Contents 1)Hawkins v. McGee - ED ......................................................................................................................................... Error! Bookmark not defined. The Bullet point The P Phrase. ........................................................................................................................................................................

. 4 2) Groves v.Wunder ............................................................................................................................................................................................. 4

2. Peevyhouse v. Garland Coal .......................................................................................................................................................................... 5

First restatements of contracts (346) ................................................................................................................................................................... 5 The Bullet P Phrase has 2 methods. ................................................................................................................................................................. 5 3)AcmeMills&ElevatorCo. v. Johnson ................................................................................................................................................................. 5 The Bullet Only P Phrase, nothing more, we will not let the other party lay their hands on the profits. ............................................................... 6
Squib: Laurin v. DeCarolis Constr. Co., Inc.:.............................................................................................................................................................. 6

4)Missouri Furnace Co. v. Cochran ..................................................................................................................................................................... 6

Common law: Hockster v De La Tour -..................................................................................................................................................................... 6

5)Neri v. Retail Marine Corp................................................................................................................................................................................ 7 The Bullet: The seller is entitled to the lost profits, plus expenses. ....................................................................................................................... 7
Squib: Commonwealth Edison Co. v. Decker Coal Co.................................................................................................................................................. 7

6)Illinois Central RR Co. v. Crail:........................................................................................................................................................................ 7 The Bullet Not cranking formulas, only actual damages. .................................................................................................................................. 7
Squib: Watt v Nevada Central RR. ........................................................................................................................................................................... 7

Reliance Damages .......................................................................................................................................................................................... 8

7)Chicago Coliseum Club v. Dempsey: Illinois Court of Appeals. ....................................................................................................................... 8 Rule: ................................................................................................................................................................................................................. 8
Squib: Security Stove & Mfg. Co v American Ry Express Co.: Mo. App. (1932) .................................................................................................................................... 9

The Bullet: If reliance of something consistent, can get damages anticipating K. ............................................................................................. 9
Squib: Anglia Television Ltd. v. Reed: ...................................................................................................................................................................... 9

Bullet Can rely when there are many alternatives, and late breach. ............................................................................................................... 9 Restatement of Contracts, 349: ......................................................................................................................................................................... 9 8)L. Albert & Son v. Armstrong Rubber Co.: ...................................................................................................................................................... 9
Squib Mt. Pleasant Stable Co. v. Steinberg:.............................................................................................................................................................. 10

Section 2 Limitations on the P Phrase. ..................................................................................................................................................... 10

1)RockinghamCountyvLutenBridge Co.: ........................................................................................................................................................... 10 The Bullet Mitigate damages. ........................................................................................................................................................................ 10
Squib: Leingangv CityofMandanWeedBoard ....................................................................................................................................................... 10 Squib: Kearsarge Computer, Inc. v. Acme Staple Co.: ................................................................................................................................................ 11 Wrongful discharged employee duty to mitigate: .................................................................................................................................................. 11

pg. 1

2)Shirley Parkerv20thCenturyFox:.............................................................................................................................................................. 11
Bullet; Rule - Shirley McClain is not Kearsarge. Kearsarge and RMC is a service - goods dealer. Employees cant get lost profits; they only can be at one place at a time. Employees lose recovery by mitigating................................................................................................................. 12 Squib: BillettervPosell (1949)........................................................................................................................................................................... 12

3)Hadley v Baxendale ..................................................................................................................................................................................... 12

4)Globe Reffining Co. v. Landa Cotton Oil Co.: ................................................................................................................................................ 13
Squib: Lamkins v International Harvester Co ........................................................................................................................................................... 13 Squib: VictoriaLaundryLtdv NewmanIndusLtd......................................................................................................................................................... 13 Squib: Heron II ................................................................................................................................................................................................... 13 Squib Hector Martinez & Co v Southern Pacific Transp Co.: ....................................................................................................................................... 14

5)Valentine vGeneral American Credit,Inc........................................................................................................................................................ 14

Squib: Hancock v. Northcutt ................................................................................................................................................................................. 14

6)MindGames, Inc. v. Western Publishing Co.: ................................................................................................................................................. 14

Freund vWashington Square Press,Inc.: ................................................................................................................................................................... 15 Fera v. Village Plaza, Inc. ..................................................................................................................................................................................... 15

Section 3- Restitution Alternative Damages ............................................................................................................................................... 15

1)Boone v Coe(1913) ........................................................................................................................................................................................... 16 Quantum Meruit:........................................................................................................................................................................................... 16 The Bullet: No K; therefore restitution: Only when benefit. ............................................................................................................................... 17 2)United States vAlgernonBlair, Inc................................................................................................................................................................... 17 The Bullet: If breachee and MB; Can claim On k and Off K. ...................................................................................................................... 17
Squib: Kearns v Andree ....................................................................................................................................................................................... 17

The Bullet: Breachee can get reliance-restitution. .............................................................................................................................................. 18

Notes: Farash v Sykes .......................................................................................................................................................................................... 18 Notes: The Doing and Giving Problem .................................................................................................................................................................... 18 Squib: OlivervCampbell(1954) .............................................................................................................................................................................. 19

The Bullet: Only restitution until the point you performed, once performed no res. ........................................................................................ 19
Notes: Noyes v. Pugin ......................................................................................................................................................................................... 19 Notes: Clark-Fitzpatrick Inc. v. Long Island Railroad Co. (pp. 109) .............................................................................................................................. 19

3)Stark v. Parker ................................................................................................................................................................................................ 19 4)Britton vTurner-(1834).................................................................................................................................................................................... 20

Notes: Schwasnick v. Blandin: ........................................................................................................................................................................................................................... 20 Squib: Thach v. Durham ..................................................................................................................................................................................................................................... 20

5)Pinches v Swedish EvangelicalLutheran Church,S.C. of Errors of Ct, 1887 .................................................................................................. 21

pg. 2

Squib: Kelly v. Hance .......................................................................................................................................................................................... 21

6)Vines v Orchard Hills,Inc................................................................................................................................................................................ 21 The Bullet: WhenwelookattheP phrase,wedodamagesbasedonthelaw,however with restitution, werelookingatequity. ......................................... 22 Squib: DeLeonvAldrete.................................................................................................................................................................................... 22 Rule: ............................................................................................................................................................................................................... 22

Section 4 Contractual Controls on the Damage Remedy ...................................................................................................................... 22

Penalty Clauses and Liquidated Damages ......................................................................................................................................................... 22 1)Muldoon v. Lynch ........................................................................................................................................................................................... 23
Note: Pacheco v. Scoblionko (pp. 135).............................................................................................................................................................................................................. 23 Squib: Yockey v. Horn........................................................................................................................................................................................................................................ 23 Squib: Wilt v. Waterfield (MO Sup. Ct. 1954) ................................................................................................................................................................................................. 24

Comment: Applying Damage Clauses ........................................................................................................................................................... 24 2)Samson Sales Inc. v. Honeywell Inc. (149)....................................................................................................................................................... 24 Section 5: Enforcement in Equity....................................................................................................................................................................... 24 Note: Manchester Dairy v Hayward .................................................................................................................................................................. 24 1)Van Wagner Advertising Corp. v. S & M Enterprises (153)........................................................................................................................... 25 Squib:Curtice Bros. v. Catts (154) .................................................................................................................................................................... 26 UCC 2-716 specific performance only applicable in extraordinary circumstances ................................................................................. 26 Squib: Paloukos v. Intermountain Chevrolet Co. (160) ...................................................................................................................................... 26 2)Fitzpatrick v. Michael (MD Court of Appeals, 1939) ...................................................................................................................................... 26 3)Lumley v. Wagner ........................................................................................................................................................................................... 27
Squib: Pingley v. Brunson .................................................................................................................................................................................................................................. 27

Note: Enforcing Noncompeting Pledges ............................................................................................................................................................................................... 27

Note: ABC v. Wolf (173) ................................................................................................................................................................................................................................... 27 Squib: Fullerton Lumber Co. v. Torborg ........................................................................................................................................................................................................... 28 Squib: Data Management v. Greene (AK Sup. Ct., 1988)................................................................................................................................................................................ 28 Northern Delaware Indus Dev Corp v EW Bliss Co......................................................................................................................................................................................... 28 Squib: City Stores v. Ammerman (DDC, 1967) ............................................................................................................................................................................................... 28 Squib: Grayson-Robinson v. Iris Constr. Corp (NY Ct. of Appeals, 1960) .................................................................................................................................................... 29

pg. 3

Chapter One: Section One

1)Hawkins v. McGee - ED Facts: P claimed K based on doctors words; doc guaranteed for a %100 perfect or goodhand .Jury awarded P K damages. Unlike torts damages, K damages put someone in the position they would have been in had the promisor performed. Hawkins had 2 claims: (1) Oral Breach of K (2)Negligence - Hawkings claimed DR. wascareless.P failedtoproduce sufficient evidence- Non-Suit OrderedProcedural History: Amotion claiming excessiveverdictwas granted - Dr.McGee was grantedaremittitur - afterverdict. Dr. requested foranewtrialunlessHawkinsremitall$over$500.Hawkinsrefused, and appealed. McGeemadealistoflegalerrors cross appealed: (1) Judgment as a matter of law - Trialjudge should grant motion for a directed verdict due to insufficient evidence for the jury(sufficiencytest). Claim: No K was formed.(2)Damage instruction to the jury was in error -1) pain and suffering* 2) ill effect of the operation**. (Instructions was premisedon tort damage measures - restoreperson to position before the tort) *This wouldhave been a measure ofdamage had the negligence/tort claimprevailed. However,In K this does not preclude other pain and suffering in the second surgery to repair what occurred in the first. **Another tort measure which is backward looking versus it being a K measure, K damages put the promisein the positionhe wouldhave been in had the promissor performed, regardless if it is worse or not (THE P PHRASE) Kdamageslooktothefuturehypotheticalpositionhewouldhavebeenin,while tortdamageslook tothepositioninthepast and restore thatposition. Three interests beingconsideredinbreachofK cases: (1) Expectation interestfocus on injured party - forward-looking, it aims at putting her in the same (monetary) position had K been fully performed. (2) Reliance interest focuses on the injured party - backward-looking put her in the position that she would have been in had she not made K in the first place. It does so by reimbursing her for the loss caused by her reliance on K. (3) Restitution interest focuses on the breaching party. It is backward-looking in that it aims to put the breaching party in a position similar to the one she would have been in had no K been made. Forcing the party in breach, to return any benefits she obtained by breaching.
Injured party Past Future Reliance Expectancy Breachingparty Restitution ?

How do we accomplish the P Phrase here? (1)Good handvs. current damagedhandfor remainder of his life. Diminution of market Value (2) Another remedy is cost of completion- Cost of Performance. SC was wrong is saying that we should not apply COC due to fact that D does not want to do a second surgery. Prof.: This is sheer nonsense, what reasoning is that? Reasoning:What was the reasoning of the trial judge? Breach of K damages for future considerations seem excessive. Sullivan vs. OConnor.Mass. SC. Doctor promised to surgically improve Ps nose and it didnt. Court: had DR beennegligent,althoughclaimwasforBOC, we give the patient full Kdamages (Future). If DR was not negligent (only BOC), thanonly givevictimtort damages, repair what the action changed - Now Vs. Before. Shows that rules arent rigid and robotic. The Bullet point The P Phrase. 2) Groves v.Wunder SC - Minn. (1939) Facts: D breached K to level ground after removing gravel. Cost of leveling was much higher thanMV of the land already leveled. Issue: is cost of performance the proper measure when it exceeds DIMV? Ruling: Yes. Dissent (Prof):This should occur when it satisfies the land owners personal taste and desires, not the case here.Notes:P could have specifically stipulated that he wanted COC. P Phrase comes in two flavors:(1) Cost of performance (where Groves gets the cost of what it would take to set right the wrong)(2)

pg. 4

Diminution in market value (where Groves gets the change in its valuation of the topic under discussion). Groveswasover-compensated: (1) weknowhewillnot (and didnot)level theland. (2)InK law we dont care what the intent of the breach was (willful or not), &we do not give punitive measures. In this case, there wasapunitiveair(notallowedin K)itsanissuewhetherdeliberatebreachshouldmatter; usuallyitdoesnot,but herecourtsaid itdid; abaddecision. (CRT thought they could analogize the case to construction K where there is a good faith breach, breaching party may not sue, and may not invoke substantial performance limiting damages to DIMV - Legalines.) However, in certain circumstances the court should award cost of performance, when we know the money will be used to complete K. Ex: 1. Ugly Fountain (Restatement, Second) - A Ks to construct a monumental fountain in B's yard for 5G, abandons the work after the foundation has been laid and $2.8G had been paid by B. Fountain is so ugly that it would decrease prop value. COC would be $4G. B gets $1.8G - cost of completion less the part of the price unpaid.Prof.:Different than Groves: hewouldnt havedoneitand fountainguywill do it at his cost. 2. Peevyhouse v. Garland Coal:Facts: P leased part of their farm to D for strip mining of coal. Express written term of K stated that D smooth out the land once it was done. D refused to smooth out the land. P sued for COC ($29G) P farm was worth less than $5G COC would have added $300. Trial jury awarded 5G Issue: Can award COC rather than DOV when disproportionate? Holding: No.Analysis: P wouldvespentthemoneytofixthe land (the stayed on land after the case), however, OK courtonly awarded DIMVnotCOC. Prof.: court got it wrong, should have given COC. How we know groves will not level land:Coase Theorem- In aperfect market, where therearenotransactioncosts, changingthelegalrule governinga certaintransactionwill notaltertheequations ofproduction(will not causeareallocationofproductive resources)As long as there is a possible change in the terms of our deal that would produce net benefits, we will negotiate. First restatements of contracts (346):unless economic waste, where builder breaches, award COC. The Bullet P Phrase has two methods. 05/24/2011 3)AcmeMills&ElevatorCo. v. Johnson Facts: Acme made a deal with a wheat farmer to buy all of his wheat upon delivery at $1.03/bushel, April 23. However, on July 13, D makes a second deal with another miller for 1.16; further, when threshing ended (Wheat is ready to harvest, threshing must be done immediately. It began on the 25th, ended on the 29th), wheat is worth less than $1/bushel. (Trial court rules for D)Analysis:Prof:Delivered from thrasher 1909:(1) when and from (2) where is the delivery. Acme claims that D breached K and asks for damages (diff. between K price and Resell). Johnson responds: (1) Acme was rumored to be unable to pay (2) damages are 0 -P would have lost about 3C/bushel. (According to the court, breach occurred on the day that D began harvesting. K doesnt state a date; court says K was for delivery for wheat on July 25-29. Ruling: The Court applies diminution-of-value, due to the strictly commercial nature. However, the diminution is zero; no damages. Court also affirms that there are no punitive damages in K law, unless there is also a tort claim. Academictheorywhy courts use expectancy as aremedy:We prefer compensatory damages to punitive or nominal, largely because we want to respect the efficient breach,it is not necessarily in societys interest to have every promise be performed. In our case,breach isefficient because whensoldtoLibertyMills;Dmovedwheattoahighervalueuser. Theexpectancyremedygivesbreachersbenchmarks,andawards breacher forbeingmoreefficient. Q:IftheruleisthatAcmewontget$fromJohnson,whydidhethink hewouldget$from theprofit?
y

IfDhadperformed bygetting wheatfrom elsewhere, hewouldve chargedAcme $1.03andmadeaprofit -ratethenwas97C.However,AcmewouldclaimthatK wasforDsspecific wheat.Dwould reply thatwheat is fungible - Commercially interchangeable with other property of the same kind.

A: Acme Believed: 1. Dmanipulatedthe threshingandintentionallyheldoffuntil themarketwent down (estoppelargument).CTruling:

pg. 5

noevidence 2. Ihave this daysoldthe wheattoAcme.- WordsoftheK-title ofthewheattopasson 4/26istheintentsoafter4/26,theactual wheatbelongedto Palready.Byselling Pswheatitisconversion* andtheremedyisthatDhastopayall theprofitshe gotfromLibertytoD.Prof: How the lawyers did not win the argument is question. (*Tort& criminal law - The wrongful possession or disposition of another's property as if it were one's own) Ds selling toLibertyon 7/13-14was anticipatorilyrepudiatingtheK.  UsuallywhenBOC,youfindoutonthedayoftheKthatitwasnot performed.Here, he and we knewinadvancethathewillnotperform. Shouldmeasuredamagesasof 7/13-would be$1.16! (Prof: However this is not the case, he did not breach on 7/13-4, for he could still replace the wheat).  Lawallowsyoutogotocourtwheninformedthatthekwillnotbedone.

[**Special casewhere:fiduciary relationships - theresa specialtrust imposedbythepromissoronthepromissee] The Bullet Only P Phrase, nothing more, we will not let the other party lay their hands on the profits. Squib: Laurin v. DeCarolis Constr. Co., Inc.: Facts: P bought a tract of land from D. Before the transaction was closed, D took gravel without permission. P sued for BOC and was awarded MV of the gravel. PH: case was appealed and reversed because damages werent consistent with K damages, but conversion tort. They reduced damages to the amount by which the propertys valuereduced by removing the gravel. P appealed. Issue: What damages should be awarded to P? Rule: D ought to be liable for MV of materials removed. Analysis: Court says it is not sufficient to award damages based on how much less the property is worth. Note: Paiz v. State Farm Fire and Cas. Co. - HowK was breached is irrelevant.Non-breaching party shouldnt be able to get extra bonus from a breach with a high degree of fault. Common law states that the standard measure for compensation is the amount by which the marker price at the time and place of delivery exceeds K price. If there are installments; we assess the differential on each date of delivery. However, This however places the buyer in a bad position of assuming all the risk and the buyer cannot cover for the whole contract. UCC takes the position in this case that the B should not need to use the spot market: 2-612. 2-712. 4)Missouri Furnace Co. v. Cochran Facts: MF contracts with Cochran to get coke at $1.20/ton but only gets a fraction of K. MF makes a new K on 02/27 with a third party to get the rest at $4.00/ton. P sues to recover the difference in price (2.80/ton)Ruling:Court rejects that price difference calculation - P is only entitled to the difference between K price and MP of standard coke at the time of delivery* (Same rule in Acme Mills).Reasoning: MF entered into another forward K. Had it entered a spot market deal, buying at MP specifically as it happened; it would have been fully compensated. (Since MF knew it was going to sue and get spot market damages, it should have stuck with that). Old Rule: where delivery is to be made in installments, damages will be measured based on MP of the time and date of each installment. D can reenter the K any time he wants and you have to wait and see if he will continue to breach by not delivering at the set times. Prof:This was the law at that time and is a pretty bad choice. Law today, the recipient of an anticipatory repudiation is relieved of any duties that he had: Common law: Hockster v De La Tour-apartythat receivesananticipatoryrepudiationmaysueright awayanddoesnthavetowaituntilthetimethathe wouldve completedperformance When Buyer breaches contract, how to we do the P Phrase? 2-610:Anticipatoryrepudiation / 2-713: Prof.: Why at time learned of breach? Person may be away, so instead lets you get price on date you learned of breach. Most of the time one learns the day of actual breach. 2-723 (1) if action based on anticipatory repudiation comes to trial before day of breach before time for performance we asses MV at time when aggrieved party learned of the repudiation, which seems to confine itself to actions that come to trial before its performance date, we measure damages at time that learn of repudiation, not of the breach, but only in that one special case when action comes trial before performance date. Commercially reasonable time after repudiation: Damages should be calculated by use of the market price at the expiration of a commercially

pg. 6

reasonable time after the buyer has learned of the repudiation.Incentivize the buyer to cover. 2-706(1): Seller's Resale / 2-708. Seller's Damages for Non-acceptance or Repudiation /2-709. Action for Price / 2-718(2) Liquidation or Limited D / 2-718(3). Buyer restitution in BOC. 5)Neri v. Retail Marine Corp Facts: P entered K to buy a boat from D. P made a K $12G for the boat and down payment of $4G (for immediate delivery.)P breached K, but wants his deposit back. D declined and P brings suit. Trialcrt awarded P restitution in the amount of $3750 less $500 as an offset amount to D for BOCunder the rules of the 2-718. Rule: Court reverses and finds that that measure of damages (difference in MP at time of sale and unpaid K price) should be replaced by a rule which shows the appropriate measure of damages to D Lost profit. Notes: Trial court looks at the UCC, In this case, $500. It awards D remainder = $3.7G. COA awards damages to RMC in the amount of the profits on the sale, plus the incidental damages for maintaining the boat while it was languishing. This is less than the deposit, so the balance of the deposit is ordered returned  There are two different kinds of sellers in the marketplace: (1) One seller with one item: Not deprived of lost profit when a person breaches in this case. S only has one item to sell thus the only harm or damages would be the incidental cost of finding a new B. Same # of B for the same number of items (1:1). (2) A seller with inexhaustible supply Loss of profits in this case. If B performed, S would have made 2 sales instead of 1 two sale theory. This situation: same number of B and the same number of items (unlimited: unlimited) (The 2nd Seller: Would D have made 2nd sale? Maybe not, 2 reasons: (1) Boats are out of the same harbor. It is not really likely that another boat will be sold - 2 similar boats in the same harbor not likely; hence, we should discount the value of a guarantee sale. What would the S discount if he had a guarantee? (2) Marine has competiion: 2nd buyer could have bought from Neri.) Prof: COA misread the UCC! Rule: $500 + lost profits. The Bullet: The seller is entitled to the lost profits, plus expenses. Squib: Commonwealth Edison Co. v. Decker Coal Co. Issue: If a seller can recover K price of goods under 2-709, can they alternatively recover larger damages for lost profits under 2-708(2): Rule: 2-708 only applies if the seller cannot recover for the price of the goods under 2-709. 2-708 is sort of a backup provision. Analysis:Drafters of the UCC said that2-708(2) only kicks in if 2-708(1) is insufficient (inadequate) to put S in as good a position as performance would have done. Court argues by analogy that the drafters must have intended that 2-709 is the same sort of front-line provision as 2-708(1), and that 2-708(2) is a backup to 2-709 as well as 2-708(1). Conclusion:S cannot recover damages under 2-708(2) if he or she can recover the price of the goods under 2-709. 6)Illinois Central RR Co. v. Crail: Facts: P, a coal dealer, mad aK with D for the delivery of 88K lbs carload of coal. D delivered an unexpected shortage of 5K. P purchased the coal with no intention to resell it, just add it to inventory, at a wholesale price of $5.50; NOT at the retail price of $9.70, but sued for the retail price of coal. Ruling: the court finds that Ps request for measure of damages at the retail price is not an accurate measure of damages and would over-compensate P. B always bought coal at wholesale here he cannot buy 5Klbs at wholesale it ONLY came by carload.
The Bullet Not cranking formulas, only actual damages.

Squib: Watt v Nevada Central RR. Facts: P collected approx. 700 tons of hay over 4 years which he stored in his ranch to prevent a starvation of his cattle in the event of a harsh winter. Ds train negligently set fire to Ps hay destroying all of it. P sues D for damages. The trial court finds for P and awards him the value of hay in the closest hay market to their location Austin, TX - $10 a ton when bailed. The appeals court reverses and awards P with only $3.50 per ton of hay ($10 Austin price - $2.00 to bail the hay, $6.50 to transport the hay). Notes: Economic function of the hay was that it was drought insurance, so we could give him the value of insurance for that time and the cost of growing the hay and it would still be less than going to Austin.Questions: What are Watts actual damages? Trial courtwas incorrect: (1)P wouldve had to bale the hay to Austin-labor, so the COA changed it to $3.50 b/c deducted labor costs (2) Watt didnt go buy the hay and transport it, so it would have over-compensated him. The cheaper way to recover is to grow hay at $5 which is

pg. 7

cheaper than going to Austin, and thats what he wouldve done. So giving him the price in Austin plus labor, overcompensating. Reliance Damages Damages suffered by the party because he relied on K to happen. If A to sell a device to B, and the device costs $2 to make, the reliance damages if B breaches (by not accepting, for example) are $2. They are intended to put P in as good a position as he was in before the contract was signed." Reliance D wont recover for expenditures before k was made. (1) Essential Reliance- Money spent in the furtherance of performance of the victim of the breach on the K. Consequential damages. (2)Incidental Reliance- Money spent in reliance on the promise, but not spent in furthering the K, but rather spent on collateral transactions. (If Dempsey who BOC expected wine, he may need to repay that) 7)Chicago Coliseum Club v. Dempsey: Illinois Court of Appeals, First District (1932). Facts: P Ks to host a fight between D and another fighter, paying D $10 upfront and more money later, D agreed not to engage in any boxing matches prior to date of match. P also entered into an agreement with Wills (other fighter) to deposit $50G in escrow 10 days before fight date. When it came time to get insurance as required under K, D contended that there was no agreement and that he was scheduled to fight Tunney.P filed complaint in Indiana to have D restrained from fighting Tunney. Court found K was valid and granted injunction. Psought damages against D for flagrant BOCin Illinois court. P sues for four types of damages: (1)Loss of profits from the event not happening. (2) Expenses incurred before K was signed, including K with the other fighter. (3) Expenses incurred getting and enforcing restraining orders against D. (4) Expenses incurred after K was signed but before breach. (1)P admits lost profits can't be calculated and therefore can't be recovered, so denied (However, D lawyers tried b/c of a rule that parties can agree a K that is executed one day will be effective as of a different date that is before or after date of execution). (2) Court: since expenses incurred before K was signed were incurred without assurances that K would be signed, they can't be recovered, only expenses that naturally flow denied. (3)Civil procedure matter about the risks and expenses of litigation, skip. There are multiple parts to(4): one was expenses to a certain employee, to be paid out of the proceeds - denied. However, the others are valid: the upfront money to D, the cost of buying plans for a possible location of the fight, and any special expenses incurred after K was signed, such as flights or additional temporary workers (normal salaried workers are excluded, of course, since they would have been paid K or no K [Me: how come no fixed cost damages? - Leingang case]). In the end only those parts of #4 are recoverable.  This rule of reliance damages must have been known to the clubs lawyers, why did they think they canwin? If a person takes on pre-K expenditures when signing the K, they maybe held liable.  HowdoweknowDtookonresponsibility?Kwasdatedsame dateasthe Kwith Wills(other fighter).Willsexecutedon3/6andDon 3/13, but Ds K bared thedate as of3/6. Hence, it is possible courts got it wrong againProf.: How did the lawyers screw this up?Courtassumed that the Kwaseffective3/13, not3/6 - couldbebecause theyleft outthewordsasof. Rule:Parties can agree that a K that is executed one day will be effective as of a different date; before or after date of execution. Q.:Isit trueclubsprofitswerespeculative?Didnt they estimate whether theevent wouldfillup*?Whydidntthecourt allowit? Thecourt took the litigatingpostureinapplicationforinjunction fromIndianacourt thatsaidthat inorder to getinjunction theyneed toshowit wouldcause them irreparabledamages, so ED damages would not be enough. Now here,once they tookthattheoryon,theyrestuckw/it. However, it is questionable what the procedural process is, and if the Illinois court had to accept the equity decisions. If courts can value hairy hand; should be able to value ticket pricing? However, we deviate from it, for we dont know the ED, so how do we know the RD? How do we know they would have covered their expenses? This leads us to the next case. We shift burden of proof on D breacher, not P. We assume he would have covered his damages. This is a procedural maneuver. Outline: If ED are too speculative, give reliance damages; like here, where Ps profit was totally dependent on ticket sales, can only grant himamount he already expended.Restatements 2nd of contracts - 349. Effort to collect pre-K expenditures that were successful:

pg. 8

Squib: Security Stove &Mfg. Co v American Ry Express Co.:Mo. App.(1932) Facts: P - Security Stove wanted a demo stove shipped in 22 packages from Missouri to NJ for an appliance exhibition. They hoped to get a distributor interested in their product. Only 21 packages arrived on time. P sued shipper (D). (D argued that since it was just an exhibition, there was no real loss of profit, therefore, no ED. P argued that there was considerable loss of goodwill and potential future profits. In addition, they had a reliance interest which is a measure of compensation given to a person who suffered an economic harm for acting in reliance on a party who failed to fulfill their obligation. Issue: What damages may P recover?Rule: P has the option to recover reliance damages when EDis too uncertain.Analysis: Court: application of ED is a general rule that doesnt apply in all cases.Sometimes injured party can recover reliance damages even though this money is spent had K been performed. Although booth space was rented before K, P had arranged for exhibit knowing that it could call on D to perform its common law duty to accept and transport the shipment with reasonable dispatch.. Conclusion: Judgment of trial court upheld. Argumentwasthatthey knewwith legalcertaintythatthepromisewouldbemade.
y

Why was P successful? Theres an ancient law of common carriers that in exchange for privilege in using kings highways, carrier undertakes to carry all itemsfrom people who pay the fee. When P made pre-K expenditures, it did it in reasonable reliance that D - a common carrier - couldnt refuse K. K was as good as if it had already been made!

