BREAK DOWN

1) What is the offeror looking for? What does he want? Performance or promise?
2) Is it unilateral or bilateral?
3) Unilateral can only accept by completing full performance
4) Bilateral: promise or partial performance
5) UCC or RESTATEMENT?
6) Statute of frauds apply?
7) Two Causes of Action: Breach o r Restitution

TIMELINE  
Formation
1) Offer/Invitation
2) Bargaining
3) Counteroffers/Rejection
4) Acceptance (and possible clarification)
Enforceability
5) Consideration (good enough thing)
6) Defenses and Estoppel
7) Does contract need to be in writing?
8) Determine the parties’ obligations. Was the contract integrated?
Terms
9) Missing or Disputed Terms
Breach  
10) Type of contract and associated promise
Damages
11) What damages are appropriate to make the breached party whole?

Contract = a promise or set of promises for the breach of which the law gives
a remedy, or the performance of which the law in some way recognizes a duty
-promise, consideration, capacity to make one
View the transaction from the point of view of the parties
Reasonable person standard

SPOKEN WORDS IN FACT PATTERNS ARE USUALLY AMBIGIOUS!!!

ALWAYS EVALUATE DAMAGES FROM POTENTIAL BREACH!!!!
Types of Contracts
Type of Description When accepted When non-revocable Notice required?
Contract

Unilateral Offer seeks only By fully Once “invited” No. Exception:

performance/forbearance (more completing performance begins when offeror not
than suggestion needed) performance (creates option likely to find out
contract). Preparation performance
not enough. rendered.

Bilateral Offer invites acceptance by Return promise Once accepted by Yes

return promise provided return promise

Indifferent Offer invites acceptance by Either of above Either of above Yes.

return promise or action actions taken actions taken

-view transaction from point of view of the parties

-Reasonable Person Standard (stick-figure)

1- Formation     2- Terms   3 - Breach   4- Damages  

 __Missing or disputed? __ ID Duties and/or Conditions  __ __ UCC or REST?
Implied Cond? __ Unique or fungible subject
__ UCC or RST?  (__ construction K?) __ Entire or Divisible?    __ matter?
__ Writing  __ No Writing   __ Gratuitous UCC 2-207 Modes A,B,C Terminable At Will? __ Expectation / __ Restitution /
No W: Look for SoF issues A: K with non-material conflicts __ List of poss. Breaches __ Reliance 
Yes W: Look for Parol B: No K yet, material conflicts and __ Spec. Perf. / __ Liq. Dmgs? /
Evidence issues express requirement __ Diminution
__ Write timeline to agree to term For Each breach, ID: __ ID Market Price(s)  __ ID
C: Act like in a K, material __ Total or __ Partial    Value of Ben. Conf.
conflicts (said/did nothing) __ Any failure to
ID each event on timeline: a. “Unjustified Present mitigate/avoid?
__ Mode req: promise / Material Breach?
perform / indifferent? Ambiguity in Formation (mistake) b. Non-Material Breach (see
         __ Mutual Mistake below) RST Damages
         __ Unilateral mistake c. Repudiation Expectation
d. Anticipatory Repudiation Damages
(explicit / implicit) A: D
a. Invitation to make an offer; Omission/Unclear(hierarchy) e. Seeking assurances? = LV – CA – VR
b. Request for gift? Course of dealing,  f. Failure to Provide B: D
c. Offer;    objective M of Course of Adequate Assurances = P + CI – VR 
intent to convey power performance,  nb: duty of good faith
d. Rejection;    objective M of Trade Usage,  may require even if law doesn’t
disagreement to terms Modification,  Argue both sides!
e. Counteroffer; Default terms (UCC
f. Acceptance;   objective M gap fillers) Consequential
of intent to form binding K e.g. Materiality:                 NB=non- dmgs must be:
Accept by perf? Cond. best efforts, good faith
Accept?
breacher  B=Breachor
i. extent that NB if denied
 foreseeable and
a. Clarification provable
benefit of bargain
Ambiguity in K Language ii. extent that NB can be  specific basis for
Ambiguous term made whole by $$ calculation
For Each Offer: _ Objective iii. extent of performance
__ Sufficient terms to est. meaning,  “substantial”  Hadley v.
breach and remedy? _ Parol Evidence,  Baxendale
iv. extent of uncertainty of
_ Other party have completion
reason to know? v. Willfull vs. Good-Faith
_ Trade / Custom vi. Hardship imposed on NB Restitution
Did the offer die other than clarify? Damages
rejection?: vii. Will B suffer complete
forfeiture? Maj:
i. Lapsed?        $$ benefit conferred
offer face-to-face? Int to hold open? viii. Extent to which cure is
Missing term Min:
ii. Revoked?   possible
          _ Is K short or informal?   labor+costs+reas. Profit
revoked implicitly? NB: not the law!!
Yes:
Partial integregation.
          _ Parol ev. can add term if partial Defenses:  UCC Damages (2-706, 2-713)
For Each Acceptance: Integ. Did risk of loss
__ Mode req: promise / Impossibility  /
          _ Natural and prob. that term was Impracticability / Frustration pass? (FOBs)
perform / indifferent? left out?
__ Does the __ big
          _ Credible that term was left out? surprise  __ risk not allocated
acceptance conform? _ Other party have Seller: 
___         __
reason to know? shared basic assumption
Notification required?           _ Fraud, misrepresentation, 
__ Consider: [ Mailbox Hindrance?  Contract – Actual
mutual
Rule ] [ SoF ]  mistake? (cover)
[ Silence as
Which party is in better
Acceptance ]
position to insure? Contract – Market 
__Ambiguity generally interpreted against
drafter
Any Defenses Available?
IMPLIED CONDITIONS Profit (lost
__ Duress    __
Long performance / volume)
Unconscionability    ISSUES FOR NONCOMPETES short performance.
__ Undue Influence   __ Consideration (training, raise, Duty of best effort /
Misrep. / Concealmt promotion) good faith if exclusive. Buyer:
Counter-Defenses: __ Duress (threat). 
Promissory Estoppel
STATUTE OF FRAUDS Contract – Actual
DEFENSES (cover)
Modifications                       Mod or New
Other evidence than
K?
writing:
Fair & unexpected? OK if Contract – Market 
__ part
UCC. +
perform or payment 
Not OK if K fully Consequential (nb: not for
__
performed, either side. seller)
improvements to property?
Otherwise, consideration.
__ other
Pass-through terms.
recording of K (e.g. ans mach tape)
__ Detrimental reliance
Pre-K Liability __ Unjust Enrich.
__ Benefit conferred? __ __ UCC: failure to
Off. Estoppel?  __ Option? object to confirm? (merchants)
__ Extent necessary to
avoid injustice?
Formation
Assent: objective manifestation to intend to be bound
 Offeree must be on inquiry notice—needs to be aware that party is entering
contract… See Spect, where court used objectively prudent offeree who would not
have known that they entered into arbitration clause because K terms were not
immediately apparent (on a submerged screen)
Parties orally agree to essential terms and leave the writing and the rest of the K to the lawyers to
figure out?
 Depends on whether the parties intended to conclude their agreement at the earlier
point in time
 Absent an expressed intent that no contract shall exist, mutual assent
between the parties, even though oral or informal, to exchange acts or
promises is sufficient to create a binding contract; and
 That to avoid the obligation of a binding contract, at least one of the
parties must express an intention not to be bound until a writing is
executed
 Several factors that could help: 
 Whether there has been an express reservation of the right not
to be bound in the absence of a writing
 Whether there has been partial performance of the K
 Whether all of the terms of the alleged K have been agreed
upon
 Whether the agreement at issue is the type of K that is usually
committed to writing

Offer: Manifestation of willingness to enter into a bargain so made as to justify another person in
understanding that his assent to that bargain is invited and will conclude it

= Rejection + Counteroffer

Contract on terms of offer        No Contract

Contract on terms   of counteroffer             No contract         and so on

UCC vs Restatement on hybrid transactions

 -sale of goods with a service; services that require goods
-use the predominant purpose test to determine which rules to use

