I.

The Importance of Promise -Second Restatement, a promise creates a legal relationship, the legal obligation from the agreement -Social Order rests upon stability and predictability of conduct, reliance on promises is a major part of that -well being of individuals and society relies on the volume of transactions, enforcing contracts facilitates trade by promoting promise, brings consumer confidence II. The Agreement Process: Manifestation of Mutual Assent -Primary objective is to complete the exchange -There is negotiation when options are not determined by law -Legal system wants to support and complete exchanges (A). Ascertainment of Assent: The Objective Test -Once negotiations have commenced, to what extent is a party privileged to withdraw, what were the intentions of party -For a contract to be formed their must be mutual assent, use objective not subjective test -what a reasonable person understands the expression of terms to be, -Rationale: Protect parties reasonable expectations -modern contract law has rejected the concept that a subjective meeting of the minds is necessary, rather protect reasonable expectations of the parties in relying on a promise, and the need for security and certainty in business transactions. -Imperative that each contracting party is able to rely on the others manifested intentions, without regard to its thoughts or mental reservations -meeting of the minds- shorthand for formation of contract, doesnt require subjective meaning of meeting of the minds -Application: There is sufficient manifestation of assent whenever a party uses an expression that he knows, or can reasonably infer, the other party would reasonably interpret as an offer or acceptance, and the other party does so interpret (Rest. 2d S. 19) Embry v. Hargadine, McKittrick Dry Goods Co. -Ps written employment K expired, met with president(D), and said hed quit if he didnt have K for next year. D told him hes alright and to get men out. P thought he had a K and continued to work, was fired three months later. P sued for breach of K. D said he didnt intend K. -Court Held: Inner intention cannot make or prevent a contract. If a reasonable person believed that there was a K, the words constitute a valid K. P was led to believe there was a K and didnt seek other employment, therefore a valid K. -Rule: The general rule of interpretation is that where the interpretation of an expression is an issue, the expression is given an objective view. Lucy v. Zehmer -P offers to buy Ds farm, and D accepts offer in jest believeing P doesnt have the money. The parties work out terms, and both parties sign it. P tries to enforce writing. -Court Held: Even if D did not subjectively intend to form a K, he is bound because P actually and reasonably believed that it was a serious transaction -Outward expression vs. intent Cohen v. Cowles Media Company -Law does not create a contract where w=one was not intended -Contract law does not seem to include promise of news confidentiality

-The parties didnt intend to enter into a legal contract, it was a moral one rather than a legal one (B). Implied-In-Fact-Agreement -If the promises of the parties are inferred from their acts or conduct, or from words that are not explicitly words of agreement, the contract is implied-in-fact -Usually arises when one accepts a benefit from another for which compensation is customarily expected. Where evidence shows that parties understood that compensation would be paid for services rendered, a promise to pay fair value may be implied even if no agreement was reached. -The mutual assent is inferred and is real (Rest. 2d S 4) Wrench, LLC. V. Taco Bell Corp -Taco bell used Ps idea for a Chihuahua in their commercials after talking with P about using it. Created impression of business relationship -An implied in fact contract may be found when the parties have an understanding that the recipient of a valuable idea has accepted and used the idea, knowing that compensation is expected for use of the idea, without paying the purveyor of the idea -A contract between two parties may be implied in fact when the intention to enter into a contract is not manifested by direct or explicit words between the parties, but instead is gathered by implication or proper deduction from the conduct of the parties, language used, or things done by them, or other pertinent circumstances attending the transaction. (C). Offer: Creation of Power of Acceptance -First step in analyzing a contract is determining whether an offer has been made. -Offeror is master of the offer, can withdraw under circumstances i.e. death -Offeree given the power of acceptance Significance of Offer: Creates the power of acceptance to whom the expression was addressed. If expression constitutes an offer, the addressee has the power to conclude a bargain by giving assent in the appropriate manner. What Constitutes an Offer: An expression of willingness to enter a bargain, made in such a way that a reasonable person in the shoes of the person to whom the expression is addressed would believe that he could conclude a bargain by giving assent in the manner required by the expression. (Rest. 2d 24) 2 Elements: i. Intent to enter bargain; and ii. Definiteness of terms -Intent to enter into bargain -Offer vs. Invitation to Deal: Not an offer if the language expresses clearly that the expression is merely an intent to begin preliminary negotiations, invitations to negotiate, or invitations to deal, rather than offers. -Definiteness of terms -Generally, an expression will not be considered an offer unless it makes clear: i. the subject matter of the proposed bargain, ii. the price and iii. the quantity involved. -Intent Determinative: The exclusion of one of the terms does not preclude the expression from being an offer if: i. theres evidence of intent to conclude a bargain, ii. The omission does not indicate lack of intent, and iii. The court can fill in the omitted term by implication. Application: Lonergan v. Scolnick -D placed ad in paper that he was looking to sell property. P inquired and D responded with description of propery, directions and stated that his rock bottom

(D).

price was $2,500. After further inquiry by P, and D responding to act fast, D sold the property to a 3rd party for 2,500. P then responded trying to buy the property. P sued for breach of K. -Appeals court affirmed decision in favor of D that there was never an offer to sell. There was no intent to enter into contractual obligation. - If from a promise, or manifestation of intention, or from the circumstances existing at the time, the person to whom the promise or manifestation is addressed knows or has reason to know that the person making it does not intend it as an expression of his fixed purpose until he has given a further expression of assent, he has not made an offer. (Rest. 2d. 25) Rule: There must be a manifestation of contractual intent and it must be unequivocal and show that the parties intended to create a binding agreement. Leonard v. Pepsico, Inc. -P brought action to enforce specific performance from Pepsico on their Pepsi Stuff promotion including a television advertisement that displayed possibility of a Harrier Jet. -The commercial was merely an advertisement and therefore unenforceable.(ads are usually deemed to be invitations to deal rather than enforceable contracts). -if the terms are specific and clear there is the possibility for acceptance -A reasonable person would not have understood the commercial as an offer Southworth v. Oliver -D approached P about buying land, but other factors not determined, P then phoned D for more info and D sent a letter with info about land and financing. The letter was sent to P and two others and that they would go from there. P responded accepting offer, but D said that letter was not an offer but merely information pertaining to future negotiations. -The court held that the letter was an offer and that P met one of the two terms to accept the offer. P accepted the offer for the land. A reasonable person wouldve understood the letter as an offer and therefore it was upheld. -The surrounding circumstances under which this letter was prepared by Defendants and sent by them to Plaintiff were such to have led a reasonable person to believe that Defendants were making an offer to sell to Plaintiff the lands described in the letters enclosure and upon the terms as there stated. Bretz v. Portland General Electric Co. -P wrote letter to D offering to buy stock of subsidiary company, D sent letter to P with revisements and instruction to resubmit letter as offer, P responded with letter with slight revisions and guidelines for acceptance, D responded with letter with price that theyd be receptive to, P responded with acceptance of offer, and sold coal from property to 3rd party. -Court held that Bretz could not accept a solicitation for an offer and therefore no contract had been created. -Rule: Whether or not a document or documents creates a contract, is determined by whether or not the recipient would reasonably believe he had a contract after seeing it in the context of prior negotiations. Acceptance: Exercise of Power of Acceptance -Bilateral: an offer that requires acceptance by a promise -General Rule: A bilateral contract usually can only be accepted by a promise, not by an act. May be expressed or implied, can sometimes be implied by an act. Offeror is master of the offer. Exception- full performance prior to termination of the offerees power to accept. May be implied in fact from the offerees

conduct. Limitation if the act signifying acceptance is an act the offeree might do anyway. (1) Acceptance by Promise LaSalle National Bank v. Vega -P sought specific performance of supposed contract with D for real estate. The contract required that the trust execute the contract upon execution by the seller (P). The contract was never signed by trust. -The court held that since the only way the contract could be executed was by the trust and the trust did not do so the contract was not valid. An offeror has complete control over an offer and may condition that acceptance be made according to the terms of the offer. No other mode may be used when an offer by its terms requires a written acceptance by a specific person or entity. Rule: An offer can not be accepted by anyone but whom the offeror intended to create power of acceptance and in the manner of acceptance specified by the offeror. Hendricks v. Behee -D placed $5,000 in escrow account for the purchase of land of 3rd party. Behee mailed a written offer of $42,500 for the real estate and $250 for a dinner bell and flower pots. Smith signed the agreement but Behee notified an agent of Smith that he had withdrawn the offer before he received notice of the acceptance. Rule: A contract is not formed until acceptance has been communicated to the offeror, the offeror can revoke prior to communication of acceptance. -Behee can withdraw the offer until he knows its been accepted. Ever-Tite Roofing Corp. v. Green -P sent D an offer and D sent back the signed offer with Ps terms for acceptance. P had the option to accept by certain signer or commencement of work. P then sent their workers to Ds house to complete job. D already had workers reroofing the house. -The court ruled that P acted with due diligence and the work commenced with the loading of the trucks and were therefore awarded damages. (2) Acceptance by Performance Not By Promise Acceptance of Unilateral Contract: Acceptance only by performance -A contract may be formed by beginning or completing performance, eventhough the offeror may not know that performance has begun or been completed. -A problem may arise when the offeror does not know when the offer has been accepted. -Generally accepted that the offeree has an obligation notice to the offeror in a reasonable time after the performance has been completed. A contract has been formed, but the offerors obligation is discharged due to lack of notice by the offeree Glover v. Jewish War Veterans of United States -D offered a reward for $500 for information leading to the arrest of a murderer. P did so, but at the time had no knowledge of the offer. -The court held that because she had no knowledge at the time of the acceptance that it did not constitute acceptance of the offer. There is no