Psuedforpresidentswastedtime-Although hegetspaidaflatsalary, pres.Time wastruly wastedexpenditures because he couldntproduce whilstonthetrain.In contrast to Dempsey,pres. didntrecoverbecause duringwastedtimehecouldvemadealternatearrangements.Q: Whypayfortime, payforlostprofitspotentially gained duringwasted time? A: Speculative damages! The Bullet: If reliance of something consistent, can get damages anticipating K. Squib:Anglia Television Ltd. v. Reed: Facts: Anglia (P) made preparations to produce a TV play. Anglia Ks with Robert Reed (D) to star in the production. D agreed to come to Eng.

and be available from Sep9-Oct11 to rehearse and act in the filmfor 1G pounds (+ living expenses and airfare). D breached.P sued D for lost expenditure.Trial court: P can recover damages from both before and after D repudiated K, D appealed.Issue: What damages are available to a P in a claim for wasted expenditure?Holding: P is not limited to expenditures incurred after the formation of K, but also before. Analysis:Court:if expenditures incurred before the parties entered into K were reasonably within the contemplationof the parties as likely to be wasted if K were to be broken, expenditure are recoverable. Here, D knew or should have known that if he repudiated K, fees incurred for directors and other expenses would be wasted. Disposition: Affirmed.Notes: Before and after K expenditures; In contrast to CCC v. Dempsey. This is because before K was signed, there was time to find another actor if D turned down K; once it was signed and breached, there was not enough time. All of productionexpenses were incurred in reliance that someone would sign a K. Therefore, once D went into K he assumed that responsibility. This case is different from Dempsey: Dempsey was unique-the only heavyweight champion in the world; Reed was just an actor, and there are other actors P could have signed, but none of the other guys who were eligibleto play the part had a legal duty to sign w/ P (By stove, carrier had a legal duty to K). However, reliance on one of 12 guys was neverthelessreasonablebecause theres always a struggling actor. However, When Reed signed, waited, and then breached, he converted himself to Dempsey and became unique! Had he backed out right away; P probably wouldnt have won - could have gotten another actor, but since D waited, and then breached, he caused expenditures to be wasted! The bullet Can rely when there are many alternatives, and late breach. Restatement of Contracts, 349:RD less any loss that the party in breach can provethe injured party would have suffered had K been performed: (a) Dont want to put P in a better position than had there been performance (b) However, the BOP shifts to the D to prove the loss saved. 8)L. Albert & Son v. Armstrong Rubber Co.: Facts:P Ks to sell four rubber refining machines to D for $1G, and D paid $3G to be ready to receive them. P delivered two - 2 years late. Trialcourt awarded P cost of the first two machines.D sued for reliance of P promise to deliver: (1) Its investment in a reclaim project (118G) (2) Cost of scrap rubber (27G) (3) Cost of laying the foundation for refineries (3G). Rule:COA awarded claim 3, but denies other 2. Analysis:D couldnt prove refinery was the reason or cause of the loss of (1) and (2). S is not an insurer against B presumed benefits and loses. ED is unknown, hence we rely on RD. True reliance is this case is the 3G, and BOP is on the P to prove that D would have lost money had they actually sent the refineries.

pg. 9

Squib Mt. Pleasant Stable Co. v. Steinberg: Facts:PCo. agreed to supply teams of horses at agreed rates as required from day to day by the D for his business. P bought 2 "Cliest" horses.Drepudiated K. P sold horses at a loss; sued Ruling:P not entitled to loss; for it is already recoveringlost profits. Section 2 Limitations on the P Phrase. Principle of Mitigation: (A)Construction K Builder is not required to assume another job due to breach.However, builder must stop for accruing damages. (B) Employees have very specific ways they need to mitigate. 1)RockinghamCountyvLutenBridge Co.: Facts: Rockingham County (D) contracted with Luten (P) to construct a bridge. D had completed very little work on the bridge (2G) when P provided a notice of K cancellation. P proceeded to complete the bridge and suedD for BOC (Full K 18G). Trialjudge gave full amount of K. P appealed.Issue: What damages are appropriate where one party gives notice of BOC and the other party completes performance?Holding and Rule: Damages are limited to the amount he would have been able to recover as of the time od repudiation (Profits). D is entitled to expenses incurred up until repudiation, plus expected profits from K completion, plus losses incurred.(However not costs incurred after BOC the bridge). Reasoning: P must mitigate damages. It is wasteful to complete a bridge when changed circumstances have rendered it worthless. The law seeksincentives for efficient breach. Prof.:Bridge Co. performance is condition precedent for the County to pay - Bridge Co. must finish the bridge before the countys responsibility to pay comes about. Law says that if 1 party prevents the other from fulfilling a condition, then the preventer is liable for breach.County prevented the bridge Co.from fulfilling its condition precedent - breach. Q: Why did he continue building, was there a breach? A.: He did not know who to listen to, due to political maneuverings. Maybe b/c of the dissent in the commission P may not have had a clear answer that the county was breaching. We dont know but it is possible, and would have put Luten in a very dangerous position if they listen and letter was notice was sent from a party out of power they would have been the ones who breached. The Bullet Mitigate damages. Calculation:Profits = (K - Total Expenditures) [TE = Total Expenditures (EI + ES): EI = expenses Incurred/ ES = Expenses saved by Breach - AR] Costs: (1) Fixed Cost (2) Variable Cost (3) Semi-variable Cost (hard to figure) Fixed Cost: Total cost does not change with changes in the volume of activity. Ex: Rent, insurance, administrative salaries. However, it changes per product. More products means diminishing fixed cost. Variable Cost: Changes in total, in direct proportion to changes in the level of activity. The total cost increases/decreases as units made increases/decreases. Direct material, direct labor and variable overhead are all variable costs.It is a variable cost if it costs you more if you make or sell one more. However, cost per product remains the same. Rockingham> K ES / Leingang> Trial Court: K TE net profits. (He did not do any work). COA: K ES (Why is that not TE? There is not variable cost incurred? A: K includes fixed cost) Explained: 05/13/2011 Squib: Leingangv CityofMandanWeedBoard Facts:D awarded K to P to cut weeds from large lots and another K toanother party to cut weeds from small lots.D then improperly assigned some large lots to small lot contractor.P sued for K price of the work he should have been allowed to perform minus the costs P saved by not performing. Trial court held only net profits were recoverableminussaved variable &fixed cost.Issue: How are damages to the P calculated? Rule: P is to be compensated for all of the damage caused by BOC,including fixed costAnalysis: Court argues that constant overhead expenses should not be included expenses savedof K because they would have been spent whether or not K had been performed, and hence needs to be given back as damages, for itwas not saved.Conclusion: Appeals court ordered a new trial. InLeingang,theydeductfromtheKpricethemoneysavedfromthebreach,the variablecosts.Thelowercourt howeveralsodeductedalso thefixedcosts because accountanttreatedaportionofthefixedcostsas expensesforthatyear(depreciation), regardless of work done, hence, they are

pg. 10

deductingit from theKprice. However, theaccountantsviewofprofitdiffersfroma lawyers viewofprofit. Accountantdoesnttakeintofixedcosts because they calculate causation (cost driver) constant cost regardless of production.Ifvictimsofthebreachwouldincurthe expensesregardless oftheK,thenbreachdidntcausethe damages.
y

However, accounting is not the whole picture. Whengeta K,companies useitall topayvariable,fixed,and other expenses.So,in fact theKyoumakecontributetopayingthefixed expenses.IfaKisbreached,more cashcomesoutfromthe otherKsto payforfixedexpenses.

Squib: Kearsarge Computer, Inc. v. Acme Staple Co.: (1976) Acme breached a K with Kearsarge in which P was to perform services for D. Trial Court awarded P full K (12G). D appealed, contending: (1)certain savings saved by not performing K(2)P serviced other clients after the breach new income.Ruling: No error Reasoning: No real savings (semi-variable cost are trivial) and can service two people at once; it wasn't shown that it would have been impossible to service the other clients but for the Acme breach:
y

Rule- Ifa partybreachesandyougetareplacementjob,you stillgetthelostprofitthatyouweredeprivedofifyouwould havebeenableto handlebothjobs. (Neri v. RMC)

Q:Canwe useKearsarge tosay the replacementcontributes to the overhead and replace breacherscontributionto fixed costeven ifwe didnt allow the second client to replace theprofit fromthe K?A: ME: based on the policy of lost profits (which I disagree with in the boat case), we can say the same here. The prorated fixed cost should not be replaced by the second client. He could have had two clients, and therefore more money contributing to the fixed cost.

What about employee and employer? What has the employee need to do to mitigate damages? Wrongful discharged employee duty to mitigate: 1) When employer breaches, employee can recover full K subject to mitigation. Employee duty to mitigate means he needs to find comparable work, same position and rank, same locale, however not the same pay-scale (this he recovers from breach of K). Burden of proof is on the employer.
y

More unique the skills of the employee may make it difficult for employer to prove comparable E.

2)ShirleyParkerv20thCenturyFox(Cal. 1970): Facts: Actress Shirley MacLaine (P), made a K with 20th Century-Fox (D)to play lead in the film Bloomer Girl a musical. D thereafter repudiated the agreement by not producing picture and instead offered P lead role in another picture, a westernin AUS (did not grant P the same control over directors and screenplay) P declined; sued for 750G (54G*14 weeks of work).Trial Court: awardedP full K. D appealed. Issue: Should P recovery be limited by her failure to accept substitute and possibly inferior work in order to mitigate damages?Ruling: Majority: P rejecting western does not change her recovery of K price, since offer was inferior; not violating her duty to mitigate. Dissent: 2 Ks were substantially equivalent, both called for the same type of work. Fox argued that the P had to accept the second role; she had a duty to mitigate.  Shirleypromisedtobeavailabletoworkfor14weeks forguaranteed compensation (regardless if foxmakesthe movie).Shewasbeingpaidtobe availabletomakethemovie,like firemenarepaidtobe available to putoutfires. Why structure the K this way? They didnt want her to make other movies; only be available to make their movie. Fox was in middle of negotiations if they couldnt get her locked up, they couldnt market herto get other stars!   She performed-did nothing for 14 weeks and claims FOX owes her K price. She also wants damages for failure to perform. However,FOXsentheraletterthattheywillnotbemakingthemovie-anticipatory repudiation.TheydidthissothatshecantclaimthatshefulfilledK,andshehadadutytomitigate and wont recoverthefullKprice (very clever). They offered her a movie she knew would not take to get out of cost.   Theycould notbreachbynot making the movie.Theonlywayforthem tobreach is for them to say they willnotpayK price. Ps reply had two claims, the first being the main one (1) that by doing nothing, she in fact earned the K price. The letter stating that they are repudiating the K b/c theyre not making the movie, is notrepudiating the K; she just had to be available in the event that the movie was

pg. 11

maderegardless whether they made the movie or not (2) wrongly the focus of the court was for damages, which led to the disagreement if she mitigated or not. Why did the P lawyers add the second claim? And whats thedifferencebetweenK priceanddamages? Inorder togettheKprice,mustcompletedperformance.If you do not perform (due to the other party breaching) then you get damagesforananticipatoryrepudiationoracondition precedent(Notthe Kprice which the lawyers wanted by finishing the bridge)FOX repudiated, so her K for availability ceases to be in effect. The bullet; Rule - ShirleyMcClain is not Kearsarge. Kearsarge and RMC is a service - goods dealer. Employees cant get lost profits; they only can be at one place at a time. Employees lose recovery by mitigating. Squib: BillettervPosell(1949) D was awarded full wages for employer hiring someone else (for "floor lady and designer") and offering D a lower wage as a floor lady. The amount owed does not subtract unemployment compensation, nor does it subtract the lower salary offered to the employee.
y y

She had no duty to mitigate, and hence they cannot be deducted from her compensation. Floorlady/designerchangedtobesales in appliances: Whatisconsideredinferior?Andwhat does she have to accept inorder to mitigate damages?

y y y

What happens when she gets more money to be a waitress? What happened if she in fact accepted the offer? Prof.: thinks we hold it against her. Same position but a long commute?

Pp.74 Q.- Speechtherapist.Theyregettingabettertherapist,butnotagoodargument they did not ask for a better one,sotheold speechtherapiststillhas topay; shebreached. R2 351(2) - Foreseeability / 2-710(2): Sellers Consequential damages / 2-715: Buyer's Incidental and Consequential Damages. * Tort accepts the injured as they are - no limit. Tort may have an out - there is proximity cause - as some point we say causation is too remote and therefore no faulty. This is not true in K law - consequential damages have a limit. 3)Hadley v Baxendale Facts (Written by a barrister Not the judge (US)): P crank shaft broke. It was the only one they had, and without it they could not run their mill. Made K with the D to send it to the engineers; delivery was delayed; P sued for lost profits. Jury awarded damages of 25. D appealed. Issue: Is P entitled to damages for lost profits? Rule: Dwill only be held liable for the Ps losses if they are generally foreseeable or if the P tells the D about any special circumstances in advance. Analysis: Court: evidence that a client wants to ship a broken item fastdoes not necessarily followthey will lose profits if it is not delivered on time. Other circumstances under which Pwould have acted similarly; D need not have assumed situation was dire. If special circumstances existed, special provisions can be made in K.Conclusion: New trial Hadley was the 1st time a court put a limit on what the jury would award in K damages. 1. 2. 3. 4. The famous rule of consequential damages is that damages for a breach: Baron Alderson - Rule(1) Arising naturally, i.e., according to the usual course of things Rule (2)may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract Judgeignores the fact that were told that the shipper was aware P servant told the clerk that the mill was stopped. Prof: Barrister disagreed with judge whether they told them if the mill stopped, Judge presumed D did not know. Guido Calabresi - Coase theory that says the allocation of resources is irrelevant and it makes no difference who carries the liability, least-cost avoider, says the opposite. LCA is party who can avoid an accident at the lower cost.LCA relies on the assumption that either party can undertake a discrete amount of care that is sufficient to prevent an accident - it is socially best for least cost-avoiderto assume responsibility. Rule: assign liability to the least cost avoider.Policy:Coase v LCA Here, LCA would be mill owner. He was in the position to decide what to do if his shaft broke and he can figure out how to minimize the cost of the accident. He can decide if it is better-to invests in a spare shaft, or if it doesnt happen enough get insurance - Mill owner could figure out what is the least cost - cheapest way, to avoid loss as a result of such an accident. NASA engineer walks into Joes hardware and ask for a replacement part for a rocket. He buys one and installs it into the shuttle and

pg. 12

malfunctions and destroys the rocket. Did Joe sign up for this when he sold the part? A more realistic case is Lamkins. This is the beginning of the discussion: 4)Globe Reffining Co. v. Landa Cotton Oil Co.: Facts: P K with D to buy an amount of crude oil, to be delivered at D mill. P obligated itself to pay in advance for the railroad transportation of its tanks to D mill. D refused to deliver the oil; P sued for the transportation costs, lack of alternative supply due to late notice, loss of customers, credit and reputation. Rule: Holmes: Mere notice (tacit) to a seller of some interest or probable action of the buyer is not enough necessarily and as a matter of law to charge the seller on that account with special damage if he fails to deliver goods.It will be seen that none of the items was contemplated expressly by the words of the bargain. Those words are before us in writing, and go no further than to contemplate that when the deliveries were to take place the buyer's tanks should be at the defendant's mill.
y

Court applies the Hadley rule, saying those extra damages were not foreseeable.This is K not torts. Agreements are a fundamental aspect of K Classical Theory of K.

Judge H: knowledge of extra terms "must be brought home to the party sought to be charged" which is stricter thanHadley rule. This is the "tacit agreement" test; something needs to be made expressly clear and at least tacitly agreed to in order to be liable (rather than just conveying orally a hypothetical)

What is a tacit agreement? Seems vague and hence not based on agreement something Justice Holmes wanted people to have. Ironic, because allowing the suit to follow will get people to actually agree on terms in case of failure Joe would tell NASA that they should not be buying the part from them.

UCC 2-715 disagrees with tacit agreement. If he was informed of potential issue, it may be reason to know Modern courts disagree with tacit agreement. Prof. tried to convey reason for tacit rule. R2 351(3) may limit Hadley rule.

Prof.:Oliver W. Holmes (Samuel Williston) was a founder of classic theory We do not have a fiduciary obligation. One only takes their own interest into account. We only owe basic duties of civility and such obligations we choose to undertake. Hence, we do not owe anything implied everything should be written in clear terms. That is the spirit of this case. Corbin was neo-classical. Squib: Lamkins v International Harvester Co Facts: Lamkins bought a tractor. He wanted lights on it. Wasnt delivered with lights and he didnt get lights for a year. P was unable to work at night; sued D for his lost profits. Issue: Is Dliable forcrop loss? Rule: For D to be liable, must be evidence that he tacitly agreed to risk liability for a crop loss of the size sustained.Analysis:Court argues that the dealer neither made a K to assume such liability, nor, based on the evidence, made a tacit agreement to do the same. Notes: ProblemwithHadleyisthatitcanleadtohugedamages.Holmessaiditsnotenoughto justbetoldaboutthecircumstances,butyoumustpresentcertainty.Ideally,youwantto havesome sortofagreementaboutwhatthedamagesare.Heprobably wouldveloved LDCwhichstateinK what damageswillbe in event ofa breach.Q. whatdoesPshowtoprovethat therewasatacitagreement? Problemwith testisitsvagueanduncertain. Squib: VictoriaLaundryLtdv NewmanIndusLtd Facts:P made a K to buy a boiler from D. Boiler was delivered a few months late. P sued for lost profits. Issue: What part of the Ps profits can they recover? Rule: When there is BOC, breaching party should be liable for damages that naturally arise from breach or damages that both parties contemplated at the time they made the K. Analysis: Court: reasonable to think that since D knew that P was in laundry business, it was foreseeable that a lack ofboiler would keep them from receiving profits they usually get. D cannot plead ignorance as to what the boiler was for; any reasonable person would understand that it is essential to their business. Conclusion:damages for ordinary profits but not for special dyeing Ks that D didnt know about.Notes: Areasonable person in the breachers position would have foreseen.Here: D liable for the foreseeable consequences, but no other damages. Squib: Heron II Facts: D Ks with P to carry Ps 3K tons of sugar to Basra. P intended to sell the sugar. D did not know this. Voyage approx. take 20 days.Vessels stop at 3 other ports, and 9 days late. In the interval, a large amount of sugar arrives from Formosa, causing a drop in MP. P loses approx. 4K pounds on the deal. Rule: Judgment for P based on Hadley, but none of the judges are sure exactly why.Analysis: Should have known that by adding stops, market might change and hurt their customers.

pg. 13

Squib Hector Martinez & Co v Southern Pacific Transp Co.: Facts: D delivered a dragline a month late. P sued for the fair rental value of the dragline for delayed period. Trial court dismisses claim. Issue: Can P recover forrental cost ofdragline? Rule: Hadley requires notice only when it is not obvious that a delayed item has use value.Analysis: Dragline has use value; was being purchased to be used, not to be sold. It is foreseeable that if delivery is delayed,P will have to rent a replacement. Although possibleP was purchasing the dragline to sell, P need not prove their injury was most foreseeable of all possible harms, rather that it was not so remote as to make it unforeseeable does not need to be probable.Conclusion: Trial courts decision reversed; D is liable to P for the rental cost of dragline for delay period. Q.: Does the court disagree with R2 351 probable result rule? Restatement (Second) of Contracts 351(3)Damages for foreseeable loss by excluding recovery for loss of profits, by allowing recovery only for loss incurred in reliance, or otherwise if it concludes that in circumstances justice so requires in order to avoid disproportionate compensation fanother such circumstance is an informality of dealing, including the absence of a detailed written contract, which indicates that there was no careful attempt to allocate all of the risks. The fact that the parties did not attempt to delineate with precision all of the risks justifies a court in attempting to allocate them fairly....Prof:Whatisthe requirementforjustice? Theofficial comment (f.)speaksofinformalityof dealing whichmeansthefailureofthepartiestoallocaterisksandtheproblemofdisproportionatelosses. 5)Valentine vGeneral American Credit,Inc Facts:P alleged that her employment K was broken. P sued for mental distress due to loss of job security. Mental distress claimsdismissed at trial, decision upheld on appeal. P appealed. Issue: Can employees who lose a job sue for mental distress? Rule: Mental distress damages for BOC are not recoverable except when K has a personal element or when damages suffered due to breach cannot be compensated within terms of the K. Analysis: Court: BOC always cause annoyance, but the law does not allow P to recover for such annoyance.
y y y

No recovery for mental distress. Rule:in K we use MV Prof: we dont allow damages for emotional distress, unless we do. Wehavethisrulebecauseifnot, peoplewillhesitate toenterinto K. The mainreasonthoughis because we already have amarketpriceremedy,althoughat times itmay over/undercompensate. Whydowewant amarketremedy?Efficientbreach.GovernmentsenforceKforthe socialgoodandnottheindividualsbenefit.Hence, itmakessensetojudgeharmbased onthesocialharm. ( At times we do in fact look at theindividualwithin the framework of the K-SPremedy.)

Squib: Hancock v. Northcutt Rule: K for the sale of a home; no emotional distress in BOC Analysis: Idea of emotional distress claims in breach of construction K is rejected on policy grounds. Court: permitting emotional distress damages on K claim for negligent construction of a personal residence would make financial risks of construction difficult to predict. Only in Ks where 'emotional tranquility' is the K's essence is emotional distress recoverable.

6)MindGames, Inc. v. Western Publishing Co.:

Facts: Mar 90 P licensed its board game to D for a royalty (%15) to end Jan 93. Another year for 1.5M (K stipulated to deduct royalties, in this case 600G), and with every additional year 300G. The contract continued to Jan 94 past the first renewal date; as such, MindGames claimed 900G for the Ks renewal, plus 40M in lost profits and 300G for the K balance of 94(third year). District Court Ruling: Renewal fee and balance were tossed out because Court ruled K as having been renegotiated in 93. As to the lost profits, at the time Arkansas law had a new business" rule: he who is prevented from embarking on a new business can recover no profits because there are no provable data of past business from which the fact that anticipated profits would have been realized can be legally deduced." D claimed that since P was only 3 months old, no data. Rule:COA overturns new business rule. It is at once vague and arbitrary." Note:Purpose of new business rule is to prevent damages for speculative loss, which is incalculable. K law doesn't allowspeculative damages. Court talks about the diff between a rule (new business rule) and a standard (such as no speculative damages"). There's no way, the Court continues, thatD would have agreed to a K including speculative losses. COA throws out the new business rule, replacing it with the general speculative-loss doctrine. It therefore cuts out the logic but keeps the result. J Posner:In this case, the rule is unclear: what is a business"? What is new"? What are profits"? And given that the courts are sophisticatedenough to analyze lost-earnings claims, the new business rule is unnecessary. Discard rule. Rules versus Standards: A rule is easily enforceable, but can be simultaneously over & under inclusive. Ex: 55mph speed limit. If it's a straightaway, and there are no cars, and it's a clear day, what's wrong with 70mph? And if itsraining, dark, and the car looks rickety, even 55mph

pg. 14

can be dangerous. Therefore, rules have error costs." The standard, though, is completely subjective, and can be prone to abuse; plus, they are more uncertain. A standard makes it harder to predict the actions of the decision maker. Therefore, standards have decision costs." Usually there's a combination, such as a negligence standard of a duty to care, applied atop a rule.Expectation and other damages tend to be rulelike; speculative loss is standard-like. Prof: Posner says new business rule is not a rule Must prove damages - New business just a fact - Not a limitation on p-phrase but must prove damages Freund vWashington Square Press,Inc.: Facts:P made a K with D to publish a book. Terms included 2G advance upon delivery of the manuscript and agreement to publishwork. P delivered manuscript and collected 2G, but D did not publish. P sued at first for SP of K. Trial judge denied SP but granted a trial for monetary damages. P sued for damages stemming from(1) delay of his academic promotion, (2) loss of royalties, and the (3) cost of publication to publish book himself. Trial court awarded him the cost of publication (10G) but not the other two elements. P appealed; appellate court affirmed, with the minority holding P should recover only nominal damages. Issue: Should author be able to recover for cost of publishingbook himself? Rule: COA: Damages are not awarded based on the benefit to the breaching party, but rather according to the consequences of breach to the P. Analysis: The court argues that the P expected two things from the performance of the K: the advance and royalties. The author already had his advance, and the court says that damages for lost royalties cannot be awarded because insufficient evidence was presented at trial to support how much he might get. Conclusion: P may only recover nominal damages.Prof.:
y y y

Speculative damagesruleisbroughtout inthiscase.Theotherinfointhis caseis interesting: WasthereaBOC?COAsaid yes. However, K says they had arightto publishandcouldve cancelled, hence no breach. AssumingBOC,trial court awardedcost ofpublication.Absurd! - Authordoesntgetcostofpublicationifhisbookwouldvebeenprinted-he waspromisedroyalties,notthebooks!Whatisthecourtdoing?!

