Anda di halaman 1dari 21

Contracts 1 of 21

1. Chapter 1: Introduction
a. Concept of Contract
i. Promisors must be held to their promises; promises must be kept
b. Meaning of “Contract”
i. Requires an agreement between two parties (a promisor and a promisee) to execute a future action
that reasonable parties would view as binding and which would allow courts to measure costs
(damages) to provide adequate relief to the aggrieved party. There must be:
1. A promise (or a set thereof) that manifest a bargained-for-exchange (offer/acceptance)
2. An exchange of something of value to and from each of the parties (consideration
c. Sources of Contract Law
i. Restatement (Second) of Contracts
1. Do not have force of law; serve as persuasive authority and clarifications
ii. Wiliston Treatise (1920)
1. Mechanical and inflexible
iii. Corbin Treatise (1950)
1. Flexible and modern
d. The UCC and CISG
i. UCC governs only the sale of goods
1. Article 2: sale of goods (see: Appendix 1)
2. Article 3: checks and promissory notes
3. Article 4: bank deposits and collections
4. Article 4 (a): wire transfers
5. Article 5: letters of credit
6. Article 6: bulk transfers
7. Article 7: documents of title
8. Article 8: investment securities
9. Article 9: secured transactions
ii. CISG governs only the international sale of goods
1. Contains 101 articles dealing with all aspects of contracts for the sale of goods where
CISG applies
2. Ratified by over 60 nations; including: United States, Canada, Mexico, France, Germany,
China, Russia, and other developing nations
3. Parties can choose not to be bound by CISG where it may apply
e. Electronic Contracts (UCITA and E-Sign)
i. Legislation to facilitate internet commerce
ii. In the US, E-Sign is the federal version of UCITA
f. An Introduction to Contract Remedies
i. Expectation Interest, Reliance Interest, and Restitution Interest
1. Expectation Interest: the position that the party would have been in had the contract
been fully performed
a. Cover Damages: where a contract is breached, the aggrieved party may
purchase a substitute for the product or service not delivered under the
breached contract and bring action on the difference in price of the original
contract and the cover purchase
b. Expectation Interest in Construction and Employment Contracts
i. Example: C agreed to construct a building for D for $500,000; the
building was half completed; without justification, C refused to
complete it; D was forced to hire another contractor, E, to complete it
1. In this case, C would be liable to D for cover damages in
the amount of the difference between $500,000 and the cost
for E to complete the building. D’s expectation interest
would be fulfilled, as D expected to receive the completed
building for $500,000
ii. Example: E, an engineer, signed a one-year contract to work with F
Company, at an annual salary of $100,000; after working for 6
months and receiving $50,000, F fired E without justification or
Contracts 2 of 21

1. In this case, E is entitled to recover from F the 6 months of

salary ($50,000) remaining on the contract. In the event
that E is able to take a reasonable and similar job within the
remaining 6 months, F will only be liable to E for the
difference in time between the firing and the available
opportunity—the same is true if E takes any other
(dissimilar) job in the meantime; he is only required to take
a reasonable or similar job
2. Reliance Interest: concerned with the actual loss that the party has suffered as a result of
the other party’s breach of conduct (a minus quantity); puts he injured party in the
position he would have been in had the contract never been made
3. Restitution Interest: concerned with the recoup of losses by one party (a minus quantity)
offset by the gains or unjust enrichment of the breaching party (a plus quantity), and
restores both parties to the position that they would have been in had the contract never
been made
ii. Damages Must be Reasonably Certain
1. Freund (Π ) v. Washington Square Press, Inc. (∆ )
a. ∆ and Π had an agreement for ∆ to publish Π book; ∆ breached the
contract; Π brought action in which he sought damages based on: (1) delay of
promotion based on the breach (2) loss of royalties (3) cost of publication if Π
had chosen to print the book himself (which Π did not)
b. Trial Court judgment for Π (∆ breached contract); (no damages for [1];
damages for [2] at $10,000; no damages for [3]); ∆ appeals
c. Appellate Court judgment for Π (no damages for [1]; no damages for [2]; no
damages for [3]
d. Rule: damages must be able to be foreseen by the breaching party at the time
the contract is made; cannot include any speculative injuries; cannot put the
injured party in a better position that he would have been in had the contract
been performed
2. Liquidated Damages Clause: a clause in the original contract that specifies and limits the
damages automatically available to the injured party in the event of a breach; both parties
must agree to the liquidated damages clause
i. Had a liquidated damages clause been used in the Fruend case, the
entire trial could have been avoided, and Π (even though he won the
trial) would have received some agreed-to damages
iii. Damages Must be Forseeable
1. Forseeable damages are those that the breaching party had a reason to know at the time
the contract was formed
iv. Efficient Breach (pareto superior)
1. Used mainly in unison with a liquidated damages clause; implemented when it would be
more efficient for one party to breach one contract and pay damages, with the purpose of
entering into a new, more lucrative contract for the same good or service.
a. Example: A contracts to sell a book written by B; A and B have a liquidated
damages clause that sets damages at $10,000. A, before publishing, but after
the contract has been formed, receives an offer to publish a book with the same
subject-matter as B’s from C—a nationally renowned expert on the subject—
with exponentially higher projected sales.
i. Here, it is cheaper for A to breach his contract with B, pay the
liquidated damages, and contract with C (whose book will sell more
than B’s and the additional $10,000 in sales needed to offset the
liquidated damages to B) for a net profit to A
[C > B + $10,000]
v. Inadequate Damages—Specific Performance
1. Relief in equity (an equitable remedy)
2. Given in cases where the object in question cannot be replaced or substituted for money
damages (a classic car, a piece of art, a family heirloom)
a. Items can be either objectively unique (in the case of a valuable painting or a
rare car) or subjectively unique (in the case of a family heirloom)
Contracts 3 of 21