contract because there was no acceptance when she provided the information. Rule: There is no contrat unless the person claoming the reward knew about it when she gave the desired information and acted with the intention of accepting it. Carlill v. Carbolic Smoke Ball Co. -D advertised a reward to anyone who caught the influenza after having used their product three times daily for two weeks. P used the product and caught influenza. -The court held that a reasonable person would have been led to believe that using the product and getting the flu would constitute acceptance of the reward. It is consideration when the person chose to use the product. Rule: An advertisement of a reward to anyone who performs certain conditions specified in the ad is an offer, and the performance of such conditions is an acceptance which creates a valid contract. Comment: Acceptance by Performance Under Restatement 309-311 (Second) -Where the offer invites a choice between a performance and a promise, the reliance in part performance creates a promise to complete rather than an option. -The beginning of performance is an acceptance which operates as a promise to render complete completion. -In a case where there is doubt of whether the offer is intended to be a bilateral or unilateral contract, an offeror is interpreted as either. Acceptance can be invited as either promise or performance. The offeree is protected in his interpretation of acceptance. Acceptance By Conduct or Silence -Generally silence of an offeree does not constitute acceptance. -Exception: (1) Offeree leads offeror to believe that silence constitutes acceptance, prior words or conduct gives offeror reason to believe silences is acceptance (2) silence coupled with subjective intent, (3) Execise of Domininon, i.e. buyer accepts something and sends to someone else (4) Solicitation of offer by offeree, offeror relies on solicitation (5) Late acceptance, similar to counteroffer, if the offeree accepts late the offeror must notify that it was too late (6) Implied-in-fact contracts, (7) Unjust enrichment or quasi contract, Russell v. Texas Co. -P was the surface owner of property, D had the mineral rights on the land but was acting in excess of rights granted by lease. P sent D an offer for a revocable license for use of surface, stated that continued se would constitute acceptance. Continued use but claimed that it had not intended to accept offer. - Court held that because D continued use on the land led P to believe as a reasonable person that D intended to form a contract. Rule: When the offeree excercies dominion over things which are offered to him, such exercise of dominion in the absence of other circumstances showing a contrary intention constitutes acceptance. -Ads not generally offers, but the specificity of directions led the customer to reasonably believe that it was an offer.

(3)

(E)

Ammons v. Wilson -P gave Ds salesperson an order,P heard nothing from D for 12 days when he was later told that the offer had been rejected. Previously, the orders were filled within a week. -The court held that because of previous dealings, P reasonable relied on the offer and the offeror gave P reasonable belief that the offer would be filled. It was implied acceptance. Rule: Where an offeree fails to reply to an offer, his silence and inaction operate as acceptance where, because of previous dealings or otherwise, the offeree has given the offeror reason to understand that the silence or inaction is intended as a manifestation of assent and the offeror does so understand (4) Time When Acceptance Is Effective Adams v. Lindsell -D sent a letter to P as offer to sell wool. D misaddressed the letter and P did not receve until much later. The same day that P got the letter he mailed an acceptance. D sold the wool to another person, but P argues that in usual circumstances D wouldve receive acceptance on time. -The court held that the offeree is not bound untilhe receives the offer, The acceptance is accepted upon dispatch in the mail. The mail serving as an agent for acceptance. Rule: An acceptance of an offer is effective upon dispatch. Mailbox Rule-(i) creates security for the offeree as if the contract were made face to face (ii) creates contract at earliest possible moment -acceptance must be timely and proper -the time period begins running when the offer is received -some hold that if there is an option the acceptance must be received, within the time period noted in the option. (5) Nature and Effect of Counter-Offer - A counteroffer is an offer made by an offeree to an offeror that concerns the same subject matter as the original offer, but differs in its terms. A counteroffer terminates the offerees power of acceptance, on the same rationale thatapplies to rejections. - Status as Offer: Terminates power of acceptance by offeree, but creates a new power of acceptance for original offeror because it is an offer. -An offerees power of acceptance is not terminated by an offerees inquiry concerning th offer or by a request for different terms. -Would a reasonable person in the offerors shoes think the communication was an offer to be accepted. Minneapolis & St. Louis Railway Co. v. Columbus Rolling-Mill Co - P inquired about prices for 500 to 3000 tons of lb. steel rails and 2000 to 5000 tons of iron rails. D replied stating it had 2000 to 5000 50 lb railsfor 54$. D would permit acceptance of offer until 12/20/1879. 12/16/1879, P told D it accepted and ordered 1200 for $54. 12/18 D refused to fill order. P tried to order 2000, D refused. - The court held that P failed to place an order with the specified terms of the offer and therefore it was essentially a counteroffer. Rule: An acceptance by an offeree is not valid unless it meets the specified terms of the offer, it manifests an unwillingness to the offeror. Assent in Electronic Commerce Specht v. Netscape Communications Corporation

(F)

-P downloaded from D free software. When P found out the software transmitted info to D about Ds internet usage, P sued D for violation of ECPACFAA. D moved to compel arbitration because, D says, by downloading the program P agreed to the clause in the download license. P was unaware of license, it could only be viewed by clicking on hyperlink. -The court held that because P coud not have reasonably been aware of the license at the time of downloading the program, and therefore did not have reasonable notice of the license terms. Also, the SmartDownload claims are unrelated to the agreement for Netscape Communicator, therefore by clicking on the agreement they were not clicking on the SmartDownload agreement. Rule: The act of downloading software does not indicate assent to be bound by terms of license agreement, where a link to such terms appears on, but below that portion of the web page that appears on the users screen when such downloading is accomplished. -Downloading in the absence of conspicuous terms is not an act that binds plaintiffs to those terms. Termination of Offer: Destruction of Power of Acceptance -Race to accept before other events or revocation. General rule, a revocation terminates the power of acceptance, unless the offer has already been accepted. Effective when received, minority: CA, others: On Dispatch. Usuually must be communicated, exception: Offr to public, Indirect Revocation(Dickinson). - Hendricks v. Behee -D placed $5,000 in escrow account for the purchase of land of 3 rd party. Behee mailed a written offer of $42,500 for the real estate and $250 for a dinner bell and flower pots. Smith signed the agreement but Behee notified an agent of Smith that he had withdrawn the offer before he received notice of the acceptance. Rule: A contract is not formed until acceptance has been communicated to the offeror, the offeror can revoke prior to communication of acceptance. Dickinson v. Dodds (Indirect Revocation) -June 10, Dodds offers land to Dickinson to be open until June 12. On June 11, someone tells Dickinson that Dodds is selling the property someone else. Dickinson gives Dodds his acceptance on June 12. -The court held that since P had learned from a third party that the offer had been revoked, there had been an indirect revocation. Rule: The offer is revoked despite direct communication, if theofferee obtains information that offeror has taken action showing that he has changed his mind. -Revocation of firm offers(ones to stay open for a certain period of time, act in the same way as ordinary offers. -Rationale: A promise without consideration is not binding. A promise to keep an offer open without consideration is therefore not binding also. A firm offer with consideration for the expressed time with consideration is an option contract, and is irrevocable. Irrevocable Offer: Option Contracts - If the offeree gives consideration for the promise to keep a firm offer open, it is irrevocable for the period stated, an option contract (see Humble Oilbelow). Even if there is no true consideration for a firm offer, uner majority rule the offer

(G)

is irrevocable if it recites a purported or nominal consideration (at least if the offer is in wrting and proposes an exchange on fair terms in a reasonable time). - A firm offer is also irrevocable if the offeror should have foreseen the offer would induce reliance by the offeree and such occurs. (see Drennan below) Humble Oil & Refining Co. v. Westside Investment Corp. - P and D contracted for the purchase of property. P paid D $50 to keep the option open for a certain period of time. P then wrote to D to amend the K to extend all utility lines to the property prior to the closing date. Before option expired. Then P wrote D that it wished to exercise option prior to the option being over. D contended that the counteroffer of the amendment terminated Ps power to accept. - -The court held that P is entitled to specific performance because valid consideration was given for the option. The option is a separate agreement and gave P the power to accept within the specified time and boud D to keep the option open for the time. It was still valid when P exercised the option. - The Restatement 2nd provides that an option gives the power to accept despite revocation, counteroffer, or the death of offeror. - Rule: If the original offer is irrevocable and creates in the offeree a binding option, the rule that a counteroffer terminates the power of acceptance does not apply. Marchiondo v. Scheck - D offered to sell real estate to a prospective buyer and agreed to pay commission to P. The offer set a six day limit to accept, and P received a notice of revocation by D on the sixth day. Later that day P secured an acceptance of the offer. - The court held that the offerees partial performance furnishes acceptance and consideration for a binding option contract conditional on the offerees full performance. Ds right to revoke hinges on whether P had partially performed or not prior to revocation. The case was remanded to determine whether P partially performed prior to revocation, an issue of fact. - Rule: If an offer invites an offeree to accept by rendering performance,an option contract is conditional on the offerees completion of performance in accordance with the terms of the offer. Drennan v. Star Paving Co. - P was preparing a bid for a construction project. On the day of the bid, D phoned its bid for $7k. The bid was included in the overall bid of P to the school for the project. Ps bid was accepted and the next day D phoned P to tell him that he made an error and could not provide the paving for less than $15k. P then had to find another company to do the paving for $11k. P then sued for the difference. - The court held that since the bid was low, that D should have reasonably believed it would be accepted by P. It induced action of a definite and substantial character on the part of the promise. Where there is an offer for a unilateral K, the offer is revocable at any time before complete performance is obsolete. When any part of the offer is given or tendered by the offeree, the offeror is bound. Reasonable reliance acts in lieu of consideration. D had a stake in Ps bid. P is bound by its bid to the school makes it fair to bind D by his bid to P. The mistake was not one that P should have reasonably known.