Fera v. Village Plaza, Inc. P signed lease to open book and bottle shop in Ds shopping center. Ps space was given to another tenant, and Ds offer of alternative spot was refused because it was unsuitable.Trial court awarded 200G. Appellate court: damages for a new business too speculative. Ruling: Trial court was correct, just because damages are speculative, doesnt mean Jury cannot do their jobs of assessing damages.If there is some injury, doesnt preclude recovery just because lost profits are speculative. Restatement (Second) of Contracts 352.Uncertainty as a Limitation on Damages Section 3- Restitution Alternative Damages Truly a new section. Section 2 is, in the end, just explaining the P Phrase. Not just limitations, but also elucidating the subtle aspects of the P Phrase. Section 3 is not contract claims. Why places it in K? A contract claim may not be feasible due to many factors. Hence, this is not about what the K is, rather what the effects of agreements can have. RESTITUTION Four Requirements: y Must be a total breach
y

Usually the breaching party needs to have received benefit of performance, although the breaching party may not have benefited from in any economic sense

y y

Injured party must choose to pursue either restitutionor damages if one has completed performance(K) , can only get expectation damages

Restatement 370 Statute of Frauds 1677 English statute that declared certain contracts judicially unenforceable (but not void) if they were not committed to writing and Signed by the party to be charged (Promisor). The statute was entitled "An Act for the Prevention of Frauds and Perjuries". Statute (based on the

pg. 15

English Statute of Frauds) designed to prevent fraud and perjury by requiring certain contracts to be in writing and signed by the party to be charged. Statutes of frauds traditionally apply to the following types of contracts: (1) K for the sale or transfer of an interest in land (WP: This applies not only to a contract to sell land but also to any other contract in which land or an interest in it is disposed, such as the grant of a mortgage or an easement.) (2) K that cannot be performed within one year of its making, (3) K for the sale of goods valued at $500 or more (4) K of an executor or administrator to answer for a decedent's debt (5) K to guarantee the debt or duty of another (6) K made in consideration of marriage. UCC 2-201. Abbr. S/F; SOF. This can be remembered by the mnemonic "MY LEGS": Marriage, contracts for more than one year, land, executor (or estate), goods (over $500), surety; or Marriage, one year, land,executor (or estate), guarantor, sale. 2-201. Formal Requirements; Statute of Frauds. Parol contract (p;l-rohl or par-;ll). 1. A contract or modification of a contract that is not in writing or is only partially in writing. Also termed oral contract; parol agreement; (loosely) verbal contract. 2. At common law, a contract not under seal, although it could be in writing. Also termed informal contract; simple contract. 1)Boone v Coe(1913) Facts: D made an oral K with P to move to TX and work on his farm for a year. When they got there, D repudiated and Pwent back to KY. P sued for the cost of trip. D demurred and won. P appealed. Issue: Can P recover reliance D on a K that is unenforceable under SOF? Rule: Damages cannot be recovered when K isunenforceable under the SOF, unless D receives benefit from part performance of a service K, in which case P may obtain restitution for services rendered. Analysis: Court finds no benefit to D: however had he received a benefit, the law would imply an obligation to pay" Notes: This case enforces the Year provision of SOF (2) K that cannot be performed within one year of its making. SOF makes K unenforceable, hence, cant sue on the K damages - that would be enforcing the K. CaseintroducesustoStatute of Frauds whichsayscertainKshavetobein writing.  Writingisamemorandum oftheK,butnotactualK. Itisevidence that a K exists.

Q. Are they completely out of luck? Is there anythingone can do with a K that violates SOF? A. Can claim Quantum Meruit. Quantum Meruit:Reasonable value of services; damages awarded in an amount considered reasonable to compensate a person who has rendered services in a quasi-contractual relationship. 2. Claim for reasonable value of services rendered. 3. Common law, count in an assumpsit action to recover payment for services rendered to another person. Note: QM is still used today as an equitable remedy to provide restitution for unjust enrichment. It is often pleaded as an alternative claim in a BOC case,Pcan recover even if the contract is unenforceable. Important point: theory of the claim is unjust enrichment. It doesnt have to be that one suffered a loss (could be you did, but not required), rather its that D have somehow benefited, and benefit should have gone to or belongs to me. It is broader than Restitution is based on the presumption that if 1 person confers benefit on another, it was done on the expectation that he would be paid for the benefit. This is fundamental. The transferee of any good or service must prove that it was done with donative intent. Hence, had there truly been a transfer of benefit, courts would have given restitution. This is a fundamental aspect of common law.
y

Even in the absence of any K, this is a presumption that the common law makes. So if the recipient of the benefit has the burden of proving that when the conferrer conferred the benefit, he intended to make a gift-must prove that it was a donative transaction. If not, theres the presumption and then the recipient must pay the reasonable value of the G/S conferred.

y Hence, in this case - Pmaysueforrestitutionoff the K, but cannot suefor reliance (no K). ThekeyisDmusthave benefited, why? A: (1) BecauseBOP that was a gift is on the recipient-maintaining our architectonic principle. 9gift complete

when there is a transferdone with intent) (2) Actoftherecipientinreceivingthebenefitis evidencethattherewass/tofa transactional actiongoingon; retaining benefitsshowssomething is goingonbetweenparties.

pg. 16

The Bullet: No K; therefore restitution: Only when benefit. 2)United States vAlgernonBlair, Inc. Facts: A subcontractor, Coastal (P called US), starting doing work for a primary contractor, Blair. D refused to make certain payments on a crane rental and P stopped work. P brought suit against the primary contractor (D) to recover for the services rendered (37G), however if they would have completed performance P would have lost more than 37G. Trial court: No damages Issue: Can P get damages for services rendered when primary contractor breaches a K even if the SubC would have lost money if they had completed K? Rule: If EDis insufficient to cover the P losses, P may substitute restitution damages. Analysis:P is entitled to damages for services rendered because D benefited. Damages should be measured by MV of labor and equipment provided not limited by K (was breachee). Conclusion: Ruling reversed and remanded to find out how much the services P rendered was worth. An accepted principle of K law is that the promissee upon breach by promisor has the option to forego any suit on the K and claim only reasonable value of his performance. This is true even if the complaint joins Quantum Meruit claim with a claim for damages from BOC. Q:HerewehaveaperfectKandthecourtletsthelawyers for P decided to sueoffK; Why? A:SubC chose this route becausetheywouldhavelost$iftheK hadbeenperformed,hence,damages would have been zero on the K. Byallowingthesubtosueoffk,theyareputtingthesubinabetterpositionthanhe wouldhavebeeninhadtheKbeen performed. Q: Why do we allow Restitution when there is ED? 1) We care about unjust enrichment, hence we allow restitution. 2) Material breach - A BOC that is significant enough to permit the aggrieved party to elect to treat the breach as total (rather than partial), thus excusing that party from further performance and affording it the right to sue for damages.Rescission (ri-sizh-an) 1.A party's unilateral unmaking of a contract for a legally sufficient reason, such as the other party's material breach, or a judgment rescinding the contract; VOIDANCEaccompanied by restitution of any partial performance. 1. An agreement by contracting parties to discharge all remaining duties of performance and terminate the contract. - Also spelled recession; recession. - Also termed (in sense 2) agreement of rescission; mutual rescission; abandonment. "The [UCC] takes cognizance of the fact that the term 'rescission' is often used by lawyers[1]'Termination' refers to the discharge of duties by the exercise of a power granted by the agreement. [2]'Cancellation' refers to the putting an end to the contract by reason of a breach by the other party (prof; by law). Section 2-720, however, takes into account that the parties do not necessarily use these terms in this way." Prof: the innovation of cancellation (Material breach - UCC article 2) is that it is automatic. This is not true under Common Law where K is rescinded by way of the Chancellor (who decides with his moral compass). 2) Thegeneralcontractorbreachedbynotpayingforcranerentals.This wasaunique breach-a material breach - that empowersthe victimtogetequitable rescission (he wants to end the relationship and hence wants restitution).RescissionistheunwindingofaKandobligations under the K aredischarged.

Instead of materialbreach,subcould have continuedperformingandthensue forthecranerental feesaslongashe wrotealetter thatwillfinishworkandwillsue laterforthe rentalfees. This was the safer option. (He may not have done so due to cash flow issues to pay for crane).

There was a risk in declaring a Martial breach 1) he may not recover the crane rental monies 2) The court may not find that it was a Martial breach, and they are the ones who breached the K. Same can be said for the D. He should have paid the crane price, and then send a letter like P could have done (will sue later for crane), would have gained K damages (benefit of the bargain) which would have offset the loss. Ask Prof: Can choose on the K vs. Off the K only when MB? A: NO, only when there is MB can he go off the K.
The Bullet: If breachee and MB; Can claim On k and Off K. Squib: Kearns v Andree Facts: D breached K to buy Ps house for 8G; 4G in to be paid in cash and another 4G in a mortgage payment that had not had a lender or terms

pg. 17

as of the making of the K - after P repainted and repapered walls to Ds specifications - additional demands made after the K. P wants expenses for 1) MeetingDs specs 2)Meeting purchasers specs 3) diff b/t K and resale prices. Issue:Can P recover even if K was unenforceable? Rule: Yes even though the attempted K was unenforceable, it showed the parties expectation of compensation. Analysis: P complied with Ds requests with expectation that D would compensate him, doesnt matter that D did not benefit. Prof Notes:This is NOT a restitution claim, as there was no benefit to D.
y

Why was the K b/t the buyer and the contractor unenforceable? The terms of the K were fatally indefinite; the K did not specify the terms of the mortgage.Procedural issue:contrast this form of unenforceabilitydue toindefiniteness,versus the SOF unenforceability. Kthat is indefinite isvoid while K that lacks the writing that is required isvoidable;it is an affirmative defense he must claim SOF. The difference is that usually we require the P to plead certain matters in the complaint, specifically P must plead the As aelements of whatever claim he is making. And then, typically, the BOP follows the burden of pleading P specified what he want (he adds and whatever the court hold is just). Other matters such as SOF we allocate to the D to plead: affirmative defenses.

K isvaliduntil and unless the D pleads SOF as an affirmative defense, and then the K is rendered void.Definition: Affirmative defense.A defendant's assertion of facts and arguments that, if true, will defeat the plaintiff's or prosecution's claim, even if all the allegations in the complaint are true. Defendant bears the burden of proving an affirmative defense. However, (such as in this case) a K that is indefinite is void-K is ab initio: void from the beginning (get go), as opposed to the SOF which
y

merely puts K in jeopardy of becoming void.

y

Courts think that the defaulting B should pay P for work done although K was void and B did not benefit. Therefore, they need to find a theory that would make B pay :

Court comes up with theory 1)B requested that S do the repapering (2) S reasonably expected to be compensated we are going to imply a promise, although no benefit was conferred.

Theory is wrong! When D requested the repapering; P was willing to do it for free, to entice D to continue buying. He was trying to give D a gift,D rejected, so gift was never actually made, no transfer.There was no expectation to be compensated. There needs to be mutual consideration in order for valid K (bargained for exchange) and here there was no exchange; S was going to do it for free as long as B wouldnt breach. This is fundamental:A promise not to breach - cannot form consideration.

The Bullet: Breachee can get reliance-restitution.

Notes: Farash v Sykes Facts: P claimed that D had agreed to lease space in one of his buildings, and as part of the agreementP would make renovations and modifications. However, D never signed a lease or even occupied the building. Issue: Can P get reliance damages from having work done in anticipation of K? Rule:Yes. COA sights Kearns, P can recover damages in reliance of D promise irrespective of benefit to D; his reliance was to his economic detriment. Analysis: P could not make the lease enforceable because of the SOF, but he could still get reliance damages. Dissent: Claim for reliance is just based on the other claims - a K based on a lease of landthat violates SOF, additionally there was nounjust enrichment.Ask Prof.: [This case may be different than Kearns due to the nature of the renovations, were they as a gift to entice the D to buy, such as Kearns? Or was it an agreement? See Prof. Comment to Kearns.]
Notes: The Doing and Giving Problem Ex: In the beginning of the note on pp. 106:Case in Restatement 370: (1) Cant get restitution b/c the buyer didnt get benefit. (2) S can get damages for BOC according to the UCC and incidental and consequential damages Problem on pp. 107B make K with S to buy car for 900, 100 DP. S repudiates K. The value of the car at Bs repudiation was $700. Issue:Is B entitled to restitution of the $100? Analysis:S says you shouldnt get restitution b/c there are nodamages due to the value going down. S did a favor by repudiating and keeping the crummy car. Bwill say that restitution doesnt look at B and whether the he is better off due to breach, rather at the unjust enrichment of S, and here if he keeps the $100, he received unjust benefit.In restitution, we look for unjust enrichment.Prof: B is entitled to the $100 back.

pg. 18

Squib: OlivervCampbell(1954) Facts: P lawyer agreed to represent D in divorce proceeding for $850 for a 29-day trial. D fired P. Court filed findings in favor of Ds wife. Reasonable value of Ps services was 5G Issue: Did P effectively finished performing under K at time he was fired, thus entitling him only to K? Rule: Yes.Had P been fired before completing K, wouldve been entitled to restitution of reasonable value of services.Analysis: Rule is if P is fired before completion - repudiates K. K is no longer relied upon as fixing limit of compensation. But Ps performance was in effect complete at time of wrongful discharge. Notes: Other courts would disagree; would pro-rate the K price according to how much work P finished. Restitution is to prevent unjust enrichment.
y

VictimofabreachcangetoffK and on the K whichever puts you in a better position, (Blair), upuntil victimcompletes performance.Whencompletesperformance,onlygeton the K; cantgo offKandclaimrestitution. Whydo we only allow off the K damages?Courtsaretoo lazytofigureoutMVofperformance andtheywouldrathernotbother.Politepeople wouldsay it ismore efficientto use thevaluationthat thepartiesthemselvesput onthefullperformance.

The Bullet: Only restitution until the point you performed, once performed no res. Notes: Noyes v. Pugin (Bottom of p. 108) Facts: P had only partly performed when D breached. Court wont give P more compensation for labor actually performed (value of services on open market) than he would have received for same services under K (set price). K law is to make whole, not indemnify against all damages.Rule: K here is a limit to restitution. Note:Not the rule, If P is the breachee, can recover MV(De Leon) Notes: Clark-Fitzpatrick Inc. v. Long Island Railroad Co. (pp. 109) Facts: Contractor sues Railroad alleging breach, fraud, and negligence.P Sued for BOC and quasi-K after complete performance;Held:Existence and completion of K means court wont enforce a quasi-contract [Oliver] 3)Stark v. Parker (Mass.SC 1824) Facts: P (employee) agreed to work for D (employer) for one year for the sum of $120. P voluntarily left his service beforeexpiration of the yearand without any fault of D. P now seeks restitution for the work he performed ($27) beforeP breached. Trial Judge awarded pro-rated sum for work done. D appeals Issue: Is a breaching party to a K for a stipulated sum to be paid for a term of service entitled to apportionment of the price when he stops working after only providing part performance? Rule: No. Judgment reversed. Prof.: analysis: Court held that the K was a conditional K. The labor is a pre-cedent to payment. Employer has not obligation to pay unless employee works for 1 year. Only then, does the payment clause trigger. At it is an entire K, it is not divisible into parts.
y

K did not say payment will be at the end of the year - This is the J. Lincon interpretation of K. We perceiveK in light of the behavior of the party.

The employer by periodically giving money to employee seemed to waive the conditional K aspects of the K. Corbin treatise of K law:Corbin makes a distinction betweeninterpretation and constructions. Interpretation is the activity of discovering the meaning the parties had in using certain words. It is the meaning the parties attached to the words they agreed to. A construction is not like interpretation at all. Constructions already assume that we know the meaning; however, we need to figure out the LEGAL consequences to that meaning. What did J Lincon use? Construction. We are not arguing on the facts or meaning, rather the legal understanding. Does it mean after complete work is done? - Or installments? Additionally, Constructive condition of performance. We know what construction is, what is a condition (subject that is very important in K)?In this simple case, we have two views. Does the money need to be paid before labor? Or labor before money? Ideally, this should be a matter of interpretation, not constructive. However, typically they dont have a clause in K, hence; this is constructive on the legal principle of a condition.
y

Condition:Something that has to happen or not happen before a covenant becomes an obligation becomes enacted. There must be a triggering event. A subsequent clause is one that takes effect immediately unless something occurs.

pg. 19

Entire Vs. Divisible The idea is that a K is entire when it cant be divided in parts. EX: I K with you to deliver coal to your furnace, once a week, with expectation to be paid each week a K for one year. This is divisible. However if the K is for payment at the end of the year it is entire. U.C.C 2-610.

This case is not like Case of A v. Blair who P was a victim, MB; promissee can end K immediately and get off the K since K ended. In that case; had he completed K, he can only get K damages. Here, J. Lincoln says this is not the case. Here it P who is in default -breached K, who is suing. He has no power to wipe K off the table (Breachee can claim MB, not P who walked off the job).In sum: Constructive condition of performance  Employee must fulfill his promise first. y Reflected the custom of the community; If you pay someone first they have no incentive to perform  Divisibility: y Entire contract. o Not divisible o Each side responsible for entire performance until the other side completes performance y Places lots of risk on employee as creditor to employer o Was the employer unjustly enriched?  No. Employee breached. This was Judge L argument, and very logical. Until ten years later.. 4)Britton vTurner-(1834) Facts: P and D made 1 year employment K. P stopped working after 9.5 months. Jury awarded P $95 out of the full $120. D appealed on the basis that P should get nothing because work had been done under a so-called special contract. Issue: May the breaching party recover for services rendered? Rule:New Rule! - Modern View. A hired laborer is entitled to compensation for work actually performed unless there is an express stipulation to the contrary in K.Analysis: Court makes an analogy between labor Ks and construction Ks. When you build only part of a house and then breach, you are entitled to restitution damages for the value you conferred upon the other party. Old ruleStark V. parker.Court felt that although precedent says differently, the better rule is the one above. Baird: This is just the default rule; you can K around it or prove damages to employer or provided. Also, this idea will become important later when a builder builds a house where living room is one ft. too small? Clearlyhe doesnt lose rights to get paid, and it is too expensive to reasonably repair. He just gets less than the full payment. Prof.: Damages cannot be more than K, unlike Blair;however, we do not let the breacher go undamaged: Theywill deductfromtherestitutionanydamagesthattheemployeecausedtheemployerandwill measuretherestitutionby thereasonablevalueoftheservicesonthemarket.But,thecourt will not allowMV to exceedvalueontheK(unlike Blairwherethe restitutioncouldexceed theKprice).Thisisa punishmentthatthe court imposes ona defaultingP. JParker: Restitution for theP indefault the breacher. (Did Justice Parker disagree with Stark v. Parker? Not sure.) Kwassetupthatitrequiredtheemployeeperform100%ofwhathepromisedbeforehe getshiswages.Thisis theway theysetituptypicallyitsnotthisway;youdontusually waitayeartogetyour salary this seems right.
y

Theydiditthiswaysothattheemployercanexercisedisciplineontheemployee.This K wasentire-theKisnotdivisible. Employeecant claimamonthsworkat atime, only the whole year.

Note: Restitution interest y Not a contracts claim y Prevent unjust enrichment o Can be unjust enrichment if employee walks off the job Notes: Schwasnick v. Blandin (pp. 124): Notes: J. Learned Hand:Justice demands no more than that the promisor shall not profit at the promisees expense Squib: Thach v. Durham Facts: D made K to sell sheep to P. P breached. P seeks restitution of 3.1G down payment. Issue: Can breaching buyers get DP back? Rule: No. Analysis: D (S) was willing to perform. Breaching B should not be favored over S. Purpose of DP is ex ante form of restitution should B breach. Additionally in this case, damages are speculative.Notes: BreachingBcannotrecoverinrestitutionadeposithe gaveSevenifitexceeds theamountofdamagessustainedbythesellerdue toLD.

pg. 20

5)Pinches v Swedish EvangelicalLutheran Church,S.C. of Errors of Ct, 1887 Facts: P built a church for the D. It wasnt exactly the way D wanted it, but good enough to be beneficialto D. D refused to pay; P sued. Issue: Can P recover for the services rendered and value of the materials if he violated the K by good faith mistake? Rule: P is entitled to K price minus diminution of value of church due to P departure from the agreed-upon specifications. Additionally, Ds architect was also involved in the mistake. Analysis:1) he acted in good faith2) was reasonably adopted for intended use 3) To fix it and make it in compliance with K would cost so much that P would not get any compensation.P is entitled to restitution (K price;not more not less), because otherwise D will have benefited while P loses. Notes: AcaseforrestitutionforaPindefaultlikeBritton (violated K).The difference b/t the 2cases arethat herethecourt requires that thecontractoractingoodfaithinordertogetrestitutionwhereinBritton, employeejust leftw/ogoodfaith however employees may not fall under the good faith umbrella due to its very nature.Policy:ConcerninBrittonisthatemployers will abuse employees & force employee to quit (makes conditions intolerable) so we dont care whether the employee acted willfully or not. We dont have that issue by Pinches, he is an independent contractor who it not subject to the physical direction of an employer.Iftheissueisonthequalityofperformance,thengoodfaithmatters (Schwasnick?),whentheissueisoneofabandonment, (Britton) thengoodfaithdoesntmatter(Ask Prof.) Q: What if benefit is more than the value of services? No answer! This is hard stuff. Rule: A bit of a summary: If P is the breacher: get the benefit conferred to the other party. If you are breacheecan get off the K damages market value of your service. Squib: Kelly v. Hance Facts:P was hired by D to construct a sidewalk and curb in front of Ds home. After removing strip of earth 12ft wide &8ft deep P left the premises and did not return. P sued to recover the reasonable value of work done. Issue: Can one recover in construction K without substantial performance? Holding: No, reversed. Reasoning: Inconstruction Ks, can only recover with substantial performance. Even where the performance is not substantial butbreach is merely negligent,recovery can be allowed, not on the K but in quasi-K. P abandoned work without justification. 6)Vines v Orchard Hills,Inc Facts: Vines made K to buy a condominium from Orchard Hills for $78G and made a 10% down payment, which K designated as LD in case of default by P. P was transferred to another state and did not take title to the condo. P sought recovery of the down payment. D refused. P sued. By the time of trial 6 years later, condo was worth $160G. PH:Trial court found that D had gained a windfall due to this appreciation and awarded the P $7,8G. D appealed. Issue: Can a B who breaches K recover money paid that unjustly enriched S? Holding: Yes, Judgment reversed and remanded to determine amount of reward Reasoning: Early cases refused to allow a breaching party to sue, but modern trend permits actions for restitution to prevent unjust enrichment and avoid forfeiture. Remedies for breach are intended to compensate for loss; injured party should not be allowed to keep money in excess of his actual losses. Purchasers such as P whose breach was not willful have a restitutionary claim to recover money paid that unjustly enriches S. However, P must prove that D was unjustly enriched. When breaching party is P, courts should presume that a LDC is a reasonable approximation of S actual damages. The value of the condo 6 years after breach is not determinative. On remand, P will have to overcome presumption of reasonableness through adequate proof. Prof:Seems to just repeat whatwe learnedin Pinchesthatyoucangetrestitutionifyourdefaultisntwillful, andwherethedeposit exceedsactual damages.[Here it is a land sale, not a construction K] Was it willful? His job moved, of course its willful they exercised their will. Prof.:Judge Interprets willful to mean opportunistic. They were not trying to gain from breach. What does good faith mean? Bad faith means you are trying to recapturevalue you gave up in negotiation. Court: nobody claimed that breach was willful, so it wasnt! On remand, D may try to claim breach was willful. Complicationisthat thedepositwaslabeledas a liquidated damages clause.twopurposesof a DP: (1)EarnestMoney-Bshowsthathesserious - deposit is refundable. (2)Liquidated damages-deposittreatedasLD. Here, parties made it clear they intendedLD. There is a conflict between restitution and LD. The first part, court says they will permit a non-willful defaulter to get restitution if the defaulter can show that the deposit exceeds the actual damages. However,court has to deal with the fact that the parties agreed that what damages would beif one party defaulted, so it seems they should enforce the clause. Exceptions to LDC: courts refuse to enforce the clause if B can show there was zero damages - LD clause must

pg. 21

assess damages. Additionally, if LDCis substantially disproportionate to actual damages, courts wont enforce clause but will allow restitution. Prof.:Theresthe issueofwhodetermines whatissubstantiallydifferent-isitaQ.oflawor is it aQ.offact?Andmakingsetamountsstillmay unjustlyenrich theseller. Prof:Therewasadisputeaboutwhethertheenormousriseinthe valueofthehousefrom Kand trialwasrelevant.JPetersheldthatitwasnotrelevanttodeterminingwhatScould recover in damagesb/cforbreaches ofK, guidepost isMVonperformancedate(notMVonthedateofthetrial)
y

Trialcourtjudgefelt (and we arguing with Peters) that this isa claimfor unjustenrichment notforBOC anditmayverywellberelevantthat thevaluewent up! S gained by the breach; value went up, are we going to pile on top of that the money S received from P?We examine the clause and restitution.

J peters rejected or did not see this argument. Trialjudge wasntanidiot - there is an argument,wejustdontfollowthattrainof thought.

