Phillips	1997
CONTRACTS

Basis for Enforcing Promises

I.     Definitions

    1. consideration - a benefit received by the promisor or a detriment incurred by the promisee.
    2. promise - an assurance or undertaking, however expressed, that something will or will not
    be done in the future. Promises are enforceable by law called contracts.
    3. beneficiary - when performance of a promise will benefit someone other than the promise, 
        that person is called the “beneficiary.”  
    4. express K - theory of contractual liability.  oral or written and consists of offer, acceptance,
        and bargained-for consideration.  
    5. bilateral - requiring both of the contracting parties to fulfill obligations reciprocally toward
        each other. i.e. contract of sales where seller delivers and buyer buys.
    6. unilateral - one party becomes bound to fulfill obligations toward the other w/o receiving 
        any return promise or performance.  
    7. consequential damages - damages unique to P, which are only recoverable if they are 
        considered reasonably foreseeable by the breaching party when the contract was formed.
        Such damage, loss, or injury as does not flow directly and immediately from the act of the 
        party, but only from some of  the consequences or results of such act. Consequential 
        damages resulting from a seller’s breach of K include any loss resulting from general or 
        particular requirements and needs of which the seller at the time of contracting had reason
        to know and which could not reasonably be prevented UCC 2-715 (2)
    8. modification - occurs when the parties to an unfullfilled (executory) contract modify
        it, and change a duty of performance already due from one or more parties
        c.l.a new agreement must be a complete, enforecable K to be eefective, with all 3
        elements. If a party is under preexsiting duty rule to perform duties called for by the 
        modified K, that party muts give consideration for the release of the preexisting duty rule
        or the modification K is invalid. The modification K must be in writing if the original
        K was so required. The modification discharges those original terms that are covered by the
        modification and imposes new obligations. If there are remaining  terms outside the scope 
        of a new agreement, they sill must be performed.
        UCC - If both parties in good faith, agree to modify a K for sale or lease of goods, no 
        additional consideration is needed, eeven if a party was under a preexisting duty under the 
        original K to do the same thing. Preexisting rule is abolished. The modification must still
        be in writing and if the original K had to be UCC 2-209 and 2A-208 

II. The Meaning of Enforce

A. When a K which cts. recognize as enforceable is breached, the non-breaching party 
     often has a choice of remedies including damages, specific performance, recission and 
    restitution, quasi-contract, and tort action.

B. Cases

1. Focus on Party’s Damages

United States Naval Institute v. Charter Communications:
Facts:  The U.S. Naval Institute (P) owned the copyright to the book The Hunt for Red October. It granted an exclusive licensee to CC, Inc. (D) to publish a paperback edition of the book “not sooner than Oct. 1995.” D sent its paperback edition of the book to retail outlets early enough to allow sales to begin on Sept. 15.  The book was near the top of the paperback best seller lists by the end of Sept. and allegedly reduced P’s sales of hardback copies of the book.  P sued, claiming copyright infringement and seeking all of D’s profits from pre-October sales (estimated at $724,300).  The district court found that D had breached the K and that P was entitled to recover damages for copyright infringement, compromising actual damages suffered by P plus D’s profits attributable to the infringement.  The court calculated P’s actual damages as the profits P would have earned from hardcover sales in Sept. if D’s paperback had not been for sale, based on difference b/n Sept. and Aug. sales. D’s profits attributable to infringement were it profits on paperback  sales to buyers who would not have bought a hardcover copy in Sept. ($7, 760). D appeals.
Issue:  A breaching party does not have to pay the profits it received through its breach to the promise.
Rationale: Amount awarded was based on previous month’s sales. Damages for breach are usually measured by P’s actual losses in order to compensate the party. Awarding P all of D’s profits would be a penalty, and Punitive awards are not part of K law. They only needed to be put in the smae position as before K.

Sullivan v. O’Connor: 
Facts: Sullivan  (p), a professional actress, k’ed with (D), plastic surgeon for a nose job.  D promised to enhance P’s beauty. Parties contemplated 2 operations. The surgery actually required three operations and resulted in irreparable disfigurement of  P’s nose. P sued for breach of K and for negligence (Malpractice), but obtained a favorable verdict only in 1st count. P recovered her out-of-pocket expenses, foreseeable damages resulting from D’s breach and pain and suffering for third operation. P did not recover pain and suffering for first two operations nor the difference in value b/n the nose as promised and the nose as actually completed. D appeals claiming that only out-of-pocket expenses should have been awarded.
Issue/Rule: Reliance is the proper measure of damages for breach of a physicians K to produce certain results.
Rationale: Restitution would have been insufficient. Expectation would have been extreme, but the middle ground, Reliance, puts p back in the same position that she occupied before agreement. Recovery for Pain and suffering for third operation may be awarded under expectation or reliance cause P had waived her claims of pain and suffering for first two operations.

Opportunity costs - costs you forewent in pussuing what you did

C. Ways of Measuring Damages

Compensatory or expectation - an amount intended to put P in the position he would be in if K had been performed as agreed.

restitution damages - An amount corresponding to any benefit conferred by P upon D in the performance of K.

Reliance Damages - any expenditure made by P and any other detriment following proximately and foreseeably from D’s failure to carry out his promise; ie., putting P back in position he occupied before the agreement.

White v. Benkowski: - punitive damages in actions for breach of K
Facts: White(p) bought house next to D and K’ed with D to share water from D’s well. The relationship became hostile  and on  a couple of occasions D turned off P’s water supply for a few minutes. As a result, P twice had to take the kids to neighbor’s house for bath and once suffered odor in bathroom. P sued for compensatory damages and punitive damages and recovered $10 and $2,000 respectively, which trial court later reduced to $1 compensatory and no punitive damages. P appeals.
Rule/Issue: Punitive damages are not allowed in actions for breach of K.
Rationale: Except for breach of K to marry, party may never collect punitive damages. Only in cases where contractual duty is a tort any punitive damages be offered. Punitive damages deter actions, and most times, people need to breach K. We do not want to penalize them for it. No proof of damages.

Specific performance - where damages are shown not to be an adequate and just remedy, equity may allow specific enforcement of K. The classic example is a K for sale of real property; since each parcel of land is unique, the buyer can only get the benefit of his bargain by actually getting the particular parcel contracted for, ie. damages will not let him realize the benefit of his bargain. 

Effciency: reallocation of resources that amkes someone else better off without maing anyone else worse off.

Klein v. PepsiCo.:  not specfic performance where money damages are adequate
Facts: Klein(P) wanted to buy a used corporate jet, model G-II. P contacted Janas, president of Universal Jet Sales, who told P about suitable jet owned by PepsiCo. (D). P’s employees inspected D’s jet in N.Y. and D flew it to AK for p to personally inspect. P paid Janas $200,000 as a deposit and told him to offer 4.4 million. D countered to Janas with $4.7 million, then lowered it offer to 4.6 million, which Janas accepted with the intent to sell the jet for $4.75 million. Within a week, D’s chairman used the jet and asked that it be withdrawn from market. D refused to tender the aircraft or negotiate further. P sued, seeking specific performance. Court ordered it, and D appeals.
Rule/Issue: Specific performance may not be awarded where there are substitute goods that can be purchased to satisfy the original K.
Rationale: UCC 2-716, a non-breaching buyer of goods may seek specific performance of the K if the goods sought are unique. Money damages were recoverable and other comparable G-II jets were available for purchase. 2-713 didd. b/n market price and K price.  2-712 cover.

Output K - K that does not set definite quantity

Requirements K  - quantity is not set; seller is required to furnish buyer.

Laclede Gas Co. v. Amoco Oil Co.: practical approach
Facts: Laclede Gas Co. (p) and Amoco Oil co. (D) agreed to an arrangement to provide central propane gas distribution systems to certain residential areas until natural gas mains were extended. D, as supplier, was to provide the necessary supply facilities. P, as distributor, was to provide and operate to pay D four cents per gallon above a particular posed price. P could terminate the agreement on 30 Days’ notice at the end of any year or when natural gas mains were extended. D had no right of termination. After a price dispute, D terminated the agreement, claiming that it lacked mutuality. P sought an injunction against the continuing breach, but the trial court agreed with D.  P appeals.
Rule/Issue: Specific Performance is an appropriate remedy for breach of a k involving Personal injury.
Rationale: P could not with certainty find an alternative long-time supplier. Thus, the equitable rules have been met and sp. is available as a matter of right.

E. Consideration:  Benefit, Detriment, and Bargained-For Exchange

Hamer v. Sidway:  Goody Two Shoes
Facts:  Decedent promised his nephew that if he would refrain from drinking, using tobacco, swearing, and playing cards or billiards for money until h became 21, the uncle, would pay him $5,000. Upon reaching 21, the nephew informed decedent that he had kept bargain. Decedent reaffirmed his obligation but retained funds until nephew would be capable of taking care of them. Decedent died without paying. Nephew assigned claim to Hammer who sued Sidway (d), the executor. Trial ct. held for p, but was reversed on appeals. P appeals.
Rule/Issue:  A promisee’s abstention from legal but harmful conduct does constitute legal and sufficient consideration for a promise to pay money.
Rationale: D claims that nephew suffered no loss or detriment but gained a real benefit from abstaining from vices. However, nephew had legal right to do so, but he voluntarily waived these rights.  Consideration is a tool to separate enforceable and unenforceable K.

Forms in Relation to Substance

1. Evidentiary - evidence d fact that promise was made and that K was entered into.
2. Cautionary - cautions actions about legal effects of words
3. Channeling - form enables parties that have a certain intent on how to proceed.

