CONTRACTS

10:30-11:20 MWF
Prof. Bridy

Common Law vs. UCC

Sources of Law for Contracts:
1. Contracts for Services
 Common Law
 Judicial decisions made on a case-by case basis
 Specific to each separate jurisdiction (state) Statutes
 Also specific to each jurisdiction
2. Contracts for Sale of Goods
 Statutes
 The Uniform Commercial Code (UCC) Articles 1 & 2 (w minor
jurisdiction-by-jurisdiction variations)
 Article 2 = Sale of Goods

Types of Contracts – Formation

• Express contract: actually written or spoken
• Implied contract: facts from behavior suggest the existence of contract.
• Quasi Contract: a circumstance where a duty to pay is imposed for benefit conferred
through rendered services or goods delivery. Quasi contract and implied in law contract
are generally synonymous. These terms used in cases where there is no contract; no
express or implied promise.

Types of Contracts - Acceptance

• Bilateral Contract: Contracts involving the exchange promises (buyer promises to pay
for goods when seller delivers)
• Unilateral contract: Contracts involving the exchange of a promise for performance

Enforcement
Two assumptions underlying enforcement:
• Law of contracts is concerned with relief of promissees to redress breach, not with
punishment to compel performance by promisors
• Relief granted to an aggrieved promisee should protect the promisee’s expectation (i.e.
should put him or her in the position in which s/he would have been if the contract had
been performed) – see Restatement § 344(a) (Purposes of Remedies)
• Three Legal Bases for Enforcement:
1. Bargained-for Exchange (Consideration) – Remedy is Expectation Damages
2. Promissory Estoppel/Reliance – Remedy is Reliance Damages
3. Unjust Enrichment/Quasi Contract – Remedy is Restitution

Consideration
 • Consideration: Is a pre-requisite for a valid contract.
• Consideration is what induces each party to enter into the contract
• On/Off Switch – there either is consideration or there isn’t
• Restatement § 71 Consideration: to constitute consideration, a performance or a return
promise must be bargained for; 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; the performance may consist of (a) an act other than a
promise, or (b) a forbearance, or (c) the creation, modification, or destruction of a legal
relation the performance or return promise may be given to the promisor or to some other
person. It may be given by the promisee or by some other person.
• Contract formation requires a bargained-for exchange and a consideration except where
special rules apply.
• If there is consideration, party will suffer either a detriment – the promisee gives up
something of value or circumscribes his liberty in some way (ie. suffers a legal detriment)
or an exchange – the promise is given as part of a bargain; that is, the promisor makes his
promise in exchange for the promisee’s giving of value or circumscription of liberty
o Hamer v. Sidway: Uncle promises to give nephew $5K on his 21st birthday if he
promises not to drink, do drugs, or swear (party). Promise is enforceable b/c
uncle’s promise was “bargained-for” – he received a benefit and the nephew
suffered a detriment through his forbearance from partaking in an activity he
ordinarily would have. The court holds there was consideration to enforce
contract.
o Fiege v. Boehm: P agrees not to pursue bastardy if D pays her child support. He
stops paying. P sues for breach of contract even after she bought bastardy charge
against alleged father of her unborn baby. Although the baby was later
determined not his, she acted in good faith, so there was consideration.
o Feinberg v. Pfeiffer: board passed resolution promising P would get pension of
$200/mo when she retired. She retired 1.5 yrs later and sued when company
discontinued pension payments.
 RULE: Past performance is not consideration to support a promise.
• Gratuitous promises lack consideration
o Kirksey v. Kirksey: P. moves to D’s lands after he promises to furnish land when
his brother dies; he then forces her to leave. The court holds that this was a mere
gratuity and was not sufficient consideration to support the promise. BUT – could
you argue that widow Kirksey relied on promise?
 RULE: Promises to make gifts are usually unenforceable because it lacks
the bargained-for element.