Elucidating the above points: Basedonassumptionthatitisavalidclause,JPetersusestheclause andsaysthat the partiesagreementaboutthedamagesgovernsandthose willbe the damages, unlessthe B canshowtheclauseisabadclause. J Peterssaysthatiftheclauseisvalid, wewill enforce it. Forgetrestitution.Additionally,theburdenofprovingthevalidityoftheclauseisontheproponentoftheclause. Here youwouldthinkitwasthe SbecauseSwantstokeep deposit, butsheputsthe burdenof proving theinvalidityoftheclauseon thebuyer. Whydoesshe dothat? Technically,S doesntwantthecourt todoanything-he hasthecashalready. BisthePseekingtoget back thecashandhewasthe one in default. Pindefaultislucky togetrestitutionin the first place, and now they dont like LD, the burden falls on them (wasadebatedissue for decades - restitutionseekstocompensatefor unjustenrichment,andifdefault,isitreallyunjust?)Conclusion: J Peters: Restitutiononlyworks afterP (here Buyer)showsthat the clauseis invalid. The Bullet: WhenwelookattheP phrase,wedodamagesbasedonthelaw,however with restitution, werelookingatequity. Squib: DeLeonvAldrete Facts: De Leon K to purchase land from Aldrete for $1,5G, payable in installments until April 1, 1961. All the payments were late and by July 6, 1961, P had paid $1,070 to D. He also paid $250 to an architect. In February 1962, Aldrete declared a default and sold the land to a third party for $1,300. Issue: Can P recover money paid towards the fulfillment of a K when his late payments led D to default? Holding: Yes, and recovers architect fee. Reasoning: Majority rule in US denies a defaulting purchaser right to recover monies paid under K. But dogmatic application of this rule leads to indefensibly absurd results. Because the amount of forfeiture is determined by the stage to which performance has progressed the purchasers loss increases as the seriousness of the breach decreases. This leaves room for consideration of all relevant factors, especially the all-important considerations of the amount, which the purchaser has paid, and the extent to which the vendor has been injured by the breach. D would be enriched unjustly were they permitted to retain more than $200; we can only justify this result if we want to punish P for the breach Note: Unjust enrichment goes back to the defaulting buyerNote (2): Since Ssold the land to someone else, P gets back $870 - $200 of the amount paid is damages to S for loss. (K = $1,500 ,vendor resold for $1,300). Palso gets back interest (and $250 for architectural fees*). Prof.: Courtmade amistake returning the architectsfee - thatsreliancedamages - notsuitablefor restitution. This wasa land K - related to amortgageK SOFNote (3): De Leon is the rule today. B who defaults can get back the downpayment [2-718; see 2-718(2)(b) (20% of price or $500) and 2718(3); these last 2 are not cumulative]. One needs to justify keeping DP for it to be allowed. Rule:In K for sale of land, if B backs out, he can get back his deposit. Under strict foreclosure setup, though, S doesnt have to give back any money. Note: The NY Forfeiture Rule: 10% or less andispresumedtobevalid, denying recovery for DP. More then %10, court reserves to right to make a decision. Section 4 Contractual Controls on the Damage Remedy Penalty Clauses and Liquidated Damages Common law, a liquidated damage clause will not be enforced if its purpose is to punish the wrongdoer/party in breach rather than to compensate

pg. 22

the injured party (in which case it is referred to as a penal or penalty clause). One reason for this is that the enforcement of the term would, in effect, require an equitable order of specific performance. However, courts sitting in equity will seek to achieve a fair result and will not enforce a term that will lead to the unjust enrichment of the enforcing party. In order for a liquidated damages clause to be upheld, two conditions must be met: 1)Amount of the damages identified must roughly approximate the damages likely to fall upon the party seeking the benefit of the term. 2)Damages must be sufficiently uncertain at the time the contract is made that such a clause will likely save both parties the future difficulty of estimating damages. [Note: seems logical inconsistent with requirement one reasonableforecast and must be hard to estimate] Traditionally, courts have upheld such a clause unless the agreed-on sum is deemed a penalty for one of the following reasons: (1) Sum grossly exceeds the probable damages on breach (2) The same sum is made payable for any variety of different breaches (some major, some minor) (3) Mere delay in payment has been listed among the events of default. The UCC and Restatement take the view that reasonableness should be tested in the light of the anticipated or actual loss. Thus, contrary to prior doctrine, there are two moments at which LDC may be judged rather than just one. This works in favor of more frequent enforceability of agreed damages clauses. Since doctrine is rooted in unconscionability, an evaluation as of the time of breach is rational. Courts generally held that BOP is on the defendant,that the agreed LDC is disproportionate to the foreseeable [or actual] harm. Restatement356:LDC:is reasonable in the light of the anticipated or actual loss caused by the breach, and the difficulties of proof of loss. A term fixing unreasonable large LD is unenforceable on grounds of public policy as a penalty. 1)Muldoon v. Lynch Facts: P was to furnish a headstone for the D. Amount to be paid was $18G (1885). Sum was to be paid in installments; $11G on completion. Work must be completed in 4 months, with a forfeiture of $10 per day beyond the stated time. Monument was delayed 2 years. D insisted on deducting 7G for the delay, P sued. Trial court held forfeiture in K to be a penalty, ordered D to pay full K, D appealed. Issue: Is forfeiture of $10 per day a penalty clause or LD? Ruling: It is a penalty clause, and therefore unenforceable. Policy issues: We ban penalty clauses because they make people hope for breach, so they can get huge damages. Also encourages people to act in irrational ways, like spending lots of money to ship marble when it doesnt make a difference to anyone. However, we may want penalty clauses, because people can use them to show reliability, especially for a small or unknown competitor. Additionally, they provide a way to measure subjective damages that can be hard to show after the fact. Prof.: The harder damages are to ascertain, the more room we allow the parties to pre-estimate.Here injury is emotional damages, and we dont permit that in K damages, so should we permit it in LD? Another problem is that the clause has no time limit no cap. Q: How can we arrange a LDC to make it more enforceable?A: We can reword it as a bonus stipulation.Q.: p.138 - What if delay in building the monument is 10 days, not 2 years? A.: Do you condemn a clause b/c it produces bad results, or do you only condemn it if it does in a specific case produce bad results? No answer! UCC 2-718: Liquidation or Limitation of Damages; Deposits.Sum stipulated must be a reasonable pre-estimate of the probable OR actual loss[Question, does this include post-facto reasonableness in hindsight? First look vs. Second look.]Never use the term forfeiture, many aspect of the clause ischaracterization made by the parties. Note: Pacheco v. Scoblionko (pp. 135) Facts:P pays D in advance for camp, paying 3G. K states $500 deposit will be refunded if cancellation is received before Feb1. If refund request is received on or after Feb 1 and prior to May 1, no refund of the deposit, if request is received after May 1, entire sum paid is forfeited. Any sum retained is liquidated damages. P cancels on June 14th, sues. Ruling:Camp must return full 3G.Reasoning:In this caseLD a penalty clause; D did not show damages, and the amount forfeited is excessive compared to K price. Squib: Yockey v. Horn Facts:2 former business partners enter into a settlement to resolve disputes arising from their failed relationship. Settlement includes a promise

pg. 23

by D not to participate in any litigation against P, as well as a clause fixing damages at 50G for breach. A few months later,D spoke to Schrock, who is a current business acquaintance of Yockey. Schrock sued P successfully (fraud and securities violations) wins $111G. D gives a deposition not under subpoena. P sues D for breach. Trial court awards P $50GHeld: $50G is reasonable LD. Notes: Court said that the Schrock suit did not need D to be successful, and Judgment for Schrock was in no part based on horns testimony, however court gave damages for reputation loss to P as one of his former partners participated in litigation against him. Such damages are difficult to evaluate and accordingly proper subject for a K, and was anticipated hence, reasonably made.Prof.: Rule: when no proof of damages no LD. Squib: Wilt v. Waterfield (MO Sup. Ct. 1954) Facts:P k with D to purchase a farm for $19G. P made DP of $1,9G. D sold the farm to another. P sued and was awarded $7G. D appealedstating Kcapped recovery to 10% of agreed sale price. Issue: Can P recover damages beyond those stipulated? Holding:Yes, Affirmed. Reasoning:Clause is a penalty. If D had failed or neglected to perform any one of the partial stipulations, some of which are difficult to ascertain and others easy,some of the damages to P may be disproportionate to the $1,9G stipulated to in K;Clause applies the same amount of damages to a wide variety of harms. Its an undifferentiated clause(see below)hence, clause is a penalty Invalid.Courts then give actual damages; 7G is very reasonable.If we can accurately measure the harm done upon breach, its very unlikely well uphold an agreed damages clause because we can give actual compensatory damages. Prof.: 1) insufficiently specific clause 2) reasonable pre-estimate of damages. Undifferentiated Clause:
y

Conventional view is that a damage formula that is invariant to the gravity of the breach applies to a variety of breachesof varying degrees of importance is not a reasonable effort to estimate damagesAlso true when fixed sum greatly exceeds losses likely to flow from minor breaches

Comment: Applying Damage Clauses PP. 145 Problem: Facts: Co. discharged VP two-year employment K. Contract clause: should K be discharged without cause Co. will be responsible for full unpaid salary for two years (not as LDC), VP was entitled 75G, went to work someplace else for 50G. Note: How can we recharacterize the LDC to make it not a LDC? They could have done better. They can call this guy Shirley McClain, if you draft the clause as paying employee money to be available to work for 3 years. Then theres no LDC, but same economic consequence and then there is no duty to mitigate. Most courts allow a party to contract out of duty to mitigate. Q1:50G from second employment relevant to clause? A: Why wont he? What is wrong with that? Q2: Will VP get 75G? A: probably yes b/c he can contract out of duty to mitigate Q3: Would A. change if he received 150G from second job? A: depends if clause was reasonable estimate; for good or bad. 2)Samson Sales Inc. v. Honeywell Inc. (149) Facts:Burglar alarm case - P Ks with Morse Signal for a burglar alarm, paid $1500 for installation and $150 a month for 5 years. They get burglarized, and D (acquired by Honeywell) refuses to pay more than $50. P sues for 68G, the value of the lost merchandise. P alleges negligence and BOC. D invokes K provision which states that D is not an insurer, and the agreement in no way binds the D as an insurer, and all charges are based solely on value of service, maintenance and installation, and in event of failure liability is limited to $50 LD. Lower court awards $50, appellate reverses concluding clause as a penalty, appealed to SC.Ruling: Reasonable compensation for actual damages is a legitimate objective of LDC, and where the amount specified is inequitable, courts ordinarily regard it as a penalty- unenforceable. Here, damages are estimable; $50 damages are disproportionate to consideration paid to D.Notes: This case the clause may be called a limitation of liability.Prof.: lots of cases where they misuse LDC. How can a clause that limits liability be a penalty? It is not, Courts wrong again! Section 5: Enforcement in Equity Specific Performance Note: Manchester Dairy v Hayward Facts: P made a K with D to buy all his dairy products. Among the provisions is one that enjoins D to SP (equitable relief).Trial court denied all equitable relief, P appealed. Issue: Does P have a right to SP? Rule: Equity (i.e. SP or injunctive relief) may enforce a K when the legal remedy

pg. 24

(i.e. money damages) is not adequate. Prof.Reasoning: If set $5/cow in damages that is a reasonable estimate of damages, however the SC says there are other damages that the $5 wont compensate for. Although most courts have combined equity and law into one court, equity is still jurisdictional - it has subject matter jurisdiction and you have to show that legal damages are inadequate-you have to show the jurisdictional premise of equity. You must establish that before one gets into the court of equity. Point (5) p. 150) is important: Enforcement may place a burden on the D that is disproportionate to the benefit to P. Since equity is rooted in the chancellors conscience (unique to each individual), maybe the SC is sending the case back to the chancellor so he can make his decision. He has to balance the burden and benefit himself (based on his own conscience). 1)Van Wagner Advertising Corp. v. S & M Enterprises (153) Facts:Original owner leases to P for 3 years + option totaling 7 years space on a wall for purposes of a billboard. P puts up a sign in early 82, and leased it to a third party for 3 years. However, in Jan 82 building was sold to D (S&M). D cancels the lease in Augwith 2months notice. There is a clause that allows them to terminate the lease with 60 days notice in the event of a sale. P claims lease only grants rights to original owner, not to new purchaser, so that the original owner would not have the property encumbered by the lease. Trial courtsays P is correct, but can only get damages. Court awards lost revenues, P appealed.Rule:SP is at the discretion of the trial court. SP to lease a billboard space is adequately denied when damages will compensate. When value is uncertain, or there are unique values that cannot be fixed in money, SP is available. Prof.: Appellate court is free to disagree only when its a question of law. Equity: only remedy is SP. This does justice when legal rules fail to do justice. Procedural Elements: Parol Evidence Rule: The common law principle that a writing intended by the parties to be a final embodiment of their agreement cannot be modified by evidence of earlier or contemporaneous agreements that might add to, vary, or contradict the writing. This rule usu. operates to prevent a party from introducing extrinsic evidence of negotiations that occurred before or while the agreement was being reduced to its final written form. "The basic principle is often called the 'parol evidence rule', and according to this rule evidence is not admissible to contradict or qualify a complete written contract. Ambiguity exception: if anything in the writing is ambiguous we will allow evidence outside the writing. K interpretation is always a question of law. This was the problem in Van Wagner. Q. of ambiguity is a Q. of law- judge decides. COA will be subject to plenary review in Q. of law. This is a Q. of law for K interpretation is a Q. of law in general-the burden of interpreting the meaning and words and phrases in a K is on the Court and not on the fact finder. The reason for this is because judges dont trust juries-they feel the need to protect the security and stability of agreements so they keep the task of interpretation to themselves. This Case: Possible meaning of the clause:There is a clause that only: 1) the lessor (or its successor)may terminate and cancel this lease. 2) The successor can break it only when they are getting ready to sell 3) both parties can break the lease (1)Trial judge said he finds the clause un-ambiguous as a matter of law (says only the lessor whos getting ready to sell can break the K). If ambiguous; Parol Evidence showed that the successor cannot terminate K if not selling. The reason he brings in parol evidence; trial judge knows clause will be subject to review, so in case COA findhes wrong, in the interest of efficiency, he resolves the ambiguity in favor of P by with parol evidence (in the end COA did accept parol evidence as fact)(2) COA finds that as a matter of law clause was ambiguous, and they have plenary review. Trial judges ruling has no weight. However, they then have to look only to the finding of fact inquire if the facts are clearly erroneous, and they found that it was not -Trial judges finding of the fact in P favor is the conclusion that they embrace. Now we deal with the problem of the case: 1) Did P meet the jurisdictional premise to be in equity at all? Then, assuming he did; What was the trial crt holding? After we resolved the ambiguity and find that S&M breached by evicting P, what is the remedy? P wants to be in Equity to get SP.S&M says that legal damages are adequate. Judge K(p. 155) that the decision to award SP rests solely on the sound discretion (Judge K description) of trial judge,not within the absolute discretion of the Supreme Court. Trial judge did not abuse his discretion: This is the holding. T Judges decision whether to let P into equity court and how to balance the benefits, are in the sound discretion of the trial judge. What does discretion mean? When they make a decision, their decision cant be wrong-it cannot be reversed for error on appeal.

pg. 25

They also cant be right-it has no precedential value (cant make a chancellors conscience binding on a future chancellor). However, the discretionary decision does have some parameters restraining it: the doctrine of abuse of discretion.Ex: flipping a coin to decide, bribes, arbitrary decisions w/o evidentiary support. The statement of this holding is just her explaining why the trial judge didnt abuse his discretion. First Q. to the trial court was whether P would get to an equity court. Strikes Prof. as the very thing equity damages seek to fix. Damages are rendered inadequate when the subject matter is unique; moneycant compensate the victim of a breach. MV of an object doesnt capture the subjective value to the individual. In this case, Judge K says uniqueness isnt that we cant calculate dollar value; everything has a price. It follows that nothing is unique. Judge believesUniqueness is uncertainty of valuing the object. SP is awarded when the market value doesnt reflect the value to the specific owner. Transactions are not a zero sum game. Proper resource allocation creates a consumer surplus. Thats why SPa favored remedy in construction K is not rebuttable presumption that land is unique Legal rules are always inadequate. The only reason why they would give P all the damages now is in case S&M would go out of business, or if S&M would voluntarily go out of business; what can P do then? Trace S&Ms assets (seems difficult). This may be what is on J Kayes mind and thats why she gives these damages now, not in a few years time when damages will be speculative Squib:Curtice Bros. v. Catts (154) Facts:P owns canning plant made Kwith D to buy his entire tomato crop. Issue: SP? Rule: Where no adequate remedy at law exists, SP of a K touching the sale of personal property will be decreed with the same freedom as a K for the sale of land. Holding:SP because of the;inability to procure at any price at the time needed and of qualitythe quantity necessary to ensure successful operation.Analysis: Hard to measure ED in output cases, because we cantreally measure the output of the fields from year to year reliably in advance, damages werent easily ascertained by the canner.Notes:spot market for tomatoes of the quality and quantity is thin or non-existent. Q.: Cant make any guesses to damages? Restatement Second 360 (162):To determine if damages would be adequate, following circumstances are significant: a) the difficulty of proving damages with reasonable certainty, b) difficulty procuring suitable substitute performance by means of money, c) likelihood that an award of damages can be collected. UCC 2-716 specific performance only applicable in extraordinary circumstances/REPLEVIN: an action for the repossession

of personal property wrongfully taken or detained by the D, whereby the P gives security for and holds the property until the court decides who owns it. 2. A writ obtained from a court authorizing the retaking of personal property wrongfully taken or detained.
Squib: Paloukos v. Intermountain Chevrolet Co. (160) Facts:P paid $120 deposit, and signed an agreement to purchase a pick-up for $3.6G. Truck was to be ordered from manufacturer. D returned deposit 5 months later, says it cant deliver because of product shortage. Holding: Dismissal for claim, SP is not available where goods are not unique (car) - will not order something impossible, such as ordering S to sell to B that what S does not have. 2)Fitzpatrick v. Michael (MD Court of Appeals, 1939) Facts: D hired P as his personal nurse and promised $8 a week + room and board, a life estate in his home, and full title to his cars. After P served for over 2 years, D suddenly terminated P employment with no benefits. Procedural history: P sued for enforcement of K; Trial court refused. Issue: SPfor a personal service K? Holding: No, affirmed.Reasoning: Although there is no remedy at law, equity will not enforce K for personal services. (1) Courts are unwilling to force a relationship on unwilling parties, this would be a variation of peonage which offends the 13th amendment in the US and (2) courts admit they do not have the means or ability to enforce such decrees. Prof.: Two things about this case: 1) Anticipatory repudiation 2) SOF problem. SOF Exception: Definition: Part-performance doctrine - Equitable principle by which a failure to comply with the SOF is overcome by a party's execution, in reliance on an opposing party's oral promise, of a substantial portion of an oral contract's requirements. "Enforcement has instead been justified on the ground that repudiation after 'part performance' amounts to a 'virtual fraud.' A more accurate statement is that courts with equitable powers are vested by tradition with what in substance is a dispensing power based on the promisee's reliance, a discretion to be exercised with caution in the light of all the circumstances." Restatement (Second) of

pg. 26

Contracts 129 cmt. (a). SOF was triggered by land clause*: D promised life estate of his house. SOF requires a written memo signed by the party to be charged (*not the one year clause for D could have died within a year). However, part performance only applies when the P is seeking SP and not damages. Here, P is seeking SP.Why should he be seeking SP? The only place you could go to get relief from the SOF is a court of equity.Once he has to go to an equity court, then his only option is to seek SP b/c cant get money damages in a court of equity (thats for a court of law).There are purely historical reasons for this rule b/c it has nosocially redeeming value. However, she could get Quantum Meruit if she could show that the wage that D paid her was lower than MV.She accepted lower wage b/c would get benefits later on. If she in fact was being paid under market, court will give her the difference. There was no K, and when there is no K, we give MV for performance. 3)Lumley v. Wagner P runs an opera company, made K with D to sing. Competitor persuades D to break K, and sing for him. P sues, in an attempt to prevent D from singing for his competitor; and only sing for him.Held: Court cannot compel her to sing; no SP. However, court grants an injunction preventing D from performing at any company other thanPs (effectively causing her to sing for P.) Prof.: Personal service K: no SP. If a party made an express negative covenant, Court will enforce it. In this case it was an implied negative covenant; Dwould not to sing for a rival Co. This court ruled in favor of an implied covenant this made people very nervous due to its implication. Note:Order forSP has to be easily administered. Other choice is to appoint a receiver of order negative convention. Equity can do this and law cant. Limitations on whether the court will enforce an express negative covenant. (law is complex and varies around the country.) One is that theyll enforce it only if the employee has some 1) special talent that makes the injury more than just the loss of services to the employer, 2)enhances the advantage of the employers competitors. Policy: we want people to sing for the most amounts of people that will benefit. So competitors should always be fighting for talent; efficient breach for a Personal Service K. What the Judge did her was astonishing. Squib: Pingley v. Brunson Facts:D enters into a K to play the organ for Ps restaurant at $50 for 3 nights a week (3 years). K states that P was to purchase musical instruments for $4G for D to use. Monthly payments for the instruments would be deducted from Ds paychecks. D gets it when paid off, but breach results in forfeiture of claimed instruments. D plays 10 times, and refuses to perform further. P sues for and was awarded both SP and an injunction.Held: Reversed.Equity courts will not ordinarily decree SP in this kind of case, especially when there are personal services over a period of time. There is an exception when performer has extraordinary skill or an area of expertise, but he can hire many organists of comparable ability. Injunction was also denied no express covenant to perform elsewhere. Notes:Court held Brunson wasnt unique to justify the award of a negative injunction even although there was a negative covenant. Note: Enforcing Noncompeting Pledges Discusses enforcing post performance agreements not to compete-wont compete after termination of the K. Rights of the employer after termination are much stricter than while still employed.Court looks at whether the covenant is too broad in time and area. Courts may not enforce a valid covenant if it is too broad. The court will rewrite the clause to make if fair. The employer then drafts overbroad clauses to scare the employee from competing. Note:ABC v. Wolf (173) Facts:Employment K between ABC and Wolf, which included a renewal option. The renewal option said: (1) 90 days prior to the expiration of the K, D was to enter into good faith negotiations with P for a K renewal (12/6/79 - 3/4/80) (2) during the first 45 days prior, D could not negotiate with anyone else. (12/6/79 - 1/19/80) (3) If an agreement could not be made, P had a right of first refusal. For 3 months following the expiration, D could not work in certain capacities (sportscaster, etc.) without first giving ABC the opportunity to offer him an agreement on substantially the same terms and the D would have to accept. (3/5/80 - 6/3/80) ABC and Wolf couldnt come to an agreement. D met with CBS (rival) in early Oct (before the 90-day period). On 2/1/80 Wolf and CBS made

pg. 27

an oral agreement(after the first 45 day period). K with CBS had an effective date of 3/6/80, but Wolf paid $100 as consideration for the option to hold the offer open until 6/4/80, when he would be free from the terms of ABC's K. Wolf resigned, and ABC tried to negotiate with him, but Wolf refused. ABC then brought this suit on 5/6/80 claiming breach of the good faith negotiation and the right of first refusal provisions of the K. ABC sought specific enforcement of their right of first refusal, and an injunction against D's K with CBS. Issue: Whether the court should grant an equitable remedy for breach of an employment K by a TV personality (personal service K).Holding: No. There is BOC, but equitable relief is inappropriate.Notes:Employee promises not to compete. Only if explicitly promises not to compete in K, is injunctive relief available. Even when explicitly in K, it will be rigorously examined and specifically enforced if it meets certain requirements, Ex: protect trade secrets, customer lists, good will, or other specific harms. Squib: Fullerton Lumber Co. v. Torborg Facts:P has a lumber yard, hires D as manager. D signs employment K stating that if he is no longer employed, he wont work anywhere else handling lumber or building at retail within 15 miles of any town where employed by P for a period of 10 years, he was afraid of customer list. D quits in 53, and sets up his own yard. P sues. Held: Time limit is excessive; illegal restraint of trade. Under earlier Wisconsin decisions, clauses with unreasonable restraint of trade are void. SC suggests reasonable time forP protection would be a max3 years. Prof. Notes: overreaching by employer. Strike the clause but here they rewrite it. Squib: Data Management v. Greene (AK Sup. Ct., 1988) Facts: P sued 2 former employees to stop them from providing computer services to named individuals, alleging they breached a 5-year noncompetition covenant in Alaska. PH: A preliminary injunction was granted, but trial court granted summary judgment to Ds because agreement was too broad, and because clause could not be narrowed down by deleting broad words - unenforceable. P appealed. Issue: Was the trial court correct in making the whole covenant unenforceable because it was too broad, or should another approach be used? Holding: Court remands the case for more information about Ps good faith and whether K could be altered to make the covenant reasonable. Reasoning: Court looked at 3 approaches to dealing with overly broad covenants:(1) Strict method: When a clause is overbroad, and hence unconscionable, it will not be enforced. Court says they dont like this approach for it is too harsh - any overly broad clause will be void automatically; parties should have the freedom to bargain Ks. This was the approach adopted by the trial court.(2) Blue Pencil Method: Make clause enforceable by striking out certain words that make it unconscionable. Court rejects this option; all it changes are the words, not substance of the clause. Stupid rule for it values wording over substance (3) Rule of Reasonableness: Reasonably alter the covenant to make it enforceable, in accordance with their intentions, if it is found to have been written in good faith. This is the position of most states and the Restatement Second 184(2) and consistent with UCC 2-302 which says the rest of the K can be enforced without the unconscionable clause. This position has been criticized because it lets employers overreach in drafting Northern Delaware Indus Dev Corp v EW Bliss Co Facts: P and D made a K to update a steel plant. D was too slow; P sought a court order forcing them to hire more workers. Issue: Should court issue the order? Rule:Court can decline to enforce SP if doing so would put a burden that is disproportionate with the benefits Analysis: Court wont become involved in supervising& refuses to simply order D to hire 300 workers, because SP cannot be ordered to fulfill personal service K. Conclusion:Court does not order SP.Notes: Ruling is incorrect.Hiring 300 guysisnt imposing a personal service K. However, damages are easy to calculate, not speculative, known damages for a delay in established construction Co.: Equity should not be awarded. P did not show that legal damages were inadequate, so he is not entitled to equity! Squib: City Stores v. Ammerman (DDC, 1967) Facts: D owned land in Tysons Corner, VA. P had been negotiating for rezoning on a nearby site. D promised P that if it lobbied on its behalf for the rezoning of the site, P would be given an opportunity to become one of Ds major tenants. P got it approved. D refused to lease to P. Procedural history: P sued for SP. Issue: Are the legal remedies adequate to compensate P?Holding: No. P can get SP. Reasoning: D had given P an option with 2 conditions approval of the necessary rezoning and execution by defendants of leases to other major tenants which could provide the essential terms of a lease to be offered to P. Since both conditions occurred and P exercised the option so as to produce a valid K, P can have SP. There is no way to calculate Ps future earnings as a tenant in the mall and by its expansion into the suburbs. Notes: SP is granted.

pg. 28

Squib: Grayson-Robinson v. Iris Constr. Corp (NY Ct. of Appeals, 1960) Facts: D owned a piece of land and agreed to build a building that would be rented to P for 25 years. After D started to build it,D told P that it could not secure financing in order to continue, unless P would agree to a raise in rent, the project would stop. P refused and per the K the dispute went to arbitration. The arbitration panel rejected Ds excuse that it could not find financing and ordered D to precede building. The arbitration statute then said that the courts were to enforce the order. Procedural history: The NY COA, in a 4-3 decision affirmed the lower court ruling the dissent pointed out that D had tried unsuccessfully to get financing from 27 lending institutions. In the end the building was not completed and the court appointed referee awarded P $3,287,483 for rental value lost. The case was then settled for $550k.Notes:Shows how the court treats arbitrators-cant play around with the decisions of arbitrators, even when arbitrator is wrong.It is clear that D couldnt get the loans because the banks believed the rent D was going to charge P, was too low, and the rent was security for the loan. This is why D went to P to raise the rent. The arbitrator was an idiot.The case was settled for 500G which showed that the P knew that they would have trouble on appeal with the 3M ruling.

pg. 29

Contents
Chapter Two: ..................................................................................................................................................................................................... 31 Section one: Introduction ................................................................................................................................................................................... 31

Congregation Kadimah Toras-Moshe v. DeLeo ................................................................................................................................ 32

The Bullet: gift promises are not enforceable [beside for the seal in some states].
Squib: Pitts v. McGraw-Edison Co. (190)

33

33 33

Squib: In Re Bayshore Yacht and Tennis Club Condominium Assn. Inc. (191)

Section 2. The Bargained For Exchange .............................................................................................................................................. 33 Hamer v. Sidway (195) ............................................................................................................................................................................... 34
Squib: Earle v. Angell (198)

34 34

Squib: Whitten v. Greeley-Shaw (198)

Fisher v. Union Trust Co. (201) ............................................................................................................................................................... 35

Squib: Sharon v. Sharon (204) Comment: Schnell v Nell (1861)

35 35 35

Promises to surrender or Forbear from Asserting Legal Claim

Duncan v. Black (MO Ct. of Appeals, 1959)................................................................................................................................ 36

Squib: Military College v. Brooks (NJ, 1929) 36

Section Three: Promises Grounded In The Past ....................................................................................................................... 36

Mills v. Wyman (211) .................................................................................................................................................................................. 36 Webb v. McGowin (216) ............................................................................................................................................................................ 37
Squib: Harrington v. Taylor (220) Squib: Edson v. Poppe (224) Squib: Muir v. Kane (224) 38 In Re Schoenkermans Estate (225) 38

37 38

Section Four: Reliance On A Promise ............................................................................................................................................ 38

Seavey v. Drake (225).................................................................................................................................................................................. 38 Kirksey v. Kirksey (230) ............................................................................................................................................................................ 39 Ricketts v. Scothorn 1898 (231) ............................................................................................................................................................... 39
Squib: Prescott v. Jones (233)

39

Alleghany College v. National Chautauqua County Bank (234) .................................................................................................. 40

Squib: Siegel v. Spear & Co. (241) 41

pg. 30

Squib: Carr v. Maine Central R.R. (243)

41

First Natl Bank of Logansport v. Logan Mfg. Co. (246)................................................................................................................ 41

Squib: I & I Holding Corp. v. Gainsburg (252) 42 Squib: Salsbury v. Northwestern Bell Telephone Co. (253) Notes: Fried v. Fisher (254)

42

42 42

Mahban v. MGM Grand Hotels Inc. (255)

Stearns v. Emery-Waterhouse Co. (256) .............................................................................................................................................. 43

Squib: Goldstick v. ICM Realty (258) 43

Section Five: Precontractual Obligation ....................................................................................................................................... 43

Thomason v. Bescher (261) ........................................................................................................................................... 44 James Baird Co. v. Gimbel Bros. (265) ................................................................................................................................................. 44 Drennan v. Star Paving (269) ................................................................................................................................................................... 45
Squib: E.A. Coronis Associates (D) v. M. Gordon Constr. Co. (P) (273) 45

Goodman v. Dicker (279) ........................................................................................................................................................................... 45

Squib: American National Bank v. A.G. Summerville Inc. (280) 46

DUlisse-Cupo v. Board of Directors of Notre Dame High School 46 Osborn v. Commanche Cattle Indus. 46

Hoffman v. Red Owl Stores (284) ........................................................................................................................................................... 46

Chapter Two:
Section one: Introduction
Identifying Enforceable and Unenforceable Promises y y People are morally and ethically obliged to keep promises,however, promises should not be legally enforceable. A major problem in K law is determining what promises are legally enforceable. Normally problem is resolved by examining the promise to see if it is supported bydoctrine of consideration. a bargained for exchange:  A benefit received by the promisor or a detriment incurred by the promisee, although at times his definition is inadequate  Inducement (incentive)isthekeytoconsiderationthepromisemustbeinducedby performanceand theperformancemustbeinducedbythepromise.Thisisabargain. Analysis of the kinds of promises that can raise questions of enforceability is useful in solving such problems: y Promises can be divided into broad categories:   Bargain promises (consideration) Promises based on past or moral consideration

pg. 31

  Formality: 1.