Rule: A promise which the promisor should reasonably expect to induce action or forebearance of a definite and substantial character on the part of a promisee and which does so, is binding if injustice can be avoided only by enforcement of the promise. o There is an implied promise to hold the offer open for a reasonable time. o The rule is a bit one sided, as P is not bound to use the bid of D after awarded the project by the school. - Restatement- reliance on a firm offer creates irrevocability, at least to avoid injustice. III. Insufficient Agreement: Indefinite, Incomplete, and Deferred Terms - Another problem: after negoiations have produced an agreement on proposed exchange, one party may withdraw because of terms not agreed upon., or left to future negotiations. (A) Defective Formulation and Expression of Acceptance: The Peerless Problem - One parties assertion that defects in the process of formulating or expressing an agreement justifies withdrawal or avoidance without liability, even though that agreement satisfies the requisites of a contract. Raffles v. Wichelhaus - P contracted to sell D bales of cotton on the ship Peerless. There were two ships known as the Peerless, each carrying cotton on the same route. The ships were scheduled at different times of the year, and the parties misunderstood which cotton they would be receiving. - The court held that since both had separate interpretations of the contract, it is not binding. The ambiguity was reasonable, and parole evidence was used to determine that both parties intended a different Peerless. When there is ambiguity, the court looks at the intent of the parties, and since the intent of the parties was ambiguous as to a material part of the contract. There is no meeting of the minds and thus no binding contract. - Rule: Where neither party knows or has reason to know, the ambigiuity is given the meaning that each party intended. Where each party subjectively attaches different, reasonable, interpretations to their expressions in a contract, no contract is formed. Konic International Corporation v. Spokane Computer Services, Inc. - An employee of D sought to buy a surge protector. After searching he found none that met the needs of D. He contacted P and asked what the units price was. The employee of P stated fifty-six twenty. P meant 5620, not 56.20 as D interpreted. The sp was ordered and installed. 2 weeks later when the order was being processed, the discrepancy was discovered. D immediately tried to return the product, stating the employee had no authority to order the part. - The court held that since there were different interpretations of the price, no contract was formed. There was no meeting of the minds. - Rule: There can be no contract when the parties give two interpretations to a material term. (B) Indefinite Agreements - An apparent bargain will not be enforced if it is found to be too indefinite: i. its terms are so indefinite that they show the parties did not regard themselves as having completed a contract, or ii. Even if it seems that the parties regarded themselves as completing a contract, it is so indefinite that a

(C)

court cannot determine its material terms with a reasonable certainty or fashion an appropriate remedy for breach - Courts may fill the gaps in a contract with implication Varney v. Ditmars - D told P that if P would continue working until the first of the year, he would close books and give P a share of the profite. P told D that he intended to stay home on election day, Nov. 6. That day P got sick and couldnt return to work until 12/1. D informed P that since he did not come to work on election day he was being discharged. - The court held that in order for a contract to be valid, the promise or agreement betwwen the parties must be certain and explicit so that their full intention may be ascertained to a reasonable degree of certainty. This contract is not so certain and hinges on so many outside aspects that are indefinite that the contract itself has to be indefinite. Thus, the intention of the parties is pure conjecture. The courts cannot aid parties when they are unable to agree upon the terms of their own proposed contract. - Rule: In order for a contract to be valid, the agreement must be explicit so their full intention can be ascertained to a reasonable degree of certainty. Invokes a standard of reasonableness, a promise to pay a fair value of services rendered. Griffith v. Clear Lakes Trout Co., Inc -.P and D made an agreement that P would buy fish from D and then P would raise them to be market size. The demand for trout went down and D started buying less fish. There was disagreement on what the term market size means. P filed suit for breach because D stopped buying fish from P. -The court held for P because there was reasonable certainty Incomplete and Deferred Agreement -In general, agreements to agree are not enforceable. The agreement does not give rise to legal enforceability unless the parties agree on relative term. -The courts can neither force the parties to agree nor determine what they wouldve agreed upon. There is no room to supply a reasonable term because the parties did not just leave a gap, but their gap filling mechanism has failed. -If there is a complete omission the courts may fill in the gap reasonably, but if there is a provision to be agreed upon, the court likely will not fill the gap. Metro-Goldwyn-Mayer, Inc. v. Scheider - D refused to perform in a television series. The parties negotiated for several weeks for D to appear in a pilot film and the TV series that might develop therefrom. Initially there was an agreement on the broad outlines of the contract and its financials. The only essential term without an articulated understanding was the start of the TV series. D argued that there was not a complete contract between the parties. - The court held that in many instances parties negotiate agreements on the essential actors of a contract and begin performance on the good faith understanding that agreement on the unsettled matters will follow. The court will then find and enforce the contract if some objective method of determining the unsettled elements is available. The court filled in the gaps. - Rule: If the court can find an objective way to fill in the gaps on unsettled matters of a contract, it will based on the contract, commercial practice or other usage and custom. Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher

D leased a store from P for 5 years at a specified rate. In the lease it stated that the lease could be renewed for 5 years at a price to be agreed upon. D wanted to renew, but was told the price would be 900, 400 over market value. D filed suit for specific performance, and the trial ct. ruled for him. The ct. ruled an agreement to agree is unenforceable for a material term. Rule: A real estate lease provision calling for the renewal of the lease to be agreed upon is unenforceable due to its omission of a material term.

Oglebay Norton Company v. Armco, Inc. - P and D entered into a long term contract for the shipment of iron ore by P for D. The two had a long term dealing with eachother. Both parties realized that due to Ds growing capacity needs that P would have to invest capital to maintain, upgrade, and purchase iron ore vessels. The agreement provided for primary and secondary price rate mechanisms tied to prices recognized by leading iron ore shippers. After several years and extensions, the two couldnt agree on a price for shipping for the 1985 and later 1986 seasons. P sought declaratory relief by the court to determine a rate. D said that they were not bound by the K. - The court held that the parties continued to deal with eachother despite the fact that the pricing mechanisms failed and that shows that they intended to be bound by the contract. Ps dedication in upgrading and purchasing vessels upn the agreement further shows that the parties intended to be bound \and relied long term. - Rule: The court will look at parties course of dealing in order to determine their intent to be bound. Comment: How Should the Law Set Default Rules? 168th and Dodge, L.P. v. Rave Reviews Cinemas, LLC (D) Remedies Where Agreement Incomplete or Indefinite Hoffman v. Red Owl Stores, Inc. -D promised P that it would establish him in a supermarket for the sum of $18k. In reliance upon the promise and the recommendation of his agent, P purchased a grocery store to gain experience. P then sold it to D before the profitable months and bought a land option for 1000. P then moved near the land and was told the franchise would cost $24k. He then acquired the amount, mainly from a loan from his father-in-law. He was then told it would be 2000 more and he would have to sell his bakery. D then sid the money from his f-i-l would have to be agift not a loan. P then sued for damages. Won, D appeals. - The court held that under promissory estoppel, P should be awarded damages. Rule: Promissory estoppel, a person whom the promisor should reasonably expect to induce action or forbearance of a definite and substantial character and which does induce such action is binding if injustice can be avoided by its enforcement. IV. The Consideration Requirement (A) An Historical and Definitional Note -At early stage in contract law, consideration defined as either a benefit received by the party promising to perform or a detriment incurred by the party to whom performance was promised.

-In practice, the definition was not too helpful. First, overbroad. i.e. a promise to make a gift imposes a condition, but conditional gifts are held to lack of consideration. (B) When Is an Act or Promise Bargained for and Given in Exchange? -Bargain approach- Treating bargain equivalent to consideration. A bargain is an exchange of promises, acts or both. Each party each party views what she gives as the price of what she gets. Includes promises to forebear and actual forebearance from performing acts one is legally entitled to perform. Kirksey v. Kirksey -D wrote a letter to P that If you come down and see me, I will let you have aplce to raise your family. D moved 60 miles to Ps residence and remained there for 2 years. Kirksey then asked her to move. P contended that her loss in moving was sufficient consideration to support Ps promise to give her a place to raise her family. -The court held that the promise was a promise to make a gift. D did not appear to be bargaining for her to move or for her presence. D merely wanted to help her out. There is no bargained for consideration, the case may have been decided differently had promissory estoppel been developed. Rule: To be legally enforceable, an executor promise must be supported by sufficient, bargained-for consideration. Hamer v. Sidway -Uncle promised nephew to give him 5000 if he refrained from smoking, drinking, and gambling until he turned 21. -The court held that the legal detriment by the nephew was bargained-for consideration. -Rule: Forebearance of a legal right is valuable consideration. Langer v. Superior Steel Corp. -D promised P upon his retirement that he will receive $100 pension per month as long as he loyal to the company and he does not seek employment of one of the companys competitors. -The court held that foregoing employment opportunities was valuable consideration for the $100. Unlike Kirksey v. Kirksey, here there was a benefit received by the employer in Langer not attaining employment by one of the companys competitors. A promise in which the promisor should reasonably expect to induce action or forebearance and does so is binding if injustice can be avoided by the enforcement of the promise. -Rule: A good consideration exists if one refrainsfrom doing anything he has the right to do. Jara v. Suprema Meats, Inc. (C) Mixed Motives and Nominal Considerations Thomas v. Thomas -Ps deceased husband owned dwelling houses and told his brother he wanted P to have one of the houses or a certain amount of money. He promised to pay Samuel one dollar annually for P to remain in one of the houses. P remained in one of the houses for a period of time, but when Samuel died, his executors refused to execute an agreement based on the agreement with John. Instead they tried to eject P. -The court held that a promise to perform an act may constitute valuable consideration. Here, Rule: The promise to perform an act may constitute a valuable consideration. (D) Limits of the Consideration Doctrine