Fiege v. Boehm: - forbearance as sufficient consideration 
Facts: Boehm (P) became pregnant and threatened D with a suit in bastardy. D promise to pay for expenses of P’s child and provide for its support if P would forebear prosecuting the suit. D paid $480 b/n Sept. 1951 and may 1953, at which time he stopped payments when he found out that blood tests indicated that the child could not possibly be his. P then filed a charge of bastardy with State’s Attorney. At trial D was found Not guilty and P sued to enforce promise to support. Jury as not bound by D’s acquittal and found that D was liable to P. D appeals.
Rule/Issue: A forbearance to sue, although based on an invalid claim, is sufficient consideration to make a promise to pay binding.
Rationale: All that is required is that P act in good faith, under a reasonable belief.
Minority rule - where parties bargain in good faith and claimant honestly believes that claim is valid, disputed claim need not be reasonable. Legal detriment to promisee or benefit to promisor.

Feinberg v. Pfeiffer: - gratuitous pension plan
Facts: Feinberg (P) worked for D for 37 years. Unknown to P, directors of D voted to give her a raise and a  guaranteed retirement income for life. after the vote, P was informed of the action and was told she was free to retire whenever she saw fit. P continued working for a year and a half, and would have continued even without added benefits. However, the retirement plan was a major factor in her decision to retire. D paid the benefits for several years, but a new president of D determined to stop the payments. P sued to recover the payments because she had suffered severe medical problems and could no longer work. Trial court found for P and D appeals.
Rule/Issue: A gratuitous pension plan is enforceable is the promisee retires in reliance on continued payments.
Rationale: Promissory estoppel is a recognized species of consideration.  P would not have retired if she had not relied on funds. Promissory estoppel is the only theory that allows enforcement of K lacking consideration without abandoning the doctrine of consideration.  Other theories include treating the act of reliance itself as consideration and finding a bilateral K.

Mills V. Wyman: Moral obligation not enough consideration
Facts: Mills(P) took in Wyman’s 25-yr. old son who was poor and had become sick on a sea voyage. P cared for him for two weeks. D subsequently promised to repay P’s expenses, but then changed his mind.  P sued to recover the expenses. The court granted non-suit to D and P appeals.
Rule/Issue: A moral obligation does not constitute as sufficient consideration to make a promise enforceable.
Rationale: A moral obligation is not enough for consideration. The law will only give a promise validity if the promisor gains something , or the promisee loses something, by the promise.
Performed duty before letter was sent.

Webb v. McGowin:
Facts: Webb (P) was cleaning the upper floor of a mill and was about to drop a heavy weight to the floor below.  P saw McGowin there, and in the process of avoiding harm to him, P himself fell and sustained permanent injuries. McGowin promised to pay P a monthly sum for life, and made payments for eight years until he died. McGowin’s executor stopped payments. P sued. D was granted non-suit and P appeals.
Rule/Issue: Moral consideration is sufficient to support a promise given in recognition of a past economic benefit received by the promissor.
Rationale: where the Promissor received material benefit and the promisee suffers material detriment, then moral obligation is sufficient consideration to support a promise.
Even when only consideration is moral obligation, K may be enforced.
2-209

PFC for quasi-K
a. A has rendered services or expended property which confers a benefit on B
b. A has rendered such performance with the expectation of being paid.
c. A was not acting as an intermeddler or “volunteer.”
d. To allow B to reatin the benefits without paying A would result in the unjust enrichment of B at A’s expense.

C.  Restitution as an Alternative Basis for Recovery

Cotman v. Wisdom: emergency services
Facts: Harrison was mortally injured in a streetcar wreck. A third party summoned Wisdom (P), a doctor to attempt to save Harrison’s life. P later brought this action against Cotnam. Harrison’s administrator, to recover the reasonable value or services rendered. The judge instructed the jury that if P rendered services in attempt to \save decedent’s life, then P should recover, and that in awarding compensation, the jury should consider the character and importance of the operation, the responsibility of the surgeon, his experience and training, and the ability of the injured to pay. D appeals from a judgment for P.
Rule/Issue: Courts may find that an implied K to pay for medical services provided to a person who is incapable of contracting.
Rationale: The theory of recovery is based on an implied K or quasi since decedent could not assent. P is entitled to fair compensation for services rendered and not allowed unjust enrichment simply because decedent may have been wealthy or his estate may have been left to collateral heirs. Services are the same. Quasi-K - half way b/n tort and K.  He would have assented and court wants restitution.

Callano v. Oakwood Park Homes Corp.: indirect benefit
Facts : Callano (P) planted shrubbery for Pendergrast, who was the purchaser of a home under K of sale with D. Pendergrsat died before paying P for shrubbery. D had no knowledge that p was not paying, thought it had knowledge of the planting. After Predegrast’s death, his estate canceled the K of sale with D.  D then resold the property, including shrubbery, to a third party. From judgment of $475 for P the reasonable value of the shrubbery on the theory of quasi-contractual liability was unjustly enriched through cancellation and resale.  D appeals.
Rule/Issue:  D had no contractual relationship with P and is not obligated to pay for the benefit received on the theory of quasi-K.
Rationale: To prove liability in quasi-K, P must show unjust enrichment by D.  D was enriched but not unjustly because  P had no dealings with D and therefore expected no remuneration from D.  P should seek money from estate of decedent.

D. The Problem of Unsolicited Action
      Reliance and the Requirement of Bargain

Kirksey v. Kirksey: - screwed his sister-in-law
Facts: P’s deceased husband’s brother (D) invited P to bring the kids and he would provide a home for them on the farm until they had grown up. P moved the 70 miles to the farm; after two years D required them to leave. P sued for breach of K and won a judgment for damages in the trial court; D appeals.
Rule/Issue: A gratuitous promise is not legally enforceable even after P has suffered loss and inconvenience.
Rationale:  Mere gift, and no consideration given.
Dissent: Loss and inconvenience to P is sufficient consideration.

Central Adjustment Bureu, Inc. v. Ingram: - covenant not to compete
Facts: Ingram (D) worked for Central Adjustment Bureau (P), a debt collecting agency. D started out as  a salesman and over seven yeas became a regional manager. A week after D began working For P, P required that D sign a covenant not to compete. D objected, but when threatened with his job, D signed. The covenant prevented D from competing with p in any manner for 2 years anywhere in the United States. Two other employees of P also signed similar covenants after joining P. Ds quit P and began a competing collection agency, using information gained while employed by P. Ds also approached P’s customers. P sued for compensatory and injunctive relief. The trial court awarded P damages for breach of the covenants and for the torts of unfair competition and breach of the duty of loyalty. The court of appeals held that the covenants were enforceable for lack of consideration, and that they were unreasonably broad anyway.  However, it upheld the tort findings and remanded the reconsideration for damages. P appeals.
Rule/Issue: A covenant not to compete is enforceable even if it is signed after the employee has accepted employment and has begun working.
Rationale: Ds had been promoted and received additional benefits. If D had not left of free-will and has been discharged out of bas faith, they would have better claim.  In some states the job is consideration enough.  Market, salary increases, promos. Cabs’s interest was national debt collection. They also got to learn the buss. They were in direct contact with all clients and asked a couple of them to leave.
Dissent: Continued employment does not give the employer any choice to sign the K.

Bankey v. Storer Broadcasting:
Facts: Policy changed to term at will. Employee was fired after policy changed that no cause for termination was necessary.
Rule/Issue: employer with a written policy requiring discharge for cause may unilaterally change it policy to one of termination at will, so long as it provides affected employees reasonable notice of the change.
Rationale: There was no reliance by employee. Policy is that employers need stability and unconfinement.

Reliance as an Alternative Basis for Enforcement

Restatement 90 liberalized the doctrine of estoppel , applying it to more situations. It eliminates the Requirement of substantial reliance, where reliance is still less than substantial, partial enforcement of the K may still be granted. also, the doctrine is now applied to bargain situations as well as gift situations.

Ricketts v. Scothorn: gratuitous promissory note
Facts: Scothorn (P) received a note on may 1, 1891, from her grandfather promising to pay her $2,000. she then quit her job. On June 8, 1894, her granddad died after only one year’s interest and Ricketts (D), the grandfather’s executor, refused to pay the note, claiming that there was no consideration for it. From a judgment for P, D appeals.
Rule/Issue: A gift promise is enforceable if it induces the promisee to take detrimental action in reasonable reliance on the promise.
Rationale:  P was influenced by note, it would have been inequitable to permit D to resist payment on the basis of no consideration.
example of equitable estoppel - court accepts true something that might not otherwise be true.

Feinberg v. Pfeiffer :
Facts: bookkeeper who was promised a pension
Rule/Issue:  P’s retirement from her position on reliance on D’s promise to pay her a pension was sufficient to make D’s promise enforceable. 
Rationale: Promise induced action on her part in accordance with Rest. 90
A promise which the promisor should reasonable expect to induce action or forbearance on the part of the promisee or a third person and which does not induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

Cohen v. Cowles Media Company: 
Facts: Cohen told paper about arrest and conviction of political candidate. reporters promised to keep Cohen’s identity secret, but editors published name. Cohen was fired from his job and  sued for damages.
Rule/Issue: Court ruled that it was unjust for paper to break promise.
Rationale: The newspaper knew themselves how important confidentiality was to Cohen.

D+G Stout, Inc. v,. Bacardi Imports:
Facts: D&G, Inc. (P) was a liquor distributor. When two of its main suppliers chose another distributor, P had to either continue operating on a small scale or sell out. D started negotiating a potential sale and received an offer price. Bacardi Imports, Inc. (D), one of P’s major remaining suppliers, knew about the negotiations and promised that P would continue to act as D’s distributor. Based on this representation, P turned down the offer. A week later, D withdrew its account. When this news spread round, P lost another major account and its employees started taking jobs with other distributors. P could not continue to operate, and settled for a sales price $550,000 lower than the price offer. P sued D for the price differential on a theory of promissory estoppel. Trial court granted S.J. P appeals.
Rule/Issue: A party that promises to maintain a business relationship becomes liable for damages when the promisee relies to its detriment on the promise.
Rationale: P rejected an offer based on D’s promise, and then extent of the devaluation of the sale opportunity represents  a reliance injury. P could reasonably rely on D’s promise under these circumstances. There was an exclusive dealing K here. 

reliance- gotta suffer in detriment 4 promise

requirements for Promisory Estoppel:
1. foreseeable that promisee will rely on it
2. promisee did rely on promise
3. reliance was reasonable under circumstances.
4. Injustice can only be avoided by enforcing the promise.