b. Specific performance cannot be ordered in the case of personal service

i. Example: JJ decides that he does not want to honor his contract with
the PP hockey team
1. PP cannot bring an action for specific performance of the
2. PP can, however, bring action to estopp JJ from playing
with WC for the duration of JJ’s original contract with PP
3. Specific performance is a literal fulfillment of the injured party’s expectation interest
g. An Introduction to the Validation Process
i. Consideration
1. Consideration is a bargained-for-exchange; the promise of one party must induce a
detriment to the other party, and that detriment must have induced the original promise
a. Example: A promises to pay $500 to B if he refrains from drinking and
smoking until he is out of college; A’s promise (to give $500) induces the
detriment to B (giving up a legal right to drink and smoke) and the detriment to
B induces A’s promise
2. Return promise or performance must be bargained-for
3. Return promise or performance is bargained-for if it is sought by the promisor in
exchange the promisee’s promise (or performance); and is given by the promisee in
return for that promise (benefit to the promisor; detriment to the promissee) (promise
induces the detriment and the detriment induces the promise)
4. Performance may consist of (a) an act other than a promise, (b) a forbearance, or (c) the
creation, modification or destruction of a legal relation (previous contract)
a. Example: A is the owner of a clothing store; A sees B, a homeless person on
the street, in the cold of winter; A tells B that if B comes to A’s store the next
morning, A would give B his choice of a new coat; B arrives at the store in the
morning, and A refuses to give him the coat
i. Here, A is not liable to B for the coat, as there was no consideration.
The promise (to give a coat) may have induced the detriment, but the
detriment (walking to the store) did not induce the promise. Here, the
promise may have been induced simply because A felt bad for B and
didn’t want him to freeze. Because both were not “the motive, each
for the other”, there is no consideration, and no binding contract
5. Harris (Π ) v. Time, Inc (∆ )
a. Π ’s son received a mailing from ∆ ; mailing, on the front of the envelope, said
that Π would receive a free watch just for opening the envelope; when opened,
revealed more text saying that Π must subscribe t receive the free watch. Π
brings action
b. Trial Court judgment for ∆ (granted ∆ demurrer); Π appeals
c. Appellate Court judgment for ∆ (Affirmed)
d. Rule: any bargained-for-exchange or forbearance will constitute consideration.
Courts will not inquire into the adequacy of consideration
e. Reasoning:
i. Though there was consideration here, and thus, there would normally
be a valid contract, Π was only tricked into opening an envelope. If
all such invasions into a person’s life were to be tried before the
courts, they would be flooded with litigation.
ii. The law disregards trifles (de minimus non curat lax)
ii. Promissory Estoppel
1. A promise which the promisor should reasonably expect to induce action or forbearance
on the part of the promisee or a third person and which does induce such action or
forbearance is binding if injustice can be avoided only be enforcement of the promise
2. Miles Homes Division (Π ) v. First State Bank of Joplin (∆ )
a. Π selling house-kit to builders; builders took loan from ∆ to pay for the land;
Π requested the ∆ inform Π when and if the buyers should become
delinquent in their payments, as the Π would like the chance to buy the
Contracts 4 of 21

defaulted property first (to recoup for the house-kit that they gave Π on
installment plan); ∆ said they would notify Π ; Π sent house to buyers; buyers
became delinquent; ∆ did not notify Π
b. Trial Court judgment for Π ; ∆ appeals
c. Appellate Court judgment for Π
d. Rule: promissory estoppel applies when; a promise which the promisor should
reasonably expect to induce action or forbearance of a definite and substantial
character on the part of the promisee, and which does induce such action or
forbearance is binding
iii.Moral Obligation
1. Promises that are made on the basis of a moral obligation or past consideration are
generally not binding, with a few exceptions (see: First Hawaiian Bank and exceptions)
a. General exceptions
i. Promises to pay debts barred by a statute of limitations
ii. Promises to pay debts discharged in bankruptcy
2. Harrington (Π ) v. Taylor (∆ )
a. ∆ assaulted his wife; she took refuge with a neighbor; ∆ came to the
neighbor’s house, searching for his wife; his wife came at ∆ with an axe,
swinging at his face; Π reached out and blocked the strike to ∆ ’s face with
Π ’s hand, severely mutilating it; ∆ promised to pay Π medical bills, did so
for a while, but stopped after only a few payments. Π brings action for the
payment of medical bills
b. Trial Court judgment for ∆ (Demurrer granted); Π appeals
c. Appellate Court judgment for ∆ (Affirmed)
d. Rule: past consideration and moral obligation are no consideration at all. For
consideration to be effective, the promise must induce the detriment and the
detriment must induce the promise
e. Reasoning:
i. In this case, the promise (to pay the medical bills) did not induce the
detriment (reaching out to save ∆ , hurting Π ’s hand) even though
the detriment may have induced the promise;
ii. For consideration, both the promise must induce the detriment and
the detriment must induce the promise
iv. The Seal
1. The seal imports consideration
a. A sealed contract will be assumed to have valid consideration, even where
none, other than the seal itself, can be found
b. Under UCC transactions (for the sale of goods), the seal is inoperative
2. Chapter 2: The Agreement Process (Offer and Acceptance)
a. Intention to be Legally Bound
i. Objective Theory
ii. Leonard (Π ) v. Pepsico, Inc. (∆ )
1. Π saw ∆ commercial for Pepsi Points; commercial jokingly offered a Harrier Jet for
some 7,000,000 Pepsi Points; Π collected enough Points and (cash equivalent); Π sent
in the Pepsi Points order form; ∆ did not give Π a jet; Π brings action
2. Trial Court judgment for ∆ ; Π appeals
3. Appellate Court verdict for ∆ (Affirmed)
4. Rule: words and conduct, forming a offer, must be so clear and definite that reasonable
persons could not differ on their meaning
5. Reasoning:
a. There was nothing in the ad to suggest that the jet was being seriously offered
by ∆ ; a reasonable person would have understood that the commercial was
supposed to be in jest
iii. Interpreting Statements to Determine Legal Consequences
1. Gault (Π ) v. Sideman (∆ )
Contracts 5 of 21

a. Π was a patient of ∆ ; ∆ told Π that he should probably cure Π ’s condition;

∆ was unable to cure Π , and Π brings action for breach of contract
b. Trial Court judgment for ∆ ; Π appeals
c. Appellate Court judgment for ∆ (Affirmed)
d. Rule: an offer to enter into a contract (especially one in which the contract is to
do something as difficult and unpredictable as curing a disease) language must
be clear and definite such to demonstrate the manifest intention of the parties to
be legally bound
e. Reasoning:
i. Doctors must give their patients some kind of assurance that “things
will be okay” and that the doctors will be able to do their job; this is
not sufficient to constitute an intention to be bound by a contract to
2. Balfour (Π ) v. Balfour (∆ )
a. Π was ill, and her husband, ∆ , had to leave on business; ∆ agreed to an
allowance for Π so that her medical care and expenses could be paid in his
absence. ∆ and Π , being apart so long, decided to divorce; ∆ stopped paying
allowance to Π . Π brings action to recover the stopped allowance
b. Trial Court judgment for Π ; ∆ appeals
c. Appellate Court judgment for ∆ (Reversed)
d. Rule: agreements made between those parties such as husband and wife are
made (though possibly with consideration) without any intention that the
parties be legally bound by them; there must be a clear and definite intention
that the agreement be accompanied by legal consequences
3. Parties may expressly state that they intend legal consequences to attend their agreement
(this is rare); parties may also expressly state that they do not intend legal consequences
accompany their agreement
iv. Express Statements Concerning Legal Consequences
1. Letters of Intent
a. Parties to major transactions find it useful to maintain a record of negotiations;
record will facilitate the negotiations by recording matters of agreement.
Process may eventually manifest such agreements in a letter of intent
i. Letters of intent to not constitute (in most cases) a binding contract
unless such letters of intent contain most, if not all, of the relevant
dickered terms of the final contract, and all that is missing is the
memorial of the contract in a final document
b. Venture Associates Corp. (Π ) v. Zenith Data Systems (∆ )
i. ∆ owned electronics-kit maker (Heath); ∆ wanted to sell Heathl Π
offered to buy; Π made proposal for purchase, drafted a letter of
intent, and sent it to Π ; ∆ sent letter to Π that ∆ was ready to enter
into negotiations with Π . ∆ did not sell to Π . Π brings suit against