(1)

Adequacy of Values Exchange Browning v. Johnson Apfel v. Prudential-Bache Securities, Inc. -P approached D with a proposal for issuing municipal secureties through a computerized system. P conveyed his idea for using a stipulated rate based on use for a term. D was to pay even if the idea became public knowledge. During the first year D was the only user of the system. D then refused to make payments. P appealed to certify whether novelty is needed for an idea tro serve as consideration. -The court held that novelty is not required to be consideration. Consideration is merely value to the buyer. Consideration may be grossly unequal and still suffice. In past cases novelty was used to provide the source of the idea, here it is known the source of the idea. Rule: Consideration must have value to the buyer, there is no requirement that an idea used as consideration must have novelty. Jones v. Star Credit Corp. -P, a welfare recipient, purchased a freezer from D for $900. (1439 including credit charges and sales tax). The actual value of the freezer was 300. -The court held that the contrct is unenforceable because of unconscionability. Other factors go into the unenforceability of an unconscionable contract. 1) financial resources of buyer known to the seller at time of sale, 2) knowing advantage taken of the buyer, and 3) a gross inequality of bargaining power. Rule: A court may refuse to enforce a contract for the sale of goods on the ground that an excessive price renders the contract unconscionable. In re Green -D lived in adultery with P. D gave P substantial sums of money and a 70,000 house. When the relationship hit the skids, they executed a sealed written agreement that P would pay D $1000/month, assigned her a 100,000 life insurance policy and to maintain the premiums on it, and to pay the rent of her house. The consideration was stated to be $1 and other valuable considerations. D made payments but then went bankrupt, P sued for enforcement against his bankrupt estate. -The court held that a $1 consideration, being nominal will not support this agreement. There is no other sufficient consideration in the agreement. There is no proof that other valuable consideration was exchangedand sex does not count, This agreement cannot disguise what is actually a gift. Rule: A consideration given by one party which is only token or nominal does not constitute sufficient consideration. -Adequacy of consideration vs. Sufficiency of consideration Fiege v. Boehm - D promised to pay money if P would refrain from instituting bastardy proceedings, but D, after blood tests, determined Ps bastardy claim ws invalid and refused to pay. - The court held that if a party believes in good faith that the claim foregone is valid, the forebearance is consideration for a return promise. - Rule: Forebearance to assert an invalid clim may serve as consideration for a return promise if the partieds at the time of the settlement reasonably believed in good faith that the claim was valid. (2) Pre-Existing Duty Rule

Levine v. Blumenthal -D told P that that he could not pay the higher rent called for by the lease for the second year of occupancy. P accepted the lower rate then sued D for the deficienct. -The court held that there was no adequate consideration for the modification. Rule: Neither economic disasters nor acceptance of partial payments will be considered adequate consideration for the modification of contractual obligations. Alaska Packers Association v. Domenico -A group of seaman who had agreed to ship from San Francisco to Alaska at a fixed pay, refused to continue working once they reached Alaska and demanded a new contract with more compensation. The superintendent gave them a new contract. The seaman resumed work and D refused to pay them the new K. - The court held that the second contract with the seaman is unenforceable, despite the seaman completing there performance in relianceof it. NO reasoning can change the plain fact that the party who refuses to perform and thereby coerces a promise from the other party to pay him an increased wage for work already agreed to takes an unjustified advantage of the necessities of the other party. Rule: A promise to pay a man for doing that which he is already contracted to do is without consideration. Angel v. Murray -P objected when the City of Newport paid D $10k more/yr than the original contract price for collecting refuse in the city. There were unforeseen increases in the work. -The court held that the extra compensation was enforceable because it was motivated by unforeseen events not anticipated at the time of the contract. Rule: An agreement by which a party is promised additional compensation for performing a duty which he is already contractually obligated to perform may be enforced if the new agreement was voluntarily entered into and was prompted by the occurrence of events which were not anticipated when the original contract was entered into. (3) Mutuality of Obligation -Both parties must be bound by the contract. An illusory promise is not a contract. -An illusory promise- a statement that has the form of a promise, but it is not a promise in its substance. insofar as I want to buy/sell but I may terminate, If I want to. Etc. There is no consideration and therefore the promise is unenforceable. -Applicable only to bilateral contracts, not unilateral. -Conditional Promises: The promisor has limited his future options because if the condition occurs, he must perform. It is not illusory and constitutes valid consideration even if the condition is in the promisors control. - Implied promise to use best effort when there is no explicit mention of it.(See Wood v. Lady Lucy Duffy) Wood v. Lucy, Lady Duff-Gordon -P received exclusive rights for one year, renewable on a year to year basis if not terminated by 90 day notice, to endorse designs with Ds name

(2)

on them and to market all of her fashion designs, for which she would receive half of the profits. D broke the contract by placing her endorsement on designs without Ps knowledge. -The court held that while the contrct did not precisely state that P had promised to use reasonable to place Ds endorsement and market and license all of her designs, such a promise can be implied. The implication arises from the circumstances in that P is to benefit in profits he makes from the work. The promise to pay D half of the profits and make monthly accountings was a promise to use reasonable efforts in bringing revenues. Rule: While an express promise may be lacking, the whole writing may be an instinct with an obligation-an implied promise- imperfectly expressed so as to form a valid contract. Omni Group, Inc. v. Seattle-First National Bank -P signed an greement to purchase the land of D. Ps performance subject to its receiving a satisfactory engineer and architects report concerning the lands development potential. P notified D that it would forego the report. Then D refused to go through with the transaction, P sued for breach. D contended that the condition made the contract illusory. -The court held that Ps acceptance of the feasibility report was not let to its unfettered discretion. It was bound in good faith to either accept or deny it. The promise was not therefore illusory, it supplied sufficient consideration. Rule: A contractual condition calling for the subjective satisfaction of a party imposes a duty of good faith in the exercise of discretion and thus is not illusory. Moral Obligation: Promise Plus Antecedent Benefit - The promisors motivation for making the promise is a past benefit to the promisor or detriment to the promise that gave rise to a moral obligation, but not a legal obligation, to make compensation. The promise is similar to a donative one, it is not bargained for and is altruistic. However, it is not purely donative in that it is motivted by a past transaction that gave rise to a moral obligation to make compensation. - Traditional Rule: it is unenforceable and is donative(see Mills v. Wyman) - Exceptions: - Promise to pay debt barred by statute of limitations. -Enforceable even if no new consideration is given by the promise. - The new promise is enforceable, if the debtor promises to pay less or in installments that is all he is obliged to . -Promise to perform a voidable obligation - Promise to perform a ratification is enforceable despite new consideration, if the new promise is nt subject to the same defects that made the original obligation voidable. - Promise to pay debt discharged by bankruptcy, similar to stat. of lim. Above. Modern Rule: Promise to pay Moral Obligation Arisingout of past economic benefit to promisor -If the promise is based on a material benefit, provided the benefit gave rise to an obligation to make compensation(See Webb v. McGowan) - Restatement: a promise made in recognition of a benefit previously received by the promisor to the promise is binding to the extent necessary

to avoid injustice., not binding if the value is disproportionate to the benefit -Although, a promise on moral obligation is unenforceable where the promisor did not receive a material benefit, even if the promise incurred expenses (Mills v. Wyman) May be held from reliance now though. (A) Restitution and the Scope of Quasi-Contract Bailey v. West - D purchased a horse from 3rd party. The horse arrived lame, and the 3rd party refused to receive it back. D said he would not pay for its care, and the horse was delivered to P who took care of it. P sent bills to 3rd party and D. 3rd party prevailed for price of horse v. D. P sued D for the services that he conferred. - The court held that where the service was gratuitously conferred without being requested, P is merely a volunteer and will normally be denied restitution for the services. P was neer authorized to perform the services. D must accept the benefits conferred by P. - Rule: A party whovolunteers his services to another is not normally entitled to restitution for their reasonable value. (B) Moral Obligation Mills v. Wyman -P took care of Ds son without being asked to do so. D then promised to pay compensation for expenses incurred by P. D later refused to compensate P. -The court held that there must be some preexisting obligation which will suffice as consideration. P was merely an efficious intermeddler and the benefit was not given to D directly. Rule: A moral obligaton is sufficient consideration. Webb v. McGowin -P saved D from grave bodily harm or death by placing himself in danger. D in return promised P compensation. D died and the executors of his estate refused to pay the promised compensation. -The court held that the moral obligation of past performance is sufficient consideration for the agreement. D received a material benefit from P. Eventhough there was no original duty or liability resting in the promisor. Rule: A moral obligation is sufficient consideration to support a subsequent promise to pay where the promisor has received material benefit. Harrington v. Taylor - P saved Ds life by deflecting an ax blow with her hand. D agreed to pay Ds damages. D made some small payments then refused. - The court held that the law does not reflect voluntary acts for humanitarian purposes as adequate consideration to support subsequent promises. - Rule: A voluntary action of a humanitarian nature will not be adequate consideration for a subsequent promise. (4) Promissory Estoppel: Promise Plus Unbargained for Reliance - Former Rule- Reliance irrelevant: A donative promise was unenforceable even if it was relied on (see Kirksey v. Kirksey) - Modern Rule: If a donative promise induces reliance by the promise in a manner tht the promisor should reasonably have expected, the promise will be legally enforceable, at least to the extent of the relaiance.