Moral Obligation/Quasi Contract

• A duty to pay may be imposed for benefit conferred through rendered services or goods
delivered. Quasi contracts and implied in law contracts are generally synonymous. These
terms used in cases where there is no contract; no express or implied promise.
• This is not a real contract. It is not a contract implied in fact because in those situations
there is an actual contract just implied from conduct rather than express words.
o For example: a mentally capable patient sees doctor beginning treatment and
 explaining it but doesn’t express in words acceptance. His conduct could still be
construed as an implicit agreement to pay and therefore an implied in fact
contract.
o Webb v. McGowin: P was dropping wooden block at mill where he worked and
saw D standing beneath him. To save D’s life P fell with block and sustained
injuries. D agrees to pay him weekly for his expenses. Upon D’s death the estate
stops paying fee and P sues. Although the promise was gratuitous, D sustained a
clear moral benefit. Material benefit + moral obligation = consideration
(enforceable promise).
 RULE: Moral obligation can support a promise when there is no
traditional consideration, but only when the promisor has “personally
benefited or been enriched by the promisee’s sacrifice and there is a just
and reasonable claim for compensation.”
o Harrington v. Taylor: D assaults his wife who had taken refuge in P’s house. D’s
wife about to hit him with axe and P intervenes saving his life but injuring her
hand. D orally promises to pay damages and stops after paying small amount. It
was a voluntary act and is not consideration for her to recover damages.
o Dementas v. Estate of Tallas: P was personal assistant to D for 14 yrs. D said
before he died that he would give him $50K for his servies and add it to his will.
He never did change the will and D died w/o giving him $. Promise for past
services lacks consideration. Some courts enforce promises under “moral
obligation” notion.
 RULE: Gratuitous past act, voluntarily performed is not consideration.
o CAB, Inc. v. Ingram: Non-competes signed shortly after employment began.
Consideration for non-compete of Goostree = signed contemporaneously with the
start of employment. Consideration for Ingram & Bjorkholm’s non-competes =
employed for an appreciable time after they signed the non-competes. Dissent:
Competes were not bargained for by the employees; they were merely imposed up
them after the bargain was struck. There was no free bargaining, because by the
time the employees saw the agreement, they had already given up any other
possibilities of employment they might have had. Promotions and raises given
raises years after the non-competes were signed cannot legitimately be considered
to be bargained for.
 RULE: In order to constitute consideration for a non-compete,
employment has to be reasonable, appreciable amount of time. One week
is probably not long enough, especially if the discharge was arbitrary and
capricious.
When is a return promise not consideration?
• When it lacks mutuality or is an illusory promise
• What it is an illusory promise?
• An illusory promise is one that 1) appears on its face to be insubstantial as to impose no
obligation on the promissor or 2) is cloaked in promissory terms but actually contains no
commitment by the promisor
• “If one of the promises leaves a party free to perform or to withdraw from the agreement
at his own unrestricted pleasure, the promise is deemed illusory and it provides no
consideration.” Mattei v. Hopper
• Each party must have assumed some legal obligation in order for bilateral contract to be
binding.
o Strong v. Sheffield: Demand note for debt made by D’s husband, endorsed by D,
given to P, who agreed not to collect debt for indefinite period of time. After 2
yrs P demanded payment, D unable to pay. A promise is illusory if a party’s
performance of that promise is entirely at the option of that party. For
consideration, forebearance must either be absolute or for a definite time.
Consideration must be determined by agreement itself, not performance.
o Mattei v. Hopper: P, real estate dev, accepted D’s offer for land. P paid deposit,
given 120 days to obtain satisfactory leases and complete purchase. P notified
before 120 days were up that D would not sell. Mattei couldn’t get off the hook
just by declaring arbitrarily that he wasn’t satisfied; he was required to show good
faith in his judgment about the suitability of the leases. The requirement that
judgment be exercised in good faith provides a basis for enforcement.
o Wood v. Lucy: Lady Duff-Gordon is 'designer' who allows her name to be put on
products for marketing purposes. Wood agreed to market Duff-Gordon's license.
She would get 50% of royalties from Wood's deals. Duff-Gordon licensed her
name and kept all the profits separate from Wood. Implied promise on the part
of Wood – he had underlying duty to use reasonable efforts to market/place
endorsements.
o Contract in Wood was an exclusive dealing contract. UCC § 2-306(2)
• Requirement/Output Contract
• This case governed by UCC because it is a contract for the sale of goods
• UCC § 2-306(1) specifically approves requirements contracts
• A requirements contract provides that the seller will deliver and the buyer will take all of
the goods that are required by the buyer.
• An output contract provides that the buyer will take and the seller will deliver all of the
goods that are produced by the seller.
o Eastern Airlines, Inc. v. Gulf Oil Corp.: P and D had requirements contract for jet
fuel. Used an index to measure market price. When OPEC raised prices, world
market price was up, but index used to measure market price was under gvt
control. D threatened to cut off P’s supply unless they pad higher price.
o Not an illusory promise: “…a contract for output or requirements in not too
indefinite since it is held to mean the actual good faith output or requirement of
the particular part…” UCC § 2-306, cmt. 2. Required to operate its business in
good faith so that its requirements would be reasonably foreseeable.