Relied upon promises (reliance) Promises of limited commitment

Introduction. A gratuitous or donative promise is a promise to make a gift. In common law, such a promise was generally unenforceable for lack of consideration for two reasons: (1) uncertainty of a promise (2) policy: gifts should not be enforced.However, in common law, any promise under seal - writ under covenant -, even a donative promise, was legally enforceable. The formality of the seal was sufficient even though no consideration was involved. This rule has been changed by statute in half the states.

2.

Nominal consideration. A transaction of nominal consideration (Ex: one dollar)when it has the form of a bargain, containing a recital of bargained-for consideration, but lacks the substance of a bargain because neither party really views each promised performance as the price of the other. Such transactions typically involve the purchase of an intended gift for a nominal sum, so the K does not have the effect of a donative promise. Nominal consideration will not make K enforceable, except when an option or guaranty is involved.

Restatements: Doctrine of Consideration may be a promise or an act in two forms

a. Bilateral executorcontract - apromisefora promisebothsidesmake promises (Both Promises) (1) Ex: Ifyoupromisetowalkacrossthebridge,Ipromisetopay$100 (2) Accept byagreement. (3) Onepromiseisseekinga counterpromise - tryingtomotivateapromise (4) once performed it becomes a unilateral K. b. UnilateralContract-Exchange of apromiseforanactonly oneside ismakinga promise; (1) Ex:If youwalkacross thebridge,Ipromiseto pay $100 (2) Youacceptwithperformance(3) Promiseistryingto motivatean act,not apromise. Reliance y Restitution has 2 elements: 1) restitution interest served outside the P Phrase 2) Restitution in a non-contractual transaction that is the remedy forunjust enrichment. y Reliance,has 2 elements (1) Remedy in the P Phrase (2) a claim to enforce a promise. This type of reliance theory is promissory estoppel (90 of the Restatement referred to as section 90) when a promisor understands or should know that promissee reasonably relies on the promise - than promissee can bring a claim against promissor to enforce the promise.

Case: Congregation Kadimah Toras-Moshe v. DeLeo (Mass Sup. Ct., 1989)

Facts: decedent suffered a prolonged illness during which he orally (in the presence of witnesses 4 times) promised to give 25K. Never put in writing and after patient died, wife refused to donate the money.PH: SC rendered summary judgment for the estate and dismissed the complaint. Mass SC affirms. Issue: Is an oral promise enforceable when it does not involve consideration or reliance?Holding and Rule: No! Allocation of the money for library did not create the necessary acts of reliance. Hope or expectation is not equivalent to either consideration or reliance. There were no conditions placed on how the money could be used and indication as to what the Cong. was required to do in return for Ds promise. A charitable subscription is an oral or written promise to do certain acts or to give real or personal property to a charity or for a charitable purpose. To enforce a charitable subscription a party must establish that there was a promise to give some property to a charitable institution such as a religion or religious organization, and that the promise was supported by consideration or reliance.

pg. 32

Court refused to enforce a promise in favor of a charity where there was no consideration or reliance. HadDeLeo promised 25kinexchangefor Rabbispromise tobuilda library andname itafterhim,thenpromisewouldhavebeenenforceable consideration.

Additionally, had started building, he can sue under promissory estoppel - detrimental reliance. DeLeo had reason to believe that the money would be relied upon. In this case: There was neither.

Court:promise was not written. Prof.:doesnt why this was an issue not a SOF issue. Possible answer: Public Policy is against enforcing promises against an estate when original party cant testify, and when there is no injustice in declining to enforce it.

Diff.between consideration and reliance claims isthatconsiderationsupportingapromisecanbeeithera benefitto thepromisororadetrimenttothepromisee.(HamervSidway - Uncle tryingto motivatethenephew to avoid bad habits.Promisetryingtoinducethelegaldetrimentof stoppingtosmoke.)In promissoryestoppel (reliance), the promisorissimplyaware that the detriment mightreasonablehappenbasedon thepromise,andisnottryingtoinducethedetriment. Seal Device - Historical, however, culture of the seal is on the decline in US. y y This is considered a formal device, and was a great way to enforce gift promises. Promises under seal are enforced because of the law of covenant - Kings court saying that they will enforce promises made with certain formalities - promises made under seal are enforceable.Why have seals declined? It may be unjust to enforce some promises. Equity came out to help promissor from promises made under seal when it was unjust to enforce them.[Uniform Obligation Act NY] y The problem with informal promises manifest when it is hard to determine when a promise becomes binding as far as consideration and K formation. This issue doesnt exist with formal promises. The Bullet: gift promises are not enforceable [beside for the seal in some states]. Squib: Pitts v. McGraw-Edison Co. (190) Facts:P sold Ds products on commission for 25 years, with no K. For 5 yrs. after P quit, D paid P 1% commission on sales in Ps territory. Payments stops, P sues for BOC. P tried to show agreement before retirement that if he would turn over customer records, he would be paid 1% commission. D claims retirement K only for employees.Ruling:Assuming there is a promise; remains a Q. of what passed from P to D .Turning over customer records doesnt count as consideration. Squib: In Re Bayshore Yacht and Tennis Club Condominium Ass n. Inc. (191) Facts:P buys 3 penthouses, elevator stops on the 10th floor. After buying, P asks D to extend elevator to 11th floor. P claims D agreed at no expense to P; never happened.Ruling: Unenforceable - gratuitous promise of a future gift lacks consideration.

Section 2. The Bargained For Exchange

I. Introduction. A bargain is an exchange in which each party views his promise or performance as the price of the others promise or performance. Typically, bargains are concluded by the process of offer and acceptance. As a general rule, a bargain constitutes consideration; a bargained-for promise is enforceable. However, some types of cases involve an apparent bargain, yet the courts do not find consideration was given. II. Legal detriment. In terms of the traditional benefit/detriment test of consideration, courts will normally find a legal detriment whenever a party obliges herself through a bargain to perform in a certain manner, even if the performance is not detrimental in the ordinary sense of the word. Indebitatus assumpsit: an express or implied promise, not under seal, when one person undertakes to do some act or pay.

pg. 33

Hamer v. Sidway (195)

Facts: Uncles promises Nephew 5K if he doesnt drink, smoke etc. until age of 21. Nephew performs. Uncle sends him a letter acknowledging performance, and promises that he will get his money whenNephewfully matures. Uncles estate doesnt pay, P sues. D claims no consideration; P benefitted. Held: Consideration can be an abandonment of a legal right or limits his legal freedom of action in the future as an inducement for the promise. P abandoned legal right to smoke, drink, etc.Analysis: Formulation of rule consideration can be either a benefit to the promisor OR a detriment to promisee Prof.: uncle not requiring P to promise anything; Nephews forbearance will be acceptance - Unilateral K. He must perform completely. y Itisclearthattheuncleisseekingthatthenephewshouldstopsmoking it was a legal detriment. Additionally, ifthenephewbehaves,itwouldbenefituncledue to agood family name. Court could have said that what the uncle did in putting the money into an account was a:self-declarationoftrust - a special type of living trust in which you, as trust maker, declare yourself to be trustee of your own assets. In so doing, you continue to be responsible for those assets for as long as you are able and willing. Many people find a self-declaration of trust to be superior to a will for the following reasons: (1) Ease of Transition The trust agreement provides for the appointment of a successor trustee to take over in the event of your death, incapacity, or decision to resign as trustee. In the event you become unable to manage your affairs or if you choose to relinquish those duties the administration of your trust transfers smoothly to your chosen successor, no need for any legal proceedings. In our case; if Uncle makes the Nephew another trustee on account, when he dies, will go smoothly to the nephew. It is not a promise.  y Q:Whatifthenephewwasinjailsocouldntsmokeanddrink-couldhestillenforceit?A:No,hedidnthavethelegalrightin jail; hence he did not give up anything. Note:Whatiftherewasanunderground black marketwherehecouldgetdrinksandcigarettes in jail? R2 71: Requirement of exchange; types of exchange / 81. Consideration Squib: Earle v. Angell (198) Facts:Aunt promises nephew $500 to go to her funeral. He made the promise and attended the funeral. Mary left a paper in a sealed envelope reading If P comes to my funeral, executor should pay $500. Ruling:P can recover; a promise given for a promise. K to give money after ones own death is valid (in a BK); coming to a funeral is valid consideration.Analysis:Bilateral executory promise: both sidesweremakingpromises.Auntwasseeking hispromisetocometothefuneralandhewasseeking a promisetoget$500. Unilateral wording would be offensive. Prof.:Q. on 199: What if he would have come anyway? A: she sought his promise, which he did not have to give. However she wanted a UK, there would be no consideration (in some cases). Squib: Whitten v. Greeley-Shaw (198) Facts:Parties engaged in an extra-marital affair. Woman makes man sign K that included a payment of $500/Mo, visits and phone calls at certain intervals& trips and jewelry, with no conditions explicitlyon D, but she agreed not to call his home. At some point P loaned D 64K to buy a home, she did not pay, so he foreclosed and brings suit against woman D who counterclaims BOC. Held: Counterclaim legally unenforceable. Ds promisenot to call without permission could serve as consideration, but such promise must be sought after by P (clause was made by D she felt he should get something). R2 71: Requirements for Consideration/Exchange - Love and Affection:When the recited consideration is only nominal and the real motivation for the contract is expression of love and affection, there is no consideration sufficient to make promise enforceable. Case of Nominal Consideration:

pg. 34

Fisher v. Union Trust Co. (201)

Facts: Fisher Sr. conveyed property by warranty deed to his incompetent daughter. Deed stated that she was to get the land and that Fischer Sr. would pay off any mortgages on the property. P received the deed for consideration of $1. After Sr.s death the property was foreclosed upon to settle a $3K mortgage. Fischer (P) sued Fischer Sr.s estate (Union T-Co. - D) to enforce Fischer Sr.s promise to pay off mortgage.Judgment was entered for P; D appealed.Issue: Is $1 given in exchange for real property considered consideration? Holding: No. $1 given in exchange for valuable real property is not consideration. Consideration for this transaction was love and affection between Fischer Sr. and P, and his desire to provide for her support after he was dead. New trial ordered. Prof.: Case facts:Bertha was in an insane asylum; is she really the one suing? Does she have mental competence to sue? This was a gift. No bargained for exchange.D here was the dads executor: they wanted the money to go the brothers and not to the sister because money would go to the insane asylum. Note: Court may be working with the Union Co.: It didnt want the money going to the insane asylum. Dad couldve handed her cash to pay the mortgage. Instead, he gave her the deed for the land. The problem was that the deed contained a promise that he would pay off the mortgage: a promise for the future. The document (deed)affected the transfer of the land, but did not make the promise to pay the mortgage binding. Q: Howcouldthedadachieve legallywhatheintended?A:Makeatrustfund forhisdaughter (Hamer v Sidway.) Q:Is Nominal Consideration thebasisforthe ruling?This causes issues with what is the line of what is nominal and what is not Courts do not usually look at the numbers unless they suspect fraud or nominal consideration (Batsakis v. Demotsis). A: However, you have to look to see if there was really a bargain. Did$1induce D to givethedeed?Absolutelynot.Dad is trying to give a gift and is trying to dress it up as a bargain, to make it enforceable. The court is taking the position that thisis not a bargain. Interesting Q: How do the courts look at the dollar as nominal? What is the PV of the dollar? What is the Discount rate? These are questions courts need to ask. It seems like something we should think about when it comes to nominal consideration. Squib: Sharon v. Sharon (204) Facts:D promised to pay Miss Hill $250/month. D first claims that he made the deal on consideration that P would cease irritating him.D then denies consideration.Held: Consideration before he denied it; Judgment for P. Prof.: she had accepted some of the payments. P: I hereby agree - had to be consideration. Comment: Schnell v Nell (1861) Facts:Promiseepromised to pay $200 to 3 people as per his deceased wifes will (which was ineffective). Made promise in exchange for 1 cent, Rule: Court: unconscionable K void upon its face; an illustration of nominal consideration.Prof.:Parties werent rally making a bargain, was like Fisher v U; dressing up a gift as a bargain. Promises to surrender or Forbear from Asserting Legal Claim 1. Former rule: At one time, courts held (like MO) that a bargained for promise to surrender or forbear from asserting a claim would constitute consideration only if there was an honest AND reasonable basis for believing the claim was valid.Restatement (first) of contract 76 (b) the claim forborne must be neither (a) absurd in fact from the standpoint of a reasonable man (b) nor obviously unfounded in law to one who has elementary knowledge of legal principles 2. Modern rule: the modern rule - Restatement 74: Settlement of Claims. - a promise to surrender or forbear from asserting a claim is sufficient consideration if the promisors belief in the validity of the claim is either reasonable OR is held in good faith.

pg. 35

Duncan v. Black (MO Ct. of Appeals, 1959)

Facts: Black sold 359 acres to Duncan. K included a 65-acre cotton allotment in conjunction with the federal quota system to prevent overproduction of cotton. With the purchase of 359 acres, came the rights to profitfrom 65 acres of cotton. Quotas were established annually and apportioned by the county commissioners. First year following Ps purchase, county allotted 49 acres (15 acres less). D made up the diff. the first year, but refused after that. P threatened to sue D for BOC& D gave P $1.5K to stop P from suing. D then failed to pay; P sued. PH: Trial court refused to force D to pay on the note because forbearance to sue was not sufficient consideration. P appeals.Issue: Is forbearance to sue on an unenforceable claim sufficient consideration? Holding: No. Reasoning: 1. In order for forbearance to sue to constitute legal consideration, legal claim must be one made in good faith based on a reasonable, tenable ground. Q: What does good faith mean? Does it mean there he thinks there is some legal foundation, or is the perception that there should be a legal claim enough although you know you have no chance? 2. Cotton acreage allotment exists only for 1 year and not subject to Ds control. When D made good on K for the first year he had done what K could require Additionally, K was inherently illegal since it was in direct conflict with Fed quota plan. Forbearance to sue under an illegal K is against public morals. Prof.: many claims are doubtful. Courts favor settlement to foster social peace. There must be at leastsome validity or good faith. Squib: Military College v. Brooks (NJ, 1929) Facts: D used a $927 promissory note to pay for his sons tuition at Ps school, because he wanted to avoid a lawsuit that would injure his credit. D also claimed his son was wrongfully dismissed. PH: Trial court granted summary judgment for P. Issue: Does Ds action to postpone maturity of the note meets the standard of consideration? Holding: Yes.Reasoning: Ds financial situation was so precarious that a lawsuit, regardless of the result, would be disastrous, he boughtpeace by giving the first note, which postponed any suit until maturity of that note, not to mention that by renewals it was further postponed until Feb, 1928.

Section Three: Promises Grounded In The Past

Introduction: promises made only out of a sense of honor or moral responsibility is not enforceable in most states. The prevailing rationale is that the test of moral responsibility varies with the individual and courts cant determine which of his promises he is morally bound to perform. Majority view:

Mills v. Wyman (211)

Facts:Ds son came back from a sea voyage, poor and sick, and P took care of him.After P Good Samaritan takes son in, D writes letter promising to pay expenses, he reneges, and P Sues for BOC. Promisemade without consideration to D himself, and services bestowed on son were not requested. Held: A moral obligation is not a legal obligation[Majority view]. Reasoning: P originally characterizedservicesas a gift.Whendad then promisedto reimburseexpenses, Ptriedtore-characterizetransactionasa K. A gift remains agift. Prof.: P cannot get restitution because father did not benefit. Father was a stranger to his son. If son was a minor, would be a diff. case because father would be obligated to take care of his son. Court made a line, a line based on legal duty, not moral. Anotherwaytolookat thiscaseispastconsideration.79(4 performance or return promise may be given to the promisor or to some other person. It may be given by the promissee or by some other person this would be an argument for P, however, considerationofonemust motivatetheconsiderationoftheother.There needstobeanexchange.Thepromisetopay couldnthave motivatedPstaking care ofhisson- italreadyhappened. This presents an inducement problem - promise didnt induce care; no consideration supporting the promise.P

pg. 36

didnotconfera benefiton the dad (son a minor) Q. on p. 213: Can Millsrecoverfromthesonsestate ifheknowsthevalueof hisservicesis$50? A: Mills was an innkeeper - that was his job. See in Webb the case of a doctor who serves an unconscious person. Is bodily health similar to food and shelter?

Webb v. McGowin (216)

Facts:P stops a log from hitting D, which results in P being crippled. D promises to pay P $15 every 2 weeks for rest of Ps life.D paid until he died. P suesestate, who stopped paying.Rule:Where the promisee cares for or improves the property of the promisor, even without his request it is sufficient consideration for promisors promise to pay, because of the material benefit already received. Life and preservation of body has material pecuniary values, so when D agreed to pay; it is a valid K. This ruling is the Minority view: Moral obligation plus material benefit to promisor equals consideration. Notes: difference between Mills and Webb is that in Mills the promise was based on a moral obligation where the promisor did not receive himself a direct economic benefit, even though the promisee incurred expenses. In Webb, the moral obligation arouse out of a past economic benefit directly tied to the promisor(#2 p.218.).* Note 2: Mills V. Wyman says that the order of performance and promise is important and that in order to have a bargain, we must first have the promises and then have the performance. But Webb v. McGowan stretches the doctrine to find consideration based on a benefit already conferred at the time of the promise. Courts generally do not enforce performance before the bargain unless gross unjust enrichment.Policy: ordinarily, we dont want salesman doing a service and pressuring people into saying they will pay for past performance. Court wants to protect consumers. Reasoning: (1) Courtbringsexample of theDr.thatassists anunconsciousperson.Doesthisex.fitthefacts of thiscase?TheDr.is entitled to restitution becauseK impliedinlawsincethedr.wasexercising the professionforwhichheusually getspaid.Subsequently, they enter intoa bargain - the patient promisestopayandtheDr.waivesofhis claimofrestitution. Wedonthavetorelyonasubsequentpromiseto pay, fortheresanactual bargained forexchangeIn our case:notclearthat Webbwasperformingaserviceforwhichheexpectedtobepaid. Squib: Harrington v. Taylor (220) Facts:D assaults his wife. Wife took refuge in Ps house. D gains entry into Ps house, and resumes attack on his wife.Wife is about to hit D in the head with an axe when P catches wifes hand and P hand is badly mutilated. D promises to pay P her damages. D pays a small sum and wont pay anymore.Ruling: Facts fail to allege a cause of action, a humanitarian act, voluntarily performed, is not consideration. Prof.: distinguished from Webb because P inserted himself into the situation, he was a bystander and chose to interfere.Officiousintermeddler-A person who confers a benefit on another without being requested or having a legal duty to do so, and who therefore has no legal grounds to demand restitution for the benefit conferred. WebblaunchedtheharmtoMcGowin,andthereforean intrinsicpart ofthe event. Harringtondidntlaunchtheharm;hence, wecanargue thatshewasan officiousintermeddler. Distinction between Harrington and Webb: Harrington: (1) Phad astateof mind - he could think about it what he was giving(2) GoodSamaritanwas clearlymakingagift, but tried tore-characterizeit. Court didntlethimre-characterizeit. Webb: (1) Itis unclearwhatWebbintended - heprobablyhadnostateofmindandjust reacted(2)That case there was nocharacterization,and now P wantsto characterize itas something for whichheexpectedpayment. [read other notes; did not follow] [It can be argued that Webb already gave money to him, thereby recognizing a K or promise.]

pg. 37

R2 86: Promise for Benefit Received (222) Squib: Edson v. Poppe (224) Facts: P drills a well at request of a tenant of D. P says value was 250 and that after well completed, D promised to pay. P wins Reasoning:was a direct benefit to land, and D promised to pay, not gratuitous: R2 86 - Q: Is there really unjust enrichment? Squib: Muir v. Kane (224) Facts:D orally employed P to find a B for their home. Void under SOF. P finds B, K of sale is signed - with a clause D promising to pay P 200Rule:P can recover because there was no moral turpitude in the agreement.Benefit has been rendered, so there is a moral obligation to pay. R2 86. In Re Schoenkerman s Estate (225) Facts: A mans (dead)Wifes mother and sister come to take care of kids. They do so for 10 years. Schoenkerman executed 2 notes, promising 500 to MIL and 1.5K to SIL before he died. Held: Decedent was under moral obligation to pay for 10 years of services. D is correct in the claim that serviceswere assumed to be gratuitous, but there is an express K to pay that overcomesthis presumption.In giving the notes, D acknowledge a moral obligation that was more than ample consideration, (SIL cant claim full value $4K) but can get the 1.5K.

Section Four: Reliance On A Promise

R2 90. Promise Reasonably Inducing Action Or Forbearance Comments: a. This Section is often referred to in terms of "promissory estoppel," a phrase suggesting an extension of the doctrine of estoppel. d. Partial enforcement. A promise binding under this section is a contract, and full-scale enforcement by normal remedies is often appropriateIn particular, relief may sometimes be limited to restitution or to damages or specific relief measured by the extent of the promisee's reliance rather than by the terms of the promise...Unless there is unjust enrichment of the promisor, damages should not put the promisee in a better position than performance of the promise would have put him. History of 90: 90 of the R1 set forth the following core requirements: promise, reasonably foreseeable reliance,actual inducement of reliance by the promise, and achievement of justice only through enforcement of the promise. R2 revised 90 of R1 in 3 major respects. (1) Eliminated the requirementthat the action or forbearance be foreseen by the promisor, and induced by the promise to be "of a definite and substantial character." (2) added that "[t]he remedy granted for breach may be limited as justice requires. (2)added a new subsection providing that "[a] charitable subscription or a marriage settlement is bindingwithout proof that the promise induced action or forbearance."(Rejected by NY).

Seavey v. Drake (225)

Facts:P was only child of testator (A person who has made a will). Father gave P possession of one tract of land, who then spent $3K in improvements. P has evidence that his father owed him $200, which was forgiven when his father gave a second strip of land. P claims that testator promised himthe deed to land, but died. P sues for SP. Rule:Not important if it was a gift or K: Equity protects a parol gift of land equally with a parol agreement to sell it, if accompanied by possession and where improvements have been induced by the promise. Equity: Part performance doctrine (reliance although no K) takes away SOF and allows for SP. Issues: (1) can one get K damages (reliance) when the K in unenforceable due to SOF? (2) What is the evidence that a K exist and not a gift (this case court didnt think it relevant) (3) can part performance doctrine allow us to bypass the SOF and then allow for SP? Prof.: You would think that P can get restitution for improvements; however, he asked for SP he wants the land, he cant claim that the Father was unjust enriched. Hence, D can use the desire of the son for the land to prove no restitution. Son must ask for

pg. 38

SP. Court: expenditure in money or labor in the improvement of the land induced by the donors promise to give the land to the party making the expenditures constitutes, in equity, a consideration for the promise and the promise will be enforced. Discussing (3) above regarding the SOF: What is the part performance in this case? Possession unsure of this claim, Improvements is on shaky ground as well. If this is a gift no SOF issue. Prof.:equity is not rescuing the vendee from the SOF, though the cases do, because language of the SOF says that no action may be maintained on the sale of land, and suits in equity are not actions-they are proceedings. SOF confines itself to actions in law and if the chancellors conscience is moved, he can give an equitable remedy. The main concern is evidentiary want to assure that there wasan oral promise; part performance is evidence.   Hamer: Either benefit to promisee or detriment to Promisor) Seavey: father did not seek son to spend 5k on the land y No reliance; It just happened. y Gift promises that induce reliance

Kirksey v. Kirksey (230)

Facts: P is the SIL of D. She resided on public land under a leaseK . D lives in Talladega 60/70M away. D writes her telling her to move, and that she should sell the land and ifshe comes to see him, he will let her have a place to raise her family. P leaves and moves to Ds land, giving her a house and land to cultivate. After 2 years, he moved her to a smaller house and then made her leave. P sues for BOC Held: The promise on the part of D is a mere gratuity, no K, no recovery.Reasoning:Classic approach to K - Williston. Fact that she relied on the promise is unjust. However, she didnt supply any consideration that makes promise enforceable. Court must have had a narrower rule in mind - only benefit to the promissor. The detriment to her was not consideration; it was a condition to get the gift. Prof.:We can really make it a benefit, for he desired at one point for her to move. Dissenting Judge thinks that there was consideration in the form of a detriment to the promissee (Hamer) Using that rule, P would have won - her reliance wasnt incidental of the promise - it was sought by the promise. Is there an argument that the sister ought to lose anyway even though we believe that there was a K?UK is by performance. She didnt take up her preference. She was living on land under the Homestead Act, so she could go to the Gov land office and get a deed to the publicly owned land. The land was given away by the Govwhen you went to live on it, you got a deed. However, she didnt get a deed, so she did not perform. My Q: I would advise: how was this condition to performance?

Ricketts v. Scothorn 1898 (231)

Facts:Decedent (grandfather) wrote a promissory note to pay P on demand $2K with 6% interest per year. P claims that she quit her employment as consideration. She relied upon it in abandoning her occupation. He said none of my grandchildren work, and you dont have too. She immediately quits. The promise was a gratuity. Is there EE?Rule: Yes, there is EE- reliance on the note. Therefore, estate cannot argue note was lacking in consideration.Prof.:Easy argument for P: Grandfather cared about family reputation; it made him proud that she did not have to work exactly like Hamer v Sideway. Arguments against P: For something more than a year P was without an occupation, butwith consent of her grandfather & by his assistance, she secured a position as bookkeeper He didnt tell her to stop working. EE - Court calls it equitable estoppel - earliest approach to PE was EE. The idea is that there would be some inequity, wrong, fraudulent act. The wrong is that you lured the person into reliance in addition to the failure to keep promise - wrongful luring. Squib: Prescott v. Jones (233) Facts: D insured Ps building for a year, when it was going to expire they said via letter theyd renew for another year unless notified. P didnt reply, but they didnt renew. Building destroyed by fire, P sues,claiming reliance on letter. Held: There was an offer but no acceptance, so no insurance. P neither paid the premium nor communicated promise to do so.Notes: an acceptance

pg. 39

requires word or deed. Prof.: prototypical PE case, why did crt not find for P?