Offer: An act where one person confers upon another the power to create a contractual
relationship between them. It must be an act that a RP would believe that the power the create K
is conferred upon them. Objective.
a. Manifestation of present contractual intent
b. Certainty and definiteness of terms
c. Communication to the offeree 
Offeror is the “master of the offer” and creates upon the other the unilateral power to close
the deal (power of acceptance) conveyed to the offeree.
 Acts that create an offer: expression of will or intention, and acts that
lead the offeree to reasonably believe that the power to create K has been
conferred.
 Acts NOT an offer: invitation to deal, preliminary negotiations, acts
lacking intent to be bound, price quotes, and advertisements.
 Offer becomes a promise when it is accepted
 Counter-offer is a rejection of first offer and a new offer
 If you reject an offer, you cannot revive it
 Only offeror can, since offeror has relied upon the rejection
 Offer usually cannot specify silence as a method of acceptance
 Price lists = quote (invitations to make an offer) ≠ offer
 A Price quote is an offer if:
 It is addressed to a specific person
 Makes clear the quantity in question
 Is it an offer or a solicitation/invitation for offers?
 Advertisements are typically solicitation, but depends on the wording of
the advertisement
 Ex. See Lefkowitz, where the advertisement said, “First Come, First
Served, $1 for each coat worth at $139”—this advertisement was decided
as an offer due to being specific
What is an offer?
A. The words used:
0. Some words suggest that an offer has been made while others are invitations to
make an offer
 “I bid”- suggests an offer while are you interested? Is preliminary.
a. Surrounding circumstances
 A proposal to public at large is an invitation to make an offer
b. Definiteness of terms
 More definite the more likely an offer
 Less definite less likely an offer

The offer
 Indifferent offer: When acceptance is not specified but can be demonstrated either
through a promise of performance or performance itself 
  Option Contract: a K made to keep an offer open for a specified period of time in which
offeror cannot revoke. If the offer is to remain open for 10 days it can be revoked or
terminated by the offeror at any time unless there is consideration for giving up power to
revoke or terminate for those 10 days.
 offer is binding if it:
 offeror should expect it to induce action or forbearance of a substantial
character on part of offeree before acceptance and which does induce such
action. Binding as an option if necessary to preserve justice.
 Issue of notice if it was truly inducing
 Stating minimum price does not constitute an offer
 P is trying to buy land from D and they are exchanging letters on the price. D
states he will take no less that 6k and P says I accept. When D refuses to hand
over the land P brings suit. Not enforceable. Just stated the minimum. (Owen v.
Tunison)
Construction Contracts
 Offer an acceptance usually begins with a bid and it is common in the construction
industry to make a miscalculation.
 Mistakes can be Bilateral (both make a mistake) or unilateral ( one sided mistake).
 Elsinore Union elementary v. Kastorff
  D made a bid to P, but forgot to include plumbing in the bid. D realized his
mistake the following day and the school hired another bidder and brought suit for
the difference. Held for D, P knew of the mistake and accepted.
 If one party knows of the others mistake the offeror is not bound.

Acceptance: 
“An acceptance is a voluntary act, performed freely and deliberately where the offeree exercises
the power conferred upon him by the offer, and thereby creates the set of legal relations called a
contract” 
 Always effective on receipt, except for mailbox rule
 Objective standard, not that the party actually intended to accept but
whether a person in the offeror’s position would have understood the
manifestation as an acceptance
 Acceptance needs to be in terms that agree with the offer. If the acceptance
omits or extends terms it is less likely to be an acceptance. (Specificity of terms
issue?)
 OFFEROR IS MASTER OF THE OFFER. HE DETERMINES HOW THE
ACCEPTANCE IS TO OCCUR.
 Modes of acceptance
 Unilateral: can only accept by full performance, but once offeree begins
performance, the K is treated as an option, irrevocable…  based on if he relied
 Bilateral: Either notice or partial performance—Of course provided the K does
not explicitly state a particular mode of acceptance
 Is partial performance just that or was it mere preparation?
  If offer is accepted by performance, and offeror has no reasonable
method of learning about performance, offeree has duty to notify of
acceptance by performance
 If offeree fails to notify, although acceptance already occurred,
it will be ineffective
 If the offer exclusively mandates a method of acceptance, must do that
method
 If the method is specified, but does not reasonably intended as exclusive, any
reasonable method of acceptance is effective 
 Offeror can argue that even if reasonable, not similar enough means,
therefore not reasonable
 The method of actual acceptance needs to provide the same level of
protection as the preferred method stated in K
 If the offeror is unclear whether they want a promise or performance, offeree may
choose—this is only if the K does not lend itself to one way or the other
 If it is unclear, partial performance = acceptance (treated as bilateral)
 Hammer v. Sidway
 At wedding, nephew promised his uncle not to drink, swear, use tobacco until 21
and uncle in exchange promised to pay 5k. on 21 bday will wrote requesting 5k
st

and uncle said he would keep it until will was mature. Then died. Did promise
have consideration? In general, a waiver of legal right at the request of
another is sufficient consideration for a promise. Hold: Nephew recovers.
 Termination (revocation) of the power of acceptance
 Time lapse
 If no specified time, reasonable standard—depends on nature of contract
 Face to face usually ends at the end of the conversation
 If sent through letters, longer time because communication takes
longer
 But late acceptance could act as counter-offer, alternatively, if
offeror ignores late acceptance and acts as if the acceptance was
timely, the K may be enforceable
 Revocation by offeror
 Must reasonably notify offeree of revocation: once offeree receives
 If public offer- must use similar means, offeree doesn’t need to know if it
was revoked
 Restatement 56
 Essential to an acceptance by promise that offeree must exercise diligence
in notifying offeror of acceptance.
 Restatement 54(2)- an offeree who accepts by rendering performance has reason
to know that the offeror has no adequate means of learning of the performance
with reasonable promptness then the K duty of offeror is discharged. UNLESS
 Offeree exercises diligence to notify the offeror of acceptance
 Offeror does learn of performance in reasonable time
 Offer indicates that notice of acceptance is not required
  If offeree hears from reliable third party, revocation is good
 See Dodds, where P heard from reliable third party that D sold
house to other party before option K ran out. Revocation was good
 Exceptions: Firm or option contract—needed to be supported by
consideration
 Offeror is no longer able to change its mind without incurring liability.
 International Filter Co. v. Conroe Gin
 P made an offer D accepts and makes an order from P. In P’s offer
stated “must be approved by the VP.” D cancels the order saying K
was not formed bc P never informed of VP approval. D relies on
that P set the terms of the offer and since approval was never
relayed K was never formed. Court held for P. VP did approve the
K and the offer did not require it to be communicated to D.
 White v. Corlies v. Tift
 D asked P for estimate to do work on a property. P complies both
sign. D tells P to start w/o reply. P starts and the D modifies again
after begins. D was seeking a promise in exchange not
performance of the agreement. P should have communicated intent
to begin work. Silence is not generally acceptance.

 Offerors death or incapacity

 Offer usually disappears with death
 Death does not terminate an executed contract, only an offer
 Rejection: offer ends once offeree rejects, offeror needs to reoffer 
 Irrevocable Offer: when offeror makes an option
 Promise to hold the offer for some time, must have consideration
 Courts understand that options are good for business, so “sham”
consideration can be good enough—court’s discretion
 Firm offer under UCC 
 Does not need consideration provided that one party is a merchant
 Must be a signed writing
 Must give assurance
 If assurance is given by offeree to offeror, offeror must sign
 One party must be a merchant of the kind
 UCC 2-205 Firm offers
 Allows a promise without consideration to be enforceable if:
 It is by a merchant dealing with good of the kind
 It is signed in writing
 It gives explicit assurance the offer will be held open
 If satisfied, offer is revocable for stated time or for reasonable time,
max 3 months
 Reliance by the offeree (PROM ESTOPPEl) if the promise was deliberately made
with reasonable expectation of inducing her to rely on it, and justifiably did rely
on it to her detriment then can be enforced.
  Offer invites acceptance by performance and does not invite
promissory acceptance then K is formed when offeree tenders or
begins the invited performance 
 Offer seeking performance rather than a return promise, which generates the
beginning of the sought performance
 Reliance (only in rare cases: construction)
 Mailbox rule: Only applies to acceptances
 Offer accepted once sent in the mail
 Only applies when invited means (mailing) was invited by offeror 
 If mailing was not specifically invited, then acceptance begins at receipt
 If offeree sends rejection, then later wants to send acceptance, whichever one
arrives first 
 In instantaneous electronic communication, if the sent email or fax goes awry and
does not send to the appropriate place, mailbox rule applies 

UCC 2-207
 Mode A:
 When at least one party is non-merchant
 Mode A: A definite and seasonable expression of acceptance operates as an
acceptance even though it states terms additional to or different from those
offered and agreed upon, additional terms are proposals for new K
 Differing terms: Different terms vary or contradict the terms of the offer.
Different terms are either “knocked out” and replaced with UCC gap-filler
(majority of courts) or “drop out” (minority of courts) and original terms
remain.
 Additional terms:  Additional terms add new matter not covered in the
offer
 When both parties are merchants
 Additional terms are included, unless:
 They materially alter
 If they materially alter, only can be included if other party accepts counter
offer (same def. as Mode B)
 Material alter (burden of proof is on opposer of inclusion)
 A material alteration is one that would “result in surprise or hardship if
incorporated without express awareness by other party” pg. 214
 Per Se: Material as a matter of law (arbitration is one example)
 Surprise: subjective and objective: what the party actually knew and what
they should have known
 Hardship: (rarely used) usually only applied when term creates or allocates
an open-ended and prolonged liability
 The offer expressly limits acceptance to terms of offer
 Notification of objection has already been given or is given within a reasonable
time after notice of them have been received 
 Mode B Counter-offer: Offeror demands additional terms to be included, acceptance is
expressly made conditional on assent to the additional or different terms
 Difficult to do, performance is not enough
  Counter-offer “must clearly reveal that the offeree is unwilling to proceed
with the transaction unless he is assured of the offeror’s assent to the
additional terms” pg. 208
 Acceptance of the counter-offer must be (def. of express) “directly and
distinctly stated or expressed rather than implies or left to inference