ii. Trial Court judgment for ∆ ; Π appeals
iii. Appellate Court judgment for ∆ (Affirmed)
iv. Rule: letters of intent are not much more than an agreement to
continue to negotiate in good faith. They are not necessarily an
agreement to come to a final contract; contract negotiations break
down, and as long as the parties act in good faith, they are not bound
to come to a final contract with each other
v. Contemplation of Final Writing
1. Arnold Palmer (Π ) v. Fuqua Industries (∆ )
a. Π and ∆ were attempting to combine their businesses (separate aspects of the
golfing industry). The two parties created a memorandum of intent that
eventually contained most of the dickered terms of the deal, but also had clause
that said nothing was final until there was a “final agreement” between the
parties; ∆ issued press releases alerting the industry of the forthcoming
Contracts 6 of 21

conglomerate. Both parties signed the memo of intent; ∆ eventually backed

out of the deal; Π brought action against ∆ for breach of contract
b. Trial Court judgment for ∆ ; Π appeals
c. Appellate Court judgment for Π (Reversed; Remanded)
d. Rule: parties may manifest their intention to be legally bound and enter into a
contract through words and/or deeds; though parties may state that a contract
does not exist until a final agreement is signed by the parties, if the parties have
come to a material agreement (again, orally or in writing) on dickered terms,
and have made manifestations of their intention to contract, such a signed
writing is only the symbolic representation of the contract.
e. Reasoning:
i. The memo of intent, when sent back-and-forth eventually contained
all of the relevant, dickered terms of the deal; ∆ sent out a press
release, and otherwise manifested his assent to finalize the deal with
Π . The memo, then, became a legally binding contract—it
contained, again, all of the dickered terms, and the “nothing is final
until final agreement is signed clause” did nothing but reaffirm the
notion that there was nothing left to do but sign the symbolization of
the contract. The parties were, thus, already bound; a contract existed
vi. Agreements to Agree—Missing Terms
1. Arbitron, Inc. (Π ) v. Tralyn Broadcasting, Inc.
a. Rule: UCC§ 2-305 (see: Appendix 1) the parties, if they so intend, can contract
even though the price is not settled. In such a case, the price is a reasonable
proce at thetime for delivery if
i. The contract says nothing (is silent) on price terms
ii. The price is left to be agreed upon by the parties, and they have failed
to agree
iii. The price is to be fixed in terms of some agreed market or other
A price to be fixed by the buyer or seller is a price to be fixed in good faith
b. Reasoning:
i. Under §2-305, “agreements to agree” can be binding as long as they
contain all of the relevant, dickered terms (even though price terms
are missing)
b. Anatomy of Agreements—Offer and Acceptance
i. Preliminary Negotiations vs. Offers
1. Advertisements are typically not offers; offer is an opening of negotiations, whereas an
advertisement or price quote is an invitation to open negotiations
a. Advertisements say: “I have something to sell for $X”; offers say: “I have
something to sell to you for $X”
2. Southworth (Π ) v. Olivevr (∆ )
a. ∆ was a rancher, and Π was his neighbor. ∆ wanted to sell his property; had
a series of conversations with Π about selling; Π was very interested in
purchasing. ∆ sent Π a map, indicating the land for sale; ∆ said it was only a
matter of obtaining a property assessment; Π called ∆ asked if offer was still
good, ∆ said it was. ∆ sent out letter to Π and other neighbors; Π accepted
the offer; ∆ did not sell; Π brings action for specific performance
b. Trial Court judgment for Π ; ∆ appeals
c. Appellate Court judgment for Π (Affirmed)
d. Rule: any conduct of one party, from which the other party may reasonably
draw the inference of a promise, is effective in law as such. A price quotation
alone will not constitute an offer. A price quotation with other negotiations,
documents, and/or circumstances, even one that is sent to multiple persons, is
an effective offer that can be accepted by any of the parties offered
e. Reasoning:
i. The negotiations, maps, price-quote mailings, and phone
conversation of ∆ with Π , assuring him that he was committing to
Contracts 7 of 21

sell Π the land, were effective manifestations of ∆ ’s intention to be

bound by his offer to sell
3. Zanakis-Pico (Π ) v. Cutter Dodge, Inc. (∆ )
a. ∆ placed ad in the paper for Jeep sales at their dealership; Jeep Cherokee for
$0 down*. The * suggested that the discount was only available to “loyal
customers” or “recent graduates”; Π was neither; ∆ refused t give Π sale
price; Π brings action
b. Trial Court judgment for ∆ ; Π appeals
c. Appellate Court judgment or ∆ (Affirmed)
d. Rule: advertisements invite prospective purchasers (offerors to purchase). Only
when the offeree (seller) accepts the payment is there an acceptance, and a
contract for the sale of the goods. However, if the ad contains language of
commitment (“first come, first served”; requirements to go to a certain lace at a
certain time)
4. Maryland Supreme Corp. (Π ) v. Blake Co. (∆ )
a. ∆ bid for general contracting project; Π sub-bud for concrete. Π letter stated
that Π guaranteed price at $21-yd. throughout the project. ∆ was awarded
bid; ∆ told Π to furnish concrete for the project; Π began furnishing concrete,
ran into trouble, and sent another letter, attempting to raise the price of the
concrete to $27-yd; ∆ began purchasing from others.; ∆ brought original
action against Π for breach of contract
b. Trial Court judgment for ∆ ; Π appeals
c. Appellate Court judgment for ∆ (Affirmed)
d. Rule: offers must be clear and definite; offers must express the offeror’s
intention to be legally bound by the acceptance of his offer and its terms.
e. Reasoning:
i. Π made their offer to ∆ to furnish concrete on ∆ ’s project; only
contingency was that ∆ was awarded the overall contract, at that
point, when Π was informed of the awarded contract, and ∆ told Π
to furnish the concrete, there was a contract for such concrete
ii. Identifying Offeror and Offeree
1. BC Tire Corp. (Π ) v. GTE Directories Corp. (∆ )
a. Π sent ∆ an application to place an ad in the yellow pages. The application
stated that “publication of the ad will constitute acceptance of the application”;
Π ad was not run in the yellow pages; Π brings suit
b. Trial Court judgment for ∆ (Summary Judgment); Π appeals
c. Appellate Court judgment for ∆ (Affirmed)
d. Rule: typically, a party sending a purchase order or application form is an
offeror and the party with the power to grant the application or fill the purchase
order is the offeree
e. Reasoning:
i. Π offer was never accepted; ∆ had the power to accept or reject for
whatever reason Π so chose
iii. Duration of Offers
1. UCC§ 2-309 provides that all offers, unless otherwise stated will last for a reasonable
time (reasonable time is reasonable under the particular fact-pattern and circumstances in
any given case
2. Vaskie (Π ) v. West American Insurance Co. (∆ )
a. Π was represented by ∆ ; after auto accident, ∆ offered settlement of $25,000
to Π ; Π let the settlement offer sit until her cause of action was barred by the
statute of limitations; Π accepted the offer; ∆ refused to pay the settlement
because the cause of action was barred. Π brought action against ∆
b. Trial Court judgment for Π (Summary Judgment); ∆ appeals
c. Appellate Court judgment for ∆ (Reversed; Remanded)
Contracts 8 of 21

