contracts 1_prof. cox_fall 2008[1]

8/8/2019 Contracts 1_Prof. Cox_Fall 2008[1]

http://slidepdf.com/reader/full/contracts-1prof-coxfall-20081 1/31

Ryan Coney

Contracts I- Prof. Cox_Fall of 2008

Contract: A promise that the law will enforce

Formal K’s:(1) K’s under seal- These contracts are pretty much demolished

(2) The Recognizance- promises made in open court

(3) The Negotiable Instrument- still exist today

Informal K’s:

(1) Mutual Assent [Offer + Acceptance]

(2) “Consideration”

(a) consideration(b) promissory estoppel(c) moral obligation

(3) Legal Capacity [Contracts II]

(4) Nothing that voids the “K”, like putting a gun to someone’s head and making them sign a contract

O + A + “C” + Miscellaneous = K

Enforceable K’s:

(1) Informal (Express) K’s- mutual assent to agree

(a) Verbally (using words)

(b) By Conduct- (K shown by conduct-“implied-in-fact contract)(c) By words and conduct (both)

***offeror-person who makes the offer= o/r******offeree- person who accepts the offer= o/ee***

1. Intent to Contract: Offer and Acceptance

I. Mutual Assent

“Offer + Acceptance”“Lucy v. Zehmer”-Mutual assent can only be determined by outward signs of expression. A party’s

intent is deemed to be what a reasonable person in the position of the party would think

that the first party’s objective manifestation of intent meant. ( Example: A says to B,

“I’ll sell you my house for $1,000.” If one in B’s position would reasonably have

believed that A was serious, A will be held to have made an enforceable offer, even if

subjectively A was only joking).

II. The Offer- something that creates the power of acceptance.

“An offer must have all 3 factors to be valid”:

(1) Definite - Do the nouns precisely describe what is being sold…Can I tell what’s being bought

and sold? [Look for price and quantity (sales of goods doesn’t have to have a price)

(2) Commitment to Contract- Do the verbs expressly convey the intent to enter into a K? (Ex: I

will sell… Non-Ex: I might consider selling)

(3) Communicated- Has the offer been properly communicated to the offeree? Person has to

know about the offer.

A. Statement of Opinion or Intention

Cirafici v. Goffen (dentist promised to “cure” loose dentures)



-An express promise of a professional to “cure” or to effect a certain result (Ex: If a lawyer

guarantees a client that he will absolutely win the case) or goes to far beyond the mereimplied promise to exercise requisite skill and car and is enforceable.

B. Statements made by family members

Social statements among family members are not offers

C. Advertisements

Lefkowitz v. Greater Minneapolis Surplus (ad to sell fur for $1)

- Most advertisements appearing in newspapers, store windows, etc. are not offers to sell

b/c they do not contain sufficient words of commitment to sell and there are toomany offerees and not enough of the items being sold. (Ex: A circular stating,

“Men’s hats, $20 each,” would not be an offer to sell jackets at that price, b/c it

is too vague regarding quantity, duration, etc.)

- When an advertisement is clear, definite, and leaves no room for negotiation, it

becomes an offer, to which acceptance will create a binding contract; the morespecific it is, the better chance you have an offer (Ex: “50 men’s hats at $20 apiece,

first come first served starting Friday)

D. Written Contract to FollowContinental Lab v. Scott Paper Co. (conference call agreement)-The enforcement of an oralagreement w/o a written K depends on the intent of the parties. The court determines theintent by looking at 7 different factors.

**How long does an offer lapse:(1) The time stated in the offer, if not stated, a reasonable time

(2) ***Oral offers-telephone, face-to-face, lapses when conversation ends unless

something is said to keep the offer open.

E. Auctions: When an item is put up for auction, this is usually not an offer, but is rather a

solicitation of offers (bids) from the audience. Auctions may be held either with or withoutreserve. Where it is not stated, auctions are assumed to be with reserve.

Auctions with reserve- Bids are all offers and auctioneer has power of acceptance. Even after thestart of bidding, the auctioneer may withdraw the goods from the sale.

Auctions without reserve- Auctioneer makes the offer to sell to the highest bidder, each bid is anacceptance

*** In either type of auction, the bidder can always withdraw before the hammer falls; can alwaysrevoke bid prior to drop of hammer***

**One exception!!- You are not allowed to have someone running up the prices according to thecode; no ringers in the audience driving the price unless notice is given***

III. Acceptance- a manifestation of assent to the terms thereof made by the offeree in a manner invited orrequired by the offer.

“All 3 factors must be present”:

(1) Must be responsive to the offer-meet the conditions of the offer, match up to the offer;

“mirror image rule”

(2) Must be unequivocal (absolute)-Clear, free from uncertainty, not liable to revision

(verb)

(3) Must be communicated

I. 4 communications



(a) Offer, (b) acceptance, (c) revocation, (d) rejection

***The moment of acceptance has an important legal consequence; it fixes the terms of thecontract to those agreed upon in the offer. One party cannot immediately change the terms of thecontract.***

(1) Acceptance by performance: requires that at least part of what the offer requests be performed or tendered and includes acceptance by a performance which operates as a return promise (Ex: I will give you $50 if you climb that pole; to accept you have to climb the

pole)

(2) Acceptance by a promise: requires that the offeree complete every act essential to making

the promise (Ex: I will give you $50 if you promise to climb that pole; to accept you have

to promise to climb the pole)

Beard Implement Co. v. Krusa (farmer backs out of a deal for a combine)

- A purchasing order that expressly calls for the seller’s signature to constitute valid

acceptance is not an offer but rather an invitation to make an offer which is revocable bythe buyer any time before valid acceptance by the seller.

***Where method of acceptance is not specified: If the offer does not specify the mode of acceptance, the acceptance may be given in any reasonable method.***

A. Silence as Acceptance

-Generally, an offer cannot be accepted by silence. But there are a few exceptions:(a) Reason to understand: Silence can constitute acceptance if the offeror has given theofferee reason to understand that silence will constitute acceptance, and the offereesubjectively intends to be bound.(b) Benefit of services: An offeree who silently receives the benefit of services (but notgoods) will be held to have accepted a contract for them if he: (1) had a reasonableopportunity to reject them: and (2) knew or should have known that the provider of theservices expected to be compensated.

(c) Prior Conduct: The prior course of dealing may make it reasonable for the offeree’s

silence to be construed as consent.(d) Acceptance by dominion: Where the offeree receives goods and keeps them, thisexercise of “dominion” is likely to be held to be an acceptance.

B. Knowledge of Offer

-Generally an offeree must have knowledge of an offer to give valid acceptance.Private Rewards: Offeree must have knowledge of the reward to acceptGovernment Rewards: No knowledge of reward is required

***Both private and government rewards call for an act (unilateral contract) andPolice officers are generally not allowed to accept rewards either public or private***

C. Method of Acceptance: “The offeror is the “master of his offer.”

Unilateral v. Bilateral ContractsUnilateral-K: A Promise is exchanged for an Act or Forbearance to act.(Offeree must give notice of his acceptance after he has done the requested

act.)

-If all you have is a mere preparation to perform, that is not sufficient

enough; The beginning of performance by the offeree creates an option

contract: Once the offeree starts to perform, the offer becomes temporarily

Irrevocable. ( The offeror is bound and the offeree isn’t- The offeror’s duty



under the contract is conditional on the offeree’s completing performance as

specified in the offer and the offeree must do it within the time specified in

the offer.

Bilateral-K: A Promise is exchanged for a Promise. ( If a promise is called

for, partial performance doesn’t suffice)

***Where offer invites either promise or performance: Theoffer “is interpreted as inviting the offeree to accept either by promising to

perform what the offer requests or by rendering the performance, as theofferee chooses.” (When offeree partly performs, it binds both offeror

and offeree.)***

III. Termination of the Power of Acceptance

(1) An offeree’s power of acceptance may be terminated by:

(a) rejection or counter offer by the offeree(b) lapse of time(c) revocation by the offeror (d) death or incapacity of the offeror or offeree

A. Termination by rejection

Normally, if the offeree rejects, this will terminate her power of acceptance.

***Exceptions: But rejection will not terminate the power of acceptance if either: (1) the offeror indicates that the offer still standsdespite the rejections; or (2) the offeree states that although she is notnow accepting, she wishes to consider the offer further later.***

B. Counter-Offer

If the offeree makes a counter offer, his power to accept the originaloffer is terminated just as if he had flatly rejected the offer.

(1) A counter-offer does not terminate the power of acceptance if either the offeror or the offeree indicates otherwise.

(2) If the offer is irrevocable, a counter-offer will not terminate the

offeree’s power of acceptance.(3) If the offeree merely makes an inquiry about changing the termsof the offer, he has not made a counter offer, but merely a counter inquiry. If so, his power of acceptancehas not been terminated

C. Lapse of Time

Because the offeror is “master of his offer,” he can set a time limit for acceptance. At the end of this time limit, the offeree’s power of acceptance automatically terminates by “lapse.”

(1) Expiration after reasonable time: If the offeror does not set a

time limit for acceptance, the power of acceptance terminates “at the end of a reasonable time

period.”-The court must determine what a reasonable time for acceptance is as a question of factdepending on the circumstances.

D. Revocation

Except in the case of an option contract, the offeror is free to revoke hisoffer at any time before it is accepted.

(1) A revocation by the offeror does not become effective until it

is received by the offeree.

(2) If the letter or telegram revoking the offer is lost through

misdelivery, the revocation never becomes effective.