Reliance (a.k.a. Promissory Estoppel) – Alternative Basis for the

Enforcement of Promises
• Restatement 2d § 90 Reliance: a promise which the promisor should reasonably expect to
induce action or forbearance on the part of the promisee… and which does induce such
action or forbearance is binding if injustice can be avoided only by enforcement of the
promise. The remedy granted for breach may be limited, as justice requires.
• Elements of a cause of action for promissory estoppel/reliance, using Restatement 2d § 90
as the rule:
 1. Promise
2. That the promisor reasonably expects to induce action or forbearance
3. And which does induce action or forbearance
4. Is enforceable if injustice can be avoided only by its enforcement
• When a promise has no consideration (unenforceable as a contract), the doctrine of
promissory estoppel might be utilized to enforce a promise to prevent unfairness.
• The principle that a promise w/o consideration becomes binding if the promisor intends,
or should reasonably expect, the promise to induce reliance, a party actually relies on the
promise, and non-enforcement of the promise will cause detrimental injury or injustice.
Detrimental reliance
o Ricketts v. Scothorn: D promises to give granddaughter P $2K so she can quit her
job. She quits job, and D’s estate refused to pay. Promise is enforceable. No
consideration to support the grandfather’s promise of money so granddaughter
could quit her job. Court says that the donee relied in good faith upon the donor’s
promise and suffered a detrimental reliance so the court holds the promise
enforceable under promissory estoppel.
o Feinberg v. Pfeiffer: P is long time employee and board passes resolution that she
will receive pension pay when she chooses to retire. She retires and new president
says the pension is a gift and says no contract so payments stop. She gets cancer
and retires. No consideration because no bargaining, but court holds for P because
she detrimentally relied on promise of payments and might have retired later.
(Promissory estoppel theory)
o Cohen v. Cowles Media Co.: Two newspapers publish information and revealed
the source they promised they would not. Court says no contract remedy available
because not a traditional contract because no reporters no authority to promise
(editors). Court says remedy under promissory estoppel because P’s losing job
was unjust.
o D & G Stout v. Bacardi Imports: P and D have long-term business rel. When P is
faced with selling or scaling down, P negotiates deal with another company to
sell. Before that is final, D promised P they would continue as P’s distributor. P
turned down offer to sell, and shortly after D w/drew. P relied on D’s promise.
• Damages for Reliance
o A promise that is enforceable because of the promisee’s reliance is as enforceable
as a promise for which consideration was given.
o Damages for reliance, however, “may be limited as justice requires,” which
means that the promisee’s expectation is not necessarily the proper measure of
damages
o Reliance damages generally reimburse the promisee for loss caused by reliance on
the promise. The aim is to return the promisee to his/her position before the
promise was made. See Restatement 2d § 344(b).
o Court has discretion over damages awarded.

Unjust Enrichment
• When a benefit has been conferred on a recipient under circumstances when it is unfair to
permit him to retain without payment, unjust enrichment is a cause of action available to
the person who conferred the benefit. One seeks a quasi contract action to prevent unjust
 enrichment.
o Cotnam v. Wisdom: P rendered emergency medical services attempting to save
decedent D’s life after he was thrown from car and unconscious. Efforts were
unsuccessful, but P sued to recover for their services. Quasi contract, implied in
law. S.C. overrules lower court's estimation of damages based on expected
payment rather than reasonable value of services. This was not a contract,
damages should not be calculated as if it were.
• Restatement 2d § 371 Measure of Recovery: a plaintiff is entitled to restitution can
recover the reasonable value to the other party of what he received in terms of what it
would have cost him to obtain it from a person in the claimant’s position, or…
Alternatively, plaintiff can recover the amount by which his or her efforts increased the
value of the defendant’s property.
• Court has discretion to decide which of the two measures in § 371 best serve the interests
of justice.
• General rule for Good Samaritans – presumed to be gratuitous. Exceptions: if services
performed by professional or if the services are excessively expensive or burdensome.
(Cotnam v. Wisdom = physicians – so they could recover)
• Restitution: Is a broad ranging and independent remedy to prevent unjust enrichment.
This is based as a remedy to unjust enrichment as opposed to contractual obligation.
o Callano v. Oakwood Park Homes: D contracted with Pendergast for home,
Pendergast contracted with P for landscaping work. Pendergast died and family
canceled sale after P had already done landscaping. P sues to recover from D. P
had no dealings with D, did not expect any remuneration from it. Brought suit
against wrong party. Should have recovered from Pendergast estate of unjust
enrichment.
• RULE: No person shall be allowed to enrich himself unjustly at the
expense of another.
o Pyeatte v. Pyeatte: P and D were married and agreed that P would put D through
law school and after he graduated, D would put P through grad school. After D
graduated from law school, they shortly got a divorce. Agreement was too
indefinite to form a contract. In dissolution proceedings, one party is usually not
permited to recover from the other for unjust enrichment based on usual and
incidental activities of marriage. Where, however, the facts demonstrate an
agreement between spouses an extraordinary detriment, one can recover (affirmed
as to liability).

