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c c

  
  


 pp. 22-51
** notes 2 and 3 at pg 37

Restatement § 17
Restatement § 21ǯ
Restatement § 22
Restatement § 24
Restatement § 26
Restatement § 33
Restatement § 36
Restatement § 50(1)
Restatement § 60

Restatement §§ 25,
Restatement § 26,
Restatement § 36,
Restatement § 38,
Restatement § 39
Restatement § 40
Restatement § 43
Restatement § 58
Restatement § 59
Restatement § 63
Restatement § 69

c- pp. 51-63


Restatement §
Restatement § 32
Restatement § 45

c c 
 
 
 
c .
a.Y m ocedu al mostu e: Defendant eal estate b oke age appeals f om a judgmen
ente ed on ju  ve dict that awa ded Coldwell banke s fo me salespe son
b.Y å : Affi m judgment fo Cook the plaintiff fo damages of $18,404.31 fo
uncompensated bonus wages ea ned.
c.Y mlaintiff Ma  Ellen Cook, a licensed eal estate agent, wo ked pu suant to a
ve bal ag eement as an independent cont acto fo Coldwell- sold eal estate
fo the, ea ned commission on the sales.
-Coldwell Banke makes an ë  to thei agents/b oke s/people like Cook
independent cont acto s: a bonus/incentive p og am that inc eases with the mo e
ou make in commission; $15k ea ns $500 bonus, 22%, 30% if $25k o above
-the te ms of the bonus p og am we e that the bonuses we e paable at the end of
the ea **, sta ting Jan 1 of that 1991 ending Dec. 31. Ȃ Laiben was the pa tne and
kept t ack of the bonuses in a sepa ate book.
-Sales meeting in Septembe Laiben changed the polic and made bonuses paable
in Ma ch of the following ea , AND indicated that the individual must be Dzp esentdz
with the compan in o de to be compensated.
-Janua  of the following  . Cook accepted a job w/ competing agenc Remax, and
Laiben info med Cook she would not be eceiving he bonus; even stas on a few
months to sell off a few mo e pieces of p ope t
Cook b each of cont act claim: $18,404.31 damages (what he bonus would have
been if she we e to be paid out fo he ea )- lowe cou t ente s judgment
Defendant Laibanǯs claims:
1.Y no conside ation to suppo t the offe of a bonus
2.Y Cook did not make an acceptance of the offe to give a bonus
(view the evidence in the light most favo able to the plaintiff Cook)- not wa anted
of a di ected ve dictË mlaintiff Cook p esented evidence of a:
|Y  

 
-cont act in which pe fo mnce is based on the will o
pleasu e of one of the pa ties:
1.Y the p omiso doesnǯt eceive a p omise o conside ation fo his p omise
2.Y no conside ation fo want of mutualit (not a mutual obgligation)
3.Y cont act is enfo ceable to the extent pe fo med
4.Y offe fo a unilate al cont act is ! when the equested
pe fo mance is ende ed

B. F om m ecedent: A p omise to pa a bonus in etu n fo an at-will emploee


continued emploment is an offe fo a unilate al cont act which becomes
enfo ceable when accepted b the emploeeǯs pe fo mance.
Y Reasoning
a.Y Sufficient evidence that the bonus offe induced plaintiff to emain
with defendant th ough the end of 1991 and to ea n a high level of
commissions fo the cou t to submit the it to the ju .
b.Y Gene all, an offe o ma withd aw an offe at an time p io to
acceptance unless the offe is suppo ted b conside ation. å ,
an offe o ma not evoke an offe whe e the offe ee has made
substantial pe fo mance Ë  on Cont acts.
c.Y Defendant offe ed to pa the bonuses so long as she staed, and she
fulfilled he specific pe fo mance of wo king until the end of the ea ,
and still was not given he bonus pa.

Notes and Questions.


d.Y Restatement §45- eph ases unilate al cont acts as Dzoptiondz
cont acts- attempt to id the cont act law of the usage of unilate al
and bilate al cont acts
e.Y Llewellnǯs view= mode nist- towa ds the Restatementǯs view- pu e
unilate al cont acts whe e offe o seeks onl pe fo mance and not a
p omise a e so few and fa between in compa ison to comme cial
cont acts that shouldnǯt be viewed as a majo pa t of cont acting
wo ld
i.Y Some Dzt uedz unilate al cont acts do exist: Offe s of
commissions to eal estate b oke s, offe s of ewa ds, etc.
f.Y Would the Cook t ansaction be a Dzt uedz unilate al cont act in
Llewelln view?
i.Y Llewelln made an exception fo some t ue unilate al
cont acts, the pu e example of when one pe son offe s ou to
do something, and ouǯll get it once ou do it, is ese ved fo
both  and fo eal estate b oke age situations. This
would likel be a combination of the both, an incentive
cont act, fo the sale of eal estate p ope ties inc easing with
the individualǯs inc easing commission ea nings.
a.Y The offe : mone fo ce tain b ackets of ea ned commission
b.Y Acceptance: upon completing the act = the management info ms all that the
commission ea nings based bonus a e paid out at the end of the ea , and
the must be on hand to keep them
2.Y Note: Williston and Co bin- Cook would have had to have had ende ed
substantial pe fo mance
ii.Y Does §45 of Rest. Impose a substantial pe fo mance
equi ement?
1.Y No- it onl equi es that the act be susbantiall inituated o begun, Dzbegins the
invited pe fo mance o tende s a beginning of itdz Ȃ the wo d tende s p obabl
applies to mone, so once he begins, which leaves oom fo va ing possible
inte p etations both between diffe ent people/judges and between pa ticula
cases themselves.
iii.Y Cou ts a e now using unilate al cont act analsis (although it
has beenput out b the Restatement (2nd) not to avoid liabilit
but to  ë
, bu imposing liabilit on an offe o in cases
whe e no p omisso  acceptance was incited o equi ed. Ȃ
DzNew stledz unilate al cont acts do not involve pe fo mance b
the offe ee enti el- buut whe e the e not necessa l
committed to full pe fo mance in the te ms of the cont actual
ag eement.

mepsi comme cials in the Cou se Documents in the o de the appea and look fo
the diffe ences in points fo the jet. We will discuss them in class
http://www.outube.com/watch?v=q8S Tc8i1c
http://www.snopes.com/business/ma ket/ma s.asp

cc pp. 63-70


Restatement § 22 (2)
UCC § 2-102
UCC § 2-105(1)
UCC § 2-204
UCC § 2-207(3)

"Y å#$%"%c"&&'" !!"(()*(+,


i.Y Selle : Ha low- selling 1000 tons of impo ted Eu opean Steel
1.Y Claim- thei sales confi mation fo m that the initiall mailed, which was
eceived but neve signed and etu n, constituted an offe , which the
defendant accepted b mailing back an alte native but almost identical
pu chase o de ten das late .
ii.Y Bue : Advance Steel Co.- denies liabilit, claiming that the shipment of steel
was late and was the efo e p ope l ejected unde the cont act
1.Y Seve al telephone conve sations we e had in June 1974 between Robe t
Stewa t, the p esident of Advance, and William VanAs, and independent
steel b oke autho ized to solicits o de son behalf of Ha low.
2.Y VanAs tells Stewa d of 500 met ic tons of west Ge man Steel fo shipment
du ing Septembe -Octobe **
3.Y Stewa t advises that he is inte ested in pu chasing 1000 tons of the Steel-
the te ms of the t ansaction a e d awn up on a wo ksheet and we e
elaed to G eve, the m esident of Ha low.
4.Y G eve mailed Stewa t a sales fo m invoice with the specified dates and
amount of steel being shipped- Stewa ts eceived the invoice but did not
etu n a signed cop
5.Y Stewa t p epa ed a wo ksheet as thei pu chase o de and sent it back to
G eve, with same specifications and quantities, shipping dates, etc., was
also neve signed and etu ned.
6.Y Steel is shipped in th ee sepa ate vessels. The fi st two a ive in Octobe ,
the last on a ived in Novembe 27th (shipping said supposed to be
Septembe -Octobe ; but it is widel known in shipping indust  to expect
such items to be delive ed in Novembe

iii.Y Cou tǯs Holding:


1.Y Cou t that both Ha low and advance have mis ead the evidence. The cou t
found that an o al cont act fo the pu chase of steel was fo med befo e
eithe pa t began sending o eceiving w itten cont act fo ms.
2.Y The ag eement was made in the seve al telephone conve sations between
Stewa t and VanAs ding week of Jul 2nd
a.Y O al cont acts a e often made this wa and late confi med in
w iting- o al cont acts a e a mutual assent of two individuals fo
some so t of mutual p omise/exchange
b.Y UCC §2-204: A cont act fo sale of goods ma be made in an
manne sufficient to show ag eement, including conduct b both
pa ties which ecognizes the existence of such a cont act
3.Y The pa ties conduct demonst ates a mutual unde standing that a sale had
been a anged fo a futu e date, and that the exchange in Dzoffe sdz that both
pa ties conside ed we e not actuall offe s, but instead simpl
confi mations of the negotiations and ag eement that had p eviousl
taken place
4.Y Does not matte that shipping and delive  te ms we e not i oned out
acco ding to the UCC §2-204(3) and UCC §2-207(3) - even though one o
mo e te ms a e left open, a cont act fo sale does not fail fo indefiniteness
if the pa ties have intended to make a cont act and the e is a easonabl
ce tain basis fo giving an app op iate emed.
5.Y Cou t holds: Advance b eached the cont act b efusing the accept the last
shipment- because the mutual assent was the e that one would pa and
the othe would take the goods- and simpl because the we enǯt
delive ed p ecisel on time, onl entitled to elief if the e was some so t of
Dzmate ial deladz- Cou t finds that the e was no such mate ial dela he e
because of evidence that Novembe delive  is common in inte national
steel t ade.
Note:
1.Y UCC onl applies to goods, NOT to se vices- so the cont act between Ha low
and VanAs would be gove ned b diffe ent egulations.
2.Y Unde the p incipals of offe and acceptance- was the e a cont act in Ha low
case?
a.Y Most likel I would sa so- I ag ee with the opinion that the cont act is
fo med when the both mutuall assented to ce tain thing ove the
phone/made the ag eement then. Howeve , in that sense the delive  ma
be late and the cont act void- if the initial o al cont act which stipulated
that 1000 tons of steel would be delive ed ë     ë -
because the UCC ules wouldnǯt appl. A solicitation was made b VanAs fo
the availabilit of the Steel, an offe was made to pu chase 1000 tons of that
steel b Advance, and specifications we e d awn up and ag eed upon.
Then, the o de s we e all placed, both pa ties sent confi mation lette s
which va ied slightl, but onl with specification to delive  date- all of
which we e left unsigned. What was ag eed upon was the initial wo ksheet
in the telephone conve sations- but the e was.
b.Y m incipals of cont act fo mation:
i.Y Doesnǯt have to be w itten- o al cont acts a e binding
ii.Y Can ecind offe du ing conside ation
c.Y Ce tain details can be left out of a cont act and ag eed upon late /not at all.
d.Y Ea l common law: clea ules; mode n common law: mo e cha acte ized
b standa ds than clea ules, esponsive to issues of social justice and
economic powe (good faith and unconscionabilit)
Lone gan- solicitation not an offe - needs to be clea - lette s in exchange leave it
hanging on a limb, need to know ASAm, etc. Looking fo some    ;Ë He e-
no fu the assent is needed because the discussed and ag eed p eviousl and
began the p ocess of fulfilling the mutual equi ements of the cont act.
c- pp. 71-107
Restatement § 2
Restatement § 17
Restatement § 71
Restatement § 79
Restatement § 81
http://www.ca ollcitizens.com/ASH.html
** Conside ation Hpos in Cou se Documents

c
1.Y Bilate al cont acts- both pa ties make p omises
2.Y Unilate al Cont acts- onl one of the pa ties will be a p omiso , and the othe
pa t onl becomes a p omisee/accepts the offe once pe fo mance is met
3.Y An additional equi ement is needed beond a p omise in the fo mation of a
cont act--> needs to be p esence of Dzconside ationdz
4.Y Conside ation is known b most to be the - ( efe s to an
indispensable and essential action, condition, etc.)- of cont act law--> BUT IT
IS NOT/NEVER WAS THE  baqsis on which liabilit fo b each of a
p omise ma est
‰. c
-Both the Restatement (2nd) of Cont acts and the UCC include conside ation
UCC Chapte 4- Fo mation of cont acts

ë  Ȃ Requi ement of Exchange; tpes of Exchange
"Y /!.0!00
11 ."
"Y A pe fo mance o etu n p omise is ba gained fo if it is  2132
!042 .2!0 %132!0
42 .2!0"
3.Y The pe fo mance ma consist of
a.Y An act othe than a p omise
b.Y A fo bea ance
c.Y The c eation, modification, o dest uction of a legal elation
4.Y The pe fo mance o etu n p omise ma be given to the p omiso o to some
othe pe son. It ma be given b the p omise o b some othe pe son.

ë - Fo bea ance/Settlement of Claims and Conside ation

ë  Ȃ Illuso  and Alte native m omises
-Y A p omise o appa ent p omise is not conside ation if b its te ms the
p omiso /pu po ted p omiso ese ves a choice of alte native pe fo mances
unless
a)Y Each of the alte native pe fo mances would have been conside ation
if alone it would have been ba gained fo
b)Y One of the alt p omises would have been conside ation and the e is o
appea s to the pa ties to be a substantial possibilit that befo e the
p omiso exe cises his choice, events ma eliminate the alte natives
which would not have been conside ation.


ë  Ȃ Adequac of Conside ation
-Y If the equi ement of conside ation is met, the e is no additional equi ement
of:
a)Y A gain, advantage, o benefit to the p omiso o a loss, disadvantage,
o det miment to the p omise; o
b)Y Equivalence in the values exchanged; o
c)Y Dzmutualit of obligationdz
Note: (this ule of the Restatement cont adicts the easoning fo the holding in
Hame - decision f om 1891)

ë 
1.Y The fact that what is ba gained fo does not itself induce the making of a
p omise does not p event it f om being conside ation fo the p omise
2.Y The fact that a p omise does not itself induce a pe fo mance o etu n
p omise f om being conside ation fo the p omise.
[ Note- Section 87- Option Cont act = Cont act without Conside ation]
-Y The Restatement in Section 71 adopts the ba gain theo  of conside ation,
and in Section 79 ejects an additional equi ement of benefit o det iment.

å0%" #3&5678)8*,
'
-Y Willaim E. Sto  S was the uncle of William Sto  2nd- at the celeb ation of
the Golden wedding annive sa  of Samuel Sto  and wife- he p omised his
nephew that if he would ef ain f om d inking, using tobacco, swea ing, and
plaing ca ds o billia ds fo mone until he became 21 ea s of age, he
would pa him the sum of $5000. (Offe ).
-Y The nephew ag eed (assented) and specificall pe fo med to the full extent
of the p omise
-Y He w ote his uncle when he tu ned 21 that he had pe fo med his pa t of the
ag eement and was the eb entitled to the $5000.00.
-Y W.E. Sto  S . eplied in a lette stating that he wanted to hold onto the
mone in a sepa ate bank account, because he is oung onl 21 and itǯs a lot
of mone, so he wants to keep it safe
-Y The nephew consented that the mone should emain with the uncle
-Y The uncle died on the 29th da of Janua  without paing ove an of the
mone to the nephew.

: Is this a cont act?: Is the uncle indebted to the nephew fo the amount of
$5000.00 that was p omised to him- o was it me el a p omise that se ved mo e
along the lines of a p esent/gift, to be eceived upon a ce tain date?
-Y ‰. 0- no conside ation in the ag eement, so the e is no
cont act --> Dz the p omise to ef ain f om liquo and tobacco was not ha med
b benefitted, tha it was best fo him to do so independentl of his uncleǯs
p omise, and it follows then that unless the p omiso was benefited, the
cont act was without conside ation.
cå : c eating a ule that defines what Conside ation is Dzthe cou t will
not ask whethe the thing which fo ms the conside ation does in fact benefit the
p omissee o a thi d pa t, o is of an substantial value to anone. It is enough that
something is p omised, done, fo bo be, o suffe ed b the pa t towhom the
p omise is made as conside ation fo the p omise made to him.dz
1.Y Conside ation means not so much that one pa t is p ofiting as that the othe
abandons some legal ight in the p esent o limits his legal f eedom of action
in the futu e as an inducement fo the p omise of the fi st
2.Y Application to p esent case: It is sufficient that the nephew est icted his
lawful f eedom of action within ce tain p esc ibed limits upon the faith of his
uncleǯs ag eement (abstaining f om d inking and smoking with a legal ight
to do so), and now having full pe fo med the conditions imposed, is of no
moment whethe such pe fo mance actuall p oved a benefit to the
p omiso .
3.Y The abandonment of the use of alcohol ma have saved him mone o
impo ved his health, but the su ende of that ight caused the p omise, and
having a ight to cont act with efe ence to the subject matte , the
abandonment of the use was of sufficient conside ation to uphold the
p omise

3 !!3/
"%"023 c!8*6"6*6
) +,
':
1.Y The case a ose out of a const uction p oject fo No the n Yo k HS in mA
2.Y The School dist ict ente ed into a const uction cont act with gene al
cont acto LOBAR
3.Y LOBAR hi es subcont acto mennse- both a e equi ed to meet ce tain
paving equi ements, but pe mitted the use of alte native mate ials, namel
T eated T ash Agge gate (AggRite)
4.Y menns contacted Ame ican Ash- who had put out a solicitation (notice to
bidde s) fo f ee AggRite on a fi st come, fi st se ve basis, info med AA that it
would equi e 11,000 tons of Agg ite.
5.Y menns picked up the AggRite and used it fo the paving p oject in Decembe
2001.
6.Y B Feb. 2002 the Dist ict notified Loba (gene al cont acto ) that the e was
extensive c acking- menns is notified to emed the defective wo k, and the
do so at no cost to the school.
7.Y Scope of the emedial wo k included emoving and app op iate disposal of
the AggRite, which is classified as a haza dous waste mate ial b the EmA
8.Y menns alleges thaqt the emedial wo k cost ove $250,000.00 to pe fo med
and an addition $130,000.00+ to have the aggRite emoved = Damages?

1.Y menns files a 5 count complaint against Ame ican Ash fo : 1.  ë
ë  ; 2+3. B each of implied AND exp ess wa ant of me chantabilit,
b each of wa ant of fitness fo a pa ticula pu pose, p omiso  estoppel.
2.Y Ame ica Ash files demu e s (motion to dismiss) and t ial cou t sustained
the MTS and 

  ë 
 - T ial cou t holds that an b each of
cont act claim is dismissed because the e was not adequate conside ation to
ende the cont act enfo ceable.
3.Y
  : Whethe mennsǯs elief of Ame ican Ashǯs legal
obligation to dispose of a mate ial classified as a haza dous waste, sich that
AA avoided the costs of disposal the eof at a haza dous waste site, is
sufficient conside ation to g ound the cont act and wa ant claims
å - the cou t eve ses the t ial cou ts dismissal on the fi st count and eve se
and emand fo fu the p oceedings
1.Y   9cc
- 212.0-a cont act
must be established b pleading:
a.Y Existence of a cont act
b.Y B each of dut imposed in the cont act
c.Y Resultant damages
2.Y It is axiomatic (essential) that conside ation is an essential element of an
enfo ceable cont act--> mutual unde standing, exchange conside ation, and
delineate the te ms with p ope cla it
3.Y It is not enough that the p omise has suffe ed a legal det iment at the equest
of the p omiso - the det iment incu ed must be the Dzquid p o quo,dz o the
Dzp icedz of the p omise, and the inducement fo which it is made
a.Y Williston ex.: If a benevolent man sas to a t amp, if ou go a ound the
co ne to the clothing shop the e, ou ma pu chase the ove coat on
m c edit,ǯ no easonable pe son would unde stand that the sho t
walk was equested as the conside ation fo the p omise, but that in
the event of the t amp going to the shop the p omiso would give him
a gift.
4.Y | |   
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5.Y Ame ican Ashǯs p omise to suppl Agg ite f ee of cha ge induced menns to
assume the det iment of collecting and taking title to the mate ial, and
c iticall, that it was this ve  det iment, whethe assumed b menns o
some othe successful bidde to the paving subcont act, which induced AA to
make the p omise to p ovide f ee AggRite fo the p ohect.
a.Y This is the ecip ocalit of the offe /acceptance that establishes
conside ation and thus makes it a cont act.
¢!Y 
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a.Y The ba gain theo  of conside ation does not actuall equi e that the
pa ties ba gain ove the te ms of the ag eement.
b.Y Acco ding to åë , fo conside ation to exist: the p omise and the
conside ation must bbe in the elation of ecip ocal inducement, each
fo the othe
c.Y å: the defendants AA benefit because the donǯt have to pa fo
disposal costs; and menns obviousl benefits in getting the mate ials
fo f ee; but the p oduct is haza dous and has to be emoved to the
det iment of menns.
d.Y 212.//1!%
2.2 Ȅmenns planned on using the
AggRite in paving wo k, which did not involve an disposal expenses-
the onl eason the incu ed these costs was that the AggRite was
defective, eui ing moval and disposal

1.Y Citing p io case law- the cou t holds that conside ation equi es a benefit to
the p omiso o det iment to the p omise that is ba gained fo
2.Y the cou t holds that, unde Holmes test of Dz ecip ocal conventional
inducementdz --> Unde this test- Ame ican Ash affi mativel sought
companies to take AggRite so that Ame ican Ash could avoid the disposal
costs of the mate ial , and mennsǯs assumption off this disposal oobligation
induced Ame ican Ash to delive Agg ite to it- thus each pa tiesǯs p omise
and esulting pe fo mance induced the co esponding p omise and
pe fo mance b the othe pa t- even though the e was no actual ba gaining
between the pa ties.
3.Y Diffe ent than the menns suppl, benefit det iment test fo conside ation:

ë Ba gain theo  of conside ation: negotiation esulting in the
volunta  assumption of an obligation b one pa t upon condition of an act
o fo bea ance b the othe .
4.Y F om m. 85- Newman & Snells Bank

| c 


    

‰ 23%" (5)**,Cha les N. Doughe t, an Infant, b


Susan M. Teves, His Gua dian ad Litem, Respondent, v. Emma L. Salt, as Execut ix of
Hellena M. Doughe t, Deceased Aunt, Appellant
Facts
1.Y Doughte  is now an 8 ea old bo who eceived f om his aunt, the
defendantǯs administ at ix, a p omisso  note fo $3000.00 paable at he
death o befo e
2.Y The p omisso  note was blank when filled out, but filled in and signed- the
aunt handed it to he nephew with the wo ds Dzou have alwas done fo me,
and I have signed this note fo ou. Now, do not lose it, Some da it will be
valuable.dz
3.Y Ê
 "ë ' Dismissed the complaint (set aside the ju  ve dict fo the
nephew)- and held that the e was not sufficient evidence of conside ation fo
the e to be a binding cont act
4.Y %  (


ë, b a divided cou t, eve sed the judgment of dismissal and
einstated the ve dict- stating that the e  g ound fo sufficient
conside ation.
5.Y å : New Yo k Cou t of Appeals: this is a matte of law not fo a ju  to
decide--> the case is based on testimon of individuals speaking on behalf of
those that we e the e (The auntǯs ep esentative, visiting he nephew @
time, who was an infant).
a.Y Note = volunta  p omise executo gift = Unenfo ceable: the child isnǯt
a c edito o dealt as one, the aunt wasnǯt paing a debt, but
confe ing a bount.
b.Y The p omise was neithe offe ed no accepted with an othe pu pose
--> The m omise of $$ was not in exchange fo the Childǯs p omise
Dznothing is conside ation that is not ega ded as such b both pa tiesdz
(no sense of ecip ocal p omise and/o mutual assent).
6.Y :
a.Y Doughe t compa ed with Hame Ȃ (both involve p omise between
ounge and olde elative) - the p omise in Doughe t was made in a
mo e fo mal manne than the one made in Hame , but Hamme was
enfo ced while Doughte t was denied- Wh?
i.Y Hamme - The e was an actual offe and acceptance
(p esumabl)
ii.Y Specified amount and a time f ame (simila )
iii.Y The e was a ecip ocal p omise made b the bo in Hame ,
that he specificall pe fo m the act of abstaining f om d inking
and smoking fo a specificied pe iod of time, and he accepted
to do so, and then specificall pe fomed the te ms of that
p omise.
1.Y Doughte - the e is no pe fo mance
2.Y Doughe t- no conside ation- no pe fo mance o etu n
p omise ba gained fo --> onl the p ospect of eceiving
the mone at a ce tain time = a 
!
p.90 Ȃ cont acts in p actice- was/mechanisms atto nes can use to confe the
obgligation/c eate a cont actual obligation Ȃ like in the (ë  case:

1. m omisso  note
2. m omise unde seal
3. Executed Gift
4. Testamenta  Gift
5. Gift in T ust (t ust fund)



:;%"‰0+ ""+(7)*&*,
Facts/m ocedu e Below:
1.Y mlaintiff Geo ge Bestakis is a lende of mone to defendan t Eugenia
Demotsis sued to ecove $2000.00 plus 8% inte est as pa t of a w itten
lette , o al conve sation and mutual assento an ag eementË
2.Y The cont act was o iginall w itten in G eek: w itten b Defendant in fo m of
lette that she eceived toda $2000.00 of US cu enc and that she p omised
in etu n to pa the mone b the end of the wa time and ag eed to the 8%
inte est added togethe with the p incipal.
3.Y The t ial cou t uled fo the lende Bestakis fo $750.00 p incipal plus
inte est toalling $1163.83
4.Y Defendant Eugenia claims: the onl eceived the sum of 500,000 D achmae
which is allegedl onl valued at $25.00 US cu enc- so the claim is
inco ect fo $1975.00, and she has to etu n $25.00 the amount of mone
that was given to he . Defendant asse ts that she was neve given the
$2000.00 US cu enc that she stipulated that she had Dzhe eb accepted in
fulldz- and in exchange fo he p omise p omise to etu n in a timel manne
and to pa an 8%inte est on the total sum of $2000.00 while the p incipal
emained unpaid.
5.Y Defendant also claims that she was taken advantage of in he dist essed
financial state and that )  #
* exacted  the $2000.00 in exchange
fo $25.00 initiall fo signing the p omise/c eating the cont act.
c< =å 
1.Y The t ial cou t below exacted that the 500,000 d achmaes we e of value of
$750.00 US cu enc Ȃ in addition to the othe conside ation which plaintiff
gave the defendant fo the inst ument if he believed plaintiffǯs testimon-
2.Y This amounts to conside ation.
3.Y Essentiall the cont act stated that, upon the plaintiffs ag eeing to sign
saing he would epa the $2000.00, he would get 500,000 d achmaes
(plaintiff claims that this is onl wo th $25.00) initiall and would, in etu n
fo the mone, be epaed the total sum of $2000.00 US cu enc.
4.Y The p omise to  
 ë   of $2000.00 US cu enc was NOT
stipulated in the cont act- onl the p omise that he would 
  #
 the
amount of $2000.00 US cu enc that she had Dzhe eb accepted in full.dz
5.Y The adequac of the conside ation in the cont act is NOT examined o
Dzweigheddz b the cou tË the Dzfai nessdz of the conside ation is not assessed,
onl examine the ba gain/exchange element of the t ansaction to see if the e
is mutual assent and conside ation (p omise in etu n fo the othe ǯs
p omise)
6.Y Cou t Conclusion : evidenced b the inst ument she sued on the cou t should
have ende ed judgment in favo of the plaintiff against the defendant fo the
enti e p incipal plus inte est Ë efo m the judgment fo that amount and
affi m.
3=
0!: the Restametent §79 does not equi e an mi o ule o an
Dzequivalence in the values exchangeddz Ȃ although g oss inadequac ma be
conside ed (in cases whe e the t ansaction is unconscionable)
1.Y Is the defendant (and a guabl both pa t) equall esponsible fo the
t ansactiosn the ente into, and the cont acts the stipulate and ente into?
2.Y Obligation fo fai ness/03 in c eating ag eements and cont actual
obgligations Ë
3.Y m opo tion of ba gaining powe
4.Y Change in the laws conce n fo fai ness Ȃ 
 vs. ë 
 
ë
 ë ë ë  based on thei app aisal of the maket Ë the whole
point of p icate cont acting and the abilit to do so in a f ee ma ke it so
move awa f om cou ts and thei equalizing tendencies and be able to ente
into potentiall beneficial ba gains/exchanges that would necessa il
benefit one pa t ove the othe .

3!0 Ȃ a p omise that makes pe fo mance enti el optional with the
p omiso
1.Y A p ediction of futu e willingness is not an exp ession of p esent willingness
and is not a p omise
2.Y Whe e the p oiso has no limitations on his futu e choises
3.Y Whe e the p omiso has no expectation of futu e pe fo mance if it is left to
the will/pleasu e to pe fo m @ a late date
4.Y = NOT BOUND = no p omise/fo /p omise notion that unde lies
conside ation
5.Y f ee to te minate at will = no commitment b the othe pa t to pe fo m
upon the etu ned p omise =
  conside ation
6.Y NOTE: UNILATERAL CONTRACTS = NOT an illuso  p omise because one
side is onl seeking  ë  and NOT a etu n p omise- so
conside ation is NOT an issueË because acceptance is confe ed afte
pe fo mance is complete, so the actual pe fo mance would seve as sufficient
conside ation
7.Y Conside ation ma also be found within the seconda 
commitments/obligations made b pa ties in thei cont actual ag eements
(like implied obligations to confo m with building
codes/ egist ations/ egulations/inspections.
8.Y Mutualit of Obligation >     - estatement sas that as long as
conside ation is p esent it is enough to cont actË p ecedent- Whe e a
deale ship is not bound to o dse an goods f om a dist ibuto , the
dist ibuto is not bound to pe fo m- because in this sense its mo e of a
unilate al cont act if the deale is onl seeking the pe fo mance of the
dist ibuto  to delive the ca s, the dist ibuto did not make a p omise fo
delive  but seeking pament upon delive /pe fo mance, and the
deale ship did not seek/have a p omise of delive  f om the dist ibuto .



 
 
  c  ! "#$%
'= :#
1.Y 13 individuals plus 5 administ ato s fo deceased pe son b ought suit
against Indian Refining Co., an oil compan that ente ed into an
ag eement/alleged cont act with the plaintiff emploees/admins fo
deceased.
2.Y The oil compan sought a wa to inc ease p ofit ma gin and dec ease
ove hea /cut costs, and had to essentiall la off emploees.
3.Y Issue: the alleged cont act is based on a theo  of plaintiffs that the Vm and
gene al manage of the efine  called the emploees into his office (with the
exception of 2) and made with each a cont act to pa the, fo the est of thei
lives, half the amount of thei cu ent sala 
a.Y mlaintiffs claim that conside ation exists and a ose out of the
elationship existing between them and the Refine  fo thei ea s of
dedicated se vice, and the Refine ǯs desi e to p ovide fo the futu e
welfa e of thei dedicated emploees.
4.Y In etu n the plainitiffs we e to cease wo king enti el and we e to
epo t/contact the office and come in to get thei pament checks.
5.Y The Refine  Agents (the Vm and GM) we e autho ized to ente into this
ag eement. Howeve , the boa d of t ustees of the compan did not autho ize,
consent, o know of these cont actual ag eements, and mo e specificall that
the we e to be instated fo the du ation of the p omiseeǯs lives. Ê 

  ë
  ëë  
ë 
  ë    
   ë 

  ë ë  ëë
ëÄ
 Ä ë  



     ë 

 ë  ë
 ë #   ! (So
acco ding to the compan blaws, the Agents who made the ag eements that
we e allegedl binding fo life, we e not autho ized to do so).
6.Y The cont act itself, based on the ve bal ag eement in the offices and the
fo mal lette that followed and affi med the ag eement, did NOT stipulate in
an wa that the semi-monthl checks would be paid fo the du ation of the
emploees lives.
7.Y mlaintiffis testif that the we e told o all that the paments would be given
fo the du ation of thei lives, and since the ag eement/cont act was
confe ed upon the offe and acceptance and conside ation du ing the o al
negotation and acceptance.
8.Y Defendants den p omising an of them that the paments would pe sist so
long as the lived, and sent a lette following up that   


 , and the lette s Dzwe e in compliance with what he had said.dz
9.Y ISSUE IN THIS CONTRACTUAL EXCHANGE = Issue of fact: whethe the
plaintiffs told each of them that the paments would continue until thei
death --> Cou t sas it is eall a matte of law: is the e a cont act? See below:
c<å = 
1.Y Unde the blaws, co po ation t ansactions as eco ded in the minutes, the e
was no autho ization o atifaction of an such cont act Ë knowledge that the
men we e on the pa oll and paing them as such does not p ove an
knowledge of the cont act ente ed into, and the efo e does not c eate an
estoppel of the Refine  to den autho it.
2.Y NOT Effective Ratifiaction0 would equi e knowledge of all the mate ial facts
the boa d of di ecto s- who could not have known me el f om the pa oll
eco ds that the emploees we e no longe wo king o we e eceiving
lifetime pensions.
3.Y Conside ation:
a.Y  9  4c- self-cont adicto  te m:
something given in exchancge fo a p omise o in a eliance upon the
p omise cannot be something which has been delive ed befo e the
p omise is executed and the efo e made without efe ence to it.
i.Y 02 3
.!0
ii.Y 301  .!.2.
%20
# 
b.Y !!.!%!..20!3
213..Ȃ love and espect a e not
adequate motive to constitute conside ation.
c.Y 2#0!30!!201 
!- not Conside ation: if the defendants af eed to
make the paments fo life, then fatal to plaintiffs cases is the lack of
conside ation- we have me el a g atuitous a agement without
conside ation
i.Y mlaintiffs t avel to the defendantǯ s office, to pick up thei
checks, did not constitute conside ation Ë analogous to the
hpothetical of the t amp having to go to pick up his f ee coat-
the e is no p omise exchanged b the p omisee.
d.Y 3: to impose this expense upon the indust , to the c eation of
whose p oduct he has cont ibuted, is not unfai o un easonable, fo
eventuall, obviousl, unde wise budgeting and cost accounting
sstems, this element of cost is passed on to the consume of the
p oduct the public bea s the bu den
e.Y 2.: it is not a factual question of whethe the have to pa
until death: but eall a  -9 we e the valid cont acts:
Cou t sas NO: onl a g atituitous a angement without conside ation
= NO cont act.

1.Y #0%" 3 !!3- In menns suppl, the compan that offe ed
the AggRite fo f ee was in a sense giving a Dzgift,dz but it still constituted a
business t ansaction because it was still a ba gain/exchange fo goods and
the e se vice of p odiing good p oducts- the e was conside ation because
both p ovided a p omise in exchange fo the othe oneǯs p omise Ȃ p omise
to p ovide the goods fo f ee in exchange fo the p omise to take themË and it
was NOT pa t of the p omise to incu the costs of disposal when the goods
a e dete mined to be fault-.
2.Y Mo al Conside ation in cont actual obligations- Utilita ian/mo al
implications in individual/pe sonal cont acts and t ansactions->
expectations in othe s, t ust, and espect
3.Y Should mo al obligation be enfo ced in eve  cont act? Ȃ depends on ou
view economicall and sociall- weighing the value of thei past commitment
with the value of thei futu e p mised pension
4.Y Would it have been diffe ent if the Vm and GM had been given the autho it
exp essl to ente into those cont acts- most likel, because then it would
have been in the minutes and the autho it to ente into lifelong cont acts
with outgoing emploees would have been binding, and the ve bal
ag eement to do so, so long as the disputed fact of if such a lifelong paout
was in fact ag eed upon, would confe that obligation upon the Refine  to
fulfill. But the facts of whethe such a lifelong timef ame fo the cont act was
in fact ag eed upon would still be in question- so although the Vm and GM
having autho it to ente into such cont acts would indeed legitimize them, it
would still have to be p oven that the in fact offe ed to do so.
a.Y Unde UCC- (even though this isnǯt goods its emploment)- the
specific te ms donǯt have to be offe ed and accepted upon explicitl,
so long as it would be ag ed upon gene all that such an offe was
tende ed and accepted, the timef am wouldnǯt have to be included in
the cont act to be valid so long as it was easonable fo eseeable.
5.Y The mowe of Agents to Bind thei m incipals
a.Y Actuall Autho it
b.Y Exp ess Autho it
c.Y Autho it fo esultant/incidental actions in achieving the p incipals
objectives
d.Y Appa ent Autho it
6.Y Estoppel
a.Y Unde Agenc law, a p incipal ma be estopped to den that its agents
actions we e unautho ized, whe e the p incipal b wo ds o actions
caused the othe to el to his det iment on the agents autho it to act
b.Y Appa ent autho it, is based on the p incipals manifestation- while an
estoppel could esult f om othe acts o even inaction b the p incipal
that place the agent in a position to lead the thi d pa t to believe that
the agent has autho it to act fo the p incipal.
c.Y Knowledge of the t ansaction/cont actual obligation ente ed into +
inaction to change/stop (+autho it to do so) = ESTOmmED to den the
agent acted with autho it.
0 2 #%;2 ... ! pp. 108-
137
Restatement § 32
Restatement § 45
Restatement § 87
Restatement § 90

Restatement § 90, 87

10

Limiting the mowe to Revoke b Statute


pp. 138-140
UCC §§1-103; 2-102 2-205
How does the UCC change the common law?
Could §2-205 have been applicable to Bai d o D ennan?

m oblem 2-2
[Not assigned the issue if Gale was a Canadian which is cove ed b the CISG]

1.Y T aditional mode of mutual assent: offe and acceptance; offe evocable
until acceptedË Dzf ee evocabilitdz
a.Y Option Cont acts- mode of making an offe i evocable b cont act- a
binding offe (du ing the pe iod of the option).
i.Y Ex: landowne makes a p omise to sell in exchange fo some
conside ation, usuall mone (but can be pe fo mance); If the
offe ee accepts the offe , decides to exe cise the option, heǯs
accepting the offe eeǯs fi st p omise to sell the land.
ii.Y Useful in comme cial elations- pe mitting one who is
conside ation a cont actual t ansaction to dela committing
he self to the contemplated exchange without fea ing that such
dela will cost he the abilit to ente into that cont act, should
she eventuall decide to accept it.
iii.Y Classical contact law: NO p otection fo OFFEREE who elied
on an offe not et accepted (this is like the   case-
whe e the landowne makes an offe to keep the option open
fo sale of p ope t fo 120 das, 
ë conside ation
iv.Y Spawns a ke issue:    ë  ë  
  ë )ë

ë*   ë  ë ë& ë
ë 
 
 ë   

1.Y 0>


$0:c"%"01:"/
"+&'"7&&)*77,
1.Y The Depa tment of Highwas in mA asked fo bids fo the const uction of a
public building.
2.Y Emploee fo Gimbel sent emploees to the office of a cont acto in mA who
had possession of the specifications et al, - computed the amount of linoleum
that would be equi ed fo the job, and estimated the TOTAL YARDAGE b
about half the p ope amount = MISTAKE.
3.Y Gimbel b os then, using the specifications that the came up with with the mA
cont acto , sent an offe to suppl all of the linoleum fo the job to 20-30
othe cont acto s that would likel bid on the job.
4.Y The offe s stated DzIf successful in being awa ded this con act, it will be
absolutel gua unteedǥ andǥ we a e offe ing these p ices fo easonable,
p ompt acceptance afte the gene al cont act has been awa ded.
5.Y James Bai d, the plaintiff cont acto f om Washington got the cont act to
build the numicipal building p oject.
6.Y That same da, Gimbel ealized thei mistake in thei miscalculation and
estimates, and teleg aphed ALL of the cont acto s to whom the had sent the
offe Ë withd awing the initial ofe and substituting with a new one double
the amount of the old.
7.Y mlaintiff Bai d eceived this news the same da, but AFTER he had put in a
bid fo the cont act on a lump sum based on the p ices quoted b Gimbel
initiall.
8.Y Bai d gets the bid on Decembe 30th- Gimbel w ote a lette of confi mation of
withd awal that was eceived Dec. 31. Bai d accepts the offe Janua  2nd.
9.Y Defendant Gimbel pe sists that the evoked the initial offe .
10.Y mlaintiff Bai d sues Gimbel B os., Inc., fo b each of cont act

c 

1.Y Gene all: since the offe was withd awn befo e it was accepted, the
acceptance was too late (Rest. § 35)
2.Y mlaintiffǯs claim: it was a easonable implication f om the defendants offe
that it should be i evocable in case the plaintiff acted upon it (b using the
p ices quoted b Gimbel in making the offe - putting it at a position that it
could not withd aw without suffe ing g eat loss)
3.Y The plaintiff could have evoked his bid afte eceiving the evocation- but
time had passed to submit anothe without incu ing penalt (because it
ha d elied on the plaintiffs offe in making/assu ing thei cont act)
4.Y Inevitable implication: when the cont acto s acted upon it, the accepted the
offe and p omised to pa fo the linoleum, in case thei bid was accepted.
5.Y Howeve , it seems enti el clea that the cont acto s did not suppose that
the accepted the offe me el b putting in thei bids.
a.Y If the successful one had epudiated the cont act with the mA pub.
Autho ities afte it had been awa ded to him, ce tainl the defendant
could not have sued him fo a b each, no would the e be an emed
fo the linoleum compan against the cont acto = NO Cont act
b.Y The ph ase Dzif successful in being awa ded this cont act; offe ing
these p ices fo p ompt acceptancedz Ȃ impl that the a e looking fo
something mo e, something fu the that assents o moves f om the
option to acceptance Ë no whe e does it impl that use of the p ices
would impl acceptance of the offe .
6.Y mlaintiff Bai d a gues: even though no bilate al cont act was made- the
defendant should be held unde the doct ine of Dzp omisso  estoppeldz
a.Y Whe e pe sons subsc ibe to a ventu e, usuall cha itable, and a e held
to thei p omises afte it has been completedË Gene alized no in
Restatement §90.
b.Y Application: offe s a e o dina il made in exchange fo a
conside ation, eithe a counte p omise o some othe act which the
p omiso wishes to secu e ( = ba gain)
c.Y An offe fo exchange is not meant to become a p omise until a
conside ation has been eceived, eithe as a counte -p omise o
whateve else ma be stipulated
d.Y Gimbel offe ed to delive the linoleium in exchange fo acceptance,
not fo its bif Ȃ that offe could onl become a p omise to delive 
when the equivalent was eceived: when Bai d p omised to take and
pa fo itË NOT p omisso  estoppel
7.Y NOT an option cont act HERE: whe e Bai d would not be bound to accept the
offe it its bid we e accepted, if he found anothe offe elsewhe eË Gimbel did
not mean to subject itself to that one sided obligation- 
   

  ë ë ë
 ë
 ë  +
 
ë

ë  
 ë
 ë   
 ë  ë  
ë    ë ë
ë

& 
a.Y Cou t essentiall leaves this issue of p omiso  estoppel fo anothe
da- just states that its clea that Gimbel didnǯt intent to make an
option cont act- the wanted to secu e thei bid if the mA bid got
secu ed (business)
8.Y Notes:
a.Y Justice Hand acknowledges that the plaintiff Bai d would have a claim
if was the case that the he would be bound to the defendant in using
the defendants bidË but REJECTS it in 
 because it Dzseems enti el
clea that the cont acts did not suppose that the accepted the
defendants offe me e b putting in thei bidsdz Ȃ Cou ts ag ee
gene all- easoning: Basicall because ou can put in a bid at an
p ice ou damn well please, ou would just be foolish to put it in at a
p ice that the subcont acto couldnǯt do it fo - so using the
subcont acto s p ice quote as ou bid doesnǯt bind the subcont acto
to that bid without fo mal acceptance of the offe
b.Y Thus, the Dz eliancedz that plaintiff Bai d claimed was not enti el a
eliance without a legal emed
c.Y Is Judge Handǯs ejection of an ë
ë ë  in Bai d pe suasive?
No, but the facts do demonst ate Handǯs pointË the cont act doesnǯt
stipulate that the offe will be open fo them fo an pa ticula time
f ame, the also offe ed that p ice to 20 o 30 othe people
9.Y

 


 c & c
'"! "&(%
1.Y Action is an appeal b ought b Sta maving f om a judgment fo plaintiff in an
action to ecove damages caused b Sta mavingǯs efusal to pe fo m ce tain
paving wo k acco ding to the bid it submitted to D ennan.
2.Y On Jul 28, 1955, D ennan, a licensed gene al cont acto , p epa ing to bid on
the Monte Vista school job.
3.Y Customa  to get last minute bids f om Sub-Cont acto s to pe fo m pa ts of
the p oject- fo fea that thei offe s will get unde cut o manipulated if
divulged with too much time befo e the bid is due.
4.Y The bid had to include the names of the subcont acto s who we e to pe fo m
on hald of one pe cent o mo e of the const uction, as well as a bidde ǯs bond
(deposit = ë

ë) of $317,385.00 as a gua untee that he would ente
the cont act if awa ded the wo k.
a.Y So, not onl is the cont acto bound if his bid is accepted- but if he
evokes his offe afte the bid is accepted, he incu s a BIG loss in the
deposit and othe damages.
5.Y M s. Johnson- plaintiffǯs sec eta  (not autho ized agent) eco ded the
estimato fo the defendantǯs bid of $7,131.60 (D enna listened in on the
othe line)- Sta maving bid was the lowest fo the paving.
6.Y mlaintiff D ennan computed his pown bid and listed Sta maving as the
cont acto fo the paving po tion of the p oject.
7.Y The next da, D ennan stops @ Sta mavingǯs office- and immediatel the sa
the made a mistake in the p ice the had given as the quote and that it
would actuall cost $15,000.00Ë D ennan tells them he expects them to ca 
th ough with the cost of the o iginal bid, because he had used (RELIED) on it
in compiling his bid, and the job was being awa ded to them, and he has to do
the job acco ding to his bid- and would expect them to do the same.
8.Y Defendant had to find anothe paving compan to eplace Sta , fo a cost of
$10,948.60, and had to eplace them in thei initial bid with the Monte Vista
School Job.
9.Y 2 found that Sta had made a definite offe to do the paving
acco ding to the plans and specs, fo $7, 131.60 AND THAT mLAINTIFF
RELIED ON STARǯS BID IN COMmUTING HIS OWN BID FOR THE SCHOOL JOB,
AND NAMING DEFENDANT THEREIN AS THE SUBCONTRACTOR FOR THE
mAVING WORK Ë judgment fo D ennan fo damages in the amount of
$3,817.00- the diffence in the initial offe b Sta and the cost fo them to pa
the new subcont acto s to pave.