(3) The offeree is deemed to have received the revocation when it

comes into his own possession, the possession of someone authorized to receive it for him, or when it is

put into the mailbox

(4) Indirect communication of revocation: If the offeror behaves

in a way inconsistent with an intention to enter the contract she has proposed, and the offeree learns

indirectly that the offeror has taken such an action, there is a revocation, even though the offeror never

intended to communicate directly with the offeree.(5) If the offeror takes an act inconsistent with the outstanding

offer (as by selling land to a third person) and the offeree does not learn of the inconsistent act, his

power of acceptance is not revoked.

(6) Revocation of general offer: Suppose that an offer has been

made by newspaper advertisement or other general public notice. If so, it may be revoked by similar

publication or general notice.

(7) Option- This is not an option contract but an option just simply

sets the time the offer remains open; an option is revocable

E. Death or incapacity of offeror or offeree

If either the offeree or the offeror dies, or if either loses the legal

capacity to enter into the contract, the power to accept is terminated.

This is so even if the offeree does not learn of the offeror’s death or incapacity until after he has dispatched what he intends as an

acceptance.

F. Mailbox Rule (Offer sent by mail)- Ignore first partial day; start

counting with the first whole, 24-hr day.

Acceptance is effective upon proper dispatch.

- Where the mail is an appropriate medium of correspondence an acceptance

becomes binding when it is posted, not when it is received.- Ordinarily the medium of correspondence for the acceptance is acceptable so

long as it is the same or faster than the medium used to send the offer.

- The mail box rule applies only to acceptances by promise, not acceptances by

performance.

- The MBR does not apply if the offer provides otherwise (e.g., “This offer will be accepted when and if your letter of acceptance is personally received by me”).

- If the acceptance is lost in transmission or delayed , the applicability of the

mailbox rule depends on whether the communication was properly addressed.

- (A) Properly addressed: If the acceptance is properly addressed, it is effective

at the time of dispatch even if it is lost and never received by the offeror at all.

- (B) Not Properly Addressed: If the acceptance is not properly addressed, or

not properly dispatched (e.g. sent by an unreasonably slow means), it will be effective upon dispatch

only if it’s received within the time in which a properly dispatched acceptance would normally have

arrived. If it comes later than this “normal” time, it will not be effective until receipt.

- Note on Option Contracts- The “mail box rule” does not apply to option

contracts. The acceptance must be received within the option period to be effective.

- If the offeree sends both an acceptance and rejection: (A) If the rejection is sent first, then the acceptance will be

effective if (and only if) the offeror receives it before he receives the rejection.

(B) If the acceptance is sent before the rejection, the acceptance is effective upon dispatch, and the

subsequently-dispatched “rejection” does not undo the acceptance, whether that rejection is received bythe offeror before or after he receives the acceptance.

G. Irrevocable offers: The ordinary offer is revocable at the will of the offeror.However there are some exceptions to this general rule of revocability.



(1) Standard Option Contract: Where payment or other consideration is given to hold an offer open

for a certain period of time, the option is enforceable and it cannot be revoked during the option period.

(a) Options- statements that an offer will be held open for a certain period of time are not enforceable;

these can be revoked.

(2) Firm Offers: Formation of an irrevocable offer even if no recital of the payment of consideration is

made. By 2-205 an offer to:ṩ(1) promise to buy/sell goods (goods is something that is moveable such as tables, chairs, eggs, a

furnace, etc.)

(2) by a merchant (a person who deals in goods of the kind or otherwise has the knowledge of the skill

(3) in a signed writing (anything that is authenticated; that traces to you (e.g. serial code, blood, etc)

(4) gives explicit assurance that the offer will be held open

(5) for a stated time or reasonable time (no offer can be made irrevocable for any longer than

three months

The Mirror Image Rule- The common law has long relied on the theory thatthe acceptances must look exactly like the offer and not try to change it inany way. If the acceptance tried to add new terms not already implied in the

offer, it was no acceptance at all but a counter offer.

G. Indefiniteness

No contract will be found if the terms of the parties’ “agreement “areunduly indefinite.

(1) Court supplies missing term: If the court believes that the parties intended to contract, and the court

believes that it can supply a “reasonable” value for the missing term, it will generally do so.(2) Where a contract apparently fails for lack of completeness, the UCC requires the courts to look

to 3 matters as aids for the construction of the contract:

(a) Usage of trade- the custom within any given industry

(b) Course of dealing- the parties’ conduct in past contracts with one another

(c) Course of performance- what the parties do while performing this one contract

(d) In holding with the general purpose of contract law as an “attempt to realize reasonable expectationsthat have been induced by the making of a promise” the court pursues 2 goals:

(1) fill in the gaps in the K to ensure fairness where reasonable expectations are fairly clear; and

(2) do not impose on a party any performance to which he did no and probably would not agree.

I. Consideration

A. Definition: Either a explicit benefit to promissor or detriment to promise bargained for in quid pro

quo must have value that the law recognizes. A contract will not be enforceable unless it is supported by“consideration”.

A promise is supported by consideration if:

1. Detriment or Benefit (Value): The promisee gives up something of value (detriment to promisee),

or circumscribes his liberty in some way (i.e., he suffers a legal detriment”) or (benefit to promisor ) and

2. Exchange (Bargained for): The promise is given as part of a “bargain”; that is the promisor

makes his promise in exchange for the promisee’s giving of value or circumscription of liberty. ( Did

the promisee’s detriment motivate the promisor to make the promise?)

B. Use of consideration: The requirement of consideration renders unenforceable two main types of

transactions:

(1) Promises to make gifts (which do not satisfy the “bargain” element)



(2) Business situations in which one party has not really promised to do something or given anything

up, even though he may appear to have done so (the detriment element is missing here)

- In determining whether consideration exists the court will ask 4 questions:A. What is the promise trying to be enforced P=?

B. What is the act/promise sought in return? A/P=?C. Was the act/promise bargained for? B/4=?

D. Does the act/promise have value (sufficiency)? V=?

- Forebearance of a right (Ex: tobacco right)- has value

- Conjuring- no value

- Love and affection- no value

- Veneration memory- no value

- Doing the obvious thing- no value

- Monetary value-normally not bargained for

Hamer v. Sidway

-The court will not inquire into the adequacy of the benefit to the promisor and thedetriment to the promisee in determining whether consideration existed. It is enough thatsomething is promised, done, forborne, or suffered by the party to whom the promise ismade.

C. Sufficiency

-Traditionally the common law rule was that the courts would inquire into the sufficiency of theconsideration, but not the adequacy of the consideration.

Sufficiency means that the offered consideration must be something that has value in theeyes of the law

Adequacy refers to the relative value or quantity of the amounts exchanged. -Mereinadequacy of consideration is not sufficient to void a contract. It is not the court’s place to decidethe relative values of promises against what was bargained for.

-The courts normally do not inquire into adequacy of consideration except:At Law: when awarding damages the court will consider whether the quid pro quo contained an

exchange of fungibles (like for like, e.g. $ for $, corn for corn) At Equity: before granting specific performance

D. Forbearance as Consideration

1. Valid claim surrendered: If a plaintiff promises to waive a valid claim, all courts are in agreement

that this promise is “detriment” to the plaintiff, and constitutes consideration for the defendant’s promiseto pay a settlement.

2. Surrender of invalid claim: If, on the other hand the claim surrendered by the plaintiff is invalid

(or of uncertain validity), courts are in agreement as to whether that surrender is “detriment” giving riseto consideration for the defendant’s promise to pay a settlement.

a.Majority view: Most modern courts would probably hold that for the surrender of an objectively

invalid claim to constitute consideration for a settlement, the plaintiff must, at the time of settlement,

have had a bona fide subjective belief that the claim was valid, and this belief must not have beenunreasonable.

II. The illusory promise

A. Definition- An “illusory” promise is not supported by consideration, and is therefore not

enforceable. An illusory promise is a statement which appears to be promising something, but which infact does not commit the promisor to do anything at all.



B. Illusory promises have no value therefore they are promises that do not have consideration. If

you make a promise and were not as free as before it has value and therefore it is not illusory. If

you don’t restrict your future action and are as free as you were before=illusory. (Ex: A says to B,“I’ll sell you as many widgets at $4 apiece, up to 1,000, as you choose to order in the next 4 weeks.” Banswers “Fine, we’ve got a deal.” B then gives A an order for 100 widgets, and A refuses to sell at thestated price because the market has gone up. B’s promise is illusory, since she has committed herself to

do anything. Therefore, A’s promise is not supported by consideration, and is not binding on him.C. UCC Code 2-306—BEST EFFORTS IMPLIED- court will find a promise not illusory where it

is mutual for both parties to use best efforts to sustain agreements that otherwise might be illusory-thecourt places a duty even though it seems like there isn’t one. You have an obligation to promote thatexclusive deal- this has value and is not illusory.

-explicitly validates requirements and output contracts. 2-306 provides that a term which measuresthe quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonable disproportionate

to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded-The promise WILL BE mutually found to exist:1. Best Efforts Implied (Exclusive Marketing Agreement)

Wood v. Lucy, Lady Duff-Gordon (fashion designer breaks exclusive dealing contract)

-The plaintiff can be impliedly found to have promised to use “reasonable efforts” to market Lucydesigns. This implied promise is a sufficient “detriment” to the plaintiff to constitute considerationfor Lucy’s counter-promise that she would not place her endorsement upon anyone else’s designs.Therefore, the contract is binding and Lucy has breached it.

III. Alternative Promises -A promise which reserves to the promisor several alternative

performances is generally consideration only if each of the alternative performances would have

been consideration if it had been bargained for alone. (Ex: A offers to sell B a book if B will promise either to give A a different book, or to pay A $5 which B has previously owed A. B accepts. B decides he wants to make the exchange of books, but A changes his mind. Because one of thealternative performances open to B under the offer would not have constituted consideration (i.e.,the paying of the $5 B already owed A, B’s promise is not consideration for A’s counter-promise,even though B is willing to give the books.