The Bargaining Process

The Nature of Assent & The Offer
• Subjective vs. Objective standard = what parties expressed (doesn’t matter what they
intended); Subjective test = what parties intended (doesn’t matter what they expressed).
20th century has move towards objective standard.
• Restatement 2d § 24 Offer Defined: “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.”
• Corbin on Contracts: “ An offer is… an act whereby one person confers upon another the
power to create contractual relations between them.”
 o Lucy v. Zehmer: D gives written instrument to P stating D agrees to sell P their
farm for $50K. D claims he was drinking, joking, didn't intend to make promise.
Zehmer and his wife (D) signed it, didn't say that it was a joke. $50Kwas
reasonable price. P relied on this and went out to secure funding. Court
establishes that offer was serious, acceptance was serious = contract.
 RULE: An offer is not an obvious joke, but when the offer is considered
serious by offeree, court can bind offeror.
o Owen v. Tunison: P sent letter to inquire if he can buy D’s property. D writes
back “it would not be possible for me to sell it unless I was to receive $16K cash.”
P accepts this, but notified 4 days later that D did not want to sell. Language used
by D was not an offer. It was a minimum sale price, showing he had intent to
negotiate further.
 RULE: An offer is not an invitation to deal/preliminary negotiation.
o Harvey v. Facey: P telegraphed D asking if he would sell property and for what
price. D answered with cash price but did not say if he would sell. P agrees to
buy. Court finds there was no offer.
 RULE: Min. selling price is an invitation to negotiate not an offer to sell.
o Southworth v. Oliver:
o Murray’s treatise contains guides the court takes into account in determining
whether an offer has been made:
1. Whether a reasonable person in the offeree’s position would believe an
offer had been made, given the surrounding circumstances.
2. Whether the language used contain words of promise or commitment
3. Whether the proposal was addressed to specific party or parties (vs. as
an advertisement to a general audience)
4. Whether the proposal was definite in its terms (e.g., price, financing,
description of property).