 Mode C: If counter-offer is not accepted but parties perform as if there was an offer and
acceptance UCC 2-207(3) applies
 Contract will include terms parties agree, together with any supplementary terms
provided in the UCC section 2
 Additional terms will not be included unless they are supplementary written
within the UCC
 Differing Terms
 Maj: different terms fall out and replaced with UCC gap-fillers (“knock-out rule”)
 Min.: equates different with additional
 if differing terms are in acceptance, then look at if different terms
materially alter (assuming if both are merchants)
 Post-Agreement Terms (inside box Ks)
 Can be accepted by performance if performance is defined by offeror as an
appropriate method of acceptance
 UCC 2-206 a buyer accepts goods under 2-206 when after an opportunity to
inspect, fails to make an effective rejection under 2-206

 Requirement of Definiteness
 1) Whether both parties must manifest intent to be bound
 2) Whether terms of the agreement are sufficiently definite to be enforced
 The terms must be reasonably certain, which requires the K to provide a
basis for determining the existence of a breach and for giving an
appropriate remedy (Rest. §33)
 If price is omitted, needs objective calculation to decide the price
in the future… if K lacks that, could be materially indefinite
 The fact that one or more terms of a proposed bargain are left open or is
uncertain may show that the manifestation of intention is not intended to
be understood as an offer or as an acceptance
 Indefiniteness
 No contract comes into being if a material aspect of the agreement is left
indefinite and the uncertainty cannot be resolved by the process of interpretation
or construction
 Must be an incurable uncertainty about what the parties agreed to, so
that the intent to enter a K is in doubt
 Uncertainty must relate to material aspect of the relationship
 Material if it is an important component of the K
 It is enough for agreements to provide means for making those terms sufficiently
definite by the time performance is due
  If K is missing relevant terms, courts may fill in gaps with, or by implying a
term
 UCC: If price is not stated, reasonable price at time of delivery

UCC 2-207 ANALYSIS STEPS

1) Is it a Mode A analysis? Was the acceptance made expressly conditional on the additional
terms?
 Rule: Mode A K formed if offeree’s reply is a seasonable and definite expression of
intent with different/additional terms that is not expressly conditional on offeror’s assent
to any new terms
 One party is going to argue that the acceptance was expressly conditional to get the
additional terms in (making it a mode B counter-offer) and the other is going to argue that
it was not expressly conditional (making it a mode A)

2) Assuming the acceptance was not made expressly conditional on the additional terms, is the
terms additional or different?  
 Rule: Additional terms add new matter not covered in the offer. Different terms vary or
contradict the terms of the offer. Different terms are either “knocked out” and replaced
with UCC gap-filler (majority of courts) or “drop out” (minority of courts) and original
terms remain.
 One party will argue different, one will argue additional
3) If the terms are additional, do the additional terms come in?
 Rule: If only one party is a merchant, additional term is construed as a proposal (not part
of K). If both parties are merchants, additional term is party of the K UNLESS the offer
expressly limits acceptance to the terms of the offer OR the new terms materially alter the
offer; OR notification of objection to them has already been given or is given within a
reasonable time after notice of the additional terms is received. Merchant = deals in
goods or by a following a particular occupation, has or represents having knowledge or
skill concerning goods
 One will argue merchant, the other no merchant
 Then continue argument in assuming both are merchant, whether additional terms
material alter
4) Assuming that other party’s acceptance was expressly conditional on assent, do the
additional terms come in?
 Rule: Mode B K is formed on offeree’s terms if there is a clear manifestation of
acceptance of the additional or different terms by the offeror.  
 One party will argue that the additional terms were expressly agreed to, the other party
will argue that the terms were not expressly agreed to
5) Assuming that offeror did not clearly manifest acceptance to the additional terms, what
were the terms of the K that the parties agreed to?
 Rule: Mode C K is formed when offeror does not accept offeree’s counter-offer but the
parties act as if a K has been formed anyways. The terms of the K are those terms upon
which both parties agreed to in writing. UCC Gap Filler supplements where no agreed
term exists. 

Notice of acceptance of Unilateral K

 A. Only looks for performance as acceptance.
B. Restatement 54 (1) Where an offer only seeks acceptance by rendering performance, no
notification is necessary to make an acceptance effective, unless offer explicitly states it.
 Allied Steel v. ford
 Agreement entered between the two and Allied was to accept an indemnity
provision to assume liability for injuries to employees. Starts work before
accepting indemnity and an employee is injured. Allied claims that the K was
never formed BC indemnity clause wasn’t accepted, but allied commenced work🡪
that is acceptance by performance.
Shipment of goods as acceptance
A. UCC 2-206 1 (b)- an order or other offer to buy goods for prompt or current shipment is
inviting acceptance either by prompt promise to ship or by the shipment of conforming
goods or non-conforming goods, shipment of non-conforming goods does not constitute
an acceptance if the seller reasonably notifies buyer that non-conforming goods were
shipped as an accommodation. (COUNTEROFFER)
-Shipping non-conforming goods is acceptance and a breach
-unless turned into a counteroffer with accommodating goods with note explaining
- UCC 2-206 a buyer accepts goods under 2-206 when after an opportunity to
inspect, fails to make an effective rejection under 2-206

-Restatement on nonconforming services: accept by commencing performance

-If ambiguous to send notice or commence performance, offeree chooses

ENFORCEABILITY

Consideration
 Definition: a bargained for exchange that is a good enough thing exchanged for a
promise
 Good Enough Thing- act, forbearance, promise
 Not good enough things
 Pre-existing Duty
 Illusory promise
 Bad-faith forbearance of a case where it is invalid-subjective honesty,
farther from reasonable, harder to prove bad-faith
 Right to cancel clauses: usually enforceable if there is a required notice
accompanying right to cancel
 At will employment may not be consideration because employee can be fired at
any time for any reason 
 Employment agreements
 Covenant not to compete- Cont. employment is sufficient consideration to enforce
 As long as reasonable and not excessive
 At-will employment- either side can terminate/change at any time. Continued
employment is the consideration since you can be let go at any time.
  Employee handbooks are generally binding
 Should be applied consistently
 Lake land employment group of Akron LLC v. Columber
 established that as long as a non-compete is reasonable then
continued employment is consideration.
 Bargain
 Exchange
 Must be sought after
 Even a peppercorn as long as it is sought after

-Reliance (promissory estoppel)

 Equitable estoppel based on misstatement of fact, promissory based on promise
 Change in position by the promisee
 Promisee reasonably relies on promise of promisor and changes position to promisee’s
detriment
 Rest §90- a promise which the promisor should reasonably expect
(foreseeable) to induce act by promisee, and does induce promisee to
detrimentally act, is binding if injustice can be avoided only by enforcement. 
 Remedy can be limited as justice requires
 At will employment may not be able to enforce in promissory estoppel because party can
be fired at any time. What kind of promise is that? Is it reasonable to expect someone to
quit for a job that has no guarantee?

Reliance as a basis for enforcement

A. Reliance is a change in position by the promisee in reliance of a K. This can substitute for
consideration and render performance enforceable
B. Promissory Estoppel 90: A promise which the promisor should reasonably expect to
induce an action or forbearance on the part of the promise or a third person and which
does induce such an action or forbearance is binding if injustice can only be avoided bu
enforcement of the promise.
0. Court will determine Reliance by considering
0. Was it reasonable under the circumstances?
i. Did the promisee suffer economic detriment 
ii. Can injustice only be avoided by enforcing the promise
 Ricketts v. Scothorn
 D gave P a note for 2K to quit job. D died before giving. P did quit job. Suit to
recover. P reasonably relied on it to her detriment🡪 Recover
A. Growing trend of enforcing family gratuitous promises
-Usually need a forebearance
 Fienberg v. Pfeiffer
 200/month upon retirement. Recovers under Promissory esstopel. P changed
employment status in reliance and grew older/unemployable. 
 Wright v. Newman
 D brought suit against P for child support. P is only father of 1 child but gave 2nd

his surname, listed as father on BC, denied child creating a relationship w/ natural
 father. D and son relied on P promise to detriment so he has to pay. Policy
concerns as well behind the decision. Jury inferred the promise here.