$3 !

1.Y Defendant claims: no enfo ceable cont act between pa ties because Sta
made a evocable offe and evoked it befo e D ennan communicated his
acceptance to them.
a.Y The e is no evidence that Sta offe ed to make its bid i evocable in
exchange fo plaintiffs use of its numbe s in calculating its bid fo the
p oject
b.Y No is the e eason to believe that D ennanǯs use of Sta ǯs numbe s in
the bid would constitute an acceptance of the offe , binding D ennan
(so long as he won the bid) to awa d the subcont act to the defendant.
c.Y In sum, the e is neithe an option suppo ted b conside ation no a
bilate al cont act binding both pa ties
2.Y mlaintiff claims: that he elied ë 
  
 on Sta ǯs offe and that
defendant must answe in damages fo its efusal to pe fo m
3.Y ISSUE AT BAR: did D ennanǯs eliance on the offe that Sta had made fo the
paving p oject make defendants offe i evocable?
a.Y §90 Restatement- A p omise which the p omiso should easonable
expect to induce action o fo bea ance of a definite and substantial
cha acte on the pa t of the p omisee and which does not induce such
action o fo bea ance is binding if injustice can be avoided onl b
enfo cement of the p omise.
b.Y Sta ǯs offe constituted a p omise to pe fo m on such conditions as
we e stated exp essl- Defendant had a eason to expect that f its bid
p oved the lowest I would be used b the plaintiff.
c.Y The offe was silent on evocation- Sta did not state anwhe e that
the could evoke at an time.
i.Y In a 
  ë  §45 Restatement- if an offe fo a
unilate al cont act is made, and pa t of the conside ation
equested in the offe is given o tende ed b the offe ee in
esponse the eto, the offe o is bound b a cont act, the dut of
immediate pe fo mance of which is conditional on the full
conside ation being given to ende ed with the times stated in
the offe (o easonable pe iod of time).
ii.Y 


ë- 

 ë
= if pa t of the
equested pe fo mance is given, the offe o will not evoke his
offe , and that if tende is made it will be accepted.
d.Y The ve  pu pose of section 90 is to make a p omise binding even
though the e was no conside ation in the sense of something that is
ba gained fo and given in exchangeË 1 se ves to
hold the offe o in lieu of the conside ation o dina il equi ed to
make the offe binding.
i.Y SD sup eme cou t Dz in executing the ag eement which was not
suppo ted b conside ation, still made a p omise which the
would have easonable expected would induce the plaintiff to
submit a bid based the eon, that such a p omise did induce this
action, and that injustice can be avoided onl b enfo cement
of the p omisedz
ii.Y The Real p oblem fo Sta is that, when Sta submitted its bid
to the cont acto fo paving, D ennan elied on that bid, and in
tu n used that numbe in fo mulating its bid- and when its
bid/offe was accepted, the we e bound to the te ms of that
cont act, which included doing the p oject fo the p ice of thei
offe Ë
iii.Y When plaintiff used the defendants offe in computing his own
bid, he bound himself to pe fo m in eliance on defendantǯs
te ms; AND Defendant was bound to ealize the substantial
possibilit that its bid would be the lowest, and that I would be
included b plaintiff in his bid.
iv.Y Defendant had eason not onl to expect D ennan to el on its
bid, but want him to, because the wanted to win the cont actË
= Sta ǯs inte est/stake in plaintiffǯs eliance on its bid.
a.Y This inte est, in addition that plaintiff was bound b its own bid, it is
in the inte est of FAIRNESS fo plaintiff to have an oppo tunit to
accept defendantǯs bid afte the gene al cont act has been awa ded to
him
e.Y Defendantǯs Claim: its bid was a esult of a mistake and it was
the efo e entitled to evoke it
i.Y This is onl the case when the plaintiff has eason to believe
that the defendant had made a mistake- because if he had
eason to believe it was in e o , he could not justifiabl el on
it ( emembe that eliance is used, as in Rest. §90 when the e
is offe and acceptance without conside ation)

 03 !!

1.Y While D ennan involves an offe to ente into a bilate al cont act, Justice
Talo concludes that p otection against evocation of an offe should also
appl in that situation when the offe ee has easonabl elied esulting in
fo eseeable p ejudice
a.Y Reling on §90- 03 !!
2.Y D ennan vs. Bai d Ȃ The D ennan Rule
a.Y In 
, Judge hand points out that p omisso  estoppel deals with
eliance on p omises- and that an offe is not meant as a p omise until
some so t of conside ation is eceived; does not p omote justice to
seek to aid those who do not p otect themselves
b.Y The ( option counte s those a gumentsË basicall saing that
ou can have cont act without conside ation- so long as the offe ee
elies on the p omise to some det iment that can onl be emedied b
enfo cing the cont act
i.Y The eliance b the offe ee binds the p omiso to the cont act
because in eling on the p omise the become bound to
pe fo mance of that p omise in thei bid (satisfies the
benefit/det iment test; ba gain fo exchange test?- the e is
offe , acceptance?--> acceptance of the offe is implied in thei
eliance on the offe and then becoming bound in subsequent
cont act afte wining the bid,
c.Y 03 !!: Cont act Law and Business m actice Ȃ p. 119-
mOLICY- move f om classic cont act theo  to mode nism and
ealism- law is made b judges- and that cont act law should eflect
the wa 
 t ansactions actuall happen- and not adhe e to the
black lette of elativel a bit a  cont act law- c iticism, etc.

3.Y Notes p. 118

 
)  )
#'! "$$%
1.Y Be man is a landowne that gives an ë
ë ë  to Kmoch.

2.Y Kmoch is a eal estate b oke who wanted the option to pu chase the land so
that he could in tu n find a pu chase fo the land- wanted the exclusive ight
to option the cont act if he could fid a bue

3.Y Sam Goe ts is a Neb aska ag icultal consultant,, who lea ned that Be man
was inte ested in selling the land and spoken with him about obtaining the
option fo Kmoch.

4.Y Kmoch p epa ed the option cont act dated June 19, 1973- and the Dzg anting
clausedz of the option cont act ead DzFo $10 and othe valuable conside ation
I he eb g ant unto ou o ou assigns an option fo 12 das afte the date
top pu chase the following desc ibed eal estateǥdz

5.Y The option cont act was signed b Be man, but the $10 that se ved as the
p ima  mode of conside ation (not Dzothe valuable conside ationdz) was NOT
paid.
6.Y Nothinf definite had been wo ked out between then, and Be man called
Kmoch in Jul 1973 to be eleased f om the option ag eement

7.Y Be man in tu n sold the land to anothe pe son.

8.Y In August, Kmoch attempted to exe cise the option on his cont act, but was
info med b the Bank that the land had been sold --> afte an unsuccessful
conve sation w/ Be man, Kmoch attempted to exe cise the option.

9.Y Be man esponded b b inging the p esent action to have the option
decla ed null and void.

10.YÕ020: although the $10 conside ation had beneb been paid- the
p ovision allowed fo Dzothe valuable conside ationdz- his time spend and
expenses incu ed in an effo t to inte est othe s in joining him in acqui ing
the land Ȃ se ves as the othe valuable conside ation

a.Y c: an option cont act to pu chase land to be binding bmust be


suppo ted b conside ation,t he same as an othe cont act

11.YÕ02c09 the option cont act should be enfo ced b wa of ë
ë
 ë- Dzthe p omise must be made unde ci cumstances whe e the
p omiso intended and easonabl expected that the p omise would be elied
upon b the p omise and fu the that the p omise acted easonabl in eling
upon the p omise --> mROMISSORYU ESTOmmEL MUST SHOW:

a.Y The p omise was made unde such ci cumstances that the p omiso
easonable expected the p omise to act in eliance on the p omise

b.Y The p omisee acted as could easonabl be expected in eling on the


p omise

c.Y A efusal b the cou t to enfo ce the p omise must be vi tuall


sanctioning the pe pet ation of the f aud o must esult in anothe
injustice

12.Yc: Ê 


   ë $ë
ë  ë  ë  : This was an
option cont act p omising to sel the land to the appellant, it was NOT a
cont act listing the eal estate with Kmoch fo sale to othe s

a.Y Kmoch was familia with eal estate cont acts and d wew up the
p esent option--> he knew that no conside ation was paid fo the
same and that it had the effect of a continuing offe subject to
withd awal an time befo e acceptance (  ë ë
ë



 ë 
*

b.Y Time effo t, and expense incu end in an attempt to inte est othe
incesto s in the land- not elating to acts which could be easdonabl
be expected as a esult of extending the option p omise to sell the land
to him (not a listing with a b oke , it was an option cont act to sell the
land to him- he doesnǯt el on anthing). --> time and mone spent
b a pa t in t ing to sell p ope t fo which he holds an option
cannot be const ued as a conside ation to the pa t fo whom he has
secu ed the option- it is a necessa  pa t of secu ing the
self/p epa ing fo the sale du ing the option pe iod.

i.Y Êë - eliance on stock option p omise causes plaintiff to


obtain calculable d illing cont acts, pa off a mo tgage and put a
compan in financial st aits--> stock p ice offe inc eased f om
99/sha e to 250/sha e- cou t finds the offe was dul accepted
b/c the pu chase p ice was tende ed befo e evocation

ii.Y -

c.Y An option cont act can be made binding and i evocable b


subsequent action in eliance upon it even though its not equested o
gien in exchange fo the option cont act- but it is a e that the option
holde will have

d.Y The offe ee acqui ed eliable info mation of the fact that the l inte est
in the land had been sold to anothe - the offe ee has NO eason to
then el on the option = REVOKED OFFER

e.Y Restatement 42 Ȃ offe ees powe of acceptance is te minated when


the offe o takes a definite action inconsistent with an intention to
ente into the p oposed cont act

0<  ...

-Y Restatement Section 87(2)- ( - but applicable to an case whe e
the e has been substantial and easonabl fo eseeable eliance on an offe
befo e its acceptance Ȃ but the showing of eliance must be that of
Dzdet imental eliance

-Y C icicism of the D ennan decision- Kniffin- insufficientl ecognizes the


distinction between a p omise and the me e conditional p omise eflected in
an offe ->   ma se ve to demonst ate some ogf the objections
aised to the extension of p omisso  Estoppel to the othe cases of p e-
acceptance eliance

0c

-Y If the $10 pament in Be man as conside ation had been paid- would the
outcome be diffe ent? --> Gene all: cases appea to hold that even a ve 
small amount of mone can se ve as sufficient conside ation fo an Dzoption
cont actdz
0< ..0.!

-Y If such a small amount mone is valid conside ation in an option cont act-
could it also be enfo ced if the pament wasnǯt actuall made?

-Y Restatement Section 87: an offe made in a signed w iting is binding as an


option cont act if it p oposes an exchange on fai te ms within a easonable
time and ecited a pu po ted conside ation fo its making --> the signed
w iting has significance as a fo malit: based on fo m athe than the
implication of a p omise = Mino it View (Be man v. Kmoch is the majo it
view of option cont act- still need some conside ation).

%

-effo ts to secu e a loan fo pu chase as valid conside ation?- held not to be


ba gained-fo conside ation, but MAY constitute eliance sufficient to justif elief
based on p omisso  estoppel.

14 !

-Y Should an option cont act be an exception to the deposited acceptance ule-


so tat acceptance must be eceived b the offe o befo e expi ation of the
option pe iod specified? Restatement Second takes this view--> ut cou t has
ejected this b/c mailbox ule is so widel known that pa ties to an option
cont act should p esumed to have cont act with efe ence to that ule unless
the have exp essl p ovided othe wise

..%.%

-Y In Be man, the selle appa entl did not make an unequivocal evocation
of his offe , but the bue ǯs powe of acceptance was held to have te minated
when he lea ned that the selle had sold the land to someone else-->

-Y Indi ect communication of evocation (like the ou snooze ou losedz in
ë
 ! ,
* has been suppo ted- so although the estatement sas ou
need to communicate it clea l, Section 43 DOES account fo indi ect
evocation.

 c    



*  #$+, '- ! ""(%

1.Y mops Cones is an autho ized f anchise of TCBY Yogu t Ȃ ope ate a TCBY sto e
in Ma gate NJ- p esident is B enda Taube

2.Y Reso ts is a Casino Hotel in Atlantic Cit- CEO is Me v G iffin (one of his man
business/ eal estate ventu es)ȄMa lon mhoenix is the Exec Di ecto of
Business development- maul Ran is the Vm fo Hotel Ope ations at Reso ts-
Belisle is the Chief Ope ating Office of Reso ts

3.Y F om June 1991 to Septembe 1994 mops ope ated a TCBY in Ma gate NJ

4.Y Taube has a numbe of discussions with mhoenix (Reso ts)- about the
possible elocation of the mOms sto e- specificall to the boa dwa p ope t
in NJ whe e the mlae s Club Location had been- p ime eal estate.

5.Y Conce ns about the financial viabilit b mops is met with Anxious Reso ts
who want them in the space (want to have it ented ASAm)- and Reso ts
offe s to let mops have a TCBY ice c eam ca t on thei Reso ts p ope t f ee of
cha ge to Dztest out the business flowdz and assuage mops financial conce ns.

6.Y mops opened the ca t pu suant to the offe - TCBY gave mops the OK fo the
f anchise change afte Taube equests.

7.Y Based on mops ma keting assessment- Taube d afted a w itten p oposal


dated August 18 1994 add essing the leasing of the mlae s Club location Ȃ
fo mal offe : offe ed Reso ts 7% of net monthl sales (g oss less sales tax)
fo the du ation of the mlae ǯs Club Leaseǥ and if this offe is acceptable,
mops would need a 6 ea lease, and a enewable option fo anothe 6 ea s.

8.Y Mid Septembe 1994 Taube speaks with mhoenix and wants to know Reso ts
position on thei offe - mops has an option to enew the lease fo its Ma gate
location and needed to give notice to its landlo d if its staing o going b
Octobe 1 1994.

9.Y Afte anothe conve sation, mheonix states hat Reso ts is about Dz95% the edz
on thei offe and getting Besisleǯs signatu e on the offe , fo acceptance-
because he has ultimate esponsibilit fo signing off on the cont act-
Autho ized Agent
10.YTaube told mhoenix she needed to tell he landlo d whethe she was
enewing o not- and mhoenix told them that the deals good to go, and the
should pack up the sto e and plan on moving

11.YReling to mhoenixǯs assu ances- Taube notified thei landlo d the we enǯt
enewing- moved all the stuff out and into sto age, and commenced plans
sending new sto e design and etaining an atto ne to ep esent mops with
the te ms of the lease with Reso ts

12.YOn Novembe 1, 1994 Gene al counsil fo Reso ts fo wa ded mops atto ne a
w itten offe - thei counte offe - fo the lease of ONLY 3 YEARS- which
included Dz7% of g oss evenies; OR $50k ea one, $60k ea 2, $70k ea 3,
with an 3 ea enewal option afte the initial te m --> AND included a boile
plate slease af eement- ë
  ë  

 ë ë 
  ë
 ë  
    ë

ë ë 
 ë  ë  

 ë
ë
      - ë ë ë

ë   .
ë ë 



  

13.YEa l Decembe 1994 Taube and att met with Mu tha, Gene al Counsel of
Reso ts, and maul Ran--> info m Taube that the have to eschedule the
meeting to finalize the te ms of the leasue intil agte the new ea because of
anothe announcement of business ventu e that Reso ts is in- but asso ted
Tabe that Reso ts wanted TCBY on the boa dwalk fo the following season.

14.YJanua  1995- afte seve al faield attempts to contact Reso ts, Taubeǯs
atto ne eceived a lette stating that the evoke the cont act offe ed
Decembe 1.

15.YAs soon as the hea d of the evocation of the offe , mops unde took effo ts to
eponed the f anchise at a diffe ent location.
16.Ymops filed a complaint against Reso ts seeking damages- because mops
easonabl elied to its det iment on the p okises and assu ances of Reso ts
that it would be pe missed to elocate its ope ation to Reso tǯs mlae s Club
location.

17.YT ial cou t g anted Reso tǯs motion fo summa  judgment

å 

1.Y m omisso  Estoppel= claimw ill be justified if it satisfies the bu den of


demonst ating the existence of a disopute of mate ial fact with ega d to:

a.Y Clea and definite p omise b the p omiso

b.Y The p omise must be made with the expectation that the p omise will
el the eon

c.Y The p omise must in fact easonabl el on the p omise

d.Y Det iment of a definite and substantial natu e must be incu ed on


eliance on the p omise

e.Y *** molic justification fo m omisso  Estoppel: avoiding the


substantial ha dship/injustice that would esult if such a p omise
we e not enfo ced

2.Y Although the cou t has in the past uled that an implied p omise to lend an
unspecificed amount of mone does not constitute a clea and definite
p omise (Malake )--> ecent decisions have tended to elax such st ict
adhe ence to the Malake fo mula-->

3.Y Restatement Section 90dzm oomise Reasonabl Inducing Action o


Fo bea ance
a.Y A p omise which the p omiso should easonabl expect to induce
action o fo bea ance on the pa t of the p mosee o a thi d pe son and
which does not induce such action o fo bea ance is binding if
injuscitce can be avoided onl b enfo cement of the p omise

b.Y Bake  example- A owns a bake , B offe s to establish him in a


g oce  sto e fo $18k and advises him to move to anothe town and
bu a small g oce  gain expe ience- sells at a capital loss twice, and
when he etu ns with the mone fo the g oce , the p ice gets jacket
up--> he incu ed such a loss that the assu ances f om B to A a e
p omises upon which B easonabl should have expected A to el,
and A is entitled to has actual losses on the sales of bake  and
g oce  and moving costs etc.

4.Y ** St ict adhe ence to p oof of a clea and definite p omise- NOW being
e oded b the Restatement Section 90 and a mo e equitable analsis
designed to avoid injustice.

a.Y mops elied on the wo ds of mhoenix and othe s that the we e 95%
the e just waiting a signatu e = easonable eliance on the p omise of
Reso ts

b.Y mops incu ed a loss b vacating thei p esent sto e, not able to enew
thei old lease, and had to take a loss to ent diffe ent space because
thei old one was not available (although the easonableness of that
eliance is a question fo the ju )

c.Y mhoenix as p omiso - could/should easonable have expected to


induce action o fo bea ance b mops in its p ecise inst uction not to
enew the lease and pack up thei cu ent location

i.Y DzCha acte of eliance p otecteddz Ȃ the p omiso is affected


onl be eliance which he does o should fo see, and
enfo cement must be necessa  to avoid injustice- satisfaction
of the latte (avoid injustice) ma depend on the
easonableness of the p omises eliance- on the substantial
cha acte in elation to the emed sought

ii.Y AmmLICATION: mops isnǯt seeking enfo cement of the cont act
o an speculative losses that it could have made- just wants
damages it incu ed including the loss of the Ma gate leasehold
b easonabl eling on Reso ts m omise

1.Y It is asking of an equitable claim aises a dispute of fact-


the easonableness of thei eliance- which is a ju 
question- so summa  judgment should NOT habe been
g anted
Notes p. 135

1.Y Rewui ement of a m omise- In mops, the cou t dispensed with the
equi ement indicated in some ea lie cases that p omisso  estoppel must
be based on a clea and definite p omise--> sections 90 and 87 of the
Restatement a e in acco d that a p omise o offe will be sufficient without
an heightened equi ements of p oof (some cou ts still adhe e to the
heighten equi ements of a clea and definite p omise

2.Y The Hoffman Case- Hoffman v. Red Owl 133 NW 2d 267 Ȃ assu ances made
du ing negotiations that a cont act will be fo thcoming amount to a p omise
sufficient to p ovoke p omisso  estoppelȄWHEN THE mRMISSEE HAS
RELIED TO ITS DETRIMENT BY GIVING Um ANOTHER BUSINESS LOCATION
AND BY INCURRING OUT-OF-mOCKET EXmENSES IN mREmARATION fo the
new location --> same thing in D ennan and const ucting bidding whe e a GC
can ecove via p omisso  estoppel against a subcont acto who attempts to
evoke its bid

3.Y Natu e of the pa ties- sophistication of one pa t ove the othe - genuine
unfai ness

4.Y mlaintiffs damages- mops cones sought to ecove 


  - the loss
of income f om the Ma gate location that it gave up in eliance on eceiving a
lease f om the Reso ts location, in addition to out of pocket expenses in
p epa ing fo h the eso ts lease -->  Ê . 
ë  - what it would
have expected to eceive f om Reso ts location du ing the life of the lease

5.Y Schola l Commenta  -

10

1, Chu ch in Cit of Cantonville needs to expand its facilities.

Next to Chu ch is the lib a , which also is in despa ate need of a la ge st uctu e

-Y Offe fo Sale- b the cit that owns the lib a - option (ag eement to sell the
p ope t to the chu ch) until June 1, 2007- final sale to take place when the
fund aised mones eached $1million AND that amount was deposited with
the cit.

-Y Is the e conside ation? Does the Chu ch have to p omise something in etu n
fo keeping the offe open? Yes- the conside ation is thei fund aising the
mone fo the lib a  in exchange fo the offe of sale to emain open to the
Chu ch and thei s, so long as the funds we e aised and deposited b the
specified date

-Y It is likel that the e is valid conside ation because the e was an exchange of
p omises made
-Y Its an option cont act offe - so the e ë be a cont act the e without
adequate conside ation--> and b a theo  of p omisso  estoppel, the cit
could be cont actual bound- so long as the e was (f om mops):

a)Y Clea and definite p omise b the p omiso - YES

b)Y The p omise must be made with the expectation that the p omise will
el the eon -YES

c)Y The p omise must in fact easonabl el on the p omise

d)Y Det iment of a definite and substantial natu e must be incu ed on


eliance on the p omise Ȃ QUESTIONABLE

-Y In ealit, I think it depends on how much fund aising was actuall done, the
specific pe fo mance would the eb indicate the level of det iment that the
Chu ch actuall faced- if the had aised most of the funds, then it seems
likel. But if the had onl just begun and it was shot down- then the Chu ch
didnǯt eall suffe a det iment- no evidence that the took steps to place
them in a financial bu den/comp omise fo loss- like seen in the othe cases.

UCC §1-103 Ȃ Definitions and index of definitions;

 cc>- Te ms to which the confi mato  memo anda of the pa ties ag ee o


which a e othe wise set fo th in a w iting intended b the pa ties as a final
exp ession of thei ag eement with espect to such te ms a e included the ein ma
not be cont adicted b evidence of an p io ag eement o of a contempo aneous
o al ag eement but ma be explained o supplemented --> 1. B cou se of dealing o
usage of t ade o b cou se of pe fo mance; 2. b evidence of consistent additional
te ms unless the cou t finds the w iting to have been intended also as a complete
and exclusive statement of the te ms of the ag eement.
1.Y This section ejects:

a.Y An assumption that b/c w iting has been wo ked out that is final
on some matte s, that its includes all matte s

b.Y NOT fo const uction

c.Y

cc>6 Ȃ Fi m offe s Ȃ An offe b a me chant to bu o sell goods in a signed


w iting which b its te ms gives assu ance that it will be held open is NOT
evocable, fo lack of conside ation, du ing the time stated o if no time is stated fo
a easonable time, but in no event ma such a pe iod of i evocabilit exceed 3
months- b an such te m of assu ance on a fo m supplied b the offe ee must be
sepa atel signed b the offe o .

How does the UCC change Common Law?

Could UCC §2-205 have been applicable in Bai d? D ennan?

p. 138 Ȃ I evocabiluit b statu e: The DzFi m Offe dz

m oblem 2-2 p. 141

Does Gale have an ights against B anch?


c 
‰ 
å5

1. I mROMISE YOU $100 IF YOU WILL DELIVER MY GIFT OF CHOCOLATE TO MY


FRIEND SUSAN. YOU ACCEmT. CONSIDERATION?

2. ANTHONY AND I AGREE TO SUmmLY HIM WITH ALL THE CHOCOLATE HIS SHOm
NEEDS. CONSIDERATION?

3. a. BECAUSE YOU ARE MY GOOD FRIEND I mROMISE YOU 10 mOUNDS OF


CHOCOLATE. YOU ACCEmT

b. BECAUSE YOU ARE MY GOOD FRIEND I WANT YOUR CONTINUED ADVICE I


mROMISE YOU 10 mOUNDS OF CHOCOLATE. YOU ACCEmT

c. BECAUSE YOU ARE MY GOOD FRIEND I GIVE YOU 10 mOUNDS OF CHOCOLATE.


YOU SAY DzTHANKS. YOU ARE TOO FAT SO IT WAS GOOD IDEAdz I AM UNHAmmY AND
SAY DzGIVE IT BACK.dz

4. a. I CALL YOU AND SAY I AM AT THE MALL AND NEED A RIDE CAN YOU COME
GET ME? YOU SAY DzSUREdz. I THEN SAY DzI WILL GIVE YOU 10 mOUNDS OF
CHOCOLATE.

b. I CALL YOU AND SAY I AM AT THE MALL AND NEED A RIDE CAN YOU COME GET
ME AND I WILL GIVE YOU 10 mOUNDS OF CHOCOLATE? YOU SAY DzSURE BUT
UNNECESSARY. YOU ARE MY FRIENDdz.

c. I CALL YOU AND SAY I AM AT THE MALL AND NEED A RIDE CAN YOU COME GET
ME AND I WILL GIVE YOU 10 mOUNDS OF CHOCOLATE? YOU SAY DzI WAS ON MY
WAY ANYWAYdz.
5. a. GRANDMOTHER HAS A HOUSE AND NEEDS TO MOVE TO NURSING HOME. SHE
mROMISED TO GIVE IT TO HER FAVORITE GRANDDAUGHTER.
b. HOW ABOUT SELL IT TO HER FOR HER ImOD?
c. HOW ABOUT SELL IT TO HER FOR $100,000 but wo th $250,000?

6. WHAT IF GRANDMOTHER mROMISES HER GRANDDAUGHTER $5000 BECAUSE


SHE LIKES HER. GRANDDAUGHTER GETS A CALL ABOUT A JOB SHE HAS WANTED
BUT SAYS DzI DO NOT NEED IT NOW BECAUSE WITH $5000 I CAN CONCENTRATE
ON MY mAINTING.dz GRANDMOTHER DOES NOT mAY AND GRANDDAUGHTER
CANNOT GET THE JOB NOW.

7. IF GRANDMOTHER ASKS GRANDDAUGHTER TO COME TAKE CARE OF HER.


SHE COMES AND DOES TAKE CARE OF HER. AFTER A YEAR GRANDMOTHER
mROMISES TO GIVE HER $50,000.



=7

?.!:.2'0- pp. 143-167

›"" / 001  001 


 ë ë  

cc>(

Revised UCC §§ 2-206 (c) and 2-207 in Rules book

Restatement § 59

  c  . 


/ c  '##((!'c  ""(%
-Y m ima il, the cou t deals with the issue of which law toi follow, the UCC o
the common law. The situation is difficult because the cont act cove s both
se vices and goods (pa ts that need to be eplaced, etc.). The cou t
dete mines that the cont act is p ima il fo se vices ende ed, so the
common law conception of ba gain/exchange and mutual assent gove n,
-Y With that decision, the cou t holds that GEǯs final epl to m incessǯs mu chase
o de ,entitled DzFinal m ice Quotationdz se ves as GEǯs counte offe - in which
the dictated the te ms that GE would onl be liable up to the amount of the
cont act p ice, which was $231,925.00.
-Y The cou t held that use of the UCC is not a mandato  sou ce of admi alt law
(shipping laws)- has to be a cont act p ima il fo the exchange of goods.
 c ‰    9 The United States Dist ict Cou t fo the Easte n Dist ict
of Vi ginia denied appellant compans enewed motion fo judgment as a matte of
law equesting it to vacate a ju s awa d of incidental and consequential damages
to appellee shipowne fo b each of cont act. The compan appealed.

@ @
9 A compan and shipowne ente ed into a ma itime cont act fo the
inspection and epai se vices of the shipowne s c uise ship. A ju  found the
compan liable fo b each of cont act and awa ded the shipowne damages. The
cou t held that when the p edominant pu pose of a cont act was the ende ing of
se vices, the Unifo m Comme cial Code was inapplicable, and cou ts had to d aw on
common law doct ines when inte p eting the cont act. As a matte of law, se vices
athe than goods p edominated the pa ties cont act. The compans final p ice
quotation was a counte offe ejecting the shipowne s pu chase o de , and the
te ms and conditions of the p ice quotation cont olled liabilit and damages in the
t ansaction. The ju  could onl awa d damages consistent with the te ms and
conditions of the compans p ice quotation and could not awa d incidental o
consequential damages.

c  9 The o de dening a compans motion fo judgment as a matte of law


was eve sed, and the case was emanded fo ent  of judgment against the
compan in the amount of $ 231,925.00, inte est to accumulate f om the date of the
o iginal judgment
HEADNOTES
1.Y ISSUE OF SCOmE: Whethe the Unifo m Comme cial Code (U.C.C.) applies
tu ns on a question as to whethe a cont act involves p incipall a sale of
goods, on the one hand, o a p ovision of se vices, on the othe . Thus, befo e
appling the U.C.C., cou ts gene all examine the t ansaction to dete mine
whethe the sale of goods p edominates
2.Y United States Cou t of Appeals fo the Fou th Ci cuit deems the following
facto s significant in dete mining the natu e of a cont act: (1) the language of
the cont act, (2) the natu e of the business of the supplie , and (3) the
int insic wo th of the mate ials
3.Y Unde the common law, a epl to an offe which pu po ts to accept it but is
conditional on the offe o s assent to te ms additional to o diffe ent f om
those offe ed is not an acceptance but is a counte offe . Vi ginia follows the
same ule.
4.Y ACCEmTANCE OF COUNTER OFFER BY mERFORMANCE - At common law, an
offe o who p oceeds unde a cont act afte eceiving the counte offe can
accept the te ms of the counte offe b pe fo mance.
a.Y The manifestation of assent ma be made wholl o pa tl b w itten
o spoken wo ds o b othe acts o b failu e to act. The mental
assent of cont acting pa ties is not equisite fo the fo mation of a
cont act. In evaluating a pa ts intent the t ial cou t must examine
ones outwa d exp ession athe than his sec et, unexp essed
intention.
6"Y   
a.Y In p incess, the cou t applues the classical mi o -image ule in a
contempo a  setting--> citing TRestatement Second Section 59 -->
Comment (a) of Section 59 Ȃ Qualified acceptance- a qualified o
conditional acceptance p oposes an exchange diffe ent f omt hat
p oposed b the o iginal offe o . Such a p oposal is a counte -
offe o and o dina il te minates the powe of acceptance of the
o iginal offe - BUT a definite and seasonable exp ession of acceptance
is ope ative despite the additional o diffe ent te ms, if acceptance is
not made to depend ion assent of these additional te ms- then theǯ e
viewed as p oposals fo modification of the cont act and  be
accepted implicitl/silentl
b.Y The Last Shot Rule Ȃ a pa t impliedl assented to and the eb
accepted a counte -offe b doncuct indicating lack of objection to it
i.Y If no qualit te m is contained in the fo m, the be is entitled
to goods of fai ave age qualit o me chantable goods =
implied wa ant of me chantabilit
ii.Y Selle a gument: since his acknowledgement fo m did not
exactl match the te ms of the bus offe , the fo m was not an
acceptance of the offe , but it was a counte -offe which
c eated a new powe of acceptance in the o iginal offe o (one
who initiall) p oposed to bu. --> when the goods a e eceived
b the pu chase , the cou nte -offe is accepted--> the cont act
o deal the efo e was made on the te ms set fo th in the &
fo m- so the selle has the Dzlast shotdz since his fo m c eated the
last powe of acceptance which the bue exe cised
p esumabl b accepting and eceiving the goods on the te ms
set fo th in the selle ǯs fo m




 0
  *  $$1' -!0c   
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1.Y He clues asks B own fo p ice quote fo T-100 t im p ess used to make Cool
Whip bowlsB own machine sends p ice quote to He cules.
2.Y M . Fasset is B ownǯs machine shop manage
3.Y Tim Wilson is He cules pu chasing agent
4.Y M . Ran is a ep esentative of B own Machine
5.Y On nov 7th, B own Machinse submitted its o iginal p oposal with 16
numbe ed pa ag aphs desc ibing the machine to be sold
a.Y B own w ites in the 8th pa ag aph that Dzthe pu chase He cules ag ees
to pa in behalf o b own all sums which B own becomes legall
obligated to pa because of bodil uinju o p ope t damage cause
b o esulting f om the use o misue of the item of saleǥdz
6.Y He cules pu chasing agent eviewed the p oposal submitted b B own and
esponded that He cules had p epa ed its pu chase o de in esponse to
B own, objected to the down pament of twent pe cent, but ultimatelt
gave ve bal agh eement go ahead with the pu shace and be invoiced fo the
cost.
7.Y On Janua  19 B own eceived He cules w itten pu shade o de fo a
t imp ess Dzin acco dance with the B own machine quotedz fo all
specifications except one clause should ead Dz eve se t imdz instead of
standa d egula fo wa d t im.
a.Y B own also included on thie blue box of the pu chase o de , exp essl
ejecting an and all additional o diffe ent te ms p oposed b the
selle unless exp essl ag eed to in w iting
b.Y Dzno o al ag eement o othe unde standing shall uib an wa modif
this o de dzǥ Acceptance will be ifL: 1. accepting the o de , 2.
delive ing mate ial, o 3. pe fo ming se vices.
8.Y B own eceived two copies of the pu chase o de , one as an
Dzacknowledgementdz meant to be etu ned to He cules.
a.Y B own did not etu n the acknowledgement, but instead
i.Y Sent B own an invoice fo the 20% owed - $4,882.00
ii.Y sent He cules an o de acknowledgement , stating new clause:
that the must be advised within 7 das of the te ms enclosed
a e not in acco dance with thei specification, othe wise the
will send the t im p ess --> included the o iginal te ms and
conditions of sale of B ownǯs o iginal p ice quote/p oposal
9.Y He cules esponded in a lette on Feb ua  9 (not within 7 das) acking the
co ect the intial clause in 6.1 Dz eve se t imdz etc. Ȃ the chance was confi med
b B own and the modifications we e to be made, acco ding to consent b
B own (M . Fassett)
10.YHe cules neve paid the 20% deposit--> B own sent He cules an invoice
dated Ap il 14 equesting final pament of the total pu chase p ice.
11.YB own eventuall shipped the t im p ess to He cules and He cules paid the
ag eed upon p ice

å :
1.Y The gene al ule is that p ice quotation is not an offe , but athe an
invidtation to ente into negotiations, o a met e suggestion to induce offe s
b othe s --> p ice quotes  amount to an offe , but it must REASONABLY
AmmEAR f otm he p ice quote that assent to the quote is all that is needed to
ipen the offe into a cont act.
a.Y Application: He cules could not have easonabl believed that
B ownǯs quotation was intended to be an offe - the cove lette stated
that the would be in contact to Dzdiscuss the quotedz
b.Y ma ag aph Th eedz No o de , sale, ag eement fo sale, accepted p opsa,
offe to seel and/o cont act of sale shall be binding upon BROWN and
accepted b BROWN on BROWN standa d DzO de Acknowledgement
fo mdz
c.Y Thus B ownǯs Dzoffe dz was in fact a p ice quotation- and thei
acceptance was laid when the sent theui Dzode Ackinowledgment
fo mdz in esponse to He culeǯs esponse to B ownǯs p ice quote, the
Janua  19th pu chase o de --> this constituted the fi st offe -->
B ownǯs acceptance came in the Feb 5th lette DzO de
Acknowledgmentdz
d.Y So the te ms an conditions set in He cules w itten pu chase o de
constituted the te ms and conditions of the cont act; and acco ding to
clause 16, acceptaqnce awas made upon accepting the o de .
e.Y Thus, acco ding the UCC 2-207, an additional te ms that B own
included in the acceptance, also known as thei O de
Acknowledgementdz we e onl suggestions because THEY
MATERIALLY ALTERED THE TERMS OF THE CONTRACT.


 c ‰    9 Appellant pu chase sought eview of a judgment of the
Ci cuit Cou t of St. Louis Count (Missou i), which awa ded appellee selle damages
in an action fo indemnification.

@ @
9 Appellant pu chase He cules bought a t im p ess f om appellee selle
B own Machine. One of appellants emploees was inju ed while using the p ess and
b ought a lawsuit against appellee. Appellee settled with the emploee and sought
indemnification f om appellant. The t ial cou t ente ed judgment fo appellee and
appellant sought eview.
Holding:
1.Y On appeal, the cou t eve sed. The cou t found that the e was no
indemnification ag eement between the pa ties.
.Y The cou t ejected appellees a gument that a p ice quote, which contained
an indemnification clause, sent b appellee to appellant was effective. The
cou t found that the quote constituted an offe that was not timel accepted.
The cou t held that appellants pu chase o de , which did not contain an
indemnit clause, constituted the offe .
r.Y The cou t ë  2 ë #ë  Ä 
 ë 
 

 
 Ä      ë 
 

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   ë ë  . 22220
10!.2120032
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c  9 The cou t eve sed a judgment that awa ded damages to appellee selle
against appellant pu chase in an action fo indemnification. The cou t held that
appellees o de acknowledgement constituted an acceptance of appellants offe to
pu chase machine  and that an indemnification clause contained in the o de
acknowledgement was an additional te m that had not been exp essl accepted b
appellant.

