ISSUE -> What facts and circumstances brought these parties to court?

RULE -> What is the governing law for the issue?

ANALYSIS -> Does the rule apply to these unique facts?
CONCLUSION -> How does the court's holding modify the rule of law?


Stephen Haas, Esq.
From: Student
Re: Bernie and Vivian: Mutuality of Consideration
Statement of Facts
Bernie, a resident of Richmond, Virginia, advertised the sale of his 2006 Ford Fusion in his local
newspaper with a $13,500 asking price on February 1. On March 1, Vivian called Bernie and offered to
purchase the vehicle for $12,000. Bernie and Vivian met to negotiate the sale on March 10, at which
time Vivian agreed to pay $12,500 for the car but stated she needed three more weeks to raise the
money. Bernie agreed to wait, but only if Vivian gave him a deposit of $1,000, which she agreed to do.
Bernie drafted an agreement stating that he agrees to sell his car to Vivian and she agrees to pay
$12,500 for the car and that the transaction will take place no later than March 31. In addition, the
agreement stated that in the event the seller breaches the agreement, the seller must refund the
purchasers deposit, but the parties shall be limited to this remedy only; and in the event that the buyer
breaches the agreement, the seller may keep the buyers deposit, but the seller shall be limited to this
remedy only. Vivian signed the agreement and gave Bernie a check for $1,000. Two weeks later, Vivian
realized she would not be able to raise the money needed to purchase the car. On March 24, she called
Bernie to tell him she was pulling out of the deal and Bernie told her that he was keeping her
deposit. Vivian is suing Bernie for the $1,000 claiming that there was no mutuality of consideration for
the agreement and that the contract was void.
Issue
The issue to be determined is whether, under Virginia law, there was sufficient mutuality of
consideration in order for the agreement to be binding, thereby allowing Bernie to keep Vivians
deposit.
Applicable Law
As the Supreme Court of Virginia stated, *t+he general rule of law is . . . where the consideration for the
promise of one party is the promise of the other party, there must be absolute mutuality of
engagement, so that each party has the right to hold the other to a positive agreement. Both parties
must be bound or neither is bound. American Agricultural Chemical Co. v. Kennedy & Crawford, 103 Va.
171 (1904), citing 1 Parsons on Contracts (7
th
Ed.) 448-452. That case involved a contract that included a
reservation on the part of the seller of the right to cancel at any time. As the Supreme Court stated, the
plaintiffs offer left it optional with it whether or not it would sell . . . . As that proposition did not bind
the plaintiff to sell, there was no consideration for the defendants promise to purchase, and, as we
have seen, neither party was bound at that time. Id. at 178.
When deciding a case that involved a contract with a limitation clause that negated any remedy against
the plaintiff should he elect not to perform the terms of the contract, the Circuit Court of Fairfax County,
Virginia determined that if it appears that one party was never bound on its part to do the acts which
form the consideration for the promise of the other, there is a lack of mutuality of obligation and the
other party is not bound. Busman v. Beeren & Barry Investments, LLC, 68 Va. Cir. 375, 378 (Va. Cir.,
Fairfax County 2005), quoting First Sec. Bank, N.A. v. Murphy, 131 Idaho 787, 791 (1998). In Busman, the
Court rejected plaintiffs argument that the limitation clause does not destroy mutuality but merely
limits *defendants+ remedy to the recognized measure of damages for a purchasers breach of a
contract . . . . Busman at 379. The Court found that the contract lacked mutuality and could not be
enforced.
Application to Our Case
As the Supreme Court of Virginia determined in American Agriculture Chemical Co., in order for a
contract to be valid, there must be mutuality of consideration and that both parties to the contract must
be bound or neither is bound. In our case, Bernie was not bound by the agreement because he did not
actually have to confer a legal benefit to Vivian. Just like the facts in Busman, the agreement in our case
included a limitation clause which effectively destroyed the mutuality of consideration because Bernie
did not actually have to sell the car to Vivian.
Conclusion
Based on the above, in this case the agreement is not binding under Virginia law because of the lack of
mutuality of consideration; therefore, Bernie must return Vivians $1,000 deposit.

FACTS:
Terra Inc. orally places an order with Yarner Inc. and sends a purchase order with no terms regarding
how disputes should be settled between parties. Yarner sends an acknowledgement back containing a
clause stating that any dispute must be submitted to arbitration. Terra retains the acknowledgement
without objecting to the arbitration clause.
ISSUE :
Assuming that the Purchase Order is an offer and the acknowledgment is an acceptance of the offer. Is
the acceptance binding? If so, is the arbitration clause part of the acceptance?
DISCUSSION :
According to the Uniform Commercial Code : NY CLS UCC 2-207 (2009)
Additional Terms in Acceptance or Confirmation

(1) A definite and reasonable expression of acceptance or a written confirmation which is sent within a
reasonable time operates as an acceptance even though it states terms additional to or different from
those offered or agreed upon, unless acceptance is expressly made conditional on assent to the
additional or different terms.