UCC § 2-204 Formation in General

• Contract for sale of goods may be made in any manner sufficient to show agreement,
including conduct by both parties which recognizes the existence of such a contract
• An agreement sufficient to constitute a contract for sale may be found even though the
moment of its making is undetermined
• Even though 1 or more terms are left open a contract for sale does not fail for
indefiniteness if the parties have intended to make a contract and there is a reasonably
certain basis for giving appropriate remedy.
• UCC generally relaxes stringent formalities/laws of common law when it comes to
contracts.
o Fairmount Glass Works (D) v. Cruden-Martin Woodenware Co.(P): P sends letter
to D asking for lowest price on order for glass jars. D sends reply stating definite
terms, saying “for immediate acceptance” and prices. P accepts, orders 10
carloads w/ spec. in the mail. D responds – impossible to book order. 'For
immediate acceptance' language in Fairmount's telegraph, court finds to constitute
an offer that P accepted.
• Advertisements as Offers. General Rule – An advertisement is not an offer, but rather
and invitation by the seller for the buyer to make an offer. EXCEPTION =
 o Lefkowitz v. Great Minneapolis Surplus Store: D published advertisement stating
on Sat, first come first served would be able to take advantage of sale prices. P
was first and demanded deal. D refused to sell it to him bc of house rule that only
women were intended for this offer.
o RULE: Where an offer is clear, definite and explicit, and leaves nothing open for
negotiation, there is an offer and acceptance completes the contract. New
conditions cannot be added to ad after acceptance.
Building Contracts
o Elsinore Union Elementary Schl Dist. V. Kastorff: D, a GC, prepared bid using
various bids from SCs, did not include plumbing SC by mistake. D submitted the
bid to P, confirmed it was correct and was awarded the contract. D discovered
mistake and promptly notified P and rescinded bid. P awarded him contract.
o RULE: Rescission may be had for mistake of fact if elements are met:
 One party knows or has reason to know of other’s mistake
 The mistake is material to the contract
 The mistake is not the result of neglect of a legal duty
 Enforcement of the contracts as made would be unconscionable
 The other party can be restored to the status quo
 The party seeking rescission gives prompt notice and restores anything of
value he gained under the contract
Acceptance
• Restatement 2d § 50. Acceptance of Offer Defined: 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 the offer. 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. 3) Acceptance by promise requires that the offeree
complete every act essential to the making of the promise.
• Corbin on Contracts: “An acceptance is a voluntary act of the offeree whereby he
exercises the power conferred upon him by the offer, and thereby creates a set of legal
relations called a contract.”
o Int’l Filter Co. v. Conroe Gin: P offered to sell to D filter for specific price. Offer
called for prompt acceptance by D and approval by exec of P. D accepted offer
and P’s president approved. P acknowledged the order, but did not specifically
inform D that exec had approved it. D rescinded acceptance. Notification was not
required.
o White v. Corlies & Tift: P, a builder, gave D estimate on construction of office
space. After leaving the estimate, P got note from D indicating P could begin
construction at once. P did not respond, but purchased lumber for the job. D send
another note revoking offer. Mental determination not indicated by speech is not
acceptance. Performance as acceptance must be specific to the performance of
the contract.
o Restatement 2d § 53: An offer can be accepted by the rendering of a performance
only if the offer invites such an acceptance.
Notice
• Restatement 2d § 54 Acceptance by Performance; Necessity of Notification to
 Offeror: Where an offer invites acceptance by means of performance, the general rule is
that notice to the offeror is not required unless such notice is requested in the offer. – The
commencement of the performance functions as notice of acceptance.
• Restatement 2d § 56 Acceptance by Promise; Necessity of Notification to Offeror:
Where an offer invites acceptance by means of a return promise, the general rule is that
notice to the offeror is required.
o Ever-Tite Roofing Corp. v. Green: D contracted with P to re-roof house.
Document signed by P’s rep w/o authority, and provision included that acceptance
by authorized officer only or upon commencement of work. D knew that P would
have to get funding approval taking a few days. P got funding and sent workers
to D’s house, only to find another group of workers there. Since P had started
work when they loaded up the trucks to go work, they commenced performance
before D informed they would revoke the offer.
o Allied Steel v. Ford: P sold machine to D. Contract included indemnity clause
holding P liable for all negligence of P and D employees. Indemnity clause was
not voided on 2nd purchase order. P signed. Employee is hurt before P signs
amendment. If a certain manner of acceptance was not prescribed, but merely
suggested, other methods of acceptance may meet up with an offer to make a
contract. P accepted contract in full by performing.
• Restatement 2d § 60 Acceptance of Offer: Place, Time or Manner of Acceptance – If an
offer prescribes the place, time or manner of acceptance its terms in this respect must be