921.2.0%.2 cc

1.Y Revised A ticle two makes significant changes in fo me 2-207 and deals
with two distince issues:
a.Y Cont act fo mation: Has a cont act been fo med when the pa ties
exchange coduments o use confi mations that have
diffe ent/additional te ms?
i.Y The issue of cont act fo mation WAS in 2-207(1), but the
evised moves it into 2-206(3), which eads: Dza Definite and
seasonable exp ession of acceptance in a eco d ope ates as an
acceptance even if it contains te ms additional to o diffe ent
f om the offe dz (also ejects the mi o image ule, like fo me
2-207(1)
ii.Y Comments 2 and 3 of 2-206 deal with the difficult issue of
Dzexp essl conditional acceptancesdz
1.Y Comment 3 Ȃ the offe eeǯs esponse to the offe must be a Dzdefinite acceptancedz
2.Y If the offe ee clea l states that it is onl willing to do business if the offe o
assents to the offe eeǯs te ms, that is NOT a definite acceptance (like the final
clause of 2-207(1))
3.Y If the offe o states that theǯ e onl willing to ente into an ag eement on

te ms, a pu po ted acceptance with additional o diffe ent te ms is not a
definite acceptance within the UCC.
4.Y It is NOT impo tant (Section 2-204) fo the exchange of documents to ield a
cont act
 
  ë : DzA cont act fo sale of goods ma be made in
an manne sufficient to show ag eement, incuding offe and acceptance,
conduct b both pa ties which ecognizes the existence of a cont act (i.e.
pe fo mance)ǥ etc.
b.Y What a e the te ms of the cont act, if a cont act has been fo med?
i.Y Revised UCC 2-207 deals with the te ms of the cont act once it
has been fo med eithe unde 2-204 (fo mation in gene al) o
2-206 (offe and acceptance in fo mation of a cont act)
ii.Y IF a cont act is fo med eithe b: 1. Conduct of both pa ties
that ecognizes the existence of a cont act although thei
eco ds to not establish one; 2. Offe and acceptance; o 3.
Fo med in an manne confi med b a eco d that contains
te ms additional to o diffe ent f om those in the cont act
being confi med--> THE TERMS OF THE CONTRACT ARE:
a.Y Te ms that appea in the eco d of both pa ties
b.Y Te ms, whethe in the eco d o not, to which
both pa ties ag ee
c.Y Te ms supplied o inco po ated unde an
p ovision of this act.
iii.Y Revised 2-207 is in ealit an expanded and estated ve sion of
the p esent 2-207(3).
iv.Y The intent of the New 2-207 is to avoid favo ing eithe the fi st
o the last shot in dete mining the te ms of the cont act, as
stated in new comment 2:
1.Y The same test is applied to the te ms in each fo m ega dless of whethe fi st
o last.
2.Y When one pa t insists in thei eco d that thei fo m/te ms a e condition to
cont act fo mation- IF:
a.Y The pa t doesnǯt subsequentl pe fo m; o
b.Y The pa t othe wise acknowledge existence of
the cont act, o
c.Y If the ë  pa t does not ag ee to those te ms;
then
3.Y Such a eco dǯs existence in its own te ms will keep the cont act f om being
fo med unde 2-204 o 2-206.
2.Y Summa  of the effects of the 2003 modifications of UCC 2-206 and 2-207
a.Y If EITHER the offe o o the offe ee wishes to efuse to ente into a
cont act except fo ITS te ms, it ma do so b: clea language in the
document saing so AND a efusal to pe fo m o othe
acknowledgment of the cont actual elationship
b.Y If a pa t insists that it wont p oceed unless on its own te ms, BUT
THEN mERFORMS EVEN THOUGH THE OTHER mARTY HAS ISSUED A
DOCUMENT WITH ADDITIONAL OR DIFFERENT TERMS, a cont act
will be fo med unde 2-204(1) and the te ms of the cont act will be
dete mined b 2-207.

- Look again at the facts of Ha low case p. 64 and assume a cont act was fo med b
the fo ms then what te ms will gove n?

- What if the GE case (p 144) was cove ed b he UUC- how would it change the
esult?

REVIEW FACTS OF: å#$%"%c"&&'" !!"((

i.Y Selle : Ha low- selling 1000 tons of impo ted Eu opean Steel
6.Y Claim- thei sales confi mation fo m that the initiall mailed, which was
eceived but neve signed and etu n, constituted an offe , which the
defendant accepted b mailing back an alte native but almost identical
pu chase o de ten das late .
ii.Y Bue : Advance Steel Co.- denies liabilit, claiming that the
shipment of steel was late and was the efo e p ope l
ejected unde the cont act
7.Y Seve al telephone conve sations we e had in June 1974 between Robe t
Stewa t, the p esident of Advance, and William VanAs, and independent
steel b oke autho ized to solicits o de son behalf of Ha low.
8.Y VanAs tells Stewa d of 500 met ic tons of west Ge man Steel fo shipment
du ing Septembe -Octobe **
9.Y Stewa t advises that he is inte ested in pu chasing 1000 tons of the Steel-
the te ms of the t ansaction a e d awn up on a wo ksheet and we e
elaed to G eve, the m esident of Ha low.
10.YG eve mailed Stewa t a sales fo m invoice with the specified dates and
amount of steel being shipped- Stewa ts eceived the invoice but did not
etu n a signed cop
11.YStewa t p epa ed a wo ksheet as thei pu chase o de and sent it back to
G eve, with same specifications and quantities, shipping dates, etc., was
also neve signed and etu ned.
12.YSteel is shipped in th ee sepa ate vessels. The fi st two a ive in Octobe ,
the last on a ived in Novembe 27th (shipping said supposed to be
Septembe -Octobe ; but it is widel known in shipping indust  to expect
such items to be delive ed in Novembe

Assume a cont act was fo med b the fo ms--> what te ms gove n?

What if m incess C uises was gove ned b the UCC?

 2'


!:  - pp.167-190

*** Have to take notes on 2/7/11 eading- compa e with notes w itten in spi al
f om class to make b iefs/outline of the class--> e: mostponed/incomplete
ba gaining***

UCC § 2-305
UCC § 2-204(3)

Restatement § 27
Restatement § 33

m oblem 2-5

c‰. pp. 285-293 of Rules Book


Two tpes of cont acting situations
1. Whe e ou ep esent one pa t and the othe pa t is eithe ep esented b
anothe atto ne, o p o se- and in that case, ethical obgligation incu s to disclose
the NON-att-client elationship with the opposing pa t.
2. Whe e the cont act is w itten fo in house pu poses, whe e the lawe is called
upon to act as an inte media  between two o mo e pe sons, all of whom will be
clients.

Cont act D afting m oblem Questions to Conside


1. How does the lawe take the clients ideas and d aft them in the cont act? Wh
did the lawe d aft it the wa she did?

2. Did the lawe miss anthing? An othe issues that should be conside ed o
cove ed? How do ou decide if that is the case? If something should be added how
would ou d aft the clause?

3. In d afting should the lawe c eate a one sided cont act fo he client?

4. If ou ep esented the independent cont acto what modifications, changes o


additions would ou equest?

3/14

c - pp. 193-212


1.Y Sh inkw ap te ms- pu chase o de s a p oduct (via phone, inte net o in
pe son) Ȃ when it is eceived, it is w apped in plastic, often with a wa ning on
the outside of the package- info ms the pu chase that the p ocudt contains
the selle ǯs cont act te ms and that use of the p oduct constitutes the
pu chase ǯs ag eement with those te ms. Can open and eview the te ms, and
etu n if not satisfied with the p oduct o selle ǯs te ms (w/in easonable
pe iod of time) --> NO equi ement to ag ee, implicit assent if no objections
w/in easonable pe iod of time.
2.Y Clickw ap te ms- befo e pu chasing the p oduct, the bue must sc oll
th ought h selle s te ms of sale and click on an DzI ag eedz button- can involve
eithe softwa e o tangible p oducts
3.Y B owsew ap te ms- te ms of use a e a e no mall accessible f om the
p ovide ǯs home pafe b clicking a button, but the use is not equi ed o even
encou aged to sc oll th ough the te ms of use and is not equi ed to click an
ag eement- pu po ted ag eement to the p ove ǯs te ms comes simpl f om the
use ǯs actions in b owsing the site (like a wa ning adult content tpe thing)ǥ
Dzb b owsing this site, ou acknolwdge that uou have ead, unde stood, and
ag ee to te ms and conditionsǥdz Ȃ link to te ms and conditions is usuall
available, but not equi ed to be signed, ag eed, o even viewed to be accepted.
 .

-$-+3&-"!+3|c ""%
Appellant pu chase s challenged the o de of the Sup eme Cou t, New Yo k
Count (New Yo k), which g anted espondent selle s motion to dismiss the
pu chase s complaint on the g ound that the e was a valid ag eement to a bit ate
between the pa ties.

@ @
9 The pu chase s alleged deceptive sales p actices against the selle of
compute s and softwa e p oducts. The selle s p ocedu e was to ship standa d
te ms and conditions of the pa ties ag eement that included an a bit ation clause
to the pu chase .

-Y The a bit ation clause was not invalid unde U.C.C. § 2-207 because the
clause was not a mate ial alte ation of an o al ag eement, but athe one
p ovision of the sole cont act that existed between the pa ties. The cont act
was the efo e outside the scope of § 2-207.
-Y The cou t held that an enfo ceable cont act was fo med onl with the
consume s decision to etain the me chandise beond the 30-da pe iod
specified in the ag eement. Thus, the ag eement as a whole, including the
a bit ation clause, was enfo ceable once the 30 da pe iod had lapsed, b/c it
qualified as an ag eement/acceptance.
-Y The cou t modified the o de that equi ed a bit ation befo e the
Inte national Chambe of Comme ce because it found the cost excessive and
that it dete ed individual consume s f om invoking the a bit ation p ocess.

c  9 The cou t g anted the selle s motion to dismiss the pu chase s


complaint based on the pa ties valid a bit ation ag eement. The cou t modified
the o de that equi ed a bit ation befo e the Inte national Chambe of
Comme ce as excessive.

   4   #&-##"#! c '%




    /  
 0 
   2
 
Acco ding to ecent cases, use s a e not obligated to check fo changes to the te ms
of use each time the go online. If use s a e not given easonable notice of changes,
the a e not bound b those changes. This Commenta , w itten b David Bende ,
autho of Compute Law, discusses these cases and the esulting ule.
 c ‰    9 Defendant VERIO was engaged in the business of selling a
va iet of web site design, development, and ope ation se vices. VERIO appealed
f om an o de of the United States Dist ict Cou t fo the Southe n Dist ict of New
Yo k g anting the motion of plaintiff REGISTER, a egist a of Inte net domain
names, fo a p elimina  injunction.
1.Y The dist ict cou ts o de enjoined defendant f om:
a.Y using plaintiffs t adema ks
b.Y ep esenting o othe wise suggesting to thi d pa ties that
defendants se vices had the sponso ship, endo sement, o
app oval of plaintiff;
c.Y accessing plaintiffs compute s b use of automated softwa e
p og ams pe fo ming multiple successive que ies; and
d.Y using data obtained f om plaintiffs database of contact
info mation of egist ants of Inte net domain names to solicit the
egist ants fo the sale of web site development se vices b
elect onic mail, telephone calls, o di ect mail.
2.Y On appeal, the cou t found that it had no eason to assume that plaintiffs
conduct should be conside ed unethical, especiall whe e the dist ict
cou t made no such finding.
a.Y The dist ict cou t acted within its disc etion in concluding that
plaintiff showed a likelihood of success on the me its of its
cont act claim
b.Y The dist ict cou t had not abused its disc etion in finding that,
unless specific elief we e g anted, defendants actions would
cause plaintiff i epa able ha m th ough loss of eputation, good
will, and business oppo tunities.
c  9 The uling of the dist ict cou t was affi med.
The cou t in egiste holds that Ve io had assented and was cont actuall obound b
the te ms of use of Registe ǯs website because VERIO had used the site man times
and was well awa e of Registe ǯs est ictions --> cou t uses the analog of biting into
an apple @ an apple stand- the fi st time ou ma have ca te blanche because ou
didnǯt know the te ms, but afte a ce tain point of expe ience one ought to know the
te ms and conditions associated

Mutual Assent in b owsew ap t ansactions- cou t ejects the a gument that clicking
DzI ag eedz is essential to cont act fo mation on the inte net--> T ue? Conside 4
equi ements:
1.Y Adequate notice of the existence of p oposed te ms
2.Y Use has meaningful oppo tunit to eview the te ms
3.Y Use is p ovided with adequate notice that taking a specified action
manifests those te ms
4.Y Use takes the action specified in the latte notice

;#! Ȃ cou t Registe is dealing with


ë te ms, but if clickw ap te ms we e in place (clicking I ag ee)the use
would be cont actuall bound

UCC § 2-204
UCC § 2-302

Restatement § 69

http://www.mevis- esea ch.de/~mee /MISC/di/a.htm

50
c


:

5
å : c  ':
 ‰'  Acå 9  
5
 ‰ 
 


03 !!


 -p.215-228
Restatement § 90 [Compa e Fi st Restatement § 90 at casebook p.113]

Fi st Restatement Section 90 Ȃ Co bin (t aditional, igid definitions of cont act law)


Ȃ cou ts often used eliance as a basis of cont actual obligation Ȃ Dzm oomise
easonabl Inducing Definite Substantial Actiondz Ȃ a p omise which the p omiso
should easonable expect to induce action o fo bea ance of a definite and
substantial cha acte on the pa t of the p omisee and which does induce such action
o fo bea ance is binding if injustice can be avoided onl b law enfo cement

-Y No limitations on the subject matte of the p omise OR the tpes of pesons


that ma benefit f om its application

0#22.03

-Y Famil membe s can and sometimes do ente into fo mal cont acts with
eachothe --> but most p omises in the famil context a e likel to be
actuated b feelings of affection and alt uism athe than b expectation of a
quid p o quo in etu n

-Y Obligations a e fo the most pa t based on the elationship of the pa ties Ȃ ex:


pa ental dut of suppo t- athe than a cont act

-Y m omisso  estoppel in THIS context p ovides an additional tool fo cou ts to


each what the conside to be equitable decisions.

Õ;3%"Õ;3/8"7)8&6,
1.Y A b othe -in-law, w ote to the widow of his b othe , living sixt miles distant,
that
 ë ë    
Ä  ë       ë 
 

. Sho tl afte , she moved to the esidence of he b othe -in-law, who
fo two ea s fu nished he with a comfo table esidence, and then equi ed
he to give it up: Held, that the p omise was a me e g atuit, and that an
action would not lie fo a violation of it.

2.Y OmINION: ORMOND, J.--The inclination of m mind, is, that the loss and
inconvenience, which the plaintiff sustained in b eaking up, and moving to
the defendants, a distance of sixt miles, is a sufficient conside ation to
suppo t the p omise, to fu nish he with a house, and land to cultivate, until
she could aise he famil. M b othe s, howeve think, that the p omise on
the pa t of the defendant, was a me e g atuit, and that an action will not lie
fo its b each. The judgment of the Cou t below must the efo e be eve sed,
pu suant to the ag eement of the pa ties

%"/7Õ"(+)*7,
 c ‰    9 Appellant mothe sought eview of the decision of the
Mitchell Count Dist ict Cou t (Kansas), which g anted judgment in favo of
appellee son in the mothe s action to ecove possession of land and the sons
counte claim to have the mothe conve land to him.

@ @
9 The mothe filed an action against the son to ecove possession of an
eight-ac e t act of land. The son filed a counte claim against the mothe that
contended that the mothe had p omised to conve the land to him in o de to
ectif the fact that the son had been disinhe ited b his fathe s will. The t ial cou t
g anted judgment in favo of the son and o de ed the mothe to conve the p ope t
to the son. On appeal, the cou t affi med the t ial cou ts decision on the basis of
p omisso  estoppel. The cou t held that the mothe had made a p omise to the son
that she would conve him a home and the land if the son moved to the land. The
mothe s offe was definite b seg egating the land fo the son, p epa ing the home
on the land fo the son, and giving the son possession of the land. Although the son
paid nothing fo the land, he gave up his homestead in anothe count, moved and
established himself and his famil on the t act, made some lasting and valuable
imp ovements upon it, and made othe expenditu es, eling on his mothe s
p omise; and he lived on the land fo nea l a ea befo e he was se ved with notice
to quit.

c  9 The cou t affi med the t ial cou ts g ant of judgment in favo of the son.



1.Y Evolution of p omisso  estoppel Ȃ distinction that Rest. section 90 makes Ȃ


p omisso  estoppel vs. equitable estoppel (whe e one pa t has made a
misstatement of fact, athe than a p omise)

2.Y When is eliance det imental --> Dzp otecting det imental eliancedz Ȃ wo se
off as a esult of eliance upon the p omise than othe wise would have been
3.Y Does mo al obligation facto into section 90? --> in one sense es, because it
p otects those f om eliing to thei det iment on the p omises of anothe Ȃ
but in the same sense it also ha kens to the UCC standa d which states that
the e need not be acceptance to fo m a cont act- o even ba gained fo
exchange if both pa ties ag ee that a cont act was fo med p io = elativel
amo al standa d as well.

 2%"#0/++"6*)**+,2!!)0!
!0!!%1.0,

 c ‰    9 Appellant ex-husband sought eview of an o de f om


Whitfield Supe io Cou t (Geo gia), which o de ed him to pa child suppo t fo
appellee ex-wifes son, who was not his natu al child.

@ @
9 The ex-husband a gued that the t ial cou t e ed in its legal conclusion
that the facts autho ized the imposition of an obligation to p ovide suppo t fo his
ex-wifes son. On appeal, the cou t held that although the ex-husband was neithe
the natu al o adoptive fathe of his ex-wifes son, he was still liable fo child
suppo t unde the cont actual doct ine of p omisso  estoppel. The cou t found that
the ex-husband p omised his ex-wife and he son that he would assume all of the
obligations and esponsibilities of fathe hood b allowing himself to be listed as the
childs fathe on his bi th ce tificate and giving the child his last name. The cou t
also found that the ex-wife and he son elied upon the ex-husbands p omise to
thei det iment b ef aining f om identifing and seeking suppo t f om the childs
natu al fathe . The cou t concluded that if the ex-husband we e allowed to evade
the consequences of his p omise, an injustice to his ex-wife and he son would
esult.

c  9 The cou t affi med the lowe cou ts o de equi ing the ex-husband to
pa child suppo t fo his ex-wifes son.

Notes

1.Y Implications of W ight- la ge social issues of out-of-wedlock child en Ȃ


p inciples of cont act law can dete mine suppo t obligations even when
famil law does not p ovide fo such an obligation

"
 - pp. 234-236
Alleghen case in cou se documents

"ë 
 - pp. 237-253

)
5

 - 1  ! "(%
 c ‰    9 mlaintiff fo me emploee appealed a decision of the
Ci cuit Cou t of Jackson Count (Missou i) that found that defendant emploe was
not legall obligated to ende him pension paments. The fo me emploee
asse ted that he was entitled to pension paments unde the doct ine of p omisso 
estoppel- At that time Katzs ea nings we e about $23,000 pe ea .

@ @
9 A fo me emploee was inju ed on the job while he was still wo king
fo his fo me emploe . (A man walked in, picked up the bag of mone and left.
When Katz followed him and attempted to et ieve the mone, Katz was st uck in
the head.) The fo me emploe s boa d of di ecto s app oved a esolution in which
the p omised to pa the fo me emploee a pension.

1.Y The t ial cou t found that the fo me emploee was entitled to the pension
a.Y The cou t found the pension f om Da e did not equi e Katz to do
anthing and he was in fact f ee to wo k fo anothe compan. The
cou t found Katz did not give up anthing to which he was legall
entitled when he elected to eti e. The cou t found that since Katz had
the choice of accepting eti ement and a pension o being fi ed, that it
could not be said that he suffe ed an det iment o significant change of
position when he elected to eti e
2.Y The appellate cou t eve sed that decision, but the cou t found fo the fo me
emploee.
3.Y Unde the doct ine of p omisso  estoppel, a p omise could be enfo ced if the
p omissee had det imentall elied upon the p omise such that enfo cement of
the p omise was necessa  to avoid injustice.
4.Y The cou t found that the fo me emploee had eti ed in eliance on the
p omise and noted that the fo me emploe could have te minated him but
chose not to.
a.Y In the Fall of 1975, Katz began wo king fo anothe compan on 3 to 4
half-das pe week. At the end of that ea Shopmake asked Katz if he
could do pa t-time wo k fo Da e and Katz told him he could wo k one-
half da on Wednesdas. Fo the next two and one-half ea s Katz
continued to wo k fo Da e one-half da pe week.
b.Y In Jul, 1978, Da e sent a semi-monthl check fo $250 instead of $500.
Katz sent the check back and stated he was entitled to the full $500.
The eafte Da e stopped sending an checks
c.Y The fact emains that Katz was not fi ed, but instead did volunta il
eti e, but onl afte the boa d of di ecto s had adopted the esolution
p omising to pa Katz a pension of $13,000 pe ea fo life. Thus, the
same facts a e p esent in this case as we e p esent in 

d.Y The e a e th ee elements to be satisfied to invoke the doct ine of
p omisso  estoppel:
i.Y a p omise;
ii.Y a det imental eliance on such p omise;
iii.Y that injustice can be avoided onl b enfo cement of the
p omise
e.Y It is conceded Da e intended that Katz el on its p omise of a pension
and Da e does not contend Katz did not in fact el on such p omise.
f.Y Thus, the element that injustice can be avoided onl b enfo cement of
the p omise is p esent, because Katz cannot now engage in a full-time
job to etu n to the ea nings which he gave up in eliance on the
pension
5.Y Fu the , the fo me emploee was not equi ed to invoke conside ation in
o de to enjo the benefits of the p omisso  estoppel doct ine.
6.Y The facts in this case a e st ikingl simila to Ê.. Shopmake undoubtedl
wanted to educe his ove head b educing the amount being paid to Katz and
it is t ue that Katz could have been summa il discha ged. Howeve , it is also
t ue that Shopmake efused to fi e Katz, but instead patientl negotiated fo
about 13 months to wo k out a pension which Katz did ag ee to accept and
volunta il eti ed. Ê.2   , 27 ma.Dist. & Co. Rep. 4 (1936)
c  9 The cou t eve sed the appellate cou ts decision and found that the
fo me emploee was entitled to pension paments

Notes p. 243

 
 c  

$| #! ""$%
 c ‰    9 Appellant mo tgago sought eview of an o de of the
Cou t of Common mleas, Lcoming Count, Civil Division (mennslvania), which
g anted a motion fo summa  judgment filed b appellee mo tgagee in appellants
action alleging f aud, p omisso  estoppel, and b each of cont act against appellee
in connection with appellees alleged failu e to obtain insu ance cove age fo
appellants home that was dest oed b fi e.

@ @
9 Appellant mo tgago b ought an action against appellee mo tgagee
alleging f aud, p omisso  estoppel, and b each of cont act in connection with
appellees alleged failu e to obtain insu ance cove age fo appellants home, which
was dest oed b fi e.

1.Y The t ial cou t g anted summa  judgment in appellees favo , and appellant
sought eview.
2.Y The cou t eve sed and emanded the pa t of the t ial cou ts o de that
g anted summa  judgment against appellants p omisso  estoppel claim.
3.Y The cou t held that appellees obligation to maintain insu ance on the
p ope t did not p eclude that claim.
4.Y The cou t also found that the e we e mate ial issues of fact that p ecluded
summa  judgment, including:
a.Y whethe appellee made a p omise that should have easonabl been
expected to induce eliance b appellant
b.Y whethe it was easonable fo appellant to el upon appellees
p omise.
c.Y M s. Shoemake a gues that Commonwealth made a mis ep esentation
to he when its ep esentative, in a telephone conve sation, stated that
Commonwealth would pu chase insu ance cove age and add the cost of
the p emium to the cost of he and he husbands loan. M s. Shoemake
di ects ou attention to he deposition testimon
d.Y The fu the allege that the elied on this p omise b not pu chasing
the insu ance on thei own and that injustice can be avoided onl b
enfo cing Commonwealths p omise
e.Y Illust ation 13 to comment e of section 90 of the Restatement (Second)
of Cont acts p ovides:
i.Y A, a bank, lends mone to B on the secu it of a mo tgage on Bs new
home. The mo tgage equi es B to insu e the p ope t. At the
closing of the t ansaction A p omises to a ange fo the equi ed
insu ance, and in eliance on the p omise B fails to insu e. Six
months late the p ope t, still uninsu ed, is dest oed b fi e. The
p omise is binding
ii.Y Shoemake s claim that Commonwealths p omise to obtain
insu ance was, essentiall, conditioned upon the Shoemake s cou se
of conduct, i.e., that Commonwealth would obtain insu ance if the
did not, we conclude that this evidence, if believed, would be
sufficient to allow a ju  to find that Commonwealth made a p omise
upon which it easonabl should have expected the Shoemake s to
el
iii.Y inst ucted Commonwealths ep esentative to acqui e insu ance on
he behalf. We conclude that this evidence, if believed, would be
sufficient to allow a ju  to find that the Shoemake s elied upon
Commonwealths p omise to obtain insu ance.
iv.Y eceived no communication f om Commonwealth ega ding thei
insu ance afte he conve sation with a Commonwealth
ep esentative in ea l 1994. Commonwealth, on the othe hand,
asse ts that it sent the Shoemake s lette s info ming them that thei
house would be uninsu ed afte Decembe 1, 1994. We conclude
that this evidence is sufficient to c eate a genuine issue of mate ial
fact ega ding the easonableness of the Shoemake s eliance
5.Y The cou t affi med the g ant of summa  judgment against appellants f aud
claim because the alleged p omise to obtain insu ance in the futu e was not
actionable in f aud.
a.Y Shoemake s base thei f aud claim on Commonwealths alleged p omise
that it would obtain an insu ance polic fo thei home if the failed to
do so. Commonwealth was, the efo e, p omising to take futu e action.
Thus, Commonwealths p omise cannot fo m the basis of a cause of
action in f aud
6.Y The cou t affi med the g ant of summa  judgment against appellants b each
of cont act claim because appellant waived this claim on appeal.

c  9 The cou t eve sed and emanded the pa t of the t ial cou ts
o de that g anted summa  judgment fo appellee mo tgagee against
appellant mo tgago s p omisso  estoppel claim, holding that the e we e
genuine issues of mate ial fact ega ding whethe appellee p omised to obtain
the insu ance and appellants eliance on that p omise. The cou t affi med the
g ant of summa  judgment against appellants f aud and b each of cont act
claims.

Cited m edecent Cases:


A.Y +ë ! 3
 Ä 138 Cal. App. 2d 577, 292 m.2d 632 (Cal.App. 1956), a
Califo nia appellate cou t conside ed whethe homeowne s, who we e obligated
unde a deed of t ust to p ocu e and maintain fi e insu ance on thei home,
could establish a cause of action based upon an o al p omise b a bank to obtain
the È B insu ance on the homeowne s behalf. The cou t fi st conside ed
whethe the banks p omise to obtain fi e insu ance was inconsistent with the
te m of the deed of t ust that equi ed the homeowne s to p ocu e and maintain
fi e insu ance. 292 m.2d at 635. The cou t concluded that the banks p omise was
not inconsistent with the homeowne s obligation unde the deed of t ust
because the deed equi ed onl that the homeowne s p ocu e and maintain
insu ance; the deed did not ba them f om making a sepa ate ag eement unde
which anothe pa t would p ocu e the insu ance on thei behalf. 292 m.2d at
635-36. The cou t then held that the evidence p esented b the plaintiffs was
sufficient to establish a cause of action in p omisso  estoppel because the
plaintiffs elied to thei det iment on the banks p omise to obtain insu ance

Notes p. 249

p. 250-253- Comment: the Status and Futu e of m omisso  Estoppel


pp. 253-286
http://www.kenjioshino.com/a ticles/fo gas eadfinep intntimes.pdf

Resitution Ȃ Dzgains based ecove dz (VS- Dzcompensationdz = loss based ecove )

This tpe of damages esto es the benefit confe ed to the non-b eaching pa t (the
plaintiff). Simpl, the plaintiff will get the value of whateve was confe ed to the
defendant when the e was a cont act. The e a e two gene al limits to ecove ,
which is that a complete b each of cont act is needed, and the damages will be
capped at the cont act p ice if the estitution damages exceed
c   
/   -(+1!%

@ @
9 Appellant, detained against his will at a hospitals pschiat ic unit,
eventuall, unde du ess, ead and signed the hospital elease fo m, stating he
unde stood his liabilit fo cha ges not cove ed b insu ance. He late efused to
pa the bill o autho ize his health insu ance ca ie to do so. The hospital assigned
its claim against appellant to appellee c edit bu eau fo collection, who then sued
appellant, seeking judgment on the bill. The cou t found appellant had benefitted b
the hospitalization and the efo e appellee was entitled to the value of the se vices
ende ed and ente ed judgment in favo of appellee. Appellants application fo
disc etiona  eview was g anted and the judgment affi med. The dist ict cou t had
the efo e p ope l dete mined that appellant was legall obligated to pa fo those
se vices 10!#23.

Issue: Who pas fo mental health medical se vices p ovided to a patient who is
involunta il committed to a p ivate hospital

1.Y Restitution and unjust en ichment a e mode n designations fo the olde


doct ine of quasi cont acts o cont acts implied in law (const uctive
cont acts)

c  9 Judgment affi med; the cou t concluded appellant benefitted


b his hospitalization and was the efo e liable fo medical se vices
ende ed to him

c  6("(6/7c  c -"& 


#(#! ""$%
 c ‰    9 Defendants, a co po ation and the gene al pa tne ,
appealed the judgment f om the Ci cuit Cou t fo the Seventeenth Judicial Ci cuit,
B owa d Count (Flo ida), which uled fo plaintiff compan in its suit against
defendants fo quantum me uit fo the su facing of an office building.

Comme ce was the owne of an office building. Comme ce cont acted with a gene al
cont acto , Wo ld m ope ties, Inc., to pe fo m imp ovements on its p ope t. Equit
was the stucco and su facing subcont acto fo the job, having cont acted with the
gene al cont acto to pe fo m the wo k. Because it inspected the job on a weekl
basis, È B Comme ce was awa e of Equits wo k. Equit completel pe fo med
its subcont act and the easonable value of its wo k was $ 17,100. Comme ce failed
to pa the gene al cont acto the full amounts due fo the job. The gene al
cont acto did not pa Equit. Comme ce was unjustl en iched because it had
accepted Equits se vices without paing an entit fo them

@ @
9 mlaintiff compan sued defendants, a co po ation and its gene al
pa tne , fo quantum me uit fo the su facing of an office building. Afte the t ial
cou t uled fo plaintiff, defendants appealed. On appeal, the cou t held plaintiff did
not p ove at t ial that defendant co po ation had not made pament to an pa t fo
the benefits confe ed on the p ope t b plaintiff. This was not an affi mative
defense, but an essential element of a quasi cont act claim b a subcont acto
against an owne . The cou t eve sed the uling fo plaintiff and emanded because
what defendant paid on the p oject was not full litigated, so whethe its
en ichment was unjust was an open question. The cou t noted that, cont a  to the
t ial cou ts evidentia  uling, defendant co po ations attempt to p ove that it had
paid mone di ectl to subcont acto s fo wo k on the building was elevant to
issues in the case and that what it expended on the p oject was cent al to the cause
of action.

1.Y A cont act implied in fact is one fo m of an enfo ceable cont act; it is based
on a tacit p omise, one that is infe ed in whole o in pa t f om the pa ties
conduct, not solel f om thei wo ds. Whe e an ag eement is a ived at b
wo ds, o al o w itten, the cont act is said to be exp ess. A cont act implied
in fact is not put into p omisso  wo ds with sufficient cla it, so a fact finde
must examine and inte p et the pa ties conduct to give definition to thei
unspoken ag eement. It is to this p ocess of defining an enfo ceable
ag eement that Flo ida cou ts have efe ed when the have indicated that
cont acts implied in fact est upon the assent of the pa ties
2.Y Cont acts a e implied in fact a e whe e a pe son pe fo ms se vices at
anothe s equest, o whe e se vices a e ende ed b one pe son fo anothe
without his exp essed equest, but with his knowledge, and unde
ci cumstances fai l aising the p esumption that the pa ties unde stood and
intended that compensation was to be paid. In these ci cumstances, the law
implies the p omise to pa a easonable amount fo the se vices
3.Y A cont act implied in law, o quasi cont act, is not based upon the finding, b
a p ocess of implication f om the facts, of an ag eement between the pa ties.
A cont act implied in law is a legal fiction, an obligation c eated b the law
without ega d to the pa ties exp ession of assent b thei wo ds o conduct.
The fiction was adopted to p ovide a emed whe e one pa t was unjustl
en iched, whe e that pa t eceived a benefit unde ci cumstances that made
it unjust to etain it without giving compensation
a.Y The elements of a cause of action fo a quasi cont act a e that: (1) the
plaintiff has confe ed a benefit on the defendant; (2) the defendant
has knowledge of the benefit; (3) the defendant has accepted o
etained the benefit confe ed and (4) the ci cumstances a e such that
it would be inequitable fo the defendant to etain the benefit without
paing fai value fo it.
4.Y Whe e the e is no enfo ceable exp ess o implied in fact cont act but whe e
the defendant has eceived something of value, o has othe wise benefitted
f om the se vice supplied, ecove  unde a quasi cont actual theo  ma be
app op iate
5.Y An unjust en ichment cannot exist whe e pament has been made fo the
benefit confe ed
c  9 The cou t eve sed uling fo plaintiff and emanded because what
defendant co po ation paid on the p oject was not full litigated, so whethe its
en ichment was unjust was an open question.

1
1
 #$1&-! "($%
 c ‰    9 mlaintiff female cohabitant sought eview of a judgment
ente ed b the Ci cuit Cou t of Dane Count, Wisconsin, that dismissed he action
against defendant male cohabitant fo failu e to state a claim. The female asse ted
va ious theo ies to suppo t he alleged entitlement to an accounting and a sha e of
the males accumulated pe sonal and business assets.

@ @
9 The pa ties 12-ea nonma ital cohabitation elationship p oduced 2
child en. The cou t held that the female stated a claim upon which elief could be
g anted that could est on a cont act, unjust en ichment, o pa tition theo . Neithe
the Wisconsin Famil Code no public polic p ecluded the female f om asse ting an
exp ess o implied cont actual ight to sha e p ope t accumulated th ough the
pa ties joint effo ts. The female could aise an unjust en ichment claim in view of
the males alleged un easonable etention of the pa ties jointl acqui ed p ope t.
Facts about the pa ties business pa tne ship, joint p ope t pu chases, and the
females uncompensated home and business cont ibutions stated a pa tition claim,
which was a p ope cause of action in ma ital cohabitation cases. The female did not
state a claim fo p ope t division unde § 767.255 because the pa ties and thei
child en we e not a "famil" within the meaning of the statute, which was not
intended to extend to unma ied cohabitants. The doct ine of "ma iage b
estoppel" did not appl because the pa ties conduct could not place them within the
ambit of § 767.255, which was not intended fo thei benefit.

1.Y Nonma ital cohabitation does not ende eve  ag eement between the
cohabiting pa ties illegal and does not automaticall p eclude one of the
pa ties f om seeking judicial elief, such as statuto  o common law
pa tition, damages fo b each of exp ess o implied cont act, const uctive
t ust and quantum me it, whe e the pa t alleges, and late p oves, facts
suppo ting the legal theo . The issue fo the cou t in each case is whethe
the complaining pa t has set fo th an legall cognizable claim.
2.Y A motion to dismiss a complaint fo failu e to state a claim tests the legal
sufficienc of the complaint. All facts pleaded and all easonable infe ences
the ef om a e admitted as t ue, but onl fo the pu pose of testing the legal
sufficienc of the claim, not fo t ial.
3.Y A complaint should not be dismissed fo failu e to state a claim unless it
appea s ce tain that no elief can be g anted unde an set of facts that a
plaintiff can p ove in suppo t of his o he allegations. The pleadings a e to
be libe all const ued to do substantial justice to the pa ties.
4.Y Whethe a complaint states a claim upon which elief ma be g anted is a
question of law and an appellate cou t need not defe to the ci cuit cou ts
dete mination.
5.Y Some of the p ope t division c ite ia listed unde Wis. Stat. § 767.255
(1986) a e: the length of the ma iage; the p ope t b ought to the ma iage
b each pa t; the cont ibution of each pa t to the ma iage, giving
app op iate economic value to each pa ts cont ibution in homemaking and
child ca e se vices; and an w itten ag eement made b the pa ties befo e o
du ing the ma iage conce ning an a angement fo p ope t dist ibution.
6.Y A cont act is not enfo ced if it violates public polic. A decla ation that the
cont act is against public polic should be made onl afte a ca eful
balancing, in the light of all the ci cumstances, of the inte est in enfo cing a
pa ticula p omise against the polic against enfo cement. Cou ts should be
eluctant to f ust ate a pa ts easonable expectations without a
co esponding benefit to be gained in dete ing "misconduct" o avoiding
inapp op iate use of the judicial sstem
7.Y The abolition of common law ma iages does not invalidate a p ivate
cohabitation cont act. Cohabitation ag eements diffe in effect f om common
law ma iage. The e is a significant diffe ence between the consequences of
achieving common law ma iage status and of having an enfo ceable
cohabitation ag eement.
8.Y Cou ts efuse to enfo ce cont acts fo which the sole conside ation is sexual
elations, sometimes efe ed to as "me et icious" elationships. Cou ts
distinguish between cont acts that a e explicitl and insepa abl founded on
sexual se vices and those that a e not. A ba gain between two people is not
illegal me el because the e is an illicit elationship between the two so long
as the ba gain is independent of the illicit elationship and the illicit
elationship does not constitute an pa t of the conside ation ba gained fo
and is not a condition of the ba gain.
9.Y Mone, p ope t, o se vices, including housekeeping o child ea ing, ma
constitute adequate conside ation independent of the unma ied cohabiting
pa ties sexual elationship to suppo t an ag eement to sha e o t ansfe
p ope t.
10.YA nonma ital cohabitation elationship and joint acts of a financial natu e can
give ise to an infe ence that the pa ties intended to sha e equall. The joint
owne ship of p ope t and the filing of joint income tax etu ns st ongl
implies that the pa ties intended thei elationship to be in the natu e of a
joint ente p ise, financiall as well as pe sonall.
11.Ymublic polic does not necessa il p eclude an unma ied cohabitant f om
asse ting a cont act claim against the othe pa t to the cohabitation so long
as the claim exists independentl of the sexual elationship and is suppo ted
b sepa ate conside ation.
12.YA claim of unjust en ichment does not a ise out of an ag eement ente ed into
b unma ied cohabiting pa ties. An action fo ecove  based upon unjust
en ichment is g ounded on the mo al p inciple that one who has eceived a
benefit has a dut to make estitution whe e etaining such a benefit would
be unjust.
13.YA const uctive t ust is an equitable device c eated b law to p event unjust
en ichment. To state a claim on the theo  of const uctive t ust the complaint
must state facts sufficient to show: (1) unjust en ichment; and (2) abuse of a
confidential elationship o some othe fo m of unconscionable conduct. The
latte element can be infe ed f om allegations in the complaint which show
a famil elationship, a close pe sonal elationship, o the pa ties mutual
t ust

c  9 The judgment that dismissed the females action against the male fo an
accounting and a sha e of the pe sonal and business assets accumulated du ing the
pa ties unma ied cohabitation elationship was eve sed. The female stated a
claim fo which elief could be g anted and he claim could est on cont act, unjust
en ichment, o pa tition g ounds

03 - pp. 286-300

Restatement §86

m oblem 3-2 which we ill go ove in Class 17

03 Ȃ ecipient of se vices does make an exp ess p omise to


pa fo them, but onl afte the benefits a e eceived --> exceptions to the past
conside ation doct ine (whe e past actions do not suffice fo adequate
conside ation)

01
0
$! (&%
Levi Wman, at the time when the se vices we e ende ed, was about 25 ea s of
age, and had long ceased to be a membe of his fathe s famil. He was on his etu n
f om a voage at sea, and being suddenl taken sick at Ha tfo d, and being poo and
in dist ess, was elieved b the plaintiff in the manne and to the extent above
stated. On the 24th of Feb ua , afte all the expenses had been incu ed, the
defendant w ote a lette to the plaintiff, p omising to pa him such expenses. The e
was no conside ation fo this p omise, except what g ew out of the elation which
subsisted between Levi Wman and the defendant, and Howe J., befo e whom the
cause was t ied in the Cou t of Common mleas, thinking this not sufficient to suppo t
the action, di ected a nonsuit. To this di ection the plaintiff filed exceptions.

The sup eme cou t affi med because the e was no conside ation fo defendants
p omise to pa plaintiffs expenses. The kindness and se vices p ovided fo
defendants son we e not bestowed at defendants equest, and defendant was not
legall obligated to suppo t his son in an wa. Thus, because defendants son was
an adult who was esponsible fo his own debts, an debt he incu ed c eated no
obligation upon defendant. Without conside ation, defendants p omise founded
upon such a debt had no legall binding fo ce.

c  9 The cou t affi med the judgment because defendants p omise to pa
expenses incu ed fo the ca e of his adult son was not suppo ted b conside ation
because the se vices p ovided fo defendants son we e not bestowed at defendants
equest and defendant was not legall obligated to suppo t his son in an wa.

Notes p. 290:

-Y The cou t in Mills clea l holds that the law will not necessa il enfo ce eve 
p omise, ega dless of the mo alit of failing to hono a p omise se iousl
made --> Dzthe e ae e g eat inte ests of societ which justif withholding the
coe cive a m of the law f om these duties of impe fect obligation. Ȃ What
Inte ests? Should we follow mo alit instead?
-Y Debts ba ed b time: m omises to pa debts ba ed b the statute of
limitations a e enfo ceable because the debt is a p eexisting legal obligation
-Y Debts discha ged in bank uptc: m omises to pa debts p eviousl
discha ged in bank uptc
-Y Statuto  est ictions on p omises to eceive debts: At common law a p omse
to pa a debt ba ed b the statute limitations o disha cged in bank uptc
was binding even though made o all--> man states equi e it to be in
w iting
-Y Obligations of Mino s: Cont acts made b a mino p io to the time a mino
eaches the legal age of majo it a e Unenfo ceable unless the a e fo
Dznecessa iesdz Ȃ ie goods and se vices needed b the mino --> AFTER
eaching the legal age, the mino becomes legall liable on an cont acts
made du in g mino it that the mino elects to affi m.
a)Y Rest 85- eflects the ule that a mino s p omise when he eaches the
age of majo it to pe vfo m a cont act made du ing mino it is legall
binding.