Alleghany College v. National Chautauqua County Bank (234)

Judge Cardozo Facts: Mary Yates rights a letter to pledge $5K to be due 30 days after her death, the proceeds to be added to the endowment. On the reverse it says in loving memory this gift shall be known as the Mary Yates Johnston memorial for scholarships for ministry students, however, conditions of her will must be met first. She pays $1K while still alive, which college sets aside for fund. A year later, she repudiates the promise and gave notice. P sues after she dies.Held: The moment that the college accepted the $1K as a payment; there is a duty to do whatever was reasonably necessary to maintain the memorial fairly and to announce the name of the foundation. Donor was not allowed to gain the benefit of such an undertaking upon the payment of a part, and disappoint the expectation that there would be payment of the residue. Rule:She asked for the foundation name When the promisee subjected itself to such a duty at the implied request of the promisor, the result was the creation of a bilateral agreement. One of the promises may be a promise implied in fact. One of the promises is the promise by the college to do whatever may be necessary to make the scholarship effective. Therealotof legal modelsinthiscaseandthey/ we look toseewhichmodel bestfitsthe data. y Charitable subscription case: not subject to consideration (90).

There is a pledge; hardtosayit is an enforceable promisebywording of pledge. College tried to set thepledgeupso that it lookedlike anexchange -inconsideration of interestinChristianand othersubscribers. Q: Isthecollegereallypromisinganything? WasMarytrying toinduceothersto pledge? Cardozos model:(Majority) (1)It began as a pledgewhenoriginally gave1K tothecollege. However, once she sent money, the 1Kisanoffertoenterintoabilateralexecutory K for areturnpromise.This wasoffered and accepted by the college, anditchangedtherulesofthegame; we dont need to waittillshedies.Additionally, it is not a unilateral K,becauseshe isseeking a promisetosetup fundin hername. Thiswasallimplied;noneofitwasexpresslystated. (Prof.: where did Cardozo get this model? Agrees with dissent.) J Kellogg dissent:thepledgewasanoffer,butthecollegeneveracceptedtheoffer sotherewasnoformationofaK,gives 2 models: (2) If we must; Pledge was an offerfora unilateral K; that fund willbe setup inhername.Only oncethecollegedidthat wouldthecollege accept her offer. Since that event wouldnthappentillaftershe died,the offer diesbecause offererdied (Thisisthelaw.K formationisthe meetingoftheminds, cantbea meetingofthe minds whenonepartyisdead [law in Cardozo times was that there are no implied acceptance by action).So,an offer was made that could never beaccepted-could onlybe accepted after death, and atdeath, the offerisgone. (3)Makingagiftwithaconditionsubsequentattached.Thecondition was that collageneededto set upfund,name it afterMary, and usedfor Christianeducation.Ifthecollegedidntdoanyofthese things, moneywouldreverttoMarysestate. Prof.: Thesimplestmodelforwhat happened:Marywasmakingagiftof 1Kwithacondition. (4) Cardozodistinguishes it becausethegift withthe condition benefitsMary. HequotestheclassicistagainstKelloggthatif theconditionbenefitsthepromissor, it suggests thathe is apromissornotadonor. Soughtexpectations that couldbe in action not justwords- Neo-classical vClassical (reluctance accept anything other than explicit words)Cardozowas neo-classical. PartsofthecasethatbothersJacobson: Cardozos attitude toHamervSidwaywhichsaidthatconsiderationto supportapromise can be benefittothepromissororadetriment tothepromisee.Ishedenying that adetrimenttothepromiseewillbesufficient consideration?Cardozo: If thereisadetriment,doesntmeanthere isconsideration. Detriment must have been sought bythe promise

pg. 40

in order forthere to bemutualconsideration. Q. WhydoesnthejustinvokePEforcharitable consideration instead ofgoingtothe difficultyoffinding animpliedK? NY did notmind giving PE for Chartable consideration when there was detrimental reliance, However NYCOAneveraccepted 90 A:(1) Saysthecollegeset themoney aside tobe heldbythe ministers - doesnt reallysee liketheresreliance. (2)Hardtoprovereliance - needtoshowthatyoudidan actionthatyou otherwise wouldnthave done.Its hard foracharity toshowthatb/c they dontchangetheiractions basedonpledges - theyhavetheirbudgetsandprojectsandwontactuntilthey getthemoney because charitiesknownotguaranteed. No detrimental reliance, hence, no PE. CardozoneededtofindimpliedK. y JACOBSON: when Mary Johnson tendered the money it was an offer to enter into a K When college accepted her money they entered into a K. Courts today are reluctant to enforce charitable subscriptions unless detrimental reliance. o PE depends on the promisee detrimentally relying on the gift. o Kellogg: gift with a condition [conditions are the nuclear bombs of K law]. Mary stipulated conditions for the gift [no need to distort facts]. o NO NY COURT OF APPEALS ACCEPTANCE OF RESTATEMENT 90(1) o 90 CHARITABLE GIFTS ARE BINDING

Squib: Siegel v. Spear & Co. (241) Facts:P purchased furniture from D, taking a mortgage and promises not to take the furniture out of his apartment until it is paid for. He is leaving town and goes to Ds credit officer to talk about storing furniture.Officer agrees to keep it for him free of charge. P claims there was a promise to insurefurniture.Furniture is destroyed by fire, no insurance has been purchased. P sued, wins, D appeals.PH: If there was a voluntary promise to insure, was it part of the whole transaction& he is obligated to do it.Held:There was consideration for the agreement to insurewhich makes it unnecessary to determine if the P surrendered any right which would establish consideration. Squib: Carr v. Maine Central R.R. (243) Facts: P was overcharged for freight hauled by D, who claimed they could give no rebate without approval of the ICC. D told P to fill out a form and send it to the railroad and they would forward it. P claims railroad negligently or fraudulently failed to forward document, which led to their claim being time barred.Held:Although no consideration, because P relied upon the Ds undertaking to performservice,a duty was imposed upon the D to send the documents.Notes: Detrimental Reliance

First Nat l Bank of Logansport v. Logan Mfg. Co. (246)

Facts:Bank officer and VP named Brandt sought to attract new business. He learned of a small Michigan Co. called Winamac, which suffered loses and wanted to move to Indiana. Brandt met with Garret and Moore (Ps) who were interested in Winamac to move to Logansport. However, the officer can only authorize $100K for Ps (to purchase majority interest in Co.) with promises for additional funding. Bank denies loan for Winamac. D later gives them another loan of 346K with 250K credit for the newly renamed Winimace Co. called Logan - with conditions that the loan be guaranteed by the state. Brandt says that the bank will loan even without the guarantee. The state didnt guarantee the loan, and Bank said they wont give the loan. They sue based on Brandts representations. They win, appealed. Bank says it was not obligated to make the loan, no enforceable oral agreement, and that the adequate measure of damages was the interest rate differential. Rule:PE encompasses the following elements: (1) A promised by the promisor. (2) Made with the expectation that the promisee will rely thereon. (3) Induces reasonable reliance by the promisee. (4) Of a definite and substantial nature and (5) injustice can be avoided only by enforcement of the promise. Held: These facts meet all 5 elements. They get reliance damages of 73K, however, no lost profits. PE does not make us do the P

pg. 41

phrase, was not a real promise, but we will give reliance. Prof: even that they should not get even that. Baird:PE may create perverse effects when you get a promise, you spend in reliance on it so you can win on PE. Prof.: Did bank fulfill Brandts assurances? Brandt is an idiot, kind heart- empty head. When do expectations become a promise? Squib: I & I Holding Corp. v. Gainsburg (252) Facts:D signs pledge to pay 5K in 4 annual installments to Beth I. Hospital. Hospital sues.Court: a charitable subscription and a binding UK. Dissent: Must be proof that promise induced the promisee to perform - not in this case. Squib: Salsbury v. Northwestern Bell Telephone Co. (253) Facts:D promises to donate 15K to new college.College closes, D doesnt pay. SC finds promise enforceable without proof of detrimental reliance, necessity for proof of detrimental reliance would make it hard to get charitable donations. Public policy: when subscription is unequivocal, subscriber should keep his word. Calamari: Typically, charity would need to show it did something differently than it would have done without the promise. Notes: Fried v. Fisher (254) Rule:It is beyond the pale of argument that a promise by a creditor to release one of the partners from a debtor firm from obligation is, in the absence of qualifying facts, legally unenforceable for want of consideration. Mahban v. MGM Grand Hotels Inc. (255) Facts:D leases retail shop space to P. Lease contains clause permitting either party to terminate if premises are damaged to an extent that they cant be used within 180.There is a fire on Nov. 21. On Jan 30, P receives a letter which says the target date to reopen should be finalized in late Feb. P claims that he relies on this letter by ordering merchandise. On March 17, P receives another letter saying D is terminating lease pursuant to destruction of premises clause. P sues.Court awards Summary judgment for D; reversed on appeal.Held: SJ is inappropriate because P asserts EE and that is not what they ruled on.Rights may be waived by the lessor or he may by his conduct become estopped. Ds letter allows an inference of intent not to exercise termination right, and instructs P regarding reconstruction plans: Question of fact.Note: there was not a clear waiver, this case is more PE. If it was a waiver, letter should have said we are waiving out right to shut down. Prof.:The courts dont really treat these 2 terms with accuracy and consistency. They are different terms with different meanings. Courts dont always use them correctly. Distinction between waiver and estoppel: Waiver - A knowing and intelligent relinquishment of a (known) right. Two important characteristics: (1) Does not require any consideration to be effective. Normally,a creditor cannot effectively release a debtor from a portion of debt, without additional consideration. [Consideration may be trivial - Courts dont scrutinize adequacy of consideration. However, there has to be bargained for exchange that would serve as a modification of the K.] A more general rule (including the legal duty rule*) is that K cant be modified unless there is new consideration by both sides. (Modified K has the same rules as new K.) *Levine - legal duty rule there is no consideration when there is already a legal duty (Ex: cop solves crime when not on the job) However, Waiver doesnt need consideration even though it effectively modifies a K. Conclusion: If we can characterize this letter as a waiver, then it will be effective. (2)A waiver does not require reliance in order to be effective. The doctrine of PE - key is reliance. From PE view point, we require reliance. If we look at it from waiver view, no need for reliance or consideration!

pg. 42

Prof.: no promise. Court said tenant was allowed to rely on the letter. Should have waited until the target date. y Waiver v. Estoppel o Always be warned when you see waiver/estoppel  Waiver is the voluntary relinquishment of a known right y Valid without consideration then do it for free. Once its done, its done. The right is gone. You cannot restore it. o Estoppel:  Requires reasonable reliance  Usually the result of voluntary actions  Counterparty relied on certain things that were reasonable for them to rely on and unfair for them to disappoint their expectations  Estoppel can be reversed y If you are no longer entitled to those observations Courts confuse the two all the time.

Stearns v. Emery-Waterhouse Co. (256)

Facts: D made an oral K to employP for a term greater than one year (5 yrs. at 85K/Y). P moves to Maine to be in charge of sales. He is then notified that he is being moved to a different job for less pay, at which he works for 6 months, after which he is fired. P sues for oral BOC. D is estopped from asserting its defense under SOF because of reliance on the oral K. Held: PE is insufficient to overcome SOF. No evidence of fraud on the part of the employer, and enforcement is barred by SOF. Only in cases of fraud can equitable estoppel be invoked to prevent SOF. Notes: Court: 139-highly restrictive. Some courts arent so restrictive-may just heighten the standard of proof, but they wont require fraud by the employer. Using 139 - PE to overcome the SOF is a complex subject. In employee and employer K. PE makes courts very nervous to override SOF: impossible to distinguish reliance of ordinary employee entering 1 year from a term of many years &concerned employees will lie. EE V. PE: EE doctrine is estoppel imposed by the court of equity for fraudulent conduct promise for employment. PE only requires a promise upon which the person relies, and not bad behavior. EE can only serve as a shield whereas PE is a shield or a sword. EE depends upon a misrepresentation of an existing fact. Squib: Goldstick v. ICM Realty (258) J Posner -Rule: Employmentat will[no K] isthedominant typeofemploymentrelationship,and itwouldbe seriouslyunderminedifemployeescouldusePE tomakeallegedoralpromises enforceable. PE is too easily shown in employment setting. JACOBSON: SOF no matter what you say about reliance. o Why does the court reject reliance on reliance? General concern with SOF is that people can make stuff up.  Nothing to distinguish employee who had promise and one that did not, higher evidentiary standard than for normal claim. y PE ONLY when Clear and convincing evidence y Higher burden on the P y Moral balance starts to shift  Reliance based exceptions to SOF is tricky. Lots of moral pressure to enforce. Restatement Second 139 (259) y

Section Five: Precontractual Obligation

Revocability of firm offers A firm offer is one that by its terms is to remain open until a fixed date the general rule is that even a firm offer can be revoked prior to expiration of its term, and such a revocation terminates the offerees power of acceptance. The rationale is that the provision stating that the offer will be held open is merely a promise not supported by consideration (or a seal). Revocation of an Option Contract:

pg. 43

(a) General rule: if an offeree has given anyconsideration (even nominal value) for the offer it becomes an option. An option is a completed contract in which the offeror has a bound himself not to revoke the offer. (b) Effect if recital of consideration: under the general view, a mere recital of consideration is not conclusive. The courts decide whether the consideration was paid. However, in a case of sham consideration, Restatement (2nd) 89 provides that an offer is binding as an option if it is in writing, signed by offeror, and recited a purported consideration.

UCC 2-205:Firm offers; offers expire after 3 months if date of acceptance not specified. Offer must be written down.

Restatement Second 87. OPTION CONTRACT

(1) An offer is binding as an option contract if it (a) Is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or (b) Is made irrevocable by statute.

Thomason v. Bescher (261)

Facts: D made a promise under seal that in return for $1 from P, they would sell P a timber tract in exchange for 6K by a certain date. Before 6K was tendered, D notified P that they had revoked the offer. P sued for SP. Jury found that the $1 had never been paid, but that P was able and willing to pay the 6K the whole time: granted SP. D appealed. Issue: Are offers under seal enforceable at equity? Rule: Instruments under seal are binding at common law even without consideration. When the offer is accepted, it becomes a BK, trial ruling affirmed. Analysis: Court: sealed instrument is effective to bind the offerors to keep their offer open until date they said they would. P was ready to give him the money before that date, and D refused, breaking their sealed promise. JACOBSON: option here: promise not to withdraw offershould be enforceable like any other promise (consideration in exchange). Neither present here. Options have market prices. Promise to keep option open is a gift promise. Compensation to be received by offerer is fair. Assumption of the breach of option will be followed   Damages a law would be different for breach of option than v. underlying contract. AN OFFER IS BINDING ON A UNILATERAL CONTRACT/OPTION IF: y Offer is binding if in writing and signed by offeror y Recites purported consideration for making of the offer [1 penny] y Exchange of terms are fair in related to the value of the actual goods etc.

James Baird Co. v. Gimbel Bros. (265)

Judge Learned Hand - Facts:D, a linoleum seller, made a mistake as to how much linoleum was needed to build a new public building: they thought only half as much was needed as actually was required. D sent out offers to a bunch of contractors to supply all the linoleum necessary to build the new building, but the offer price was basically half of what it should have been. One P, having received the offer, put in a bid to build the state building based on that offer. First, D telegraphed all the contractors to let them know of the mistake. However,State had already accepted the offer, and P sent D an acceptance. D denied K. PsuedBOC. Trial court found D. P appealed: it was understood that the contractors would be making bids in reliance on Ds offer to supply linoleum. Rule: A bid does not constitute an acceptance, which means that D is not required to deliver linoleum, and no PE, because D was bargaining for an acceptance. Analysis: Hand finds there was no K between parties because putting in a bid could not be construed to constitute an acceptance. JACOBSON: sub made an offer for bilateral/executory but general contract never accepted. 3 models for holding sub liable: o 1st model - Best: parties actually entered into a K  By submitting a bid the subcontractor made an offer that general contractor acceptedby using it in his bid for gov K. (gov giving the K is a Precedent conditional to both Ks)  1st model rejected: sub withdrew.

pg. 44

2nd Model Below: PE- however, in this case, setting is not conducive to gifts. 3d Model - Entirely within purview of the parties to specify relationships  Both parties were free to walk shop the bid. If successful in being awarded; however, it may have been an option.  3d model rejected:(1) Option seems one sided, he can now shop the Offer. y WRITE IT DOWN OR LOSE Modern view: o o

Drennan v. Star Paving (269)

Jude Traynor - Facts:P is a contractor who was looking for a SubC to do some paving. D put in an unusually low bid, and based on this bid, P made the low bid for the main construction K. However, after K was made(and GC called and confirmed the price), D said they had made a mistake and wouldnt do the paving for the price theyd offered. P had to go out and find a different subcontractor to do the paving at a higher price. P sued D for diff. in cost. D argued that there was no K because D made a revocable offer and revoked it in time. Pclaims reliance. Issue: Did P reliance make Ds offer irrevocable? Rule: If you make a promise that you should reasonably expect will cause the promisee to act in reliance to their detriment, and it actually does cause them to act, then you may be bound to that promise if necessary to avoid injustice. Analysis: The court finds that D reasonably induced reliance on the part of P. No evidence that D offered to make its bid irrevocable - Restatement 90 (PE).Reasonable reliance serves to hold the offeror in lieu of the consideration normally required to make the offer binding. If we want to reconcile the case from James Baird, we can. Here the subC was far more reckless. o o JACOBSON: subs offer uncharacterized. Evidence of a custom of the trade. 3rd model (see last case): PE  Sub promised - Hand says no promise.  Not a gift promise  Classic Traynor made the PE up out of the air. Legislative.  Traynor wanted to rectify power differential between subs/general contractors y He leveled the playing field by using PE. But it didnt work. What are the rules?

Squib: E.A. Coronis Associates (D) v. M. Gordon Constr. Co. (P) (273)

Facts: Gordon expected to bid on 2 buildings, solicits bids from SubContractors including D. D offers to supply and erect steel for 155K. P is awarded K, and formal documents executed 2/weeks later. P had not accepted Ds offer during that 2 weeks. D telegraphs revocation after P officially gets the K. P seeks damages for diff between Coroniss bid and what is charged by another SubC. Coronis prevails at trial. On appeal; reversed and remanded because PE is applicable.

Pre-K Liability

Goodman v. Dicker (279)

Facts: P was the local distributor for Emerson Radio. P encouraged D to apply for an Emerson franchise. P induced D to incur business expenses to be under the franchise including employment of salesmen and solicitation of orders for merchandise. P represented that D had been approved for a franchise and that he would receive a delivery of 30 radios, but later informed D that there would be no deal. D sued P and was granted a judgment of 1.5G of which $350 was for expected profits from the sale of the radios. P appealed, asserting that the franchise agreement was at will (can cancel whenever it pleases) and therefore no liability.Holding:P is estopped from arguing that they were under no obligation to give D any radios because of representations and Ds detrimental reliance. Court: true measure of damages is the expenditures made in reliance on the assurance of a franchise, but no lost profits (not reliance damages). Q: Did D make a promise? That the franchise would be granted? Sounds like a prediction or a claim of fact, not a promise. Q: Is PE the right claim here? P reaction should inquire what it means or get it in writing if he was going to substantially rely.Are you really goingtogostartssettingupwhenyoudidntsignyet b/cyoure goingbydirectionofa3rd.party?

pg. 45

Prof.: negligent misrepresentation. PE is a cover for the real claim. Problem is that PE can get full P Phrase, here no promise (in any of these cases). Traynor says we can imply a promise. Who bears the cost of insurance as a result of breaches? Conversation on page 283: Williston wants PE in cases such as Chapter Three Wheeler v White. When we know there was a K, believed there was a K, but it was enforceable due to vagueness and indefinite. Hence, there is either a K or not. However, when we get to PE as reliance when no real promise exists, it creates the issue of excess money that the conversation was about. Squib: American National Bank v. A.G. Summerville Inc. (280)
Facts: Summerville sold 2 automobiles to Tomlinson for 3.G each. Tom signed K that stated he acknowledged receipt, and that if S assigns the right to the money owed to a 3rd party, Tom cant attack K validity (or not paying). S assigns rights to P-bank. P sues to collect, and Tom pleaded that he never received automobiles. Held: K does not preclude him from showing no consideration, or that consideration had not been given. He can be precluded by estoppel en pais - showing the falsity of a statement of fact on which another had relied.

D Ulisse-Cupo v. Board of Directors of Notre Dame High School Facts: School board doesnt rehire teacher despite representations that she would get a new K. Sues for K damages on PE. Held: Even if the board cannot be held liable for PE, they could still be held liable for negligent misrepresentations (intentional is fraud) - no requirement that those representations be promissory.Notes:This case &Goodmanaremore suitablefornegligentmisrepresentationclaims.Q: Doyouhavearight to relyona3rd.party?Maybe the 3rd.partymade amistakeandnot necessarilycareless. Osborn v. Commanche Cattle Indus.
Facts: 3 year services K terminable by either party with 30/d notice. Suit on K for lost profits. Held: Promisee may not recover more than he would have gained by full performance. Since the assurance of performance doesnt last beyond 30 days, neither does his right to recover: can only recover for 30 days from breach.

Hoffman v. Red Owl Stores (284)

Facts: Hoffman owned a bakery, but wanted to open a Red Owl store. Red Owl repeatedly assured P that 18K was sufficient. He started working on opening a store, which included selling the bakery, buying and later selling a small grocery, paying some money for a lot and house in Chilton, and moving to Neenah. Then D starting raising the amount of capital they wanted from P to be able to open the store. P backed out of negotiations and sued D. Trial court found P had acted to his detriment in reasonable reliance on D promises, and awarded him reliance damages. D appealed. On appeal, judge upheld everything except damages for the sale of the small grocery store. D appealed again. Analysis: The promise lacked essential terms that would make a K. Issues: (1) should we recognize PE. (2) Do the facts make out a cause of action for PE (3) Are the jurys findings sustained by the evidence. Rule:(1) Yes we recognize PE. Elements of PE are: [1] was the promise one which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character. [2] Did the promise in fact induce such action of forbearance? [3]Can injustice be avoided by the enforcement of the promise? (2) There was PE here.(3) Approve 2K in damages for (the loss on the) sale of bakery. Approve 1K for option on the lot.Approve the rent. Approve moving expenses.Do not approve damages for the sale of the grocery store and equipment because there were no actual losses, and in cases of PE, damages cannot exceed potential rewards. Order a new trial on those issues. (When inducement created an opportunity for profits, PE will not give him lost profits, for being induced again to leave said profitable venture.) What he is recovering is pre-K expenditures. In Dempsey, courts did not allow Pre-K expenditures. Here, we are not trying to enforce K, hence, we allow pre-k cost. Why? Because the costs are incurred while in negotiation, after promise was made. Due to wrongful behavior of D we are allowing pre-k expenditures; this is Culpa in contrahendo civil law rule that assures

pg. 46

negotiation with care. In the classical theory of K, there is no liability when behavior is in questions short of gross intentional fraud. Classical theory advocates would disagree with giving pre-k reliance. We want to force the parties to negotiate and elucidate the full terms. We dont want courts sifting and clarifying. Parties should have that burden. However, this may lead to overnegotiation. People cant spend forever in working every detail. Additionally, there is a very minor amount of these types of cases. Another point, maybe all these risks may be a deal-breaker people are risk averse. This can lead to many deals falling through. Baird: P got lucky, most courts wouldnt allow PE for preliminary negotiations, and there is no K here. There is something called a letter of intent, that all would agree, that such reliance would be correct. Letter of intent says what the prelim negotiation is. Would allow him to go to the bank for funding, and hence is legit reliance. This case; company would have said immediately 18K isnt enough. NOTES: this decision extends the PE doctrine since it does not rationalize it in terms of reliance as a substitute for considerations. Here, there is not even an offer. There is simply negotiation. The implication is that parties must bargain in good faith; if they do not, and if one party relies to its detriment, PE will apply and damages will be awarded to prevent injustice from the detrimental reliance. Prof.: prolonged negotiations between franchisee/franchisor  Red owl never promised anything  Until you have everything you dont have anything  Should the law reflect reality? Traynor  Should the law provide a firm framework for bargaining? Hand. Q on pp. 289: The distinction between Hoffman and this Cosgrove is that there is clarity when the father says he is thinking, there was no assurance that created ambiguity. He did not set up the listener to misconstrue to facts.

pg. 47

Contents
Chapter One: ........................................................................................................................................................................................................ 4 Section One........................................................................................................................................................................................................... 4 1)Hawkins v. McGee - ED .................................................................................................................................................................................... 4

The Bullet point The P Phrase. ...............................................................................................................................................4

2) Groves v.Wunder ............................................................................................................................................................................................. 4

2.