-Restitution (benefit conferred)

 Officious Intermeddler cannot recover, nor gift can be enforced
 Unjust enrichment conferred on promisor/offeror
 Quasi/constructive contract
 Contract implied by law
 Regardless of assent, obligated to pay b/c reason and justice
 Usually no restitution for married or cohabitants 

Restitution as a basis for recovery

A. Derived from the receipt of benefit that would unjustly enrich the D at expense of P
B. Restatement 370-77: Basis for recovery where there is no promise or agreement. Prevents
unjust enrichment. If mistakenly confer a benefit, then entitled to compensation.
C. Quasi-K/constructive/implied K
0. Not a true K because there is no mutual assent bargained for and received
a. Fictional K created by restitution
b. Usually the K defines the duty, here the duty defines the K
c. Purpose: to avoid unjust enrichment
 Cotnam v. Wisdom
 Man thrown from car. D preformed a difficult surgery and seeks to recover for car
eon scene. Policy interest in making sure DR administers care and is justly
compensated as a professional. 
 Callano v. Oakwood Park Homes
 Shrub delivery by P unjustly enriched D. But the property wasn’t originally
meant for D just happened to be the one to buy the property with shrubs
there. P claims this created a Quasi-K with D. Cannot substitute one Debtor
for another. P can sue Pedegrast estate for the shrubs.
 GENERAL RULE: You should recover from who you dealt with

 Did something with permission, just unjustly enriched a party

- Cotnam v. Wisdom
 Man thrown from car. D preformed a difficult surgery and seeks to recover for car
eon scene. Policy interest in making sure DR administers care and is justly
compensated as a professional. 
 Benefit conferred is increased chance of survival
 Based on Rest §20

-Moral Obligation
 Moral obligation is not sufficient unless
 Reaffirm promise as an adult for promise made as a minor
  Promise to pay debts from bankruptcy
 Debt where statutory period has ended
 Rest. §86: “prevent injustice”
 The promisor has been unjustly enriched by a benefit previously received from
the promisee
 The benefit was not given as a gift
 The promisor subsequently makes a promise in recognition of the benefit
 The promise is not binding to the extent that its value is disproportionate to the
benefit
 If these requirements are satisfied, the promise is binding to the extent necessary
to prevent injustice
 Charitable obligations are usually binding

Assent
 Manifestation of intent to be bound by all parties
 Offeree must subjectively and reasonably (obj.) infer offeror’s intent 
 Mental assent of both parties are not required
 Offeree needs to be on “inquiry notice”, know they are entering a contract
(Spect) 

The nature of Assent

A. In a K bargain is typically formed by mutual assent for the parties through an offer by
one and an acceptance by the other.
B. Parties Intend to be bound: For K formation parties must manifest intent to be bound
C. Two contrasting theories
0. Objective: does not look to intent of parties only at words used in K
0. Would a RP believe the actions/words of the other party
a. Subjective: original intent of the parties 
 Lucy v. Zehmer
 P brings suit to recover land D sold to him. P + D drinking in restaurant D claims
it was a joke/bluff. Written on back of receipt. Objectively K was agreed on
Subjectively D was bluffing. K is enforceable.
 Called on a bluff is a risk in contract formation

Intent to be bound
A. Formal K contemplated
0. In complex negotiations parties agree on essential terms and leave small details to
be worked out later in a final document parties will sign
0. Absent an expressed intent that no K shall exist until all terms agreed
mutual assent oral or informal is sufficient to create a K
i. To avoid at least one party must express intention not to be bound until a
formal K is signed
ii. The fact that parties later agree to make a formal writing of a prior
agreement does not prevent them from being bound before that writing
is made. 
iii. If parties express the intent not to be bound until a writing is formed then
they are not bound until the writing is created 27
  Specht v. Netscape Communications
P downloaded free software which licensing included an arbitration clause. The Term was not
easily readable (had to scroll down to view). Software tracked usage of comp. P didn’t even
know there was terms. Not bound by arb clause.

Statute of Frauds
 Checklist:
 Is there a contract?
 Does category fall within SoF?
 Is K written?
 Is there an exception?
 May still be a contract, but unenforceable if NOT in writing
 6 categories: 
 1) executor of an estate to answer for a duty of the decedent, 
 2) contract to answer for the debt of another (suretyship), 
 3) a contract made upon consideration of marriage, 
 4) contract for the sale of an interest in land, 5 

 5) contract that is not to be performed within a year, 

 6) a contract for the sale of goods
 Common law for SOF- service K and land K; UCC- applies to sale of goods
 Requires K (could be just a memorandum of the K) to be in writing and signed, and if not
in writing and signed, the K is not enforceable 
 6
any sale over $500 
 5
Must be physically unable to do in a year, starts on acceptance 
 lifetime promises are within a year
 4
any interest in land, lease is good enough
 Building a building or lending $ for someone to use to buy land does not
fall w/in SOF)
 If Vendor, Under oral Land K makes the K for conveyance, he may
recover K price
 Vendee under oral land K may in reliance on the K take action which:
 Shows that the K was really made
 Create reliance interest on the part of the vendee in enforcement
 May obtain specific performance even though K was
originally unenforceable BC it was oral
 Taking possession and making improvements shows that they took action
in reliance
 Payment alone is not sufficient to make a K enforceable, instead the
Vendee can recover purchase price in a Non-K action of restitution
 2
Surety = obligor owes obligee (creditor), third party signs to obligee (creditor)
 Promise to answer for a debt of another
 Novation: 3rd party takes complete debt of obligor
 Indemnity: third party signs with obligor
 Exception to surety: if third party benefits from surety, SoF doesn’t apply
(primary purpose rule)
 Not the primary promise; Suretyship is taken outside SOF if the
promisor has made an agreement for his own purpose rather than for
benefit of the original debtor. (Primary Purpose rule)
**Watch for mixes: K for sale of $300 of goods to be delivered in 18 months MUST be in
writing
 Even if sale is over 500, exempt from SOF if:
 Specially manufactured goods for the buyer. Not suitable for sale
elsewhere
 Estoppel: If you admit in court that a K for sale was made, but it
wasn’t enforceable under this provision beyond the quantity of the
goods- writing is not required.
 No writing is required for goods that have already been delivered
and accepted or good for which payment was already received
 K for sale of goods says no oral modification/rescission might have
to satisfy SOF🡪 But if one party detrimentally relies on an oral
rescission this will probably be binding, as a waiver of the other
parties right to rely on the no-oral-mod clause
 Oral rescission usually doesn’t have to satisfy SoF non-
UCC cases
 If either materially changes their position in reliance on an
oral modification then the court may enforce a modification
despite the statute
 Under UCC if a K as modified would have to meet SOF,
any modification of a key term must be in writing.
 If modification is unenforceable then the K stands
as original
 If it is a minor term modified orally then court will
probably find it effective

 Writing needs to include identification of parties, setting out nature of exchange, and
containing most of material terms, and signature
 Can be a string of writings
 Signature = any symbol made or adopted with an intention, actual or apparent, to
authenticate the writing as that of the signer
 UCC 2 exception: Both parties must be merchants, within a reasonable time of
oral K, one parties sends a written confirmation to the other, which is signed by
the sender, the recipient has reason to know its contents, and the recipient does
not give written notice of objection to it within 10 days of receipt
 Reliance based exception: part performance:
 1) goods are to be specially manufactured for the buyer
 2) goods can’t be sold to others in the ordinary course of seller’s bus.
 3) seller has substantially begun making the goods or making
commitments to getting goods
 Estoppel: a promise which the promisor should reasonably expect (foreseeable) to
induce action and which does induce action is enforceable but remedy is limited
as justice requires
 If plaintiff would suffer unconscionable injury or defendant is unjustly
enriched
  Minority rule: for sale of goods (when UCC applies) , estoppel does not
apply 

Policing The Bargaining Process

 Three types of policing concerns: status of the party seeking relief from a promise,
behavior of parties during the bargaining process, and the substance of the resulting
bargain
 Status
 Minority and mental infirmity
 Minority (Infancy doctrine): Contracts entered into by minors are
voidable by minor, unless they reaffirm after turning of majority (18)
 If disaffirm, must return the remainder in whatever shape its in
 16/17 usually held to the standard
 Infirmity: A person has no capacity to incur contractual duties if his
property is under guardianship by reason of an adjudication of mental
illness or defect