11%"#(!!"8)*76, Ce tio a i denied b
Sup eme Cou t in Webb v. McGowin, 232 Ala. 374, 168 So. 199.
Facts: Essentiall, two individuals we e wo king on floo ing with big cement blocks,
and Webb had a big block ,that had he done no mall with it, would have c ushed
McGowin- so he instead fell with the block and ended up c ippled fo life:

"On the 3d da of August, 1925, appellant while in the emplo of the W. T. Smith
Lumbe Compan, a co po ation, and acting within the scope of his emploment,
was engaged in clea ing the uppe floo of mill No. 2 of the compan. While so
engaged he was in the act of d opping a pine block f om the uppe floo of the mill
to the g ound below; this being the usual and o dina  wa of clea ing the floo , and
it being the dut of the plaintiff in the cou se of his emploment to so d op it. The
block weighed about 75 pounds.

"As appellant was in the act of d opping the block to the g ound below, he was on
the edge of the uppe floo of the mill. As he sta ted to tu n the È +B block loose so
that it would d op to the g ound, he saw J. G eele McGowin, testato of the
defendants, on the g ound below and di ectl unde whe e the block would have
fallen had appellant tu ned it loose. Had he tu ned it loose it would have st uck
McGowin with such fo ce as to have caused him se ious bodil ha m o death.
Appellant could have emained safel on the uppe floo of the mill b tu ning the
block loose and allowing it to d op, but had he done this the block would have fallen
on McGowin and caused him se ious inju ies o death. The onl safe and easonable
wa to p event this was fo appellant to hold to the block and dive t its di ection in
falling f om the place whe e McGowin was standing and the onl safe wa to dive t
it so as to p event its coming into contact with McGowin was fo È *(B appellant
to fall with it to the g ound below. Appellant did this, and b holding to the block
and falling with it to the g ound below, he dive ted the cou se of its fall in such wa
that McGowin was not inju ed. In thus p eventing the inju ies to McGowin appellant
himself eceived se ious bodil inju ies, esulting in his ight leg being b oken, the
heel of his ight foot È (B to n off and his ight a m b oken. He was badl c ippled
fo life and ende ed unable to do phsical o mental labo .dz

The complaint as amended ave ed in substance: (1) That on È 8B August 3, 1925,


appellant saved J. G eele McGowin, appellees testato , f om death o g ievous
bodil ha m; (2) that in doing so appellant sustained bodil inju  c ippling him fo
life; (3) that in conside ation of the se vices ende ed and the inju ies eceived b
appellant, McGowin ag eed to ca e fo him the emainde of appellants life, the
amount to be paid being $ 15 eve  two weeks; (4) that McGowin complied with this
ag eement until he died on Janua  1, 1934, and the paments we e kept up to
Janua  27, 1934, afte which the we e discontinued.

The action was fo the unpaid installments acc uing afte Janua  27, 1934, to the
time of the suit.

Citing m ecedent: In Boothe v. Fitzpat ick, 36 Vt. 681, the cou t held that a p omise
b defendant to pa fo the past keeping of a bull which had escaped f om
defendants p emises and been ca ed fo b plaintiff was valid, although the e was
no p evious equest, because the subsequent p omise obviated that objection; it
being equivalent to a p evious equest

In the business of life insu ance, the value of a mans life is measu ed in dolla s and
cents acco ding to his expectanc, the soundness of his bod, and his abilit to pa
p emiums. The same is t ue as to health and accident insu ance.

It follows that if, as alleged in the complaint, appellant saved J. G eele McGowin
f om death o g ievous bodil ha m, and McGowin subsequentl ag eed to pa him
fo the se vice ende ed, it became a valid and enfo ceable cont act

The case at ba is clea l distinguishable f om that class of cases whe e the


conside ation is a me e mo al obligation o conscientious dut unconnected with
eceipt b p omiso of benefits of a mate ial o pecunia  natu e. ma k Falls State
Bank v. Fo dce, sup a. He e the p omiso eceived a mate ial benefit constituting a
valid conside ation fo his p omise.

** Some autho ities hold that, *+' fo a mo al obligation to suppo t a subsequent


p omise to pa, the e must have existed a p io legal o equitable obligation, which
fo some eason had become È 7B unenfo ceable, but fo which the p omiso
was still mo all bound. This ule, howeve , is subject to qualification in those cases
whe e the p omiso , having eceived a mate ial benefit f om the p omisee, is
mo all bound to compensate him fo the se vices ende ed and in conside ation of
this obligation p omises to pa. In such cases the subsequent p omise to pa is an
affi mance o atification of the se vices ende ed ca ing with it the p esumption
that a p evious equest fo the se vice was made.**

COURT USES A BENEFIT-DETRIMENT TEST: the complaint show that in saving


McGowin f om death o g ievous bodil ha m, appellant was c ippled fo life. This
was pa t of the conside ation of the cont act decla ed on. McGowin was benefited.
Appellant È &B was inju ed. *+& Benefit to the p omiso o inju  to the
p omisee is a sufficient legal conside ation fo the p omiso s ag eement to pa

Notes p. 295:

-Y m omisso  Restitution m inciple:


-Y Restatement (2nd) ve sion of the m inciple:
-Y Legislation:
-Y Schola l Commenta 
-Y Recove  in the absence of a p omise



.' pp. 303-314
Restatement §110
Restatement §130
Restatement §131
Restatement §132
Restatement §133
Restatement §134
The Statute of F auds p. 303

1.Y Ove view


2.Y Classes of Cont acts Cove ed
3.Y Gene al m inciple: Scope and Application

0  .')!"88,

a.Y Cont act of an executo o administ ato to answe a dut fo


decendent
b.Y Su etship p ovision
c.Y Ma iage p ovision
d.Y Land cont act p ovision
e.Y One-ea pe fo mance p ovision




107
10' "

milot Buck Roge s emploed b Alliance Aviation made a test flight of the p ototpe
of an Alliance bombe ; fi e b oke out in the cockpit.

Compan polic is that pilots a e supposed to use thei Dzbest effo ts to avoid the isk
of ha m to civiliansdz Ȃ aka doesnǯt want to eject, leave the plane unmanned, and have
it c ash into the g ound and people below.

Roge s instead of ejecting, made an eme genc c ash landing at the base.

-Roge s suffe ed se ious inju ies, pa tial pa alsis, and the end of his test pilot
ca ee ; Hospitalized fo seve al months.

m esident of alliance visits him in the hospital and sas that the compan planned to
p ovide fo him financiall

Lette exp essing his g atitude fo pe ofessionalism, dedication, and se ive to


compan; enclosed $7500.00 check and statement: DzYou ǯll eceive checks in this
amount eve  month so long as the companǯs financial condition continues to be
solid.dz
Roge s got the checks fo seve al months afte wa d, visited the place, and even met
with pilots, offe ed advice, etc. = good continued elationship.

Buck was p esented with and pu sued/w ote and p oduced a best selling expose of
the milita  ai c aft indust - has onl a few unfavo able notes about Alligiance, but
the books will put mo e gove nment limitations, est ictions, and hu t thei
business/indust  ove all.

Tom Agnew p esident of Allegiance feels bet aed b Roge s and wants to know if
he can legall te minate Roge ǯs pension.

#

1.Y The ultimate question is whethe Roge s could b ing a claim of p omisso 
estoppel if the pension was te minated. m io , we must fi st decide if the
exchange between Agent and Roge s was a p omise, a gift, o instead
constituted a cont act. IT does not appea that the e was an cont act made,
eithe implied o the wise. Nothing in the emploment ag eement states
anthing about incu ing the costs of pe sonal damages etc fo actions taken
to p ese ve the lives of the public o the ai c aft itself. Instead, the pension
was confe ed especiall fo the inju ed pilot Roge s, fo his pas pe fo mance
of p ofessionalism in not ejecting f om the plan and unning both the ai c aft
and endange ing human lives below, and inju ing himself in the p ocess. In
Webb, the cou t said that when Webb was inju ed and unable to wo k an
fu the , in o de to save the block f om hitting McGowin, that McGowin
mate iall benefited when his life was saved, and that such a mate ial benefit
would se ve as valid conside ation. The e, the cou t essentiall ead into
some kind of cont act, whe e the p omise to pa in the futu e was an
affi mance of a atification of the se vices ende ed, ca ing with it the
p esumption that a p evious equest fo the se vice of saving his life was
made. But that is NOT NECESSARILY the case he e, because the pilot did not
di ectl save the lives of the p esident of the compan. The question thus
becomes whethe Agnew and Allegiance mate iall benefited f om his
d iving the ai c aft back to the base, inju ing himself pe manentl in the
p ocess, and a e the efo e obligated to ca  out the pension.

2.Y Anothe issue that suppo ts the claim that the te ms of pension seem mo e
like a p omise to pa, o a gift to help take ca e of him fo the inju ies he
sustained, a e that it is seemingl evocable at antime the compan is not
Dzin a solid financial position.dz This is elative and a bit a , and evokes the
notion that the p omise to continue to p ovide fo the gift is dependent upon
an assessment (not defined b whom in the te ms of the cont act) of the
solida it of Allegianceǯs financial situation. Like in the classic Mills v.
Wman, even a fathe is not obligated to pa fo the p esent and futu e
medical expenses of his own son that he is not legall obligated to p ovide
fo . An pament made towa ds his health o safet do not consitute an
conside ation.
3.Y So the e is no ba gain fo exchange he e because conside ation cannot be
made of a past pe fo mance, and it was onl a p omise to pa going fo wa d
fo his dedicated past pe fo mances with the compan. Thus the question
tu ns on a claim of p omisso  estoppel: including fou facto s fo a potential
p omisso  estoppel claim:
a.Y (1) a 0: the e was a p omise to pa $7500 monthl fo as long
as the compan was financiall sound
b.Y (2)'13- If it was fo eseeable fo Agnew to think that Buck
would el on his p omise: It seems that because he was a test pilot,
blue colla wo ke of a decent age, and inju ed while doing wo k fo
the compan and going above and beond, to the point of sac ificing
his shown health and livelihood fo the sake of the companǯs
equipment and social policies; he most likel could not have paid fo
his extensive hospital sta as a esult of the accident without the
assistance of the compan. No could he have an eal sou ce of
income going fo wa d, because he was pa tiall pa alzed and could
not longe p actice his p ofession. It is easonable to sa that Agnew
would believe that Roge s would el
c.Y (3) a ‰0 to be found b Roge s, in his eliance on
the monthl $7500.00 paments to cove living and medical expenses,
as a esult of his pe fo mance. In this case, ou facts become
analogous to Katz. V. Dann Da e, that places p omisso  estoppel in
the comme cial context. The e p omisso  estoppel was invoked as a
substitute fo a ba gain and exchange and conside ation. When the
wo ke in Katz was inju ed, he was essentiall pe suaded b his
compan to eti e at a loss of his then cu ent sala . Howeve , he
was able to subsidize his lost wages with othe emploment
oppo tunities and even moonlighting some shifts at his fo me
emploe . He had been eceiving checks ove the cou se of seve al
ea s- and it seems as though he was eling on them- howeve he
had just w itten a book that gained nationwide ecognitition (Dzbest-
sellingdz), and su el gained some mone f om its p oceeds AKA
p oviding an alte native sou ce of income.
d.Y (4)Injustice- Would it be an injustice to Buck to not continue his
pension? Would he have elief b some othe means? The e is some
evidence, having visited the compan afte the incident and even
meeting with pilots/offe advice etc; that his wo king life was not
enti el finished, he did not die and was not ë   pa alzed-
although he could not wo k at all as a pilot anmo e.

Thus it seems like a claim fo p omisso  estoppel ma have some t action given
ou facts. The e we e no clauses in the initial p omise, w itten in a lette and signed
b Agnew, that Roge s need do anthing in exchange fo this p omise, thus no
conside ation seems p esent. Howeve it seems that an claims to the  
 

 
 of p omisso  estoppel could be a gued awa and dismiss the
p omisso  estoppel claim. Buck had othe sou ces of income, and one was at the
expense of the indust  p oviding his pension- so would it eall be eliance to his
det iment? The e is a diffe ent between eling on the p omised paments, and
expecting them to come. I think the claim would likel have much st onge footing if
in fact Buck was not capable of wo king in an capacit, had no alte native sou ces
of income, no abilit to pa his hospital bills o ongoing expenses without Allianceǯs
p omised pension. It seems that w iting an expose on the ve  indust  p oviding
ou pension would not be indicate of a pe sonal det imental eliance.

On an equall impo tant platfo m, the expose on milita  ai c aft w itten b Roge s,
a nationwide best selle , will have a significant impact on Allianceǯs business, and
could easil be g ounds to ende the compan as economicall unstable. If an
appeal to economic stabilit is well-founded and found t ue, the p omise to pa
becomes nullified given its plain-faced te ms that the paoff will continue onl so
long as the compan is economicall sound An action like an expose on thei
indust  would well justif an appeal to economic instabilit, and the eb justif
evoking Roge ǯs monthl pension.

c
 /5
|  
c #&+3'(! "&#%
Cause of Action: Septembe of 1947, Nate C abt ee ente ed into p elimina 
negotiations with Elizabeth A den Sales Co po ation, manufactu e s and selle s of
cosmetics, looking towa d his emploment as sales manage . Inte viewed on
Septembe 26th, b Robe t m. Johns, executive vice-p esident and gene al manage
of the co po ation, who had app ised him of the possible opening, C abt ee
equested a th ee-ea cont act at È 6B $25,000 a ea . Explaining that he would
be giving up a secu e well-paing job to take a position in an enti el new field of
endeavo - which he believed would take him some ea s to maste - he insisted
upon an ag eement fo a definite te m. And he epeated his desi e fo a cont act fo
th ee ea s to Miss Elizabeth A den, the co po ations p esident. When Miss A den
finall indicated that she was p epa ed to offe a two-ea cont act, È *B based
on an annual sala  of $20,000 fo the fi st six months, $25,000 fo the second six
months and $30,000 fo the second ea , plus expenses of $5,000 a ea fo each of
those ea s, C abt ee eplied that that offe was "inte esting". Miss A den the eupon
had he pe sonal sec eta  make this memo andum on a telephone o de blank that
happened to be at hand:

"EMmLOYMENT AGREEMENT WITH NATE CRABTREE Date Sept 26-1947 At 681 -


5th Ave 6: mM
Begin 20000. 6 months 25000. 6 months 30000. 5000. - pe ea Expense mone
[2 ea s to make good] A angement with M C abt ee B Miss A den m esent Miss
A den , M John, M C abt ee , Miss OLea "

A few das late , C abt ee phoned M . Johns and teleg aphed Miss A den; he
accepted the "invitation to join the A den o ganization", and Miss A den wi ed back
he "welcome". When he epo ted fo wo k, a "pa- oll change" ca d was made up
and initialed b M . Johns, and then fo wa ded to the pa oll depa tment. Reciting
that it was p epa ed on Septembe 30, 1947, and was to be effective as of Octobe
22d, it È 67B specified the names of the pa ties, C abt ees "Job Classification" and,
in addition, contained È B the notation that "This emploee is to be paid as
follows:

"Fi st six months of emploment $20,000. pe annum


Next six months of emploment 25,000. pe annum
Afte one ea of emploment 30,000. pe annum
App oved b RmJ [initialed]"

Afte six months of emploment, C abt ee eceived the scheduled inc ease f om
$20,000 to $25,000, but the fu the specified inc ease at the end of the ea was not
paid. Both M . Johns and the compt olle of the co po ation, M . Ca stens, told
C abt ee that the would attempt to st aighten out the matte with Miss A den, and,
with that in mind, the compt olle p epa ed anothe "pa- oll change" ca d, to
which his signatu e is appended, noting that the e was to be a "Sala  inc ease"
f om $25,000 to $30,000 a ea , "pe cont actual a angements with Miss A den".
The latte , howeve , efused to app ove the inc ease and, È 667B afte fu the
f uitless discussion, plaintiff left defendants emplo and commenced this action fo
b each of cont act.

At the ensuing t ial, defendant denied the existence of an ag eement to emplo
plaintiff fo two ea s, and fu the contended that, even if one had been made, the
statute of f auds ba ed its È B enfo cement.
Cont acts - Statute of F auds - two-ea emploment cont act - (1) Statute of F auds
equi es that "some note o memo andum" of cont act be "subsc ibed b the pa t
to be cha ged"; statute satisfied in this case b unsigned memo andum of hi ing
p epa ed b defendants p esident, pa oll ca d initialed b defendants gene al
manage , pa aise ca d signed b defendants compt olle , all efe ing to same
t ansaction, and b o al testimon showing inte connection and defendants assent
to unsigned pape - (2) sepa ate pape s, all clea l efe ing to same subject, ma be
ead togethe , if one establishing cont actual elationship bea s signatu e of pa t to
be cha ged; o al testimon is È B then admissible to show pape s connection
and that defendant assented to unsigned pape - (3) immate ial that pa oll ca ds
we e made up afte cont act was made whe e the we e signed t0 authenticate
info mation the ein, which evidences cont act - (4) memo andum that plaintiff was
to have aise at end of ea and "2 ea s to make good", even if ambiguous, was
shown b pa ol evidence, to satisfaction of t ial cou t, to mean two-ea cont act -
(5) defendant having b eached cont act b failing to aise plaintiffs sala ,
judgment fo damages should be affi med.

1. The Statute of F auds (me sonal m ope t Law, § 31) which states that an
ag eement not to be pe fo med within one ea is void unless "some note o
memo andum the eof be in w iting, and subsc ibed b the pa t to be cha ged", was
satisfied in this case b (a) an unsigned memo andum which defendant
co po ations p esident had he pe sonal sec eta  w ite, as follows: "Emploment
Ag eement with Nate C abt ee Date Sept 26-1947 Begin 20000. 6 months 25000. 6
months 30000. 5000.-pe ea Expense mone [2 ea s to make good] A angement
with M C abt ee B Miss A den m esent Miss A den M . John M . C abt ee Miss
OLea ", È 7B and (b) a pa oll ca d effective as of Octobe 22, 1947, initialed b
defendants executive vice-p esident, and eading that plaintiff was to be sales
manage "to be paid as follows: Fi st six months of emploment $20,000. pe annum
Next six months of emploment 25,000. pe annum Afte one ea of emploment
30,000. pe annum", and (c) a pa oll change ca d fo plaintiff, effective Octobe 23,
1948, eading "Sala  inc ease pe cont actual a angements with Miss A den * * *
$30,000 pe annum", to which is appended the signatu e of defendants compt olle ,
and (d) o al testimon showing the connection among such pape s - all of which on
thei face efe to the same t ansaction - and showing the assent of defendant
co po ation to the contents of the unsigned memo andum.

2. The memo andum equi ed b the statute ma be pieced togethe out of sepa ate
w itings, some signed and some unsigned, p ovided the all clea l efe to the same
t ansaction. O al testimon as to the ci cumstances su ounding the making of the
memo andum is then admissible to show the connection between the documents
and to establish the acquiescence of the pa t to be cha ged to the contents of the
unsigned È &B one. Unde this ule, none of the te ms of the cont act a e supplied
b pa ol. All of them must be set out in the va ious w itings, and at least the one
establishing a cont actual elationship must bea the signatu e of the pa t to be
cha ged, while the unsigned documents must on thei face efe to the same
t ansaction as that set fo th in the signed one. If the o al testimon does not
convincingl connect the pape s, o does not show assent to the unsigned pape s, it
is within the p ovince of the judge to conclude, as a matte of law, that the statute
has not been satisfied. In this case, howeve , it is ha dl likel that defendants
unsigned office memo andum was f audulentl manufactu ed.

3. It is of no consequence that the pa oll ca ds we e not p epa ed o signed with


the intention of evidencing the cont act, o that the came into existence subsequent
to its execution. It is enough, to meet the demands of the Statute of F auds, that the
documents we e signed with intent to authenticate the info mation contained
the ein, and that such info mation does evidence the te ms of the cont act.

4. The ph ase, "2 ea s to make good", when viewed with the est of that
memo andum, È 6B signified a two-ea te m, not a me e emploment at will.
But if the ph ase was ambiguous, pa ol evidence was admissible to explain its
meaning. The pa ol evidence of the negotiations in which plaintiff had insisted on
secu it of emploment wa anted the t ie of the facts in finding that the pu pose
of the ph ase was to make at least a two-ea cont act.

5. Defendant having b eached the cont act b failing to aise plaintiffs sala  at the
end of the fi st ea , a judgment fo plaintiff fo the damages which followed should
be affi med



1.Y The one ea clause:


2.Y Lifetime Cont acts
3.Y Requi ements fo Linking Documents
4.Y Alte nate analsis of C abt ee
5.Y The Requi ement of a Signed W iting

   ë  ›"" - mm. 335-336; 341-344. v


UCC § 2-201 and COMmARE it to the Statute of F auds used in cont acts not
involving sale of goods
UCC §2-201 vs. Common Law Statute of F auds

(1)YExcept othe wise p ovided- the sale of goods fo the p ice of $500 o mo e is
not enfo ceable b wa of action o defense unless the e is some w iting
sufficient to indicate that a cont act fo sale has been made between the
pa ties and signed b the pa t 
 whom enfo cement is sought (o b
autho ized agent)
a.Y Cooment: all that is equit ed of the w iting is that it affo d a basis fo
believing that the offe ed o al evidence ests on a eal t ansaction-
onl 
 must be included; p ice, time, delive , gene al qualit,
o othe pa ticula s need not be included
(2)YBetween Me chants: if within a easonable time a w iting in confi mation of
the cont act and sufficient against the sende is eceived and the pa t
eceiving it has eason to know its contents, it satisfies subsection (1) Ȃ
unless within 10 das of eceipt a w itten notice of ejection is given.
(3)YIf it doesnǯt satisf subsection (1), it is still enfo ceable in othe espects if:
a.Y Goods a e speciall manufactu ed fo the bue and a e not suitable
to sale to othe s in o dina  business- befo e epudiation is eceived
and unde ci cumstances which easonabl indicate that the goods
a e fo the bue - has made a substantial beginning of thei
manufactu e o commitments fo thei p ocu ement
b.Y If the pa t against whom enfo cement is sought, admits in pleading
testimon o othe wise in cou t that a cont act fo sale was made, but
the cont act is not enfo ceable unde this p ovision beond the
quantit of goods admitted;
c.Y With espect to goods fo which pament has been made and accepted
o which have been eceived and accepted.

Comment:
-Y ma tial pe fo mance as a substitute fo the equi ed memo andum can
validate the cont act onl fo the goods which have been accepted o fo
which pament has been made/accepted.
-Y Recepit and acceptance eithe of goods o pament constitutes an
unambiguous ove t admission b both pa ties that a cont act actuall exists
-Y Fo MERCHANTS: failu e to answe a w itten confi mation within ten das of
ecept is tantamount to a w iting unde (2) and is sufficient against BOTH
pa ties unde (1) Ȃ the pa t who fails to answe can the efo e no longe
asse the Statute of F aunds defense

Elect onic Signatu es §101(a)(b) and 106(5)in Rules book. p 272 & 279
Restatement §139

.' 03 !!


mp. 323-332 Restatement §139

|

 

"#' # #
Issue: Whethe the doct ine of p omisso  estoppel can be invoked to enfo ce an
o al cont act that falls within the Statute of F auds Ȃ fi st imp ession upon this
cou t.

1.Y Rice sas that G eg Wakefield as chai elect of the Alaska Democ atic ma t,
p omised he a 2 ea position as Exec. Di ecto of the pa t.
a.Y Rice wo ked f om 87-91 with the pa t in one capacit o anothe .
b.Y She was fi ed and left fo Ma land Dem. ma t
c.Y While in Ma land Wakefield sought he out, decla ed his pending
political victo , and wanted he to be his exec. Di ecto .
d.Y Wakefield elected to chai of the pa t.
e.Y He at one point subsequentl Dzconfi med his decision to hi e he as
executive di ecto dz on the following specific te msdz $36k/ea fo @
least 2 ea s +2 s conditioned upon his eelection + $4k f inge
benefits (va ious non-wage compensations p ovided to emploees in
addition to thei no mal wages o sala ies.\
f.Y Rice took a job with Landau in Ma land afte the offe f om
Wakefield was confi med. Thei p io conve sations should be
conside ed p elimina  negotiations of an offe fo a cont act, and not
a ve bal ag eement that would the eb constitute an offe and
acceptance and a subsequent confi mato  statement (NO TERMS!).
His statement that confi med his decision was eaffi ming the offe
based on thei p elimina  discussion.
g.Y The executive committee of the pa t in a closed doo session in
Feb ua  1993, afte Rise had quit in Ma land and moved to Alaska
the p evious Novembe
2.Y Job failed to mate ialze so she sued on the alleged o al cont act.
3.Y Afte a ju  t ial, Rice was awa ded damages- the Alaska ma t/Wakefield
appeal; Cou t AFFIRMS.
-Y The lowe cou t ultimatel concluded that as between the statute of f auds
and p omisso  estoppel, the latte would p evail, based on Restatement
§139(a)- Dza p omise which the p omiso should easonabl expect to induce
action o fo bea ance on the pa t of the p omisee o a thi d pe son and
which does not induce the action o fo bea ance is enfo ceable
notwithstanding the Statute of F auds if injustice be avoided onl b
enfo cement of the p omise.
a)Y St ict confo mance to the statute of f auds will be ove idden upon an
affi mative showing of establishing the p omiseǯs extistence b clea
and convincing evidence
b)Y Restatement exception is invoked- whethe injustice can be avoided
onl b enfo cement of the p omise- the ju  found the p e equisites
we e found and that it was easonable that justice could be found onl
if the p omise was enfo ced.
c)Y The cou t found that she elied on the statements that Wakefield had
told he that he had exp ess autho it to fi e and hi e he position and
that he could not be debunked b the executive committee- who in
tu n debunked his decision and did not hi e he .
d)Y Wakefield could have easonabl expected to induce Riceǯs action b
thei p omise- she esigned the othe position in Ma land she had
taken and moved to Alaska fo the job- and such actions we e
easonable unde the ci cumstances
e)Y Examination of whethe injustice could onl be avoided b
enfo cement of the p omise- Restatement §139:
$Y Adequac of othe emedies, pa ticula l cancellation and
esitution
$Y Definite and substantial cha acte of the action in elation to
the emed sought
$Y The extend the making and te ms a e othe wise established b
clea and convincing evidence
$Y Reasonable of the action
$Y The extent to which the action o fo bea ance was fo eseeable
b the p omiso .

f)Y Cou t holds: The statute of f auds ep esents a t aditional cont act
p incipal that is la gel fo malistic and does not gene all conce n
substantive ightsË section 139(2)(c) ensu es that p omisso 
estoppel will not ende the statute of f auds supe fluous in the
emploment context (because wo ds alone wouldnǯt be enough to
establish clea and convincing evidence. = §139 is the law of this
ju isdiction. In this case the te ms we e w itten down and both
negotiated and confi med b the individual claiming sole and
complete powe to emplo and te minate he position = easonable
eliance to he det iment.
g)Y The lowe cou t was co ect to include the ph ase Dzdefinite and
substantial cha acte dz of the action in eliance taken- this is suppo ted
in Restatement §139 as well.
h)Y Agenc- A gument that Wakefield as chai -elect had neithe explicit o
implied autho it to cont act on behalf of the pa tË Wakefieldǯs
implied autho it- lowe cou t eads it easonable to assume that
Wakefield had the implied autho itË chai s implied gene al autho it
to make hi ing decisions ega ding executive pe sonnel. Cou t affi ms
on the g ound that the evidence adduced in the lowe cou t ielded
the gene al imp ession that Wakefield had the gene al autho it- and
the question of whethe he had the specific autho it to hi e fo a
ce tain numbe of ea s was not aised at t ial o on motion fo
di ected ve dict, and was acco dingl waived.
i)Y Mis ep esentation- The ma t contends that Wakefield was a
voluntee not speaking in his business o p ofessional capacit- and
the efo e his ep esentation could not p ovide a basis fo ecove  Ë
Cou t: it is NOT the case that the info mation he gave Rice was
Dzinfo mation pu el given g atuitousldz Ȃ Wakefield had a significant
stake in Riceǯs acceptance of the alleged offe - he wanted he to be his
di ecto Ȃ it was easonable to sa that he ep esented the ma t and
had autho it to make the decision he did- and even if he actuall
didnǯt have the autho it, the p e equisites a fo claiming a negligent
mis ep esentation as defined in p omisso  estoppel claim §139-
we e met in this case.
j)Y Damages not excessive in light of the evidence- $28K is less than he
$36k sala  plus $4200 benefits package- it is easonableË A specific
section of 139 makes the p omise enfo ceable despite the statute of
f auds- damages we e co ectl calculated. Not excessive on the
mis ep esentation g ound eithe because the damages we e what she
spent on moving expenses- because he did end up mis ep esenting

Notes

1.Y Reliance on the p omise of a w iting- 1st estatement vs. 2nd Restatement
§139
2.Y Enfo cement of the o al cont act does not 
 follow even if accepting
§139- cou ts a e supposed to conside othe emedies like esititution, that
ma be available. (ex.- pa tial pe fo mance pu suant to a cont act is
unenfo ceable of statute of f auds- but p ovide estitution fo the value of the
wo k emplo ed instead)
3.Y To t Claim-

!
pp. 349-82
Restatement §201
Restatement §202
Restatement §203
Restatement § 204
Inte p etation te ms at p358-359
DY
http://www.outube.com/watch?v=h8p Y-HYoE
Make su e ou get all of the ke points- e- ead cases if it is not clea in
class/points a e not clea f om class notes (ou didnǯt ead initiall)

,   |
($+c|&$! "($%
 c ‰    9 mlaintiff lessee and defendant lesso appealed a
conclusion of the Wake Count Supe io Cou t (No th Ca olina) that the e was no
binding ag eement on ent escalation whe e no meeting of the minds was
established.

@ @
9 Lesso and lessee ente ed into a ental ag eement. Afte the
supe io cou t concluded that the e was no meeting of the minds on the ent
escalation p ovision and thus no binding ag eement, both pa ties appealed. In
affi ming in pa t, the cou t concluded that whe e the supe io cou t found
dive gent meanings between the pa ties, it did not e in concluding that the e
was no meeting of the minds on the question of what conditions would t igge the
et oactive ent escalation. In eve sing and emanding in pa t, howeve , the
cou t concluded that the supe io cou t e ed in awa ding judgment fo lessee
based on the ule that ambiguous cont act te ms we e to be const ued against the
pa t d afting the cont act whe e the cont act was negotiated between
expe ienced pa ties who occupied essentiall equal positions of powe . Lessee
would be entitled to a favo able const uction if lesso knew that lessee attached a
ce tain meaning to the disputed language and lessee did not know of the meaning
attached b lesso . On emand, the supe io cou t was to dete mine whethe
lesso knew of the meaning lessee attached to the te ms and whethe lessee knew
of the meaning attached b lesso .

c  9 The supe io cou t judgment was affi med in pa t and eve sed in
pa t, and the matte was emanded fo fu the factual findings ega ding each
pa ts knowledge of the meaning attached to ce tain te ms b the othe pa t.

"Y It is axiomatic that whe e pa ties have att ibuted diffe ent meanings to a
te m within a cont act, the e is no meeting of the minds on that p ovision,
and a cou t will not enfo ce eithe pa ts meaning.
"Y It is well-established that whe e one pa t knows o has eason to know
what the othe pa t means b ce tain language and the othe pa t does
not know o have eason to know of the meaning attached to the disputed
language b the fi st pa t, the cou t will enfo ce the cont act in
acco dance with the innocent pa ts meaning.
7"Y A dete mination of whethe eithe o both pa ties knew o had eason to
know of a diffe ent meaning att ibuted b the othe is essential in almost
eve  case whe e the cou t finds a lack of mutual assent.
&"Y The ule that ambiguit in cont act te ms must be const ued most
st ongl against the pa t that d afted the cont act ests on a public
polic theo  that the pa t who chose the wo ds is mo e likel to have
p ovided mo e ca efull fo the p otection of his own inte ests, is mo e
likel to have had eason to know of unce tainties, and ma have even left
the meaning delibe atel obscu e. Consequentl, the ule is usuall
applied in cases involving an adhesion cont act o whe e one pa t is in a
st onge ba gaining position, although it is not necessa il limited to
those situations.
6"Y Befo e the ule of const uction that ambiguities a e const ued against the
d afte should be applied, the eco d should affi mativel show that the
fo m of exp ession in wo ds was actuall chosen b one pa t athe than
b the othe Ȃ to show evidence that the lesso , the d afte of the cont act,
had knowledge that the lessee had attached a diffe ent meaning.
+"Y NOTES:
1.Y Whose Meeting m evails?

2.Y Subsequent p oceedings- on emand, the t ial cou t found that


the defendant neithe knew no had eason to know the plaintiffs
eading, and affi med fo the defendant:
a.Y mlaintiff lesso ǯs testiomon eveals two meanings:
Dzcompleted buildingdz condition avoiding ecomputation vs.
Dzcompleted building and tenant occupation of the buildingdz
b.Y Lack of communication du ing negotiation insufficient to
give defendant eason to know plaintiffs meaning
c.Y Lack of evidence defendant assented to cont act in eliance
completed building meaning
d.Y Defendants extensive outside knowledge impa ted diffe ent
meanings of te ms than plaintiffs intentions.

3.Y Const uction against d afte Ȃ

4.Y m. 358- Cont act D afting Te ms

 
    c  + 6
c  "
-! "-%
9Whose meaning p evails- Ambiguit and Ǯplain meaningǯ
mROCEDURAL mOSTURE: mlaintiff, a fo eign co po ation, b ought an action fo
b each of the wa ant, alleging that goods sold should co espond to the
desc iption in two cont acts with defendant, a state sales co po ation.

OVERVIEW: Defendant state sales co po ation had two cont acts with plaintiff
fo eign co po ation fo the sale of "chicken". Afte plaintiff eceived one shipment of
stewing chicken and anothe was stopped, plaintiff b ought a b each of wa ant
action, alleging that the goods sold should have co esponded to the desc iption
because the chicken was not suitable fo b oiling and f ing. In dismissing plaintiffs
complaint, dist ict cou t held that plaintiffs eliance on the fact that the cont act
fo ms contained wo ds with a blank not filled to negate agenc was wholl
unpe suasive whe e the clauses pu pose was to pe mit filling in an inte media s
name to whom commission would be paable. Defendants subjective intent that it
could compl with the cont acts b delive ing stewing chicken coincided with
objective meaning of "chicken," which had at least some usage in the t ade; and
plaintiff did not sustain its bu den that "chicken" was used in the na owe athe
than in the b oade sense.

OUTCOME: mlaintiff fo eign co po ations complaint was dismissed whe e plaintiff


did not sustain its bu den of pe suasion that the cont act with defendant state sales
co po ation used the wo d "chicken" in the na owe sense and defendants
subjective intent coincided with an objective meaning of "chicken."

1.Y When one of the pa ties is not a membe of the t ade o othe ci cle, his
acceptance of the standa d must be made to appea b p oving eithe that he
had actual knowledge of the usage o that the usage is so gene all known in
the communit that his actual individual knowledge of it ma be infe ed
a.Y He e the e was no p oof of actual knowledge of the alleged usage;
indeed, it is quite plain that defendants belief was to the cont a 
2.Y In o de to meet the alte native equi ement, the law of New Yo k demands a
showing that the usage is of so long continuance, so well established, so
noto ious, so unive sal and so easonable in itself, as that the p esumption is
violent that the pa ties cont acted with efe ence to it, and made it a pa t of
thei ag eement.
3.Y Statuto  Inte p etation
a.Y Since the wo d chicken standing alone is ambiguous, I tu n fi st to
see whethe the cont act itself offe s an aid to its inte p etation
b.Y Afte testing the ma ket fo p ice, Baue accepted, and Stovicek sent a
confi mation that evening. mlaintiff st esses that, although these and
subsequent cables between plaintiff and defendant, which laid the
basis fo the additional quantities unde the fi st and fo all of the
second cont act, we e p edominantl in Ge man, the used the
English wo d chicken; it claims this was done because it unde stood
chicken meant oung chicken whe eas the Ge man wo d, Huhn,
included both B athuhn (b oile s) and Suppenhuhn (stewing
chicken), and that defendant, whose office s we e tho oughl
conve sant with Ge man, should have ealized this.
c.Y mlaintiffs [**7] next contention is that the e was a definite t ade
usage that chicken meant oung chicken.
d.Y Evidence offe ed suggest othe sieȄex: Defendants witness
Weininge , who ope ates a chicken evisce ating plant in New Je se,
testified Chicken is eve thing except [**10] a goose, a duck, and a
tu ke.
e.Y Defendant makes a fu the a gument based on the impossibilit of its
obtaining b oile s and f e s at the 33 cents p ice offe ed b plaintiff
fo the 2 1/2-3 lbs. bi ds --> no p ofit would be had (no mall .35)



c8, 5  |0 c $+1 -"! "$&%


 c ‰    9 mlaintiff appealed an o de of the Hen  Dist ict Cou t
(Iowa), which held that plaintiff had failed to establish bu gla  within the
definitions of an insu ance polic.

9 T ial cou t made ce tain findings of fact in suppo t of its conclusion eached.
mlaintiff ope ated a fe tilize plant in Olds, Iowa. At time of loss, plaintiff was insu ed
unde policies issued b defendant and titled "BROAD FORM STOREKEEmERS
mOLICY" and "MERCANTILE BURGLARY AND ROBBERY mOLICY." Each polic
defined "bu gla " as meaning,

"* * * the felonious abst action of insu ed p ope t (1) f om within the p emises b
a pe son making felonious ent  the ein b actual fo ce and violence, of which fo ce
and violence the e a e visible ma ks made b tools, explosives, elect icit o
chemicals upon, o phsical damage to, the exte io of the p emises at the place of
such ent  * * *."

Chemicals had been sto ed in an inte io oom of the wa ehouse. The doo to this
oom, which had been locked, was phsicall damaged and ca ied visible ma ks
made b tools. Chemicals had been taken at a net loss to plaintiff in the sum of
$9,582. Office and shop equipment valued at $400.30 was also taken f om the
building.

T ial cou t held the polic definition of "bu gla " was unambiguous, the e was
nothing in the eco d "upon which to base a finding that the doo to plaintiffs place
of business was ente ed feloniousl, b actual fo ce and violence," and, appling the
polic language, found fo defendant

@ @
9 mlaintiff ope ated a fe tilize plant that he insu ed against bu gla 
unde the policies issued b defendant. When the plant was b oken into defendant
efused to pa fo the loss and plaintiff b ought an action to ecove fo the loss.
Defendant a gued that the b eak in did not compo t with the definition of "bu gla "
in the polic, which envisaged a violent b eaking that left a visible ma k o phsical
damage to the doo . The lowe cou t found on behalf of defendant. On appeal,
plaintiff claimed elief unde the doct ine of easonable expectations, implied
wa ant, and unconscionabilit. The cou t eve sed the lowe cou ts decision,
holding that inte p etation was a matte to be dete mined b the cou t and that the
meaning of the wo d in the polic diffe ed widel f om its legal o no mal meaning.
The cou t held that plaintiff was entitled to a judgment in his favo because the
p ovision of the polic was unconscionable and depa ted f om the easonable
expectation of an o dina  pe son.

c  9 The cou t eve sed the lowe cou ts o de that was ende ed in favo
of defendant because the p ovision of the polic did not compo t with the
easonable expectation of a easonable pe son, was unconscionable, and was a
b each of an implied wa ant.

1.Y The question of inte p etation o the meaning to be given cont actual wo ds,
is one to be dete mined b the cou t unless the inte p etation depends on
ext insic evidence o on a choice among easonable infe ences to be d awn
f om ext insic evidence- Const uction of a cont act is alwas a matte of law
fo the cou t.
2.Y Insu ance cont acts continue to be cont acts of adhesion, unde which the
insu ed is left little choice beond electing among standa dized p ovisions
offe ed to him, even when the standa d fo ms a e p esc ibed b public
officials athe than insu e s.
3.Y The objectivel easonable expectations of applicants and intended
beneficia ies ega ding the te ms of insu ance cont acts will be hono ed
even though painstaking stud of the polic p ovisions would have negated
those expectations
4.Y Although custome s tpicall adhe e to standa dized ag eements and a e
bound b them without even appea ing to know the standa d te ms in detail,
the a e not bound to unknown te ms which a e beond the ange of
easonable expectation.
a.Y A debto who delive s a check to his c edito with the amount blank
does not autho ize the inse tion of an infinite figu e. Simila l, a pa t
who adhe es to the othe pa ts standa d te ms does not assent to a
te m if the othe pa t has eason to believe that the adhe ing pa t
would not have accepted the ag eement if he had known that the
ag eement contained the pa ticula te m.
b.Y Such a belief o assumption ma be shown b the p io negotiations
o infe ed f om the ci cumstances.
c.Y Reason to believe ma be infe ed f om the fact that the te m is
biza e o opp essive, f om the fact that it evisce ates the non-
standa d te ms explicitl ag eed to, o f om the fact that it eliminates
the dominant pu pose of the t ansaction.
d.Y The infe ence is einfo ced if the adhe ing pa t neve had an
oppo tunit to ead the te m, o if it is illegible o othe wise hidden
f om view.
e.Y This ule is closel elated to the polic against unconscionable te ms
and the ule of inte p etation against the d aftsman.
5.Y Statement in w itten sales cont act that it contains the enti e ag eement does
not exclude implied wa ant.
6.Y Although implied wa anties of fitness fo intended pu pose have
t aditionall been attached onl to sales of tangible p oducts, the e is no
eason wh the should not be attached to sales of p omises as well. Whethe
a p oduct is tangible o intangible, its c eato o dina il has eason to know
of the pu poses fo which the bue intends to use it, and bue s o dina il
el on the c eato s skill o judgment in fu nishing it.
7.Y Standa dized cont acts such as insu ance policies, d afted b powe ful
comme cial units and put befo e individuals on the "accept this o get
nothing" basis, a e ca efull sc utinized b the cou ts fo the pu pose of
avoiding enfo cement of "unconscionable" clauses.

3/14

 %

"

- p. 382-388

,ë
- p. 388-432

Compa e the app oach of the classical view (Wilistonian); Restatement (Co bin) and
UCC to the issues of pa ole evidence- such as deciding the integ ation of the
cont act; effect of a me ge clause.; what is a collate al ag eement; t eatment of
additional te ms (consistent and cont adicto )?