Restatement 1st (90)- a promise which the promisor should reasonably expect to induce action or forebearance of a definite and substantial character on the part of the prommisee and which does incuce such action or forebearance is binding if injustice can be avoided. Restatement 2nd- damages may be limited to the extent of the reliance, substantial reliance not required. It is enough that the promisor should have reasonably expected that the promise would induce reliance. -check to see if there is a bargain contract before considering promissory estoppel because it is more valuable to the promise. Ricketts v. Scothorn In reliance of her grandfathers promise to pay,P quit her employment. The court held that P quitting her job was not sufficient consideration for the promise. Therefore the contract fell through. The note was a gift, and absent reliance would not normally be enforced. Some courts treat the reliance as consideration, however this is misleading. Rule: A promise may be legally binding without considerationif it reasonably induced action or forebearance and if justice will be avoided by its enforcement. Congregation Kadimah Toras-Moshe v. DeLeo Ps rabbi visited decedent while sick who gave an oral promise to donate $25k. P planned on using the money to transform storage to be library in decedents name. -The sourt held that it was an oral gratuitous pledge and there was no indication how the money was to be used by the decedent. There would be no injustice in declining to enforce the promise. The doctrine of promissory estoppel should be limited to where a promise brings about an injustice. Rule: An oral promise make a gift cannot be enforced unless the promisee has acted in reliance on the promise Blinn v. Beatrice Community Hospital and Health Center, Inc. -P received job offer from another hospital, went to D seeking assurance about his position. They told him he was doing a good job and that they had at least 5 more years of work to do. He was then told to resign a year later. - The statement of assurance to P was deemed to be indefinite. An employee subjective view of job security is not sufficient reliance to form an implied contract. No intent by D besides employment at will. The court held that there was enough reliance though to support Promissory Estoppel. Relince needs to be reasonable and foreseeable, P reasonably relied on the promise of D and foregoed the other opportunity. -Rule: The difference between contract claims and promissory estoppel is that a contract requires that the promisor intended to make a binding promise, while promissory estoppel requires only that the promisees reliance on the promise be reasonable and foreseeable, even if the promisor did not intend to be bound Cohen v. Cowles Media Co. -P and D made an agreement that in exchange for information, theat D would not reveal his identity. D later published his identity. -The court held that PE is enforced to stop injustice.

Rule: A promise of confidentiality made to a news source may be enforced under the doctrine of promissory estoppel to prevent any injustice resulting rom revealing the sources identity.

All-Tech Telecom, Inc. v. Amway Corporation -Rule: While a warranty may give rise to a promissory etoppel claim in certain limited circumstances, a party may not use promissory estoppel if it fails to show a breach of contract based on the warranty -Economic Loss Doctrine: The economic loss doctrine indicates that economic losses resulting from a defective product are recoverable, if at all, under contract law, instead of tort law. V. Avoidance of Contracts (1) Capacity to Contract: Infancy, Mental Incompetence (A) Infancy -A contract made by a minor(infant-younger than 18), is voidable at the minors option, although the minor may enforce the contract against an adult. -Restitution- If the minor disaffirms the contract she must reurn anything she received under the contract and still retains at the time of disaffirms. A minor is liable in restitution for the reasonable value of necessaries furnisher to her. (B) Mental Incompetence -If a person lacks the mental capacity to contract only if the mental processes are so deficient that he lacks understanding of the nature, purpose, and effect of the transaction. Psychological or emotion problems that affect a partys judgment or reasoning do not in themselves constitute mental incapacity for contract law purposes. The psychological condition must deprive the party of an understanding of what he is doing. Restatement- unable to act in reasonable manner, and other party has reason to know of the condition. (2) Defects in Bargaining Process -grounded in efficiency as well as equity, can infer that the defect in the bargaining process the revealed-preference presumption fails. Each contractor is no longer made bette off in the exchange. (A) Unilateral and Mutual Mistake - Mutual mistake- a shared mistake made by both of the parties. In contract law, a mistaken assumption shared by both of the parties as to the condition of the outside world. -Modern Rule- where parties enter into a contract under a mutual mistake concerning a basic assumption of fact on which the contract was made, the contract is voidable by the adversely affected party if the mistake has a material effect on the agreed exchange and the adversely affected the party did not bear the risk thaty the assumption was mistaken. -Party cant assume risk of mistake, or have a mistake in judgment. -Unilateral Mistake- A mechanical error of computstion, perception or the like concerning a basic assumption of which the contract was made. Boise Junior College District v. Mattefs Construction Co.

-D bid on a job by P with a bid bond that if they refused to perform they had to pay difference. P accepted 3rd lowest bid because the others, including D, wouldnt sign. P sued D for the difference. -The court held that the item omitted to create the bid was substantial and material. Also, P still received a bid lower than estimated. Rule: One who errs in preparing a bid for a project is entitled to recission if he can establish that a mistake is material, enforcement of a contract pursuant to terms of the erroneous bid would be unconscionable, the mistake did not result from violation of a positive legal duty or from culpable negligence, the party to whom the bid was made will not be prejudiced, and prompt notice of the error ws made. Beachcomber Coins, Inc. v. Boskett -P bought a coin from D believing it was very valuable. His principal then examined the coin and he purchased it for $500. Later found out it was counterfeit. -The court held that there was a mutual mistake and therefore the contract was voidable by the adversely affected party. Both parties believed the coin was valuable and that was the basis for the contract. Rule: A mutual mistake as to basic assumption on which the contract was made provides a basis for recission of the contract for mutual mistake of fact. Comment: Reformation for Mistake in Expression OneBeacon America Insurance Co. v. Travelers Indemnity --Rule: When a written contract can be reformed to better express the extrinsic intent of the parties, the court will do so in order to assure the contract reflects what the parties agreed upon. -Reformation fixes the mistake of writing, not the mistake of the agreement. Ayer v. Western Union Telegraph Co. -P sent a telegraph through D that he was selling 800 M laths two ten net. D omitted the word ten. -The court held that while D is not a party, his mistake set the terms of the agreement. So D is bound by his mistake. Rule: The Party that selects the means of communication to transmit an offer bears the risk of loss caused by errors in the communication, unless the receiver has reason to know of the error or the communicated offer was forged, in which case, the offeror may have an action against the sender for damages if the sender was negligent. (B) Fraud and the Duty to Disclose -A misrepresentation is fraudulent if the misrepresenting party intends her assertion to induce another party to enter an agreement and she either (i) knows or believes the misrepresentation is false, (ii) lacks confidence in the the assertion but presents it as fact, or (iii) says or implies there is a basis for the assertion, such as personal knowledge or investigation, when the basis does not exist. (Rest 162) -Material misrepresentations are also voidable by a party who justifiably relies on it and agrees to a contract as a result of it. Nondisclosure- A party that proposes a contract does not have an obligation to affirmatively disclose facts concerning the subject matter of the contract. However, disclosure of material facts is required if the prospective parties are in a fiduciary relationship or a relationship of trust

or confidence. Disclosure may also be required where a material fact is known by one party by virtue of his special position and could nt be readily determined by the other party in the exercise of normal diligence. Laidlaw v. Organ -D delivered 111 hogheads of tobacco to P under contract. D later took possession by force. P had knowledge that the was of 1812 was going to end increasing the value of the tobacco, but did not disclose the information to D. -The court held that a vendee is not obligated to disclose information that he knows. Either party must not say anything or do anything to misrepresent information to the other. The court believed that D cou;dve gotten the information if it had been diligent. Rule: A vendee is not obligated to communicate information to the vendor which might influence the price of the commodity being exchanged, even if that info is exclusive to the vendee. However, they must not misrepresent the information in any way. -Two types of fraud: fraud in executing the agreement(party doesnt know he is signing a K0 and fraud in inducement ( misrepresentation of facts). Hill v. Jones -Before buying Ds house, P asked whther it had been infested with termites, D denied that there had ever been a problem with termites when in fact there had been and he had that knowledge. -The court held that failure to disclose information in good faith is the same as misrepresentation. The information wouldve affected the buyers decision and therefore shouldve been disclosed. Once P asked about the problem, there is a duty to disclose Rule: A homeowner has a duty to disclose material facts that affect the propertys value or desirability and that are known or accessible only to him, provided the seller knows that the buyer does not know the facts or that they are not within the reach of the buyers diligent attention and observation. Vokes v. Arthur Murray, Inc. -P was continually cajoled nto purchasing thousands of hours of dancing lessons when D knew that she had no aptitude towards dancing. -The court held that despite misrepresentations of opinion not normally being actionable, a statement made by a party in a position of superior knowledge may be regarded as a misrepresentation of fact. When a party undertakes to make representations based on superior knowledge, it as a duty to act honestly and to disclose the entire truth. Rule: Although a party has no duty to disclose facts within his knowledge or to answer inquiries respecting these facs, if the party undertakes to do so, he must disclose the whole truth. (C) Duress and Undue Influence -Duress- Acontract is voidable on the ground of duress where consent was induced by wrongful threats. - A threat to withhold something that a party needs or wants is not duress, because it is not wrongful to refuse to contract or to agree to contract only on favorable terms. -Economic Duress is valid when : i) the party commits or threatens to commit a wrongful act, including breach of k, that would place the other in a positin that would seriously threaten his property or finances; and ii)