 Behavior
 Pressure in bargaining
 Duress: (Restatement §175): 
 (1) If a party’s manifestation of assent is induced by an improper
threat by the other party that leaves the victim no reasonable
alternative, the contract is voidable by the victim
 (2) If party’s manifestation of assent is induced by one who is not a
party to the transaction, the contract is voidable by the victim
unless the other party to the transaction in good faith and without
reason to know of the duress either gives value or relies materially
on the transaction
 Duress must induce assent, induce = substantially contributes
to his decision to manifest his assent
 Threat is improper if the threat is:
 a tort or crime
 criminal prosecution
 bad faith use of the civil system,
 breach of the duty of good faith and fair dealing 
 Lawful action is not improper threat
 Pre-Existing duty: 
 (Rest. §73) Performance of a legal duty owed to a promisor which
is neither doubtful nor the subject of honest dispute is not
consideration
 -layman terms: if you had the duty before, can’t use that same duty
as consideration 
 Avoiding pre-existing duty rule:
 May use pre-existing duty for consideration if it is “fair” to do so
(see Watkins v. Carrig) 
 Watkins & son v. Carrig
 P agreed to excavate cellar of D. after starting P found out that
there was rock below 2.3x price to finish work. D reluctantly orally
agrees to the increase in price. D argues he agreed under duress
and the oral modification was a preexisting duty w/o consideration.
Price was fair and D agreed w/o much resistance. Court found for
P.
 Restatement 89 a promise to modify a duty is enforceable if
 It is fair in view of circumstances
 Justice requires in view of material change in reliance on
promise
 Yielding to threat:
 Sufficient in severity or apprehension to overcome the mind of a
person of ordinary firmness
 Avoiding pre-existing duty: new consideration
 Partial payment: not good enough, nothing new from what was
already owed
 Find out about “paid in full” checks
 Pre-Existing duty to a 3rd party
 Enforceable if consideration (Central Ceilings v. National) 
 Duress in Business Transactions
 K is voidable when plaintiff establishes that it was forced to agree
by means of a wrongful threat precluding the exercise of free
will… it is demonstrated by proof that “immediate possession of
needful goods is threatened” 
 Employer threatening at will employee may be undue influence
 Undue Influence (can be termed over-persuasion) 
 Unfair persuasion of a party who is under the domination of the
person exercising the persuasion or who by virtue of the relation
between them is justified in assuming that the person will not act in
a manner inconsistent with his welfare (Rest §177)
 Typically associated with (KEY IS POSITION OF
POWER):
 unusual time or place, 
 insistent demand on finishing at once, 
 threatening consequences for delay, 
 multiple persuaders from dominant side,  

 absence of 3rd party advisers to subservient side, 

 stating no time to seek lawyer or financial advisor
 Concealment & Misrepresentation
 Mere failure to reveal without fiduciary relationship is not enough
 Half-Truth: truth but implies a falsity is misrepresentation
(Kannavos)
 If asked, must answer with whole truth
 Innocent misrepresentation is often good enough to make K
voidable
 Some degree of diligence is required for party that relies on
another’s statement—depends partly on victim’s capacities, nature
of the transaction, and plausibility of representation
 Promissory Fraud
 If promise is made by party where the party never intended to
perform
 Entitled to expectation & possibly punitive
 If superior party makes statements of opinion (puffing), can be
regarded as fact if the parties are different enough
 UCC 2-213 -“sellers talk”
 No requirement that buyer relies on the fact, description or sample but it must be
the “basis of the bargain”
 Not necessary to use formal language
 If it is merely an opinion of the seller then it is “puffing”

LIMITS ON THE BARGAIN AND ITS PERFORMANCE

-at this point the two parties have successfully have successfully bargained with one another, a
deal has been struck, and that the obligations of each party are clear
-Specific performance cannot be given unless remedy at law is inadequate
- can argue that although damages can be calculated, can argue that damages are so
sentimental that money was remedy it
 UNFAIRNESS
 Specific enforcement of a contract may be refused if:
 (a) the consideration for it is grossly inadequate or its terms are otherwise
unfair, or
 (b) its enforcement will cause unreasonable or disproportionate hardship
or loss to the defendant or to third persons, or
 (c) it was induced by some sharp practice, misrepresentation, or mistake
 These contracts that are “unfair” are still enforceable at law, just cannot be
remedied by specific performance
 Transaction fairness must be looked at time of creation of K, not retrospectively
 Cannot factor in market price changes, etc
 Prior services can’t act as consideration, but can be considered in connection with
the fairness of the K and adequacy of the consideration
 STANDARD Form ADHESION CONTRACTS 
 Whether a party to a standardized contract can reasonably be held to have seen,
understood, and assented to its unfavorable terms, and accordingly, to be bound
by them.
 “Adhere or pass up the contract”
 Exculpatory clauses (relieving party of negligence) see O’Calligan
 They are generally enforced unless:
 It would be against the settled public policy of the State to do so
or,
 There is something relating to the social relationship of the parties
militating against upholding the agreement
  Landlord tenant are not recognized as disparate enough
relationship to sustain exculpatory clauses
 Could be though if housing market is scarce enough—
Argument point!
 UNCONSCIONABLE 
 UCC 2-302: (1) if the court finds as a matter of law that the K or any clause
was unconscionable at the time the K was created the court may refuse to
enforce the entire K, the clause, or limit the application of any
unconscionable clause as to avoid the unconscionable result
 (2) If clause or K appears unconscionable, the parties are to have a reasonable
opportunity to present evidence to its commercial setting, purpose and effect to
aid the court in making the determination
 Unconscionable if K is unfair surprise or undue hardship
 Generally recognized to include an absence of meaningful choice on the
part of one of the parties together with contract terms which are
unreasonably favorable to the other party
 So extreme as to appear unconscionable according to the mores and
business practices of the time and place
 All K’s have implied duty to good faith in performance and enforcement
according to the terms of the K
 Neither party shall do anything which will have the effect of destroying or
injuring the right of the other party to receive the fruits of the K
 Good faith is: honesty in fact and the observance of reasonable
commercial standards of fair dealing
 In analyzing good faith, good faith is defined more as what is not than
what it is
 “has X acted in good faith with respect to the performance or enforcement
of some right or duty under the terms of the Agreement
 Bad faith means more than mere negligence, it involves a dishonest
purpose
 An honest mistake is not bad faith
 Good faith does not equal candor
 RESTRAINTS OF TRADE (as a matter of public policy)- no competition
agreements
 REST. §179: public policy against enforcement may be derived by the
court from the need to protect some aspect of the public welfare, as is the
case for the judicial policies against
 REST. §186: a promise is unenforceable on grounds of public policy if it
is unreasonably in restraint of trade
 A promise is in restraint of trade if its performance would limit
competition in any business or restrict the promisor in the exercise
of a gainful occupation 
 The initial burden is on the employer to prove the covenant is reasonable
and has a fair relation to, and is necessary for, the business interests for
which protection is sought
 Test: restraint is reasonable if: 
  1) it is not greater than is required for the protection of the
employer
 2) does not impose undue hardship on the employee 
 3) is not injurious to the public
 PUBLIC POLICY AND AT WILL EMPLOYMENT 
 Can generally fire employee for any reason except for if employee:
 Refuses to commit perjury
 File a worker’s comp claim
 Engage in union activity
 Perform jury duty
 (all for public policy) Argument point!
 See Sheets if employee refuses to break statute in course of
employment
 See Balla where lawyer was fired for releasing information that
employer/client was doing practices that put people in possible harm, he
was mandated to report
 Court did not award the lawyer damages because he was mandated
to, and they did not want to allow lawyers to retaliate against
clients because it would compromise client/lawyer relationship on
a policy basis
 FAMILY LAW K’s (pre-nup)
 Pre-nup are enforceable provided that parties have full and fair disclosure
of the financial positions (the K should be treated as any other K other
than that requirement)
 Artificial insemination K
 Cannot have any money exchange (which is banned statutorily
which makes the K illegal)
   Laws also require proof of parental unfitness before termination
of parental rights are ordered
 Also laws that make surrender of custody and consent to adoption
revocable in private adoptions
 Also public policy, if they allow money to be involved in
adoptions, there will be middle men who are solely in the business
to make money allowing people to make money for babies which
is not good for public policy
 Surrogacy K’s are good if the surrogate mother volunteers, without
any payment, to act as a surrogate and is given the right to change
her mind and to assert her parental rights