UCC §1-102 (1)(2);


UCC §1-205
UCC §2-202
UCC §2-208
UCC §2-103

Restatement §§ 209 th ough 217

Restatement (Second) §209-218

UCC §2-202
-Y DzWhen the pa ties to a cont act have mutuall ag eed to
inco po ate/integ ate a final ve sion of thei enti e ag eement in a w iting,
neithe pa t ill be pe mitted to cont adict o supplement that w itten
ag eement with Dzext insicdz evidence (w itten o o al) of p ope ag eements
o negotiations between them
-Y When the w iting is intended to be final onl with espect to a pa t of thei
ag eement, the w ting ma not be cont adicted, but it ma be supplemented
b such ext insic evidence.

** The pa ole evidence ule does not define what evidence is affi mativel
admissible, bit onl ope ates to . evidence that would othe wise be
admissible as ationall p obative of some fact at issue.

-Y IF the pa ole evidence ule DOES AmmLY at all in a given situation- it has the
effect of  
 one pa t f om int oducing into cou t ext insic/collate al
evidence of matte s not contained n the w itten ag eement between the
pa ties (thus ext insic), whe e that evidence is offe ed to supplement o
cont adict the w itten ag eement
-Y IF the pa ole evidence ule DOES NOT AmmLY Ȃ eithe because the pa ties
havenǯt executed an such ag eement ë because the offe ed evidence comes
within some exception to that ule Ȃ then admission of the evidence will tu n
on the bod of fed. ules of evidence.

Ê  #'0 #$'! ((&%


 c ‰    9 mlaintiff vendo appealed f om an o de of the Dist ict
Cou t fo Dakota Count (Minnesota), which efused a new t ial in his action against
defendant pu chase fo the pu chase mone, afte admitting evidence of a b each
of a ve bal wa ant alleged to have been made at the time of the sale ove the
vendo s objection.

@ @
9 The vendo b ought an action to ecove the pu chase mone f om the
pu chase . The pu chase pleaded that the vendo had b eached a wa ant of the
qualit of the logs, and the t ial cou t admitted o al testimon to p ove the ve bal
wa ant ove the vendo s objection that such testimon was incompetent to p ove
a ve bal wa ant, because the cont act of sale was in w iting. Upon the vendo s
appeal, the cou t eve sed the t ial cou ts o de , holding that it e ed in admitting
pa ol evidence of a wa ant. ma ol contempo aneous evidence was inadmissible to
cont adict o va  the te ms of a valid w itten inst ument. Because the pa ties
delibe atel put thei engagements into w iting in such te ms as to c eate a legal
obligation, without an unce taint as to the object o extent of such engagement, it
was conclusivel p esumed that the whole engagement of the pa ties, and the
manne and extent of the unde taking, was educed to w iting. The e was nothing
on its face to indicate that the cont act was a me e info mal and incomplete
memo andum. Fu the mo e, no new te m, fo ming a me e incident to o pa t of the
cont act of sale, could be added b pa ol evidence.
c  9 The cou t eve sed the t ial cou ts o de , which efused the vendo a
new t ial in his action against the pu chase to ecove the pu chase mone.

1.Y ma ol contempo aneous evidence is inadmissible to cont adict o va  the


te ms of a valid w itten inst ument. Whe e the pa ties have delibe atel put
thei engagements into w iting in such te ms as to impo t a legal obligation,
without an unce taint as to the object o extent of such engagement, it is
conclusivel p esumed that the whole engagement of the pa ties, and the
manne and extent of thei unde taking, was educed to w iting. Of cou se,
the ule p esupposes that the pa ties intended to have the te ms of thei
complete ag eement emb aced in the w iting, and hence it does not appl
whe e the w iting is incomplete on its face and does not pu po t to contain
the whole ag eement, as in the case of me e bills of pa cels, and the like
.Y Whe e a whole cont act be not educed to w iting, pa ol evidence ma be
admitted to p ove the pa t omitted. But to allow a pa t to la the foundation
fo such pa ol evidence b o al testimon that onl pa t of the ag eement
was educed to w iting, and then p ove b pa ol the pa t omitted, would be
to wo k in a ci cle, and to pe mit the ve  evil which the ule was designed to
p event. The onl c ite ion of the completeness of the w itten cont act as a
full exp ession of the ag eement of the pa ties is the w iting itself. If it
impo ts on its face to be a complete exp ession of the whole ag eement, that
is, contains such language as impo ts a complete legal obligation, it is to be
p esumed that the pa ties have int oduced into it eve  mate ial item and
te m; and pa ol evidence cannot be admitted to add anothe te m to the
ag eement, although the w iting contains nothing on the pa ticula one to
which the pa ol evidence is di ected. The ule fo bids to add b pa ol whe e
the w iting is silent, as well as to va  whe e it speaks, and the law
cont olling the ope ation of a w itten cont act becomes a pa t of it, and
cannot be va ied b pa ol an mo e than what is w itten
r.Y ma ol evidence of ext insic facts and ci cumstances would, if necessa , be
admissible, as it alwas is, to appl the cont act to its subject-matte , o in
o de to a mo e pe fect unde standing of its language. But in that case such
evidence is used, not to cont adict o va  the w itten inst ument, but to aid,
uphold, and enfo ce it as it stands.
ð.Y ma ol evidence of covenants fo epai s, imp ovements, pament of taxes,
etcete as, would not be admissible to add to the te ms of a w itten lease. So,
in a sense, a wa ant is collate al to a cont act of sale, fo the title would
pass without a wa ant. It is also collate al in the sense that its b each is no
g ound fo a escission of the cont act b a vendo , but that he must eso t to
his action on the wa ant fo damages. But, when made, a wa ant is a pa t
of the cont act of sale. The common sense of men would sa, and co ectl so,
that when, on a sale of pe sonal p ope t, a wa ant is given, it is one of the
te ms of the sale, and not a sepa ate and independent cont act. To justif the
admission of a pa ol p omise b one of the pa ties to a w itten cont act, on
the g ound that it is collate al, the p omise must elate to a subject distinct
f om that to which the w iting elates
j.Y c   %#0"--The onl
c ite ion of the completeness of a w itten cont act as a full exp ession of the
ag eement of the pa ties is the w iting itself. If it impo ts on its face to be a
complete exp ession of the whole ag eement,--that is, contains such language
as impo ts a complete legal obligation,--it is conclusivel p esumed that the
pa ties have int oduced into it eve  mate ial te m, and pa ol evidence
cannot be admitted to add anothe te m, although the w iting is silent as to
the pa ticula one to which the pa ol evidence is di ected.

c   %.c"--Whe e the


pa ties have educed a cont act to w iting, in o de to wa ant the
int oduction of pa ol evidence of a matte as collate al, it must elate to a
subject distinct f om that to which the w iting elates.

c    %.3"--In case of a sale


of pe sonal p ope t, a wa ant of its qualit is not a sepa ate and
independent collate al cont act, but one of the items o te ms of the cont act
of sale; following Xë v. %, 17 Minn. 269, (292.)

c !!.2"--In this case the pa ties,


having full ag eed on the te ms of sale of the p ope t, executed the
following w itten ag eement: "Ag eement. Hastings, Minn., June 1, 1883. I
have this da sold to R. C. Libb all m logs ma ked H. C. A. cut in the winte s
of 1882 and 1883, fo $ 10 a thousand feet, boom scale at Minneapolis.
mament cash, as fast as scale-bills a e p oduced. [Signed] J. H. Thompson. R.
C. Libb." å, that o al testimon to p ove a pa ol wa ant of the qualit of
the logs was inadmissible

Classical View of pa ole evidence:

1.Y
  combining te ms th ough a p ocess of p emlimina 
negotiations and then a w iting containing the final te ms.
-Y Complete integ ation- efe to a w iting that is intended to be a dinal and
exclusive exp ession of the ag eement of the pa ties
-Y ma tial integ ation- a w iting that is intended to be final but not complete
because it deals with some but not all aspects of the t ansaction between the
pa ties
-Y The co ect application if pa ole evidence ule equi es the cou t to fi st
dete mine 1. Whethe the w iting in question is intended to be a final
exp ession of the pa ties ag eement, and if so 2. Whethe it is a complete o
pa tial statement of the cont act te ms.

( 

  
ë:

-Y Willistonian view: Fou Co ne s app oach--> must dete mine acco ding to
the 4 co ne s of the w iting without eso t to ext insic evidence:
ëY Me ge clause- a me ge clause states that the w iting is intended to
be final and complete; all p io unde standings a e deemed to have
been Ǯme gedǯ into o supe seded b the final w iting
-Y Co bin View/Restatement Second View: %"ʛ% ÊÊ  Êå $%Ê -
cou t should conside evidence of all of the facts and ci cumstances
su ounding the execution of the cont act, as well as the w iting, in
uncove ing the intent of the pa ties.

Scope of ma ole Evidence Rule- Whe e ma ole evidence ule does NOT appl:

1.Y Does not appl to evidence offe ed to explain the meaning of the ag eement
a.Y If found to be a pa tial integ ation- the w iting ma not be
cont adicted b ext insic evidence--> but MAY be supplemented b
additional consistent te ms
b.Y If complete integ ation- the w iting ma not be cont adicted o
supplemented
c.Y But ext insic evidence can alwas be used to $% a w itten
ag eement.
2.Y Does not appl to ag eements, whethe o al o w itten, made afte the
execution of the w iting.
a.Y Evidence of subsequent o al modification of plaintiffǯs w itten
emploment cont act not ba ed b pa ol evidence ule- b/c not full
integ ated so as to exclude p oof of asse ted o al ag eement.
3.Y Does not appl to evidence offe ed to show that effectiveness of the
ag eement was subject to an o al condition p ecedent
a.Y Like in cases whe e the te ms of an ag eement a e contingent upon
app oval of a pending loanǥ
b.Y Ex- if the bank had denied Libb a loan the pa ole evidence ule would
not ba evidence of Libbǯs o al statement- even though the w iting
was absolute on its face, because the evidence would establish an o al
condition to the effectiveness of the ag eement
4.Y Does not appl to evidence offe ed to show that the ag eement is invalid fo
an eason like , du ess, undue influence, incapacit, mistake, o
illegalit ( estatement Second Section 214(2))
a.Y Such invalidating facto s esult in wha t appa entl a cont act being in
legal contemplation not a cont act at all, and thus not entitled to the
benefit of the pa ole evidence ule to begin with
b.Y Difficulties: in f aud claims- because in that case, the o al evidence
would be di ectl cont adicting the te ms that sa no othe o al
ag eements etc. a e binding.
c.Y B each of cont act claim vs. f aud via pu poseful mis ep esentation =
diffe ences in claims justif inclusion of o al evidence
5.Y Does not appl to evidence that is offe ed to establish a ight to an Ǯequitableǯ
emed, such as efo mation of the cont act
a.Y Have to show clea and convincing evidence that equitable emedies
a e justified because the pa ties eall did intend thei w itten
ag eement to contain the te m in question.
6.Y Does not appl to evidence int oduced to establish collate al ag eement
between the pa ties (Restatement Second Section 216(2))
a.Y An ag eement will not be ega ded as full integ ated if the pa ties
have made a consistent additional ag eement which is eithe ag eed
to fo sepa ate conside ation o is Dzsuch a te m as in the
ci cumstances might natu all be omitted f om the w itingdz

Ê
 

0
|  
 $&| 5 '(! ""#%
 c ‰    9 mlaintiff insu ed sued defendant insu e on a bad faith
claim. The cou t of appeals eve sed a ju  ve dict in favo of the insu ed, and the
insu ed appealed.

@ @
9 The insu ed sought damages against the insu e fo bad faith damages,
asse ting that the insu e imp ope l failed to settle a claim within polic limits,
esulting in a la ge excess ve dict against the insu ed. (The Rings eventuall settled
with State Fa m. Talo , howeve , sued State Fa m fo bad faith seeking damages fo
the excess Rive s judgment, claiming, among othe things, that State Fa m
imp ope l failed to settle the Rive s matte within polic limits.)

1.Y The insu e moved fo summa  judgment, asse ting that the insu ed had
eleased the bad faith and all othe claims th ough a document which
p ovided fo the elease of "all cont actual claims" against the insu e as pa t
of a settlement involving uninsu ed moto ist cove age
a.Y 1981: signed a elease d afted b atto ne Randall in exchange fo
State Fa ms pament of $ 15,000 in uninsu ed moto ist benefits
b.Y Because Wist om was uninsu ed, Randall believed that Talo might
be entitled to ecove fo his inju ies unde the uninsu ed moto ist
p ovisions of Talo s polic. State Fa m , howeve , disputes Talo s
entitlement to these benefits. In an event, Randall p epa ed a elease
as pa t of the t ansaction. It is this elease that is at issue. The extent
of State Fa m s pa ticipation in its d afting is disputed.
2.Y The insu ed also moved fo pa tial summa  judgment fo a finding that the
elease did not p eclude his bad faith claim. The t ial judge denied both
motions, finding that the elease was ambiguous and that the efo e pa ol
evidence was admissible at t ial to aid in inte p eting the elease. The ju 
awa ded the insu ed compensato  damages, and the cou t g anted atto ne
fees. The cou t of appeals found no ambiguit and eve sed the judgment fo
the insu ed. On appeal, the cou t held that the bad faith claim was to tious in
natu e, that the elease was easonabl susceptible to the insu eds
inte p etation, and the t ial judge did not e in admitting pa ol evidence to
the ju .
c  9 The t ial cou t p ope l conside ed and then admitted ext insic
evidence to inte p et the elease and dete mine whethe it included Talo s
bad faith claim. That question, in this case, was app op iatel left to the t ie
of fact. The e emain othe issues not esolved b the cou t of appeals. We
a e awa e of the f ust ation that additional dela imposes on all involved,
especiall in a case as old as this. Neve theless, because the othe issues we e
initiall and full p esented to the cou t of appeals, p udence dictates that
the cou t of appeals complete its eview of this case as expeditiousl as
possible. The decision of the cou t of appeals pe taining to the elease is
vacated and the matte is emanded to the cou t of appeals fo esolution of
the emaining issues

HEADNOTES
1.Y When two pa ties have made a cont act and have exp essed it in a w iting to
which the have both assented as the complete and accu ate integ ation of
that cont act, evidence, whethe pa ol o othe wise, of antecedent
unde standings and negotiations will not be admitted fo the pu pose of
va ing o cont adicting the w iting. Antecedent unde standings and
negotiations ma be admissible fo pu poses othe than va ing o
cont adicting a final ag eement. Inte p etation is one such pu pose.
2.Y Inte p etation is the p ocess b which the cou t dete mines the meaning of
wo ds in a cont act. A cou t will attempt to enfo ce a cont act acco ding to
the pa ties intent.
3.Y When inte p eting a cont act, it is fundamental that a cou t attempt to
asce tain and give effect to the intention of the pa ties at the time the
cont act was made if at all possible
4.Y *** The bette ule is that the judge fi st conside s the offe ed evidence and,
if he o she finds that the cont act language is " easonabl susceptible" to the
inte p etation asse ted b its p oponent, the evidence is admissible to
dete mine the meaning intended b the pa ties***
a.Y The judge fi st conside s the offe ed evidence and, if he o she finds
that the cont act language is easonabl susceptible to the
inte p etation asse ted b its p oponent, the evidence is admissible to
dete mine the meaning intended b the pa ties.
b.Y A cont act should be ead in light of the pa ties intentions as eflected
b thei language and in view of all the ci cumstances.
c.Y B oad language eleasing "all" claims "whethe in cont act, to t o
othe wise" necessa il includes a bad faith claim.
d.Y Whethe cont act language is easonabl susceptible to mo e than
one inte p etation so that ext insic evidence is admissible is a
question of law fo the cou t.
j!Y 1
  
 

 
9  
 :  
     ;
a.Y The p ope inqui  is not whethe the claim was cont actual in natu e
o whethe the judge believed it was cont actual but, instead, what
the pa ties intended to elease when the used language
conspicuousl less inclusive than the elease of "all claims."
b.Y Of cou se, the t ue doct inal natu e of the claim, if it could be
dete mined, would be elevant evidence in the sea ch fo the pa ties
cont acting intent. If bad faith was o dina il and unive sall thought
of as a "cont act" claim, it would be ve  difficult fo Talo to a gue
that the 

  in the ag eement, eleasing all "cont actual"
matte s, was easonabl susceptible to his inte p etation
c.Y Bad faith has its genesis in cont act. Howeve , the p ecise legal
cha acte of a bad faith claim ma depend on the context of the
discussion.
d.Y Despite the cont actual o igin of an insu ance bad faith claim, the
seminal A izona decision on the subject, less than six months old at
the time State Fa m and Talo made the ag eement, decla ed that
such conduct is a to t
e.Y Because the legal cha acte of bad faith was and is not unive sall
established, the elease easonabl could be inte p eted as Talo
asse ts. The t ial cou t, the efo e, did not e in concluding that the
text of the elease did not necessa il cove claims fo bad faith
6.Y 1
 


 

   
   
   




  

 

7
 

;
a.Y Although occu ing late , the Rings ga nished State Fa m seeking to
satisf thei enti e judgment, including the excess above the polic
limits, based on State Fa ms liabilit to Talo fo alleged bad faith.
b.Y The e was some evidence that Hofmann (although uled as hea sa),
on behalf of State Fa m, di ected that "gene al elease language" be
used in the ag eement without exp essl mentioning "bad faith." + The
documents c ptic language suppo ts this Ȃ fo pu poses he e,
hea sa evidence satisfies the inqui  because not assessing the  
of the hea sa evidence, just whethe it existed.
c.Y 1
 :       





 

 Ê
 6
   
 ; The potential size of Talo s bad faith claim was
obvious. We ecognize that, with few exceptions, pa ties a e f ee to
st uctu e a deal in an wa the wish. Neve theless, it is a guabl
easonable to conclude that Talo and his counsel would seek
something mo e than just the pament of a potentiall bona fide
$15,000 UM claim to elease a bad faith claim possibl wo th millions
of dolla s
d.Y me haps most telling, is the fact that the pa ties used limiting language
in the elease. It is easonable to believe that if the pa ties had ag eed
to elease the bad faith claim, the would not have d awn the elease
so na owl -- confining it to "cont actual" and "subsequent" matte s,
with ë mention of to t claims o bad faith.
e.Y The elease language is b oad enough to elease something mo e than
just the cont actual UM claim
f.Y All of the evidence, howeve , does not ende the elease language
impe vious to Talo s inte p etation. Instead, it demonst ates that
the e we e th ee easonable, but conflicting, inte p etations of the
language used in the ag eement: (1) the pa ties ag eed to elease the
bad faith claim; (2) the pa ties ag eed to exclude the bad faith claim;
and (3) the pa ties did not each an ag eement ega ding elease of
the bad faith claim (in which case, of cou se, the claim would not be
eleased). In light of this, the t ial judge co ectl concluded that the
elease could not as a matte of law be inte p eted to include o
exclude Talo s bad faith claim
!Y 1

  9 ;
a.Y Because inte p etation was needed and because the ext insic
evidence established cont ove s ove what occu ed and what
infe ences to d aw f om the events, the matte was p ope l
submitted to the ju 
8"Y ‰9
a.Y Classical View = Rest ictive View Ȃ 4 co ne s view: Unde the
est ictive "plain meaning" view of the pa ol evidence ule, evidence
of p io negotiations ma be used fo inte p etation onl upon a
finding that some language in the cont act is unclea , ambiguous, o
vague. E. Allan Fa ns-wo th, Fa nswo th on Cont acts § 7.12, at 270
(1990) ("Fa nswo th"). Unde this app oach, "if a w iting, o the te m
in question, appea s to be plain and unambiguous on its face, its
meaning must be dete mined f om the fou co ne s of the inst ument
without eso t to ext insic evidence of an natu e."
i.Y A cont act ma be susceptible to multiple inte p etations and
the efo e t ul ambiguous et, given the context in which it
was negotiated, not susceptible to a clea l cont adicting and
wholl unpe suasive inte p etation asse ted b the p oponent
of ext insic evidence.
ii.Y seems clea that a cou t should exclude that evidence as
violating the pa ol evidence ule despite the p esence of some
cont act ambiguit.
iii.Y ** the ambiguit dete mination dist acts the cou t f om its
p ima  objective -- to enfo ce the cont act as intended b the
pa ties.**
b.Y Mode n = Co bin View: the e is no need to make a p elimina  finding
of ambiguit befo e the - ë
 ext insic evidence.
Restatement § 212 comment(b)
i.Y Cou t conside s all of the p offe ed evidence to dete mine its
elevance to the pa ties intent and then applies the pa ol
evidence ule to exclude f om the fact finde s conside ation
onl the evidence that cont adicts o va ies the meaning of the
ag eement.
ii.Y The cou t cannot appl the pa ol evidence ule without fi st
unde standing the meaning the pa ties intended to give the
ag eement. ! To unde stand the ag eement, the judge cannot
be est icted to the fou co ne s of the document. Again, even
unde the Co bin view, the cou t can admit evidence fo

  
ë but must stop sho t of ë 

ë!
9.Y c- motential Issue = Inconsistenc: The canon of inte p etation
which we p opound toda is amo phous. The p oblem with an amo phous
ule is that in the end, onl 
 cou t can make a
 dete mination in
const uing an cont act. Ou inte p etation will be based upon which pa ol
evidence imp esses us the most. That ultimatel means that this cou t 
decide eve  cont act dispute subject to this analsis. As the histo  of this
case shows, the t ial cou t ma go one wa and the cou t of appeals anothe
and this cou t et anothe

Talo case vs. Thompson Case

mlain Meaning, Ambiguit, and the ma ole Evidence Rule

CISG

*/< +c
 
|
0< <+2)+=/+
c<0|+3
c    c<c    


  
c 
 | 
 


  '"0 (! "" %
9

"Y She odd, Inc. (She odd), is a famil-owned Montana const uction
co po ation. She odd subcont acted with COm Const uction (COm) to do
ce tain excavation involved in the const uction of fift famil housing units in
Fo sth, Montana, fo the A m Co ps of Enginee s. 
"Y COm itself was a subcont acto to the gene al cont acto s Mo ison-Knudsen
Compan, Inc. (Mo ison-Knudsen), and Schlekewa Const uction, Inc.
(Schlekewa).
7"Y Safeco [**1136] Insu ance Compan of Ame ica (Safeco) p ovided COms
pament bond on the job

9She odd contends that while its office William She odd was examining the
building site in p epa ation fo submitting a bid on this p oject, a ep esentative of
Mo ison-Knudsen told him that the e we e 25,000 cubic a ds of excavation to be
pe fo med on the job. It claims that its bid of $ 97,500 on the subcont act was made
in eliance on that ep esentation, based on $ 3.90 pe cubic a d fo 25,000 cubic
a ds. Mo ison-Knudsen denies that its ep esentative made an such statement to
William She odd--> She odds bid, and, in tu n, COms bid including She odds
bid, we e submitted and accepted. She odd began wo k befo e a w itten cont act
was signed. While pe fo ming the ea thwo k, She odd discove ed that the quantit
of wo k fa exceeded 25,000 cubic a ds.

 c ‰    9 mlaintiff subcont acto She od appealed f om the


Dist ict Cou t fo the Thi teenth Judicial Dist ict, Yellowstone Count (Montana),
which g anted summa  judgment to defendants, gene al cont acto s and insu ance
compan. The subcont acto s evidence of alleged o al mis ep esentations b the
gene al cont acto s was found to be inadmissible unde the pa ole evidence ule.

1.Y Rule 56(c), M.R.Civ.m. The Dist ict Cou t held that, unde the È 86B pa ol
evidence È 6B ule, She odd could not int oduce evidence of the alleged
o al mis ep esentations b eithe the Mo ison-Knudsen ep esentative o
the COm office . The efo e, it concluded that even taking the evidence in the
light most favo able to She odd, summa  judgment fo defendants was
p ope .
2.Y Section 28-2-904, MCA, p ovides that: "The execution of a cont act in w iting,
whethe the law equi es it to be w itten o not, supe sedes all the o al
negotiations o stipulations conce ning its matte which p eceded o
accompanied the execution of the inst ument."

@ @
9 The subcont acto She od ente ed into a const uction cont act with
the gene al cont acto s, and the insu ance compan p ovided pament bond on the
job. The subcont acto asse ted that the excavation to be pe fo med on the job
g eatl exacted that which was stated in the cont act. The subcont acto filed an
action to set aside the p ice p ovisions in the cont act and to ecove quantum
me uit plus to t damages. The lowe cou t g anted summa  judgment to the
gene al subcont acto s and the insu ance compan, and the subcont acto
appealed. On appeal, the cou t affi med and held that, unde the pa ol evidence ule,
the subcont acto could not int oduce evidence of the alleged o al
mis ep esentations of the gene al cont acto s. The cou t stated that unde Mont.
Code. Ann. § 28-2-904, the execution of a cont act in w iting supe ceded all the o al
negotiations o stipulations conce ning its matte that p eceded o accompanied the
execution of the inst ument. The cou t held that the subcont acto made no
allegation of an subsequent cont act in w iting fo p omises of additional
paments, and that the compensation fo the subcont acto was exclusivel
gove ned b the w itten cont act.

1.Y "Standa d Subcont act m ovisions," the cont act ente ed between She odd
and COm also p ovided a clause that: as to the . . . cha acte , quantit and kind
of mate ials to be encounte ed . . . no ve bal ag eement with an agent eithe
befo e o afte the execution of this Subcont act shall affect o modif an of
the te ms o obligations he ein contained and this cont act shall be
conclusivel conside ed as containing and exp essing all of the te ms and
conditions ag eed upon b the pa ties he eto.
2.Y Because the w itten ag eement supe sedes all p evious o al È 8+B
ag eements, the ule p ohibits admission of an evidence of the
ep esentation b the Mo ison-Knudsen ep esentative.
3.Y Because of the inadmissibilit of She odds evidence as to alleged
mis ep esentations, the claim of b each of the covenant of good faith and fai
dealing also fails. The e is no allegation of an violation of the exp ess te ms
of the w itten È 8B cont act, as would be equi ed in this a ms-length
cont act unde ou opinion in ë ! "
 ë ë4  (1990), 242 Mont. 436,
791 m.2d 767.
4.Y molic A gument: The pa ol evidence ule is the public polic of Montana and
it is clea l established b statute and the decisions of this Cou t. If this
public polic and ule is not upheld, cont acting pa ties that include lawful
p ovisions in w itten cont acts would be unde a cloud of unce taint as to
whethe o not thei w itten cont acts ma be elied upon. The public polic
and law does not pe mit such unce taint to occu .

c  9 The cou t affi med the lowe cou ts g ant of summa  judgment fo
defendants.

5.Y Dissent- J. TRIEWEILER: If the facts a e as alleged b the plaintiff (and fo


pu poses of this p oceeding we must assume that the a e), then the esult of
this case is that no pa t can be held accountable fo its f audulent conduct
so long as it is in a sufficientl supe io ba gaining position to compel its
victim to sign a document elieving it of liabilit
a.Y The plaintiff was info med b Lou Castino, the const uction manage
fo Schlekewa and Associates, that the p oject he was being asked to
bid on involved moving 25,000 cubic a ds of di t. It was based on
that info mation that he submitted his bid. It was based on his bid that
he was given an o al equest to p oceed with the wo k.
b.Y Afte commencing wo k on the p oject, plaintiff ealized that the
amount of ea th that had to be moved g eatl exceeded 25,000 cubic
a ds, and was actuall mo e than twice that amount. È B He had
conve sations with ep esentatives of both COm Const uction and
Schlekewa and Associates, du ing which it was ag eed that the
amount of wo k to be pe fo med would be ecalculated, and du ing
which the defendants ag eed to compensate plaintiff on the basis of
the actual amount of wo k done, athe than the p ice which was
o iginall ag eed upon.
c.Y B Ma 22, 1985, plaintiff had al ead been wo king on the p oject
and had incu ed substantial expenses and obligations to his own
emploees. He had not been paid fo his wo k, and was still ope ating
without a w itten ag eement.
d.Y On that date that he was equested b COm Const uctions
supe intendent to sign the w itten cont act which the defendants now
asse t as a ba to his cause of action. He was advised that if he did not
sign the ag eement he would not eceive the p og ess pament in the
amount of $ 70,372.80 which was due. Without the p og ess pament
he would not have been able to pa his cu ent expenses and pa oll.
e.Y Because of the defendants failu e to pa the plaintiff the additional $
100,000 to $ 120,000 which the owed him, plaintiffs business lost its
abilit to bo ow mone, lost its bonding, and was unable to complete
additional cont acts because of a lack of ope ating capital. mlaintiff
was unable to bid on cont acts that equi ed bonding, and completel
lost its abilit to ca  on business as it had in the past. As a di ect
esult of the defendants failu e to pa the amounts due, plaintiff was
unable to continue in business as a const uction compan, which it
had done fo the p evious 30 ea s.
f.Y The majo it has chosen to el on this Cou ts 58-ea -old decision in
"ë
 
 ! , 94 Mont. 123, 133, 21 m.2d 65, 68 (1933). In
that case, this Cou t held that pa ol evidence of f aud was not
admissible when the o al p omise di ectl cont adicts a p ovision of
the w itten cont act.
g.Y Would not follow this Cou ts p evious decision in "ë
 
 fo
two easons:
i.Y That decision made no specific efe ence to the statute which
is cont olling, and et adds qualifications to the statute which
we e not included b the legislatu e. The È &B legislatu e
p ovided that pa ol evidence could be offe ed to establish that
a cont act was induced b f aud. It made no exception whe e
evidence of the f audulent o al ag eement cont adicted a te m
in the w itten ag eement.
ii.Y To follow the decision in "ë
 
 c eates a te ible
injustice, ewa ds f audulent pa ties who a e in a supe io
ba gaining position, and totall defeats the pu pose fo which
the f aud exception was p ovided to the pa ol evidence ule
h.Y Gene al cont acto s who induce subcont acto s to ente into a w itten
ag eement b f audulent ep esentations should find no secu it in
the piece of pape which esulted f om thei culpable conduct

+


 
 c <c --'$$
- Nanakuli case: exempla of Mode n ma ole Evidence Theo - UCC theo  vs.
Common law theo - la gel t ades on the concept defining cont acts gene all
unde the UCC Ȃ that a cont act ma be fo med b wo ds/the pa ties intent, that
ma not be w itten in the exp ess te ms of a cont act (t ade usage)

 c ‰    9 Appellant paving compan, in its action fo b each of


cont act, sought eview of an o de of the United States Dist ict Cou t fo the Dist ict
of Hawaii that ente ed judgment notwithstanding the ve dict in appellee oil
compans favo .

@ @
9 Appellant Nanakuli b ought suit claiming a b each of a cont act to sell
asphalt b the Appellee Shell. The ju  etu ned a ve dict in favo of the appellant
Nanakuli awa ding damages. The t ial cou t set aside the ve dict of the ju .

-Y On eview, the cou t dete mined that the Unifo m Comme cial Code in
Hawaii equi ed the cou t to look at exte nal ci cumstances in o de to
dete mine the intent of the pa ties to a cont act.
-Y The cou t also held that the unique ci cumstances of the ma ket on Oahu and
in Hawaii in gene al c eated a gene al t ade usage of p ice p otection in the
sale of asphalt.
-Y The cou t found the t ial cou t did not e in allowing evidence of t ade usage
to be admitted into the eco d, and found sufficient evidence suppo ted the
ju s ve dict in favo of the appellant. The judgment of the t ial cou t was
eve sed and the ju  ve dict was einstated.

c  9 Judgment notwithstanding the ve dict was eve sed and ju  ve dict


einstated because the ve dict in favo of the appellant was suppo ted b sufficient
evidence of t ade usage of p ice p otection.

: You have good notes in the text !&8&7 but did not put them in
outline fo m.






0!0.2- p.437- 462


UCC §§1-102(3) 1-203, 2-103(b), 1-201(19), 2-306 (2), 2-309 Restatement § 205

7=+ !!0 2 09


0!0/2 1 .
'2/C

5;21;.0 

.2
mp. 462-491
UCC §§ 2-306
Restatement § 228
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 1
   &$c
|'#&'! ""$%
 c ‰    9 Appellant di ecto sought eview of a decision of the
Supe io Cou t of Los Angeles Count (Califo nia) that g anted summa  judgment
in favo of espondent ente tainment studio. Appellant b ought the action fo
to tious w ongful discha ge in violation of the public polic against sex
disc imination, b each of cont act, and f aud.

@ @
9 Appellant di ecto b ought action against espondent ente tainment
studio fo to tious w ongful discha ge in violation of the public polic against sex
disc imination, b each of cont act, and f aud. Summa  judgment was g anted in
favo of espondent, and appellant sought eview. In eve sing the decision, the
cou t held that a t iable issue existed as to whethe espondent b eached its
cont act with appellant b failing to evaluate appellants p oposals on thei me its.
If espondent acted in bad faith b catego icall ejecting appellants wo k and
efusing to wo k with he , i espective of the me its of he p oposals, such conduct
was not beond the each of the law. The implied covenant of good faith and fai
dealing obligated espondent to exe cise its disc etion honestl and in good faith.
Testimon indicated that espondent exp essed an absolute unwillingness to wo k
with appellant, it could have easonabl been infe ed that espondent neve
intended to give appellants p oposals a good faith evaluation. Respondents
pament of the gua anteed compensation unde the ag eement did not establish
that espondent fulfilled its cont actual obligation.

c  9 The cou t eve sed the decision that g anted summa  judgment in
favo of espondent ente tainment studio, holding t iable issues of fact we e p esent
with espect to appellant di ecto s claims of b each of cont act and f aud. The cou t
uled that the evidence p esented infe ed espondent b eached the ag eement b
efusing to conside appellants p oposals in good faith, and the issue of f audulent
intent was one fo the t ie of fact.



/: c $&#|#(!%
 c ‰    9 Appellant challenged an o de which ente ed judgment
in the Cou t of Common mleas of Alleghen Count, Civil Division (mennslvania)
g anting appellees p elimina  objections in the natu e of a demu e and ente ing
judgment in appellees favo in w ongful te mination case.

@ @
9 Appellant emploee called defendant emploe s attention to va ious
imp op ieties. The eafte defendant supe viso , appellants immediate supe viso ,
accused appellant of g oss misconduct. Appellant afte failing to have his
te mination ove tu ned b defendant emploe s Gua anteed Fai T eatment
m ocedu e (GFTm), sued. Defendants p elimina  objections in the natu e of a
demu e we e g anted. The cou t held that: (1) appellant could not as a matte of
law maintain an action fo b each of the implied dut of good faith and fai dealing,
whe e the unde ling claim was fo te mination of an at-will emploment
elationship; (2) the GFTm was not exp essl inco po ated into appellants
emploment cont act, and the efo e imposed no sepa ate cont actual duties on
defendant emploe ; (3) appellant failed to identif an elevant statutes o legal
p ecedents indicating that epo ting unsc upulous p actices violated public polic;
and (4) appellants gene al allegation of supe io wo k pe fo mance was insufficient
to establish additional conside ation to ove come the at-will emploment
p esumption.

c  9 O de affi med; appellant could not sue fo b each of the implied dut of
good faith and fai dealing, whe e the unde ling claim was fo te mination of an at-
will emploment elationship; defendant emploe s g ievance p ocedu e imposed
no sepa ate cont actual duties on it; supe io wo k pe fo mance could not
ove come at-will emploment p esumption

 -2

3
mp. 497-500

"    ë 



ë ë
ë ë ë 
5
 6 7

-Y In the last qua te of the 19th centu - changing ma kets etc g aqduall
eve sed the ule of caveat empto b imposing obligations on the selle as to
the qualit of goods sold --> Dzimplied wa antiesdz
ëY Exp ess Wa anties- w itten o o al exp ess wa ant given b a
selle o manufactue of a consume p ofuct, conce ning the qualit o
natu e of the goods
ëY Implied Wa ant of Me chantabilit Ȃ me chant impliedl wa ants
to the bu that the goods a e of good qualit and a e git fo the
o dinat pu poses fo which the a e used
ëY Implied Wa ant of Fitness fo a pa ticula pu pose- c eated onl
when the bue elies on the selle s skill o judgment to select
suitable goods, and selle has eason to know of this eliance; goods
donǯt have to be defective, just not fit fo the bue ǯs pa ticula
pu pose.
ëY Implied wa ant in NON-UCC t ansactions
$Y Implied wa ant of habitabilit Ȃ landlo d/tenant t ansactions
meant to aid the inhe ent unequal ba gaining powe

Avoiding Enfo cement: Incapacit, Ba gaining Misconduct, Unconscionabilit, and


mublic molic
Conce n is NOT with the ë itself (like in statute of F auds

HERE: Conce n is on 1. Competenc of pa ties; 2. Ba gaining p ocess b which


ag eement is made; 3. Substance of an esulting ag eement

Mino it and Mental Incapacit

-Mino s: donǯt have the judgment to p otect themselves in the ma ketplace

The emoval on the fo me p actices of ace and gende -based est ictions on the
abilit to cont act eflected a new societal consensus that such laws we e designed
to opp ess, athe than p otect, the affected g oups.

m oblem 6-1 p. 491 Ȃ Insu ance agent has his own business, pe suaded b F an of
neighbo ing big accountant fi m to come wo k fo him; asks compan to match his
$5k/month p ofits --> Dzcome with us and ou should do even bette than that.dz Ed is
on Dzp obation statusdz as emploee fo 3 months, te ms in cont act Dzis the enti e
emploment ag eement f om the pa tiesdz- his p ofits inc ease, making $5k+ $3k
commission, and he is given a manage awa d fo his pe fo mance --> gives
c iticism to compan p actices and involved in inte -office elationship, asked to
stop --> then t ansfe ed to small subu ban b anch making $3k/month. Does he
have a claim fo elief? What issues would a ise?

1.Y Cou se of tpical business- onl 2 manage s in last 10  s have been


demoted/fi ed, and onl b/c the inflated thei figu es.
2.Y What Issues Would A ise?

3
!3- pp.517-537
Restatement §14, 15,16

 $2 

Restatement 14- not Dzvoiddz, but voidable at the election of the mino

Restatement 15

Restatement 16

  
 ('1&'&! ""%
Issue: whethe the mino is entitled to a full efund of the mone he paid fo t uck,
o whethe selle is entitles to a setoff fo the dec ease in value of the pickup t uck
when it was in possession of the mino
1.Y 16 ea old Dodson pu chased t uck f om Sh ade ǯs Auto Sales, and paid
$4900.00.
2.Y No inqui  b Sh ade s and no mis ep esentation about his mino it status.
3.Y 9 months afte pu chase the uck has mechanical p oblems (bu nt valve)-
but continued to d ive it.
4.Y One month late the t ucks engine blew up and t uck was inope able.
5.Y Dodson filed action to decind the cont act and ecove the amt. paid fo the
t uck.
6.Y The Sh ade s efused to accept the tende o the t uck o to five Dodson the
efund he equested.
7.Y Lowe cou t dismissed the claim.
8.Y Dodson filed an appeal de novo in ci cuit cou t.
9.Y Befo e the ci cuit cou t could hea the case, t uck was st uck in fton lef
fende b hit and un d ive - at the time of the t ial the t uck onl wo th
$500.00
10.YT ial judge found in favo of Dodson, and o de ed Sh ade to pa $4900
pu chase p ice; Sh ade s appealed.

Cou t:

1.Y T aditionall: Goes th ough the histo  of child/infant/mino it cases -->
unde ling ule of infanc doct ine = to p otect min s f om thei lack of
judgment and f om quande ing thei wealth th ough imp ovident cont acts
with c aft adults who would take advantage of them in the ma ketplace.
2.Y Mode n T end: balancing the ights if mino s against those of innocent
me chants --> 2 mono it- ules have eme ged:
a.Y Benefit Rule- upon ecission, ecove  of full pu chase p ice is subject
to a decution fo the mino s use of the me chandize Ȃ bound whe e he
failed to esto e what he has eceived to the extent of the benefit
actuall de ived b him f om what he has eceived f om anothe pa t
to the t ansaction.
b.Y Use Rule- ecove  of the full pu chase p ice is subject to a deduction
of the mino ǯs Dzusedz of the conside ation he o she has eceived unde
the cont act, o fo a dep eciation/dete io ation of the conside ation
in thei possession
3.Y Cou t: Rule to Follow Ȃ whe e the mino has not been ove eached in an
wa, and the e has been no undue influence, and the cont act is
fai / easonable, the mino has actuall paid mone on the pu chase p ice,
and taken and used the a ticle pu chased, that he ought NOT to be pe mitted
to ecove the amount actuall paid, without allowing the vendo of the
goods easonable compensation fo the use of, dep eciation, and willful OR
negligent damage to the a ticle pu chased while in his hands
a.Y An f aud = unfai = ule does not appl
b.Y Ove eaching/fai value = issues of FACT.
c.Y Meant to adapt to the mode n conditions unde which mino s can do
a g eat deal of business themselves
d.Y Bu densome fo eve one conce ned if me chants cannot deal with
mino ities of age in a hai and easonable wa
e.Y Doesnǯt teach kids anthing about the ealities of cont acting if the
get a full efund afte using it fo X amt of time, simpl because the e
not of legal age.
f.Y Remand the case fo the t ie of fact to dete mine:
i.Y Counte claim fo to tuous damage
ii.Y G oss negligence vs. intentional conduct that engine blew up
iii.Y Amount of damage b hit and un d ive

-Y Mino liable fo necessa ies and to tuous conduct- unde the t aditional ule,
mino is iable fo easonable value of necessa ies (food, clothes, shelte ,
medical expenses, etc) and to tuous conduct (mis ep esentation of age o
willful dist uction of goods)
-Y Ratification afte Reacing majo it
-Y Statuto  Limits
-Y Avoidance of emploment cont act p ovisions
-Y m e- and mostinju  elease ag eements
-Y Effect of Ma iage

*
 =  

 1
 
 "1&$-! ""&%
 c ‰    9 Defendant bank appealed a judgment of the Ci cuit Cou t
fo Winnebago Count (Wisconsin), which voided a loan made to plaintiff bo owe ,
equi ed the bank to etu n the bo owe s collate al, and dismissed the banks
counte claim to ecove p oceeds f om the loan on the bo owe s claims that he
mental incapacit voided the loan ag eement. The bo owe c oss-appealed the
denial of atto nes fees and punitive damages.