d. Rule: where an offer does not specify an expiration date or otherwise limit the
allowable time for acceptance, the offer is deemed to be outstanding for a
reasonable period of time
e. Reasoning:
i. Trial Court erred in ruling that acceptance was tendered within a
reasonable amount of time; Summary Judgment was error
3. Caldwell (Π ) v. Cline (∆ )
a. Rule: when parties wish to contract, and the offeror sets a fixed period for
acceptance, the offer must come to the knowledge of the offeree before it is
operative and the time starts to run, and likewise, the offeree must (usually) put
the acceptance into transmission before it can become operative as such
4. CISG Article 20(1): a period of time for acceptance fixed by the offereor begins to run
from the moment the telegram is handed in for dispatch or from the date shown on the
letter, or if no such date is shown, from the date shown on the envelope. A period time
fixed by the offereor by telephone, telex or other means of instantaneous communication
begins to run from the time that the offer reaches the offeree
c. Termination of the Power of Acceptance
i. Rejection
1. Chaplin (∏) v. Consolidated Edison Co. of New York (Δ)
a. Rule: if no time-period for acceptance is stated, an offeree has a reasonable
time to accept an offer; if the offeree rejects an offer, the offer is dead, and the
offeree may not accept at a later time
ii. Revocations, Acceptances, and the Mailbox Rule
1. Farley (∏) v. Champs Fine Foods, Inc. (Δ)
a. Rule: Mailbox Rule: an acceptance is binding from the moment the offeree
deposits a properly addressed letter of acceptance into the mailbox (or with the
postman personally);
b. Rule: the offeree may not retrieve an acceptance letter from the mail to renege
an acceptance.
i. In the event that the offeree retrieves the letter from the mailbox
and/or sends a quicker-arriving rejection (an e-mail or phone call) to
offereor, the offeree cannot bind the offeror to the offer if the offeror
has relied on the first-arriving rejection
c. Rule: the offer may be revoked by the offeror at any time before acceptance is
i. Mailbox Rule
1. Offer: effective upon receipt of offeree
2. Acceptance: effective upon transmission by offeree
3. Rejection: effective upon receipt of offeror
4. Revocation: effective upon receipt of offereee
ii. Telegram: mailbox rule applies
iii. Fax/Telex: mailbox rule applies
iv. E-Mail: no discernible case-law, but mailbox rule probably applies
v. Option Contracts: mailbox rule does not apply; acceptance must be
received by offeror to be effective
vi. CISG Contracts: offer effective upon sending by offeror; acceptance
effective upon receipt by offeror
iii. Indirect Revocation
1. Dickinson (∏) v. Dodds (Δ)
a. Rule: an offer may be revoked in several ways
i. Direct Revocation: the offeror directly expresses to the offeree that
the offer has been rejected, that it is no longer alive
ii. Indirect Revocation: the offeree has knowledge of acts of the offeror
that are inconsistent with continuance of the offer
1. Statements that would generally lead a person to believe
that an offer no longer exists
2. Actions that would generally lead a person to believe the
Contracts 9 of 21

iii. Indirect Communication of Revocation: if a third-party (who is

reliable and who has correct information) revokes the offer on the
offeror’s behalf, the offer is revoked
iv.Counter Offers
1. Ardente (∏) v. Horan (Δ) ]
a. Rule: to be effective, an acceptance must be definite and unequivocal; offeror
is entitles to know in cler terms whether the offeree accepts his offer. A
probable inference of acceptance is not enough
b. Rule: an acceptance which is equivocal or conditional is a counter-offer and
requires an acceptance by the original offeror (who now becomes the offeree of
the counter-offer); a counter-offer rejects and nullifies the original offer
c. Rule: frequently, an offeree, while making an acceptance also makes a request
for modification of the contract; so long as it is clear and unequivocal that the
offeree is accepting the offer, regardless of whether the new requests are met
(the requests are treated as an offer to enter into a new set of negotiations), the
acceptance is valid and a contract is formed
v. Death or Incapacity
1. Beal (∏) v. Beal (Δ)
a. Rule: the death of an offeree (or the death of one member of a group of
offerees) revokes the original offer; there is no requirement that the fact that the
offeror has died be communicated to the offeree
d. Making Offers Irrevocable
i. Option Contract—Right of First Refusal
1. Orlowski (∏) v. Moore (Δ)
a. Rule: an option contract is created when the promise offers separate
consideration to the promisor for the ability to make the offer irrevocable for a
specified amount of time
b. Rule: an option contract comes with the right of first acceptance/refusal; that
is, in the event that the original offer was made to more than one person, the
option-holder has the right to accept or refuse the original offer first
c. Rule: an option-holder may reject the original offer or make a counter-offer to
the original offer and still be able to accept the offer within the option period if
the offeror did not rely on the rejection or counter-offer
ii. Irrevocability Through Reliance—Firm Offers
1. Pavel Enterprises, Inc. (∏) v. A.S. Johnson Co., Inc. (Δ)
a. Rule: UCC § 2-205: an offer by a merchant to buy or sell goods in a signed
writing which by its terms gives assurance that it will be held open is
irrevocable, for lack of consideration, during the time stated or if no time is
stated, for a reasonable time, but in no event may such period of irrevocability
exceed three months; any such assurance on a form supplied by the offeree
must be separately signed by the offeror
i. Distinguish between an offer merely stating it’s duration (e.g. “you
have eight days to accept”) and a firm offer (e.g. “this offer will
unconditionally remain open for eight days”)
b. Rule: CISG: offer cannot be revoked if (a) it indicates by stating a fixed time
for acceptance, or otherwise that it is irrevocable; or (b) it was reasonable to
rely on the offer as being irrevocable and the offeree has acted in reliance on
the offer
iii. Irrevocability Through Part Performance—§45 of the Restatement (Second)
1. Unilateral vs. Bilateral Contracts
a. Bilateral Contract: where parties exchange promises and detriments for the
purpose of entering into a contract; bilateral offer can be revoked at any time
before acceptance is tendered by the offeree
i. Two promisors; two promisees
ii. Two rights; two duties
1. Example: A offers to sell his car to B for $7,500; B accepts
A’s offer to buy the car
Contracts 10 of 21

a. Exhange of two promises: promise to sell (A);