Peevyhouse v. Garland Coal .............................................................................................................................................5

First restatements of contracts (346)..........................................................................................................................................5 The Bullet P Phrase has two methods. ....................................................................................................................................5
3)AcmeMills&ElevatorCo. v. Johnson ................................................................................................................................................................. 5

The Bullet Only P Phrase, nothing more, we will not let the other party lay their hands on the profits......................................6 Squib: Laurin v. DeCarolis Constr. Co., Inc.: ............................................................................................................................6
4)Missouri Furnace Co. v. Cochran ..................................................................................................................................................................... 6

Common law: Hockster v De La Tour -.....................................................................................................................................6

5)Neri v. Retail Marine Corp................................................................................................................................................................................ 7

The Bullet: The seller is entitled to the lost profits, plus expenses. .............................................................................................7 Squib: Commonwealth Edison Co. v. Decker Coal Co. .............................................................................................................7
6)Illinois Central RR Co. v. Crail:........................................................................................................................................................................ 7

The Bullet Not cranking formulas, only actual damages. ........................................................................................................7 Squib: Watt v Nevada Central RR. ............................................................................................................................................7
Reliance Damages ................................................................................................................................................................................................. 8 7)Chicago Coliseum Club v. Dempsey: Illinois Court of Appeals, First District (1932)....................................................................................... 8

Rule: ........................................................................................................................................................................................8 Outline: ....................................................................................................................................................................................8 Squib: Security Stove & Mfg. Co v American Ry Express Co.: Mo. App. (1932).......................................................................9 The Bullet: If reliance of something consistent, can get damages anticipating K. ...................................................................9 Squib: Anglia Television Ltd. v. Reed:......................................................................................................................................9 The bullet Can rely when there are many alternatives, and late breach. ...............................................................................9 Restatement of Contracts, 349:................................................................................................................................................9
8)L. Albert & Son v. Armstrong Rubber Co.: ...................................................................................................................................................... 9

Squib Mt. Pleasant Stable Co. v. Steinberg:............................................................................................................................. 10

Section 2 Limitations on the P Phrase. ............................................................................................................................................................ 10 1)RockinghamCountyvLutenBridge Co.: ........................................................................................................................................................... 10

pg. 48

The Bullet Mitigate damages................................................................................................................................................ 10 Squib: Leingangv CityofMandanWeedBoard .......................................................................................................................... 10 Squib: Kearsarge Computer, Inc. v. Acme Staple Co.: (1976) .................................................................................................. 11 Wrongful discharged employee duty to mitigate:..................................................................................................................... 11
2)Shirley Parkerv20thCenturyFox (Cal. 1970): ................................................................................................................................................. 11

The bullet; Rule - Shirley McClain is not Kearsarge. Kearsarge and RMC is a service - goods dealer. Employees cant get lost profits; they only can be at one place at a time. Employees lose recovery by mitigating. .......................................................... 12 Squib: BillettervPosell (1949) ................................................................................................................................................. 12
3)Hadley v Baxendale ......................................................................................................................................................................................... 12 4)Globe Reffining Co. v. Landa Cotton Oil Co.: ................................................................................................................................................ 13

Squib: Lamkins v International Harvester Co .......................................................................................................................... 13 Squib: VictoriaLaundryLtdv NewmanIndusLtd ....................................................................................................................... 13 Squib: Heron II....................................................................................................................................................................... 13 Squib Hector Martinez & Co v Southern Pacific Transp Co.:................................................................................................... 14
5)Valentine vGeneral American Credit,Inc........................................................................................................................................................ 14

Squib: Hancock v. Northcutt ................................................................................................................................................... 14

6)MindGames, Inc. v. Western Publishing Co.: ................................................................................................................................................. 14

Freund vWashington Square Press,Inc.: .................................................................................................................................. 15 Fera v. Village Plaza, Inc. ....................................................................................................................................................... 15
Section 3- Restitution Alternative Damages ....................................................................................................................................................... 15 1)Boone v Coe(1913) ........................................................................................................................................................................................... 16

Quantum Meruit: .................................................................................................................................................................... 16 The Bullet: No K; therefore restitution: Only when benefit. ..................................................................................................... 17
2)United States vAlgernonBlair, Inc................................................................................................................................................................... 17

The Bullet: If breachee and MB; Can claim On k and Off K. ............................................................................................ 17 Squib: Kearns v Andree .......................................................................................................................................................... 17 The Bullet: Breachee can get reliance-restitution. .................................................................................................................... 18 Notes: Farash v Sykes ............................................................................................................................................................. 18 Notes: The Doing and Giving Problem.................................................................................................................................... 18 Squib: OlivervCampbell(1954) ............................................................................................................................................... 19 The Bullet: Only restitution until the point you performed, once performed no res. .............................................................. 19 Notes: Noyes v. Pugin (Bottom of p. 108) ............................................................................................................................... 19

pg. 49

Notes: Clark-Fitzpatrick Inc. v. Long Island Railroad Co. (pp. 109)......................................................................................... 19

3)Stark v. Parker (Mass.SC 1824) ..................................................................................................................................................................... 19 4)Britton vTurner-(1834).................................................................................................................................................................................... 20

Notes: Schwasnick v. Blandin (pp. 124): ................................................................................................................................. 20 Squib: Thach v. Durham ......................................................................................................................................................... 20
5)Pinches v Swedish EvangelicalLutheran Church,S.C. of Errors of Ct, 1887 .................................................................................................. 21

Squib: Kelly v. Hance ............................................................................................................................................................. 21

6)Vines v Orchard Hills,Inc................................................................................................................................................................................ 21

The Bullet: WhenwelookattheP phrase,wedodamagesbasedonthelaw,however with restitution, werelookingatequity. .............. 22 Squib: DeLeonvAldrete .......................................................................................................................................................... 22 Rule: ...................................................................................................................................................................................... 22
Section 4 Contractual Controls on the Damage Remedy................................................................................................................................. 22

Penalty Clauses and Liquidated Damages ............................................................................................................................... 22

1)Muldoon v. Lynch ........................................................................................................................................................................................... 23

Note: Pacheco v. Scoblionko (pp. 135).................................................................................................................................... 23 Squib: Yockey v. Horn ........................................................................................................................................................... 23 Squib: Wilt v. Waterfield (MO Sup. Ct. 1954)......................................................................................................................... 24 Comment: Applying Damage Clauses ..................................................................................................................................... 24
2)Samson Sales Inc. v. Honeywell Inc. (149)....................................................................................................................................................... 24 Section 5: Enforcement in Equity....................................................................................................................................................................... 24

Note: Manchester Dairy v Hayward ........................................................................................................................................ 24

1)Van Wagner Advertising Corp. v. S & M Enterprises (153)........................................................................................................................... 25

Squib:Curtice Bros. v. Catts (154)........................................................................................................................................... 26 UCC 2-716 ........................................................................................................................................................................ 26 Squib: Paloukos v. Intermountain Chevrolet Co. (160) ............................................................................................................ 26
2)Fitzpatrick v. Michael (MD Court of Appeals, 1939) ...................................................................................................................................... 26 3)Lumley v. Wagner ........................................................................................................................................................................................... 27

Squib: Pingley v. Brunson ...................................................................................................................................................... 27 Note: Enforcing Noncompeting Pledges.................................................................................................................................. 27 Note: ABC v. Wolf (173)........................................................................................................................................................ 27 Squib: Fullerton Lumber Co. v. Torborg ................................................................................................................................. 28 Squib: Data Management v. Greene (AK Sup. Ct., 1988) ........................................................................................................ 28 Northern Delaware Indus Dev Corp v EW Bliss Co................................................................................................................. 28

pg. 50

Squib: City Stores v. Ammerman (DDC, 1967) ....................................................................................................................... 28 Squib: Grayson-Robinson v. Iris Constr. Corp (NY Ct. of Appeals, 1960) ............................................................................... 29
Chapter Two: ..................................................................................................................................................................................................... 31 Section one: Introduction ................................................................................................................................................................................... 31 Case: Congregation Kadimah Toras-Moshe v. DeLeo (Mass Sup. Ct., 1989) .................................................................................................... 32

The Bullet: gift promises are not enforceable [beside for the seal in some states]. .................................................................... 33 Squib: Pitts v. McGraw-Edison Co. (190) ............................................................................................................................... 33 Squib: In Re Bayshore Yacht and Tennis Club Condominium Assn. Inc. (191)....................................................................... 33
Section 2. The Bargained For Exchange............................................................................................................................................................. 33 Hamer v. Sidway (195) ....................................................................................................................................................................................... 34

Squib: Earle v. Angell (198) ................................................................................................................................................... 34 Squib: Whitten v. Greeley-Shaw (198) .................................................................................................................................... 34
Fisher v. Union Trust Co. (201) .......................................................................................................................................................................... 35

Squib: Sharon v. Sharon (204) ................................................................................................................................................ 35 Comment: Schnell v Nell (1861)............................................................................................................................................. 35 Promises to surrender or Forbear from Asserting Legal Claim ................................................................................................. 35
Duncan v. Black (MO Ct. of Appeals, 1959)....................................................................................................................................................... 36

Squib: Military College v. Brooks (NJ, 1929).......................................................................................................................... 36

Section Three: Promises Grounded In The Past ................................................................................................................................................ 36 Mills v. Wyman (211) ......................................................................................................................................................................................... 36 Webb v. McGowin (216) ..................................................................................................................................................................................... 37

Squib: Harrington v. Taylor (220) ........................................................................................................................................... 37 Squib: Edson v. Poppe (224)................................................................................................................................................... 38 Squib: Muir v. Kane (224) ...................................................................................................................................................... 38 In Re Schoenkermans Estate (225)......................................................................................................................................... 38
Section Four: Reliance On A Promise ................................................................................................................................................................ 38 Seavey v. Drake (225) ......................................................................................................................................................................................... 38 Kirksey v. Kirksey (230) ..................................................................................................................................................................................... 39 Ricketts v. Scothorn 1898 (231) .......................................................................................................................................................................... 39

Squib: Prescott v. Jones (233) ................................................................................................................................................. 39

Alleghany College v. National Chautauqua County Bank (234) ........................................................................................................................ 40

Squib: Siegel v. Spear & Co. (241) ......................................................................................................................................... 41 Squib: Carr v. Maine Central R.R. (243) ................................................................................................................................. 41

pg. 51

First Natl Bank of Logansport v. Logan Mfg. Co. (246) ................................................................................................................................... 41

Squib: I & I Holding Corp. v. Gainsburg (252)........................................................................................................................ 42 Squib: Salsbury v. Northwestern Bell Telephone Co. (253) ..................................................................................................... 42 Notes: Fried v. Fisher (254) .................................................................................................................................................... 42 Mahban v. MGM Grand Hotels Inc. (255)............................................................................................................................... 42
Stearns v. Emery-Waterhouse Co. (256) ............................................................................................................................................................ 43

Squib: Goldstick v. ICM Realty (258) ..................................................................................................................................... 43

Section Five: Precontractual Obligation ............................................................................................................................................................ 43 Restatement Second 87. OPTION CONTRACT .............................................................................................................................................. 44 Thomason v. Bescher (261) ................................................................................................................................................................................. 44 James Baird Co. v. Gimbel Bros. (265)............................................................................................................................................................... 44 Drennan v. Star Paving (269) ............................................................................................................................................................................. 45

Squib: E.A. Coronis Associates (D) v. M. Gordon Constr. Co. (P) (273).................................................................................. 45
Goodman v. Dicker (279).................................................................................................................................................................................... 45

Squib: American National Bank v. A.G. Summerville Inc. (280) ............................................................................................. 46 DUlisse-Cupo v. Board of Directors of Notre Dame High School ........................................................................................... 46 Osborn v. Commanche Cattle Indus. ....................................................................................................................................... 46
Hoffman v. Red Owl Stores (284) ....................................................................................................................................................................... 46 Chapter 3: When (and how) promises become enforceable ............................................................................................................................... 53 Section 1. Mutual Assent Requirement of Offer and Acceptance.................................................................................................................... 53

UCC gap fillers: .................................................................................................................................................................. 54

Raffles v. Wichelhaus (299) ................................................................................................................................................................................ 54

Conclusion: ........................................................................................................................................................................ 55 Squib: Flower City Painting Contractors v. Gumina Construction Co. (300) ............................................................................ 55 Note: Konic Intl Corp. v. Spokane Computer Services Inc. .................................................................................................... 55 Squib: Dickey v. Hurd ............................................................................................................................................................ 55
Embry v. Hergadine, McKittrick Dry Goods Co. (304) ..................................................................................................................................... 56 Kabil Developments v. Mignot ........................................................................................................................................................................... 56

Squib: NY Trust Co v Island Oil & Transport Corp ................................................................................................................. 57

Wheeler v. White ................................................................................................................................................................................................ 57 Section 2. Offer and Acceptance......................................................................................................................................................................... 57 Morrison v. Thoelke (309) .................................................................................................................................................................................. 57 Moulton v. Kershaw (317) .................................................................................................................................................................................. 58

pg. 52

33. CERTAINTY ................................................................................................................................................................. 58

Petterson v. Pattberg (320) ................................................................................................................................................................................. 58 Restatement of Contracts Second 45 Option Contract Created by Part Performance or Tender (326) ......................................................... 59 Carlill v. Carbolic Smoke Ball Co. (327) ............................................................................................................................................................ 59

Lefkowitz v. Great Minneapolis Surplus Store, Inc.................................................................................................................. 59

Cobaugh v. Klick-Lewis, Inc. (331) ................................................................................................................................................................... 60

Pine River State Bank v. Mettille (336). .................................................................................................................................. 60

Allied Steel & Conveyors, Inc. v. Ford Motor Co(338). ..................................................................................................................................... 61 Davis v. Jacoby (341) .......................................................................................................................................................................................... 61

Squib: Jordan v. Dobbin ......................................................................................................................................................... 62

Brakenbury v. Hodgkin (347) ............................................................................................................................................................................. 62 Section 3. Limited and Indefinite Promises (353) ............................................................................................................................................... 62

DavisvGeneralFoodCorp ........................................................................................................................................................ 62 NatNatServiceStations vWolf ................................................................................................................................................. 62

Obering v. Swain-Roach Lumber Co. ................................................................................................................................................................ 63 Wood v. Lucy, Lady Duff-Gordon (361) ............................................................................................................................................................ 63 Omni Group, Inc. v. Seattle-First National Bank (365)...................................................................................................................................... 63 Feld v. Henry S. Levy & Sons, Inc. (370)................................................................................................................... Error! Bookmark not defined.

Squib: Corenswet Inc. v. Amana Refigeration Inc. .................................................................... Error! Bookmark not defined.
Sun Printing & Publishing Assn v. Remington Paper & Power Co., Inc. (376) ....................................................... Error! Bookmark not defined. Empro Mfg. Co. v. Ball-Co Mfg., Inc. (380) .............................................................................................................. Error! Bookmark not defined.

Borg-Warner Corp. V. Anchor Coupling Co. ............................................................................ Error! Bookmark not defined. Squib: Southwest Engg Co. v. Martin Tractor Co. (394)......................................................................................................... 66

Chapter 3: When (and how) promises become enforceable Section 1.Mutual Assent Requirement of Offer and Acceptance.
(1) How Manifested - in General: the first requirement of a K: parties must manifest to each other mutual assent to the same bargain, usually in the form of offer and acceptance. [restatement (2nd) 22] (2) Offer: i. Definition. An offer is a proposal by one party to another, manifesting a willingness to enter into a bargain, and made in such a way that the other person is objectively justified in believing that his assent to that bargains is invited and, if given, will result in a binding K. An offer creates a power in offeree to create a K by appropriate acceptance [R2 24] 3 essential elements to a legally sufficient offer: (1) manifestation of present contractual intent (2) certainty and definiteness of terms (3) communication to the offeree.

pg. 53

ii.

Requirements of manifestation of present contractual intent - The words or conduct used in the proposal must be words of offer rather than words of preliminary negotiation. The test: Objective = reasonable actions taken would lead one to presume agreement manifestations of assent. Policy: Subjective meeting of the minds is too speculative and businesses need some certainty [R220]

iii.

Factors considered in applying the test. A single one is notconclusive (1) Words (2) context (3) to whom proposal is made (public ads are an invitation) (4) definiteness and certainty of terms (5) written K contemplated (is the K when they agreed or when written?)

(3)Acceptance: (A)Definition: an acceptance is a voluntary act by the person to whom an offer is made, by which such person exercises the power the manifestation of assent on the manner requested authorized by the offeror.[R2 52] (B) Requirements for a valid acceptance: (1) who may accept: offer may only be accepted only by the person to whom the offer is made. Offer to public can be accepted by anyone. (2) Acceptance must be unequivocal; any modification is a new K. (4)Requirement of Certainty and Definiteness of Terms: Offer must be sufficiently clear to allow courts to fix damages in case of non-performance [Restatement (2nd) 32.] Essential terms: Parties, Subject, Time for performance, price: Implication of reasonable terms: Terms must be clearly stated or capable of reasonable implications from their agreements. Reflecting a general policy of liberal construction so as the uphold the expectations of the parties, courts may imply reasonable terms in an offer, so long as they are consistent with the expressed intentions of the parties. Such terms are implied in fact from the dealings and relationship between the parties. i. ii. iii. iv. No Implication when some provisions made by parties. However, courts will never imply terms when the parties have imperfectly of incompletely convert the terms in questions. Courts wont remake K. Price:(a) Price completely omitted: courts will imply a reasonable price fair market value. (b) Price term indefinite: too vague, no enforceable K. No reasonable terms will be read in. Time for performance: if parties fail to set a time, courts will imply K must be performed within a reasonable time after date of acceptance. Agreement to agree: An offer may reserve some terms for future agreement, K not enforceable till they agree on terms. UCC gap fillers : K for sale of goods, omission of one or more essential terms does not render K invalid, as long as parties intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. 2-204. Definition of Reasonable terms: a) Price omitted: a reasonable price at the time set for delivery 2-305 b) Place of delivery: if omitted, delivery is sellers place of business. 2-308 c) Time for shipment: a reasonable time after contacting 2-309 d) Time for payment: if not specified, payment is due at the time and place where the buyer is to receive the goods. 2-310 e) Quantity: U.C.C does not fill gap. See Moulton v Kershaw

(5) Ambiguities: language can logically be interrupted many different ways. Types: 1) Latent offer and acceptance are certain, rather extrinsic facts causes uncertainty (peerless case) 2) Patent words and expressions are uncertain (stricter version).

Raffles v. Wichelhaus (299)

Peerless Case Facts: Dmade a K with P for cotton to be delivered on the ship Peerless departing from Bombay. There

pg. 54

are2ships named peerless, one arrived in Oct (which D intended) and another arrived in Dec (Pintended)Held: No binding K - both can show they meant the other ship Peerless, hence, no meeting of the minds. Consensus id idem Notes:English position on K ambiguity -courts will admit parol evidence. Q. is whether courts will admit evidence to show that there is an in fact a latentambiguity, orambiguityneed to be patent (obvious on face of the K strict requirement)? This court allowed latent-let them show that there were 2 ships named peerless. Q. pp. 293 - (1) Wine case is different. Wine can have different tastes whereas who cares about which warehouse. Judge Milward is right; we cant know when Peerless is sailing, for it depends on the winds and how many stops it makes. The best you could do to specify the time is to say the next Peerless to assure in the case of sinking merchandise - which peerless is irrelevant. Prof.: Cotton prices may is like the wine case due to price fluctuation. (2) What if both parties knew there were 2 ships? 20. However, If both knew and both knew the other knows as well, then they are indifferent between ships, however, 20(1)brules there is no K. Prof.:Sshould be allowed to put cotton on either ship (3) Both know there are 2 ships and both intended Oct. Presumably allow parol evidence that parties meant Oct valid K.

Conclusion:
If both unaware No K. Subjective will the same K If both aware No K (if both aware of the others awareness, prof.: K, S decides.) Subjective will the same K One is aware, and the other is not K binding on the innocent partys subjective understanding. Squib: Flower City Painting Contractors v. Gumina Construction Co. (300) Facts: P a subcontractor insists that it is only obligated to paint interior walls of buildings not exteriors. P demands additional money to paint. D cancels SubC and fires P. P sues. Trialcourt dismisses on Ds interpretation: P asking for extra money - is repudiation.Held:Judgment dismissed based on Peerless no meeting of the minds. Ambiguity is resolved by customary practice that painting SubC are awarded for the entire project, but the industry usage cannot bind a party unless they know or have reason to know about it. P was new at painting, and didnt know industry standards.Prof.:This case is like Peerless- Term is unambiguous on its face, but if both parties intended same meaning, then there would be K. Here, the words only had onenormal meaning to contractor trade men in that area. Why dont we apply objective theory of K interpretation? Why subjective meeting of the minds? Court: neither party acted so unreasonably to justify enforcing the K. They are imposing a fault standard to K formation. Sub may be at fault. Entering a trade as novices, dealing with contractors,they must know that it is possible people in the trade attach special meanings to certain words - their obligation to make sure that you know the meanings of words in a K. GenC may be at fault: Shouldnt they have to tell Sub his intent when knows a special meaning is attached? Both parties acted unreasonably!Then no K Note: Konic Int l Corp. v. Spokane Computer Services Inc. Facts: B asks how much for computer set up. S replies fifty-six twenty. S meant 5.6G, B thinks he meant 56.20. Misunderstanding is not discovered until after the equipment is installed. Held:Peerless; both parties are equally at fault.When parties knowingly agree to ambiguous terms, they are agreeing to have the court decide. Here: they reasonably agree to something that appears unequivocal, it can be rescinded on the grounds of mutual misunderstanding or latent ambiguity. Squib: Dickey v. Hurd Facts:Dickey in Georgia writes to Hurd in MA, asking how much hed want for a piece of land. D replies $15/acre, and he gives him until the 18th (10 days) to accept offer. P writes back on the 12th and 15th to express interest. On 17th he telegraphs acceptance and sent DP. D said it was ineffective; offer called for the whole price by the 18th. Judge:original offer was ambiguous, but Ps

pg. 55

letters to D indicate that he believed only an answer was due by 18th. When D received the letters, he had a duty to inform P about misunderstanding.Held: If you know about a mutual misunderstanding, you have a duty to correct it.D had a duty to clarifyso he loses!pp. 294, J Posner: Damages would be arbitrary to choose either one, so you choose neither! Braucher (Reporter to restatements) -if there is disagreement about the terms, no one is really at fault. Do not get the impression that objectivism is gone and the subjective theory has snuck in through Peerless. Courts do bind parties to K even when they meant different things by the words and the court may attach meaning to the words that neither party had. 20. EFFECT OF MISUNDERSTANDING

Embry v. Hergadine, McKittrick Dry Goods Co. (304)

Facts:Appellant was employee under D company. His K expired Dec 15th, paid 2K/Y. On Dec. 13, he was reengaged for another year with same pay, but on Mar 4, he was fired. D claims they never reemployed him after termination of his written K &they had a right to fire him.Court: if both parties intended a K, a valid K. Did what McKittrick (pres.) said constitute a K of reemployment?The conversation, when P approached McK, according to P was go ahead, youre alright, dont worry about it. P says he relied on that promise and did not seek employment.Held:We treat P as making an offer to work for another year, and then if D said things that a reasonable person would think is acceptance and if P did so think - a K is formed, although D did not subjectively think he was accepting the offer we dont care what D thinks.Subjective Intent Irrelevant - Objective theory of K formation. Notes:P wanted the court to instruct the jury according to subjective theory of K formation- K is formed only if both parties intended it to be formed. Both parties must subjectively think they have made a K. Theory stems from the dominant 19th century approach (pre-Holmes) will theory of K formation The metaphor of this theory is meeting of the minds - both sides have to wish to make a K. This case rejects the subjective theory! There are several problems with Obj. theory:It is a response to the problem of subjective theory: people may behave in a way that seems accepting the offer, but then might be able to prove that he didnt in fact think he was accepting. This theory forces D in position that he has to be careful with his speech and makes himliable by careless speech. However, this is why the objective theory is odd; you end up with D entering into a K that he thought he didnt make and then is liable for ED when there will be zero reliance interest and only expectancy we need to know what his thoughts were. It is hard to be a strict objectivist. We want to hear his thought to know if it is reasonable. Problem (2) is over in thereasonable person test. There are many reasonable people who have different opinions! Objective theory isnt purely objective:(1) You have to be reasonable in believing in the promise and (2) you actually have to believe. We care about what reasonable person would have thought and we care about what Embry did in fact think.This says that we also care about McKs thoughts were. Q: If Embry knows that McK thought it was a joke? When both parties know its a joke; No K. However, what if Embry believes that Pres. believes that the transaction is a joke?But, Pres. doesnt in fact think it is a joke. Then what? Anissue for objective theory.

Kabil Developments v. Mignot

Facts:P alleges that D orally agreed to supply P with helicopter services. D denied K. At trial, testimony was admitted that P subjectively thought they had a K with D. P won. D appealed on the basis that subjective testimony of P shouldnt have been admitted. Issue: Was the jury allowed to find K on the basis of a subjective standard instead of an objective standard? Rule: When a court determines whether a party has assented to an agreement, the only intention that matters is the partys apparent, objective intention (reasonable person would infer). Analysis: The subjectivists and objectivists fought it out over many years, but the

pg. 56

objectivists won. Jury is only to consider whether a reasonable person would have inferred a promise on the part of D. However, court finds that subjective evidence is relevant, though not completely determinative. Jury was instructed correctly: judgment for P affirmed. Squib: NY Trust Co v Island Oil & Transport Corp Facts:D was trying to circumvent Mexico laws, by created shell companies which allowed them to exploit oil. They kept accounts showing payments between the subsidiaries and Island CO., and these accounts had balances due that Island theoretically had to pay shell companies. Island mortgaged stock in the shell companies, and the stock was sold at foreclosure. In bankruptcy reorganization, P bought shares of the shell Co. and sued the receiver of Island for balance due from Island to the shell co. P claim was dismissed; P appealed. Issue: Should legal duties be created by utterances designed to scam a third party? Rule: The fact that writing was a sham trumps the fact that it would otherwise on its face appear legally binding. Analysis: It wasnt really anticipated that the shell co. and the real company would ever be at odds since the latter created the former to basically scam the government. Naturally, you wouldnt breakK with yourself. But when shell co. and the real company get separated , it turns out that the fictional dealings between them have no legal force. Notes: Case is evidence of Hand taking subjective evidence - context. Officials of subsequent are conspiring against Mexican Gov. Pp. 305:Kind v Clark: No sale results where one party to an outwardly seeming sale knows that the other does not mean his words or acts to be taken seriouslySquib: Robbins v Lynch:Prof.: PosnerSticking with objective test.

Wheeler v. White
Facts:P sued D for allegedly BOC to finance construction on Ps land. In reliance on this K, P knocked down some buildings. However, financing never came through. D should be barred from saying K was uncertain because his actions reasonably induced P to knock down buildings. Trial court dismissed case;P appealed. Issue: Does PE bar D from claiming that K is void for vagueness since he induced Ps reliance? Rule: When a party acts to his detriment in reasonable reliance on an otherwise unenforceable promise and is injured, party may have a claim for breach. Analysis:K is void for indefiniteness. However,Court sees this as classicPE and gives P reliance damages (Goodman v Dicker.) D was trying and succeeded in influencingPs conduct by promising to get him financing. But then D backed out.K is no good, but PE has the power to make K enforceable Notes: Williston Would say that this case is Classic PE. Judge:understands that K is insufficiently definite to enforce SP: no way of knowing what to order the lender to do since no terms were agreed upon, but, this K is sufficiently definite to enforce at law for money damages.Greenhill pp. 308: would give full damages for BOC, which means that the borrower gets ED, not just reliance damages does not mean SP although he may want it it can mean just damages. R2 and the UCC say that if the actual breach doesnt force us to look at the faulty parts of the K, they will enforce the K.

Section 2.Offer and Acceptance

Problems with offer and acceptance: K must be accepted the manner requested by offeror. This leads to many issues. Bilateral K - Calls for a counter-promise, effective when properly dispatched. This is called the mail-box rule.

Morrison v. Thoelke (309)

Facts:P owns some property in Florida that they were going to sell to D. D mailed a K for the sale of the property to P in Tex. P signed K and sent it back. After mailing K back but before D received it, P called to repudiate K. P sued to quiet title in order to try to prevent D from selling property. Trial court ruled forP: repudiation was effective; D appealed. Issue: When does a mailed acceptance become effective? Rule: The mailbox rule says that an acceptance is effective as soon it is deposited in the mail. Analysis: Court: factors in creating the rule in the case of Adams v. Lindsell: (1)its efficient to establish a hard-edged rule. (2) In terms of doctrine, a mailed offer is considered an offer that remains continuously open while its in the mail.Baird: This is just

pg. 57

the background rule, if the offeror wants to set a different rule for acceptance, they can do that in K, but a rule is needed when it is not specified and there is no non-arbitrary rule, so this is as good as any. Prof.:Although this seems to side with the offeree interest, we may say that the offeror could have stipulated manner of acceptance. Offers terminate: (1) Natural death (rules that decided the manner offers leave the table in different circumstances)(2) counteroffer (3) revocations (4) rejection. Offers normally are effective on receipt by offeror. We want the offeror to be the first to know about the acceptance; so that he can make sound decisions going forward; some protection. Offeree should have some assurances. Mail-box rule: proper dispatched through authorized means, offer is than effective immediately, even if it never reaches offeror. Modern rule: Unless offer specifies medium of acceptance, offeree may use any reasonable medium under the circumstances - Restatement Second 29(2) - UCC 2-206(1). Common Law: if specified, he still can use something faster, unless an absolute condition (If absolute means qualified offer new K66(a)). What would happen if a rejection letter is send after acceptance, but reached offeror first? Court wants to stay consistent there is a K. Prof.: why, what is wrong with that? Me: he is effectively creating his own option. - R2 63 (315)

Moulton v. Kershaw (317)

D, salt dealers, write to P a dealer known to buy lots of salt and say in the letter that they are authorized to offer salt at 85/C per barrel, and would be pleased to receive your order. Ps receive order on the 20th, and on the same day wires a reply saying to ship 2K barrels. Following day, Ds notifies of withdrawal of offer. P sues. Held:Authorize to offer is not the language of sale. Plus, P could demand a million barrels of salt and then sue if not delivered; much easier to construe the letter as a notice rather than as an offer for any reasonable amount of salt - it didnt contain a quantity term and offers need to have material terms. 33. CERTAINTY- Terms of the contract must be reasonably certain. Meaning K needs material terms. Sufficient to say that quantity is a material term! If no quantity, K is void (not just voidable, for courts couldnt enforce it if they wanted to: dont know quantity.) Q. What if the seller said we offer as much salt as you order or in a case where we have some prior history of output (2-306) A. would be enforced so long as the amount you order is reasonable. They would view reasonable amount as an implied term in the offer. Q pp. 319-what if the letter had been preceded by a wire from the B? A: would seem that there is a K. Quantity is limited by the buyers request for 2K barrels. Second, the term authorize to offer may be a response to Bs wire: Interruption more reasonable.

