionable result. K sec.2& .72'!+ same as above. Dhis is a widely accepted doctrine that is rarely used. ts find it to be both paternalistic 'cts determine what is best for the parties+ and redistributive 'ta/e money from the wealthier , larger, or stronger party and redistribute to the poorer, smaller or wea/er party 'e.g. progressive ta)++.. %ec.9:'b+ as long as there is consideration, cts won4t loo/ at fairness this contradicts unconscionability. +pecific +tatutory Provisions some states prohibit certain types of clauses 'e)culpation clauses in certain contracts+ by statute.