complied with in order to create a contract. If an offer merely suggests a permitted place,
time or manner or acceptance, another method of acceptance is not precluded.
• Restatement 2d § 62 Effect of Performance by Offeree Where Offer Invites Either
Performance or Promise: (1) Where an offer invites an offeree to choose between
acceptance by promise and acceptance by performance, the tender or beginning of the
invited performance or a tender of a beginning of it is an acceptance by performance. (2)
Such an acceptance operates as a promise to render complete performance.
• When the offer is an offer for a unilateral contract and does not allow the offeree to
choose the means of acceptance, the offeree’s part performance does not bind him or her
to complete performance. Restatement 2d § 45 comment e.
• The offeror, by contrast, is bound as soon as the offeree begins performance. The
offeree’s start of performance is such a case that creates an option contract.
o Corinthian Pharm. V. Lederle Labs: D = seller of vaccine. P = purchaser. D
increased price of vaccine in response to liability suits. P heard of price increase
and ordered 1000 vials (usually ordered 100 or less), order over automated tele.
sys. D sent 50 vials at low price, w/ invoice noting price increase, saying they
could purchase the rest of the vials at the new price.
o UCC § 2-206(1)(b): an order or other offer to buy goods for prompt or current
shipment shall be construed as inviting acceptance either by a prompt promise to
ship or by the prompt or current shipment of conforming or non-conforming
goods, but such a shipment of non-conforming goods does not constitute an
acceptance if the seller seasonably notifies the buyer that the shipment is offered
only as an accommodation to the buyer.
o Shipment of 'non-conforming goods' does not indicate acceptance, however, as
long as there is timely notice.
Offer Terminated
• An offer, conferring on another the power of acceptance, can be terminated:
o By lapse of the offer (i.e., expiration of the period within which the offer can be
accepted;
o By the offeror’s revocation of the offer (i.e., withdrawal of the offer by the offeror
before it has been accepted);
o By the offeror’s death or incapacity;
o By the offeree’s rejection of the offer.
• Lapse of an offer: after some period of time, every offer lapses. If no period is specified
in the offer, it lapses after a reasonable time. What is a reasonable time?
o E.g., when there is an offer to sell goods that specifies no time period, a
reasonable time will be relatively short if the goods are subject to rapid price
fluctuations.
o E.g., where there is an offer to sell property that specifies no time period, a
reasonable time might be longer because prices do not fluctuate as rapidly.
Revocation
• Restatement 2d § 43 Indirect Communication of Revocation: An offeree’s power of
acceptance is terminated when the offeror takes definite action inconsistent with an
intention to enter into the proposed contract and the offeree acquires reliable information
to that effect.
o Dickinson v. Dodds: D sent memo to sell P land for specified price with the offer
held open until Friday morning. Before P accepted, P learned D intended to sell
to a 3rd party.
• A promise to keep an offer open for a stated period is not enforceable without
consideration
o Ragosta v. Wilder: Negotiations for The Fork Shop; Wilder’s requested specific
performance but Ragosta only sought financing and did not fully perform
• Bilateral contract offer does not become an option contract (binding on offeror) upon
promise of performance, nor because of preparations for performance.
• Offer is not firm (irrevocable) unless there is consideration.
• b. Restatement 2d § 45. Option Contract Created by Part Performance or Tender: when
acceptance is in the form of performance, option contract is created when performance
begins.
o Minneapolis & St, Louis Railway Co v. Columbus Rolling-Mill Co.: D offered P
to sell specific amount of iron rails, P changed the amount and when D couldn’t
fill order, P sued
• Each new set of terms is a new offer that rejects last offer; “Mirror Image Rule”
• When an offer is made, the acceptance must mirror the offer to be valid
• UCC § 2-207 (1) rejects mirror image rule (2) Recognizes that terms of contract can
change over time, thus terms are not set at moment that contract is formed, additional
terms in writing are considered proposals that are incorporated into the contract unless (a)
materially alters the contract (would create surprise or hardship for other side). (b) other
side objects (3) conduct implying/assuming a contract will be sufficient evidence of the
presence of a contract when there is no writing that establishes a contract.
o Step-Saver Data Sys. v. Wyse Tech.: D sold P computer programs who resold
 them. Computer programs had problems and P wanted indemnity for D
• Box-top license wouldn’t be considered a conditional acceptance
because ∆ didn’t clearly express unwillingness to proceed unless
additional terms were incorporated into agreement
o C. Itoh & Co. (America) Inc. v. Jordan Int’l Co.: P sent D a P.O. for
steel coils. D sent acknowledgment form with “expressly
condition” provision. One of the additional terms was an
arbitration terms. P never assented to additional terms but D
shipped the steel and P accepted.
• Where no acceptance can be found (last writing was a counter offer)
but parties act as if they are in contract, then we imply a contract and
use UCC gap fillers to determine the terms.
o Northrop Corp v. Litronic Industries: 90 day warranty v unlimited