Petterson v. Pattberg (320)

Facts: P owned real estate; D was owner of a bond and mortgage on the real estate. D wrote on April 4that he agrees to accept cash for the mortgage, and will discount $780 if P pays on or before May 31.Pgoes on May 31 with the money, knocks on Ds door and tries to offer it to him. D says he has sold the mortgage and refuses to take money. P sues for loss of $780.Held: An offer may be withdrawn before acceptance without formal notice. It is sufficient if that person has actual knowledge that that person has done something inconsistent with continuance, such as selling that property to a third person. J Kellogg: offer was withdrawn, tender occurred after withdrawal of offer. First creditor said he sold it and then debtor tried to give money.J Lehman - 2 arguments: Stronger argument: (2) There was a K. Creditor promised to accept payment which became binding when a present offer to pay is made. Creditor wrote: I hereby agree to accept cash: If he wanted to reserve the right to refuse payments, he should have used other words. (2) Law of conditions; promissor whose obligation is being triggered by the condition cannot do anything to stop condition from occurring. Debtor paying was a condition precedent to the sellers obligation to reduce the debt. Once P embarked on performance he created an option agreement where the offeror has to keep the offer open for a reasonable time. Prof.: However, rule is that he can revoke offer before it is accepted, why is it a bad faith effort?

pg. 58

Here the creditor frustrated performance before the parties had a K there was no K. J Lehman interprets the letter: When parties make promises, court will try to figure out what the parties were wanted/seeking to do. He believes we can ignore parts of the letter when it is inappropriate. This is a common method of interpretation today when the courts read confused agreements. Kellogg: offeror is not bound until debtor actually pays. Other judges: tender would be enough to bind the offeror to keep the offer open and accept payment. If it were totally in the creditors power whether the debtor could perform or not, then it would be very risky to embark on costly preparations - offeror could refuse to accept payment. Kellogg: preparations are a risk assumed by offeree. Legal realism - A2 of UCC - tries to look at whats really happening. Turn it into law to fit business practices rather than make business fit law. However,Cardozo, a big realist, agreedwithmajority because creditor had withdrawn offer in writing (see note), but it couldnt be evidence due to dead man statute (D had died beforetrial). Kellogg was trying to do justice. Lehman is following the dead mans statute! Others Judges believe it is a stupid statute. If we didnt know about the letter, Lehman would be right, however we do know.

R2 45 Option Contract Created by Part Performance or Tender (326)

(1) Where an offer invites an offeree to accept by rendering a performance, and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins or tenders a beginning to the implied performance.(2) The offerors duty of performance under any option K so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer.Analysis: 45 require performance that is begun be part of the performance provided for in the K. Walking up to the door with the value of the mortgage(minus $780) is not sufficient. Only applies only to a case where the offer is clear UK. Offeror is bound to keep offer open once performance is started&bound to do what promised when offeree completes. 62where offer invites choice, the tender of the beginning of act of choice, it is binding to complete performance.

Carlill v. Carbolic Smoke Ball Co. (327)

Facts: D makes Carbolic Smoke Ball and offers in their Ad a 100 reward for anyone who contracts influenza after using the ball for 3 times/ 2 weeks. Ad indicates that 1K have been deposited in a bank showing sincerity in the matter. P used as directed and gets sick. J. says that she is entitled to recover 100;D appeals. P argued that the ad and her reliance on it, was a K. D argued it was not a serious KHeld:COA rejected Ds arguments and held that there was a binding K for 100. Reasons (1) Ad was a unilateral offer to the public (2) satisfying conditions for using the smoke ball constituted acceptance of the offer (3) Purchasing or merely using the smoke ball constitutes consideration: was a distinct detriment incurred at the behest of the Co. and, furthermore, more people buying smoke balls by relying on the Awas a clear benefit to Co. (4) Ds claim that 1K was deposited in the Bank showed serious intention to be legally bound. Lefkowitz v. Great Minneapolis Surplus Store, Inc. Q. pp. 330: (1) sat 1 A.M.: Fur coats for $1 - First Come First Serve. Ad gives terms, but there is a house rule only woman that is omitted and not even incorporated by reference, Mr. Lefkowitz is first in line multiple times &wants to buy. There is an offer. If the rule had been incorporated, offer would have been limited by those rules. However,rule was not referenced. Court formulated the much-cited test of whether the offer is clear, definite, and explicit, and leaves nothing open for negotiation." This advertisement met the commitment requirement because some performance was promised in positive terms in return for something requested. since it was much more specific as to subject matter, offeree, and manner of acceptance than the ordinary ad; it constituted an offer that the plaintiff could accept by being the first one in the store on Saturday. Normally:Rule: Ads are not offers. Why? They are solicitations of offers, not offers; sellers have limited supply and would be

pg. 59

offering unlimited amount. Hence, it is not reasonable for consumers to believe an offer is being made. This case is distinguished: singles out the offeree first come first served. The 1st X amount to show up are the intended offerees. How do they accept? Showing up or by tendering money? We dont want to say that by showing up one is bound to buy, logicallypaying is acceptance. The 2nd time he showed up, store told him that now he knows house rules because they told him rule the 1st time, valid argument? - Carlill V Carbolic may be determinant: limited amount of people that will use it correctly and contract flu. (2) Self-service supermarket leaves food out and shopper puts it into basket- is there a K? No - hasnt paid for it. Tendering payment is acceptance of the offer. Some Courts believe that it is a K: we want to give the shopper the warranty of merchantability under the UCC. If something happens to or from the products, consumer would be protected under K law, no need for tort law.

Cobaugh v. Klick-Lewis, Inc. (331)

Facts: P is playing in a golf tournament, day after a charity tournament. On the 9th hole there is a sign & a Chevy Beretta. Sign says: HOLE-IN-1 wins this car, courtesy of Klick-Lewis - $49 over factory invoice. He aces the hole in 1, and D refuses to deliver, bc sign was for a charity golf tournament.Held: If an offeror makes an offer, and before it is withdrawn, another person acts on it, you are bound to perform your promise. KL benefitted from publicity, &D was required to perform an act under which he had no legal duty to perform, so this is adequate to support K. No evidence suggests P knew it was only for the earlier tournament.Prof.: This case is loss of control, back to the objective theory. A reasonable person would have thought that D making an offer. Ds intentions do not matterConsideration. Issue: D was seeking to induce a hole in 1 by offering the car, but did P feel induced by the offer? How about if it had been longer after the car had been put there for the intended tournament? Rule:a reasonable amount of time. What is a reasonable amount of time? Maybe it is a continuing reiteration of an offer. (Another analysis) Pine River State Bank v. Mettille (336). Facts: Mettille was an at-will employee in MN fired for incompetence in loan processing. Mettille claimed that employee handbook was a K, and that Pine River did not follow its own procedures for stated disciplinary policy. Bank argued that handbook was unsupported by consideration - not part of employment K. Trial court awarded damages to D. Bank appealed, MN SC affirmed. Rule:An employee handbook can be a K if it contains an offer and it is communicated to an employee by dissemination. AnalysisIn at-will employment - manual is an offer for UK that employee can accept by continuing to work. Prof:Problem with this analysis is the rule that a modification of K requires consideration like K itself. Employer by giving the manual is providing something new and different; employee is not. J. Macy: PE situation: giving the manual is a promise that employer assumes employee will reasonably rely and employee did. Prof.:Wasnt reliance- P would have worked even with no manual. Suppose manual was just available in the office and wasnt given to P-would the manual be part of K now or does D have to tell P about it and the reference to read carefully before signing? Is it important that he personally gave him the manual? PE claim is questionable and that is why majority didnt follow it. So back on a K claim and then there is problem of consideration. One approach to it is to say that dont need consideration for the modification of an at will K. This is what the majority says.Default position of employee Ks is that it is at will; free to fire whenever they want & employee is free to quit. If given manual and says take it or leave it &employee keeps working, parties have made a fresh K. This case would seem ridiculous in the classicaltheory of K law because it insists on distinct moment that K was made. Neo classical critique (Corbin), dont believe you can find exact moment in every case. Legal realism - 2-204(2)an agreement for K for sale may be found even though the moment of its making is undetermined. 2-204-sale of goods valid even if just behavior that shows K was made. 2-204(3)K for sale good if party intended to make K even if indefiniteness as long as available remedy at law.

pg. 60

Allied Steel & Conveyors, Inc. v. Ford Motor Co(338).

Facts: Ford bought some machinery from Allied in 1955 to be installed by Fords employees.Ford offered to buy more machinery in 1956 to be installed by Alliers employees. Along with the offer was an indemnification form that said P must take responsibility for negligence committed by Ds workers as well as its own. P began installing machinerybefore they sent back the acceptance of the offer. One of Ps employees was injured as a result of the negligence of one of Ds employees.Then P sent back their written acceptance of offer. Employee sued Ford, and Ford brought in allied as a third-party defendant. At trial, employee prevailed against Ford, but Ford prevailed against Allied. Allied appealed.Issue: Was indemnity form enforceable against P even though they hadnt sent back written acceptance of it? Rule: If a certain manner of acceptance wasnt prescribed, but merely suggested, other methods of acceptance may meet up with an offer to make a K. Analysis: Court: P accepted Kby performance; interprets K to be a suggested method of acceptance. Diff. would be if K stipulated that a written response was the only way of accepting Prof.: We can solve this case by saying that Allied showing up to work was a counter-offer for a new K, and Ford letting Allied in before they signed was acceptance. It was a counter-offer with the same terms in written in the order, without including acceptance clause.

Davis v. Jacoby (341)

Facts:P, Caro Davis, was niece of Blanche Whitehead, and she is quite fond of her. Caro marries Mr. Davis and they move to Canada. In 1930, Blanche becomes ill, and her husband is having a lot of problems and needs help. He writes to the Daviss and asks them to come down, repeatedly, eventually saying that he believed practically everything would go to Caro under Ms. Whiteheads will, and he writes again pointing out that he could still save 150K with Mr. Daviss help, which would presumably go to Caro. On April 12, he makes a definite offer: Caro will inherit everything if they come. They get letter on April 14, and decide to go. They send a letter airmail indicating they accept and would be there on the 25th, which is lost, but Mr. Whitehead acknowledges receipt. On the 22nd, Mr. Whitehead commits suicide. They come and take care of Ms. Whitehead until she dies a month later. Records show they fully performed their side of the agreement. After Ms. Whitehead death, it was discovered the will left everything to Mr. Whiteheads will, and his will leaves everything to his nephews. Action was commenced on the ground that Mr. Whitehead had a contractual obligation. Daviss losses were over 8K.Held: It is elementary that an acceptance that meets the offers terms for method of acceptance is valid. Letter constitute acceptance. Damages are insufficient, so SP is granted. Prof.:Difficult to tell what sort of offer is being made.1) If you come, will inherit: A unilateral K, performance is them coming 2) Let me hear from you ASAP: BK seeking security of a promise. If it was a UK, offer dies with offerees death. Court use R1-31; if ambiguous,there is a presumption a BK was offered for policy reasons: in order to give the offeree security. At the time of the 1R, I offer to pay $100, if cross bridge-halfway acrosswithdraw offer; Out of luck didnt complete the act. Offeree is at risk until complete performance. Therefore, 1R made presumption that in case of ambiguity, offer BK. In the courts defense with some justice, it seems he knew he was going to die, and wanted them to come - peace of mind of them coming. Proof of this was the letter saying they will come acceptance of the desire for a promise. Q. pp. 346: If after letter of acceptance of the offer, Davis had written another letter that they will not move, is Davis liable for expectancy? Prof.: No. Problem with section is that 45: offeree does not have to finish. (Comment d.: if invited performance takes timebeginning of performance carries with it an express or implied promise to complete performance, see 62.) is this performance that takes time? In MY opinion yes! What does it mean to commence performance? There is a distinction between preparations and commencement, which has to be part of the performance: a category issue. See comment f. to 45 3 employments: 1) at will 2) just cause (employee may quit employer needs a cause) 3) service at term (hired for a period of time - can only fire if it is a material breach) IS at will a K? Prof.: Yes there are agreed to terms of a future time. Some argue

pg. 61

illusory promise; all the power is in employers hands. U.C.C 2-206 Unless an offer to buy goods expressly limits acceptance to shipment, it is to be construed as a BK. Squib: Jordan v. Dobbin Facts:P Jordan sold goods to Moore on credit, relying on Dobbins agreement in writing to guarantee payment. Dobbins dies before the sale, but P doesnt know. Court holds that death revokes an offer of guarantee, so P cannot recover. 36 - Methods of Termination of the Power of Acceptance (347)

Brakenbury v. Hodgkin (347)

Facts:D wrote a letter to her daughter and Son IL saying that if they would come and take care of her, they would inherit her property. They came, but D and Ps started fighting. She wrote a deed to give her property to her son, who told P they had to get out. P sued to force the son to give the property back to his mother and keep him/her from kicking them out of the property. Trial court found for P. D appeals. Issue: Was there a valid K? Did P have an equitable interest in the property? Did P breach their duty under K? Rule: To accept an offer of a UK, only performance is necessary. A trust concerning land must be created by a signed writing.Analysis:court: a valid K. D made an offer for a UK which was accepted by P by coming to take care of her. K created an equitable interest in the land on the part of P. D was primarily responsiblefor things going sour. Analysis: Shemay have kicked them outpreventing them from completingcondition. No 45; an unambiguous offer for a UK was made, but commencement of performance creates an option K. Comment 350 they ended up living with her; was unpleasant to the end.

Section 3.Limited and Indefinite Promises (353)

1) Mutuality of obligation. BK is enforceable, when each sides bargained-for-promise is legally sufficient consideration or its counter promise - both parties must be bound or neither will be. Effect of an illusory promise: a statement that has the form of a promise, but is not a promise in substance promissor is no bound, his promise is only illusory, and hence; promissee is not bound. No mutuality of obligation in UK. 2) Requirements and Output K: In a requirement contract, A agrees to buy all of her requirements of a given commodity from B, and B agrees to sell that amount to A. In an output K, A agrees to sell all of her output of a commodity to B, and B agrees to buy that amount from A. Former rule: At one time, courts tented to treat requirements & output Ks as illusory, on the ground that B in a requirements K was not obliged to have any requirements, and the S in an output K was not obliged to produce any output. Modern Rule: Courts normally enforce requirements & output, since parties have limited their options. UCC 2-306(1): enforceable if a)good faith b) reasonable quantity c) implied promise to stay in business. SOF issue: most courts in requirements Ks will consider the K divisible: a series of contracts places each time by B. DavisvGeneralFoodCorp P wrote Dabout a new recipe. D replied: compensation would be at Ds discretion. Held: Letter giving D unlimited right to decide is not consideration; no K so no recovery in quantum meruit. Prof.:We promise to pay you if we feel like it - classic illusory promise NatNatServiceStations vWolf D, wishing to get a discount from its supplier, told P(Wolf) that if he purchased gasoline from D and they accepted order, they would pass on discount. This a K not to be completed within 1 year, barred by SOF? Held: Original K did not bind either party to take any action, D could buy gas anywhere, D could decline to accept the order & D could at any time decline to give future discounts. Each time D accepted an order causing a separate K& forcing a discount, hence, not covered by SOF.

pg. 62

Q: 356 1) Suppose a K for the sale of 500 wool sweaters to be delivered by S in installments of 100/month, with a provision for payment by B for each installment at the rate of $30 a sweater, within 60 days after delivery. Would K be enforceable by either party if it contained any one of thefollowing clauses? (a) S reserves the right to cancel this K immediately in the event of any default in payment by B? Not unrestricted B must default first. (b) S reserves the right to cancel K on 10 days notice? Not unrestricted 10 days is a restriction (Corenswet Inc. v. Amana Refigeration). (c) S reserves the right to cancel this K on the giving of notice? Seems unrestricted, Prof.: notice is something that may restrict S ability to cancel.

Obering v. Swain-Roach Lumber Co.

Facts: Buhner died and his executor was going to sell some land. Obering and Swain were going to make a deal whereby Swain would buy the land, sell it to Obering for 8K, and harvest timber within 4 years. Swain bought the farm and brought Obering deed. Obering repudiated and Swain sued for SP. Trial court found for P; ordered SP. D appealed. Issue: Is K invalid for want of mutuality? Rule: Just because K doesnt kick in until P does something to accept it and provide consideration, doesnt mean K is unenforceable once P does that thing. Analysis: Court finds that K was unenforceable when it was signed, but became enforceable upon Ps performance (buying land from Buhner). Notes: R2-77 - An alternative promise is a K device - promise will purchased 500 on 4/1 or 600 on 6/1- both are good consideration, and are no-illusory, you just have a choice. Here:Prof: it wasnt an illusory promise to begin with, but rather a power to choose! Was a condition precedent- Swain must purchase tract from the estate.Ex: car insurance condition that before it pays a claim is that car crashes. No obligation until there is a car accident. The problem w is that the triggering effect is in sole control of the promisor. However, because promisor purchased tract before suit, promisor lost control over the triggering condition, so result is perfectly sensible. An alternative promise in K to an illusory promise - is when there some future state of the world which the promisor experiences themselves as obligated at the moment they make the K.

Wood v. Lucy, Lady Duff-Gordon (361)

Facts:D employs P to market her name. She would place her endorsement on designs of others and has exclusive right to approve. P has exclusive right to place those designs on sale. It lasts one year, and thereafter year to year unless terminated with 30-days notice. P says D broke K by placing her mark on things without his knowledge. D insists that agreement lacks elements of a K because P does not bind himself to anything. Held: No dice! There is an implied promise because he has an exclusive privilege and he assumes the duty, and there is an implication that the Ps business will be used for the purpose for which it is adapted. His promise to pay half profits was a promise to make reasonable efforts to make those profits.Analysis:Courts are doing what they say they would never do-making the terms of the K. Lucy gave wood an exclusive right to use her name for endorsements. If she gave absolute rights, then she would have been at his mercy, and the parties could not have meant that. If she had wanted P to use reasonable efforts to market her name they would have put it in and they didnt! Cardozo is making up that the K is intact with an obligation that is imperfectly expressed. Holmes: it wasnt expressed clearly. Leave people to make their own devices; dont make up terms for them! Cardozo says no, it was implied that he would use reasonable efforts to market her name&part of the parties intention! However, At most, he has an obligation of good faith,what does that mean? Hard to answer.

Omni Group, Inc. v. Seattle-First National Bank (365)

Facts: Omni was K to buy land from the Clarks. Clarks backed out and argued that they werent bound by the earnest money agreement because Omnis performance was conditional and thus its promise was illusory. Trial court entered a judgment for the Clarks estate, and P appealed. Issue: Was Ps promise illusory because it was conditional? Rule: A promise dependent on the promisors satisfaction or the quality of the promisees performance is not illusory. Analysis: The court finds two conditions upon which Ps performance depends: (1) P must receive an engineers report and (2) the report must be satisfactory to P. Court finds that P has not given itself the unfettered power to get out of the K at any time for any reason; rather, P cant cancel

pg. 63

unless the report is unsatisfactory, and notifies D, it would be up to the factfinder to decide whether P cancelled in good faith under the circumstances. Analysis:Where there is a condition precedent to the promissors duty that the promissor be satisfied, such an agreement may require performance that is personally satisfactory to the promissor, or performance that would be acceptable to a reasonable person. Whether the promissor is actually satisfied or a reasonable person would have been satisfied is a question of fact. P can cancel by failing to give notice only if the feasibility report is not satisfactory. Otherwise P is bound to give notice and purchase property. Analysis:Phada constraintuponitsdecision - acondition of satisfaction ingoodfaith. 2 types of satisfaction, one in a commercial settings, another personal taste. This case was a developer, and hence was bound the commercial standard of what is satisfaction.

Feld v. Henry S. Levy & Sons, Inc. (370)

Facts:Ps operate Crushed Toast Co., D are bakers. K that D agrees to sell& P agrees to buy all bread crumbs produced by S at specified factory from June 19, 68 to June 18, 69. It was deemed automatically renewed unless cancelled with 6 months notice from either party. Dstopped producing breadcrumbs without notice &after P refused to pay a higher price, dismantled equipment and started selling bread product to others. D maintains the K did not require it to produce bread crumbs, only to sell those it produced. Does the agreement carry an implication that D was obligated to continue mfg for the whole term?Held: A lawful agreement for exclusive dealing in the kind of good imposes an obligation to use the best efforts to supply the goods, unless otherwise agreed upon. This is known as an "output" K and under 2-306 there is sufficient mutuality to uphold K. UCC also states that for exclusive agreements S must use good-faith efforts to supply the product - a question of fact here. Only a "genuine imperiling of the very existence of its entire business caused by the production of the crumbs would warrant cessation of production of that item."Notes: Judge: trivial losses dont count; must produce even at no profit - doesnt give us any guidance what is trivial. There was a 6 month notice in the termination clause. Case where there was an elaborate termination clause. Court ignores termination clauses in output K. Problem in the case is more difficult than the book suggests. Ex: requirements Kmanufacturer of glass made K for coal with a coal S at a certain price for 1YR. Suppose price of coal shoots up, the K is favorable to the glass maker; can sell the glass cheaper than competitors so more people will buy; will need more glass so will need more coal so requirement up. At what point can the coal seller say ordering too much and could be selling at a much higher price. UCC addressed this problem - no quantity unreasonable to estimate or to average prior output is allowed in a requirement/output K. Squib: Corenswet Inc. v. Amana Refigeration Inc. Facts:P had an exclusive wholesale dealership which D wanted to terminate based upon K for indefinite duration but that any party could terminate "at any time for any reason" With 10 days notice. P said the termination was "arbitrary and capricious." UCC has an obligation of good faith, but 2-309(2) allows successive, indefinite Ks to be terminated at any time. Held UCC 2309(2) applies, allowing termination with the notice given in K for franchises and dealerships. Both parties were given equal ability to "cut the knot" should the relationship turn sour. "What public policy does abhor is economic overreachingthe use of superior bargaining power to secure grossly unfair advantage. That is the precise focus of the codes[2-302] unconscionable doctrine; it is not at all the concern of the codes good faith Issue: Whether party should be able to waive any requirement of good faith? Judge said why not. Some courts will automatically read good faith clause in spite of 2-309(2). This may be due to the problem that franchisee is often in a weaker position than the franchisor. Franchisee has to make substantial upfront investments. If franchisor not bound by good faith & can terminate at any time; franchisee will lose a lot of money.

Sun Printing & Publishing Ass n v. Remington Paper & Power Co., Inc. (376)
Facts:P agrees to buy 1K tons of paper per month over 16 months. Payment was to be made on the 20th of each month for paper shipped the previous month at prices specified for the first 3 months. For the balance, price of the paper & length of terms for which such price shall apply shall be agreed upon 15 days prior to the expiration of each period, but no higher than the price

pg. 64

charged by the Canadian Export Paper Co. to its largest consumers. When the time arrives that they have to agree. D repudiatesclaimingK was imperfect & no obligation to deliver. P demanded each month that D deliver at the price charged by Canadian, & D now wants damages Held:Gaps in K make it nothing more than an agreement to agree, so D has a right to say it is legallyunenforceable.Notes: Cardozo reads line said price in no event to be higher than the contract to apply to the agreement clause, not to the general clause of paper and month. Meaning, even if they agree upon the price at which to buy, and the standard at which to cap the price, that is not enough to be legally binding; it lacks a specified term during which to buy at agreed upon price. Without specifying the term, K has functionally morphed into an options contract, offering the option to accept or deny the benchmark maximum price every monthor buy nothing. I.e. they agreed to a benchmark maximum - Canadian standard - but not the term. Say Canadian standard starts at $30 in Jan and they agree to price but not the term. However, it goes up to $35 in Feb. If they havent specified the term, Sun Printing can say, No thanks, well keep taking it at $30.Which we agreed in Jan. Alternatively, if the price goes down, they can take the lower price every month; this left D exposed in a way it clearly did not intend to be. So while the parties had a good faith agreement to hedge against the possibility that they cant agree on a price, they forgot to hedge against not agreeing on the term. Without specifying the term, they have functionally only made an agreement to agree. Note 2: Cardozo rejects 2 arguments from P (1)D was obliged to accept a reasonable term in the event of no negotiation. He rejects this argument: Would be rewriting K. (2)D had a duty to simply assume term would expire every month (again reads the clause into the possible agreement). Cardozo: K does not stipulate that. DISSENT Crane: Because parties agreed to buy and sell 16K tons of paper, capped at a certain price, if B offered to B at that price, S had a contractual obligation to S (reads at no event into the original agreement, not the clause). Since intent ofK, quantity of paper, and price were not in question, court should be very wary of any conclusion that lets D simply step out of K. In this case, when the renegotiating time came around, D didnt ship, didnt agree on a price, and didnt even attempt to negotiate a price. In default of its renegotiating obligations, it should be held to the Canadian standard.

Empro Mfg. Co. v. Ball-Co Mfg., Inc. (380)

Facts: D makes truck nuts (knock off truck nutz ). P is interested in buying Ball-Co. P sends D and SBCa 3 page letter of intent to purchase of Dassets, but the letter required a later final agreement and other conditions.Parties sign a letter of intent in Nov. When PhearsD is negotiating with someone else, P sues for a TRO.Held:Pwas allowed back out of K, and nothing indicated D was not afforded the same opportunity under K, D was not bound to only negotiate with P. Prof.: Letter of intent is an extremely useful device: When parties - for business reasons - wish to enter into an agreement in stages. Problem with letters of intent is whether it is binding. This is an interpretative Q. Sometimes it is drafted in a way that it imposes upon the parties to negotiate any remaining terms in good faith. Borg-Warner Corp. V. Anchor Coupling Co.Facts:P entered into negotiations for the purchase of D. Ds directors assured P that if it made an offer within 50 days it would accept. D also required that P give suitable assurances that personnel would not be fired & that a mutually acceptable arrangement would be made for the continued employment of one of the owners. These conditions were left open to be agreed upon in good faith after a K was executed. P made an offer that was accepted. D later refused to perform. Issue: Can a K be formed even though some terms were left open to be decided by parties at some future time. Rule: When two parties manifest intent to K and reach substantial agreement a K is formed, even though minor issues are left to be resolved. Here, Q. was the Q that was raised in the Borg-Warner case, and the judge distinguishes it. Empro says it was like Warner-had an option to purchase Ds plant; Letter of intent was an option agreement. Judge said no. An option is a promise to hold open the offer for a certain amount of time. However, B has to give consideration to secure an option. If option agreement is in writing and is recited that the offer is in exchange for the consideration, then they will not look at it. Fact that the 5K is returnable doesnt matter;

pg. 65

had writing signed by the grantor of the option. The problem in warner was that the terms were so open that would be issues if the parties had to be bound. Terms for this case seems to be reasonably complete, could use some gap fillers, or could impose on themgood faith negotiation.Empro was seeking to change a term that was already understood by the parties; not good faithAgreed to take interest in the ground, so cant change it to include plant too. Last argument is that the letter of intent expressly gave P outs and did not give Ds outs. Why would a letter of intent give outs if they hadnt considered the letter binding? If they didnt intend it to be binding, then they wouldnt need to have outs. Squib: Southwest Eng g Co. v. Martin Tractor Co. (394) The more terms are left open, the less likely they intended to have a binding agreement.R2 33

pg. 66