TERMS
 The ordinary meaning of words used by the parties in formulating their rights and
obligations is always the primary indicator of what they intended
 Conduct by the parties can shed light on the terms if the behavior relates to the
terms
 Whether parties objected to behavior in the past
 If other party surreptitiously acted 
  Prior dealings may assist in clarification of intent
 If they are commercial dealers, trade usage is incredibly valuable 
 UCC Test: is the term currently observed by the great majority of dealers
 REST.:  A usage of trade is a usage having such regularity of observance in a
place, vocation, or trade as to justify an expectation that it will be observed with
respect to a particular agreement. It may include a system of rules regularly
observed even though particular rules are changed from time to time.
 Requirement of Definiteness
 1) Whether both parties must manifest intent to be bound
 2) Whether terms of the agreement are sufficiently definite to be enforced
 The terms must be reasonably certain, which requires the K to provide a
basis for determining the existence of a breach and for giving an
appropriate remedy (Rest. §33)
 If price is omitted, needs objective calculation to decide the price
in the future… if K lacks that, could be materially indefinite
 The fact that one or more terms of a proposed bargain are left open or is
uncertain may show that the manifestation of intention is not intended to
be understood as an offer or as an acceptance
 Objective or subjective interpretation?
 Objective if both parties disagree about meaning of term. But if 
 Indefiniteness
 No contract comes into being if a material aspect of the agreement is left
indefinite and the uncertainty cannot be resolved by the process of interpretation
or construction
 Must be an incurable uncertainty about what the parties agreed to, so
that the intent to enter a K is in doubt
 Uncertainty must relate to material aspect of the relationship
 Material if it is an important component of the K
 It is enough for agreements to provide means for making those terms sufficiently
definite by the time performance is due
 If K is missing relevant terms, courts may fill in gaps with, or by implying a
term
 Filling Gaps
 First basis for supplying terms is the actual expectation. If parties shared common
expectation then the court will give effect to that.
 Second (without common expectation) is what the parties would have wanted if
their imagination had anticipated this. Fair and reasonable man. REST. §204
 UCC gap fillers
 UCC 2-314- Implied merchantability & fitness If seller is a merchant, absent a
warranty, Goods must be merchantable:
 Pass w/o objection in the trade
 Fair and average quality w/in description
 Fit for ordinary purpose the good is used
 Conform to promises or affirmation of fact made
Warranty
Changing warranty ALWAYS materially alters risk.
  Express warranties
 Affirmative act by the seller 
 Description of goods creates a warranty
 Sample or model creates a warranty

Restatement §265 = must be dissatisfied w/performance, not the contract

Two types of satisfaction clauses
1) Satisfaction as to the value and quality and operative fitness as per a reasonable person
2) Satisfaction involving fancy, taste, and judgement. Must act in good faith.

Exclusive Contracts
Structural Polymer Group V. Zoltek
 D agreed to manufacture and sell P all of its carbon fiber at MP. Exclusive
K. If P has no requirements, then not required to buy from D but if P does
then require to buy from D –“good faith”. P was entitled to last years
ordered CF plus 1 million.
-UCC §2-306(2) = Exclusive dealing
-best efforts in exclusive dealing contracts

2-315- If seller knows what good is to be used for and buyer is relying on sellers judgment, it
must be fit for that purpose.
 Precursory Negotiations to Later Contract
 If parties negotiate and agree on some terms, but additionally agree to resolve
later material matters, usually no good faith duty arises. But duty could arise if
party invested a lot in the negotiation or relied on negotiations that would lead to
a K  
 REST: Parol Evidence rule: Agreements Rest. §213
 1) A binding integrated agreement discharges prior agreements to the extent
that the K is inconsistent with the prior agreements
 2) A binding completely integrated agreement discharges prior agreements to the
extent that the prior agreements are within the written K’s scope
 3) An integrated agreement that is not binding or that is voidable and avoided
does not discharge a prior agreement. But an integrated agreement, even though
not binding, may be effective to render inoperative a term which would have been
part of the agreement if it had not been integrated
 Evidence of Prior or Contemporaneous Agreements and Negotiations (Rest. §214)
 Are admissible into evidence when:
 Writing is or is not an integrated agreement 
 That the integrated agreement, if any, is completely or partially integrated
 The meaning of the writing, whether or not integrated
 Illegality, fraud, duress, mistake, lack of consideration, or other
invalidating cause
 Ground for granting or denying rescission, reformation, specific
performance, or other remedy
 Rest. §215 Contradiction of Integrated Terms
  Except as stated in the preceding section, where there is a binding agreement,
either completely or partially integrated, evidence of prior or contemporaneous
agreements or negotiations is not admissible in evidence to contradict a term of
the writing
 Rest. §216 Consistent Additional Terms
 1) evidence of consistent additional terms is admissible to supplement integrated
agreement unless court finds K was completely integrated
 2) K is not completely integrated if writing omits consistent additional term
which:
 A) agreed to for separate consideration, or
 B) such a term that might naturally be omitted from the writing
 Integrated K’s (210)
 Completely Integrated K: Adopted by the parties as a complete and exclusive
statement of the terms of the agreement
 Partially Integrated K: any other integrated agreement other than a Complete
 Ambiguity
 NY – FOUR CORNER RULE
 Is the term ambiguous?
 Yes: Judge reviews in camera
 Does evidence clear up ambiguity?
 Yes: Admissible
 No: Not admissible
 No: term is not ambiguous
 Implied warranty of merchantability UCC 2-314
 UCC 2-314: seller must be merchant of goods of that kind
 Fungible goods: fair average quality within description
 Fit for the ordinary purposes for goods are used
 Adequately packaged & labeled
 Conform to promises or affirmations of fact made on the container or label
if any 
Parol Evidence Rule: SUBJECTIVE (Majority) vs California (objective) approach
 Parol Evidence: Prior/Contemporaneous Agreements

Parol Evidence: Ambiguity

BREACH

 Section 1: Express Conditions

 RST. 224: A condition (precedent) is an event, not certain to occur, which must
occur, unless its nonoccurrence is excused, before performance under a contract
becomes due
 Due diligence must be used to make the condition occur
 If party purposely avoids the condition occurring, the condition is treated as it
occurred 
 If condition is based on satisfaction, if it is noncommercial—good faith, if it is
commercial—reasonable
Satisfaction Clauses
1) Satisfaction as to value and quality and operative fitness (REASONABLE
PERSON STANDARD)
2) Satisfaction as to taste, fancy, or judgement (Good Faith standard)
Rest §265 = must be dissatisfied with performance, not the contract or its terms