(2) The additional terms are to be construed as proposals for addition to the contract. Between
merchants such terms become part of the contract unless:

(a) the offer expressly limits acceptance to the terms of the offer;

(b) they materially alter it; or

(c) notification of objection to them has already been given or is given within a reasonable time
after notice of them is received.

(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a
contract for sale although the writings of the parties do not otherwise establish a contract. In such case
the terms of the particular contract consist of those terms on which the writings of the parties agree,
together with any supplementary terms incorporated under any other provisions of this Act.
In this case, under NY CLS UCC 2-207 (2009) part (1) Terra Inc. sent a purchase order to Yarner, who
responded with an acknowledgment the acknowledgement, although stating additional terms (on
arbitration) is an acceptance of the offer from Terra to purchase their goods.
However, the fact that Yarner included the additional clause on arbitration, could be described as
materially altering the agreement as described in Schubtex, Inc. v. Allen Snyder, Inc., 49 N.Y.2d 1 (N.Y.
1979) where the court held that .. an arbitration clause printed on the back of a written
acknowledgment of order is a material alteration of the proposed purchase order and cannot be binding
upon the prospective purchaser merely by virtue of the prospective purchaser's retention, without
objection, of the acknowledgment form containing the clause.
There was also no evidence that a written provision for arbitration had been incorporated into the oral
agreement of the parties as a result of trade usage or of prior trade dealings with each other.
Also, in this case, Terra Inc. do not appear to have had a history of prior dealings with Yarner Inc.
In Schubtex, Inc. v. Allen, in each of the two prior dealings relied upon by the trial courts, the only
reference to arbitration appeared in the written confirmation of the order form sent to the buyer after
the negotiation of an oral contract. There was no evidence of prior arbitration by the parties pursuant to
the arbitration clause or that the clause was material in their negotiations. Thus no binding agreement
to arbitrate could have arisen and the mere retention by the buyer of the form containing the
arbitration clause, failed to create such an agreement in the first instance.
Furthermore, in Gaynor-Stafford Industries, Inc. v. Mafco Textured Fibers, 52 A.D.2d 481 (N.Y. App. Div.
1976) the purchaser claimed that was not aware of the arbitration clause nor bound by its inclusion
on the reverse side of the order acknowledgment, and that the form used by appellant which included
the arbitration clause should not be deemed superior to the form used by respondent which contained
no arbitration clause. Finally, it said that the arbitration clause was a "material alteration" of the
contract, thereby falling within the purview of section 2-207 (subd [2], par [b]) of the Uniform
Commercial Code.
However, the court quoted from In Matter of Helen Whiting, Inc. (Trojan Textile Corp.) (307 NY 360)
CitingWhiting for the purpose that arbitration is common in the textile industry, the court held that : In
these circumstances, the arbitration clause cannot be considered a "material alteration" (Uniform
Commercial Code, 2-207, subd [2], par [b]) so as to be binding only where there is affirmative consent.
Therefore, respondent's failure to notify appellant within a reasonable time after receipt of the order
acknowledgments of its objection to the arbitration clause, gave said clause binding effect..
CONCLUSION :
From the facts given in this example, it is clear that acknowledgement of the order by Yarner Inc., is a
binding acceptance of the agreement since it falls under the UCC section 2-207 (1) definite and
reasonable expression of acceptance or a written confirmation which is sent within a reasonable time
operates as an acceptance even though it states terms additional to or different from those offered
But given the particular circumstances, where we are not told whether Terra Inc. and Yarner Inc. have
dealt with each other previously, and thus whether they have established a trade pattern.
From the New York cases cited which dealt with similar matters, it appears that arbitration clauses are
fairly standard in this industry. Since Terra Inc. did not object to the clause within a reasonable time
(under Uniform Commercial Code, 2-207, subd [2], par [c]), and the clause cannot be viewed as a
material alteration, then the arbitration clause is part of the acceptance and is binding on Terra Inc.