Gilmore argues in Death of a K that P. Estoppel swallows up consideration.  -- almost tort-like
It shot off from equitable estoppel- as misrepresentation or fraud.

Promise for Promise

Introduction:
Mutual promises are exchanged. The test for a K is whether the performance promised would be a sufficient consideration. A bargain must have mutuality of obligation; both parties must be bound or neither will be. 
Sometimes there is no proof of a promise cause transactional cost are expensive.
Questions to ask then are: Why can you not reneg? How are return promises binding?
Dont we all change our minds?  True, but we want people to rely- greater utility is required and it is good for commerce.   All these cases deal with are you getting a solid promise?  Because if promise is illusory, you have not gotten anything for it. If illusory, no mutuality of obligation.

Illusory promise: If promisor reverse expressly or by implication an alternative by which she can escape performance altogether, she has really not promised anything at all. Thus, no mutuality, no consideration, no K.

Cases

Strong v. Sheffield:
Facts: Sheffield (d) endorsed a demand note made by her husband and delivered it to Strong (P) as security for an antecedent debt owed by her husband to P. D expected that P would forebear to collect the note; however, there was no agreement as to how long the forbearance should last.  When P demanded payment two years later and D failed to pay, P brought suit on note. From a judgment for P, D appealed. Ap. ct revered and p appeals.
Rule/Issue:  An agreement not to collect a debt for as long as the creditor shall elect does not constitute consideration.
Rationale:  While P did not foreclose for two years, the test is what was the agreement, not actually what was done. There was no consideration given for the note through the agreement. Here, the note was payable on demand and therefore the agreement to forebear was illusory.
UCC 3-408 states that no consideration is required to create an enforceable obligation which guarantees am antecedent debt of any kind.
Promises should be enforced if you only get promise in return cause people would be afraid to rely. Could have demanded payment at any time.

Mattei v. Hopper: promise conditional on promisor’s satisfaction
Facts: Mattei(P) a real estate developer, unsuccessfully tried to buy property belonging to Hopper (D) until D made an offer which p accepted. The deposit receipt showed that P made a down payment and was given 120 days to consummate the purchase. However, the agreement was expressly subject to P’s obtaining leases satisfactory to P. During the 120-day period. D told P she would not sell her land. P obtained the necessary satisfactory leases and tendered the balance of the price, but D failed to tender the deed. P sued, but the trial court found that the agreement was illusory and lacked mutuality because the condition depended on P’s satisfaction. P appeals.
Rule/Issue:  A promise that is conditional on the promisor’s  satisfaction with a related matter is enforceable. 
Rationale: A promise conditional to the promisor’s satisfaction is not illusory cause it does not permit the promisor to arbitrarily avoid the K. An expression of dissatisfaction is not conclusive; the promisor must actually be dissatisfied with the performance, and not with the K itself. P could not have simply change his mind bout the k and walked away. Court wants P to make good effort. Good faith standard demanded.  There are two categories of discretion: objective and subjective. Subjective and good faith standard vs. objective standard that gives less latitude.
2-103 identifies good faith standard.
Luellen  wants objective to apply. 1-201 is general and 203 is subjective.

Eastern Airlines V. Gulf: foreseeable quantity sufficiently binding
Facts:  P and d have long-term relationship where D supplied aviation fuel to P at various locations pursuant to a series of requirements K’s. in 1972, the parties agreed to another in series of K. Unlike the previous K’s, however, P agreed to bear the costs of increased crude oil prices in a direct proportional relationship of crude oil cost per barrel to jet fuel cost per gallon. As the indicator of crude oil cost, the parties agreed to use posted price of West Texas Sour crude, the price of which was controlled by the U.S. government. As the price was increased. P paid more for the fuel. By 1973, foreign oil was more expensive than controlled domestic oil. The U.S. government began an unprecedented two-tier price control, whereby all production at May 1972 levels from a given oil well. were priced at one level lower, and all production over that level , pulls an equivalent amount of old production, was released from price controls. The posted price was old oil price . D wanted to pay higher prices for its fuel, but P insisted that K be adhered to. Because D threatened to shut supply to P. P seeks injunction requiring D to provide fuel as agreed. D claims that K was not binding requirements K
Rule/Issue:  A contract may be a valid requirements K even if it does not specifically approximate the amounts involved, as long as the amounts are reasonable foreseeable.
Rationale: UCC 2-306 approves requirements K based on good faith and reasonable foreseeable requirements.  Parties here have acted pursuant to requirements K’s such as the one here for several yr. and have acted in good faith. K is valid and enforceable. 

Wood v. Lucy; reasonable efforts implied - exclusive K
Facts:  Wood (P) was given an exclusive K to place Lucy, Lady Duff-Gordon’s (D’s) endorsement on the designs of other clothiers and top place D’s own designs on sale and to license others to sell them.  D was to receive one-half of P’s profits. The K indicated that P had an organization capable of performing the K, but it did not expressly indicate that OP would perform. P sues for breach here on the basis that d put her endorsement on clothes of competitor without P’s knowledge and with no share of the profits to P.  The intermediate appellate ct. reversed trial court’s denial of D’s motion for judgment on pleadings. From dismissal, P complains.
Rule/Issue: Where P did not specifically promise to use reasonable efforts to promote D’s goods, and all compensation to D under the K is to come from such efforts, there is still  valid promise by P.
rationale promise that P will use reasonable efforts is implied, he benefits as well.  If D was not getting anything at all, neither was P. Plus, if she thought it was nothing why did she enter into it.
UCC 2-306.

II. THE NATURE OF ASSENT - THE BARGAINING PROCESS  

Introduction: In testing for mutual assent apply the objective theory of  K; ie. what a reasonable person in the position of each of the respective parties would be led to believe by the words or the conduct of the other party. Think about what a reasonable person standing in the place of the respective parties believes. The rationale is that each contracting party shoals be able to rely on the other party’s apparent intentions without regard to his secret thoughts or mental reservations.

Has there been a “meeting of the minds”?

Lucy v. Zehmer: subjective jest
Facts: Lucy (P) sued Zehmner (D) to obtain specific performance of an alleged land sales K. The K was written, specified a price of $50,000, and was signed by D and his wife. D had declined several previous offers to sell land, but one night, at D’s restaurant, P offered $50,000.  There was a dispute over what was actually said and done, but the signed document resulted.  D claimed it was only signed in jest and that had been drinking; the trial court dismissed P’s actions. P appeals. 
Rule/Issue: A K is still enforceable if one of the parties mentally agreed to it only in jest.
Rationale: They were on equal bargaining power. P was justified in actually believing that the k represented a good faith sale and purchase of the farm. The court’s holding is likely influenced cause D stated that the K was made to force P to admit that he did not have $50,000.

Laserage Technology Corp. v. Laserage Laboratories,Inc.:  objective manisfestation of intent
Facts: Laserage Tech Corp. (P) was partly owned by Byrum, who separately controlled Laserage Laboratories, Inc. (D) and Laserage Technology West, Inc.  The companies had disputes that led to litigation. During discovery, the parties told the judge that they had reached a settlement agreement whereby P would buy Byrum’s minority interest in P. The agreement was based on correspondence b/n parties, but as they started work on a formal document, they disagreed about the security for P’s purchase of Byrum’s shares. P claimed that Byrum would retain none of his shareholders  rights during the gradual but-out, but D claimed that Byrum would only relinquish his voting rights, retaining other shareholder rights such as access to P’s books and records and the right to monitor P’s management. The parties were unable to resolve the problem using a mediator. D moved to enforce the settlement agreement. The judge granted D’s motion, finding that they had entered a binding settlement agreement that allowed Byrum to keep all his shareholder rights other than voting rights. P appeals.
Rule/Issue:   The court has to look at parties writings rather than parties actual mental processes to determine what they agreed to.
Rationale: The court’s objective is to give effect to the intent of the parties as expressed by the K. The status of the document as a K depends on what the parties express to each other and to the world, not on what they keep to themselves.   The objective theory of intent requires that the “meeting of the minds” be determined by what parties expressed to each other in their writings, not by their actual mental process. 

Sullivan v. O’Connor:
Facts: nose-job case
Rule: Expectancy damages are primarily appropriate for the breach of K in the business context. 
Rationale: If the court had awarded damages to Sullivan based on expectancy, it would have had to inquire into her subjective expectation of what her improved nose would have meant to her.
UCC 2-313, but what was the actual intent of the doctor.

The Offer

Offer - proposal by one party to the other suggesting a willingness to enter into a bargain and made in such a way that the other person is justified in believing that his assent to that bargain is invited and, if given, will create a binding K b/n parties. 

requirements for offer are: manifestation of K intent; certainty and definiteness of terms;  communication to the offer.

Test: Would a resonable person in shoes of feet of offeree feel that if he accepted the proposal, a
K would be complete.
Look at words used, surrounding circumstances, to whom made, definiteness and certainty of terms, and witten contract contemplated.

Rule: A simple quotation of a price is usually merely an invitation to the buyer to make an offer.

Owen v. Tunison: stating minumum price not enough
Facts: Owen (P) sued Tunison (D) for breach of  K. claiming that D agreed in writing to sell property to P but later refused causing p to suffer damages. P offered to purchase D’s property for $6,000. D responded to P by letter saying that he could not sell the property unless he received $16,000. P then replied that he accepted D’s offer, whereupon D decided not to sell.
Rule/Issue: A statement specifying a minimum price for the sale of property does not constitute an offer to sell.
Rationale:  D’s letter was an invitation for negotiation.
Harvey v. Facey :
Facts: There was an alleged agreement to sell based on following facts: three telegrams. the plaintiff asked will you sell?  D said that the lowest price  was 900 pounds. P said that we agree to buy.
Rule/Issue: There was no offer made-He--llooooooo!!!!!>!>!?!?!?
Rationale:  none needed!! No legal bindage!!