@ @
9 The bo owe had been fo me l adjudicated incompetent. He
gua dian was discha ged pu suant to a phsicians ecommendation. A thi d pa t
induced the bo owe to get a loan fo him and use he mutual fund as collate al.
The thi d pa t p omised the bo owe he would pa the inte est and the loan. The
bo owe and the thi d pa t met with a bank emploee who explained the te ms.
When the loan went into default, the bo owe filed a claim, alleging the bank knew
o should have known of he mental incapacit. The ci cuit cou t found fo the
bo owe . On appeal, the cou t held that the bo owe s complaint p ope l stated a
cause of action. The cou t concluded the e was evidence in the eco d, which
suppo ted the ju s findings that the bo owe was incompetent at the time of the
loan, and the ju  must have eached that conclusion to each a ve dict fo the
bo owe . The cou t held that the etu n of the collate al and holding the bo owe
not liable fo the mone was the p ope emed because the bank did not
demonst ate good faith in the t ansaction, but ejected the ci cuit cou ts application
of the infanc doct ine to each the same esult.
c  9 The cou t affi med the ci cuit cou ts o de s, which voided the loan to
the debto and o de ed the bank to etu n the bo owe s collate al. The cou t
affi med the dismissal of the banks claim fo p oceeds. The cou t affi med the
denial of atto nes fees to the bo owe

1.Y An incompetent pe sons t ansactions a e voidable; the incompetent has the


powe to avoid the cont act enti el. Wisconsin has long ecognized a cause
of action to escind a cont act o conveance based upon the lack of mental
competenc at the time of the t ansaction.
2.Y Bu den of m oof on appellate eview: In eviewing a ju s ve dict, the
appellate cou t will sustain the ve dict if the e is an c edible evidence to
suppo t it. The weight and c edibilit of the evidence a e left to the p ovince
of the ju . When the evidence pe mits mo e than one infe ence, this cou t
must accept the infe ence that favo s the ju s ve dict.
a.Y The law p esumes that eve  adult pe son is full competent until
satisfacto  p oof to the cont a  is p esented. The bu den of p oof is
on the pe son seeking to void the act. The test fo dete mining
competenc is whethe the pe son involved had sufficient mental
abilit to know what he o she was doing and the natu e and
consequences of the t ansaction. Almost an conduct ma be elevant,
as ma la opinions, expe t opinions and p io and subsequent
adjudications of incompetenc
3.Y A mino who disaffi ms a cont act ma ecove the pu chase p ice without
liabilit fo use, dep eciation o othe diminution in value. As a gene al ule, a
mino who disaffi ms a cont act is expected to etu n as much of the
conside ation as emains in the mino s possession. Howeve , the mino s
ight to disaffi m is pe mitted even whe e the mino cannot etu n the
p ope t.
4.Y An infant is often mentall competent in fact to unde stand the fo ce of his
ba gain, but it is the polic of the law to p otect the mino . B cont ast, the
adult mental incompetent ma be subject to va ing deg ees of infi mit o
mental illness, not all equall incapacitating. This diffe ence in pa t accounts
fo the majo it of ju isdictions holding that absent f aud o knowledge of
the incapacit b the othe cont acting pa t, the cont actual act of an
incompetent is voidable b the incompetent onl if avoidance acco ds with
equitable p inciples. Acco dingl, the infanc doct ine does not appl to
cases of mental incompetence.
5.Y Wis. Stat. Ann. § 401.203 does not suppo t an independent cause of action fo
failu e to act in good faith unde a cont act. Section 401.203 does not suppo t
an independent cause of action fo failu e to pe fo m o enfo ce in good faith.
Rathe , § 401.203 means that a failu e to pe fo m o enfo ce, in good faith, a
specific dut o obligation unde the cont act, constitutes a b each of that
cont act o makes unavailable, unde the pa ticula ci cumstances, a
emedial ight o powe . This distinction makes it clea that the doct ine of
good faith me el di ects a cou t towa ds inte p eting cont acts within the
comme cial context in which the a e c eated, pe fo med, and enfo ced, and
does not c eate a sepa ate dut of fai ness and easonableness which can be
independentl b eached.
6.Y If the cont act is made on fai te ms and the othe pa t has no eason to
know of the incompetenc, the cont act ceases to be voidable whe e
pe fo mance in whole o in pa t changes the situation such that the pa ties
cannot be esto ed to thei p evious positions. On the othe hand, if the othe
pa t knew of the incompetenc o took unfai advantage of the incompetent,
conside ation dissipated without benefit to the incompetent need not be
esto ed.
7.Y A cont acting pa t exposes itself to a voidable cont act whe e it is put on
notice o given a eason to suspect the othe pa ts incompetence such as
would indicate to a easonabl p udent pe son that inqui  should be made
of the pa ts mental condition

10( ou ep esent owne s of a Used Ca Sales Ȃ 12 months ago a


custome Bob pu chased a ca - and at the time Bob was onl 17; Bob put 1988
on the fo m when he bought the ca , but he was bo n in 1989- Bob is demanding
the $6000.00 back fo cost of ca l and sas now the ca is inope able and wants
it towed awa f om his house. What factual questions/legal issues must be
pu sued to advise clients/ca sales owne s?

-Y Notes p 534- mis ep esentation of age MIGHT p eclude asse tion of mino it
defense Del Bosco v. US Ski 839 F. Supp. 1470 (1993)

‰ 
.- p. 537-556
Restatement §174
Restatement §175
Restatement §176
Restatement §177

"mu chased" A t a ticle in Cou se Documents

Ê 0
 Ê

|
  c &('
&! "$(%
 c ‰    9 The Supe io Cou t (Alaska) g anted summa  judgment
in favo of defendant cont acto in an action b ought b plaintiff t anspo te . The
t anspo te appealed the judgment.
@ @
9 The cont acto hi ed the t anspo te to move const uction mate ials
b sea. Nume ous p oblems impeded pe fo mance of the cont act, and the
cont acto te minated the cont act. The pa ties settled fo a po tion of the invoice.
The t anspo te a gued that the settlement should be avoided on the g ounds of
economic du ess. The cou t held that the t ial cou t e ed in dening the
t anspo te s motion to fo mall publish a witness deposition afte summa 
judgment was ente ed because the pa ties had efe ed to the deposition in thei
memo anda and a guments. The cou t fu the held that summa  judgment was not
p ope l g anted because the t anspo te made a sufficient factual showing to
withstand the motion fo summa  judgment as to each of the elements of economic
du ess b showing that it was the victim of a w ongful th eat, and the th eat
dep ived it of its unfette ed will.

c  9 The summa  judgment was eve sed and emanded

-Y The cou t below g anted summa  judgment in favo of the defendant


Aleska mipeline, and Totem Ma ine Appealed.
-Y Totemǯs claim stems f om the sequence of events in which: the we e
cont acted to tow a bunch of pipeline supplies f om Houston, TX to southe n
Alaska, told that it would onl be 2100 tons with mo e pickups along the
wa- instead was 7-6k tons to be initiall loaded in Texas- equi ed Totem to
hi e an ext a tug to pull the ba ge. Totem stopped in Long Beach, CA instead
of San med o, CA whe e the intended to change c ews- the e Aleska off
loaded the ba ge without a ma ine su ve with voided Totemǯs insu ance-
and THEN te minated the cont act without giving eason
-Y Totem attempted to collect on what the we e owed fo wo k the did-
unsuccessful, atto ne b ought in and negotiates a $97.5k settlement and
elease of all futu e and p esent claims- when the we e owed $260-$300k.
-Y Totem complaint and amended complaint seeking to 
    
  ë  ë ëë
   ë ë   
  ë  ë  .
-Y Du ess Definitions:
ëY Restatement: an w ongful th eat of one pe son b wo ds o othe
conduct that induces anothe to ente into a t ansaction unde the
influence of such fea as p ecludes him f om exe cising f ee will and
judgment, if the th eat was intended o would have easonabl
expected to ope ate as an inducement.
ëY Williston: 1. Showing that the we e victim of a w ongful o unlawful
act o th eat; and 2. The act o th eat must be one which dep ives the
victim of his unfette ed will.
ëY Cou ts: 1. One pa t involunta il accepted the te ms of anothe ; 2.
Ci cumstances pe mitted no othe alte native (issue of FACT); 3. Such
ci cumstances we e the esult of coe cive acts of anothe pa t (MUST
show acts that p oduced the fi st two facto s, NOT simpl eluctance
to accept and financial emba assment)
-Y Du ess- does NOT exist simpl because victim of w ongful act--> have to
show the e was no choice but to ag ee to the othe pa tǯs te ms o face
se ious financial ha dship.
ëY Issue of
 and adequac of legal emedies whe e on pa t efuses
to pa
-Y Holding: RVERSE summa  judgment and emand fo futu e p oceedings-
b/c totem has made a sufficient factual showing that if p oved, Totems
allegations would suppo t a finding that it executed a elease of its cont act
claims agains Aleksa unde du ess:
ëY Aleska ellegedl withheld pament of an acknowledged debt
ëY Aleska allegedl knew Totem had no choice but to accept the
inadequate settlement sum b/c faced w/ bank uptc and debts
ëY Doesnǯt   to be p oved w ongful conduct to be du ess claim, the
events leading to the te mination would be p obative as to whethe
Aleksa exe ted an w ongful p essu e on Totem.

:

1.Y Void vs. voidable- Du ess has its o igins in phsical compulsion- assent as a
esult of a th eat to life o limb --> DISTINCTION:
a.Y Restatement (2nd) 174: a cont act is ë
 if made unde coe cion
involving a phsical th eat
b.Y A cont act is ë
 if made unde Du ess = economic coe cion
2.Y W ongful/imp ope Th eat:
a.Y Restatement (2nd) 175 Ȃ Th ee elements equi ed fo Du ess:
i.Y W ongful/imp ope th eat
ii.Y A lack of easonable alte native
iii.Y Actual inducement of the cont act b the th eat
b.Y The Êë  case uses Dzw ongfuldz to desc ibe and actual th eat,
Restatement uses Dzimp ope dz
c.Y When is the th eat imp ope ? --> Restatement (2nd) 176: th eats to
commit a c ime, to t, of c iminal p osecution
i.Y Th eats to litigate o not to pe fo m the cont act a e not pe se
w ongful- but ma be imp ope if the ci cumstances show that
the th eat was made in bad faith.

 55    '-c


| #! "--%
 c ‰    9 mlaintiff teache appealed the judgment of the Supe io
Cou t of Los Angeles Count (Califo nia), which dismissed the teache s complaint
that sought decla ato  elief and escission of an emploment esignation allegedl
submitted unde undue influence.

@ @
9 The teache contended that his esignation was invalid because
obtained th ough du ess, f aud, mistake, and undue influence and was given at a
time when he lacked capacit to make a valid cont act. The cou t held that du ess o
menace was not pled because an damage to the teache s eputation th ough the
initiation of suspension and dismissal p oceedings was incidental. The cou t also
held that f aud was not pled because the teache s complaint failed to asse t the
elements of knowledge of falsit, intent to induce eliance, and justifiable eliance.
Fu the mo e, the cou t held that mistake was not plead because the complaint failed
to disclose an facts that suggested consent was obtained th ough a mistake of fact
o law. Finall, the cou t held that the pleading did set out a claim that the teache s
consent to the t ansaction had been obtained th ough the use of undue influence.
Acco ding to the cou t, it was possible that the teache s exhaustion and emotional
tu moil wholl incapacitated him f om exe cising his judgment and that he was
ove l pe suaded into signing his esignation document.

c  9 The cou t eve sed the judgment of the t ial cou t

c 5


Although not stated, a finding of undue influence usuall equi ed the existence of
confidential elationship between the pa ties. Ê 
 
 ë   
ë ë
 ë ë

 
  #    -


 
  
 ë   ë 
   ë
  
  #2  . Howeve ,
in a significant Califo nia case, ë
44
! ëë
 ! (
 ., undue influence was
found whe e no confidential elationship existed.
- The t ansaction in question was the esignation of plaintiff teache who had been
a ested on cha ges, late dismissed, of homosexual activit. Afte 40 hou s without
sleep and soon afte his elease on bail, officials of defendant school dist ict visited
him and pe suaded him that it was in his best inte ests to esign.
- The Cou t of Appeal of Califo nia, Second Appellate Dist ict, Division Two, noted
the possibilit that exhaustion and emotional tu moil could wholl incapacitate a
pe son f om exe cising his judgment and held that the pleadings sufficed to show
the equi ed elation of a dominant subject to a se vient object. In its opinion, the
appellate cou t also laid down seven c ite ia fo distinguishing between legitimate
pe suasion and Dzexcessive p essu e.dz These included (1) discussion of the
t ansaction at an unusual o inapp op iate time, (2) consummation of the
t ansaction in an unusual place, (3) insistent demand that the business be finished
at once, (4) ext eme emphasis on untowa d consequences of dela, (5) the use of
multiple pe suade s b the dominant side against a single se vient pa t, (6)
absence of thi d-pa t advise s to the se vient pa t, (7) statements that the e is no
time to consult financial advise s o atto nes. The appellate cou t explained that if
a numbe of these elements we e simultaneousl p esent, the pe suasion could be
cha acte ized as excessive and, the efo e, undue.

Notes:

A.Y Defining Undue Influence- the cou t identifies the essence of undue influence
as: involving the use of excessive p essu e b a dominant pa t in
ove coming the will of a vulne able pe son.
B.Y Restatement (2nd) 177 Undue Influence: unfai pe suasion of a pa t who is
unde the domination of the pe son exe cising the pe suasion o who b
vi tue of the elation between them is justified in assuming that the pe son
will not act in a manne inconsistent with his welfa e.
C.Y Facto s Indicating Undue Influence- Seven Cha acte istics
1.Y Discussion of the t ansaction at an unusual o inapp op iate time
2.Y Consummation of the t ansaction at an unusual place
3.Y Insistent demand that the business be finished at once
4.Y Ext eme emphasis on untowa d consequences of dela
5.Y The use of multiple pe suade s b the dominant side against a single
se vient pa t
6.Y Absence of 3 d pa t adviso s to the se vient pa t
7.Y Statements that the e is no time to consult financial
adviso s/atto nes

Restatement §174

Restatement §175

Restatement §176

Restatement §177

!- p. 556-584
Mis ep esentation and Non Disclosu e (p. 556-584)
(Look at Restatement in this o de : Restatement §§ 164, 159 , 162 , 163; 168, 169
161)
Restatement §161-
Restatement §162-
Restatement §163-
Restatement §164-
Restatement §168-
Restatement §169-

1.Y Ê

ë in the histo  of common law, English cou ts did not ecognize
f aud as a defense- ecognized t as a sepa ate claim b allowing ecove 
unde a sepa ate to t action of deceit
2.Y "ë  ë 
 would allow fo Dz ecissiondz- judicial etu n of the pa ties to
the status quo that existed befo e the cont act was fo med.
3.Y "ë ë : In o de to obtain a ecission, the pa t has to show that she
had made a tende of an mone o p ope t eceived befo e instituting the
action- while in Cou t of Equit the tende was unnecessa  fo ecission.
4.Y ,ë ' A victim of mis ep esentation ma have a choice between 2
avenues of ed ess:
a.Y A to t action fo damages
b.Y Right o avoid the enfo ceabilit of the cont act b wa of ecission.
c.Y ** the choice of avenue depends on the desi es of the pa t (want
moneta  elief to fix the p oblem athe than eve sing enfo ceabilit
of a cont act that was based on mis ep esentation), as well as the
availabilit of the possible elief equested

 

&$ 
- #! "-&%- cou t affi ms a lowe cou t awa d in
favo fo the plaintiff fo damages of $14,300.00 and punitive damages of $40,000.00-
because evidence submitted p esented questions of fact that the cou t found the
lowe cou t had been co ectl inst ucted on, and the evidence p esented issues of
fact that the ju  was co ectl allowed to fact-find.

c  5

 c ‰    9 Defendant dance studio owne s appealed a judgment of


the molk Dist ict Cou t (Iowa), which ente ed a final judgment afte a ju  ve dict fo
plaintiff widow in he action seeking actual and exempla  damages fo allegedl
false and f audulent ep esentations in the sale of dancing inst uction to the widow.

@ @
9 The elde l widow fi st went to the dance studio as a gift f om a f iend.
On he second visit, she was sold a small cou se of lessons. The eafte , the studio
sold the widow mo e than 4,000 hou s of inst uction, including 3 lifetime
membe ships, and told he falsel that she could be a p ofessional dance . Upon the
widows filing of a lawsuit, the owne s pe suaded he to settle fo a elativel
insignificant amount and d op the action. A second elease fo mo e mone was
obtained, but nothing was paid on that elease. The widow filed a second action fo
f aud and mis ep esentation in the seve al sales to he and in obtaining the
dismissal of the p evious lawsuit and the eleases. The ju  etu ned a ve dict fo
the widow. On appeal, the cou t held that the evidence was adequate to find the e
was a conce ted effo t constituting f audulent ove eaching. The question of
exempla  damages was p ope l submitted to the ju , and the evidence of
shocking g eed and ava iciousness suppo ted the awa d of such damages.

c  9 The cou t affi med the judgment of the t ial cou t awa ding actual and
exempla  damages to the widow against the dance studio owne s.

Notes:

1.Y  ë  

 
ë- Restatement §164(1)- a cont act is
voidable id a pa tǯs manifestation of assent is induced b eithe a f audulent
o a mate ial mis ep esentation b the othe pa t upon which the ecipient
is justified in elingǥ
0!Y "ë  ë ë 
- Should Seste have also attempted to ecind these
cont acts athe than attempting to ecove damages in to t o f aud?
!Y It would depend on what she wanted- the p oblem is that she had
al ead paid based on the mis ep esentations- and if all she wanted
was he mone back, then she could have sought to ecind the claims.
Howeve , in the initial cont acts it ma have been found (as an issue
of fact) that the e wasnǯt sufficient evidence of mis ep esentation
because a sales st ateg is pa t of the business etc. Ȃ but she would
still have a claim fo ecission if she wanted it- but ecission isnǯt
necessa il going to get he an justice o what she wants- if she
al ead paid the mone- ecinding would make mo e sense if the e
was a p omise to pa in the futu e.
3.Y ,
 
ë  ë  ë

ë ë 

ë- Restatement §168-
defines opinion as the exp ession of belief, without ce taint, as to the
existence of fact (tpicall deals with qualit o value of p ope t)
4.Y ë 
 We e all of the othe elements fo mis ep esentation
p esent? i.e. Was he eliance easonable? If not- how could she p evail?
me haps because of the clea cases of f aud-0 like selling Gold Sta classes
without the abilit to teach themǥ
5.Y  
 

 ë  ë& 
 ë  
 ëë
  - In an effo t to
get he to sign the eleases- the pe suaded Seste to discha ge he
atto ne, while at the time we e themselves ep esented b counsel Ȃ Dzit is
imp ope fo a lawe to communicate about the subject of the
ep esentation with a pe son the lawe knows the be ep esented b
anothe lawe in the matte , unless consent to do so, o cou t o de dz

*,  & | 5( ! "(-%-

9Must the selle of a esidence disclose to the bue facts pe taining to past
te mite infestation?

-Y The bue s Hill filed suit to escind an ag eement to pu chase a esident-


-Y Allege:
ëY that Jones made mis ep esentations conce ning te mite damage
ëY That Jones failed to disclose to them the existence of the damage and
histo  of te mite infestation in the esidence.
-Y The lowe cou t dismissed the mis ep esentation claim based on an
Dzinteg ation clausedz in the pa tiesǯ ag eement

Facts:

1.Y Bue s visit the house seve al times.


2.Y Selle s we e to placei n exce ow $ to pa fo te mite inspection
3.Y Bue s notice Dz ippledz in wood floo leading to sunken living oom- ask about
te mite damage- Selle s sa its wate damage.
4.Y Inspection epo t shows no te mite damage.
5.Y Bue s move in and soon notice ove $5000 of te mite damage.
6.Y Selle s eceived two p io te mite gua antees when  pu chased the
house f om p io owne T ul Nolen
7.Y Slle s we e awa e of existence of te mites
8.Y Inspecto investigates 2 times and found te mite damage and evidence of
past t eatment.
9.Y Bue s asked NO othe questions except if the ipple in the floo was caused
b te mite damage Ȃ DzNot Ǯt ingǯ to find p oblems with the house b/c she
eall wanted itdz

Cou t:

1.Y Cont act Integ ation Clause- Dzthat the pu chase has investigated said
p emisesǥ selle is he eb eleased f om all esponsibilit e: valuation
the eof, and no pa t shall be bound b an unde standing, ag eement,
p omise, ep esentation, o stipulation exp essed o implied, not specified
he eindz
a.Y ma ol evidence is alwas admissible to show f aud, and this is t ue
even though it has the effect of va ing the te ms of a w iting between
pa ties
b.Y He e the claimed mis ep esentation occu ed   the pa ties
executed te cont act Ȃ Bue s f aud theo  is based on the p emise
that thew e e not bound unde the cont act until a satisfacto 
te mite inspection epo t was submitted -> assuming that the
integ ation clause would extend to statements made afte the cont act
was executed the clause could not shielf selle s f om liabilit should
bue s be able to p ove f aud
2.Y Dut To Disclose- Restatement §161- A vendo has an affi mative dut to
disclose mate ial facts whe e:
a.Y Disclosu e is necessa  to p event p evious asse tion f om being a
mis ep esentation o f om being f audulent o mate ial
b.Y Would co ect a mistake of the othe pa t as to a basic assumption
on which that pa t is making the cont act, and if non-disclosu e
amounts to a failu e to act in ggood faith and in acco dance with
easonable standa ds of fai dealing
c.Y Would co ect a mistake of the othe pa t as to the contents of effect
of a w iting, evidencing o emboding an ag eement in whole o in
pa t;
d.Y The othe pe son is entitled to know the facts because of a
elationship of t ust and confidence between them
-Y So the Issue he e is: Whethe unde these facts, the bue s should have been
pe mitted to p esent to the ju  thei claim that the selle s we e unde a dut
to disclose thei (the selle ǯs) knowledge of te mite infestation in the
esidence:
ëY Must a selle of a esidential p ope t advise the bue of mate ial
facts within his knowledge pe taining to the value of the p ope t?
$Y Unde ce tain limited ci cumstances it is unjust to st ictl
enfo ce the polic favo ing finalit of t ansactions
DY Conveing a false imp ession b the disclose of somef
acts and the concealment of othe s
$Y Judicial polic of honest and fai dealing in business
elationships
$Y Dut to Disclose: the ule equi ing disclosu e is inboked in
the case of mate ial facts --> Thusǥ
ëY Ma te mite damage and the existence of past infestation constitute
such mate ial facts?
$Y Lnn v. Talo - cou t held te mite epo t that showed evidence
of infestation, not given to bue , to be mate ial because he
claimed he would not have pu chased if he had known
$Y Mate ial: if it is one to which a easonable pe son would attach
impo tance in dete mining his choice of action in the
t ansaction in question
$Y Cou t: Te mite damage evidence ma o ma not be mate ial-
but its an issue of fact fo the ju  to have ightl decided.

Notes

1.Y Histo ical me spective: Laidlaw v. O gan 15 US 178 (1817)


2.Y Mode n me spective of Non-Disclosu e
3.Y Economic Analsis of Non-disclosu e
4.Y Real estate disclose and common law actions
5.Y Innocent o negligent nondisclosu e
6.Y To t liabilit fo nondisclosu e
7.Y Effect of disclaime o me ge clause
8.Y Effect of Fiducia  Dut
9.Y Lawe ǯs m ofessional Ethics





    )
-&+/#'$! ""&%- cou t affi ms a
lowe cou t decision finding that comme cial tenants a e not liable fo unpaid ent
unde a pe sonal gua ant of lease

9 Whethe the t ial cou t e ed in finding that ma k 100 used f audulent means
to p ocu e the signatu es of the Ka teses on the gua ant of the lease at issue.

-Y He e F aud is statuto  based on Indiana Law:


ëY A mate ial mis ep esentation of past o existing fact b the pa t to be
cha ged with
ëY Was false
ëY Was made with knowledge o in eckless igno ance of the falsit
ëY Was elied upon b the complaining pa t; and
ëY m oximatel cause the complaining pa t inju 

 c ‰    9 Appellant indust ial complex sought eview of the


judgment f om the Ma ion Supe io Cou t, Civil Division (Indiana), which found that
appellee pa t owne s we e not liable fo unpaid ent unde a pe sonal gua ant of
lease. The indust ial complex contended that the t ial cou t e ed in finding that the
indust ial complex used f audulent means to p ocu e the signatu es of the pa t
owne s on the gua ant of lease.

@ @
9 The indust ial complex appealed the judgment that found that the pa t
owne s we e not liable fo unpaid ent unde a pe sonal gua ant of lease because
the indust ial complex obtained the signatu es of the pa t owne s on the pe sonal
gua ant of lease th ough f audulent means. The indust ial complex contended that
ones eliance upon a mate ial mis ep esentation had to be justified and, in an
a ms-length elationship involving knowledgeable business people such as the pa t
owne s, such eliance was misplaced. The cou t affi med, holding that the evidence
suppo ted the t ial cou ts conclusion that the indust ial complex obtained the
signatu es of the pa t owne s on the pe sonal gua ant of lease th ough f audulent
means, and the findings suppo ted the judgment. Additionall, the cou t easoned
that a gua ant of lease was neve discussed du ing the lease negotiations, and the
lease ag eement made no efe ence to a gua ant. The cou t also found that the
document that the indust ial complexs ep esentative p esented to the pa t owne s
was entitled "Lease Ag eement" and the ep esentative neve told the pa t owne s
that the we e signing a pe sonal gua ant of lease.

c  9 The judgment that found that the indust ial complex obtained the
signatu es of the pa t owne s on the pe sonal gua ant of lease th ough f audulent
means was affi med

Notes

1.Y F aud in the Execution of the cont act- Distinction:


a.Y In both    å
, the pa t alleging f aud p esumabl
unde stood the te ms, but we e f audulentl induced into ente ing
into the ag eements b mis ep esentations/false statements (  *
o mate ial nondisclosu es (å
*
b.Y In $# 11, the tenants alleged the we e mislef ega ding the
content of the actual document that the executed o signed
c.Y Restatement §166: If a pa tǯs manifestation of assent is induced b
the othe pa tǯs f audulent mis ep esentation as to the contents o
effect of a w iting evidencing o emboding in whole o in pa t an
ag eement, the cou t at the equest of the ecipient ma efo m the
w iting to exp ess the te ms of the ag eement as asse tedǥ (a) if the
ecipient was justified in eling on the mis ep esentation
2.Y Hpothetical Va iations of ma k 100
a.Y When a tes phoned Kaplan, he was ina phone booth in the co ne of
the lobb, whe e the convo was not ove hea d b Scannel?
b.Y Scannel instead said it was 15 pages of Dzlease pape sdz Ȃ not 2 pages
c.Y No ush fo Ka tese when the met Scannel?
d.Y Common business p actice of sha eholde ag eements that we e
me el a fo malit?

http://www.outube.com/watch?v=OMOBdQkKQY

13- pp. 584-610; 622-32


UCC §2-302
Restatement § 208
LA Times a ticle in Cou se Documents

Cont act Law and Unconscionabilit

-Y Concept: DzG ossl Unfai Ba gainsdz


-Y Has oots in Roman law Ȃ whe e land ag eements could be ecinded if the
ba gain was 2-1 unfai ; DzAbuse of Rightsdz civil law concept in Louisiana
p otects..
-Y Change in econom- equit cou ts would enfo ce specific pe fomance o alte
the pa ticula unfai te ms within the cont act, o othe equitable elief if the
p ice was inadequate o wouldnǯt if the one seeking elief had unclean hands
-Y La ge comme cial ente p ises inc easingl began using a standa d fo m
cont acts to conduct business t ansactions Ȃ DzBoile plate m ovisionsdz-
ext emel favo able to the d afint pa t- often in Dztake it o leave itdz tpe
te ms Ë BRINGS THE CONCEmT OF MUTUAL ASSENT INTO QUESTION
-Y 13- is a tool that eme ged designed fo dealing with
cont acting t ends and gene al unfai ness that ma and does esult as a
esult of these intentionall/unintionall unfai cont acts
ëY c%#> %%42 
ëY c00#>.13
ëY 
 
‰
>0 .12

1
1
 2Ê 
  c #&''&! "-&%
1.Y Fu tnitu e compan oe ates a etialf u nitu e sto e in DC- each appellant in
these cases (Williams) pu chased a numbe of household items f om Walke -
Thomas, to be made in
     .
2.Y Te ms of each pu chase set out in a cont act which set fo th value and
monthl pament.
3.Y Cont act p ovided that the title of each item sold would emain in the name
of the fu nitu e compan until the total of all monthl paments made
equaled the value of the stated items- then the bue s take cont ol of title.
4.Y Cont act included an additional te m: Dz    ë    
    
 ë   ë  ë  
 Ä  
ë   ë  "ë      
    

 !dz
5.Y Effect of this p ovision: keeps a balance due on eve  item pu chased until
the balance due on all items, wheneve pu chased, is liquidated = DEBT
incu ed = RIGHT BY SELLER to epossess all items p eviousl pu chased
upon ANY default.
6.Y Issue: The appellants have al ead made sometimes significant paments
towa ds thei pu chases, and even paid off thei past pu chases, but the
scheme places a debt of the balance due on  things pu chased, AND the
title emains in the selle s possessionǥ SO the selle can simpl epossess
upon default (so long as the paments havenǯt equaled the value of the item
sold).
7.Y Lowe Cou t: ecognizes this kind of ag eement is w ong because it is
unequal0 but doesnǯt want to sa so and delineate a standa d fo futu e
cont act cases of this natu e- because of businesses p actes and cont acting
gene all (donǯt want to be activist in w iting peopleǯs contacts) Ȃ so sa
legislatu e is best suited to deal with it.
8.Y This Cou t: wants to asdd ess the issue head on and decla e: YES, ou can
efuse too enfo ce unconscionable cont acts because the e w ong
a.Y m ocedu al Unconscionabilit
i.Y Inequalit of ba gaining powe
1.Y Whethe a meaningful choice to accept/ efuse the cont act is p esent
2.Y Inapp op iate/poo manne in which the cont act was also ente ed into Ȃ pa t
with no eal knowledge of the te ms- ha ld even an objective manifestation of
intent to assent
b.Y Substantive Unconscionabilit Ȃ   of the cont act: in light of the
gene al comme cial backg ound and the comme cial needs of the
pa ticula t ade o case
i.Y Te ms which a e easonabl favo able to the othe pa t
ii.Y Co bin- whethe the te ms a e so ext eme as to appea
unconscionable in elation to business p actice
c.Y c  c
:

59( 
  

 $ë  › 

ë  Ê  ë  
 

d.Y Dissent: Cone : molic- Ca eful of the slippe  slope of public ove sight
of p ivate cont acting and the histo ical latitude fo pa ties in p ivate
cont acting
i.Y C iticism: we e the te ms in 

  actuall that
unconscionable- isnǯt it just thei business p actice to p otect
losses and incu evenue gains while the have man debto s
in installment plans?

:

1.Y Some statuto  based egulations like Unifo m Consume C edit Code have
adopted a multifacto balancing app oach: if lende believes likel default,
dispa it in p ive, dispa it in ba gaining powe , mental impai ment, etc
2.Y   ë . ë 

  Ȃ does Williams being poo and Dztaken advantage ofdz
have anthing to do with the cases outcome? (the paid fo 4-5  s befo e
defaulting)
3.Y 

  was conside ing the conscionabilit of an add-on clause- a pa t of the
cont act consume s a e unlikel to ead o unde stand
a.Y .
 $
 is la gel unconscionable
b.Y   ëë' mixed opinions- because technicall the title stas in the
owne s hands until its paid off- ight to evoke at an time
4.Y | ) &-#+/$($! ""% Ȃ Note case Ȃ Ai condition b eaks in
heatwave sas $150 fo epai , cha ges 750+ b/c know will pa it- still doesnǯt
wo k- Cou t upholds ecinding + estitution damages. Even whe e the e is no
actual f aud, cou ts will elieve against ha d and unconscionable cont acts that
have been p ocu ed b taking advantage of the condition, ci cumstances, o
necessit of othe pa ties
5.Y "


  ë  ë5 
 


ë
 ݑ
ë

: Some
instead p efe t aditional doct ines like f aud, undue influence, and du ess
wheneve possible because the a e ë 

 than the doct ine of
Unconscionabilit

c0  


1.Y Legislatu es athe than cou ts have said to be the app op iate institutions
fo dete ming the need fo and scope of an egulation of coe cion in the
ba gaining p ocess o unfai ness of the te ms of a ba gain
2.Y Consume m otection Statutes
a.Y Disclosu e Legislation- theo  that inc eased info mation gives
consume s an oppo tunit to avoid ente ing into unfai cont acts
i.Y T uth in Lending Act (1968) Ȃ equi es unifo m method of
disclosu e the ate of inte es on consume loands along with
va ious othe te ms like scope of an secu it inte est c edito
has on p ope t, etc.
ii.Y Fede al T ade Commission Imp ovement Act (1975) Ȃ
inc eased disclosu e of wa ant te ms
b.Y Substantive Regulation Ȃ pa ticula cont act p ovisions thought to be
unfai a e decla ed unlawful
i.Y T uth in Lending Act (1968) Ȃ consume s g anted ight to
ecind within 3 business das an loan cont act that involves a
mo tgage on the consume s p incipal esidence
ii.Y FTC Imp ovement Act
c.Y Statutes Imp oving Enfo cement- legal changes to p otect consume s
a e onl meaningful if enfo ced
i.Y FTC Imp ovement Act- g anted it autho it to p omulgate ules
dening unfai and deceptive p actices

*   c    | c   'c


|'
#(!-%
-Y Ext eme Makeove Home Edition Case- Higgins famil pa ents deceased-
oldest son is left as the gua dian fo the famil- the Higgins kids a e pu sued
b Lock and Ke m oductions- the Disne /Abc Inte national T.V. Inc.
p oduction compan fo Ext eme Makeove Home edition-
-Y Afte moving in with the Leomiti famil, who take the kids (5) in to live with
them --> Cha les was advised b the chu ch and Ext eme makeove go
th ough thei Chu ch (need poo families a e the ta gets of this show)
-Y Lock and Ke p oduce shoose thei famil- Fed Ex an Dzag eement and
Releasedz
fi the child en to sign
-Y 24 pages and 72 individual pa ag aphs Ȃ the top eadsdz READ CAREFULLY..
etcdz and includes valid wa nings to adequate eview befo e signing.
-Y Miscellaneous section includes 12 numbe ed pa ag aphs
-Y ISSUE: Clause # 69 A bit ation p ovision: Dzan and all disputes o
cont ove sies a ising unde this Ag eement o an of its te msǥ shall be
esolved b binding a bid ation in acco dance with the following
p ocedu eǥ b AAA, final and binding, not subject to appeal o challenge;
AND m oduce Lock and Ke has the ight to injuctive.equitable elief as
p ovided b Califo nia lawdz
ëY Te ms themselves- child en obviousl donǯt know what the a e

Complaint: with espect to the TV p oduction compan defendants (also sues


Leomiti famil: the kicked them out of the house afte the house was built, thei
mo tage was paid off etc- seems like the  the kids- and sued them fo
intential/negligent mis ep esentation, b each of cont act, etc. ) Complaint against
TV: B eached p omises, exploitation, po t aing them in a negative light ( eplaed
episodes afte the no longe we e living in that house)

1.Y A bit ation ag eements a e an ok standa d to eview fo unconsciounabilit-


ewual footing with othe cont acts.
2.Y Is it a Cont act (ag eement/ elease) of Adhesion: Is it a standa dized cont act
that is imposed and d afted b the pa t of supe io ba gaining st engths and
elegates to the othe a t Dzonl the oppo tunit to adhe e to the cont act o
eject itdz - ?
3.Y If itǯs a cont act of Adhesion --> A e facto s p esent which, unde established
legal ules, ope ate to ende it unenfo ceable?
4.Y Unconscionable- Rule of Law f om Case:
a.Y m ocedu al- MAKING: opp ession o su p ise due to unewual
ba gaining powe
b.Y Substantive- EFFECT: ove l ha sh and one sided esults
c.Y Must BOTH be p esent, but no indication of what deg ee
d.Y ARBITRATION: can be unconscionable and unenfo ceable- if it acts as
a subte fuge fo a challenge that the enti e ag eement (in which the
a bit ation clause is onl a pa t) is unconscionable
5.Y Holding/Reasoning:
a.Y A gument: The enti e ag eement wasnǯt unconscionable
i.Y Cou t: mlaintiffs kids a e onl challenging the
Unconscionabilit of the a bit ation clause he e
ii.Y Child en didnǯt get a eal chance to ead the p ovisions- and
even if the did, it could still be that the te ms a e
unconscionable- even if on thei face the a e not (p esumabl
b/c theǯ e child en)
b.Y The adhesive natu e of the pa ties ag eement
i.Y It is a cont act of adhesion- standa dized boile plate cont act
ii.Y No identifing info mation like names on thei cont acts- just
signing a boile plate fo m
iii.Y No question of unequal ba gaining powe
iv.Y Was a take it o leave it cont act- no negotiation o attempt to
do so
c.Y m ocedu al Unconscionabilit
i.Y No discussion of the p ovision @ all
ii.Y m ovision is hidden in the pa ag aphs of the miscellaneous
section of the cont act
iii.Y M s. Leomiti inst ucted petitione s to simpl Dzflip th ough the
pages and sign itdz Ȃ had it fo 5-10 mins. each befo e kids
signed it.
d.Y Substantive Unconscionabilit
i.Y TERMS ARE ONE SIDED/NOT BILATERAL- DzI ag eeǥdz
m oduction pa t not bound to the te ms- leave themselves an
out to pu sue litigation themselves
ii.Y MORE IMmRORTANT: the can COMmELL the petitione s to
a bit ation while not being bound to a bit ation themselves-
and without fea that seeking a bit ation would p eclude them
f om seeing injunctive o equitable elief in a cou t of eco d

ë 

1.Y Enfo ceabilit of a bit ation ag eements


2.Y Adhesion cont acts and p ocedu al Unconscionabilit

3.Y Substantive Unconscionabilit

4.Y Mandato  a bit ation in consume cont acts

*| case (not assigned) Ȃ compa ing: cou ts st ong inclination to enfo ce
a bit ation clause because it is judiciall efficient and cost effective ve sus litigation

1.Y molic o ientation: Reconciling å



 and %
a.Y %

ë
   

 ë  ë ë ë   

ë ë
 ë  

 5 
  

2.Y m ocedu al and Substantive Unconscionabilit


a.Y Restatement- adequac of conside ation does not itself invalidate a
ba gain, but g oss dispa it in the values exchanged ma be an
impo tant facto in a dete mination that a cont act is unconscionable

3.Y Seve ance of substantivel unconscionable te ms


a.Y The Adle cou t found that a numbe of p ovisions we e substantivel
unconsciounable, but chose to seve those te ms and enfo ce the
emainde of the a bit ation ag eement
b.Y Emphasis on a bit ation as a p efe able and cost effective solution to
conflict esultion- judicial efficienc.

4.Y m ohibitions b a bit ation ag eements on class actions


a.Y Cou ts have been divided on whethe bans on class actions in
a bit ation ag eements should be enfo ced

5.Y Confidentialit clauses du ing a bit ation Ȃ —  ! %


 ë 18 $Ä8
j8)) Ȃ Confidentialit ag eement in an emploment a bit ation
ag eement was substantivel unconscionable- Dzhampe ing an emploees
abilit to p ove a patte n of disc imination o take take advantage of findings
in past a bit ations.dz

:

9c  c
/   5 /‰
c   
1.Y Comme cial A bit ation
a.Y Comme cial Dispute Resolution m ocedu es- published b the
Ame ican A bit ation Association (AAA)
i.Y ma t seeking a bit ation must file a demand and pa filing fee
to AAA
ii.Y A bit ation can be imposed b cou t- can also be motion to be
staed fo good eason (pending litigation/suit)
iii.Y Then Selection of A bit ato Ȃ usuall not lawe s, but wo k in
the elevant indust .
iv.Y Hea ing date is fixed- usuall no p et ial discove - but
equi ed to exchange exhibits used in hea ings 5 das befo e.
v.Y Evidence conside ed has to be mate ial/ elevant- even if it
doesnǯt compl with the ules of evidence

2.Y Emploment A bit ation


a.Y Unions Sta ted the t end Ȃ now commonplace in emploment
cont acts
b.Y Emploees will find it difficult to avoid enfo cement of an ag eement
to a bit ate
c.Y De ivative of the comme cial a bit ation model
d.Y Due m ocess m otocolȄp omote fai ness in wo kplace a bit ation
e.Y Two Tpes- Emploment A bit ation Rules
i.Y Emploe -p omulgated plans
1.Y Cost-affo dable b/c compelled to a bit ation and
shouldnǯt be fo ced to bea bu den of costs to do so
ii.Y Individuall negotiated emploment ag eements

3.Y Consume A bit ation


a.Y D amatic inc ease in use Ȃ p ese ves the ight to go to local small
claims cou ts instead of a bit ation if the claims meets the cou ts
ju isdictional equi ements
b.Y Simila to comme cial model
c.Y No hea ing unless $10k @ stake o g eate
d.Y Built in cost est ictions to pa fo a bit ato fees, etc.

;
pp. 663- 684
Restatement §§ 152, 153, 154, 157
Mistake a ticle in Cou se Documents
$.. .09


Õ 

* Excuses f om pe fo mance a ising NOT f om ove eaching o deception b eithe


pa t, but f om changes in ci cumstance that have eithe occu ed o come to light
since the o iginal ag eement was made

3 ?: If fo one of the pa ties a ci cumstance was not exp essl
p ovided fo in the cont act has adve sel affected eithe pe fo mance itself o the
value the eof, should that pa t be pe mitted as a esult to escape the obligation of
pe fo mance the cont act would othe wise impose?

Mistake- ma efe to a decision that in hindsight tu ns out bad, OR a decision that
although not clea l disaste ous has tu ned out to be a decision that was not the
best choice that could have been made

-Y Sometimes have to deal with a pa tǯs mistaken belief that the we e using
language with the same intention as the othe when eall the attached
diffe ent meanings

Issue: Void contacts that tu n out to be bad fo one pa t? Should the law pe mit one
pa t to escape f om the obligations of pe fo mance simpl because it tu ned out
bad?

-O dina il NOT: pa ties make cont acts with the aim of binding 
 the m iad
of possible changes of ci cumstance that ma occu befo e pe fo mance (Thatǯs wh
the do it in the fi st place!)