warranty
• When terms of each side conflict, they cancel each other out and are
replaced by UCC Gap Fillers. KNOCKOUT DOCTRINE (SEE CHART)
• “Best Shot” rule – enforce all terms in one form based on overall
assessment of their relative fairness. Would force companies to create
more balanced terms.
o Drennan v. Star Paving Co.: subcontractor estimated bid too low
and then rescinded bid
• Subcontractor bids are binding on the subcontractor once submitted to
GC
• Restatement 2d § 87 Option Contract. Defines irrevocable offer (either
says in writing that it is irrevocable, or is irrevocable by statute) also,
version of promissory estoppel for offers – just like § 90, except the “of
a substantial character” part is still in.
o Holman Erection Co. v. Orville E. Madsen & Sons, Inc.: GC listed
Holman as subcontractor and when awarded contract didn’t use
Holman
• GCs justifiably rely on bid for their work because once GC wins
contract, they are bound by their own bid and for a SC to refuse to
perform would be a financial detriment
• Subcontractor doesn’t rely on GC and suffers no detriment. SC does
same amount of work because the same bid goes to each GC
o Hoffman v. Red Owl Stores: P kept continuing to substantially
invest in franchise at the recommendation of D.
• Promisee can recover under promissory estoppel when promises made
during negotiation were of such a nature as to induce promisee to act
on them to his detriment. Award is reliance damages.
o Cyberchron Corp. v. Calldata Systems Dev., Inc.: Parties entered
into negotiations for production of defense computer program
and D encouraged P to start production even though no
agreement had been made
o Channel Home Centers v. Grossman: P sent L.O.I. and took steps
 to prepare to use leased space and D leased space to competitor
of P
• Where parties intended to be bound to negotiate in good faith and
consideration was given, the agreement to negotiate is in itself a
binding contract.
o Toys, Inc. v. F.M. Burlington Co.: Lease option stated P could
renew lease at “then prevailing rate within the mall”. P wanted to
renew lease and dispute over price arose.
• The phrase “at the prevailing rate” in reference to rent in lease
renewal is sufficient to demonstrate an intention of parties to negotiate
in good faith, and thus an option contract.
• Restatement 2d § 33 Certainty “terms of a contract may be reasonably
certain even though it empowers one or both parties to make a
selection of terms in the course of performance”
• How do we deal with price in a long-term contract? (1) Leave price
term open, UCC gap filler (2-305, “reasonable price at time of delivery”
will fill in). (2) Escalator clause (like in Eastern Airlines)
o Oglebay Norton Co. v. Armco, Inc.: Pricing options failed under
original contract. Court ordered mediator/established rate.
• Where parties have clear intention to be bound, court will reinterpret
(or rewrite) pricing scheme so that contract can continue
o Power Entertainment, Inc. v. NFL Properties: P agreed to assume
3rd parties debt to D in exchange for licensing agreement
• “Main Purpose Doctrine” (1) Whether the promisor intended to be
become primarily liable for the debt, in effect making it his original
obligation, rather than to become a surety for another (2) Whether
there was consideration for the promise (3) Whether the receipt of
consideration was the promisor’s main purpose or leading object in
making the promise; that is, the consideration given for the promise
was primarily for the promisor’s use and benefit
o Langman v. Alumni Association of the Univ. of Virginia: P gifted D
property that had incurred substantial debt, but P did not agree
to take over debt when P accepted gift.
• Where a party receives some benefit in exchange for taking on the
debt of another, it is not a surety, but instead has assumed that debt
as its own. Therefore, Statute of Frauds does not apply.
o Kiefer v. Fred Howe Motors, Inc.: P bought car under legal age
and later wanted to void contract
• People under the age of 21 are not responsible for the contracts they
make (except for “necessities”)
• Good for kids not to be held to their contracts. BUT the result is that no
one will contract with them. This is why contracts for necessities are an
exception, because minors might need to be able to get necessities
• VOID – contracts that were never valid at all
• VOIDABLE – contracts are valid unless the contractor under infirmity
 (infancy, mentally ill, etc.) wishes to void it
o Ortelere v. Teachers’ Retirement Bd.: P made election to change
retirement that left husband with no benefits upon her death.
Wife died and P (husband) sued because she was mentally
incompetent
• Person who enters into contract by reason of mental illness incurs only
voidable contractual duties provided that she is unable to act
reasonably, and the other party had reason to know of the condition
o Cundick v. Broadbent: P sold ranching property for less than half
it’s value. Wife claims mentally incompetent
• Contract is voidable at the option of a person suffering from a mental
deficiency
• A person possesses mental capacity to contract where he has sufficient
reason to enable him to understand the nature and effect of the act in
issue
o McKinnon v. Benedict: P loaned D $5000 to purchase property. D
promised P to not cut any trees or make improvements to land
for 25 years in exchange for P giving loan and “securing
business” for D
• Equity will not enforce an oppressive contract, and restrictions on the
use of land are not favored in the law