- A promise is not made illusory if there are alternatives (‘AND’)

- Restatement II, Section 77 has codified this case: If you have alternatives, BOTH alternatives must

have valid consideration.

- AND situation- if you are promising two things AND 1 has value and 1 doesn’t, this is sufficient

consideration because you will get both promises (due to the AND) AND at least one will haveconsideration/value in it out of the two. (The consideration exits in one of the promises and the fact

that you will be getting both promises is enough to make the promise NOT ILLUSORY.)

IV. Requirement and Output Contracts (Supposed Buyer agrees with Seller that Buyer will buy all

of his requirements for a particular good from Seller at an agreed-upon price. Has Buyer givenconsideration sufficient to support such a contract (called a “requirements” contract)? Similarly, if

Seller agrees to sell all of his output of a particular product to Buyer, has Seller given sufficientconsideration for this contract (called an “output” contract)?

1. Contracts usually valid today: Such requirements and output contracts are very likely to be

enforced today, at least if it can be found that the buyer has implicitly promised to use his best efforts

to sell the goods (or that the seller in an output contract has implicitly promised to attempt to maintainhis production at a reasonable level), and the bargain is not otherwise unduly one-sided.

- A valid requirement K must have two things:



(1) Words of obligation or commitment (require, need, use---not want, wish, desire… “I promise to

deliver as much sand as you require, -- not “as much sand as you want” ), and(2) A standard of good faith

****If these two requirements are met, it keeps an offer for a requirements K from being illusory, if any of these are missing, then its simply a continuous offer. ***

B. Requirements and output contracts distinguished from continuing offers: If a seller says to a buyer, “I will sell you all the widgets you order at $2 per widget,” and the buyer says “Ok, “there is noconsideration for the seller’s promise, since the buyer has not bound himself at all. If however, a return promise by the buyer (such as a promise not to order from anyone else) can be implied, the contract isthen enforceable. Otherwise, the seller must be treated as having made an offer looking to a series of

contracts; this offer is revocable at will, and each order given by the buyer would constitute a separatecontract.

III. “Past Consideration”

A. “Past consideration” not sufficient: Where the detriment has been suffered before the promise is

made, it is obviously not “bargained for” by the promisor. Thus promises to pay a pre-existing debt, and promises to pay for services already received, usually lack the “bargain” element (but these may be binding without consideration.)

IV. The Pre-existing Duty Rule

A. Definition: If a party does or promises to do what she is already legally obligated to do, or if she

forebears or promises to forbear from doing something which she is not legally entitled to do, she hasnot incurred the kind of “detriment” necessary for her performance of forbearance to constituteconsideration. (A promise to pay a person for who he or she is already contractually obligated to do

so is unenforceable.)

i. Harris v. Watson

1. Captain offers seaman extra money to save ship during a storm 2. Since the crew of the ship is paid based on the safe passage of its cargo it can be

assumed that they have a pre-existing duty to do what is necessary to save thatcargo

3. The possibility of danger is inherent to the job and it would be unworkable if

crewmembers were to demand extra pay every time these dangers arose 4. Therefore, a promise to pay a seaman extra for something he has already

contracted to do is unenforceable ii. Stylk v. Myrick

1. Captain offers to divide 2 deserting crew members’ pay amongst the rest of the

crew 2. The desertion of crew members is to be regarded as any other emergency that

the crew would have to deal with as part of their pre-existing duties 3. Therefore, the remainder of the crew has promised nothing new as consideration

for the additional pay and the captain’s promise is unenforceable iii. Lingenfelder v. Wainwright Brewery Co.

1. Architect demands more money because brewery gave other K to a rival

architect 2. The architect was bound by the original K to design and supervise the brewery

building



3. Under the brewery’s new promise he was not to do anything more or different 4. Therefore, there is a lack of consideration and the Brewery’s promise to pay

more is unenforceable

****Under the pre-existing duty rule, One-Sided modifications of contracts should never beenforced UNLESS: unanticipated circumstances or conditions may increase the amount of

compensation provided for the K even if no additional consideration is given. (situations where itwould be difficult for the other party to perform due to unanticipated difficulties. BUT both partiescould not have performed yet, if one side did perform already- you cannot use the recission theory.

2 Ways to Get Around the Pre-Existing Duty Rule:

(1) Re-negotiate terms on both sides (put in promises for something new

by both parties so that both parties have new consideration) (Ex: A

football player’s contract-give the football player more money and he

plays longer.)

(2) Create a substitute K-tear up the old K and make a new one

Modifying a Contract (Sales)

A. Modification of sales contracts: Under the UCC 2-209, a modification of a contract for the sale of goodsis binding without consideration. The modification just has to be done in good faith and it must be alegitimate commercial reason. ( Ex: A contracts to supply 100 widgets to B at $4 a piece. Before shipment,

A says, “My costs have gone up; I’ll have to charge you $5.” B agrees. Under UCC 2-209, this

modification is enforceable, even though B received no consideration for promising to pay the higher

price .)

1. No-oral modification clauses: But a “no oral modifications” clause in a sales contract willnormally be enforced. (Ex: On the facts of the above example, if the original contract between Aand B said that any modification must be in writing, B’s promise to pay the higher price would be

enforceable only if in writing.)

Accord and Satisfaction (a way to get around the pre-existing duty rule)

Accord- when one party agrees to give or accept in satisfaction of a claim, something other than what was agreed

upon.1) offer to modify an existing agreement than what was originally agreed upon.2) Must have new consideration on both sides

Satisfaction- carrying out the accord (carrying out the agreement- ex. Payment is received and accepted.)**** must have consideration for an effective accord and satisfaction****

Executory Accord: An executory accord is an agreement by the parties to a contract by which one promises to

render a substitute performance in the future, and the other promises to accept that substitute performance indischarge of the existing duty. ( Where satisfaction hasn’t been performed (consideration hasn’t been exchanged.)

Example: Debtor has a contractual duty to pay Creditor $1,000 in 30 days. Creditor promises Debtor that if Debtor will pay $1,100 in 60 days, Creditor will accept this payment in discharge; Debtor promises to make the $1, 100 payment in 60 days. The new agreement is an executoryagreement.



B. Consequence of accord: Executory accords are enforceable. However, an accord does not discharge the

previous contractual duty as soon as the accord is made; instead, no discharge occurs until the terms of the accord are performed.

1. Accord and Satisfaction: Suppose that in the above example, Debtor pays the $1,100 in 60 days.

His payment, pursuant to the terms of the accord, acts as a satisfaction. That is, it discharges his

original obligation to pay $1,000, and Creditor will not be able to sue for any damages which hemay have sustained as a result of the later payment.

2. Failure to perform accord agreement: If, on the other hand. Debtor does not pay the $1,100 in

60 days, Creditor has an option. He may if he wishes sue for breach of the original contract to pay$1,000, or, he may sue for breach of the accord agreement. Thus he has the alternative of either recovering $1,000 plus damages for failure to get his money in 30 day, or $1,100 plus damages for his failure to get his money in 60 days.

3. Breach by Creditor: By making the accord agreement, Creditor impliedly promises that he will

give Debtor 60 daysin which to raise the money. If Creditor breaches this implied promise bysuing for the $1,000 after 30 days, Debtor will have two choices. He can obtain specific performance of the accord agreement (i.e., obtain an order preventing Creditor from suing until the60 days are up), or he can pay the $1,000 and recover damages for Creditor’s failure to wait 60days.

C. Check cashing as an accord and Satisfaction: Suppose that the Debtor owes a sum to Creditor but that

the parties are in dispute as to the proper amount of the debt; Debtor claims that he owes $100, but Creditor claims that the debt is $200. Suppose further that the Debtor sends Creditor a check for $150, marked“payment in full.” If Creditor cashes the check, can he be said to have impliedly accepted an offer of accordand satisfaction, thus discharging Debtor? The brief answer is YES, in most cases.

Substituted Agreement

A. Substituted agreement distinguished from executory accord: An accord agreement does not discharge

the debtor until he has performed according to its terms. Therefore, if she breaches the accord agreement,the creditor has the option of suing for breach of the original contract, or for breach of the accord. Butrather than making an accord agreement, the parties may make a substituted agreement, by which the previous contract is immediately discharged, and replaced with a new agreement. (Example: Debtor owes

Creditor $1,000, payable in 30 days. Creditor says to Debtor, “If you promise to pay me $1,100 in 60 days,I will immediately cancel the $1,000 debt that is payable in 30 days.” Debtor promises to do so. The partieshave made a substituted agreement, immediately discharging the original debt. )

B. Consequences of substituted agreement: The substituted agreement, unlike the executory accord,

immediately discharges the original contract. Thus if, in the above example, Debtor fails to pay the $1,100in 60 days, Creditor has no option as to remedies. He must sue for breach of the new agreement , andcannot recover for breach of the original one.

***With accord and satisfaction-the original K is still present until consideration is followed through

with. THEREFORE; if you do not know whether there is a substituted K or an accord and satisfaction-

UNLESS there is evidence to the contrary, it is recognized that an accord always exists.

Clark v. Elza

i. Settled a claim for injuries incurred in a car accident for $9,500, but later found out that

the injuries were greater and wants more money ii. The executory accord originally reached by the parties may be used as a defense to the

underlying claim iii. While an executory accord does not discharge the underlying claim until it is performed,

it does suspend the original cause of action unless there is a breach of the accord or a justifiable change in position based on nonperformance



iv. In other words, as long as the “debtor” neither breaches the accord nor provides a

reasonable basis for concluding that he will not perform, the “creditor” has no right toenforce the underlying cause of action

UCC 3-311 – Accord and Satisfaction by Use of Instrument

(a) & (b) UCC 3-311 provides that he claim will be discharged by the cashing of the check (i.e., the debtor

will win), if these conditions are met:

1. If the person against whom the claim is being asserted proves that they tendered the check in good

faith to the claimant as full satisfaction of the claim (check says: paid in full, ‘in full satisfaction’)

2. The claim was “subjected to a bona fide dispute

3. The other party cashed the check 4. The claim is discharged if the person proves the check was tendered as full satisfaction of the

claim. (***the check from the debtor is accepted by the creditor for the debt and is now paid-debtis over UNLESS

The debt is not discharged (c)

-If you dispute a charge, you must send the dispute written to the particular address required by the creditor

or else it doesn’t have any legal affect (you cannot fail to send dispute to the place required by the creditor).