Fairmount Glass works v. Grunden Martin Woodenware:
Facts: Grunden Martin (p) asked for lowest price at which Fairmount Glass Works (d) would sell to P 10 carloads of mason jars. D replied with a quote and terms for immediate acceptance and shipment. P replied by telegraph with an order, and included an additional clause requiring the “jars and caps to be strictly top quality goods.”  The same day D telegraphed that its output was sold out and that it could not fill the order. P then brought an action for breach of K. From a judgment for P, D appeals. P wins.
Rule/Issue: A quotation of prices for immediate acceptance constitutes an offer to sell.
Rationale:  D’s quotation of prices “for immediate acceptance” constituted an offer. Here, the correspondence as a whole indicated that the seller intended to create in buyer the power to accept or reject seller’s proposal. Does not matter what you intend-law will use objective std.
Allocate risk to lowest cost avoider. share risks that can be contracted to parties with the least costs. 
UCC 2-204 (1) and (2)    2-205 and 2-206
We move away from formalism here. Generally a quotation by seller is not offer, but here it was.
Other factors here like totality of  circumstances- relationship of both sides, intent, practicality- made quotes to large audience.

Craft v. Elder & Johnston Co.: ads case
Facts: Craft (p) brought suit against Elder & Johnston Co. (D) for refusing to sell merchandise advertised in the newspaper. On January 31, 1940, D advertised in the newspaper. On January 31, 1940, D advertised in the Dayton Shopping News that it had electric sewing machines for sale at $26 on Thursday only special. P tendered D $26 each as Thursday for one of the sewing machines but D refused to sell her one. From judgment for D, P appeals, and loses.
Rule/Issue: A general advertisement does not constitute an offer to sell.
Rationale: Advertisements,, without special circumstances, are merely offers to negotiate or to receive offers to purchase. Published lists without more are not offers to sell at those prices but are considered invitations to those who read them that the advertiser is ready to receive offers for the goods at the prices stated.
Sellers ought to be able to choose who they deal with.  Advertisements are often offered to the general public, so that if they were considered to be offers, a seller might find her offer overaccepted; the  number of people who Accept might exceed the number of items that the advertiser has available for sale.

Lefkowitz v. Great Minneapolis Surplus Store:
Facts: GMSS (D) advertised in a paper that it would sell a fur stole for $1 on Saturday, “first come first served.”  P was the first to present himself and demanded the stole for $1 but D refused, saying that a “House rule” limited the offer to women only. For a judgment for P, D appeals and loses.
Rule/Issue: An advertisement to the general public can be a binding obligation requiring the seller to sell the advertised merchandise.
Rationale: Advertisements to the public are binding if the facts show that some performance is definitely promised for something requested. Here the advertisement offered specific merchandise at stated price to the fist person to present himself. There was no room for negotiation as the offer was clear, explicit, and definite. Once offer published, D had no right to impose new or arbitrary conditions. 

Elsinore Union Elementary School District v. Kastorff:  - mistaken bidder
Facts: Kastorff (D), a k’er submitted a bid for construction work on school. P opened bid finding that it was lot less than others asked and asked D if he was right. D said yes, but did not have sheets with him. After a vote by P to accept D’s offer, D discovered that he did not include plumbing work. D promptly told P that he withdrew. P refused and asked D to sign K. D said no way. P sues, judgment for P.  D appeals and wins.
Rule/Issue:  P had an irrevocable option to accept D’s bid  but learned of D’s mistake of computation before accepting , so D is entitled to recission.
Rationale: It was unconscionable to force K.  P knew, D told right away. D was not negligent in  preparing bid.  Time pressures exist and qualification of sunks make things hard.

C.  THE ACCEPTANCE

- acceptance is needed for K and must be made in the same manner requested or offered by the offerer.

requirements: must be accepted to whom made; acceptance must be unequivocal and unqualified; for bilateral -mere giving ; for unilateral- only accepted by performing request.

International Filter Co. v. Conroe Gin, Ice &Light Co.
Facts: IFC (P’s) salesman submitted a letter to D offering to sell water purification machinery. letter provided that a K would arise when proposal was 1) accepted by D and 2) approved by an executive officer of P. D’s manager signed letter  “accepted , Feb., 10....” and specified delivery for march 10. Letter was sent to home of P’s office where pres, endorsed. P sent acknowledgment on Feb. 14 of order. On Feb. 28, D tried to cancel, but P said no way. D claimed that O.K. was insufficient acceptance, that notification to D from p of Approval of acceptance was required, and that letter of Feb. 14 was insufficient acceptance  or notification. P appeals and wins.
Rule/Issue: A notice of acceptance does not need be given if the offeror does not require it.
Rationale: No stipulations made and was approved by executive officer of P. Letter on Feb. 14 communicated P’s acceptance. 
Rest. second 54 and 56 requires that in bilateral K where the offereor requests a promise, that promise must be actually communicated to the offeror, ie, by mailing.

White v. Corliss:
Facts: White (P) gave estimate of  costs to fix up suite of D’s offices; the next day D’s bookkeeper sent note to P indicating that he cold begin immediately if he would agree to finish within 2 weeks and that the bookkeeper would “call again between 5 and 6.”  P never answered but immediately purchased lumber and began work. The next day D canceled the order. P sued for breach. Court told jury that there was k, D app. and won.
Rule/Issue: Where the offer requests a promise, P’s beginning of performance is not sufficient to create binding K.
Rationale: D’s note was offer only. Purchasing lumber was insufficient cause it could have been bought for any job. No indication of  P’s return promise before D’s revocation.  Buying lumber is not acceptance.

Ever-Tite Roofing Corp.v. Green:
Facts: Someone else was building the roof of client
Rule/Issue: Offeror must allow a reasonable time for offeree to accept by commencing performance. 
Rationale: P began work on D’s roof nine days after parties agreed that P’s performance would make K binding. Ever had option that was revoked when others were hired.

Allied Steel & Conveyors, Inc. v. Ford Motor Co.  - Speak UP!
Facts:  Allied (D) received order form from P that said K would not be binding until accepted and stated that acceptance should be executed on the :acknowledgment” copy which should be returned by P. The purchase order had clause that required D to indemnify P against negligence of D and P’s employees in connection with work D was doing for P. During time, employee was hurt doing work that was talked about in provision. Injured employee sued p, who impleaeded D. D lost, claiming that it did not agree and appeals.
Rule/Issue: When offeree fails to comply with suggested method of acceptance, bur instead begins performance, a k is formed.
Rationale: D manifested intent by performance, word should was there. Rest 69 says silence will be acceptance of offer.

D. Termination of the Power of Acceptance

option K - An offer is revocable even if the offeror expressly promises not to revoke or gives a definite period when the offer is to remain open. Exceptions are
1. firm offers - UCC 2-205
2. offers for consideration - REST 25
3. recitals of consideration - RET 87

how terminated: lapse of time, death, inanity, and illegality.

Toys, Inc. V. F.M. Burlington Co. - conditional exercise of option
Facts: D owned mall and leased space to P for initial 5 yrs. ending in Feb. with option to renew. 
P required to give notice and did so. D confirmed confirmed stating that a prevailing rate would be applied. P said that they had dive understanding of rate. They agreed on new rate and P was given until Aug. P asked more time, and was given till Aug. 15. P asked for another extension, and D never responded and found new building. D notified P that it was listing P’s space for March 1. P said that it would be a breach. P moved into new location, and sued. P got S.J., D appealed and won.
Rule/Issue: Where an option gives notice of exercising the option but later disputes the terms of agreement, the optionee may not enforce the agreement.
Rationale: Acceptance that varies from offer is not K. P may have waived its acceptance of option cause P’s conduct after Feb. 7 was inconsistent with intent to renew.

Ragosta v. Wilder: revocation prior to acceptance
Facts: Ps discussed buying D’s shop, but parties never reached agreement. When Ps heard that D considered selling, Ps sent D 42,000 with letter offer. D returned check with decline but offered to sell shop for $88.000 at anytime up to Nov. if Ps come to bank with cash. Ps made arrangements, but D changed mind. P sued for specific performance. Trial c. said that D could not revoke cause P relied  and begun performance and D was estopped cause of equitable estoppel. D ordered to sell, appealed, and won.
Rule/Issue: Offeror may revoke offer at any time before other party accepts by performing, so long as there is no consideration for the promise to keep the offer open.
Rationale: D’s promise had no consideration, so could be revoked. They should have known that even if they did get  financing that they might have still not gotten the store. Ps financing efforts were not performance of K, they were merely preparation for performance.

Minneapolis & St. Louis Railway Co. v. Columbus Rolling-Mill Co.
Facts: Answering inquiry from P, D quoted a price for quantity of iron nails. P answered quote with order for 1,200 tons. D replied 2 days later that order would not have been accepted under those terms. P then ordered 2,000 to which D did not reply. After P asked repeatedly, D said no K a month later. P appeals.
Rule/Issue: An order which specifies a quantity not covered by offer is a conditional acceptance and  thus a rejection.
Rationale: Initial rejection closed negotiations.  Outside UCC 2-207. An acceptance in which terms are at variance with the offer constitutes rejection and puts to an end the negotiations unless original offeror assents to modifications.  With it, inclusion of different terms by offeree in acceptance will not be rejection unless K is expressly limited. 

Mailbox Rule: An acceptance is effective on dispatch, but all other communications are effective on receipt. Offer is accepted when dropped in the mail.