promise to pay (B)
b. Exchange of two rights and duties: duty to
deliver and right to payment (A); duty to pay and
a right to possession (B)
b. Unilateral Contract: where one party makes an offer and the other party
performs with no exchange of promises; offer can only be accepted by
performance; unilateral offer can be revoked at any time before performance is
i. One promisor; one promise
ii. One right; one duty
1. Example: A offers to pay B $500 to paint A’s house while
he is on vacation; A asks for no promise in return from B
a. One promise: promise to pay $500 if the house is
painted upon return (A)
b. One duty: duty to pay $500 if the house is
c. One right: right to collect $500 if the house is
painted before A returns from vacation (B)
2. Part Performance Problem
a. Generally, an offeror can revoke an offer at any time before performance is
tendered; however, with unilateral contracts, once the offeree has commenced
performance the offeror may not revoke until the offeree has been given a
reasonable time to perform fully
i. First Restatment of Contracts §45
1. In this situation, the original unilateral offer would be
assumed to include a subsidiary promise that once
performance has commenced, the offer will not be revoked
until the offeree has a reasonable time to complete
ii. Restatement (Second) of Contracts §45
1. In this situation, the original unilateral offer creates an
option contract as soon as performance commences (option
to keep the offer open for a reasonable time after
performance has commenced; or to keep the offer open in
accordance with the time specified in the offer)
iii. Bilateral Theory
1. In this situation, the offeree’s part-performance would
constitute a return promise (to complete performance in
accordance with the original offer), making the unilateral
offer a bilateral offer (remember that bilateral contracts
cannot be revoked once performance has been tendered
b. Petterson (∏) v. Patterberg (Δ)
i. Rule: even if the promisee takes steps to begin performance or
acceptance, this is not enough to constitute an acceptance; an offeror
has until the moment that performance/acceptance is tendered to
revoke the original offer
e. Nature of Acceptance
i. Knowledge and Motivation
1. Simmons (∏) v. US (Δ)
a. Rule: in order to accept a unilateral offer, the offeree must first be aware of the
offer; the required act of performance can be performed with other intentions
(the fulfillment of the contract need not be the only motivation for doing the
act), however, the offeree must perform with at least some knowledge and
intention of performing on the contract
i. Unless the offeree makes it clear that he does not intend to accept the
offer and is doing the required act of performance for other reasons,
the offer will be accepted
Contracts 11 of 21

ii. Requirement of Volition

1. Carill (∏) v. Carbolic Smoke Ball Co. (Δ)
a. Rule: an acceptance, if clear and unequivocal in its language, is binding so
long as the offeror intended to make an offer (intentions are inferred from the
outward expressions [words and conduct])
b. Rule: the acceptance of a contract must be a volitional act
c. Rule: a contract can be conditioned on the happening of certain events, but
acceptance occurs at the moment the offer is accepted; whether the contidions
are met and the contract fully performed is another matter
i. Example: A offers to give $100 to anyone that uses his product for
30 days and still has rats in his house; B buys the product and uses it
for 30 days (thus accepting the offer); if B still has rats in his house,
he can bring a claim for the $100 (but this is a condition that is not
volitional and not part of acceptance)
f. Manner of Acceptance
i. Modern Analysis
ii. Silence as Acceptance
iii. Notice Requirement
iv. Primer on Concept of Warranty
v. Self-Service Contracts
vi. Auction Contracts
g. Deviant Acceptance—The Battle of the Forms
i. Matching Acceptance Rule
1. Traditionally, and under the mirror-image rule, the offer and acceptance must absolutely
match. In some cases, however, an exception exists, mostly in cases where offer and
acceptance are made through the exchange of forms. In such cases, the forms will most
often contain boilerplate terms that conflict with each other. Under the traditional battle
of the forms, the person firing the “last shot” (the person that sends the last form or
performs the contract) binds the other to that party’s terms.
a. The last-shot analysis was as follows: under mirror-image, any change in the
language of offer and acceptance acted as a counter-offer; thus, when buyer
(promisor) sent a purchase order to seller (promisee) who sent in return an
acceptance form, and the forms had conflicting terms, the seller’s form would
be a counter-offer. As such, if the seller shipped the goods anyway, the buyer’s
acceptance of the goods would constitute acceptance of the counter-offer on the
seller’s terms
ii. Modification of the “Matching Acceptance” Rule (UCC§ 2-207)
UCC§ 2-207. Additional Terms in Acceptance or Confirmation
1. A definite and seasonal expression of acceptance or a written confirmation
(acknowledgment) will operate as an acceptance even though it states terms additional to
or different from those in the offer; unless acceptance is expressly made conditional on
the terms of such acceptance (then it is a counter-offer)
i. Additional Terms: those that expressly appear on the acceptance form
but are silent (absent or implied) in the original offer
ii. Different Terms: those that expressly appear on the acceptance form
and conflict with those that expressly appear in the original offer
2. Between non-merchants, additional terms will be treated as proposals for addition to the
contract which can be accepted or rejected by the offeree
Between merchants, additional terms will be added to the contract unless:
a. The offer expressly limits acceptance to the terms of the offer
b. The terms materially alter (change dickered terms) the contract
i. Dickered Terms: those that are also material, such as price, quantity,
description of goods
1. Disclaimer of express warranties is material alteration
2. Disclaimer of implied warranties is material alteration
3. Arbitration clause may or may not be material alteration
4. Limiting remedy is not material alteration
Contracts 12 of 21

c. Notification of objection to the terms has already been given or is given within
a reasonable time after receipt
3. Conduct of parties, when writings are missing, will be sufficient to constitute a contract;
the contract will consist of those terms on which the parties have previously agreed (those
terms that match on both forms)
iii. Knockout View
1. When express terms in the offer conflict with express terms in the acceptance, the
conflicting terms will be “knocked out” and the gaps filled with UCC warranties,
remedies, court adjudication
iv. UCC§ 2-207 and Knockout View:
1. Additional Terms: New terms; added to contract (merchants); subject to agreement (non-
2. Different Terms: Conflicting terms; knockout view
a. Examples Between Merchants
i. Example:
1. Buyer is offeror; sends purchase-order form; silent on
2. Seller is offeree; sends acceptance form; contains
disclaimer of warranties
a. Seller’s additional terms on acceptance form
become a part of the contract
i. Because buyer’s form was silent on
warranties, and the seller’s form had a
disclaimer of warranties, the disclaimer
was an additional term, and would be
added to a contract between merchants
ii. Example:
1. Buyer is offeror; sends purchase-order form; contains
“limit acceptance to terms of offer” clause
2. Seller is offeree; sends acceptance form; contains
disclaimer of warranties
a. Seller’s additional and/or different terms do not
become a part of the contract
b. “Limit acceptance to the terms of the offer clause
is only applicable when the party implementing
the clause is an offeror
iii. Example:
1. Buyer is offeror; sends purchase-order form; silent on
2. Seller is offeree; sends acceptance form; contains
disclaimer of warranties; contains “acceptance conditional
on terms of acceptance” clause
a. Seller’s conditional acceptance creates a
counter-offer, as his acceptance is conditional
(see: §2-207[1]) on the different or additional
terms introduced in the acceptance (no contract
yet exists)
b. Buyer must agree to terms of counter-offer for
the counter-offer to be accepted (acceptance
would create a contract)
c. If Seller ships anyway, and the buyer accepts the
goods, the parties have formed a contract through
conduct (§2-207[3]).
d. The contract is on those terms previously agreed
upon (see: §2-207[3])
i. In such a case, the buyer is not bound
by the additional terms, because they
Contracts 13 of 21