1. The claimant proves with a reasonable time2. prior to the tender 3. the organization directed that communications regarding a disputed debt4. be sent to a designated person, office or place and this was not done OR:

5. IF creditor doesn’t know what the check is for and cashes it anyway, he has 90 days after receiving the payment to refund the money/repay it and the full debt is re-opened UNLESS:

6. The person against whom a claim is asserted proves claimant knew the check was tendered in full dischargeand it is cashed (If you knew what the check was for and you cashed it anyway-you lose all rights in

(c) and cannot reopen debt. It is finished.

UCC 1-207 Performance or Acceptance Under Reservation of Rights-You cannot block an accord and satisfaction if a debt is made under protest

***If debtor tends a check to the creditor and creditor cashes it and tries to write on the back of the check words like“without prejudice” or “under protest” or others like it will make the debt over with once its cashed b/c you cannot block an accord and satisfaction of a debt made under protest. Debtor will now be excused from owing.

Promissory Estoppel

Restatement (I). Sect. 90 Definition: “A promise which the promisor should reasonably expect to induce actionor forbearance on the part of the promise or a third person and which does induce such action or forbearance is

binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may belimited as justice requires.”

Example: A promises to pay for B’s college education if B will attend school full time. A intends this to bea gift. B gives up a good job and enrolls in college, incurring a liability of $5,000 for the first year. A then refuses to pay the bill. Under the doctrine of P.E., B would be able recover at least the value of the lost job and first-year tuition from A, even though A’s promise was a promise to make a gift and thus was not supported by consideration.



1. What happens is the promisee suffers a detriment but wasn’t bargained for? 2. Elements as depicted in class (RII: 90):

1. A promise by the promisor

2. Made with a reasonable expectation that the promisee or a third party

will rely on it (objective standard)- includes reliance by a 3rd party.

(The promisee must actually rely on the promise.) (Example: On the

facts of the above example, B must show that without A’s promise, Bwould not have quit his job and attended college.)

3. Which induces reasonable reliance by the promisee (subjective

standard) ( The promisee’s reliance must also have been reasonably

foreseeable to the promisor.)4. Injustice can only be avoided by enforcement of the promise

5. The remedy of the breach may be limited or tailored as justice requires

3. A charitable subscription or marriage settlement is binding under Subsection 1without proof that the promise induced action or forbearance.

ii. Similarities between R(I) and R(II)

1. No language in either section that limits coverage to donative promises 2. The 3 major limitations on the scope of the Section under R(II) are the same

under the original a. Promisor must reasonably expect that his or her promise will induce

action or forbearance

b. The promise must in fact induce such action or forbearance c. Injustice can be avoided only by enforcement of the promise

Charitable subscriptions may be enforceable without consideration:

i. How to make them enforceable:

1. Normal consideration (bargained for quid pro quo) (Ex: I’ll give you a million

dollars if you name the library after me.)2. Promissory Estoppel (reasonable reliance)- did the charity show that they relied on

the promise? Did they take steps?3. Promissory Estoppel (absence reasonable reliance-enforcement without limit.) You

don’t even have to show that you relied on the promise- it will be enforced.4. Interlocking promises of subscribers- both with value, both are promising something

with a condition placed upon the promise)- (A will pay b/c B is promising to pay aswell OR ill give you money if you name the building after me).

***You only have to meet one of these requirements***

Offers by sub-contractors: Suppose a sub-contractor renders a bid to a general contractor, whorelies upon that bid to figure out her own bid on a job which she obtains. Is the sub-contractor’s bid binding? Manycourts treat the subcontractor’s bid as temporarily irrevocable, for the period necessary to allow the contractor toobtain the job and accept the sub-contractor’s bid. Such holdings in effect apply the doctrine of promissory estoppel,since they are based on the theory that the general contractor has reasonably relied upon the sub-contractor’s bid,and would suffer a loss (or at least a reduced profit) if the sub-contractor backed out and a new one had to be found.

i. Allegheny College v. National Chataqua County Bank



1. Old lady leaves $5,000 in her will to college but repudiated her debt just before

her death and now the executor refuses to pay 2. Rather than basing its’ opinion on the doctrine of promissory estoppel, the court

chose to look for an implied promise that would bind the K under the traditionallaw of consideration

3. Court found that, by accepting the money, the college took on a duty to act in a

way beneficial to the promisor and the promisor received the benefit of havingher memory venerated

4. Since the court will not inquire into the adequacy of the quid pro quo, this

consideration does not bind the promisor to complete the gift ii. Universal Computer Systems v. Medical Services Ass’n of PA

1. PA‘s agent promises to pick up bid from airport but fails to do so, costing UCS

its contract 2. Even though PA’s agent had no actual authority to pick up the package, he did

have apparent authority and UCS acted in reasonable reliance of this apparentauthority to its detriment

3. Since evidence indicated that UCS would have actually gotten the K if PA had

picked up the package on time, it is appropriate to use promissory estoppel to

grant not only out-of-pocket losses but expectation on the K as well iii. James Baird Co. v. Gimbel Bros.

1. Subcontractor underbids linoleum and the general contractor tries to hold him to

it without ever formally accepting the offer 2. Promissory estoppel can only be substituted for consideration where there is no

consideration asked for 3. Here, the subcontractor clearly was looking for a return promise to take and pay

for the linoleum as consideration 4. Since the general contractor failed to do this until after the offer had been

revoked, there is no K and using promissory estoppels to create one would beinappropriate

iv. Branco Enterprises v. Delta Roofing

1. Subcontractor promised general contractor that he could get certification toinstall derbigum

2. The court found that the phone conversation in which the roofer assured the GC

that he would either get architectural approval of substitute material or certification to install debigum actually did create a contract without the use of promissory estoppel, but even if it didn’t, all 4 necessary elements were present:

a. A Promise i. Delta promised the either the architect would approve his

alternate material or he could get certified to install derbigum b. Foreseeable Reliance

i. Branco specifically told Delta that they were relying on

Delta’s bid and performance of the work

c. Actual Reliance i. Branco submitted the general bid based on Delta’s bid and

was awarded the K in part because Delta’s bid was so low d. Injustice Absent Performance

i. Branco was forced to pay $18,565 more than he would have

paid had Delta kept its promise

Limitations

- promissory estoppel cannot be used if an enforceable contract exists



(Hoffman v. Red Owl Stores)- applied promissory estoppel despite the fact that all elements of a K didn’t exist butthere was a valid obligation in which involved detrimental reliance. The court was forcing an agreement to agreealthough they didn’t reach mutually agreed upon terms contractually.-The doctrine of promissory estoppel only seeks to avoid injustice caused by non enforcement of a promise. Thewrong which P/E seeks to remedy is not Hoffman’s deprivation of the promised reward but the changing of his position to his detriment.P/E normally grants only reliance damages, not expectation.

To avoid these problems in Hoffman v. Red Owl Stores:1) make early disclosures of expenditures in writing2) indicate when the money is required3) have opposite party sign off 4) disclaim any representations by sales persons5) have a clause for a refund if things fall through

Moral Obligation

-You had an enforceable debt except b/c of the action of the law and now due to the law the debt is unenforceable-Common law doctrine enforceable without consideration b/c due to the moral obligation.-Lowest level of contract bond that will be applied in only rare circumstances.

Moral Obligation- Where a debt is barred by any of the following:

(1) Debt barred by statute of limitations (promise to pay debt must be in a signed writing)-When time

required to pay expires; where the debt has been discharged by the running of the statute of limitations.

(2) Debt barred by bankruptcy- Where the promise is to pay has been discharged in bankruptcy

(3) Debt barred by infancy (made by a minor)-

***a subsequent promise to repay is enforceable w/o consideration because of moral obligation (I.e., if you

owed $5,000 and it’s barred by the statute of limitations and you promise to pay $1,000, you’re only liable to pay the $1,000 (subsequent promise)***(4) Material benefit has been conferred

2. Material Benefit Rule; these are considered if the K should be enforced if there

is no consideration and PE doesn’t work: Promisor received a material benefit from the promisee Material benefit received under circumstances that create a moral obligation A subsequent promise to compensate The nature of the circumstances was such that the promisee reasonably believed he or she would be compensated

-***Look at the relationship of the parties, whether the promise was made based on good that occurred in thepast, and did the promisor actually receive the material benefit.***

(Ex. of the Material Benefit Rule (Webb v. McGowin): boss promises to pay money every few weeks toemployee that injured himself while saving the life of the boss. Boss dies and his estate refuses to keep paying theemployee. Employee argues moral obligation here since it is sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit despite the fact that there was no original duty or bargained for exchange on behalf of the promisor.



i. Mills v. Wyman

1. Father promises to pay for medical expenses of adult son after son dies 2. The general proposition that moral obligation is sufficient consideration for an

express promise is to be limited in its application to cases where at some time or other a good or valuable consideration has existed, otherwise, the necessity for finding consideration at all would be destroyed since the making of a promise

itself creates a moral obligation to perform it 3. The law refuses to recognize a naked promise; something more than mere moral

obligation is necessary 4. General rules of law established for the protection and security of honest and

fair-minded men, who may inconsiderately make character from engagementswhich they are bound in foro conscientiae to perform

a. “The Court of Conscious” 5. Express promises have a sounds legal basis

a. They are not promises to pay something for nothing but the voluntary

revival or creation of obligation which before existed in natural law, but which had been dispensed with, not for the benefit of the partyobliged solely but principally for the public convenience

i. Not equally good to support implied promises 6. This court refused to extend moral obligation beyond the 3 circumstances