no adequate means are available to avoid or prevent the threatened loss, other than entering into the k. - Undue influence is unfair persuasion of a party, who is under the domination of the person exercising the persuasion or who by virtue of the relation between them is justified in assuming the other party will not act in a manner inconsistent with its welfare. If a partys assent is induced by the other partys undue influence, the contract is voidable by the victim. Machinery Hauling, Inc. v. Steel of West Virginia -After D hired p to transport steel to a 3rd party, the 3rd party rejected the goods as unmerchantable, D demanded that P pay the vlue of the goods or else it would cease doing business with them. -The ocurt held that there was no duress put onto P by D. There was no ongoing contract and the threat was not coupled with a threat to terminate an existing contract. Rule: Where a party is forced into a transaction as a result of unlawful threats or wrongful, oppressive, or unconscionable conduct by the other party which leaves no reasonable alternative but to acquiesce, he may void the transaction and recover any economic loss. - Future expectancy is not a legal right on which a plaintiff can anchor an economic duress claim. (D) Unconscionability - Procedural (bargaining process) and substantive (contract terms) Ferguson v. Countrywide -P sued her employer, D, employer argued that she was bound by the arbitration clause in her contract. - The court held that since P was in a position of unequal bartgaining power and had to agree to the terms without the ability to negotiate the contract is so one-sided that it is unconscionable. -Rule: A contract clause must have some degree of both procedural and substantive unconscionability in order to render a contract unenforceable because it is unconscionable. (3) Illegality: Agreements Unenforceable on Grounds of Public Policy -If a proposed contract is legal at the time of the offer but becomes illegal prior to acceptance, the intervening illegality terminates the offer as a matter of law. If the contract is made legally, but becomes illegal thereafter, it is discharged. -A contract is illegal if either the consideration or the object of the contract is illegal. Some are illegal because they violate public policy, others by statute. -The contract is void, neither party can enforce. The public importance of discouraging illegal contracts outweighs considerations of possible injustice between the private parties. Severable portions may be enforced, Sinnar v. Le Roy -P attempted to bribe D in order to obtain a liquor license for his store. -The court held that serious illegality renders the contract unenforceable and voidable. The court will leave the parties as they found them. The court will examine witnesses in order to discover illegality. A finding of serious illegality will lead a court to bar recovery, as is the case here. If the illegality is not serious the court will try to uphold the K. Obviously, it is serious here with bribery and is against public welfare.

Rule: A court will not enforce an illegal contract. A defendant need not plead the illegality defense if the court determines that the illegality is of a serious nature. Broadley v. Mashpee Marina, Inc. -P injuredhis ankle at D. It got caught b/w a docks. P had signed a waiver and D argued that he is not liable under the exculpatory clause. -The court held that the exculpatory clause is overbroad and is illegal. The contract doesnt make a distinction between ordinary negligence and gross negligence. Rule: Agreements to waive claims for mere negligence are generally enforceable at common law Data Management, Inc. v. Greene -D worked for P and had a clause in his contract that he would not compete in the State of Alaska for 5 years following termination. -The court held that the contract is overbroad and is therefore illegal. There needs to be some reasonable and drafted in good faith. The intent of the parties at the time of contracting was reasonable. This includes procedural and substantive reasonableness between the parties. All overbroad covenants are unconscionable. Rule: An overbroad covenant by the employee not to compete with his employer following termination will be reasonably modified to render it enforceable unless the employer did not draft it in good faith. Watts v. Watts -P and D were cohabitants for 12 years. They lived essentially as husband and wife. She wants some of the assets accumulated during there cohabitation. -The court held that a cohabitant may recover against the other party if it is proved that the other was unjustly enriched. One who was unjustly enriched has a moral obligation to make restitution where retaining such a benefit would be unjust. Rule: An unmarried cohabitant may seek a property settlement under contract and unjust enrichment theories. Wallis v. Smith -P sought monetary damages against D, a consensual sex partner, for bearing a child after she misrepresented to him that she was practicing birth control. -The court held that For public policy reasons the court believes that making parents responsible for their parenting of children should be enforced. Rule: breach of contract theory cannot be the basis for indemnification for expenses involved in raising a child that was born as a result of a violation of a contraception agreement. VI. Formal Requirements: The Statute of Frauds (1) General Scope and Effect -Requires a written contract for certain types of contracts. The purpose is to prevent fraud and perjury by persons who might falsely claim a contract was made, when it was not. I) interest in land, ii) sale of goods over $500 (unless receives and accepts goods, part payment, special manufacture, written confirmation, admission in court(SWAP)), iii) consideration of marriage, iv) contracts that cannot be performed within a year, v) contracts for suretyship (2) Within The Statute (A) The One Year Clause - Contracts that by their terms cannot be completed within one year of their making must be written. Starts the date the contract is made.The performance merely needs to be possible within the year, not necessarily likely. If a party fully performs the contract will likely be upheld, because the other party could sue in restitution of the benefit that was received.

Professional Bull Riders, Inc. v. AutoZone, Inc. -D sponsored events for P, P drated agreement for D to sonsor for 2 years, choice to renew or cancel after one. D never signed, but P clams they agreed based on their actions. D said they wanted to cancel but P still used them then sued for breach. -The court held that this K does not fall within the statute of frauds because it had the chance to be fully performed within a year. Rule: The Statute of Frauds applies only to those agreements that exclude by their very terms, the possibility of performance within one year, and if the agreement could have been performed within one year, the statute is inapplicable. (B) Interests in Realty -Contract for sale or any interest of land must be in writing. Though not to share the profits from the purchase. Out of the scope of the interest in land. Leases(though, some not under a year), interest in land(determined by property law). Sullivan v. Porter - Property sale where defendants handed over property then wanted it back after plaintiff made improvements and also partial performance. - The court held that party: i) entered K, ii) party partially performed(gave them money), iii) the performance was induced by the others misrepresentations - Rule: To remove a contact from the operation of the statute of fraud based on part performance, the party seeking enforcement must establish by clear and convincing evidence that the parties did in fact enter into a contract; that he partially performed under the contract; and that his performance was induced by the other partys misrepresentations, which may include acquiescence or silence. Compliance With the Statute Crabtree v. Elizabeth Arden Sales Corp. -P was hired by D to be a sales manager. No contract was signed, but separate writings pieced together showed P to be hired for 2 years with pay raises after the first and second six months. When he did nt receive the bonuses he sued for breach. -The court held that there needs to be a written document because it is a contract for over a year and falls within the statute of frauds. Parol evidence can be pieced together that is written and signed and therefore there is a valid K. Parol evidence is used to piece together to connect the documents. Rule: If an agreement between two parties is memorialized in several writings, both signed and unsigned, these writings are sufficient to satisfy the statute of frauds as long as the unsigned document clearly refers to the parties transaction. Rule: The statute of frauds does not require the memorandum expressing the document to one document. It may be pieced together out of separate writings, connected with one another by either expressly or by internal evidence of subject matter and occasion. (4) Effect of Non-Compliance Comment: The Statute of Frauds and Estoppel VII. Performance (1) Determining Scope and Content of Obligation (A) Integrated Writings and the Parol Evidence Rule (3)

- Often, an agreement is put into writing, but one party claims there was also an earlier oral or written agreement that was not included in the writing but was intended to be a part of the contract. PE Rule: Parol evidence will not be admitted to vary, add to, or contradict a written contract that constitutes an integration. -A written contract constitutes an integration if the parties to the contract intended the writing to be the final and complete expression of the agreement. Merger Clauses: clauses that state the written contract is the entire contract between parties, they essentially say that all of the agreements have been merged onto writing. Mitchill v. Lath -P bought property form D pursuant to a full and complete written sales contract. P sought to compel D to perform on his parol agreement to remove an icehouse on neighboring property. -The court held that an oral agreement can only alter a written one if it is collateral in form, does not contradict express or implied conditions of the written agreement, and consists of terms which the parties could not have reasonably expected to include in the written contract. Rule: Evidence of an oral agreement may be used to vary a written contract only if (1) the agreement relates to a collateral agreement, (2) the oral agreement does not contradict terms of the written agreement, and (3) it is one that the parties would not ordinarily be expected to put into writing. Masterson v. Sine -D owned a ranch as tenants in common and conveyed it to P reserving the option to purchase the ranch back in 10 years for the same consideration paid for the ranch plus depreciation. D went bankrupt, and her wife sought the right to enforce the option. Parol evidence was introduces to clarify the meaning of the option. -The court held that parol evidence was necessary to define the terms of the contract. Therefore parol evidnce should be used to clarify assignability of the option. Rule: Evidence of Collateral agreement excluded only if the fact finder is likely to be misled thereby. (B) Interpretation Frigaliment Importing Co. v. B.N.S. International Sales Corp P ordered a large quantity of chicken from D, intending to buy young chicken suitable for broiling and frying. D believed, in considering the weights of the chickens that the order could be filled with older chicken, suitable for stewing. - Rule: The party that advocates a special meaning for a contractual term has the burden of proving that the special meaning was the one intended by both parties The Duty of Good Faith -The UCC provides that a term which measures the 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. The party that determines the quantity of requirements or output under such a contract must conduct business in good faith and according to commercial standards of fair dealing in the trade, so that output or requirements will approximate a reasonably foreseeable figure.