-Y Cou ts: will often choose the intended meaning of one of the pa ties and
appl it
-Y Cou ts: SOMETIMES will find a pa ticula tpe of mistake has been made,
which lifts the case above the o dina  (ext ao dina  elief)

Restatement §152

Restatement §153

Restatement §154

Restatement §157



c  
 *
0 ' $0 $! "(%
 c ‰    9 The Cou t of Appeals (Michigan) ente ed judgment in
favo of plaintiff bue s in thei action initiated against defendant selle s that sought
to escind the pa ties land sale cont act.
@ @
9

1.Y A landowne const ucted an apa tment building on his p ope t and
installed a septic sstem without a pe mit and in violation of the health code.
2.Y The landowne conveed title to the p ope t to the selle s.
3.Y mu suant to a land sale cont act, the bue s pu chased the p ope t f om the
selle s.
4.Y The count health boa d then obtained a pe manent injunction p ohibiting
human habitation of the p ope t due to the defective sewage sstem.
5.Y The bue s initiated an action against the selle s to escind the land sale
cont act on the basis of mutual mistake and failu e of conside ation.
6.Y The appellate cou t ente ed judgment in favo of the bue s.
7.Y On appeal, the cou t found that the bue s we e not entitled to escission.
a.Y Both the bue s and the selle s believed that the p ope t was
suitable fo human habitation when the ente ed into the land sale
cont act.
b.Y Both pa ties we e blameless because neithe the selle s no the
bue s knew of the defective septic sstem.
c.Y The cou t was faced with two equall innocent pa ties and concluded
that the isk should be allocated to the bue s.
d.Y The pa ties land sale cont act also contained an "as is" p ovision
allocating the isk to the bue s.

c  9 The cou t eve sed the decision because the bue s we e not entitled to
escind the pa ties land sale cont act

-Y A cont actual mistake is Dza belief that is not in acco d with the facts.dz (1st
Restatement)
-Y Cont act contains Dzas isdz clause-
ëY Must elate to a fact in existence at the time the cont act is executed
ëY Cou t of Appeals: the pa ties we e mistaken as to the income
p oducing capacit of the ope t
ëY Appellants (Messe ls): the e was no mistake because the defect in
sewage sstem didnǯt happen until afte contact was executed
ëY Appellees (micklesǯ): Theǯ e confusing the date of inception of the
defect and the date upon which the defect was discove ed
ëY *** B DEFINITION: a mistake cannot be found until afte the cont act
had been ente ed into- if the pa ties we e awa e befo e, the e would
be be no misapp ehension about signing the cont act
ëY Cou t: the septic tank was defective mRIOR to the execution of the
cont act- the Messe lǯs g anto installed a non-confo ming septic
tank without a pe mit- division of the pa cel and sale of the one ac e
of p ope t made emeding the septic situation impossible.
$Y Doesnǯt like the distinctions of: cont actual mistakes to value
vs. mistakes touching conside ation = confusing
$Y RULE: case b case analsis whe eb escission is indicated
when the mistaken belief elates to a basic assumption of the
pa ties upon which the cont act is made, and MATERIALLY
AFFECTS the ag eed pe fo mances of the pa ties
-Y DzA cont act ma be escinded because of a mutual misapp ehension of the
pa ties, but this emed is g anted onl in the sound disc etion of the cou t.dz

:

1.Y Factual context


2.Y Lack of consistenc in mutual mistake cases- +  ! 
#
 8 !!0 8
)0* Ȃ pu chase sought escission on g ounds of mutual mistake b/c of
special unknown zoning est ictions that neithe pa t was awa e of--> cou t
allowed escission based on mutual mistake of fact
a.Y Reconciled with ,
3.Y Limiting ea lie cou t decisions Ȃ cou t limits the ea lie decisions in A&M
case and Ba en Cow case to thei facts, dest oing thei value as p ecedent--
> is the p ocess outlined in , bette ?
4.Y Effect of Dzas isdz clause Ȃ most cou ts will den a claim fo elief on mutual
mistake and othe g ounds when the cont act contained an Dzas isdz o simila
clause
5.Y Conscious Igno ance- anothe fo m of assumption of isk is based on a
pa tǯs conscious igno ance of the facts befo e ente ing into an ag eement -->
Restatement §154(b)- being consciousl igno ant of the specs, etc (bue
bewa e)
6.Y Mistake in W itten Exp ession- efo mation of the cont act to exp ess the
pa ties mutual intent is the usual emed
7.Y Equitable Relief- o dina il escission, along with an estitution that ma
appea app op iate; often use c eative ingenuit fo elief to fashion a
emed to fit the natu e of the mistake
8.Y me sonal Inju  Settlement Cases- common mistake of taking a settlement
and then wanting to escind because ou inju  was actuall wo se than ou
thought -->Tension: social policies of finalit of litigation AND fai
compensation fo inju 

12 ? 0  




 &$ |# -
! "$(%
 c ‰    9 Defendant sanita  dist ict challenged the judgment of
the Ci cuit Cou t of Cook Count (Illinois), which g anted plaintiff cont acto s
complaint fo ecission of a cont act between the pa ties and o de ed the sanita 
dist ict to etu n a $ 100,000 deposit given b the cont acto .

@ @
9
1.Y Afte the cont acto submitted a bid fo wo k, along with the equi ed $
100,000 deposit, to the sanita  dist ict, it discove ed that its excavating
subcont acto had given an e oneous quote fo its pa t of the job, which was
$ 150,000 too low.
2.Y In challenging the judgment of ecission of the cont act, the sanita  dist ict
claimed the cont acto failed to show clea and positive evidence that the
subcont acto s mistake was a mate ial one.
a.Y The sanita  dist ict also claimed that the mistake was mathematical
in natu e and was not a p ope basis fo ecission.
3.Y The cou t found that mate ialit was shown, p ima il because the
subcont acto s e o ep esented 17 pe cent of the bid amount.
4.Y The cou t also found that the othe elements necessa  fo ecission we e
p esent:
a.Y Given the substantial loss which would have been incu ed b the
cont acto , enfo cement of the cont act would be unconscionable;
b.Y Because the p oject had not begun, the status quo could easil be
esto ed; and
c.Y The cont acto had used due ca e in submitting its bid.
d.Y The cou t noted that the natu e of the mistake should be dete mined
b the facts su ounding it, not a label, such as "mathematical."

c  9 The cou t affi med the judgment, which escinded the cont act between
the sanita  dist ict and the cont acto , and o de ed the sanita  dist ict to etu n to
the cont acto a $ 100,000 deposit that it made the eunde

:

1.Y malpable Natu e o Unconscionable Effect of Mistake


a.Y Ea lie cases g anting elief on the g ounds of unilate al mistake:
mistake must be palpable, so obvious that the othe pa t knewo
should have known a mistake had been made --> T ul unive sal
mistake (also Rest. §161- dut of disclosu e)
b.Y Restatement Second §153- avoidance of a cont act pe mitted b
Dzmistake of one pa tdz equi es eithe
i.Y Mistake be such that enfo cement of cont act would be
unconscionable
ii.Y The othe pa t eithe had eason to know of, o was
esponsible fo causing the mistakeǯ
iii.Y Unconscionable HERE = me el enough to cause substantial
loss
2.Y Mistake of Fact v. Mistake of Judgment- escission in cases of cle ical e o s
and othe mistakes of fact, but NOT fo mistakes in judgment --> molic:
bue bewa e
3.Y Effect of Negligence- Must a unilate al mistake be non-negligent in o de to
fo m basis fo elief?
a.Y Most Cou ts sa YES
b.Y But the e is a clea tendenc to RELAX this equi ement when the
p oof of mistae is st ong and the effect of enfo cement will be
devastating o seve el inju ious to the mistaken pa t
4.Y Effect of Reliance b Non-Mistaken ma t- Think about 
 and (
(unilate al mistake is contained in an offe submitted b a subcont acto o
supplie , and mistaken pa t is not excused/enfo cing subcont acto bids
afte attempted escission) Ȃ Should the have been able to ecove on a
theo  of unilate al mistake? --> ma ties etu n to Status Quo:
5.Y Unilate al mistake as to content of w iting- cana unilate al mistake p ovide
an avenue of mistake fo the pa t who failed to ead (o to unde stand)
what he o she signed?
6.Y Effect of unilate al mistake in an adve tisement- Cou ts usuall view ads as
negotiations o invitations to negotiate, athe than offe s --> ex. (ëë : ad
published sale of ca accidentall $12k less than intended p ice- bue
attempts to pu chase--> cou t held that in THIS case = offe b/c of Cali
consume p otection statute that equi es a deale be available fo sale an
ca which adve tised at a specific p ice and on specific te ms Ȃ plaintiff had
no notice of the mistake and tende ed adve tised amt. befo e published time
limit expi ed --> but DEALER STILL could escind the cont act (acceptance of
offe ) based on unilate al mistake

I will discuss the exam in the last class and with time go ove at least one sample
exam question in the Cou se Documents.
On Monda we will go ove m oblem 8-1 which is the last p oblem we will do.
Since the p oblems a e like exam questions, ou ma want to t  to w ite out an
answe and compa e it to how we go ove it in class.- A student asked if the
p oblem is onl to be answe ed with ega d to the UCC and the answe is NO.
The common law is equi ed.



c2 c0 - p.684- 713
Restatement §§ 261
Restatement §262,
Restatement §263
Restatement §264
Restatement §265

m oblem 8-1

UCC § 2-615

http://www.outube.com/watch?v=sXsb2BV69gQ&featu e=use [K ell case p686]


-Y Usuall involve changed ci cumstances that occu between the making of the
cont act and the time set fo pe fo mance Ë the ea liest to evolve was the
notion of Dzimpossibilit of pe fo mance.dz
-Y Non pe fo mance is actionable on a theo  of st ict liabilit- donǯt have to be
, but can have simpl failed to pe fo m the te ms of the cont act
-Y Histo icall- Cou ts adopted doct ine of St ict Cont actual Liabilit
-Y Exception- 1st exception Êë ! " )0¢8*- cont acted to have musical
pe fo mances at a theat e but the theat e bu ns down p io to pe fo mance-
cou t elieves of cont actual liabilit
-Y TRANSLATION TO MODERN COMMON CONTRACT LAW CHANGED
CIRCUMSTANCE (pe fo mance/specific goods): When a pe son o thing
necessa  fo pe fo mance of the ag eement dies o is incapacitated, is
dest oed o damaged, the dut of pe fo mance is acco ding excused (Rest.
§262/3
-Y UCCC §2-613- Dzcasualt to goods identified when the cont act is made which
the cont act equi es fo its pe fo mance
-Y Also common- p ohibition of pe fo mance b gove nmental action
1.Y Excuse fo
0!13- equi es a showing of lite al impossibilit- the
thing p omised simpl could not have been pe fo med at all = 1D%
0!13 Ȃ Dzno one could do itdz (vs. subjective impossibilit- DzI couldnǯt
do itdz)
a.Y ) * ! "#%2 defendant who cont acted to ent a oom
ove looking Kingǯs pa ade oute was not obligated to pa when the
King was ill and the pa ade didnǯt happen.
b.Y The exchange lost all value to the defendant because of a supe vening
change in ext insic ci cumstance.
2.Y '- f om Fi st Restatement §288- f ust ation of object o defect-
spa se application, jhas been advanced but seldom applied
7"Y
0!13- f om Cali Sup eme cou t (common law)- Mine al ma k
Land Co. V How d (1916)- Requi ements cont act, but got g avel f om
anothe sou ce because of the ext eme unexp ected, nonnegotiable, diff.
means of ext action etc. cost fo compan to have gotten that po tion of
g avel f om them as well

 9
Restatement §262

Restatement §263

Restatement §264



>
Restatement §261
Restatement §266

 
ë'

Restatement §265

UCC §2-615

)
1 
/7 c  

*
 c 
"#  !-c  "" %
1.Y IH decides to get out of the fa m equipment business because the ma ket is
bad,
2.Y Fall 1974- IH and Wendt ente into a deale Sales and Se vice Ag eement-
established Wendt as the deale of IH goods in the a ea of Ma lette, Michigan.
3.Y Requi ed method fo sale, p ovisions fo the pu chase and se vicing of goods,
as well as ce tain deale ope ating equi ements.
4.Y Specific p ovisions fo the te mination of the cont act upon the occu ence of
ce tain specified conditions.
5.Y Because the ma ket was so back and IH incu ed substantial losses, the sold
its fa m equipment division to Case/Tenneco: 246,700,000.00 in cash and
$161.3 million in p efe ed stock in Teneco.
6.Y IH incu ed pape loss of $479 million but would be offet b tax c edit.
7.Y Case/Tenneco did no acqui e IH existing f anchise netwo k, but instead
eceived access to its deale s, man of whom would eceive a Case f anchise-
but the e we e 400 a eas whe e Case and IH deale ships we e both located.
8.Y In the conflict a eas Case offe ed onl one f anchise cont act- 2/3 ds of the
f anchise cont acts fo Case went to IH deale s.
9.Y In Ma lette Michigan = conflict a ea, and Wendt was not offe ed a Case
f anchise.
10.YWendt filed action alleging b each of IH deale ag eement Ȃ all claims we e
th own out except b each of cont act claim.
11.YIH filed a counte claim against went fo a ising debts f om fa m equipment
and pa ts advanced to Wendt on c edit
12.YT ial Cou t: allowed IH defense of imp acticabilit of pe fo mance Ȃ ju 
etu ned a ve dict of NO cause of action on the cont act (imp acticabilit
defense p evailed); cou t denied Wendtǯs motion fo JNOV/new t ial based
on invalidit of the imp acticabilit defense.
a.Y This makes up the basis of Wendtǯs appeal.
i.Y Claim: The defense of imp acticabilit due to ext eme changes in
ma ket conditions Is NOT a cognizable defense unde Michigan state
law
ii.Y Claim: insufficient evidence to withstand Wendtǯs motion fo di ected
ve dict of imp acticabilit
iii.Y c:
1.Y Looks to p io Michigan case law (Bissel): which looks to the Fi st
Restatement, now Restatement 2nd §261: Whe e afte a cont act is made a
pa tǯs pe fo mance is made imp acticable without his fault b the
.%2.#22#1
0!!#222#0, his dut to ende that
pe fo mance is 
, unless the language o the ci cumstances
indicate the cont a  Ë Bissel: Dzimp acticabilit because of ext eme and
un easonable difficult, expense, inju , and loss involved.dz
2.Y
: Is Imp acticabilit app op iate in cases involving a d amatic
downtu n in the ma ket fo fa m equipment? Ë Commenta  of
Restatement 2nd §261: Imp acticabilit means mo e than Imp acticalit- a
me e change in the deg ee o difficult o expense due to inc eased wages,
p ices = NOT imp acticabilit because fixed p ices we e intended to cove
this potential p oblem.
3.Y What 
 wo k (Restatement 2nd §261-Comment (): Dza seve e sho tage
of aw mate ials o supplies to due to wa , local c op failu e, unfo eseen
shutdown, etc. which  a ma ked inc ease in cost o p events
pe fo mance altogethe dz
4.Y DzNon occu ence must be an event that was a basic assumption ON WHICH
both pa ties made the cont act.dz = FUNDAMENTAL.
5.Y !!: Imp acticabilit is NOT AmmROmRIATE HERE:
a.Y Because the ma ket got bad and the incu ed losses, and then decided
to get out of the business, does NOT excuses IH f om its unilate al
te mination of its deale ship ag eements due to imp acticabilit.
b.Y Neithe ma ket shifts no the financial inabilit of one of the pa ties
changes the basic assumptions o the cont act such that it ma be
excused unde imp acticabilit
c.Y IH ma not have been enti el esponsible of hte ma ket, but the
WERE esponsible fo how the emedied: b selling of thei fa m
equipment assets- an alte native could have been to te minate its
Deale ship ag eements b the te mination p ovisions of the cont act
and sha e the p oceeds of the sale of assets to case/Tenneco with its
deale s = ALTERNATIVES THAT mRECLUDE UNILATERAL
TERMINATION LIKE THEY DID.
13.Yc: ALSO o de ed a di ected ve dict fo WENDT as to IH defenses
of:
a.Y F ust ation of pu pose
b.Y Implied covenant limiting the du ation of the cont act
c.Y Defense elating to whethe section 2 of the ag eement pe mitted IH to
cease p oduction of all its p oduct lines.
**The di ected ve dict fo Wendt on the viabilit of these two defenses is the basis
of IHǯs c oss appeal. **
d.Y T ial cou t elied on Restatement 2nd §265- DzWhe e, afte a cont act is
made, a pa tǯs p incipal pu pose is substantiall fu ste ated without his
fault b the occu ence of an event the non-occu ence of which was a
basic assumption on which the cont act was made, his emaining duties
to ende pe fo mance a e discha ges, unless the language o
ci cumstances indicate the cont a .
e.Y T ial cou t elied on South Dakota p ecedent +ë : ' of
pu pose equi es 3 facto s:
i.Y Must be the Dz

 ëdz of the pa t making the cont act Ȃ NOT
enough that the cont acting pa t 

 a specific object without
which he would not have made the cont act- has to be SO
COMmLETELY THE BASIS OF THE CONTRACT that without the it
wouldnǯt make sense fo both pa ties
ii.Y Must be  
- so seve e that it is not fai l to be ega ded as
within the isks that he assumed unde the cont act Ȃ NOT enough that
it has become economicall bu densome
iii.Y Must have been a 
  
ë of the cont act
f.Y
: Was the p incipal pu pose of the ag eement to establish a
deale ship and te ms of inte action, OR Dzmutual p ofitabilitdz (asse ted
b IH) Ë t ial cou t uled that the economic downtu n and non-
p ofitabilit didnǯt f uste ate the p ima  pu pose of the ag eement Ë IH
IS CHALLENGING THE TRIAL COURT RULING THAT MUTUAL
mROFITABILITY WAS NOT THE mRIMARY mURmOSE
g.Y c!!9 FRUSTERATION- %
 dist ict Cou t
inte p etation: Dzmutual p ofitabilitdz would then be implied as the
p ima  pu pose of eve  cont act- when it didnǯt go ight would be
f ust atedǥ
i.Y F ust ation of mu pose: is essentiall an implied te m which is meant
to app o tion isk as the pa ties would have the necessit occu ed to
them
ii.Y In this case: the f ust ating event was IHǯs decision to sell its fa m
equipment assets and go out of that line of business- even tho it ma
have been economicall equi ed fo them, it CANOT asse t that is
obligations a e discha ged in light of that decision.
2"Y c!!9Section 2 of the Deale Ag eement (DzLeave when
necessa dz- ?)
"Y Becomes so t of an inte p etation issue: whethe o not Dz ese ving the
ight to make additions and eliminations f om list, including but not
limited to eductionsǥ discontinued linesǥdz
"Y IH sas this means the can withd aw completel om the ma ket as
the see necessa  Ë Lowe cou t followed +ë  cou t decision
which inte p eted the same clause to mean that the could elminate o
change ce tain p oducts o p oduct lines, but not to eliminate its fa m
p oducts altogethe 
i.Y c!!9Implied te m that the Ag eement was of Limited
Du ation:
i.Y IH asse ts the lowe cou t e e d in efusing to find Dzimpled in eve 
cont act is the abilit fo the manufactu e to go out of businessdz
ii.Y While eithe pa t anticipated ma ket shifts, neithe pa t anticipated
that IH would go out of business completel Ë impling a te m that
would te minate the f anchise ag eement 
  
ë
ëë
 

ë ë

ë ë     
ë


  mLACES ALL THE RISK ON THE DEALER.
iii.Y IH should p ope l seek to te minate the ag eement unde the te ms of
the ag eement, if it wants out.
j.Y Cou t: Reve se and emand on the e o of allowing the defence of
imp acticabilit of pe fo mance to go to the just: ONLY on the issue of
DAMAGESË Whethe alte natives we e available o not, IT is fo the ju ,
not the cou t, that is empowe ed to dete mine whethe IH p oved
imp acticabilit of pe fo mance as that defense was defined b the t ial
cou t
k.Y ‰
: - suggests that it should be submitted to the jus  fo a finding
of fact; alte native was to te minate a e not fo the cou t to
assign/p esc ibe afte the ju  has al ead found on the facts; and the
subjective actual losses and the possible devastating natu e of that
pa ticula loss must be analzed- the question is whethe Dz easonable
people could diffe dz that those facts amounted to Dzan event the non
occu ence of whichǥ.dz

:

1.Y ë : Views imp acticabilit and f ust ation as elativel identical-
both have to show:
a.Y Substantial eduction of the value of the cont act
b.Y Because the occu ence of an event, the nonoccu ence of which was
the basic assumption of the cont act
c.Y Without the pa tǯs fault
d.Y The pa t seeking elief not bea ing the isk of that occu ence of the
event eithe in language of the cont act o the su ounding
ci cumstances
2.Y  ë   
 ë 
 - most cou ts efuse to g ant elief (unless
TREMENDOUS COST INCURRED, i.e. Dzunquantifiable amount of incu ed
costsdz)
3.Y   (
  ë    
 ë 
 - Have been invoked, but even
he e cou ts a e gene all unwilling to g ant elief
4.Y  


  ë ë
 - Invoked on tempo a il when it c eates a
g ave ci cumstance that p events pe fo mance afte a ce tain date Ë BUT
CONSDER: should fea s of t avel because of te o ism be cause to excuse
cont act pe fo mance?
5.Y (  ë

 ë 
 ë  ë  ë - mo e
likelihood fo excuse
6.Y ë ë ë

- Some cou t have tended to equi e a showing that the
event complained of was at leas unfo eseen- pe haps even unfo eseeable;
but not alwas equi ed, because not alwas possible.
7.Y ëë
 %
 When the con act specificall allocates the isk to a pa t,
that pa t is the supe io isk bea e . In the absence of an, the isk should be
assigned to the pa t who is in the best position to p event the event f om
occu ing,/minimize consequences at the lowest cost (usuall insu ance)
8.Y (

ë  - ë X- Restatement: Mistakt, Imp acticabilit, o
f ust ation should be decided b the cou t as a matte of law, athe than
being submitted to the ju  fo a finding of fact

0
Ê 8 2cc &(+1(! ""(%
1.Y '

Y Di-Chem Co. is a chemical dist ibuto 
Y The e was no face to face negotiations between mel f ank and
dicehm b/c mel f ank used a eal estate agent
Y On the da of signing, dens f ank walked with Di-Chem and he was
made awa e the we e selling chemicals
Y Lease was 3  lease June 1 94 Ȃ Ma 31 1997l DzSto age and
Dist ibutiondz onl.
Y So chemicals Di-Chem dist ibutes a e haza dous, but this is not
disclosed to F ank.
Y Lease p ovision: Dzcompl with all cit o dinancesdz
2.Y Jul 21 1995- Info med b cit autho ities that it could no longe used its
leased p emises to sto e its haza dous chemicals b/c of ecentl enacted
o dinance; also othe deficiencies lice incomplete sp inkle , mechanical
exhaust spill/d ainage cont ol
3.Y Di-Chem sent a lette on Aug. 2 to Mel F ank info ming of cit action and
cop of the Jul 25 lette ; AND thei intent to elocate as soon as possible to
avoid civil o c iminal matte s with the cit Ë feel Dzcompelled to move thei
ope ation beond the cit limitsdz Ȃ intended to pa fo August ent and be
out b Sept. 1.
4.Y Explo ed the possibilit of fixing the violations and staing, but the citǯs
o dinance allegedl made them sto ing all the mate ials the e impossible,
the eb making the space useless as a wa ehouse.
5.Y Di-Chem vacated the p emises and the landlo d Mel F ank Tool sued fo
b each of lease and damages to the p emises.

:" 

1.Y Mel F ank sued fo b each of cont act and damages to the p ope t
2.Y Di-Chem asse ted defenses of:
a.Y Mutual mistake
b.Y Illegal Cont act
c.Y Failu e to Mitigate Damages
d.Y F aud in the inducement
e.Y Impossibilit
3.Y 2c found fo Mel F ank: he head no eason to believe o know
that the chemicals classified as haza dous would be sto ed in the wa ehouse,
onl chemicals gene all.
a.Y Di-Chem OR Me F ank didnǯt make an ep esentations that the we e
usuing the space to sto e haza dous mate ials, of fo an othe specific
pu poseË so ule in favo of Mel F ank because Di-Chem b oke the
lease and left ea l.
4.Y å
å c< : Following the Restatement Second
int oduction Ch. 11: Even though the obligo has not est icted his o he
obligation b ag eement, a cou t ma still g ant elief- in an ext ao dina 
ci cumstance that ma make pe fo mance so vitall diffe ent than what was
expected
a.Y The Rationale behind the doct ines of imp acticabilit and
f ust ations is whethe the nonoccu ence of the ci cumstance was a

  
ë ë 
  ë   .
b.Y The facts he e fall within Restatement 2nd § 235- DzWhe ein a cont act
is made, a pa tǯs p incipal pu pose is substantiall f ust atedǥ 
  ë  
  

   ë  7
i.Y m incipal pu pose
ii.Y Substantial
iii.Y Basic assumption on which the cont act was made
c.Y Iowa Case law "ë#
- in acco d w/ Restatement- THERE the cou t
uled in favo of the landlo d in the amount of the unpaid ent;
o dinance fo sto age of ags.
d.Y Look to % ! X! ë  Ê - Gene all, a lease will not be
invalidated o affect the ights and liabilities of the lessee if a statute
o o dinance fo bits using the space fo a ce tain tpe of
behavio /activit but still allows the occupant to use the space fo
othe gene al legal pu poses.
e.Y c    :
i.Y mu pose is Substantiall F ust ated IF: a statute o o dinance
p ohibits the tenant f om legall using the p emises fo its
o iginall intented pu pose.
ii.Y NOT RELIEVED FRO OBLIGATION TO mAY IF: the e is a
se viceable use still available consistent with the use p ovision
of the lease
5.Y  
c
-
a.Y Di-Chem asse ting a defense of f ust ation and pu pose
b.Y Di-Chem p oduced no evidence that all of its invento  of chemicals
consisted of haza dous mate ials
c.Y Testimon f om ep esentatives onl had to emove what chemicals
the found objectionable = not all of them.
d.Y Di-Chem had the bu den of pe suasion to show that the we e
substantiall f ust ated b the cities actions = need to show the
p ope pe centage of is invento , substantial lost p ofits, o dep ived
them of beneficial enjoment of p ope t fo othe uses.
e.Y LEASE LANGUAGE: Clause 13B- Di-Chem elies on language that gets
them out of liabilit to pa- Dzp events conducting of a no mal business
ope ationǥdz DzShould zoning make it impossible fo the landlo d to
obtain pe mits to ebuild o epai the cou se of business- shall be
t eated as total dest uction of business usedz Ȃ w itten notice within 20
das of the dest uction and  !
i.Y One cannot inte p et the clause to cove the situation whe e
gove nmental egulation p ohibits the use of the p omises fo
one of the seve al pu poses specified in the lease- it simpl
makes it less valuable to the lessee.
ii.Y c  9 The cou t affi med the t ial cou ts judgment in
favo of Mel- F ank.



1.Y +ë    


ë   
 ë .- although  did no
succeed, cou ts have been much mo e willing to g ant elief when the event
on which the claim of imp acticabilit/f ust ation ests is some fo m of
supe vening gove nmental action athe than in cases of wa , natu al
disaste , o ma ket change
a.Y UCC §2-615- makes a specific mention of Dzcompliance in good faith
with an applicable fo eign o domestic gove nmental egulation o
o de dz
b.Y Restatement 2nd §264- ecognizes compliance with fo eign o
domestic gove nmental o de as a basis fo excuse unde
Imp acticabilit
c.Y BUT cou ts still impose st ingent limitations --> must be
SUBSTANTIALLY UNDERMINED- that the pe fo mance is ende ed
vi tuall wo thless
2.Y 
   ›"" ›"" /0¢j- b oad enough to encompass
imp acticabilit as well as f ust ation: Exp essl add esses the excuse of
pe fo mance b the selle on the g ound of imp acticabilit but does not
mention elief to the bue
3.Y ë ,- "- tpicall p ovide fo excuse whe e pe fo mance is
p evented o delaed b ci cumstances Dzbeond the cont oldz of the pa t
seeking the excuse
a.Y Gove nmental egulation, natu al events (weathe /ǯacts of Godǯ),
st ikes, labo disputes.
b.Y The law does not gene all favo exculpato  clauses: a e subject to
be tested against
i.Y "ë  $ë   (ambiguous te m will be const ued against
the pa t that imposed its inclusion in the cont act Ȃ o , mo e
accu atel, against the inte ests of the pa t who imposed it
ii.Y good faith; AND Unconscionabilit
4.Y   ë 

!Y MISTAKE: No mal emed is escission of the cont act and estitution
of an benefits confe ed
!Y Impossibilit/Imp acticabilit/F ust ation: simila l been viewed as
g ounds on which a still-executo  dut of pe fo mance might be
excused, but NO as a basis of  ë 
ë of cont act.
!Y Should the cou t have the powe to eadjust and make the cont act
palatable?

!Y %ë- cou t did eadjust a long te m cont act to account fo
p ice inc eases not adequatel eflected in the existing p ice-
inc ease fo mula initiall negotiated b the pa ties

m oblem 8-1- You a e att consulted b Ba low, p op ieto of flo ist shop in ou
cit:

M Notes: I think the p oblem that Ba low ultimatel has is that the land thatǯs being
to n down isnǯt the flowe shop- the flowe shop an its ope ations unde the
imp ession that the hospital would still be open, es, and that the hospital was an
ext emel significant po tion of thei business- so- steps of analsis:

1.Y Heǯs not going to make a claim fo impossibilit- because its not that it will be
impossible fo him to pa back the mone, because his building is not being
to n down
2.Y So his claim will eithe be fo imp acticabilit o F ust ation of mu pose
3.Y Restatement §
4.Y Restatement §
5.Y Summa ize that both of them a e ultimatel the same fo the pu poses of
showing that ou need:
a.Y m incipal pu pose
b.Y Substantial
c.Y Basic assumption on which the cont act was made

6. Application/Assess/Conclude: Its not a cit o dinance which fo bids flowe shops


f om opening, in which case, although case law has disallowed it, the cou t ma have
been mo e inclined to g ant elief. Acco ding to case law (see p evious), he would
have to make a showing of a ce tain pe centage found b a ju  to be ext eme
enough- The evidence of the name ma att ibute to it being a basic assumption on
which the cont act was made- but he can still be a flo al shop, and I think heǯd
ultimatel have a ha d time if he sought a defense of imp acticabilit o F ust ation


. - p. 713-740
Restatement §§ 73, 89; UCC § 2-209 2-201 2-306

4/6/2011 Ȃ NEED TO TAKE NOTES ON THIS SECTION (MISSED CLASS)


. Ȃ conside s doct ines of conside ation, du ess, good faith,
Unconscionabilit, statute of f auds Ȃ and if the ma be b ought to bea in
deciding the elative ights and duties of the pa ties when the existing cont act is
ë

.

|


 ?| 
     $""!"  "%

Notes:

1.Y m e-Existing Dut Rule


2.Y molicing coe cive Behavio
3.Y Histo ical Context of %# $#
4.Y Modification of Emploment Cont acts
5.Y Othe Exceptions to the m e-Existing Dut Rule
a.Y Restatement §89

)2*
c .

 
c
 c $'"$"'
! ""%

Notes:

1.Y Modification without conside ationunde UCC A ticle 2


2.Y Good faith as a limitation on modification unde A ticle 2
3.Y Economic Du ess as a limitation on modification unde A ticle 2
4.Y m otest of bad faith modification


0

55 ? ($# "! ""&%

Notes:

1.Y Modifications and the Statute of F auds


2.Y No-O al-Modification Clause
3.Y Reliance and O al Modifications
4.Y Modification th ough Settlement

1087

2 p. 741-754; notes pp. 760-762


Restatement §§ 302
Restatement §309
Restatement §311

The Rights and Duties of Thi d ma ties m 741-754, Notes p. 160-762

-Y The ights and duties of anothe , 3 d, pa t, who is not a pa t to the cont act,
though still ma be bound b o enfo ceable against as a esult of the
fo mation of a cont act.
-Y Thi d ma ties as Cont act Beneficia ies
ëY Cont acts can affect thi d pa ties- and in that sense ma affect a thi d
pa ties Dz ightdz to f eel do as it wishes to the extent not fo bidden b
law
ëY A cont act between A and B cannot adve sel affect a LEGAL RIGHT of
a thi d pa t- an invasion of an individuals ights/f eedoms would
be actionable w ong
ëY ma ties CAN CREATE a cont act ight in some thi d pe son (often the
case whe e A owes B, and C owes B, so C owes A
ëY Law ence v. Fox (1859) Ȃ Law ence loaned $ to Holl, Holl loaned
same $ to Fox --> Although Law ence is not a pa t to the t ansaction
between Holl and Fox- he was not in p ivit with fox- but the cause
of action would lie Ȃ Cou t equates it to being a t ustee of a p ope t
unde a t ust c eated b anothe with inst uctions to sell the t ust
p ope t and conve p oceeds to plaintiff --> mlaintiff then =
BENEFICIARY of t ust and would have ight to enfo ce obligation
against the p omiso
ëY Known as DzTHIRD mARTY BENEFICIARYdz of the defendants p omise-
whe e plaintiff is the c edito of the p omisee = C edito Beneficia 
ëY Tpicall limited to this tpe of 3 d pa t involvement --> COURT
HAVE extended ecove  to hases whe e p omisee had appa entl
sought to confe the p omise on a child, pa ent, o some membe of
the p omiseeǯs famil --> Seave v. Ransom (1918)- ding wife wants
to co ect he will to add niece, but she ma die befo e executing new
will- so husband p omises to p ovide fo niece in his will, but he
doesnǯt, and niece sues husbandǯs estate to enfo ce p omise husband
made to ding wife -->
Cou t extended Law ence to allow Seave because of the close
elationship between p omiso and p omisee.
ëY THUS Ȃ the p incipal that a thi d pa t ma have standing to ecove
on a cont act is now unive sall accepted b Ame ican Cou ts
$Y Fundamental Distinction: INTENDED beneficia ies vs.
Incidental beneficia ies

Restatement §302

Restatement §309

Restatement § 311
4 
*
|

| 
 &((+1'! """%
 c ‰    9 Appellee homeowne s sought eview of a decision of the
Iowa Cou t of Appeals that eve sed a judgment in thei favo , based on a thi d-
pa t beneficia  theo , against appellant, an app aisal compan hi ed b bank to
monito p og ess of new home const uction.

@ @
9 Appellant was hi ed b a bank to monito the p og ess of new home
const uction fo appellees, who had obtained a const uction loan f om the bank. The
cont acto defaulted afte all of the o iginal const uction loan p oceeds and a
po tion of a second mo tgage loan had been paid out b the bank. Appellees
ecove ed judgment against appellant on a thi d-pa t beneficia  theo  based on
its alleged failu e to p ope l monito the p og ess of const uction, which allowed
funds to be imp ope l eleased to the defaulting cont acto . The cou t of appeals
eve sed the judgment because e oneous p og ess epo ts we e not the cause of
an loss to appellees. The cou t vacated the decision of the cou t of appeals and
affi med the judgment of the dist ict cou t because appellees qualified as thi d-
pa t beneficia ies of the ag eement between the bank and appellant. The cou t
found that although the initial const uction loan might have been disbu sed p io to
the fault completion estimate, the e oneous epo ting of the p ojects completion
caused the bank to disbu se othe funds of appellees that would have been etained
had the epo t been accu ate.

c  9 The decision of the cou t of appeals was vacated, and the cou t affi med
the judgment of the dist ict cou t in favo of appellee homeowne s because damages
fo sums advanced to the cont acto b the bank, based on an inaccu ate p og ess
epo t f om appellant, we e not beond appellants contemplation at the time its
cont act with the bank was made.

1.Y Standa d of Review: In assessing a motion fo judgment notwithstanding the


ve dict, the cou ts onl inqui  is whethe the e is sufficient evidence to
justif submitting the case to the ju . If the e is substantial evidence to
suppo t a plaintiffs claims, a motion fo judgment notwithstanding the
ve dict should be denied
2.Y › ë 
  between p omiso and p omisee, a beneficia  of a
p omise is an intended beneficia   ecognition of a ight to pe fo mance in
the beneficia  is app op iate to effectuate the intention of the pa ties and
 >
a.Y the pe fo mance of the p omise will satisf an obligation of the
p omisee to pa mone to the beneficia ; o
b.Y the ci cumstances indicate that the p omisee intends to give the
beneficia  the benefit of the p omised pe fo mance.
c.Y An incidental beneficia  is a beneficia  who is not an intended
beneficia .
3.Y The p ima  question in a thi d-pa t beneficia  case is whethe the
cont act manifests an intent to benefit a thi d pa t. Howeve , this intent
need not be to benefit a thi d pa t di ectl
4.Y Damages/Relief: Whe e two pa ties have made a cont act which one of them
has b oken, the damages which the othe pa t ought to eceive in espect of
such b each of cont act should be such as ma fai l and easonabl be
conside ed eithe a ising natu all, i.e., acco ding to the usual cou se of
things, f om such b each of cont act itself, o such as ma easonabl be
supposed to have been in the contemplation of both pa ties, at the time the
made the cont act, as the p obable esult of the b each of it. Now, if the
special ci cumstances unde which the cont act was actuall made we e
communicated b the plaintiffs to the defendants, and thus known to both
pa ties, the damages esulting f om the b each of such a cont act, which the
would easonabl contemplate, would be the amount of inju  which would
o dina il follow f om a b each of cont act unde these special ci cumstances
so known and communicated



1.Y Whose intent dete mines standing?

2.Y Evidence of intent

3.Y Incidental beneficia ies

4.Y Liabilit of atts fo negligent will d afting

5.Y Defenses available to p omiso

6.Y Vesting of ights of 3 d pa t benicia ies

7.Y Causation and Fo seeabilit

 0- p. 762-765


Restatement §317 Ȃ assignmnent of cont act ight

Restatement §318 Ȃ assignment of cont act dut

4!c- p. 783-804
Restatement §§224
Restatement §225
Restatement §226,
Restatement §227
Restatement §228
-Y Restatement §229,
Whethe b the exp ess te ms of the cont act/pa ties ag eenebt,
pe fo mance b one pa t is a p esentl due obligation
ëY Sometimes states explicitl what dut is owed
ëY Sometimes stated explicitl NOT owed UNLESS some event occu s.
(like eal estate ag eements = no sale unless obtain financing f om
lende )
ëY Obligo = the pa ties whose pe fo mance is so conditioned (the one
whose obligation is at issue)
ëY Obligee = the one whom the pe fo mance obligation is owed (and
p esumabl attempting to enfo ce it)

Restatement §224

Restatement §225

Restatement §226

Restatement §227
Restatement §228

Restatement §229

<  8 < |: 8c (-+3-(&


! ""&%
 c ‰    9 Defendant obligo challenged the o de of the Appellate
Division of the Sup eme Cou t (New Yo k), which held that plaintiff obligee had
substantiall pe fo med the te ms of a sublease ag eement. The obligo moved fo
judgment notwithstanding the ve dict.