did not match the original purchase

order (see: §2-207[3])
e. “Acceptance conditional on terms of acceptance”
clause is only valid when the party implementing
it is an offeree
iv. Example:
1. Buyer is offeror; sends purchase-order form; contains
express statement that all implied UCC warranties (those
that were implied or silent in other Cases) are to be
2. Seller is offeree; sends purchase order form; contains
disclaimer of warranties
a. Buyer and Seller’s terms are different, and would
be knocked out and replaced with UCC’s gap-
i. Because the offer (from buyer) had
express statement of warranty, it
conflicted with the acceptance (from
seller) that also had express statement
disclaiming those warranties
ii. Note: in the previous Cases, the terms
were additional because one form was
silent (implied) about warranties and
the other was express about the same
v. Example:
1. Seller is offereor; sends offer; contained disclaimer of
2. Buyer is offeree; sends acceptance form; silent on
a. Buyer’s written acceptance form operates as an
acceptance, and a contract is formed
b. The buyer’s implied warranty terms (while silent)
would be material alterations to the seller’s
express disclaimers, and will not be included
3. To summarize:
a. Different terms will no longer defeat an acceptance unless:
i. Offeree makes his acceptance conditional on his own terms
b. If offeree adds new terms (between merchants) the additional terms will be
added to the new contract unless:
i. the terms materially alter the contract (no contract created because of
additional terms)
ii. the offeror limits acceptance to the offer’s terms (counter-offer
created by additional terms)
iii. there was a previous objection to the addition of a certain term (no
contract created because of additional terms)
c. If offeree adds new terms (between non-merchants) the additional terms are
subject to agreement
d. If the parties who are under no contract (because of §2-207[1] counter-offer[i];
because of material alteration[ii]; because of previous objection[iii]) choose to
perform anyway, their performance constitutes a contract made up of those
terms previously agreed to (those terms that match on the exchanged forms)
3. The Validation Process (Bargained-for-Exchange; Consideration)
a. Introduction
b. The Seal and Other Formalistic Devices
c. Consideration
i. Elements of Consideration
Contracts 14 of 21

ii. Legal Value Element—Adequacy or Sufficiency of Consideration

iii. Exceptions to Refusals to Inquire Into Adequacy or Sufficiency of Consideration
1. Inadequacy in Equity
2. The Money Exception
iv. Nominal (Formal) Consideration—Bargained-for Exchange
v. Promise of Permanent Employment—Terminable at Will
vi. The Effect of Recitals
vii. Absence of Detriment—Mutuality of Obligation—Illusory Promises—Requirements
viii. The Illusion of Illusory Promises
ix. Requirement and Output Contracts
x. Exclusive Dealing
xi. Voidable Promises and Consideration—Capacity to Contract
xii. Pre-Existing Duty Rule
xiii. Modifications of Pre-Existing Duty Rule
xiv. Disputed Claims, Modifications, Accord and Satisfaction
xv. The Invalid Claim
d. Promissory Estoppel
i. Absence of Bargained-for Exchange—Antecedents
ii. Early Applications of Promissory Estoppel—Hand vs. Traynor
iii. Expansive Application of Promissory Estoppel
iv. Restatements Compared
1. Similarities and Dissimilarities
2. Elimination of “Definite and Substantial” Reliance Requirement
3. Detrimental Reliance by Third Persons
v. Precontractual Reliance
vi. Flexible Remedy—Reliance or Expectation Interest
e. Past Consideration—Moral Obligation
i. Generally, past consideration is no consideration at all; there are, however, some promises, made
with only a moral obligation as consideration, that will be enforced. The exceptions to the rule that
promises made in consideration of a moral obligation (or past consideration) will not be legally
binding are: promises made in consideration of past material benefits (material benefits doctrine);
promises made to pay a debt barred by the statute of limitations; promises made to pay debts
discharged in bankruptcy
ii. Past Consideration
1. Passante (Π ) v. McWilliam (∆ )
a. Π was legal counsel for Upper Deck; Upper Deck needed to raise money to
buy new hologram paper, without which they could not print their 1988 season
set; ∆ was unable to secure financing. Π was able to secure a bridge-loan
from his legal partner’s brother (a doctor). Π presented the loan to ∆ and the
board which accepted and told Π that he would be given 3% of Upper Deck
stock. ∆ and board refused to turn over the 3%.
b. Trial Court for Π ; ∆ moved for Judgment Not Withstanding Verdict and/or
New Trial; both were granted
c. Appellate Court for ∆ (Affirmed Judgment N.W.V. and New Trial)
d. Rule: past consideration is no consideration; past consideration will not support
a promise which is in excess of the promisor’s existing debt or duty
e. Rule: professional ethics requires that a lawyer, who is made a promise from a
party to which he already owes a legal duty, must advise such party that they
are entitled to seek separate legal counsel for that promise
iii. Moral Obligation
1. Generally, moral obligation will not make a contract enforceable (see: Harrington)
2. There exist some exceptions to the general rule
iv. Material Benefits Doctrine
1. In Re Hatten’s Estate
a. Over the course of 25 years, Π drove ∆ , allowed ∆ to eat at her home
uninvited, and performed other gratuitous services; ∆ wished to make Π a gift
in consideration of Π past gratuity and services. ∆ wrote Π a bank note that
gave her $25,000.
Contracts 15 of 21

b. Rule: every negotiable instrument (such as a bank note, check, et cetera) is

deemed, prima facie, to have been issued for a valuable consideration
(presumption of consideration). The presumption may be rebutted by
affirmative evidence that there was, in fact, no consideration given for the
c. Rule: whenever the promisor has received value—a material pecuniary benefit
—under circumstances giving rise to a moral obligation on his part to pay for
that which he has received, and the promisor so promises, the fact that the
promisor actually received some material benefit is itself sufficient to support
such a promise (even though the consideration was past consideration)
i. This rule is only followed in select jurisdictions
ii. Restatement (Second) of Contracts
1. Keeps in place material benefits doctrine
a. A promise made in recognition of a benefit
previously received by the promisor from the
promise is binding to the extent necessary as to
prevent injustice
b. A promise is not binding under the previous
i. If the promise conferred the benefit as a
gift or for other reasons the promisor
had not been unjustly enriched (if
unjustly enriched, then binding)
ii. To the extent that the promise’s value
is disproportionate to the value of the
previously conferred benefit
v. Promises Uniformly Enforced Through Moral Obligation: Promises to Pay Debts Barred by
Statute of Limitations
1. First Hawaiian Bank (Π ) v. Zukerkorn (∆ )
a. Π gave two loans to ∆ which he never paid; some years later (after the statute
of limitations had run in which Π could have enforced the two loan defaults)
∆ applied and was given another loan, on the condition that, and for
consideration of, the payment of $100 per month towards the existing debt. Π
took the new loan, and made several payments toward the requested debt-
b. Trial Court for Π (Summary Judgment on three separate counts); ∆ appeals
c. Appellate Court (Reversed in Part, Affirmed in Part)
d. Rule: a new promise, by a debtor, to pay his debt, whether then barred by the
statute of limitations or not, binds the debtor for a new limitations period. The
promise may be express or implied. If it is express, it may be conditional or
unconditional (but if conditional, it is not effective until the condition is
performed). The promise may be implied from an express acknowledgment of
the debt or from payment thereof
vi. Promises to Pay Debts Discharged in Bankruptcy
1. Promises to pay debts already barred by bankruptcy (thus, the only consideration is a
moral obligation or past consideration—consideration of interest and later repayment for
the issuance of the loan) are held to be legally binding under the following
a. Reaffirmation Promise must be approved by the bankruptcy judge
i. Judge must find that:
1. New agreement does not impose undue hardship on the
promisee (debtor) or debtor’s dependant
2. New agreement is in the best interest of the promisee
3. New agreement must not be made recklessly, or based upon
the guilt of the promisee (debtor)
4. Chapter 4: Operative Expressions of Assent
a. Introduction
Contracts 16 of 21