(statute of limitations, infancy, bankruptcy) ii. Manwill v. Oyler; included within Mills v. Wyman

1. Manwill said this about moral obligation a. If mere moral was recognized as consideration for a K, it would not be

necessary to search for consideration i. All promises have a moral obligation to perform

ii. Something more than moral obligation is needed b. The principle that in order for a K to be valid and binding, each party

must be bound to give some legal consideration to the other party byconferring a benefit upon him or suffering a legal detriment at his

request is firmly implanted in the roots of our law c. He recognizes exceptions

R (II) -82. Promise to Pay Indebtedness; Effect on the Statute of Limitations:

(1) A promise to pay an antecedent indebtedness owed by the promisor is binding if the indebtedness is stillenforceable or would be except for a statute of limitations

(2) Where the debt has been discharged by the running of the statute of limitations, on the other hand, most

courts recognize several situations in which a promise to pay the debt may be implied from the debtor’s

actions. These are the following acts or statements as giving rise to a promise to pay a time-barred debt:i. “A voluntary acknowledgement to the oblige, admitting the present existence of the

antecedent indebtedness”;

ii. “A voluntary transfer of money, a negotiable instrument, or other thing by the obligor to the

oblige, made as interest on or payment of or collateral security for the antecedentindebtedness”;

iii. “A statement to the oblige that the statute of limitations will not be pleaded as a defense.”



****Scope of promisor’s duty: If the promise to pay a previous debt is held enforceable, it is onlyenforceable under the precise terms of the promise, and the promisor cannot be held for more than

that.

vii. Webb v. McGowin

1. Webb saved McGowin’s life from a block of falling wood, McGowin then promised to pay Webb $15 every 2 weeks for the rest of Webb’s life

2. The common law supports finding that when a promise cares for or preserves a

promissor’s property (or life) without request, the promisor’s subsequent promise to pay is binding because the benefit received is sufficient consideration

f. What Function does the doctrine of consideration serve?

vii. We are not going to enforce all promises – avoid litigation viii. If you know that you have to have that something extra, it will encourage people to think

about what they are doing 1. If you want your promise to be enforced, must have consideration present (or PE

or moral obligation)

a. Gives people a choice ix. However, agreements to agree (failed negotiations); problem with Hoffman is that it will

make a whole new set of promises enforceable 1. So the only 2 functions are i and ii

Remedies

Remedies

1. Expectation: In most breach of contract cases, the plaintiff will seek, and receive, protection for her

“expectation interest.” Here, the court attempts to put the plaintiff in the position he would have

been in had the contract been performed. In other words, the plaintiff is given the “benefit of her

bargain,” including any profits she would have made from the contract.

2. Reliance: Sometimes the plaintiff receives protection for his reliance interest. Here, the court put the

plaintiff in as good a position as he was in before the contract was made. To do this, the court usuallyawards the plaintiff his out-of-pocket costs incurred in the performance he has already rendered(including preparation to perform). When reliance is protected, the plaintiff does not recover any partof the profits he would have made on the contract had it been completed.

3. Restitution: Finally, courts sometimes protect the plaintiff’s “restitution interest.” That is, the court

forces the def. to pay the plaintiff an amount equal to the benefit which the def. has received from the plaintiff’s performance. Restitution is designed to prevent unjust enrichment.

a. When used: The restitution measure is most commonly used where:(1) a non-breaching plaintiff has partly performed, and the restitutionmeasure is greater than the contract price; and (2) a breaching plaintiff has not substantially performed, but is allowed to recover the benefit of what he has conferred on the def.

b. Note: In contract actions, all three measures are used at least some of

the time. In quasi-contract actions, expectation damages are almostnever awarded, but reliance and restitution damages frequently are.



RemedyDamages (k)= at law (suing in law)Specific relief= in equity (suing in equity)In contracts: (1) The remedies provided by this act shall be liberally administered to the end that the aggrieved partymay be put in as good a position as if the other party had fully performed.

Three great interests:I. Expectation interests

(a) Relates to what you expected to gain from the K and if you don’t get that expectation, courts willgive you some cash

(b) We may seek to give the promise the value of the expectancy which the promise created(c) Lost profits coming directly from the K (d) Consequences from the K

(e) (1) the value of the defendant’s promised performance (generally the contract price), MINUS (2)

whatever benefits, if any, the plaintiff received from not having to complete his own

performance.

*** Generally, the benefits in (2) are expenditures which the plaintiff would have had to make tocomplete his performance under the contract, but which he didn’t have to make because the def. breached first.

II. Reliance Interest

(a) P has in reliance on the promise of the D changed his position(b) Object here is to put P in as good a position as he was in before the promise was made (Status quo

ante)(c) Three kinds of reliance interests

i. Expenses the non-breacher had in regards to 3rd parties as required by the K

ii. Expenses that P had with 3rd persons as a consequence of K

iii. Certain assumed expensesA. Reliance damages are appropriate where:

(1) Plaintiff cannot show his lost profits with sufficient certainty, but

can nonetheless shows items of expenditure

(2) Plaintiff is a vendee under a land contract who sues the vendor

for the latter’s refusal to convey the property to him, and the jurisdiction is one in which expectation damages are notawardable in this situation; and

(3) There is no legally enforceable contract but the plaintiff is

entitled to some protection (a situation typified by cases invokingthe doctrine of promissory estoppel).

B. Limits on amount of reliance recovery: The plaintiff’s reliance damages are sometimes limited

to a sum smaller than the actual expenditures:

(1) Contract price as limit: Where D’s only obligation under the

contract is to pay a sum of money (the contract price), reliancedamages will almost be limited to this contract price.

(2) Recovery limited to profits: Also, most courts do not allow

reliance damages to exceed expectation damages. However, thedef. has to bear the burden of proving what plaintiff’s profit or loss would have been.

(3) Expenditures prior to signing: The plaintiff will not normally

be permitted to recover as reliance damages expenditures madebefore the contract was signed, since these expenditures were notmade “in reliance on” the contract.

C. Cost to plaintiff, not value to defendant: When reliance damages are awarded, they are usually

calculated according to the cost to the plaintiff of his performance, not the value to the defendant.



III. Restitution interest

A. Generally: The plaintiff’s restitution interest is defined as the value tothe defendant of the plaintiff’s performance. Restitution’s goal is to prevent unjust enrichment.

1. Market value: Restitution is based on the value rendered to the

defendant, regardless of how much the conferring of that value costs the plaintiff and regardless of how much the plaintiff was injured by the defendant’s breach. This value is usually the sum which the def. would have to pay to

acquire the plaintiff’s performance, not the subjective value to the def.

B. Not limited to contract price: The main use of the restitution measure

is that, in most courts, it is not limited by the contract price. If the work done by P prior to D’s breach has already enriched D in an amount greater than the contract price, the entire enrichmentmay be recovered by P.

1. Not available where plaintiff has fully performed: If at the time of D’s breach, P has fully performed the contract (and D only owes money, not some other kind of performance)

most courts do not allow P to recover restitution damages.C. Losing Contract: Restitution may even be awarded where P has partly performed, and would have

lost money had the contract been completed.

(b) Equity/fairness idea(c) We are here because we don’t want expectation damages

(1) Looking for consequential damages(d) The breacher shouldn’t be allowed to keep some money(e) Two kinds:

i. Money paid by the non-breacher to the breacher as an expenseii. Assumed expenses(f) damages vary in accordance with the above interests so we have expectation, reliance, and

restitution damages(g) Concept

i. When you buy a house and you go to the closing, there will be a document whichwill be named buyer and seller assumed expenses; if it is an assumed expense, youcannot recover 1. As a buyer, you’re job to get property assessed or pay mortgage payments, thoseare assumed expenses=non-recoverable

a. Non Recovery will not be on the examii. Assumed expenses

1. Mortgage processing fees2. Survey3. Pain and suffering from first operation4. Doctor’s fee from first operation5. Hospital bills from first operation

IV. Expectation damages(a) 3-layer cake

i. Money relating to expectation interest1. We get the most money here

ii. Money that has to do with reliance interest



1. Out of pocket expenses as required by K or as a consequenceiii. Money dealing with restitution interest

1. Money you’re going to take away from the breacher 2. Part performance under control of breacher is always under restitution

iv. Look for lost profits, reliance (money to a 3rd party) and restitution (money to

breach) and minus losses avoided

V. Reliance damages(a) 2-layer cake

i. There is no expectation interest presentii. Get money for the next two levels

VI. Restitution Damagesa. Simply have money from the restitution interest because there is no expectation interest and noreliance interest; all you have is the restitution interest

Expectation damages-i. you take in all 3 damages; max damages you can getii. Expectation-losses directly from K that was breached or indirectlyiii. Primary/General Damages

1. Primary lost profit=money or losses that you suffered from the K which was breached; didn’t getwhat you expected from K (could be simply money) or difference between good hand and hairyhand but someone lost expectation for that contract

iv. Secondary/Special Damages

1. Must check for forseeability2. Add two columns and take off losses avoided3. Money/losses suffered indirectly because K was breached

a. “didn’t get coffee, therefore you lost coffee sales”

b. Generally involves when you’re reselling something to a 3rd party

4. Losses suffered at hands of 3rd persons not required by the K.

a. Pain and suffering from 2nd operation, not assumed as part of operation

b. Coffee hypo-brochures and coasters made5. Incidental damages-dollars spent to reduce effect of breach

v. If you cant prove lost profits (3-layer cake) go for 2 layer cake

Reliance damages-

i. out of pocket expenses with 3rd persons or losses involving 3rd persons

ii. General or primary reliance= out-of-pocket expenses required by K [if construction K, had to buymaterials]

iii. Assumed expenses as part of the bargain=you can memorize a listiv. Part performance under control by non-breacher [block 2]v. The non-breacher gets everything back; assumed and non-assumed expenses minus losses avoidedvi. If you cant prove lost prove and out of pocket

Restitution interest-i. Out of pocket expenses to the breacher ii. Money paid to the breacher (column 1) which hasn’t been earned

Equitable Remedies



A. Two types: Sometimes the court will award “equitable remedies” instead of the usual remedy of money

damages. There are two types of equitable relief relevant to contract cases: (1) specific performance; and(2) injunctions.