 Look at whether condition is just a duty or condition and duty

 If “of the essence” then condition and duty
 If time is of the essence, which is to be determined by the type of good
and the words of the K indicate that performance or an offer to perform by
that day is important
 Unless the condition has been excused, the non-occurrence of a condition
discharges the duty when the condition can no longer occur
 If there is doubt as to whether an event is made a condition of obligor’s duty, and
as to the nature of the event, an interpretation is preferred that will reduce the
obligee’s risk of forfeiture, unless in obligee’s control
 The failure of one condition in one K does not relieve duty of another separate K
 Problems of Interpretation: Condition, Duty, or Both?
 Intent of contract Ks that sub-contractors would not take the risk to not get paid if
the general gets paid—but with real estate brokers, the industry custom is that
they always take the risk if the house does not sell
 This is the RST. Law that requires reading the K to reduce forfeiture if
possible
 Instead reasonable time to pay—this is treated as a duty instead of
condition
 Can shift risk to sub-contractor but need to be clear and unambiguous—
treated as a condition 
 Mitigating Doctrines
 One who prevents the occurrence of a condition of one’s own duty may be
precluded from later asserting the non-occurrence of that condition
 Waiver, Estoppel, and Election
 Waiver: An obligor whose duty is conditional may promise to perform despite the
non-occurrence of a condition or despite a delay in its occurrence
 a party that, without consideration, has waived a condition that is within the
other party’s control before the time for occurrence of the condition can retract
the waiver and reinstate the requirement that the condition occur unless the
other party has relied (estoppel) to such an extent that retraction would be
unjust 
 However, a party that has waived a condition after the time for occurrence of the
condition is subject to a dramatically different rule under which the waiver cannot
be retracted, even in the absence of reliance 
 If you continually waive a condition, cannot at the end retract waiver see
McKenna who required architect certificate with installments of payment, and
party waived most of them until final payment was due
  Lenience: But a party may cut the other party some slack by waiving a condition
without forfeiting their right to demand occurrence of the condition later in the K 
 Parol Evidence is admissible to prove a condition precedent to the legal
effectiveness of a written agreement 
 Evidence is allowed for oral agreement of condition precedent as long as
the evidence does not contradict the terms of the written K
 Section 2: CONSTRUCTIVE CONDITIONS OF EXCHANGE
 Three types of covenants:
 Mutual and independent 
 If other party breaches, does not allow victim to breach, can sue for
damages
 Conditional dependent
 Party’s conduct is dependent on other person’s conduct, if other
person does not perform condition, other party is not liable to an
action
 Mutual conditions to be performed at the same time
 If one party was ready to perform and other party isn’t, the ready
party may maintain an action for breach
 Work is before payment unless contract expressly states intent of the
parties that payment is to become before work
 If there is no agreement as to the payment schedule for work, the
work must be substantially performed before payment can be
demanded 
 Section 3: MITIGATING DOCTRINES
 In express conditions, if the condition is not filled the contract is not
enforceable (strictly read)
 But in constructive conditions, the rule is substantial performance is
enough to trigger the obligation resulting from a constructive condition
 In substantial performance of a condition, if the uncompleted part of the
performance (omission) is both trivial and innocent (good faith), it will sometimes
be atoned for by allowance of the resulting damage, and will not always be the
breach of a condition to be followed by a forfeiture  
 See Jacob & Young where the contractor put in the same quality
pipe but of a different company, duty of other party to pay was still
required 
 Divisibility
 Severable and Entire
 If the part to be performed by one party consists of several and
distinct items, and the price to be paid by the other is (1)
apportioned to each item to be performed, or (2) is left to be
implied by law, such a K will generally be held severable
 If severable, will get paid for work done according to K
price
 If the consideration to be paid is single and entire the K must be
held to be entire, although the subject of the K may consist of
several distinct and wholly independent items
  Construction Ks are always entire
 Must substantially perform, otherwise classic restitution
recovery
 Restitution
 Get reasonable price at time of formation the price of the benefit conferred
less any cost to complete 
 Can get rid of this by including a clause that states that payment
will only be conferred when the job is fully complete
 If there is a special relationship between master and servant—for
example: lawyer/client, in these cases lawyers may forfeit
compensation if they do not complete performance
 Section 4: SUSPENDING PERFORMANCE AND TERMINATING K
 1) Is there an uncured breach?
 2) Is it a dependent promise? Whether the uncured breach is a breach of a duty of
performance that was part of an exchange of promises? (as opposed to a duty
under a promise on which the injured party’s promise does not depend)
 Was the breach a breach of a duty that was to occur before the other
party’s duty was due to occur?
 3) Is the breach serious enough to justify self-help in the form of suspension or
termination?
 A serious enough breach is a material breach—RST. 241, factors:
 The extent to which the injured party will be deprived of the
benefit which he reasonably expected
 The extent to which the injured party can be adequately
compensated for the part of that benefit of which he will be
deprived
 The extent to which the party failing to perform or to offer to
perform will suffer forfeiture
 The likelihood that the party failing to perform or to offer to
perform will cure his failure, taking account of all the
circumstances including any reasonable assurances
 The extent to which the behavior of the party failing to perform or
to offer to perform comports with standards of good faith and fair
dealing
 If the breach is not material, the aggrieved party must continue performance
and treat the breach as a partial breach
 The aggrieved party is entitled to any damages incurred to that point, but
does not allow suspension or termination
 Must continue to do your part
 If the breach is material, the aggrieved party has two choices
 Either continue performance and the breach is treated as a partial breach
 Or stop performance and treat the breach as a material breach
 If the party decides to treat the breach as material
 Aggrieved party has the right to terminate its own
performance
  Aggrieved party may collect damages for breach of the
entire contract, not just the part to which the performance
was defective
 If the party chooses to treat it as material, still
should give breaching party time to cure
 Factors that assess whether appropriate time has
been given: Factors in RST. 241 stated above & 242
below:
 The extent to which it reasonably appear to
the injured party that delay may prevent or
hinder him in making reasonable substitute
arrangements
 The extent to which the agreement provides
for performance without delay, but a
material failure to perform or to offer to
perform on a stated day does not of itself
discharge the other party’s remaining duties
unless the circumstances, including the
language of the agreement, indicate that
performance or an offer to perform by that
day is important 
 Hindrance and Prevention
 Hindering other party’s performance could be a breach
 Cooperation 
 Must cooperate if act is essential to performance
 Ex. You must open the gate to your barn for other party to paint it
 Other party can make it more difficult, see Iron Trade where one party
bought metal from the market making it harder for the other party to
obtain 
 Section 5: PROSPECTIVE NONPERFORMANCE
 Anticipatory Repudiation
 In order to be a repudiation, a party’s language must be sufficiently
positive to be reasonably interpreted to mean that the party will not or
cannot perform
 Repudiation must be an absolute and unequivocal refusal to
perform or a distinct and positive statement of an inability to do so
 Doesn’t need to be in writing
 Ex. Abandoning work can count as repudiation
 Is the recipient of a repudiation free to make other arrangements?
 Yes, see Hochster 
 Can the recipient of a repudiation go to court immediately before the
time for performance has arrived?
 Yes, see Hochster
 D employed P as driver. D backs out before date arrives and P sue
before performance date. Hold for P
  Rest. 250- allows suit before performance date if absolute that
other is repudiating
 Can the recipient of a repudiation ignore the repudiation and await
performance?
 Yes, but the contract is still enforceable if the party chooses to
ignore repudiation
 What are the consequences if the recipient of a repudiation urges
retraction of the repudiation?
 Can a party that has repudiated withdraw the repudiation?
 Yes, RST. 256, UCC 2-610
 May retract if party does so within a reasonable time. The
reasonable time ends when the aggrieved party materially changes
its positon in reliance on the repudiation 
 Of course may not retract once party accepts repudiation
 Assurance of Due Performance—RST. 251, UCC 2-609
 When an obligee reasonably believes that the obligor will commit a breach
by nonperformance that would of itself give him a claim for damages for
total breach, he may demand assurance of performance
 Whether obligee is reasonable to believe that obligor will commit a
breach: whether a reasonable merchant/party in parties position
would feel that his expectation of receiving full performance was
threatened
 Look at the time remaining to perform, whether the time remaining
was enough time to perform, whether the party has been unreliable
in the past, whether other party had reason to believe that other
party would be unable to perform
 If party can demand assurance, other party must meet the
demanded assurance

DAMAGES

 -Restatement §344(a)
=Expectation interest
=which is his interest in having the benefit of his bargain by being put in as
good a position as he would have been if the contract had been performed
 damages in contracts should be compensatory, not punitive
 Restatement §355 & 356
 §355 = Punitive damages are not recoverable for a breach of contract unless the
conduct constitution the breach is also a tort for which punitive damages are
recoverable
 §356 = Central objective behind the system of contract remedies is compensatory,
not punitive
 From the Restatement = “reasonable in the light of the anticipated or actual loss
caused by the breach
  -no large liquidated damages
 -no penalties for breach… just compensation