(2)

-emphasizes faithfulness to an agreed common purpose and consistency with the justified expectaitions of the other party; bad faith violates community standards of decency, fairness or reasonableness. -Good faith doctrine tries to limit defense expenditures, (A) Scope and Content of the Good Faith Duty (B) Prevention, Hindrance, Cooperation and the Duty of Cooperation Inherent covenant of good faith to not hinder others from performing. Duty of cooperation between the parties. Market Street Associates Limited Partnership v. Frey -A principal of P allegedly deliberately failed to notify D of a particular paragraph in the contract that could result in forfeiture of Ds property. Paragraph stated that if they didnt come to terms on financing for improvements then P could buy the property. -The court ruled that a contracting party cannot use this own breach to gain an advantage. Using superior market knowledge is different than exploiting another party. Depends on whether P believed that D knows of clause or if he was trying to manipulate him. Rule: The deliberate exploitation of an oversight or error by a party in the performance of a contract is a breach of the duty of good faith in the performance of the contract. (C) Exercise of Reserved Discretion Billman v. Hensel - P sought to recover 1000 deposit on home of D pursuant to a contract to sell their home which was not fulfilled by D after they were unable to secure financing. Their attempt to secure financing was pretty feeble. - The court ruled that the subject to financing clausesimpose an implied obligation to make a reasonable and good faith effort to satisfy the condition - The buyers did not make a reasonable attempt and cant rely on a condition of the contract to be relieved - Rule: A provision in a contract that makes a partys performance subject to a condition creates an implied obligation to act on it in good faith (D) Termination of Contractual Relations Other Than for Breach Hillesland v. Federal Land Bank Association of Grand Forks - P worked for D, was named CEO, later discharged. He gave financial counseling to someone and his son ended up buing their farm, bankwas concerned about involvement. He argued that the bank had violaited an implied covenant of good faith in his employment contract. - The court held that his contract was at-will and the bank therefore could use its disgression. An at-will employee can recover if his termination violates public-policy, implied covenant of good faith. Cannot impose good-faith when there is no terms of the employment. - Rule: North Dakota rejects the implication of a covenant of good faith and fair dealing in at-will employment contracts. Allocation of Risk: Warranties and Conditions (A) Representation and Warranties of Quality (1) Express Warranties -Express warranties are created as follows -Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to

(3)

the affirmation or promise -Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description -Any sample or model which is made part if the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model -It is not necessary to the creation of an express warranty that the seller use formal words such as "warrant" or "guarantee" or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the sellers opinion of commendation of the goods does not create a warranty -This indicates that "puffing" does not constitute a warranty. They must be representations of fact regarding the object. (2) Implied Warranties Merchantability Unless excluded or modified, a warranty that the goods are merchantable (of commercially accepted quality) is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Note that the merchant must be a merchant of "good of the same kind" Fitness for Particular Purpose Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required, and that they buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is an implied warranty that the goods shall be fit for such purpose Note that this could be applied to non-merchants as well (3) Limitations of Warranties and Remedies Henningsen v. Bloomfield Motors -An express warranty in a vhicle sales contract disclaimed all other warranties and severely limited the express warranty coverage. -The court ruled that generally an individual is bound by signing an agreement, However, where certain equities in bargaining position exist, courts can void enforcement on unconscionable terms. In this case the warranty was both procedurally and substantively unconscionable. Rule: An express warranty that seeks to severely limit the manufacturers liability and that disclaims all other warranties can be voided against public policy. -Public Policy prohibits enforcement of a disclaimer of warranty when the bargaining power of the parties in unequal and there is no opportunity to negotiate a different agreement. -The UCC prohibits contracts from disclaiming liability for consequential damages resulting from breach of warranty -Still tension b/w K law and torts on issue Express Conditions - Some contracts provide that a party does not have the obligation to perform unless some condition is fulfilled. An event or state of the world that must occur before a party to a contract has a duty to perform is known as a condition.

(B)

(3)

Express Condition: An explicit contractual provision which substance provides, i) an event or state of the world must occur or fail to occur before a party has a duty to perform, or ii) if it does not occur the party is released from their obligation to perform. -It is a contractual provision. (1) Nature and Effect Dove v. Rose -P contended tht although he did not perform exactly as prescribed under the contract, with D he substantially performed and was entitled to payment of abonus under the contract. -The court ruled in favor of D because attendance, the breach, was the essence of the condition on which the contract was based. Rule: A party is bound to performall conditions knowingly accepted under a contract, and unless such conditions are met, performance of the other party is not required. In re Carter's Claim -P sought to buy a company and subsidiaries. P alleged breachof a warranty provision, but Dstated that the provision was a condition precedent and that Ps only remedy was to refuse consummation of the sale. -The court held that the contract distinguished between warranties and conditions and therefore the condition precedent that was to take place prior to closing and gave P the power to void the K is invalid because the deal was closed. The change n the standing of the business was due to natural business dealings as provided for in the condition but not warranty. Rule: An express condition precedent to a partys performanceof a contract may not be treated as a warranty. -If a contracting party fails to comply with a condition of performance, the other party is under no obligation to continue performance, but may not recover damages if it elects to waive the condition and continue performance. (Partys cannot recover damages for failure to comply with condition). Excuse of Express Conditions A condition is excused if the party favored by the condition wrongfully prevents or hinders the fulfillment of the condition. A party may waive his right to insist on fulfillment of a condition upon which his to perform depends. Impossibility or impractibility also excuses the fulfillment of a condition. -Waiver- the intentional relinquishment of a known right. A party excuses the nonoccurrence of a condition on the duty to perform. It is enforceable if given in exchange for separate consideration. Also w/o separate consideration when, i) the waived condition was not a material part of the agreed upon exchange,and ii) uncertainty of the occurrence of the condition was not an element of the risk assumed by the party who gave the waiver. Clark v. West -D paid P $2/pg. for writing law books, P demanded the $6/pg. that he had been promised if he did not drink while working because D knew that P had been drinking and did not object therefore waiving the express condition.

-The court rued that since the express condition was not the material subject of the contract(consideration), it could be waived without new consideration. Rule: A condition of a contract may be waived, but no waiver is implied by mere acceptance of the proffered performance. - Additional consideration in not necessary for the waiver of a condition that is not part of the subject matter of the contract. Comment: Limitations on the Waiver Doctrine (C) Constructive Conditions of Exchange -Often, it can be implied that the duty to render performance under a contract is conditional upon the occurrence of some event or state of the world, even though the contract does not explicitly so state. -Most important CCE is the idea that each party to a contracts performance is conditioned upon the others performance. -Implied Condition of cooperation- the obligation of one party to render performance is impliedly conditioned upon on the other partys cooperation in that performance. -Must notify when performance is due, especially when it is unlikely that the other party knows that something triggered performance. (1) Historical Development Kingston v. Preston -D agreed to sell his business to P, and P agreed to, but did not, give security for the payments. -The court held that the independence or dependence of covenants is to be determined by the intention of the parties, and based on the order of the events. Here, the security was to be given prior to D selling his business to P. Therefore, it was dependent on P giving the security. Rule: Breach of a covenant by one party to a contract relieves the other partys obligation to perform another covenant which is dependent thereon, the performance of the first covenant being an implied condition precedent to the duty to perform the second covenant. - The independence of transactions must be determined from the evident intent of the parties, including the order in which the agreements are to be performed Goodison v. Nunn -P sued D to recover penalty fixed for nonperformance - The court held that Ds duty to perform never arose because P never performed. Rule: Agreements that call for reciprocal acts, to be performed at the same time, are dependent agreements. -A plaintiff must tender his own performance before the defendants failure to perform his reciprocal duties will be considered breach. (2) Contemporary Developments Palmer v. Fox -D refused to make payments to P because he did not cinderize the streets of the land as he had contracted to. The contract was for the property with the improvements and P did not fulfill the street improvement portions as called for in the contract. -The court held that the contract was concurrent, the payments and performance were supposed to be tendered in 5 years. The conditions were dependent,

Rule: Where conditions are concurrent and dependedent, the failure of one party to perform exercises the other partys counterperformance. - Agreements will not be construed to be independent unless it clearly appears that it was the intent of the parties that the agreements be independent. Jacob & Young v. Kent -P built a house for D and the contract called for Reading pipe and the pipe used was not Reading pipe but it was of the same quality. -The court held that since the pipe was of the same quality it would be unfai rto hold the constructor liable. In order for an express condition, it must be ablsoluteley clear in the contract. Dont want to be draconian. Rule: A trivial, innocent omission will not always be a failure of a condition that causes forfeiture of the contract. -For damages in a construction contract, the owner is entitled to merely the difference in value of the structure if built to specifications and the value it has constructed. Note: The part unperformed must not destroy the purpose or value of the contract, The party who has claimed substantial performance s still in breach and is liable for damages but in a much lesser amount. O.W. Grun Roofing and Construction Co. v. Cope -D contracted with P to install a new roof, and D did so with ununiform colored shingles. D attempted to fix but the color was still off. -The court held that in order for a party to substantially perform a contract, he must show that he intended in good faith to comply with his obligations and that anydeviations or ommissions which did occur were unintentional and comparatively insignificant. It is obvious that a party has not substantially performed if the partys general plan and purpose I entering the contract remains unfulfilled. Rule: In order to establish substantial performance, a party must demonstrate that he intended in good faith to comply with his obligations and that any ommissions or deviations which did occur were unintentional and comparatively insignificant. - Deficient performance will not be considered substantial performance if the deficiency is so pervasive as to frustrate the purpose of the contract in any real or substantial sense. Lowy v. United Pacific Insurance Co -P refused to pay D the contract price for ground work he performed on a development because the work was not completed by D. The contract called for excavation and grading work. D completed 98% of the grading work before continuing because of a dispute. P then had another company finish the job. -The court held that because the consideration for each of the jobs was apportioned for in the contract that it was severable and obviously 98% of the grading work is substantial performance. Intent to create a severable contract is implied where the jobs are apportioned for in the contract. Rule: A contractor may recover for work actually performed under a contract if he has substantially performed in good faith. Britton v. Turner

(4)