E.  Acceptance that Differs from the Offer

1. The Battle of the Forms Begins:
Business transactions are usually conducted through forms. Buyer sends a purchase order to seller. Purchase order contains basic terms of sale such as price, quantity, and a description of goods, but also contains printed terms drafted by buyer’s attorney in favor of buyer. After receiving order, seller sends written acceptance or confirmation to buyer.  Acceptance contains basic terms of sale but also series of printed terms drafted by seller’s attorney in favor of seller. These terms may conflict with terms printed on purchase order.

a. Common Law - Standard K law principles require that the offeree’s acceptance be in the precise terms of the offer (the mirror image rule) and that any variance therefrom, material or not, constitutes a rejection of the original offer. It becomes a counteroffer.

b. UCC - On premise that both parties recognize K despite clash, UCC says that a K can be formed under such circumstances, unless seller specifically states that there shall be no
K unless his set of terms is accepted by original offeror, in which case the offeree’s response is treated merely as a counteroffer. UCC 2-207  In absences of such limitation, the existence of a K and its terms is determined by UCC rules.

Additional Terms - 
in Ucc, if offeree’s response has more termsthan original offer, additional terms are deemed as proposal additions to K.
Where parties are merchants, proposals become part of K unless:
a. offeror’s original offer expressly limited acceptance yo offered terms (take it or leave it); or b. additional terms are a material alteration of the K.

Proposed incomsistent terms under UCC:
If offeree’s response contains terms that are inconsistent with those contained in the original offer, court’s look at parties’ conduct to determine whether they acted as though K had been formed. If so, K consists of those terms on which the writings agree; the conflicting terms cancel each other out and necessary terms are provided by UCC or by custom.

Ratolith:
disclaimer of waranty
last shot rule
buyer’s order controlled

Step-Saver Data Systems v. Wyse Technology: terms on package differ from K
Facts: P bought computer hardware from D and computer hardware from another which P packaged for its own customers. The software was bought through exchange of form purchase orders and invoices that contained terms regarding price . quantity, shipping, and payment. Each copy of the programs came in a package on which was printed a “box-top license” that disclaimed all express and implied warranties except for warranty that disks contained in box were free from defects. After installing systems, P began receiving complaints from customers regarding software. P sued for breach of warranty. Trial court found that the box-top licensee was enforceable, and P appeals and wins. 
Rule/Issue: Where goods are sold in packaging printed with terms that modify the terms of the otherwise applicable warranty, the packaging terms do not become part of the K between the parties. 
Rationale: UCC 2-207 replace the Common law rule that binds parties to the last shot rule with a rule that bids parties to terms that they have both greed to, together with any terms implied by the UCC.
Warranty not included on form, but warranty language is not essential cause UCC provides for express and implied warranties if seller fails to expressly disclaim them. Default rules of UCC fills in blank on warranties.
TSL- another- did not satisfy the requirement of the UCC section of 2-207 (1) regarding the clear expression of its unwillingness to proceed with sale unless p accepted the terms of the box-top license. Therefore, the box-top license did not constitute a conditional acceptance.
Under 2-207 the disclaimer is a matter of law, a substantial alteration and cannot become part of the agreement.

Dorton v. Collins & Aikman Co.: need to expressly communicate conditional acceptance
Facts:  P, a partner in the Carpet mart, bought carpet from (d) in a  series of transactions. P or one of D’s salesmen would telephone D’s order department and order carpet listed in D’s catalogue. D would then type the information on its reprinted acknowledgment forms which contained a provision that all claims arising out of the K would be submitted to arbitration. P never objected to forms. P subsequently learned that some of the carpets were made cheaper and inferior fiber than contracted for. p sued for damages due to D’s fraud, deceit, and misrepresentation.  D moved for a stay pending arbitration. Finding that the arbitration agreement was not binding, the court denied the stay. D appeals and wins.
Rule/Issue: A form that states that the acceptance is subject to all the terms printed on the form satisfies does not satisfy the “expressly made conditional “requirement of UCC 2-207 (1).
Rationale: District court relied on 207(3) to find that arbitration clause was ineffective. If forms are acceptances under 2-207(1), the question is whether the arbitration clause was additional to or different from P’s oral offers, and, if so, whether D’s acceptances were expressly made conditional on assent to the additional terms under 2-207(1). The form did say that acceptances were subject to all terms even arbitration. This alone was insufficient to make the acceptance expressly conditional on P’s assent to terms. 
Since P’s assent to D’s terms were not necessary, additional terms must be treated as proposals under 2-207 (2). Court must determine whether arbitration clause materially affected the oral offer.
If court finds that acknowledgment forms were confirmations of the prior oral agreements, the court would have to determine whether the arbitration clause was additional to or different from the oral agreement, and if so, it should treat the clause as proposal under 2-207 (2).

C. Itoh & CO. Inc. v. Jordan International Co.: K based on performance
Facts: P ordered steel coins from D. D’s acknowledgment included a provision that its acceptance was expressly conditional on P’s assent to additional terms printed on the reverse side. These provisions included a requirement for mandatory arbitration/. P received, accepted, and paid for the steel, then discovered it was defective. P sued, but D moved for a stay pending arbitration. Trial court said no, D appeals and loses.
Rule/Issue:  If no K is made cause acceptance is expressly made conditional on assent to additional or different terms and the offeror does not assent, a K is formed instead by performance governed by the gap-filling provisions of the UCC.
Rationale: UCC 2-207 (1), no K was created by exchange of  forms. Because the parties did perform, however, they do have an enforceable K under (3).  
At C.L., the K formed by performance would be governed by D’s acknowledgment form, which was in effect a counteroffer. However, under (3), terms of  k consist of those terms on which parties writings agree, plus any supplemental terms under UCC.  Because party’s writings do not agree about arbitration, arbitration is not a K term unless it is a supplementary term incorporated under the UCC.
The disputed additional terms cannot be brought back into the K as supplementary terms under (3).  Supp terms are limited to the gap-filing provisions of the UCC. Arbitration is not one of the gap-filling provisions of the UCC. Arbitration is not one of the gap-filling provisions, so the K contains no arbitration clause.
A seller who includes an expressly conditional term in its acceptance can get out of the K if buyer does not assent. He can protect himself by not shipping the goods. However, by shipping goods without the buyer’s assent to the seller’s additional or different terms, the seller demonstrates an intent to contract regardless of the buyer’s assent. Thus, by performing he loses 
the benefit of the additional or different terms.
2-207 asks: (1) has agreement been made and (2) what are terms posed

F. Precontractual Liability

Rest 45 provides that an option K is created when the offer invites acceptance by performance and the offeree tenders or begins the invited performance. The offeror’s duty of performance under such an option K is conditional on completion or tender of the invited performance according to the terms of the offer.

Restitution and PE are remedies here.

Drennan v. Star Paving Co.:
Facts: Star Paving Co. (D), a subcontractor, submitted a bid to Drennan (P), a general contractor, for work on  a public school building project. In his bid, P had to provide all subcontractor’s names and their prices. P used D’s bid.  P’s bid was accepted. Then, D told P that D’s bid was underestimated, and refused to perform. P then contracted with another with another paving company at a higher price and sued D for the difference. P won a judgment , D appeals, and loses.
Rule/Issue: When a general contractor relies on a  subcontractor’s bid but the subcontractor later declines to perform,  refusal is a breach of  K.
Rationale: P received a clear and definite offer. P’s reliance was reasonable and foreseeable by D. P relied in detriment.  
 
Holman Erection Co. v. Orville E. Madsen & Sons, Inc.:
Facts:  D and other contractors were bidding on a waste water treatment project. P telephoned sub-bids to D and six other contractors. D used P’s bid and listed P as sub. D won K, but used another sub, a minority-owned buss instead of P. D did this to comply with a federally mandated preference for minority buss, P sued, claiming D had accepted its bid. Trial ct. granted S.J. for D and P appeals.
Rule/Issue: A general contractor does not accept an subk’s bid merely by listing the sunk in its bid.
Rationale: Sunk does not rely on contractor. Sub gives it bid to several and does not incur any further expense unless it reaches agreement with winning contractor. No Promissory estoppel. 
Bidding process requires that contractor have flexibility in selecting the subs it hires- subs need to submit bids ordinarily only hours before general bid is submitted- prevents bid-shopping.
Plus, any changes should be made by legislature.

Ragosta v.Wilder:
Under promissory estoppel, plaintiffs are entitled to enforcement of the defendant’s promise if (1) the promise induced them to take action of a definite and substantial character, and (2) injustice can be avoided only be enforcement of the promise. 

Hoffman v. Red Owl Stores:
Facts: D’s agent promised P that D would give P a supermarket franchise for $18,000. P purchased a small store to gain experience, it was profitable. D required its selling, and that P put up $1,000 for option on land to build store. Then P had to sell bakery. Then amount was raised to $24,100, and additional $2,000 was required. Some of P’s money was a loan from P’s father-in-law, d then required that loan be gift. P sued on reliance theory and that D had not performed. D appeals, and loses.
Rule/Issue: Where P relies to his detriment on promise made by D, and such detrimental reliance is foreseeable to D, P can recover damages even though all details of the proposed transaction are not included in the promise.
Rationale: Prom. Estoppel. Sub. reliance, detriment, and justice  and 4-see are all present.
Simply negotiation here- P.E. is extended.

Channel Home Centers, Division of Grace Retail Corp. v. Grossman: 
Facts: D was planning to buy mall. D approached P to see if interested in leasing space in mall. P showed interest, and D requested letter of intent, which provided that d agree to withdraw the space from market and p obtain the necessary zoning permits. P had its legal dept. prepare lease. P sent D copy of draft, and they continued negotiations. a competitor of P’s contacted D about space in mall and D discussed with them as well. Later, D told P no way cause P did not provide mutually acceptable lease within 30 days of letter of intent. Next day, D signed a lease for higher rent than P negotiated. P sued for breach. Court said no K, P appeals and wins.
Rule/issue property owner’s agreement to negotiate in good faith and to withdraw the premises from market during the negotiation binds  the owner for a reasonable period of time.
Rationale: Parties agree to negotiate and should have done so in good faith. Proof of desire to negotiate fully is given.