4. Specific performance: A decree for specific performance orders the promisor

to render the promised performance. When reading a fact pattern, remember that the mostimportant issue is whether money damages would be adequate to protect the injured party— if they

would, the party can’t get specific performance.a. Unique good: Look for a rare or unusual object that’s the subject of the

contract—money damages are less likely to be adequate, because exact substitutes can’t be found. (Ex: an antique car; a highly unusual ring, etc.)

b. Speculative damages: Look for cases where damages would be hard to

measure. This is esp. the case where the contract involves a new business or new

product.

2. Injunction: An injunction directs a party to refrain from doing a particular act. It is esp. common

in cases where the def. is sued by his former employee and charged with breaching an employmentcontract by working for a competitor.

B. Land-sale contracts: The most common situation for specific performance is where def. breaches a

contract under which is he is to convey a particular piece of land to the plaintiff.

1. Breach by buyer: Courts also often grant specific performance of a land-salecontract where the seller has not yet conveyed, and it is the buyer who breaches.’

C. Personal service contracts:

1. No specific performance: Courts almost never order specific performance of a

contract for personal services. This is true on both sides: the court will not order the employer toresume the employment, nor will it order the employee to perform the services.

2. Injunction: But where the employee under an employment contract breaches,

the court may be willing to grand an injunction preventing him from working for a competitor. Theemployer must show that: (1) the employee’s services are unique or extraordinary; and (2) thelikely result will not be to leave the employee without other reasonable means of making a living.

D. Sale of goods (UCC 2-716): Traditionally, it has been extremely difficult for a buyer to obtain specific

performance of contract to sell goods. Generally, unless the buyer could show that the goods in questionwere unique, and could not be obtained elsewhere in the market, he could not obtain an order that the seller

deliver them.

Substantial Performance as a basis for suit on the contract

A. Substantial Performance generally: Where one party substantially performs (i.e., does not materially

breach), the other is not relieved of his duties. If the latter refuses to perform, the substantially performing

party has an action for breach of contract.

1. Rule: To put the rule more simply, a party who substantially performs may sue for ordinary

(expectation) damages for breach of contract if the other party fails to perform. The other partyhas a set off, or counterclaim, for the damages she has suffered from the plaintiff’s failure tocompletely perform the contract. The contract has been substantially performed where its“essential purpose” has been met.

B. Calculation of defendant’s damages: Where the plaintiff performs substantially but not completely, the

defendant will always have a counterclaim for the damages she has suffered by virtue of the plaintiff’s

deviations. However, the calculation of these damages will vary from case to case.

1. Cost of remedying defect: As long as the defects can be remedied without unreasonable

economic waste, the defendant’s damages are the cost of such remedial work.

2. Where waste involved: If, on the other hand, the defects are so hard to correct that the cost of

correction would be much greater than the increase in value resulting from the correction (i.e., thecorrection would involve unreasonable economic waste), the defendant’s damages are thedifference between the value of the product which def. would have received had the contract been



completely performed, and the value of the product as actually rendered by the plaintiff. Thedamages are equal to the diminution in value resulting from the deviations.

Suits in Quasi-Contract

A. Where allowed: There are a number of situations where recovery “on the contract” is not possible or

allowed: (1) situations were there was no attempt even to form a contract, but the plaintiff deserves some

measure of recovery anyway; (2) cases where there was an attempt to form a contract, but the contract isunenforceable b/c of Statute of Frauds, impossibility, illegality, etc; (3) cases where there is an enforceablecontract , but the plaintiff has materially breached, and therefore may not recover on the contract; and (4)

cases where the def. has breached but the plaintiff is not entitled to damages on the contract. In all thesesituations, the plaintiff will often be allowed to recover in “quasi-contract.”

B. No contract attempted: The courts sometimes award P a recovery where no contract was even attempted.

The most common example is where P supplies emergency services to D, without first forming a contractto do so.

C. Unenforceable contracts: The parties may attempt to form a binding contract which turns out to be

unenforceable or avoidable. This may happen b/c of the Statute of Frauds, mistake, illegality,impossibility, or frustration of purpose. In any of these cases, the court will usually let P sue in quasi-contract, and recover either the value of the services performed (restitution) or P’s reasonable expenditures(reliance).

D. Breaching plaintiff: A plaintiff who has materially breached may normally bring a quasi-contract suit,and recover his restitution interest, less the defendant’s damages for the breach. This is sometimes called arecovery in “quantum meruit” (“as much as he deserves”).

1. Construction cases: Quasi-contract recovery by a breaching plaintiff is most often found

in construction cases. Here, the builder gets to recover the value to the owner of the work done, even where the work does not constitute substantial performance of the contract.

2. Limited to pro-rata contract price: When a defaulting plaintiff sues in quasi-contract for

his restitution interest, recovery is almost always limited to the pro-rata contract price, lessthe defendant’s damages for breach.

3. Willful default: In many states, a defaulting plaintiff may not recover in quasi-contract if

his breach is “willful.”

4. UCC gives partial restitution to breaching buyer: The UCC gives a breaching buyer a

right to partial restitution with respect to any deposit made to the seller before the buyer breached. Under 2-718(2), the seller can only keep 20% of the total contract price or $500,

whichever amount is smaller—the balance must be refunded to the breaching buyer.

Foreseeability

A. General rule: Courts will not award consequential damages for breach unless the damage falls into one of

two classes:

1. Arise naturally: The damages were foreseeable by any reasonable person, regardless of

whether the def. actually foresaw them; or

2. Remote or unusual consequences: The damages were remote or unusual, but only if the def.

had actual notice of the possibility of these consequences.

B. Universally followed: The rule of Hadley v. Baxendale is followed almost universally by most American

courts

1. Knowledge of consequential damages necessary: Under the second rule of Hadley v.

Baxendale, damages other than those arising “naturally” are recoverable only if the def. hadreason to know the special circumstances which would give rise to these consequentialdamages. If the standard expectation measure doesn’t fully compensate a party for her losses,remember that the additional damages can also be recovered.

2. Time for measuring foreseeability: Whether particular consequences were sufficiently

foreseeable must be determined as of the time the contract is made. If the def. acquiresknowledge of possible consequences after the contract is formed, but before the def. breaches,this knowledge is irrelevant.



3. UCC rule is liberal: UCC 2-715(2) allows a buyer to recover “consequential damages

resulting from the seller’s breach,” defined to include “any loss resulting from general or

particular requirements and needs of which the seller at the time of contracting had reason to

know and which could not reasonably be prevented by cover or otherwise,” as well as “injuryto person or property proximately resulting from any breach of warranty.

Avoidable DamagesA. General Rule: Where P might have avoided a particular item of damage by reasonable effort, he may not

recover for that item if he fails to make such an effort. This is sometimes called the “duty to mitigate” rule.(But it’s a “duty” only in the sense that if P fails to do it, he’ll lose the right to collect damages, not in thesense that P has breached some obiligation.)

B. Standard of reasonableness: The avoidable damages doctrine merely requires the plaintiff to make

reasonable efforts to mitigate damages.

1. Personal service contract: Where the contract is for personal services, courts are

especially lenient toward the plaintiff, and do not require him to accept any position that is substantially different from, or inferior to, the one contracted for.

C. Sales contracts: The UCC sets forth certain rules regarding what an aggrieved buyer or seller must do to

mitigate damages.

1. Buyer: If the seller either fails to deliver, or delivers defective goods which the buyer

rejects, the buyer must “cover” for the goods if he can reasonably do so, if he wants to beeligible for consequential damages. That is, he must attempt to purchase substitute goods

from another supplier.

a. How code imposes this duty: UCC 2-712(1) merely permits the buyer to cover, if he does so, 2-

217(2) gives him a measure of damages the difference between the cost of cover and the contract price, as well as any consequential damage. UCC 2-715(2)(a), provides that the buyer must cover where he can reasonably do so, and may not recover for those damages (e.g., lost profits) whichcould have been prevented had he covered.

2. Seller: The seller has much less of a duty to mitigate, when it is the buyer who breaches by

wrongfully rejecting the goods or repudiating before delivery. The seller can choose between reselling the goods (and collecting the difference between resale price and contract price), or not reselling them (and recovering the difference between market price and

unpaid contract price); seller may also be able to recover lost profits.3. Summary: So in UCC cases, it is really only the buyer who has a practical duty to

mitigate.

D. Losses incurred in avoiding damages: If the aggrieved party tries to mitigate his damages, and incurs

losses or expenses in doing so, he may recover damages for these losses or expenses. As long as plaintiff acted reasonably in trying to mitigate, it does not matter whether his attempt was successful.

Nominal and Punitive Damages

A. Nominal damages: Where a right of action for breach exists, but no harm has been done or is provable, P

may get a judgment for nominal damages. That is, he may recover a small sum that is fixed without regardto the amount of harm he has suffered.