 Specific performance for the sale of personal property cannot be given unless remedy at
law is inadequate which is to be determined by the facts in the particular case
 can argue that although damages can be calculated, can argue that damages are so
sentimental that money was remedy it
 See Campbell Soup with the particular type of carrots
 In thicker markets, specific performance is less likely
 Also look at if court needs to continually supervise specific performance,
if so, less likely to grant
 UCC 2-716: permits buyer of goods to seek specific performance if the goods
sought are unique, or in other proper circumstances
 Inability to cover with like good is strong evidence of “other proper
circumstance” 
 Will be granted in a contract for chattel where there are special and peculiar
reasons exist which render it impossible for the party to obtain relief by way of
damages
 See Morris where plaintiff invested in the horse with time
 Specific performance of any building K is impractical unless there are special
circumstances or the public interest is directly involved 
 Injunctions as specific performance
 Weighing costs and benefits is analysis about whether injunction should
be granted, if balance is even=no injunction
 Expectation Damages loss in value + other loss – cost and loss avoided
 Sum of money that will put the promisee in the position he would have
been in had the promise been performed 
 Formulation: loss in value + other loss – cost and loss avoided
 Other loss RST. 347: incidental and consequential losses: which
usually include costs incurred in a reasonable effort, whether
successful or not, to avoid loss, as where a party pays brokerage
fees in arranging or attempting to arrange a substitute transaction 
 Lost profits are excellent approximations of expectation
 Overhead included in lost profits?
 Fixed overhead do not include in cost avoided, but if variable then
include in cost avoided (labor avoiding is example)
 UCC 2-712: by making in good faith and without unreasonable delay any
reasonable purchase of or contract to purchase goods in substitution for
those due from the seller may recover from the seller as damages the
difference between the cost of cover and the contract price together
with any incidental or consequential costs—when party purchases
replacement goods
 UCC 2-713: could have damages measured by the difference between
market price at the time when the buyer learned of the breach and the
 K price along with any incidental and consequential damages—when
party does not purchase replacement goods
 Lost Volume Seller:
 To qualify as a “lost volume” seller, the seller needs to show only
that it could have supplied both the breaching purchaser and the
resale purchaser with the goods.  Where an aggrieved seller has
sold goods made for the breaching party to another, courts should
consider whether the seller could and would have made a profit on
an additional sale in addition to the breached sale. If the seller
could not or would not have profitably made another sale in the
absence of breach, there is no lost volume and the seller would
normally be made whole by a recovery of the incidental costs
associated with the substitute transaction.
 Substitute K’s are only good if individual could not do multiple jobs at
once
 Restitution
 Can always recover restitution for benefit conferred, reasonable value of
benefit independent of contract worth—at time of contract formation!
 Even if K is losing!
 Substantial Performance: can get expectation although not fully completed, no
mathematical formula
 Expectation less cost to fully complete performance 
 The owner is entitled to the money which will permit him to complete,
unless the cost of completion is grossly and unfairly out of proportion to
the good to be attained. When that is true, the measure is the difference in
value
 Must be good faith
 RST. 348: If a breach results in defective or unfinished construction and
the loss in value to the injured party is not proved with sufficient certainty,
he may recover damages based on:
 A diminution in the market price of the property, or
 The reasonable cost of completing performance or of remedying
the defects if that cost is not clearly disproportionate to the
probable loss in value to him
 Pool that was made too shallow, same value but could have
personal value
 Down Payment
 If seller justifiably withholds delivery of goods because of buyer’s breach,
buyer is entitled to amount that the sum of his payments exceed 
 Amount noted in K
 If not noted in K, then 20% value of the total performance for
which the buyer is obligated under the K or 500$, whichever is less
 If down payment is over 2,500$, then it will be 500$-- less
than 2,500$ then 20%
 UCC 2-706 & 2-708
  2-706: difference between resale and the K price along with incidental
damages 
 2-708: awards profit from K—only can be awarded if the substitute would
not have been a true “substitute”
 Party must prove that it had the capacity to sell to two parties
and that it would have been profitable to do so
 If I had only one piano to sell I would recover in 706 not 708
because I could not have sold to both parties, I only had one piano
 Construction K’s are not substitutes
 Limitations on Damages
 a: victim of breach must take reasonable steps to limit the accrual of
damages
 UCC 2-704(2) allows sellers to continue manufacturing upon
buyer’s repudiation “in the exercise of reasonable commercial
judgment for the purposes of avoiding loss”
 If seller knew the buyer had a resale contract for the goods, and the
seller did not breach the K in bad faith, the buyer was limited to
actual loss of damages—UCC 1-305 (when seller could not
possibly meet K obligations, ex. Raisins K couldn’t be met because
drought)—minority jurisdictions
 Most courts apply UCC 2-713 market value and K price
 In employment (or other Ks) injured party does not need to
substitute with different or inferior kind
 Foreseeability: limits the award to those damages that are reasonably
foreseeable by the promisor, which will often, but not always imply limits
on the recovery of sentimental value and damages for emotional distress
 Damages should such as may fairly and reasonably be considered
either arising naturally 
 Special circumstances can be remedied in damages if both parties
are made aware of the special circumstances—must be very clear
—often called consequential damages
 One way for it to be clear is exchange consideration for
additional liability
 Emotional damages tend to be unforeseeable, and even if
they are, they are difficult to establish and measure with
sufficient certainty—basically never granted unless
breacher’s conduct was so outrageous as to justify punitive
damages
 Certainty: restricts party’s recovery to those that can be proven with
reasonable certainty
 3 protected interests
 loss of expectation
 reliance
 restitution
 Sullivan v. O’Connor
 breach of contract
  question was how to measure the remedy
 you can get your repayment paid back even if you use reliance theory
 Courts use reliance harm than expectation harm because its easier
to see
 courts are timid to compensate for medical procedures that are non-
negligent (so no loss of expectation loss usually)

Recovery facts:
Doctor fee $300
Hospital cost $100/surgery
Pain and Suffering $3000
Loss of Appearance $10,000
Loss of Improvement $20,000

Restitution = $300, (just doctor fee)… paid for service not rendered. Can’t expect back what she
anticipated to spend
Loss of Expectation = $30,000, Loss of appearance and loss of improvement 
Reliance = $3,400, Pain and suffering from relying on the surgery and then the costs for the
doctor and hospital cost for the 3 surgeries

Measuring expectation damages- monetary relief to place party in orig positon

a. Losses when you don’t get what was bargained for= LB
b. Other losses when you don’t get expectations are Consequential damages
c. Expectation is anticipated profit. DON’T ARGUE if losing K
d. With construction K’s are unique so there are no substitutes
e. TWO formulas
0. A- LB= LV-CA- Loss avoided/value received
0. LV what the goods are worth to non-breacher
1. CA- K price you don’t have to pay bc you didn’t perform
2. Loss in value: value of performance that should have been revived
minus what was received
i. B- LB= Profit + cost of reliance/cost incurred – value received

**Class Example
Supplier is in breach of K for the sale of goods and the goods are worth 1 million to the buyer
and the K price is 900k, wholesale for goods to be purchased by retailer
-Supplier is breached
A. LB= 1,000,000(LV) – 900k (CA)= 100k damages 
B. LB= 100k (profit) + 0 (CI) = 100k damages
-Supplier breached by retailer put down 300k down payment
 A. LB= 1,000,000- [900k-300k]= 400k damages
B. LB= 100k + 300k = 400k
-supplier breached but receiver put down a down payment and received 20% of goods
A. LB= [80% of 1,000,000]- [900k-300k] = 200k damages
B. LB= 100k+ 300k (CI) – 200k (value received)= 200k damages
  Laredo Hides Co Inc. V. H+H meet products
 When D cancelled wrongfully became liable to P
 When Seller doesn’t deliver thus breaches buyer can Cover in market
 2-712- after breach Buyer may cover by making a good faith and without
unreasonable delay purchase substitution.
 (2) Buyer may recover the difference of K price and price paid
A. Lost Volume Seller
0. A lost volume seller was only entitled to the to the diff between K price and the
resale price under 2-706(1)
a. A party whose capacity to produce items sold is sufficient to meet demands of all
customers still loses out on profit of that K.
b. Gen-K’s are considered lsot volume sellers. Jobs cannot be replaced. A lost
volume seller can get expected profit from K even after entering substitute K if
they can provide that substitute K would have occurred anyways.
c. LVS- must prove that lost volume and exactly what profit would have been.
 Davis v. Diasonics
 D sells medical equipment to P. P made 300k deposit then cancels. D sells that
exact machine to someone else but claims LVS.
 Sellers remedies under the UCC
 2-706: K price less resale price + incidentals – loss avoided
 Resale remedy- permits a seller to resell goods as long as the goods
were sold in good faith, limits recovery to diff between the K price
and the resale price + incidentals.
 2-708(1)- K price less market price + incidentals
 Here seller has not resold yet. Here the sellers damages is
calculated as if he did resell on the market. Mitigating damages. 
 2-708(2)- Loss profit + overhead + incidentals
 Lost volume seller  only comes into play when (1) above doesn’t
make seller whole again because P still lost profit. This calc profit.
 2-709- Price of goods accepted + price of goods that cannot be sold
 Required buyer to pay for the goods accepted. If seller was able to
sell half then only has to buy remaining.
 Court accepted LVS 708(2) instead of 706

A. Cost of completion and diminished value

0. K value is always ceiling for part or whole performance
 Jacob & Young v. Kent
 P built house for D. D refused to pay last 3,483 owed. D claims P used the wrong
pipe (of the exact same grade). Replacing all piping would be insanely expensive.
New trial is granted so jury can hear evidence that pipes are exact same grade.
  It is up to the fact finder to determine if injured actually seeks to complete
the minor imperfection or if they just want $ for diminished value.

A. Foreseeability
 Hadley v. Baxendale
 P Mill operator needed a Crank shaft fixed. D shipped away to have fixed. D neg
delayed Mill opening for 5 days. SPECIAL CIRSUMSTANCES rule- Both
parties must know of special circumstance for it to be foreseeable.
 Would be a consequential damage if both parties knew
a. Rest. 351- Foreseeability and related limitations on damages
0. Damages are not recoverable when party in breach did not have reason to forsee a
probable result of the breach when K formed
i. Loss may be foreseeable from breach when
0. Ordinary course of event
1. Result of special circumstance that party had reason to know
ii. Court may limit damages to foreseeable loss if justice so requires to avoid
disproportionate compensation
A. Sentimental value
0. Courts generally reject a “fanciful price P may place on item”
B. Emotional distress
0. Generally are not allowed unless K is clearly of emotional nature
0. Ex. K for burial service and coffin floods.
C. Certainty
0. Damages for breach must be down by clear and satisfactory evidence to have
been sustained
a. 352- damages not recoverable for loss beyond what evidence permits to be
established with reasonable certainty.
 Fera v. village Plaza Inc.
 P enetered 10 yr lease agreement to open a Book/liquore store. D defaulted and P
seeks lost expectancy. When seeking lost profit on a new Biz the damages are
entirely speculative. Typically P would have to get another comparable lease then
sue for difference but P was unable to find a comparable lease.
a. Even though Most states do not allow lost profit on new company court held if they can
be stablished w/in reasonable certainty then are recoverable.

Loss expectation:      Perfect hand

-bad hand
=Reasonable damages