G. The Requirement of Definiteness

Rest 33: The terms of the offer must be sufficiently clear and complete so that the court can determine what the parties intended and can fix damages in case of nonperformance.

Essential terms are: parties to K, subject matter, time for performance, and price.

Toys:
Def claims that there was no enforceable K option cause K did not fix a certain price. But , K did provide that  “the fixed minimum rental shall be renegotiated to the then prevailing rate within the mall.  -- definite guide.    2-204 (3)

Chapter 3 : The Requirement of a Writing : The Statue of Frauds

Purpose is to prevent fraud and perjury as to actual terms of And to provide better evidence of the K terms in event of dispute. Statute relates to remedies.

Types of K that must be in writing: guarantee contracts, K incpapable of being completed within a year, contracts for sale of land, contracts for sale of good more than $500, and contracts in consideration of marriage.

How satisfied:
a. identity of parties, description of subject matter, terms and conditions of agreement, recital of consideration, and signature of part sought to be charged -initials, or seal is fine

The UCC take is that less completeness is fine.2-201 (1) and (2)

Langman v. Alumni of U.V.A. 
Facts: Ps owned arcade that was conveyed to D. Property was appraised for $775,000 and was subject to mortgagee of $600,000. Deed specified that d assumed payment of  mortgage and agreed to hold Ps harmless from further liability on the mortgage. D acknowledged the gift and had deed recorded, but did not sign it. When arcade lost $, Ps made payment s on mortgagee and sued D for reimbursement. Trial court found that D did not knowingly accept the condition in deed and therefore the assumption clause was unenforceable. Ps appeal and win.
Rule/Issue: Where real estate deed specifically included an assumption of debt, the grantee may not later disavow the terms of the deed.
Rationale: A grantee that accepts becomes bound by K. D claims that suretyship clause of statute of frauds requires that D have signed agreement to be bound to assume mortgage. But a grantee who assumes an existing mortgage is not a surety. By promising the grantor to pay to the mortgagee the debt the grantee owes to grantor, the assumption becomes an original undertaking. Unlike normal surety, D received direct benefit and did not merely act as a surety for the grantors.

Types of k which must be in writing: guarantee k, K which are incapable of being performed within year, k for sale of land of an interest in land, k for sale of goods, k in consideration of marriage, and agent’s contracts.

C. Satisfaction of the Statute
Crabtree v. Elizabeth Arden Sales Corp.
Facts:  P agreed to be sales manager for D, an unsigned office memo was prepared which set forth P’s name, starting salary of $20,000, six-month increase to $25,000, one-year increase to $30,000, and a notation  “2 years to make good.”  On commencement, a payroll card was prepared indicating starting salary of $20,000 and was initialed by D’s general manager. P received his schedule increase at six months; at one year, a payroll change card was prepared and signed by D’s comptroller but Miss Arden refused to approve it. P then quit and sued for breach by D.  D appeals, and loses.
Rule/Issue:  Oral testimony may be used to establish the connection between written documents to derive the terms of the k.
Rationale: All office memos bind D. It was nec. for all three docs to be taken together cause duration of agreement was in question without unsigned memo.
UCC 2-201 (2) 

Harry Rubin & Sons v. Consolidated Pipe Co.: writing in confirmation of K
Facts: P entered into 3 separate oral agreements on Aug. 22, 25, and 28, 1958 respectively, with D for purchase of plastic hoop material, but D failed to deliver a substantial portion of material and  P sued. D defended on ground that Ks were more than $500 and therefore unenforceable since not in writing. Trial court ruled that only alleged oral contracts of Aug. 25 and 28, 1958, violated the Statute of Frauds. P appealed, alleging that its letter and purchase order of Aug. 25 and its letter of 28 were sufficient under UCC 2-201(2) to take the oral contracts out of the Statute.
Rule/Issue: A writing in confirmation of a k must satisfy the Statute of Frauds if it uses the term “order” in referring to the K. 
Rationale: circumstances reveal true meaning or order. Requirements of UCC 2-201 (2) were met cause correspondence was sufficient to remove two oral contracts from the Statute, since both O and D were merchants, the memo were sent within reasonable time after orals agreements were reached, letters sufficient to bind P, d had no reason to know of the contents, and made no objection within ten days after receipt of either letter.
2-201(3) suretyship clauses - agreement to pay another’s debt based on credit; requirement must be in writing.

 D. Mitigating Doctrines

Monarco v. Lo Greco:
Facts: grandparents made promise to son. Parents promised Christie that if he stayed at home and work, they would keep property in joint tenancy so that it would pass to survivor who would in turn leave it to him. Wills drafted accordingly, and he stayed. Before death, Natale changed will and left it all to grandson. Will was probated and property given to P. By cross-claim, Carmela, wife, asked that P be declared constructive trustee of property and receive as a result of breach to keep property in joint tenancy. Trial court held for D and Carmela, and P appeals.
Rule/Issue: Plaintiff is estopped from relying upon the Statute of Frauds to avoid that enforcement of oral k to not change the property from joint tenancy.
Rationale: Unjust enrichment and fraud is protected by Statute- both exist here.
The plea of estoppel based on statute is not based on writing here.

Chevron v. U.S.A. Inc. v. Schirmer: continued negotiations
Facts: D owned land and P wanted to build service station on part of it. Parties entered an option K that allowed P to exercise an option to purchase by mailing to D, on or before November 13, a copy of the option signed by P. P failed to exercise the option before it expired, but following the expiration date, the parties continued working out zoning and permit issues. In March, P gave an escrow agent the $ to complete transaction, but D refused to convey the property. D countered for treble damages for groundless filing of the lis pendens notice. District court entered S.J. against each party. In the meantime, D’s bank foreclosed on the property and sold it. Both parties appeal, and D wins.
Rule/Issue: Continuing negotiations do not constitute part performance sufficient to take oral action outside Statute of Frauds.
Rationale: P failed to exercise on time. 
S.O.F requires an option agreement for real property to be in writing.
2-210(3)(b)     Attorneys were well aware of the channels here.

Halstead v. Murray: 
Facts: P and D owned adjacent property. P sued to enjoin D from constructing building. Parties began settlement negotiations through respective attorneys. D’s attorney sent Ps attorney a letter offering to sell D’s lot to P for $115,000. P’s attorney wrote back a letter accepting the offer and outlining standard provisions to be included in the agreement to be signed by the parties. D’s attorney prepared an agreement which he sent to P’s attorney, without D’s signature. P executed the agreement. d then decided not to proceed unless P paid $130,000. P moved to enforce settlement.. D objected on the ground that writings did not satisfy S.O.F. Ct fond for D, and P appeals.
Rule/Issue:  Where parties negotiate through counsel, an attorney may bind his client even without a written authorization.
Rationale: Involved K of sale of land so attorney authorization or signature needed.
D’s attorney had authority to enter settlement negotiations. If S.O.F. applied, D would escape consequences of fair bargain. 
Special relationship between attorney and client.
Rest. 330
2-710, 2-2011 (2)

Chapter FOUR     POLICING THE BARGAIN 

General Rule: typically, K entered into by foillowing are void or voidable: infants, insane, convicts deprived of their civil rights, and drunken persons.

Minority rule: K of minor are voidable at the option of the minor, but a minor may nevertheless enforce the K against the adult.

Keifer v. Fred Howe Motors, Inc.:
Facts: Kiefer (P), 20 yrs. old, married and a father, misrepresented his age as 21 and purchased a five-year-old station wagon from Fred Howe Motors, Inc.(D). After turning 21, P sought to return the vehicle claiming that it had a cracked block. D refused to accept the return of the vehicle  and P sued to recover purchase price, claiming that his contract was voidable since he was a minor at the time he entered into it.
Rule/Issue: The K is voidable.
Rationale: The general rule is that the contract of minor, other than for necessaries, is either void or violable at his option. The general rule is not affected by the minor’s status as emancipated (Ie. free from parental  control and self-supporting) or unemancipated. with respect to the represenattion of the majority  on the part of  P, the court held that D had not established by the evidence that P had intended to deceive D or D’s justifiable reliance on the representation. 

Ortelere v. Teacher’s Retirement Board:
Facts: P quit his job to care for his wife, a New York City school teacher, who suffered a nervous breakdown involving “involutional Psychosis”  She made bad decision to take more $ out of her retirement fund while on metal leave that left her husband and children with nothing after her death.
Rule/Issue: When one party to a transaction has knowledge of the mental incompetence of the other party, the contract between them is voidable.
Rationale: Rest 18C states that a person incurs only voidable contractual duties by entering into a transactions if by reason of mental illness or defect he is unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of his condition. Here the court held that the retirement system was or should have been fully aware of decedent’s condition, since she was on medical leave known to the Board of Education.
Dissent-- eight questions were answered by decedent.

Cudnick v. Broadbent:
Facts: P agreed to sell certain ranch land an interest in a development company to D. A one-page handwritten agreement between P and D was later refined by P’s lawyer to an 11-page document, and P executed documents and received the agreed-upon purchase price over a period of six months following the initial agreement. The prices set forth in the K turned out to be less than half the appraised values, and shortly before the transaction was to be completed, P’s wife, who had been appointed guardian ad item, brought an action on behalf of her husband against D to set aside the agreement, asserting that her husband had mentally incompetent to contract and that D was aware of this condition and had intentionally overreached him. T.C. dismissed P’s actions, P appeals, and loses.
Rule: Contract is not voidable.
Rationale: No finding that D deceived or overreached P.
No evidence of fraud.
Dissent-  the medical testimony said that P was crazy.