- P contracted to work for D for an entire year but left without cause before the year was over. - Rule: A defaulting party, although unable to recover on a contract, may recover under quasi-contractual theory the reasonable value of his services less any damages to the other party rising out of the default. - party who receives a benefit fro the partial performance of a contract is liable for the value of that part performance, less any damages suffered due to noncompletion of the performance of the contract Changed Circumstances Impracticability and Frustration of Purpose -Ones duty to perform in not only conditioned upon the absence of material breach,but also performance becoming impractical because of changed circumstances. a) What was the nature of the risk event and its impact on the contractual relationship? b) Was the party seeking relief at fault? c) Did agreement allocate risk? d) How can the court allocate the risk to fill the gap? - Rest. 2nd- If performance is made impractical from event or non-occurrence of event that was a basic assumption of the K, duty to render performance discharged. -The pupose is frustrated, but the performance of the contract is. (A) Existing Impracticability (B) Supervening Impracticability Taylor v. Caldwell - D agreed withP to use their music hall for a series of concerts, burnt down - The court held that both parties were discharged from the contract. Whena contract is reliant on a living person, or thing, and it perishes, it usually escuses performance pertaining to it - The excuse is implied in law, they contracted for the existence of the building - It was the essence of the performance - Rule: In contracts which the performance depends on the existence of a given person or thing, a condition is implied that the impossibility of performance arising from perishing of the person or thing shall excuse the performance. (C) The Effect of Retrospective Government Acts That Prevent Performance or Make It Illegal Centex Corporation v. Dalton - P contracted D for assistance in acquiring thrift institutions. P promised to pay D a finders fee. The Bank Board said that once the deal went through, PP would not be able to pay D the finders fee. - The court held that the contract is uneforceble because of government regulation. P cannot be forced to pay because the regulation made doing so illegal. - Rule: Where a partys performance is made impracticable by the occurrence of an event, the non-occurrence of which was a basic assumption on which the contract was made, its duty to render that performance is discharged. (D) Frustration of Purpose -Even if not impractical, the contract may be discharged by frustration of purpose. Where purpose or value of the contract has been destroyed by a supervening event that was not reasonably foreseen at the time of

VIII.

contracting. The performance is not impracticle or impossible, but rather the purpose is frustrated. Pardine v. Jane -D argued that he should not have to pay rent owing on land he leased form P because he had been deprived of the lands use by the invading army of German Prince Rupert. - The court held that Rule: When a party by his own contract creates a charge or duty upon himself, he is bound to make it good notwithstanding any frustration because he might have provided against it in the contract. - A party who voluntarily takes on an obligation is bound to perform that obligation, notwithstanding any accident or other occurrence Krell v. Henry -D paid P to use a room for the viewing of the coronation of King Eddy VII. King Eddy got sick and the coronation was cancelled. -The court held that D was not obligated to perform under the contract because the essence of the contract had been frustrated. Also, P coud release the room at the later date of the coronation so there was little injustice. The purpose was not the lease of rroms, but for the viewing of the procession Rule: Where the object of one of the parties is the basis upon which both parties contract, the duties of performance are constructively conditioned upon the attainment of the object. - Performance of a contract will be excused if the purpose of the contract is prevented from being performed by an unforeseen event. Notes Breach of Contract and Permissible Remedial Responses -Responses to Breach: material-damages or termination, minor- damages, if a party terminates for a minor breach they are in breach. Material Breach vs. Substantial Performance -Mirror images- If a party has substantially performed, no material breach and vice versa. The doctrine of substantial performance is invoked when a party breaches nevertheless wants to sue for the entire contract price minus damages. Material breach is invoked when a party wants to terminate the contract. (1) Right to Suspend Performance or Cancel Upon Prospective Inability or Breach -Anticipatory Breach- By word or action, avoluntary act that disable the promisor from performing will constitute a repudiation. - Insistence upon terms not in the contract constitutes an anticipatory breach. Also, if someone demands performance to which the contract gives them no right and he states he will not perform unless the demand is complied with. -Only an unequivocal repudiation of performance expressed or implied will constitute an anticipatory breach. A mere doubt does not suffice, but may constitute a prospective inability to perform, which would allow suspension of performance. Hochster v. De La Tour -P was due to perform employment for D when D announced his intention to repudiate the contract, P then commenced an action for breach. D argued there could be no breach until the time of performance has arrived. -The court held that it would be injust to force P to wait until the breach to file an action.

Rule: A party to contract who renounces his intention to perform may not complain if the other party, instead of waiting until performance is due, elects to sue immediately for breach. - A party who renounces a contract before its start date releases the other party from any obligations under the contract. Taylor v. Johnston -P contracted to breed his mares with Ds stallion. The horse was ever bred with Ds stallion. -The court held that there was an anticipatory breach but that P did not act on it and essentially gave them a waiver. P cant cancel without repudiation and he had the opportunity early but did not. Rule: If a promisor repudiates a contract, but the injured party treats the contract as though it is still in force, the repudiation is nullified. (2) Compensatory Damages (A) An Introduction to Contract Remedies (B) Breach or Repudiation by Payor American Mechanical Corp. v. Union Machine Co. of Lynn, Inc. -P agreed to sell its property to D for 135k, who entered the K knowing that P was in financial trouble. D repudiated the contract, P was unable to find another buyer and the bank sold its land and machinery for 55k and 35k. -The court held that the general rule is to place the injured party in the position that he would have been in if there was no breach. In real estate, contract minus market value. For adequate remedy the court gave the difference of the contract price and what the bank sold the property for. Rule: For breachof a real estate contract the injured party is entitled to recover his actual losses when the traditional recovery is inadequate. New Era Homes Corp. v. Forster D and P contracted for a remodel at various prices at various stages. D refused to pay P at the third installment The court held that the assigned prices are not related to the work that was to be completed. Thus, the contract is not divisible. P can recover the value of the work done under the contract. Rule: A court must look to the language of a contract in order to determine whether a contract that provides for installment payments is severable. Bernstein v. Nemeyer P sought to rescind his partnership agreement with D after D breached his negative cash flow agreement, leading to the loss of the investment. The court held the plaintiff has to prove its right to a restitution remedy. Here, there was no unjust enrichment. Rule: Restitution should be used only to prevent the unjust enrichment of the breaching party. Locks v. Wade -D breached its contract to rent a jukebox from P. P rented the jukebox to someone else. Jukeboxes were readily available and P could have rented another one to another party. -The court held that where a party can duplicate a good and there is a breach the other party is still liable for damages. Rule: In actions for breach of contract relating ot the sale or lease of readily available goods, a plaintiffs recovery will not be reduced by any value he receives under a new contract for the goods.

Comment: Employees remedies for Employer breach (C) Breach of Contract by Supplier of Goods, Services or Construction -Damages for the repudiation by the buyer- contract price minus the market price, at the time and place of tender. Breach by seller- buyer can cover(buy goods) or recorecover damages equal to difference of market price at the tie buyer learned of breach and the contract price. Jacob & Youngs v. Kent -Reading Pipe -Rule: A trivial, innocent omission will not always be a failure of a condition that causes forfeiture of the contract Rivers v. Deane - An addition of a home was constructed in such a faulty manner as to render it unusable, and damages were awarded at trial based on dimunition of value. - The cort held that in cases where a builders failure to perform is trivial, the cost of repair can be greater than the dimunition of value on the market. In this case the failure was so significant that the house was unusable. The proper way to calculate damages should have been to calculate the cost to repair the faulty work. - Rule: In breach of contract cases for faulty construction, the measure of damages is market value of the cost to repair the faulty construction (D)Consequential Damages: Foreseeability; Mitigation; Certainty; Incidential Reliance -Consequential Damages: beyond general damages that flow from a breaches circumstances. Based on Hadley, recovered only if at the time the contract was made the defendant had reason to foresee the damages as a probable result of the breach. -Significant likelihood may suffice. -Damages only recovered if their amount is reasonably certain of computation. If not, damages are merely speculative. -New businesses more likely to be speculative, and are determined case to case whether they can or will recover. Mitigation: A party is not permitted to recover damages that could have been avoded by reasonable effort. -Sale of Goods-Employment- duty to mitigate by looking for comparable job -Construction- duty not to add to costs by continuing to work after breach. Generally not reliable to look for replacement job. Not required to take additiona business risk as a result of a breach. -Expense incurre in attempt to mitigate are recoverable. Hadley v. Baxendale -P operated a mill and contracted with D to fix there crankshaft. P suffered extra loss when D did not return the shaft in reasonable time. - The court held that the loss was not reasonably foreseeable and therefore they do not have to pay the extra damages. Rule: The injured party may recover those damages as may reasonably be considered arising naturally from the breach itself, and, second, may recover those damages as may reasonably be suppose to have been in contemplation of the parties at the time of contracting, as a probable result of the breach -.

IX.

(3) Mental Anguish and Punitive Damages -Generally not available for breach of contract, some exceptions Bohac v. Department of Agriculture -P was removed from her position at D, she sought damages for violation of Whistleblower Protection Act. Including consequential non-pecuniary damages. Rule- Non-pecuniary damages are not recoverable under whistle blower act. (Contract general theory is not recover damages for pain and suffering) (Foreseeable at time of contract) (Pig Nutts reasonably foreseeable to your contract) (4) Equitable Remedies for Breach of Contract: Prohibitory Injunction and Specific Performance Curtice Bros. v. Catts -D defaulted on his contract to supply P with tomatoes for its canning company, P was unable to purchase replacement. - The court held that Where there is no adequate remedy, specific performance will be granted. Rule: Specific performance of a contract for personalty will be granted where the goods cannot be obtained elsewhere and they are necessary to Ps business. - Courts may grant specific performance of contracts for sale of goods if failure to do so will result in irreparable injury to the plaintiff. Third Party Interests (1) Third Party Beneficiaries Johnson v. Holmes -Ps brought suit to recover damages upon an auto insurance policy that D had promised to obtain for its customer, Caldera, who collided with P. Caldera had negotiated with D for the policy upon purchasing the car. -The court held that Rule: It is not necessary that the beneficiary be named and identified as an individual; a third party may enforce a contract if he can show he is a member of the class of which the contract aimed to benefit. Hale v. Groce -D failed to make a testamentary bequest to P as requested by Ds client. D, an attorney, was directed to put P into his will, D didnt. P couldnt get what he was supposed to. Sued D. - Rule- A third party intended by a testator to be the beneficiary of a bequest by will or trust may sue, in contract or tort, the lawyer who failed to include the bequest. -