B. Punitive damages: Punitive damages are rarely awarded in breach of contract cases.

1. Tort: But if the breach of contract also constitutes a tort, punitive damages are

recoverable.

a. Bad faith as tort: Many courts now regard a party’s bad faith conduct

in connection with a contract as being itself a tort, for which punitivedamages may be awarded. For instance, if a party breaches voluntarily,in order to make a better deal elsewhere, the court may find that thisconduct constitutes bad faith punishable by punitive damages.

C. Damages for mental suffering: Damages for emotional disturbance as a result of breach of contract are

recoverable only where the breach has also caused bodily harm or the contract or breach is “of such a kindthat serious emotional disturbance is a particularly likely result.



Liquidated Damages

A. Definition: A “liquidated damages clause” is a provision, placed in the contract itself, specifying the

consequences of breach.

B. General Rule: Courts will enforce liquidated damages provisions, but only if the court is satisfied that the

provision is not a “penalty.” That is the court wants to be satisfied that the clause really is an attempt to

estimate actual damages, rather than penalize the party for breach by awarding “damages” that are far inexcess of the ones actually suffered. Therefore in order to be enforceable, the liquidated damage clausemust always meet one, and sometimes two requirements:

1. Reasonable forecast: The amount fixed must be reasonable relative to the anticipated or actual

loss for breach; and

2. Difficult calculation: In some courts, the harm caused by the breach must be uncertain or very

difficult to calculate accurately, even after the fact.

C. Reasonableness of amount; All courts refuse to enforce liquidated damages clauses that do not provide for

a “reasonable” amount.

1. Modern view: Courts disagree about the time as of which the amount must appear to be

reasonable. Most courts today will enforce the clause if either: (1) the clause is areasonable forecast when viewed as of the time of contracting; or (2) the clause isreasonable in light of the actual damages which have occurred.

2. No loss at all: Courts are split about whether to enforce a liquidated damages clause where

P has sustained no actual losses at all. The Restatement does not enforce the clause if itturns out that no actual damage has been sustained.

3. Blunderbuss clause: A “blunderbuss” clause stipulates the same sum of money as

liquidated damages for breach of any covenant, whether trivial or important. Where theactual damage turns out to be trivial, most courts will not enforce the blunderbuss clause(or will interpret the clause as not applying to trivial breaches).

D. UCC rules: The UCC basically follows the common-law rule on when a liquidated damages clause should

be awarded. The UCC follows the modern view, by which the party seeking enforcement of the clause willsucceed if the sum is reasonable view either as the time the contract is made or viewed in light of the actual breach and actual damages.

Damages in Sales Contracts

A. Where goods not accepted: If the buyer has not accepted the goods (either b/c they weren’t delivered or

where delivered defective, or b/c the repudiated), the UCC gives well-defined rights to the injured party:

1. Buyer’s rights: If the seller fails to deliver at all, or delivers defective goods which the

buyer rightfully rejects, the buyer has a choice of remedies.

a. Cover: The most important is her right to “cover,” i.e., to buy goods from another

seller, and to recover the difference between the contract price and the cover price

from the seller (UCC 2-712(2)). The buyer’s purchase of substitute goods must be“reasonable,” and must be made “in good faith and without unreasonable delay.”

b. Contract/market differential: If the buyer does not cover (either b/c she can’t or

decides she doesn’t want to), she can instead recover the contract/market differential,

i.e., the difference between the contract price and the market price “at the time whenthe buyer learned of the breach…”

i. Buyer contracts to resell at fixed margin: If the market-

price increase times the quantity is greater than the profit Themargin on the buyer’s resale contract, giving the buyer thecontract/market differential will put the buyer in a better

position than she would have been in had the contract beenfulfilled. Therefore, a few courts limit the buyer to the profits

the buyer would have made under the resale arrangement. Butmost courts hold that the buyer is entitled to the full



contract/market differential even where this would put her

in a better position than had the contract been fulfilled, b/climiting damages to the buyer’s lost profits would incentivizethe seller to breach.

ii. Probably not available to covering buyer: Probably the

buyer may recover the contract/market differential only where

she did not cover.c. Consequential and incidental damages: The buyer, regardless of whether he covers,

may recover for “incidental” and “consequential” damages.

i.Consequential damages: Consequential damages include the

profits which the buyer could have made by reselling thecontracted-for goods had they been delivered. But remember that these profits must be proved with appropriate certainty,and must be shown to have been reasonably foreseeable at thetime of the contract.

ii. Incidental damages: “Incidental damages” include such

items as transportation expenses, storage expenses, and other small but direct expenses associated with the breach and buyer’s attempt to cover for it.

d. Rejection: The buyer who receives non-conforming goods can also exercise the self-help remedy of rejecting the goods. The buyer thus throws the goods back on the seller and cancels the contract. (Observe that where the buyer has actually made a losingcontract, rejection lets him escape his bad bargain.)

2. Seller’s damages for breach: Where it is the buyer who breaches, by wrongfully refusing

to accept the goods (or by repudiating the contract before shipment is even made), theseller has several possible remedies:

a. Contract/resale differential: Normally, the seller will resell the goods to a

third party. Assuming that the resale is made in good faith and in a“commercially reasonable” manner, seller may recover the difference betweenthe resale price and the contract price, together with incidental damages.

b. Contract/market differential: If the seller does not resell the goods, he may

recover from the breaching buyer the difference between the market price at thetime and place for delivery, and the unpaid contract price, together withincidental damages.

c. Lost profits: The contract/resale differential (for a reselling seller) and the

contract/market differential (for a non-reselling seller) may not make the seller whole. Where this is the case, UCC 2-708(2) lets the seller recover his lost

profits instead of using either of these differentials.

i. “Lost volume” seller: Most importantly, this means that the

“lost volume” seller may recover the profit he has lost byreason of the breach. In the usual case of a seller who hasresold the item, a “lost volume” seller is one who (1) had a bigenough supply that he could have made both the contracted-for sale and the resale; (2) probably would have made the

resale anyway as well as the original sale had there been no breach; and (3) would have made a profit on both sales.

d. Action for contract price: In a few situations, the UCC allows the seller to sue

for the entire contract price:

i. Accepted goods: First, if the buyer has “accepted” the goods,

the seller may sue for the entire contract price (though the buyer has a counterclaim for damages for non-conformity).



ii. Risk of loss: Second, if the risk of loss has passed to the

buyer, and the goods are lost in transit, the seller may sure for the entire contract price.

iii. Unreasonable goods: Lastly, if the seller has already

earmarked particular goods as being ones to be supplied under the contract, and the buyer rejects them or repudiates before

delivery, seller may recover the entire contract price if he isunable to resell them on some reasonable basis. Mostcommonly, this applies to perishable goods and custom-madegoods.

e. Incidental damages: A seller who pursues and achieves one of the four above

remedies may also recover “incidental damages.”

f. Consequential damages: Nearly all courts hold that the seller may not recover

“consequential damages.” This is a big difference from how buyers are treated.

B. Accepted goods: If the buyer has accepted the goods (and has not rightfully revoked this acceptance), then

the remedies given to buyer and seller are different:

1. Seller’s action for price: If the buyer has accepted the goods, the seller may

recover the full contract price. (But if the goods are non-conforming, Buyer maycounterclaim for breach of warranty.)

2. Buyer’s claim: If the buyer has accepted the goods, and they turn out to be

defective, buyer’s remedy is to sue for breach of contract

a. Breach of warranty: Most importantly, buyer may sue for breach of

warranty. These may be either express warranties or warranties implied bythe UCC. The measure of damages for breach of warranty is “the differenceat the time and place of acceptance between the value of the goods acceptedand the value they would have had if they had been as warranted, unlessspecial circumstances show proximate damages of a different amount.”

b. Non-warranty damages: Buyer may also be able to recover for non-

warranty damages. For instance, damages resulting from seller’s delay inshipping the goods, or his breach of an express promise to repair defectivegoods, may be recovered on top of or instead of breach-of-warranty

damages.

Statute of Frauds

Statute of Frauds

A. Nature of Statute of Frauds: Most contracts are valid despite the fact that they are only oral. A few types

of contracts however are unenforceable unless they are in writing. Contracts that are unenforceable unlessin writing are said to fall “within the Statute of Frauds.”

B. Five categories: There are five categories of contracts, which, in almost every state, fall with the Statute

of Frauds and must therefore be in writing:

1. Suretyship: A contract to answer for the debt or duty of another.

2. Marriage: A contract made upon consideration of marriage.3. Land contract: A contract for the sale of an interest in land.

4. One year: A contract that cannot be performed within one year from its making.

5. UCC; Under the UCC, a contract for the sale of goods for a price of $500 or more.

Suretyship

A. General Rule: A promise to pay the debt or default of another is within the Statute of Frauds, and is

therefore unenforceable unless it is in writing.



1. Applies to defaults as well as debts: The agreement may also provide that the surety will

perform any other kind of contractual obligation on the part of the obligor.

2. Other person must be liable: The suretyship provision applies only where there is a

guarantee of another person’s legally enforceable debt or obligation. If that other persondoes not legally owe the duty in question, the fact that the “surety” orally undertakesliability is not enough to bring the promise within the Statute of Frauds. ( Ex: S calls up to

Retailer, and says to him “Deliver three pair of pants to D, and if D doesn’t pay for them, I will.” D is not liable for the goods, since she has not ordered them. Therefore, S is not a

surety, and his promise does not fall within the suretyship provision of the Statute of

Frauds. S’s promise is thus enforceable, even though oral.

3. Promise must be made to creditor: For a promise of suretyship to fall within the Statute

of Frauds, it must be made to the creditor, not to the debtor.

B. Main purpose rule: If the promisor’s chief purpose in making his promise of suretyship is to further his

own interest, his promise does not fall within the Statute of Frauds. This is called the “main purpose” rule.