Section 2 Unfairness

McKinnon v. Benedict: overreaching
Facts: P owned large tract of land in resort area and helped D in buying a neighboring tract by providing to assist D in making the resort business a success. D was not to cut timber on a section of his property and was not to build any structure closer to P’s property than those existed when property was purchased. Loan was repaid within seven months and P provided little assistance, so D bulldozed a portion of his property to allow its use as a tent and trailer camp. P sued for injunction. D appeals from the injunction preventing further construction and use.
Rule/Issue: Where there is evidence of overreaching by one of the parties, the court may examine the adequacy of the consideration.
Rationale: D could not have purchased property without P’s assistance and was therefore unable to deal at arm’s length with P. Law does not favor restrictions on land, and restrictions he impose heavy burden. The value of $5,000 for 7 months was slight in comparison with restraints imposed on D’s property.

Tuckwiller v. Tuckwiller: driving Miss Daisy
Facts: Mrs. (P) rented farm half owned by Mrs. Morrison. Mrs. M contracted Parkinson’s disease and returned to the farm. She asked P to care for her for the rest of her life and promised, in exchange, to will her the farm. Before Mrs. M could change her will, which directed that the property be sold and the funds used for a student loan at Davidson College, she died. P brought suit for specific performance of K against college and decedent’s executor (D) From a grant of relief for P, D appeals.
Rule/Issue K to provide personal care in return for an inheritance is sufficiently fair and equitable and supported by adequate consideration to permit specific performance 
Rationale:  P gave up employment for unknown obligation. Decedent knew what she was doing and everything was witnessed.
Obligation to care for rest of life was adequate consideration.

Black Industries, Inc. v. Bush:
Facts:  P agreed  to supply certain items to third parties for ultimate delivery to the United States Government. P contracted with Bush (D) to manufacture these parts for such resale by P. The compensation to P was to be the difference between P’s purchase price from D and its sale price to third parties. D was to ship directly to the third parties, but P was to handle all the paperwork and be responsible for differences between D’s price and P’s ultimate selling price to third parties. Ps profits ranged from 39.13% to 84.09% on the various items. When D failed to deliver the items, P sued D alleging lost profits of $19,000. D defended on the basis that P’s contracts were against public policy as the profits were excessive during the time of the Korean War and moved for S.J. on this ground.
Rule/Issue: A contract is not void as against public policy if one party’s profits are excessive.
Rationale: Neither P nor D had dealings with U.S. by virtue of K between them, and the profits were therefore not received as a result of inducing governmental action or interfering with the system of competitive bidding. The k is therefore not void as against public policy. The profits were legitimate. The relative values of the consideration in a K where there is no fraud or deceit will not affect its validity.

Section 3 Overreaching

Preexisting Duty - When A and B have K under which A is contractually obligated to perform some act, neither A’s new promise to perform that same act nor his actual performance of that act constitutes consideration for a promise by B to pay a greater amount for the performance than that set by the original contract. This prevents A from taking advantage of B’s inability to contract with someone else to perform the consideration.

Schwartzreich v. Bauman-Basch, Inc.: Recission
Facts: P and D entered into a K whereby P agreed to work D for one year at $90 per week. Before starting work, P received an offer from third party at $115 per week. D then offered P $100  per week if he would stay and P agreed, both parties signing the new contract with the increased rate of pay. When P signed the new K, he tore the signatures off the old K and surrendered the copy of the K to D. D discharged P after two months’ work and P brought suit against D on the second K.
Rule /Issue: A second K giving more compensation for the same performance is valid if the first was rescinded.
Rationale: A prior K may be rescinded with the agreement of both parties and a new K is formed. Here there was merely an agreement to pay more money for the same thing, and without recission of the first K, the second K would not have been valid.

Arzani v. People:  Strike Possibility - Pre-existing Rule
Facts: Court declined to enforce an oral K between Gen, Contractor and it subcontractor. Sub was forced to pay a higher wage to avert a labor strike. General had agreed to split the extra cost with the sub when the sub threatened to leave the job unless he did so. But when the job was complete, general refused to pay. 
Rule/Issue: The court held that there was no consideration for the general’s promise to pay the extra wage, and the original K had never been terminated.

Watkins & Son v. Carrig: - rockhard cellar
Facts: P k’ed to excavate a cellar for D but found hard rock instead of the expected dirt. D then agreed to pay more for labor involved in performing the excavation. Upon completion of the work, D refused to pay the additional sum, claiming that P was obligated under the initial contract and therefore the new K had no consideration. P sued on the K and won, D appeals, and loses.
Rule/Issue: Economic adversity may be sufficient consideration to support a second K.
Rationale:  D released right as a creditor under fist K to make new one.
The parties agreed that the K price was not to control.

Austin Instrument v. Loral Corp.: duress
Facts:  P was a subcontractor to D on a government K under which D agreed to supply certain radar sets requiring precision gear components to be manufactured by P. During the course of the K, D obtained a second k and requested bids on additional gear components. When D notified P that it would receive a subcontract only for those items on which it was low bidder, P responded that it would cease deliveries of parts due under the existing subcontract unless D consented to substantial increases in the prices provided by that agreement and placed the order for additional parts with P. When D was unable to locate a second source, it notified P , who had stopped deliveries, that it would consent to P’s demands. D failed to pay P all amounts called for by increased prices and P brought suit against D for such amounts. D also sued P for the excess charges and the suits were consolidated. From a judgment for P, D appeals and wins.
Rule/Issue: A contract modification executes under threat of economic duress is not enforceable.
Rationale: If  one party is forced to agree by modification by means of a wrongful threat is void. Threatened breach without proof that the threatened party cannot obtain the goods from another source of supply is inadequate to constitute economic duress. Here P’s threat to stop deliveries unless the prices were increased deprived D of its free will.

Kibler v. Frank: common law approach
Facts: P harvested wheat on property owned by D under agreement that he would be paid 18 cents a bushel, and more if circumstances justified it. P billed D for 20 cents a bushel because of obstructions encountered on the field. D paid only half that amount by a check inscribed with a fine print notation that endorsement would be an acknowlegedment of full payment. P did not see the fine print and endorsed the check on the advice of his attorney. P then sued D for the balance due and the trial court dismissed the action. P appeals, and wins,
Rule/Issue: A reprinted check does not serve as a notice that an accord and satisfaction is offered.
Rationale: There must be a meeting of the minds to have accord and satisfaction. Unless D made the printing on the check applicable to settlement of the amount in dispute. 
UCC 1-207 originally allowed a creditor to deposit a full payment check by explicitly reserving his rights and thereafter seeking balance due. A new subsection (2) makes this provision inapplicable to negotiable instruments.

Swinton v. Whitinsville Savings Bank: concealment
Facts: P purchased a house from D. The house was infested with termites at the time of purchase and D did not disclose this fact to P. P did not ask about the termites. P was forced to repair house at considerable expense and sued for damages. D demurred, and P loses appeal.
Rule/Issue: The seller is not alienable for bare nondisclosure of material facts which affect the value of the property sold.
Rationale: Burden of discovery and inquiry is on buyer. As long as D does not make affirmative representations relating to the defect, he is not liable for failure to disclose the defect.

Kannavos v. Annino: misrepresentation
Facts: D bought residence and converted it into eight-unit apartment in violation of city zoning restrictions. She sold property and listed it with a realtor who advertised the property as income property.  P contracted with the realtor and received expense and income figures provided by D and bought property without aid of lawyer. City began an action to abate the nonconforming use of the property and P sued for rescission.  D appeals, and loses.
Rule/Issue: If a seller makes representation, he incurs a responsibility t disclose the entire truth about the matter represented.
Rationale: D implied that P could use apartments as is. D took full advantage of that confusion at the expense of P.

Section 4 Unconscionability and Adhesion contracts

Unconscionability - terms so one-sided as to be unfair or even oppressive.

adhesion k - k where parties occupy substantially unequal a bargaining positions and the inferior party, in order to attain some service, is forced to “adhere” to terms dictated by superior party.

standard form K- often result in contracts of adhesion; used to further gain advantage over the parties to whom such contracts are offered.
 
UCC codes used here are 2-302, 2-718, and 2-719.
1. 2-302 provides that if court find K to be unconscionable, it may refuse, enforce, or limit
2. 2-718 provides that any liquidated damages clauses that fix extra-large damages in breach as penalty is void.
3. 2-719 says that parties by agreement may limit or exclude consequential damages unless such limitation or exclusion would be unconscionable.
2-313, 2-316 deal with sales.

procedural vs. substantive

O’Callaghan v. Waller & Beckwith Realty Co. - exculpatory clause
Facts: P was the lessee in Waller & Beckwith Realty CO/’s (D’s building. P was injured crossing the paved courtyard and sued D for damages based on negligence. Lease provided that D was not to be liable for personal injuries to lessee caused by D’s negligence. P sued nonetheless and won, nut an appellate court reversed the decision. P appeals and loses.
Rule/Issue: A lease clause exculpating the landlord from negligence is not enforceable.
Rationale: An exculpatory clause in a lease is enforceable unless against public policy. L-T relationship is private concern.
Dissent: housing shortage is big problem- no bargaining power.

Henningsen v. Bloomfield Motors, Inc.: disclaimer of implied warranty
Facts: P bought new car from D, a dealer and his wife was injured shortly thereafter when car veered and crashed into brick wall.  P sued D and Chrysler Corporation for damages on theory of implied warranty of  merchantibility. D defended based on small print in the purchase contract which stated that there were no warranties except as to defective parts. D appeals, and loses.
Rule/Issue: A provision in the sales K exculpating D from liability under implied warranty is not upheld.
Rationale: Disclaimer was insufficient to indicate to reasonable person that he was giving up personal injury claims if car had a defect. Courts declare void as against public policy any contractual provision that tends toward injury of the public. Further, state legislature has passed law granting an implied warranty of merchantability for cars, D tried to stop that here.
2-316(2)

Wilson Trading Corp. V. David Ferguson Ltd.: 2-316 (2)  express warranty of merchantability
Facts: P sold yarn to D under K with a warranty that P would deliver “good and merchantable yarn,” giving d 10 days after delivery to inspect and object to the quality of the yarn but disallowing claims for “shading” after the yarn had been knitted. D received the yarn and knit the yarn into sweaters, but when washed, the yarn shaded so that the sweaters could not be sold. D refuse payment to p. In an action for breach, P moved , and got S.J. on basis that D did not give required notice of “shading’ before knitting. D appeals, and wins.
Rule/Issue: Notice provision was not reasonable in view of the express warranty of merchantability.
Rationale: UCC 2-607 provides that a buyer has a reasonable time after delivery to notify seller of breach of k. Notice provision in k was unreasonable , UCC 2719 says that where the remedy provided by parties fails in its essential purpose or deprives parties of intended bargain, remedy may be has as provided in 2-607. Express warranty of merchantability contained in k is given preference over the time provision for notice.