@ @
9
1.Y In 1986, plaintiff Oppenheime & Co. moved to the Wo ld Financial Cente in
Manhattan, a building const ucted b Olmpia & Yo k Compan (O & Y). At
the time of its move, plaintiff had th ee ea s emaining on its existing lease
fo the 33 d floo of the building known as One New Yo k mlaza.
2.Y As an incentive to induce plaintiffs move, O & Y ag eed to make the ental
paments due unde plaintiffs ental ag eement in the event plaintiff was
unable to sublease its p io space in One New Yo k mlaza.
3.Y Te ms of Ag eement: m oposed sublease would be executed onl upon the
satisfaction of ce tain conditions. mu suant to pa ag aph 1 (a) of the
ag eement, plaintiff was equi ed to obtain "the m ime Landlo ds w itten
notice of confi mation, substantiall to the effect that [defendant] is a
subtenant of the m emises easonabl acceptable to m ime Landlo d." If such
w itten notice of confi mation we e not obtained "on o befo e Decembe
30, 1986, then this lette ag eement and the Sublease ǥ shall be deemed null
and void and of no fu the fo ce and effect and neithe pa t shall have an
ights against no obligations to the othe ."
4.Y The obligee p ovided timel o al notice, but not the w itten notice that was
equi ed b the te ms of the lease ag eement- Rathe , plaintiffs atto ne
telephoned defendants atto ne on Feb ua  25 and info med defendant
that the p ime landlo ds consent had been secu ed.
5.Y When the obligo failed to pe fo m acco ding to the lease te ms, the obligee
filed a complaint mlaintiff commenced this action fo b each of cont act,
asse ting that defendant waived and/o was estopped b vi tue of its
conduct  f om insisting on phsical delive  of the p ime landlo ds w itten
consent b the Feb ua  25 deadline. mlaintiff fu the alleged in its
complaint that it had substantiall pe fo med the conditions set fo th in the
lette ag eement.
6.Y The t ial cou t held in favo of the obligee.
a.Y The ju  found that defendant had p ope l complied with the te ms
of the lette ag eement, and answe ed in the negative the questions
whethe defendant failed to pe fo m its obligations unde the lette
ag eement conce ning submission of plans fo tenant wo k, whethe
defendant b its conduct waived the Feb ua  25 deadline fo
delive  b plaintiff of the landlo ds w itten consent to tenant wo k,
and whethe defendant b its conduct was equitabl estopped f om
equi ing plaintiffs st ict adhe ence to the Feb ua  25 deadline.
Nonetheless, the ju  answe ed in the affi mative the question, "Did
plaintiff substantiall pe fo m the conditions set fo th in the Lette
Ag eement?," and awa ded plaintiff damages of $ 1.2 million
7.Y The cou t eve sed the judgment, g anted summa  judgment in favo of the
obligo , and dismissed the complaint.
a.Y The cou t found that substantial pe fo mance had no application to
the dispute.
b.Y The pa ties lette of ag eement unambiguousl established an
exp ess condition p ecedent athe than a p omise.
c.Y The sophisticated pa ties dealt at a ms length and the e was no
eason to elieve the consequences of thei ba gain.
d.Y The cou t fu the held that the issue of whethe the e had been
substantial pe fo mance was not fo the ju  but the judges of the
law.

c  9 The cou t eve sed the judgment and dismissed the


complaint.
1.Y A condition p ecedent is an act o event, othe than a lapse of time, which,
unless the condition is excused, must occu befo e a dut to pe fo m a
p omise in the ag eement a ises. Most conditions p ecedent desc ibe acts o
events which must occu befo e a pa t is obliged to pe fo m a p omise
made pu suant to an existing cont act, a situation to be distinguished
conceptuall f om a condition p ecedent to the fo mation o existence of the
cont act itself. In the latte situation, no cont act a ises "unless and until the
condition occu s.
2.Y Conditions of a cont act can be exp ess o implied. Exp ess conditions a e
those ag eed to and imposed b the pa ties themselves.
a.Y Exp ess conditions a e those ag eed to and imposed b the pa ties
themselves.
b.Y Implied o const uctive conditions a e those imposed b law to do
justice
c.Y Exp ess conditions must be lite all pe fo med, whe eas const uctive
conditions, which o dina il a ise f om language of p omise, a e
subject to the p ecept that substantial compliance is sufficient.
3.Y In dete mining whethe a pa ticula ag eement makes an event a condition
cou ts will inte p et doubtful language as emboding a p omise o
const uctive condition athe than an exp ess condition.
a.Y This inte p etive p efe ence is especiall st ong when a finding of
exp ess condition would inc ease the isk of fo feitu e b the obligee.
b.Y Inte p etation as a means of educing the isk of fo feitu e cannot be
emploed if the occu ence of the event as a condition is exp essed in
unmistakable language. Nonetheless, the nonoccu ence of the
condition ma et be excused b waive , b each, o fo feitu e To the
extent that the non-occu ence of a condition would cause
disp opo tionate fo feitu e, a cou t ma excuse the non-occu ence of
that condition unless its occu ence was a mate ial pa t of the ag eed
exchange

c:2 .0.c 1


.0 4!c '0.
c

1. The doct ine of substantial pe fo mance does not appl to the p ovision of the
pa ties lette ag eement which set fo th as a condition p ecedent to the fo mation
and existence of a sublease between them that the e would be no sublease between
the pa ties "unless and until" plaintiff delive ed to defendant the p ime landlo ds
w itten consent to ce tain "tenant wo k" on o befo e a specified deadline, failing
which the sublease was to be deemed "null and void", whe e plaintiff p ovided onl
o al notice on the specified date. Conditions can be exp ess o implied. Exp ess
conditions must be lite all pe fo med, whe eas const uctive conditions a e subject
to the p ecept that substantial compliance is sufficient. In dete mining whethe a
pa ticula ag eement makes an event a condition cou ts will inte p et doubtful
language as emboding a p omise o const uctive condition athe than an exp ess
condition. This inte p etive p efe ence is especiall st ong when a finding of
exp ess condition would inc ease the isk of fo feitu e b the obligee. Howeve ,
inte p etation as a means of educing the isk of fo feitu e cannot be emploed if
the occu ence of the event as a condition is exp essed in unmistakable language.
He e, the c itical language of the lette ag eement unambiguousl establishes an
exp ess condition p ecedent athe than a p omise, as the pa ties emploed the
unmistakable language of condition ("if", "unless and until"). The e is no doubt of
the pa ties intent and no occasion fo inte p eting the te ms of the lette ag eement
othe than as w itten. Substantial pe fo mance in this context is not sufficient, and if
elief is to be had unde the cont act, it must be th ough excuse of the
nonoccu ence of the condition to avoid fo feitu e; he e, plaintiff has not suffe ed a
fo feitu e o confe ed a benefit upon defendant.

c:2 .0.c 1


.0?.#

2. A dete mination whethe the e has been substantial pe fo mance is not fo the
ju , but athe is to be answe ed, if the infe ences a e ce tain, b the Judges of the
law.

Notes:

1.Y Language sufficient to c eate an exp ess condition


2.Y Distinction: exp ess condition and p omises
3.Y Inte p eting the cont act language
4.Y Distinction: exp ess and const uctive conditions
5.Y Which pa tǯs dut is conditional?
6.Y Effect of nonoccu ence of condition
7.Y Schola l commenta 
8.Y Waive of estoppel of condition
9.Y m evention of condition
10.YAvoidance of fo feitu e

,+|
c c 
c
 '+3#"! "$$%
': J. N. A. Realt Co p., the owne of a building in Howa d Beach, commenced
this p oceeding to ecove possession of the p emises claiming that the lease has
expi ed. The lease g ants the tenant, C oss Ba Chelsea, Inc., an option to enew and
although the notice was sent, th ough negligence o inadve tence, it was not sent
within the time p esc ibed in the lease. The landlo d seeks to enfo ce the lette of
the ag eement. The tenant asks fo equit to elieve it f om a fo feitu e

 c ‰    9 Appellant tenant sought eview of an o de of the


Appellate Division of the Sup eme Cou t in the Second Judicial Depa tment (New
Yo k), which eve sed a judgment of the t ial cou t fo appellant in espondent
landlo ds p oceeding to ecove a building leased b appellant due to the lease
expi ing. Appellant failed to espond to an option to enew the lease, and appellant
alleged that it was entitled to equit to elieve it f om a fo feitu e.

: Two p ima  questions a e aised on the appeal. 1. Will the tenant suffe a
fo feitu e if the landlo d is pe mitted to enfo ce the lette of the ag eement. 2. If
the e will be a fo feitu e, ma a cou t of equit g ant the tenant elief when the
fo feitu e would esult f om the tenants own neglect o inadve tence

@ @
9

1.Y Appellant tenant leased a building f om espondent landlo d.


2.Y The lease ag eement contained an option to enew the lease: 12-page ide ,
g anted the tenants an option to enew fo a 10-ea te m p ovided "that
Tenant shall notif the landlo d in w iting b egiste ed o ce tified mail six
(6) months p io to the last da of the te m of the lease that tenant desi es
such enewal."
3.Y The tenants opened a estau ant on the p emises. In Feb ua , 1964 the
fo med the Fo o Romano Co p. (Fo o) and assigned the lease to the
co po ation
4.Y Subsequentl, espondent sent a lette to appellant info ming it that the
option had expi ed and that appellant was to vacate the p emises.
5.Y Appellant then sent notice of intention to enew the option, which was
efused b espondent.
6.Y Respondent commenced suit to ecove the p emises
7.Y Appellant eplied that it was entitled to equit to elieve it f om a fo feitu e.
8.Y The t ial cou t found fo appellant, and the lowe appellate cou t  .
9.Y å ‰
: The cou t emanded fo a new t ial:
a.Y An equitable inte est was ecognized and p otected against fo feitu e
if the landlo d was not ha med b the dela in the giving of the notice
and the tenant would have sustained substantial loss.
b.Y A tenant was entitled to the benefit of equit whe e default in notice
did not p ejudice the landlo d.
c.Y Thus, the case was emanded fo a dete mination of whethe
espondent was p ejudiced b appellants failu e to give notice.

c  9 The cou t eve sed the lowe appellate cou ts eve sal of the t ial
cou ts judgment fo appellant tenant in espondent landlo ds suit to ecove
possession of a building leased b appellant and emanded fo a new t ial so that the
t ial cou t could dete mine if espondent was p ejudiced b the default. Equit
should have elieved against default if it was due to inattention and if elief could
have been g anted without damage to the landlo d.

1.Y A notice exe cising an option is ineffective if it is not given within the time
specified. At law, time is alwas of the essence of the cont act
2.Y An option itself does not c eate an inte est in the p ope t, and no ights
acc ue until the condition p ecedent has been met b giving notice within the
time specified = equit will NOT inte vene because the loss of the option does
not o dina il esult in the fo feitu e of an vested ights.
3.Y The e is a wide distinction between:
a.Y Condition p ecedent: whe e no title has vested and none is to vest
until the condition is pe fo med = Equit can give NO elief - failu e to
pe fo m is an inevitable ba - No ight can eve vest
b.Y Condition subsequent: ope ating b wa of a defeasance. In the
fo me case equit can give no elief - Equit will inte pose and
elieve against the fo feitu e
4.Y Although the tenant has no legal inte est in the enewal pe iod until the
equi ed notice is given, et an equitable inte est is ecognized and p otected
against fo feitu e in some cases whe e the tenant has in good faith made
imp ovements of a substantial cha acte , intending to enew the lease, if the
landlo d is not ha med b the dela in the giving of the notice and the lessee
would sustain substantial loss in case the lease we e not enewed.
5.Y A tenant is entitled to the benefit of the ule o p actice in equit which
elieves against fo feitu es of valuable lease te ms when default in notice has
not p ejudiced the landlo d, and has esulted f om an honest mistake, o
simila excusable fault. This ule has been expanded to p ese ve the tenants
inte est in a long-standing location fo a etail business because this is an
impo tant pa t of the good will of that ente p ise, and thus the tenant stands
to lose a substantial and valuable asset
6.Y A tenant o mo tgago should not be denied equitable elief f om the
consequences of his own neglect o inadve tence if a fo feitu e would esult.
The ule applies even though the tenant o mo tgago , b his inadve tence,
has neglected to pe fo m an affi mative dut and thus b eached a covenant
in the ag eement
7.Y Even though the e ma be no penalt o fo feitu e in a st ict o p ope sense,
equit should elieve against it if default has been due to me e venial
inattention and if elief can be g anted without damage to the lende . The
g avit of the fault must be compa ed with the g avit of the ha dship

!#"

The tenant assignee of a 10-ea lease with an option to enew fo an additional 24


ea s ma be entitled to equitable elief f om the fo feitu e which would othe wise
esult f om its failu e th ough eithe neglect o inadve tance to give six months
w itten notice of its intent to enew as equi ed b the lease. The tenant had taken
the assignment afte fou ea s of the initial te m had expi ed, upon equi ing its
assigno to secu e a enewal te m of 24 ea s, and the tenant paid $ 40,000 fo
fixtu es and $ 115,000 fo the leasehold inte est. The landlo d egula l notified the
tenant of the due date of va ious lease obligations but failed to info m it of the
expi ation date of the option to enew until it had lapsed, and the e is testimon that
the tenant spent $ 15,000 on imp ovements, at least a pa t of which was expended
afte the option expi ed. Although equit will not usuall inte vene in the event of a
default on an option, because no vested ights can be fo feited absent compliance
with the condition p ecedent of notification, a fo feitu e ma occu in the event of
neglect to exe cise an option to enew an existing lease if the tenant has made
valuable imp ovements. While equitable elief has been g anted onl fo excusable
fault and not fo neglect in such a case, the p inciple is well established that equit
ma elieve a tenant o mo tgago f om the consequences of neglect to pe fo m an
affi mative dut if a fo feitu e would esult and the neglect is not g oss o willful o
p ejudicial to the landlo d. The tenant he ein has made a conside able investment in
imp ovements which would be fo feited and its fault in failing to give timel notice
was me e venial inattention. Unde the ci cumstances, the e should be equitable
elief if the landlo d is not p ejudiced, and the e should be a new t ial at which it
ma be dete mined whethe the landlo d made othe commitments fo the
p emises.

Notes:

1.Y Meaning of fo feitu e


2.Y Excuse of condition to avoid fo feitu e
3.Y Conditions of timel notice in options to pu chase eal estate
4.Y JNA- Legal Theo -
5.Y Counseling clients facing JNA-tpe issues

:2- p. 806-824
Restatement §§ 226
Restatement §234
Restatement §235
Restatement § 237
Restatement §241
Restatement §242
Restatement §243(1)(4),

http://www.fi ehd ant.o g/pictu es/ eading-found .html

-Y One some point in the life of a cont act- one pa t ma completel fail to
ende a pe fo mance then due and owing unde the cont act Ȃ R she ma
ende that pe fo mance but in an incomplete, defective, o untimel manne
-Y ISSUE: when does one failu e to pe fo m justif the othe pa t in efusing to
ende a pe fo mance of his own

,
 83   ) #+3#"! " %
1.Y Jacob and Youngs is a cont acto who built a count  esidence fo defendant
Kent
2.Y The cost of the house was $77,000.00.
3.Y Wo k on const uction ceased June 1914 and defendant lived in p emises
until Ma ch 1915
4.Y Specifications fo the plumbing wo k = Dzall w ought-i on pipe must be well
galvanized, lap welded pipe of the g ade known as Ǯstanda d pipeǯ of Reading
manufactu edz
5.Y Defendant Kent lea ned in Ma ch 1915 that some of the pipe was the p oduct
of othe facto ies.
6.Y Jacob and Youngs we e di ected b a chitect to do wo k ove again/co ect
it.
7.Y To fix, not onl did the eplace the othe pipe and encase whe e the pipe
was exposed- but meant demolition of a g eat amount of the const ucted
house.
8.Y Jacobs and Young did not fix the wo k, but left it untouched- and asked fo a
ce tificate that the final pament was due
9.Y Refusal fo Kent to g ant ce tificate p ompted this action

c =å 

1.Y The omission of the p esc ibed b and of pipe was neithe f audulent no
willful Ȃ it was the esult of the ove sight and inattention of the plaintiffǯs
subcont acto .
2.Y An omission- both t ivial and innocent- will sometimes be atoned fo be
allowance of the esulting damage- and will not alwas be the b each of a
condition to be followed b a fo feitu e.
a.Y Independent m omise Ȃ can neve be b fai const uction conditions of
one anothe
b.Y Dependent m omise Ȃ so plainl dependent the will alwas be
conditions
c.Y Dete mined b justice and p esumable intention = eithe independent
o dependent p omises
3.Y Necessa il a subjective inqui  Ȃ Substitution of equivalents ma not have
the same significane in fiels of a t on the one side and in those of me e utilit
on the othe --> Nowhe e will change be tole ate, howeve , if it is so
dominant o pe suasive as in an eal o substantial measu e to f uste ate
the pu pose of the cont act
a.Y mu poseful, willful intent that is malicious to b eackt he cont act will
have no efuge
b.Y The t ansg esso whose default is unintentional and t ivial ma hope
fo me c if he will offe atonement fo his w ong.
4.Y  
c
: the measu e of the allowance is Not the cost of eplacement,
which would be g eat, but the diffe ence in value- which would be nominal o
nothing,
a.Y The t ial cou t has excluded evidence that the defect was
unsubstantial and in view of that uling the e was no occasion fo the
plaintiff to go fa the with an offe of p oof.
b.Y It is t ue that in most cases the cost of eplacement is the measu e
(unless the cost of completion is g oss and unfai l out of p opo tion
to the good being attained)
c.Y BUT: the e ma be omissions of that which could not afte wa ds be
supplied exactl as called fo b the cont act without taking down the
building to its foundations --> AND at the same time the omission ma
not affect the value of the building fo useo othe wise, except so
slightl as to the ha dl app eciable
d.Y Invoke the doct ine of substantial pe fo mance = with compensation
fo defects of t ivial o inapp eciable pe fo mance
5.Y ‰
: T ial cou t was ight in di ecting a ve dict fo the defendant -->
a.Y Onl 2/5 of the pipe used we e the Reading kind stipulated
b.Y mlaintiff knew whe e the pipe was obtained- not completel off the
hook/cant el enti el on subcont acto
c.Y NOT SUBSTANTIAL mERFORMANCE (less than half completed
p ope l)

:

1.Y "ë 


 "ë . Ȃ w ought i on is 30% mo e expensive but it would
achieve substantial savings b/c of du abilit and low maintenance -->
genuine w ought pipe was used, just not of the Reading kind (which is wh
the highe cou t uled it immate ial) --> Seems like Kent was displeased with
the dela and was seeking a wa to get afte J&Y.
0!Y Ê (ë 
 ë "ë 
 "ë

ë 9) 

ë ë  *- Ca dozo
uses the notion of dependent p omises- t eated like conditions --> used to
answe : DzWhen will one pa tǯs dut of pe fo mance be dependent on/
conditioned on some pe fo mance b the othe pa t
a.Y Const uctive Conditions Ȃ in cases whe e it seems to the cou t that
one pa tǯs failu e to pe fo m (o tende pe fo mance) should
constitute a sufficient justification fo the othe pa tǯs withholding of
its pe fo mance in etu n
b.Y Judiciall c eated devices used to dete mine the consequences of the
b each when the pa ties have failed to spell it out in thei ag eement
c.Y Restatement §226 Ȃ Abandons the fo me distinctions and defines
conditions as :
i.Y Exp ess Conditions- condition within te ms of cont act
ii.Y Implied in Fact Conditions Ȃ infe ed f om conduct of pa ties
iii.Y Const uctive Conditions Ȃ c eated b cou t of easons of justice
d.Y Restatement §234- Conventional ules on o de of pe fo mance
i.Y me fo mances that can be ende ed at the same time a e due
simultaneousl
ii.Y If pe fo mances cannot be ende ed at the same time, the
pe fo mance equi ing the longe pe iod of time must be
ende ed befo e the pe fo mance equi ing the sho t pe iod of
time will be do.
e.Y UCC- p ovisions a e ules of const uction onl and a e not applicable
if the pa ties ag eement p ovides othe wise
f.Y Sta k v. ma ke (1824)- mlaintiff not entitled to ecove an pa t of
wages fo the ea and also denied an ecove  in estitution fo the
value of se vices pe fo med (quit emploment just sh of 1 ea
ma k).
8!Y $ë
 

ë ë  +ë 
 . "ë

ë- Nolan v. Whitne
(1882)- a chitect could not p ope l efute to issue a ce tificate if the
cont acto had substantiall pe fo med
!Y Êå " ›Ê : ,%X Ê  : If the cont acto s ight to eceive
pament is exp essl conditioned on the issuance of the a chitects
ce tificate, the condition will be st ictl enfo ced and the cont acto
denied ecove  unless the cont acto can show f aud o bad faith b
the a chitect.
!Y Ê $

 ë  
 $ ë - Restatement § 237- Each pa tǯs
dut of pe fo mance is implicitl conditioned on the e being no uncu ed
mate ial failu e o pe fo mance b the othe pa t
j!Y  ë  
 $ ë 
!Y Califo nia Ȃ whe e the va iance f om the specs of the cont act does
not impai the building o st uctu e as a whole, o whe e the defects
can be emedied without g eat expenditu e/mate ial damagte to
othe pa ts of st uctu e; but NOT unning th oughout the enti e wo k.
!Y Wisconsin- failing to do unde $5k of wo k on a $50k cont act = NOT
substantial pe fo mance = ONLY when details a e inconside able and
not the fault of the cont acto .
¢!Y , ë ( - often tu ns on the deg ee and qualit of the
pe fo mance ende ed
!Y "ë ë ë 
ë ë 

!Y   ë 
  
!Y 
     /0)0*: "ë
 
 : A willful b each does not
automaticall ba ecove , but the motive of a b eaching pa t is a
facto to be conside ed in dete mining whethe pe fo mance was
substantial.
!Y  +ë ë ë ' 

ë  (





!Y Restatement §240- Divisibilit- if the cont act is divisible, the cou t
ma allow fo ecove  fo the po tions that have been completed = 2
REQUIREMENTS:

!Y mossible to appo tion the pe fo mances of the pa ties into
co esponding pai s of pa t pe fo mances

!Y Must be p ope to t eat these pai s of pa t pe fo mances as


Ǯag eed equivalentsǯ


  '(c
|! "-$%
1.Y mlaintiff Sackett attempted to bu stock f om the S&S Newspape co po ation
(published the Santa Cla a Jou nal) owned b CEO, manage , publishe , etc.
Spindle .
2.Y On Jul6 1961 Spindle ente ed into w itten ag eement with Sackett fo 6316
sha es of stock in S&S Newspape s = total numbe of sha es outstanding -->
maable as follows:
a.Y $6k b Jul 10; $20k b Jul 14; $59k b august 15 = $85k total cost.
b.Y 6% inte est on an unpaid balance
c.Y Delive  of full amount of stock to Sackett f ee of encumb ances when
he made his final pament unde cont act
3.Y Sackett paid initial ^k installment on time
4.Y Sackett paied $19,800.00 on Jul 21
5.Y August 10 Ȃ Sackett w ites and delive s check fo emaining balance $59.2k
but the check bounces because of insufficient.
6.Y Meanwhile Spindle acqui ed the stock owned b the mino it sha eholde s,
endo sed the stock ce tificates, and gave all but 454 sha es to Sackettǯs
atto nes to hold in esc ow
7.Y Check does not clea b Sept 1 so Spindle eclaimed the stock ce tificates
held b Sackettǯs atto ne.
8.Y Septembe 12 Sacket sends teleg am saing theǯve p ocu ed the funds and
a e ead, willing, and eage to t ansfe them.
9.Y The atto nes coo dinate and discuss- Spindle sas that the will onl go
th ough with the deal if emaining balance plus inte est is paid b Septembe
22
a.Y Spindle in Despe ate need of wo king Capital
b.Y Fo ced to obtain $4k loan
c.Y Spindle himself sold off half his stock
d.Y Fo ced to conve t pape fo Dail to Weekl
e.Y Then e-acqui ed the stock he sold p eviousl and e-soled it at a
p ofit of $20,680.00
10.YSackett did not communicate o pa b Septembe 22 Ȃ but Spindle
extended time to Sept. 29th.
11.YSakcett still doesnǯt pa- but indicate AGAIN that thei mone is available and
the e ead to go.
12.YIn esponse to this deleg am- Spindle w ote a lette to Sacketts atto ne
stating that the e would be NO SALE AND mURCHASE OF STOCK.
13.YSpindle even conside ed to wo k something out afte wa d- but ended up
feeling as though Sackett NEVER INTENDED TO FOLLOW THROUGH WITH
THE CONTRACT
c 

1.Y Since the t ial cou t found that it was NOT IMmOSSIBLe to Sackett to pe fo m
subject to the cont act = B each (unjustified o unexcused failu e to pe fo m
all o an pa t of what is p omised in a cont act

2.Y Sakett Claims Spindle Repudiated the Cont act:


a.Y The notification that the e would be no sale o pu chase = Spindle
conside ed his own dut of pe fo mance unde the cont act
discha ged as a esult of Sackettǯs b each of the cont act and that
Spindle was the eb te minating the cont act and substituting his
legal emedies fo his cont actual ights
b.Y THIS Repudiation = Ok ONLY IF Sacketts b each could be classified as
a total, athe than pa tial b each of the cont act.
c.Y TOTAL vs. mARTIAL BREACH = Depends on its mate ialit =
CONSIDER:
i.Y Extent to which inju ed pa t will obtain the substantial
benefit anticipated
ii.Y Extent to which inju ed pa t ma be adequatel compensated
in damages fo lack of complete pe fo mance
iii.Y The itent to which the pa t failing to pe fo m has al ead
pa tl pe fo med o made p epa ations fo pe fo mance
iv.Y G eate /less ha dship on the pa t failing to pe fo m in
te minating the cont act
v.Y The willful, negligent, o innocent behavio of pa t failing to
pe fo m
vi.Y The g eate /less unce taint that the pa t failing to pe fo m
will pe fo m the emainde of the cont act.
d.Y Spindle was justified in te minating the cont act on Octobe 5
because it was ext emel unce tain to Spindle whethe Sackett
intended to complete the cont act.
i.Y Numbe of Spindle equests fo unpaid balance = Sackettǯs
failu e to pe fo m could not be innocent- g oss negligence o
willful conduct to NOT pe fo m.
ii.Y Evidence was such as to wa ant the infe ence that he did not
intend to pe fo m Ȃ unlikel he would tende balance if faced
with ultimatums (like he was), o on his own acco d.
iii.Y Spindle was not equi ed to endu e the unce taint o to
await the conscience of Sackett in paing
e.Y EVEN if Spindle was NOT justified in t eating Sackettǯs b each as a
total b each
i.Y Sacketts contention that thei dut to pe fo m was discha ged
b Spindle s epudiation of the cont act is UNTENABLE
1.Y Spindle s epudiationwas AT BEST ANTICImATORY
2.Y Its effect waqs nullified b Sacketts dis ega d of it and
his t ating of th cont act as still in full fo ce- evidenced
b the continued attempts to a ance an alte native
method fo financing
3.Y AND Spindle was still looking fo was to make it
happen if Sackett eve paid like the said the would



1.Y Êë   $


 - Restatement §242 Ȃ Once it was dete mined that
the e was a b each: Is it total o pa tial?
a.Y :29 sufficientl se ious to justif discha ging the non-
b eaching pa t f om he obligations to pe fo m the cont act
i.Y Effect of B each on pe fo mance obligations-:
Relieves/discha ges the nonb eaching pa t f om his dutes
unde the cont act = justified in efusing to pe fo m his
obligations and can ente into alte native cont acts
ii.Y Measu ement of Damages: Entitled to Recove not onl actual
damages acc ued but also an futu e damages that will
easonabl flow f om the b each
1"Y :2
i.Y Effect of B each on pe fo mance obligations: Does NOT
discha ge the nonb eaching pa t, who must continue to
pe fo m his obligations unde the cont act
ii.Y Measu ement of Damages: Right to damages onl fo the actual
ha m that has esulted to date, nt fo futu e ha m

Y 0
 

Ê 
 

a.Y Mate ial B each: Restatement §237: in effect = the nonoccu ance of a
const uctive condition to the othe pa tǯs dut to ende an
pe fo mance not et due
i.Y me fo mance is suspended until the b each occu s
ii.Y Mate ialit of the b each dete mined b wa of §241
b.Y Total B each: Restament §236: in effect = discha ging the othe
pa tǯs emaining duties of pe fo mance and pe mitting that pa t to
p oceed immediatel to pu sue a claim fo damages f om total b each
8!Y    ë , 



!Y  (ë  , 


  ë  Êë 
a.Y Restatement §242 = Facto s to Conside if Mate ial OR Total B each
i.Y Mate ialit depending on facto s of §241
ii.Y The extent to which fu the dela appea s likel to p event o
hinde the making of substitute a angements b the
nonb eaching pa t
iii.Y Deg ee of impo tance that the te ms of the af eement attach to
pe fo mance without dela
iv.Y ALSO: the ë of the inju ed pa tǯs conduct oin
communicating hid g ievances and in seeking satisfaction
j!Y 
# 
  ë
 $ Suppose Spinlde had been found to
have hjumped the gun in t eating Sacketts b each as total: What effect would
that have on Spindle s ights an obligations?

6.Y   ë  6
 ë 7 " Ȃ F om Restatement §242
a.Y Stock ph ases like Dztime is of the essencedz will not necessa il mean
that an dela in pe fo mance must be deemed mate ial- must be
conside ed along with othe ci cumstances
b.Y BUT pa ties ma make a pe fo mance b a stated date a condition of
thei age eement- in which case dela beond that conditioned date
would esult in discha ge

!3!
pp. 824-841
Restatement §§ 250
Restatement §251
Restatement §253
Restatement §256
UCC § 2-609; 2-610

&==
*** DAMAGES ***
the majo it of cont act cases- specific pe fo mance is NOT the issue:
most pa ties a e seeking mone damages --> m ime Impo tance: the wa
in which damages a e to be computed
- Damages: Williston = Has come to be known as the mode n app oach
to cont act emedies:
1. Restitution Inte est- cou t ma fo ce the defendant to disgo ge the
value he eceived f om the plaintiff --> the p evention of unjust
en ichment: p evention of gain b the fdefaulting p omiso at the
expense of the p omisee
2. Reliance Inte est- the plaintiff has in eliance on the p omise of the
defendant changed his position- cou t ma awa d damages to the
plaintiff fo the pu pose of undoing the ha m which is eliance on the
defendantǯs p omise has caused him.
3. Expectation inte est- value of the expectanc which the p omise
c eated: object is to put the plaintiff in as good a position as hew ould
have obeen had the defendant pe fo med his p omise
- Reliance and estitution tpicall awa ded b the cou t--> Expectation
Damages- const ued so as to give the plaintiff the benefit of the bagain
that would have been ealized had the ag eement been full pe fo med
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1.Y Loss in Value- the diffe ence between the value to the inju ed
pa t of the pe fo mance that should have been eceived, and the
value to that pa t of what, if anthing, was eceived (OR value to
the  of the goods eceived vs. goods actuall delive ed)
2.Y Othe Loss- the b each ma cause the inju ed pa t loss othe
than loss in value
a.Y Incidental Damages- additional costs incu ed afte the
b each in a easonable attempt to avoid loss (even if the
attempt is unsuccessful) Ȃ like paing a fee to a b oke to
obtain a substitute fo non-pe fo mance.
b.Y Consequential Damages- inju  to pe son o p ope t caused
b the b each- like defective se vices that cause damage to
p ope t.
3.Y Cost Avoided- b each ma have a beneficial effect on the inju ed
pa t b saving it the fu the expenditu e that would othe wise
have been incu ed.
4.Y Loss Avoided- b each ma have a beneficial effect of allowing the
inju ed pa t to avoid some loss b salvaging and eallocating
some of all of the esou ces that othe wise it would have had to
devote to pe fo mance of the cont act
å       '‰ '  : cå>
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p. 850- Case Examples # 1-3
1. Owne hi es builde fo $200,000.00 total. Estimated total cost
$180,000.00. Owne b eaches when wo k is pa tl done. Owne paid
$70k until b each. Builde spent $95k fo labo and mate ials (some
inco po ated into pa tial building. Builde esells $10k of pu chased
mate ials.

2. Emploe hi es emploee 2  cont act fo $50k/ea , end-month


installments. 6 months into cont act emploee is w ongfull discha ged.
Emploee unable to find job fo 3 months, pas agenc $1000. 3 months
late emploee finds new, compa able job fo $45k/ea .

3. Same as case 1, but compute builde ǯs expectation damages using the


nect fo mula of expected net p ofit on the enti e cont act plus
un eimbu sed expenses at the time of the b each.
 
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-Y Roesch is selle /appellant of house, B a is the bue /appellee
-Y Ente ed into w itten cont act to pu chase house on Lincoln
Avenue
-Y 5 das afte B as info m Roesch the cannot pe fo m on the
cont act (no mone to bu)
-Y m io to b each, Roesch ente ed into a cont act to pu chase
anothe home in Hu on- Appellee Ha  B a is fathe of Roesch
and encou aged appellants to pu chase othe eal estate so the
could move in- so the did, and then the backed out of the sale
-Y Cont act te ms: $65k total, $45k due at closing aand $20k paid
upon sale of appellees home, with no inte est on that amount.
-Y Due to b each Roesch bo owed $65k f om 3 d pa t at 16%
inte est fo his pu chase of his NEW home.
-Y Ultimatel esold the Lincoln Ave house fo $63,500.00.
-Y T ial cou t g anted Roesch motion fo summa  judgment due to
b each of cont act Ȃ issue of DAMAGEs t ied befo e a REFEREE
-Y T ial judge adopted efe eeǯs epo t which was about $9k and
included costs fo utilities, insu ance, eal state taxes,
maintenance, adve tising, and inte est on the $45k that was
paable to appellants f om appaellees at the p oposed closing
date.
-Y Appellants a gue: t ial cou t e ed- failed to awa d damages fo
diffe ence in cont act p ice ag eed between cont act p ice ag eed
upon and the ultimate esale p ice Ȃ the net p oceeds in the sale
onl amounted to $52,149.00
ëY Appellees: onl entitled to the diffe ence in sale p ice and
cont act p ice plus inte est = $1500.00
-Y c   
:
ëY Assess the ma ket value of the house at the time of the
b each: no evidence points to this Ȃ but the ultimate p ice it
sold fo was ve  close to the initial cont act sale p ice- so
can assume that the ma ket p ice was fai at $65k.
ëY AmmELANTS ARE ENTITLED TO THE BENEFIT OF THE
BARGAIN
$Y Resale p ice is $63,500.00, not $52k+ --> the
fo mulation of the initial sale p ice wasnǯt in Dznet saledz
te ms (like the p oposed $52k numbe was) =
$1500.00 + 10% inte est.
ëY Additional Costs: Although the appellees might have been
able to fo see that ce tain expenses would be incu ed in
maintaining the p ope t until futu e esale, the du ation
and extent of those expenses could onl be speculated upon
= Slippe  Slope: a b each pa t could be subjected to
liabilit fo simila expenses (maintenance and utilit
expenses fo upkeep until esale) fo months o even ea s
on end- the selle ma not take immediate action to esale
and the fo me bue would still be on the hook fo those
costs.
Notes:
1.Y Measu e of damages fo b each of eal estate cont act
a.Y Damages fo the loss of ba gain o gina il calculated as the
diffe ence between the cont act p ice and the ma ket value
of the p ope t at the time of the b each
b.Y When the SELLER b eaches- the disappointed bue must
show that at the time of the b each the p ope t had a
ma ket value MORE than the cont act p ice.
c.Y Consequential/Incidential Damages:
i.Y Damages must be easonnal fo seeable
ii.Y m ohibition of speculative damages (must be p oven
with easonable ce taint)
iii.Y Dut to mitigate damages: damages ma not be
ecove ed to the extent that the could have been
avoided o minimized b easonable effo ts)
2.Y m oof of ma ket value- App aise s = expe ts
3.Y English and Ame ican ules when  b eaches
a.Y English- whe e the selle is in b each, est icted plaintiff
pu chase to estitution of an paments made, unless
b each is in  

b.Y Ame ican- gene all awa d expectation damagtes fo an
unexcused failu e to conve, ega dless of good/bad faith --
> t aditional ule of cont act law that unless the cause of
non pe fo mance falls within an accepted catego  of
excuse (ie. Du ess etc.) an expectation-based emed is
no mall available
4.Y UCC damage ules- Dzthe diffe ence between the ma ket p ice at
the time and place fo tende and the unpaid cont act p ice, in
addition to an incidential damages, less an expenses saved in
consequences of the bue ǯs b each
5.Y m ejudgment and postjudgment inte est
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-Y Teache hi ed fo sp ing semeste at Lightfoot School
-Y Offe ed to be e-hi ed fo following school ea at annual sala  of
$10760.00 fo one school ea .
-Y Lukas accepted
-Y August 1978 befo e school ea sta ts- Lukas offe ed diffe ent et
equal job at Wee Ca e Da Ca e- much close to he home
(Handicapped Child ens is 45 mins awa f om Lukas home)
-Y Wee Ca e offe is annual $13k sala .
-Y Lukas 
 to accept, and notifies Mo elle @ Lightfoot school
that she intended to esign f om he position --> Lightfoot told he
to submit a lette to the boa d, Lukas does.
-Y Boa d efuses to eleas Lukas f om he cont act.
-Y Boa d atto ne sends lette august 28 di ecting Lucas back to
wo k.
-Y She eluctantl complied with Lightfoot cont act
-Y Septembe 8 Lukas has meeting with Mo elle and she becomes
st essed and ill.
-Y D . visit: hpe tension p oblem because of st ess f om he wo k Ȃ
D . opined that it would be dange ous fo he to d ive the 45 miles
to Lightfoot.
-Y Lukas tende ed D . Note with lette of esignation on Sept 13.
-Y Sho tl afte Lukas eapplied and got job at Wee Ca e
-Y Boa d Claim: suffe ed damage in amount of additional
compensation fo Lukasǯ eplacement
-Y T ial Cou t: held in favo of Hanicapped School, damages awa d
fo $1026.64 plus $222.50 fo costs.
-Y Appellate cou t affi med the b each, but eve sed the damages
judgment: although the Boa d paed mo e fo he eplacement, it
obtained a p opo tionatel MORE valuable teache .

-Y c   
:
ëY B each?
$Y T ial cou t made a factual finding that Lukas actuall
did NOT esign fo health pu poses = b each.
ëY Recove able Damages?
$Y Rule: the nonb eaching pa t is entitled to full
compensation fo the loss of he ba gain = losses
necessa il flowing f om the b each which a e p oven
with a easonable ce taint and within the
contemplation of the pa ties awhent he cont act was
made
$Y Damages fo b each of Emploment Cont act = cost of
obtaining an equivalent to that p omised but not
pe fo med, plus an fo seeable consequential
damages.
$Y The additional cost $1026 necessa il flowed f om the
b each and was within the contemplation of the
pa ties when the cont act was made
$Y The cou t of appeals and Lukas IMmROmERTLY focus
on the objective calue of the se vices the Boa d
eceived athe than that fo which it pba gained
(expectations)--> the Boa d EXmECTED to eceive the
se vices of a speech the apists with Lukasǯ education
and exsp ience at the sala  ag eed uponǥ NOT
expected a mo e expe ienced/educated one that had
to be paid mo e
$Y THUS, the Boa d lost the benefit of its ba gain.
ëY Dissent: the esignation was justified because of medical
condition
:
1.Y Cou ts almost NEVER o de specific pe fo mance in emploment

2.Y Illness as a defense to b each of an emploment cont act?


a.Y Death o incapacit = valid excuses
b.Y Imp acticalit b/c undue isk of inju 
c.Y Self induced = NOT valid medical excuse?




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-Y mlaintiff Hadle a e mille s doing wo kat Glouceste - thei mill
was stopped b a b eakage in c ank shaft
-Y Sent a se vant to G eenwhich to defendants, dba mickfo d- to have
the old shaft ca ied to G eenwich.
-Y Impe ative the shaft be b ough immediatel because the shaft was
stopped- TOLD THE CLERK AT mICKFORD THAT THE MILL WAS
STOmmED AND THAT THE JOB NEEDED TO BE DONE ASAm --> ?
(still not enough fo cou t)
-Y mickfo d told Hadle that if dopped off b noon it would be
delive ed the following da.
-Y Hadle d ops off the shaft and paid 2 pounds 4 shillings (about
$100 toda)
-Y Delive  to G eenwich was delaed b some neglect- did NOT
eceive the NEW shaft until SEVERAL das afte
-Y Hadle loses p ofits because mill is closed, mill wo k is delaed,
etc.
-Y Defendants A gue: Damages a e too emote and not liable
-Y c   

ëY m ope Rule: Whe e two pa ties have made a cont act which
one of them has b oken, the damages which the othe pa t
ought to eceive should be such as fai l and easonable be
conside ed eithe :
$Y Gene al Damages: a ising natu all; OR
$Y Consequential Damages: such as easonabl be
supposed to have been in contemplation of the pa ties
when the cont act was fo med
ëY IF the special ci cumstances unde which the defendant was
actuall made we e communicated b Hadle to Oickfo d-
then it would be easonabl contemplated --> If NOT, then
on speculated.
ëY AmmLICATION:
$Y T ue that the sent it back fo a new one, and that was
the onl cause of stoppage of the mill, and that the
loss of p ofits did a ise f om the dela in delive 
$Y BUT IN THE GREAT MULTITUDE OF CASES of mille s
sending off b oken shafts etc unde no mal
ci cumstances such consequences ë ë  

 ë

   ë
$Y The special ci cumstances we e not communicated b
the plaintiffs to the defendants
$Y Thus, loss of p ofits he e cannot be easonable
conside ed a fai l and easonabl contemplated
notion b both pa ties
ëY New t ial O de ed: the judge ought to have told the ju  that
the facts should NOT take the loss of p ofits into
conside ation when estimating damages.
*
:
1.Y What did the Cle k know?
a.Y It is likel the case that if it had been easonable plain that
Hadle had established the special ci cumstances to
Baxendale, that the case would have been decided the
othe wa a ound
2.Y Gene al and consequential damages
a.Y ‰0  Ȃ plaintiff need not make an special
showing to ecove gene al land (i.e. the benefit ba gained
fo )
i.Y Lost m ofits on the CONTRACT THAT WAS BREACHED
= Gene al Damage
b.Y c-‰0  Ȃ loss/costs incu ed as an
indi ect esult of the b each (not within the initial cont act)
i.Y Lost m ofits
ii.Y Inju  to pe son o p ope t caused b goods that fail
to compl with cont actual wa anties
3.Y Fo seeabilit Ȃ Restatement §351 Ȃ states the ule Hald
expounded:
a.Y Recove abilit of consequential damages depends on
whethe such damages we e in the contemplation of the
pa ties at the time the made the cont act
b.Y The TYmE of loss must be fo eseeable, NOT the manne in
which it occu s
c.Y Fo seeabilit = focused on the BREACHING pa t.
4.Y The Hadle Rule = FORSEEABILITY b BREACHING mARTY of
consequential damages (loss of p ofit on additional cont acts)
5.Y The Hadle Rule unde CISG- Damages = sum of: loss including
loss of p ofit, ma not exceed the loss which the pa t in b each
fo esaw o ë ë   ë at the time of the conclusion of
the cont act
6.Y The Tacit Ag eement Test Ȃ 1900ǯs: inju ed pa t would be
equi ed to show special ci cumstances we e told, AND the othe
pa t Dzassumed consciousldz the liabilit
a.Y C iticism: damages should be viewed as a question of
cont act inte p etation- and if its silent, cou t should adopt
a default ule of damages that the pa ties would most likel
have ag eed upon had the conside ed the issue of damages

Restatement § 344



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Notes:

1.Y Appling Hadle to Flo afax


2.Y Cnt actual limitations on consequential damages
3.Y Limitation of consequential damages to p event injustice
4.Y Speculative Damages
5.Y m oof of lost p ofits
6.Y The Dznew businessdz ule and Lost m ofits
7.Y Consequential Damages in othe cases

Restatement §347
RESTRICTIONS ON THE RECOVERY OF EXmECTATION DAMAGES: 


OF
DAMAGES- m 874 Ȃ 886

Restatement § 350

Restatement § 351

Restatement § 352

p. 886-890; 904-910

p. UCC §2-708

UCC § 2-708

%1‰0 - p. 920-935


Restatement § 353

Suppose I sign a cont act to delive 100,000 custom-g ound widgets at $.10 apiece
to A fo use in he facto . Afte I delive 10,000, B comes and sas he despe atel
needs 25,000 custom-g ound widgets at once since othe wise he will be fo ced to
close his facto  at g eat cost and thus offe s $.15 apiece. I sell him the widgets and
as a esult cannot timel delive to A esulting in a $1,000 loss in he p ofits.
Assuming that I made a $1250 p ofit f om m sale to B, I am bette off even afte
eimbu sing A fo he loss and B is bette off. What do ou think about this b each?
[Optional eading on this issue 951-958]

‰0 - p. 965-983

Restatement § 349

Look at Case 3 on p. 850 and compa e eliance damages to expectation damages in


that example

3‰0 - p. 983-988


Restatement § 370
Restatement §371
Restatement §373
Restatement §374
Restatement §375
Restatement §376
Restatement §377
!. .0- p. 1008-1021
Restatement §359
Restatement § 360
Restatement §366

 0- p.1031-1032; 1039-1040 (notes 1 and 2)


Restatement § 356



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