Teri is a firefighter who lives and works in Boston, MA. She
recently decided to purchase a new home on the banks of the
Charles River in Cambridge, MA so that she could walk to the
Harvard library whenever she gets bored. Therefore, Teri decides
to sell her home. She lists her home in an ad and receives an
offer from Jack to buy her home for $300,000. Teri accepts the
offer and they sign a contract to that effect.
After the contract is signed, however, Teri learns of a Boston
municipal rule that all firefighters must live within the
Boston city limits. Since Cambridge is outside Boston, Teri
decides that she can't move after all. She calls Jack and tells him
that
Jack sues Teri in municipal court in Boston. He asks the judge for
specific performance; i.e. to force Teri to sell him the house in
accordance with the original deal. Teri argues that, although
specific performance is usually appropriate in land sale contract
cases, the judge has the discretion to deny specific performance.
Teri argues that the unique facts of her case; i.e., that she can't
move because of the Boston residence for firefighters rule, allow
the judge to deny specific performance on this case.
You are a law clerk in the municipal court in which the case is
taking place. Please write an essay explaining whether or not the
judge can deny specific performance to Jack in this case. Please
use Massachusetts case law to the extent possible.


FACTS
Teri decides to sell her home in Boston to Jack and buy a home in Cambridge, Massachusetts. They sign
a contract to purchase her home for $300,000. Teri discovers afterward that all fire fighters must live
within the city limits according to the Boston Municipal rule. She decides not to move and informs Jack
of her decision and he, in turn, sues her in Boston municipal court. Jacks argument is that specific
performance to finalize the purchase of the home in order because they have a legitimate land sale
contract. Teri argues that due to the Boston Municipal Firefighter rule, the judge may deny specific
performance in this case.

RULE
Statute of Frauds land contracts states that certain contracts are actionable only if in writing. No action
shall be brought:

First, To charge an executor or administrator, or an assignee under an insolvent law of the
commonwealth, upon a special promise to answer damages out of his own estate;

Second, To charge a person upon a special promise to answer for the debt, default or misdoings of
another;

Third, Upon an agreement made upon consideration of marriage;

Fourth, Upon a contract for the sale of lands, tenements or hereditaments or of any interest in or
concerning them ALM GL ch. 259, 1
The Boston Municipal Employee Residence rule states: Any member of the regular police or fire
department and fire alarm division of a city or town appointed subsequent to August first, nineteen
hundred and seventy-eight shall reside within fifteen miles of the limits of said city or town. ALM GL ch.
41, 99A
The Massachusetts Courts, Judicial Officers and Proceedings in Civil Cases Procedures under Equity
Jurisdiction states: Actions to enforce the purpose or purposes of any gift or conveyance which has
been or shall have been made to and accepted by any county, city, town or other subdivision of the
commonwealth for a specific purpose or purposes in trust or otherwise, or the terms of such trust, or, if
it shall have become impracticable to observe or carry out such purpose or purposes, or such terms, or,
if the occasion therefore shall have terminated, to determine the purposes or uses to which the
property involved shall be devoted and enforce the same. Such action shall be commenced only by the
attorney general or, with leave of court, by ten taxpayers of such county, city, town or other subdivision.
The defendant in any such action may set up such impracticability or termination and request the
judgment of the court as to such other use of said property in its answer. ALM GL ch. 214, 3(10)


ANALYSIS
Teri and Jack have a signed written land sale contract for the purchase of Teris house in Boston which is
legally binding according to the Statute of Frauds land contracts. Even though they signed a contract,
they have not exchanged monies towards the purchase which would have solidified Jacks argument.
Since Teri contacted him as soon as she was aware of the municipal rule before further performance of
the contract ensued, her rescission was not as damaging to both parties.
Teri claims that her initial decision was mistake because she was unaware of the Boston Municipal
Firefighter rule when she agreed to sell her house. If Jack is granted specific performance and she
purchases a home outside the city limits, she will be going against the law and will be subject to be fired
for breaking that law which is legally and economically impracticable
Mulrain v. Board of Selectmen, 20 Mass. App. Ct. 950 (Mass. App. Ct. 1985). She also can follow
through on the sale of the home and purchase another home closer to Cambridge, but within the city
limits. Given that she has not already purchased another home, she would be homeless until she closes
on another home or rents elsewhere which would cause her extreme difficulty.

CONCLUSION
Specific performance, by definition, is an equitable remedy upon breach. Teris decision to rescind was
to prevent losing her job by breaking a municipal rule as a firefighter. Jack has cause to seek specific
performance on a legally binding contract. At this point of the contract, they have exchanged no funds
to further obligate one to the other. To obligate one to perform against a law and risk her job to fulfill
her part of the contract would appear inequitable. The judge could very well lean toward a temporary
stay on her performance upon securing another home within the city limits, or dissolve the contract due
to impracticability.