1. Examine consideration: To determine whether the promisor is primarily seeking to further

his own interest by making the suretyship promise, the consideration that is given in

return for his promise should be examined. If this consideration is of direct benefit

(usually economic) to the promisor, this fact will be a strong indication that the case fallswithin the main purpose rule, and therefore not within the Statute.

The Marriage Provision

A. Contract made upon consideration of marriage: A promise for which the consideration is marriage or a

promise of marriage is within the Statute of Frauds.

B. Exception for mutual promises to marry: If an oral contract consists solely of mutual promises to marry

(with no ancillary promises relating to property transfer), the contract is not within the Statute of Frauds,and is enforceable even though oral. In other words, an ordinary oral engagement is an enforceable

contract.

C. Part performance: Suppose that in the above example, B went ahead and married A and then A refused to

transfer the stocks to her. Although B might argue that she has detrimentally relied on the promise, and thatit should therefore be enforceable notwithstanding the Statute of Frauds, the courts hold that marriage aloneis not sufficient detrimental reliance to remove the contract from the Statute. But if B takes further action in

reliance on the promise (e.g., she lends A money, on the assumption that this money will be replaced byA’s transfer of the stocks), a court might then remove the promise from the Statute and enforce it.

The Land Contract Provision

A. Contracts to transfer and buy land: A promise to transfer or buy any interest in land is within the

Statute of Frauds. The Statute does not apply to the conveyance itself (which is governed by separatestatutes in most states), but rather to a contract providing for the subsequent conveyance of land.

1. Promise to pay: Keep in mind that not only a promise to transfer an interest in land, but

also the promise to pay for such an interest, falls within the Statute.

B. Interest in Land: In addition to the transfer of a fee simple interest in land, there are a number of other

kinds of interests in land which fall within the Statute:

1. Leases: Leases are generally held to be interests in land. So that a promise to make a lease

will generally be unenforceable if not in writing.

a.One year or less: But most states have statutes making oral leases

enforceable if their duration is one year or less.

2. Mortgages: A promise to give a mortgage on real property as security for a loan also

usually comes within the Statute

3. Easements: A promise to grant an easement over land falls within the land-contract

provision and must therefore be in writing.

4. Crops: Crops, even though they are attached to the soil, are not considered to be interests

in land. A contract for the sale of growing timber is an interest in land if and only if the



contract contemplates that title will pass before the timber is cut. A contract for the sale of minerals, including oil and gas, involves an interest in land only if they are to be removedfrom the ground by the buyer.

5. Contracts only incidentally related to land: But contracts that relate only incidentally to

land are not within the Statute. Thus a contract to build a building is not within the Statute,nor is a promise to lend money with which the borrower will buy land.

C. Part performance: Even if an oral contract for the transfer of an interest in land is not enforceable at thetime it is made, subsequent acts by either party may make it enforceable.

1. Conveyance by vendor: If the vendor under an oral contract makes the contracted-for

conveyance, she may recover the contract price. In other words, although the promise to pay for the land is initially within the Statute of Frauds, it is removed from the Statute bythe vendor’s conveyance of the land to the vendee. \

2. Vendee’s part performance: Second, the vendee under an oral land contract may in

reliance on the contract take actions which: (1) show that the oral contract was really made;and (2) also create a reliance interest on the part of the vendee in enforcement. Such avendee may then obtain specific performance (a court order that the vendor must conveythe land) even though the contract was originally unenforceable b/c oral.

a. Taking possession and making improvements: For instance, if the vendee pays

some or all of the purchase price, moves onto the property, and, then makes costly

improvements on it, this combination of facts will probably induce the court to granta specific decree of specific performance.

b. Payment not sufficient: Usually, the fact that the vendee has paid the vendor the

purchase price under the oral agreement is not by itself sufficient to make thecontract enforceable. (Instead, the vendee can simply recover the purchase price in anon-contract action for restitution.)

The One-Year Provision

A. General Rule: If a promise contained in a contract is incapable of being fully performed within one year

after the making of the contract, the contract must be in writing.

1. Time runs from making: The one-year period is measured from the time of execution of

the contract, not the time it will take the parties to perform. (Ex: On July 1, 1990, Star

promises Network that Star will appear on a one-hour show that will take place inSeptember, 1991. This contract will be unenforceable if oral; because it cannot be

performed within one year of the day it was made. The fact that actual performance will

take only one hour is irrelevant.)

B. Impossibility: The one-year provision applies only if complete performance is impossible within one year

after the making of the contract. The fact that performance within one year is highly unlikely is not enough.

1. Judge from time of contract’s execution: The possibility of performing the contract

within one year must be judged as of the time the contract is made, not by benefit of hindsight.

C. Impossibility or other excuse: It is only the possibility of “performance,” not the possibility of

“discharge,” that takes a contract out of the one year provision. Thus the fact that the contract might bedischarged by impossibility, frustration, or some other excuse for non-performance will not take thecontract out of the Statute.

1. Fulfillment of principal purpose: It will often be hard to tell whether a certain kind of possible termination is by performance or discharge. The test is whether, if the terminationin question occurs, the contract has fulfilled its principle purpose. If it has fulfilled this purpose, there has been performance; if it has not, there has not been performance. Usingthis rule gives these results:

a. Personal service contract for multiple years: A personal services contract

for more than one year falls within the one-year rule (and is thus enforceableunless in writing) even though the contract would terminate if the employee



died. The reason is that when the employee dies, the contract has merely been“discharged”, not performed.

b. Lifetime employment: A promise to employ someone for his lifetime is

probably not within the one-year provision, since if the employee dies; theessential purpose of guaranteeing him a job forever has been satisfied. So anoral promise of a lifetime job is probably enforceable.

c. Non-compete: A promise by a seller of a business not to compete with the buyer for a period longer than a year is not within the one-year provision,since if the seller dies within a year, the buyer has received the equivalent of full performance (he knows the seller won’t be competing with him.)

D. Termination: Courts are split about whether the existence of a termination clause that permits termination

is less than a year will remove a more-than-one-year contract from the one-year provision.

E. Full performance on one side: Most courts hold that full performance by one party removes the contract

from the one-year provision. This is true even if it actually takes that party more than one year to perform.

F. Part performance: But part performance by one party does not remove the contract from the one-year

provision, and thus neither side may sue to enforce it. However, in some cases this part performance mayestop one or both parties from claiming the Statute of Frauds.

G. Applies to all contracts: The rule that a contract incapable of performance within one year must satisfy the

Statute applies to all contracts (including those that just miss falling within some other Statute of Frauds provision). For instance, even though the special UCC sale-of-goods statute requires a writing only wheregoods are to be sold for more than $500, a contract to sell goods for $300, to be delivered 18 months after the contract is made, must be in writing.

Contract for the Sale of Goods

A. General Rule: UCC 2-201(1) says that a “a contract for the sale of goods for the price of $500 or more is

not enforceable…unless there is some writing sufficient to indicate that a contract for sale has beenmade…” So an oral contract for goods at a price of $500 or more is unenforceable under the UCC.

1. Contracts combining services and goods: Thus where the contract is primarily for the

provision of services, but also includes the provision of goods, the contract is not withinArticle 2, and it is only the provisions of the common-law Statute of Frauds (e.g., contractsnot performable within one year) that may apply.

2. Exceptions to the UCC Statute: Even if a sales contract is for more than $500, it isexempted from the Statute of Frauds requirement in three situations, by 2-201(3):

a. Goods specially manufactured: No writing is required “if the goods are to be

specially manufactured for the buyer and are not suitable for sale to others inthe ordinary course of the seller’s business and the seller, before notice of repudiation is received and under circumstances which reasonably indicatethat the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement.

b. Estoppel by pleading or testimony: Nor is a writing required “if the party

against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is notenforceable under this provision beyond the quantity of goods admitted.

c. Goods accepted or paid for: A writing is not required “with respect to goods

for which payment has been made and accepted or which have been received and accepted. This is sort of “part performance” doctrine, by which if thecontract is partly performed on either side, it is enforceable as to the partwhich is performed. The court will presumably attempt to apportion thecontract price, so that if a sale of 100 units for $1000 is agreed upon, and the buyer accepts 10 units, he will have to pay $100 regardless of the market priceof the units accepted.

Satisfaction by a memorandum



A. General requirements for: Even if there is no signed “contract,” a signed “memorandum” summarizing

the agreement may be enough to meet the Statute of Frauds. A memorandum satisfies if it: (1) reasonablyidentifies the subject matter; (2) indicates that a contract has been made between the parties; (3) states withreasonable certainty the essential terms of the contract; and (4) is signed “by or on behalf of the party to be

charged.”

B. Signature: Because of the requirement of a signature “by the party to be charged,” some contracts will be

enforceable against one party, but not against one party, but not against the other.C. UCC: Under the UCC, a writing satisfies the Statute if it is “sufficient to indicate that a contract for sale

has been made between the parties and [is] signed by the party against whom enforcement is sought. 2-2019(2)

1. Omissions: Even if the writing contains a mistake as to a term, there will often be enough

to satisfy the Statute under the UCC.

2. Confirmation: Under the UCC, there is one situation in which a memorandum will be

enforceable even against a party who does not sign it: if the deal is between merchants, onewho receives a signed confirmation from the other party will generally be bound, unlessthe receipt objects within 10 days after receiving the confirmation.

Oral Rescission and Modification

A. Oral rescission: Where a contract is in writing, it can be orally rescinded (i.e, orally cancelled) even

though the original was required to be in writing because of the Statute. That is, a recession does not haveto satisfy the Statute of Fraud, in non-UCC cases. Generally, this is true even if the original writtenagreement contains a “no oral modification or recessions.

1. Sale of goods:

contracts 1_prof. cox_fall 2008[1]

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