i. The promises of a party are only given legally binding effect if they manifest the assent of the party
to be bound by such promise. Thus, to form a valid contract, there must be: mutual assent
(agreement process, intention to be legally bound); consideration (bargained-for exchange; benefits
and detriments); and freedom from defenses (contract is not voidable—disaffirmed or otherwise
made void; contract is not unenforceable—statute of limitations or Statute of Frauds)
ii. Question asked: which expressions of assent will be viewed as enforceable; that is, which
agreements will be viewed as legally enforceable, and what requirements exist for agreements
(assent) to be legally enforceable
b. The Statute of Frauds
i. Origin—Repeal of the English Statute
1. The original Statute of Frauds contained twenty-five sections; only two are important for
present purposes (4 and 17). Section 4 contains six subsections, designating 5 types of
contracts that must be evidenced by a signed writing (now 4 types); Section 17 designates
the certain amount of money at issue necessary to trigger the requirement that the
contract be evidenced by a signed writing
a. Original Section 4 required the following promises be evidenced by a signed
i. A special promise, form an executor or administrator, to answer
damages out of his own estate
ii. Promises to pay the debt of another
1. Essentially, items i and ii have been combined into the
category of “Suretyship Promises”
iii. Agreements made in consideration of marriage
iv. Contracts for the sale of land
v. Contracts to be executed more than one year after creation
vi. Contracts for the sale of goods over $500
2. Types of Contracts Requiring Evidence of a Signed Writing
a. Suretyship Promises
i. Suretyship is a three-party relationship in which a principal debtor or
obligor promises to pay a certain amount to a creditor or oblige and a
third-party, a surety, promises to pay the creditor if the debtor is
unable to do so
1. If debtor does not pay, and surety is forced to pay his debt,
the surety can file a claim as a creditor against the principal
ii. Suretyship Promises must be in writing with two major exceptions:
1. Main Purpose (Leading Object) Exception
2. Four-Party Indemnity Exception
b. Main Purpose (Leading Object) Exception
i. Armbruster, Inc. (∏) v. Barron (Δ)
1. ∏ and Δ entered into a contract; ∏ agreed to construct a
bowling alley for Δ’s corporation (RBR). At the time, Δ
had not yet purchased the land on which the alley was to be
built, and had not obtained financing for the project. ∏
insisted that Δ personally assure the deal and personally
guarantee payment. Δ did not pay. ∏ brings suit (arguing
that although Δ promised to answer for the debt of a third
party [RBR] and thus ∏ action would traditionally be
barred by the Statute of Frauds, ∏’s promise falls within
the Leading Object [Main Purpose] exception to the Statute
of Frauds suretyship requirement)
2. Trial Court judgment for ∏; Δ appeals
3. Appellate Court judgment for ∏ (Affirmed)
4. Rule: if one makes an oral promise to pay the debts of
another (statute of frauds normally classifies this as a type
of contract that must be evidenced by writing) and
promisor’s main purpose (leading object) was to serve his
own monetary interest.
Contracts 17 of 21

a. In the case of a stockholder in a corporation (a

corporate fiduciary) making a promise to pay the
debts of the corporation (technically a third-
party), to distinguish the main purpose:
i. Question of fact: look to the particular
fact-pattern in question to glean the
promisor’s main purpose
ii. Typically, such a promise form a
fiduciary would be within the statute of
frauds (and thus need to be in writing)
because the actions of a corporate
fiduciary are generally those that are
intended for the best interests of the
company as whole; the fact that a
fiduciary may indirectly benefit from
the success of a company is not enough
to bring the case without the Statute of
Frauds (and thus not requiring a
5. Reasoning:
a. Because Δ made the offer as one (of only three)
shareholder in a corporation that would not have
succeeded were it not for the building of the
bowling alley (and thus, would have failed
without the promise by Δ to secure the
contractor) the Δ was acting in his own pecuniary
(monetary) interest (his interest was the
corporation succeeding, because if it didn’t, he
would lose the money theretofore invested in said
i. As such, Δ had more than a personal,
pecuniary object in making the promise
to ∏; Δ’s leading purpose was his own
financial interest
c. Four-Party Indemnity Exception
i. Example: A wanted to assure that his son, B, would obtain a loan
from the bank, C. A did not like the president of C, and so he asked
D to sign as a surety for B; A promised to pay D’s debt in the event
that B could not repay the original loan. D signed; B was given the
loan; B could not repay the loan; D repayed the loan; A would not
pay D
1. Here, when B failed to repay the loan, D became the
debtor; when D repaid the loan, D became a creditor, and B
became indebted to D (D becomes creditor through
d. Marriage Agreements
i. Agreements made in consideration of marriage are within the Statute
of Frauds and must be in writing.
1. Example: A promises to marry B if A and B can agree to
divorce settlement guidelines
2. Example: A promises to marry B in exchange for some
valuable consideration
3. Agreements to adopt children or to permit a spouse’s
parents to live with the couple are within the statute of
4. Typically, agreements between unmarried cohabitants are
not within the statute of frauds
e. Part-Performance Exception (To Marriage Agreements)
i. Dewberry (∏) v. George (Δ)
Contracts 18 of 21

1. Δ and ∏ agreed that, if Δ was to marry ∏, Δ and ∏ must:

not comingle their funds; each must keep a separate house
to use if there is a divorce; all property would be separate
property; ∏ would not get fat. Over the course of the
marriage, the parties held to their agreement, and kept
property and monies separate (no mention of whether ∏
got fat). ∏ accrued a significant amount of wealth and
property; Δ did not. Marriage dissolved; Δ argues that no
contract existed, because such an agreement would be
within the Statute of Frauds, and is thus unenforceable
without a signed writing
2. Trial Court judgment for ∏; Δ appeals
3. Appellate Court judgment for ∏ (Affirmed)
4. Rule: Doctrine of Part Performance: equitable doctrine
which provides remedies of damages or specific
performance for agreements that would otherwise be barred
by the Statute of Frauds. Part Performance Exception
requires that (a) the contract must be proven by clear,
cogent, and convincing evidence; and (b) such evidence of
part performance must unmistakably point to the existence
of the claimed agreement
5. Reasoning:
a. Here, several parties testified that Δ and ∏ had
made a prenuptial agreement and had acted
accordingly (satisfying requirement [a])
b. The actions of the parties to keep their funds and
property separate over the course of the marriage
served as evidence to support the finding that a
contract actually existed (satisfying requirement
f. Contracts for the Sale of Land
i. Contracts vs. Conveyances
1. The Statute of Frauds deals separately with conveyances of
a. For the purposes of the Statute of Frauds, it is
commonly viewed that the only application of
this section is to the sale of land
ii. Part Performance and Remedies
1. Cain (∏) v. Corss (Δ)
a. ∏ and Δ had an agreement for the sale of land;
there was no written agreement, but ∏ and Δ
agreed that ∏ would pay $10,000 down,
$400,000 upon receipt (or possession of the
land), and the balance at a later point in time . ∏
put $10,000 down. Δ did not convey the land. ∏
brings action for $50,000 damages ($10,00 down
payment [restitution interest] and $40,000
difference in price of the land offered in the oral
agreement and the price of the land on the open
market[expectation interest])
b. Trial Court judgment for Δ (Summary
Judgment); ∏ appeals
c. Appellate Court judgment for Δ (Affirmed)
d. Rule: contracts for the sale of land are within the
Statute of Frauds, and are unenforceable without
a signed writing
e. Rule: in the event that one party has partially
performed, an oral agreement for the sale of land
Contracts 19 of 21

can be made enforceable through the Doctrine of

Part Performance
f. Rule: the Part Performance of the party seeking
to remove the agreement from the reach of the
Statute of Frauds (to make the promise
enforceable even without a written agreement)
must prove the following elements
i. That payment (or part payment) had
been made; and
ii. That ∏ has actually possessed the land
iii. That ∏ has made significant and
valuable improvements or changes to
the land in question
g. Rule: the doctrine of part performance is not
available or applicable in actions for money
i. In the event that there is an oral
agreement for the sale of lands, and a
party to such agreement wishes to raise
the doctrine of part performance to
make the agreement enforceable, he
would only be permitted to do so in a
Court of Equity (thus, seeking specific
performance, promissory
estoppel/detrimental reliance, or unjust
h. Reasoning:
i. Here, there was only the giving of
payment, this is not enough to take the
agreement out of the reach of the
Statute of Frauds, because the other
two conditions (occupation and
improvement) were not present
ii. Some courts will allow recovery when
only two of the elements are met (e.g.
payment and occupation; payment and
iii. Interests in Land
1. Agreements that involve the sale of an interest in land are
also within the Statute of Frauds
a. Easements
b. Right-of-Way Agreements
c. A Change in the Exit of a Road
d. A Recission of a Land Contract
e. An Assignment of an interest in Land
f. The Restriction upon the use of land
g. An Equitable Lein Created by a Mortgage
iv. Leases
1. Under the English Statute of Frauds, leases were without
the Statute of Frauds if they did not exceed three years
from the time that the lease was made
2. Most American jurisdictions consider leases to be without
(excluded from) the Statute of Frauds unless they exceed
one year
v. Part Performance
1. Once a transfer of ownership is made from the seller, the
buyer is bound to pay the agreed-upon price (even if the
agreement was not in a signed writing as pursuant to the
Statute of Frauds: Sale of Land provision)
Contracts 20 of 21

2. However, if there is no transfer of ownership from the

seller, but payment is made by the buyer, the buyer cannot
bring an action (for specific performance) unless the other
elements (possession and/or improvement) are met.
vi. Legal/Equitable Remedies—Restitution Interest
1. Part performance in this context (oral agreements made for
the transfer of land/land interests) is an essentially equitable
remedy; that is, ∏ will be seeking to recover specific
performance [either the conveyance of the property or the
delivery of the price promised]
2. In a case like Cain, the ∏ who makes an oral agreement for
the sale of lands and makes payment pursuant to that
agreement (but does not possess or improve); such ∏ will
be able to recover at law for the money paid (but nothing
a. ∏ would bring action in a Court of Law
i. Bring action based on unjust
enrichment (restitution interest) to
offset his losses (the down payment)
with the Δ’s gains (receipt of the down
vii. Agents (Brokers)
1. An agreement to pay a broker’s-fee or commission on the
sale of land is within the Statute of Frauds, and must be
evidenced by a writing
viii. Distinguishing Land from Goods
1. Contracts for the Sale of Land: within the Statute of Frauds
a. Land: those objects that are naturally and
originally part of the land; and those objects
which the agreement in question require the
buyer to enter onto the land and sever (remove)
on his own
i. Mineral Deposits
ii. Natural Gas Deposits
2. Goods: without the Statute of Frauds; but within the UCC§
2-201 (basically, the UCC’s Statute of Frauds; specific to
the sale of goods)
a. Goods: those objects that are not natural and
originally part of the land; and those objects
which the agreement in question requires the
seller to sever and give to the buyer
i. Crops
ii. Timber (originally classified as land;
now goods)
g. Contracts not Performable Within One Year from Formation
i. Klewin, Inc. (∏) v. Flagship Properties, Inc. (Δ)
1. Plaintiff and Defendant entered into an agreement; Δ was
the developer, and ∏ was the contractor. Δ offered ∏ to be
the construction manager for the developer’s project. The
agreement did not specify whether ∏ would be
construction manager for the whole project (expected to
take 3-10 years). Plaintiff and Defendant had a written
agreement for the first phase of the project; Plaintiff did
not do a good job, and Defendant sought other construction
managers. Defendant hired another manager for
subsequent phases of the project. Plaintiff brought action
to enforce the oral agreement that Plaintiff be the
construction manager for the project
2. Trial Court judgment for Δ
Contracts 21 of 21

3. Appellate Court judgment for Δ

4. Rule: an oral agreement will only be within this section of
the Statute of Frauds if such an agreement expressly and
specifically states that the time for performance is more
than one year (in duration; away); such an agreement is
within the Statute of Frauds and is enforceable
a. Example: A and B make an oral contract that A
is to paint B’s house over the course of the next 3
i. The explicit language of the agreement
eliminates any possibility that the
agreement can be performed within one
ii. The agreement, thus, falls within the
Statute of Frauds
iii. The agreement is unenforceable
5. Rule: an oral agreement that does not explicitly specify the
time for performance is a contract of “indefinite duration”;
a contract of indefinite Duration is without the Statute of
Frauds, and is enforceable
a. Example: A and B make an oral contract that A
is to clean all of the gutters on B’s estate
i. There is no explicit language as to
when the contract will be performed
ii. The agreement, thus, falls without the
Statute of Frauds
iii. The agreement is enforceable
6. Rule: an oral agreement the does not explicitly state the
time of performance, but pure reason dictates that such an
agreement could not possibly be performed within one
year, is likewise without the Statute of Frauds, and is
a. Example: A and B enter into an oral contract,
whereby A is to empty all of the sand from the
Sahara Desert, by bucket, into the Mediterranean
i. There is no explicit language in the
agreement as to when the performance
will be made; however, common-sense
dictates that such an agreement would
be literally impossible to last less than
one year
ii. The agreement is, thus, without the
Statute of Frauds
iii. The agreement is enforceable