Williams V. Walker_Thomas Furniture Co.: repossession
Facts: P adopted standard form K for credit sales which provided (1) that all credit transactions of a buyer were to be lumped into one account and each installment payment made was to be spread pro rata over all items being purchased until all items were paid off, and that (2) if purchaser defaulted P could reposes all items.  Williams (D)bought most recent item on credit; she failed to make payments sufficient to cover the most recent item (a stereo). D was on welfare, separated from husband, and caring for seven children. P brought action to repossess all items D was purchasing on credit. D appeals, and wins.
Rule/Issue: P’s K provision on repossession was unconscionable.
Rationale: UCC- 2-302 caveat emptor.  D is in poor class where inequality of  bargaining position makes it easy for P to exploit D By k provision such as the one here, which is unconscionable.
Dissent: legislature!!!

Jones v. Star Credit Corp: excessive price
Facts: P, in welfare bought freezer worth $300(retail) for $900 ($1,235 when all charges were included.) P had already paid $620 and sues to reform K on basis that it is unconscionable.
Rule/Issue court will refuse to enforce a K as unconscionable on basis that the price is excessive compared to actual value.
Rationale: UCC 2-302, big unconscionability clause,  permits court to reform K on basis of excessive price. Factors considered are the taking advantage of unequal bargaining parties.

Carnival Cruise Lines v. Shute:
Facts:  	cruise ticket bought with forum clause if injuries result. They did.
Rule/Issue: A forum-selection clause contained in a ticket for passage on a ship is enforceable.
Rationale: Ps said that D had suff. notice. Cause admiralty case, clause was enforced. No fraud or evidence of overreaching By Carnival cause headquarters are there, and accident occurred near Mexico.
Dissent: fine print is bad. Not freely-bargained for clause.

Section 5 Illegality 

If legal at time of offer but changes - termination results
If legal at time of offer and acceptance but changes - contract is discharged under impossibility.

In pari delicto - if parties are both equally culpable, the courts generally will not aid either wrongdoer: executory contracts may not be enforced; benefits conferred or damages sustained under executed contracts may not be recovered.

not in pari delicto - when parties are not, recovery of the value of benefits depends on the wrogfulness of the K. 

Hopper v. all Pet Animal Clinic: rule of reason approach to covenenants not to compete 
D worked as vet for P  pursuant to a written employment K that allowed termination by either party on 30 days’ notice, and provided that, upon termination, D would not work as small animal veterinarian in area for three years. D was new to are and had access to P’s clients, pricing policies, and practice development techniques. D was terminated after P’s president heard she was considering buying another practice. D did in fact buy another practice and got 187 of P’s clients. P sued for an injunction and for damages. Court granted P an injunction but denied award for damages. 
Rule/Issue: A covenant not to compete is enforceable as long as it does not create an unreasonable restraint of trade.
Rationale: Employer has burden of proof of reasonability, fairness and conduciveness. Employer may be protected against competition of former employee cannot be against public policy, in writing, part of K for employment, based on reasonable consideration, reasonable in duration and geographic limitation.   
D obtained clients only by working there- they suffered actual harm. 
K was only limited to small animal practice
five-mile radius was reasonable.
Three years, however, was not reasonable- modified to one year.
Dissent: start from date court entered decision not one year after termination.

CAB V. Ingram: covenant not to compete
Facts: already stated
Rule/Issue court has authority to modify a covenant not to compete which is otherwise unreasonably broad.
Rationale: Limited provision to 1 year. On method of modification is to simply delete unreasonable restrictions and enforce what remains. This is called, the blue-pencil rule. The better approach is to enforce whatever is reasonable under circumstances.
Dissent: The court has no business re-writing,. they can either reject or enforce.

Sirkin v. Fourteenth St. Store: commercial bribery
Facts: P brought this action to recover $1,555 for goods sold and delivered. D claimed P offered D’s purchasing agent bribe of 5% of the purchase price of all orders placed with p and has already paid $75 to the purchasing agent for the goods in question. A state statute made it a misdemeanor to offer a bribe to an genet authorized to procure supplies, etc. D appeals, and wins.
Rule/Issue: D is relieved from paying cause P bribed D’s agent, even though D has retained the benefits of the agreement, ie. the goods.
Rationale: K violated penal code and was illegal. Court refused to aid K obtained through bribery of agent in violation of a statute on the same ground that the court leaves a party to a K which is void against public policy, or offends good morals, where it finds him.

McConnell v. Commonwealth Pictures Corp.connection b/n illlegal transaction and obligation
Facts: P brought action for an accounting under K in which D agreed to pay p $10,000 plus a percentage of the gross receipts if p procured a K for D with a motion-picture producer for distribution of certain films. P got k and d paid $, but refused to pay commissions or give p an accounting of the profits, claiming that P bribed a third party in order to obtain the K for D with the producer, and that the K was therefore illegal. D appeals, and wins.
Rule/Issue: A k, legal on its face, is unenforceable because of an illegality in performance.
Rationale: Where there is a direct connection between illegal transaction and the obligation sued upon, illegality in performance of an otherwise legal transaction will deprive the doer of all rights thereunder. It is sound in view of the strong public policy against commercial bribery. 
Dissent: illegality occurred in a different and subsequent agreement and should not affect P’s right to recovery.

Goldberg v. Sanglier: - comparative guilt
Facts: D persuaded P and others to invest in a car dealership that D was purchasing. D falsely represented to his financing company that the money was his own. Two years later, D arranged to buy P’s interests for $42,000 each (less than they were worth) based on false reports showing that the business was not doing well. When P’s learned of the fraud, they sued and each recovered about $262,000, representing the value of their former partnership interests. The appellate court ordered P’s suit dismissed cause parties  all deceived D’s financing company. Ps were also only entitled to disaffirm and recover funds invested if they were not in pai dilecto with D.
Rule/Issue: If parties to K are both guilty to some degree of farus, but one party is guilty of more serious fraud than the other, the less guilty party may obtain judicial relief for fraud committed by the more guilty party.
Rationale: In pari dilecto says that D prevails when parties are of equal guilt. Being in pai dilecto depends on public policy-enhancing public good.

X.L.O. Concrete Corp. v Rivergate Corp.: antitrust violation as a defense
Facts: P entered construction K as a subk to D. P fully performed and sought payment of balance of $8444,00. d refused to pay on ground that K was not part of an extortion and labor bribery operation known as the “club” which was run by a group of organized crime family bosses known as the Commission of LA Cosa Nostra. The Commission decided which concrete companies were allowed to work on construction jobs worth more than $2 million. The sucessful, contractor would pay the Commission 2% of the K price for guaranteed  “Labor Peace.” The commission rigged the bidding so that the designated company would submit the lowest bid. P was a member of the Club. D negotiated the K with P knowing all about the club and it rules. When D refused to pay, P sued. 
Rule/Issue: A plaintiff may have recourse to the courts for nonpayment of  that was awarded in violation of antitrust law.
Rationale: antitrust defenses are not favored cause they are too likely to enrich parties who benefit from K. 

Chapter 5 Remedies for Breach   
Aticle 2 organized
1 short title and subject matter
2 form, formation, and adjustment of K
3 General obligation and construction of K
4 title, creditors, and good faith purchasers
5 performance
6 breach, repudiation, and excuse
7 remedies
Seller’s pre-litigation remedies:                                                Buyer’s pre-litigation remedies
1. right to withhold delivery or demand cash payment           1. action for full purchase 709
703a and 702
2. right to reclaim goods 2-702(2) and 702(3)                            2. sale of non-comforming 
                                                                                                       goods  711(3)
3. right to stop goods in transit 707(1)                                       3. cover  712
4. right to resell goods 706                                                          4. setoff -deduction 717
5. cancellation 703(f) and 106(4)                                                 5. capture 502, 711 (2)(a)
----------------------------------------------------------------------------------------------------------------------
Seller’s litigation remedies                                                         Buyer’s litigation remedies
1. action for full purchase price 709(1)(a)                                 1. replevin and spec. perform.
                                                                                                          716(3)   and 716 (1)
 2. damages for nonacceptance                                                  2. action for damages of
2-706(1), 2-708(1), 2-708(2)                                                         nondelivery 712(2), 713(1), 715
                                                                                                      3. damages for breach of 
                                                                                                      warranty 
                                                                                                       4. limitation of damages 718, 
                                                                                                       719
----------------------------------------------------------------------------------------------------------------------
Vitex Manufacturing Corp. v. Caribtex Corp.: overhead
Facts: Both P and D entered into K obligating P to reopen a wool processing plant in the Virgin Islands to process imported wool. wool processed in the Virgin Islands was given an import duty exemption and failed to deliver wool  to P because of questions about the availability of the exception. P sued for breach of K and recovered gross profits under the Contract less costs saved by not Having to perform the K. D appeals the computation of costs saved and loses.
Rule/Issue: Overhead is not properly chargeable as a cost saved in computing an award for 
breach of K.
Rationale:  Overhead remains constant whether K is performed or not.
2-708 allows recovery of reasonable overhead.

Laredo Hides Co. V. H&H Meat Products: cover in sales of gooods K
Facts: P contacted to purchase all of the hides produced by H&H Meat Products Co. (D) from March to December. D made two deliveries in March, but P’s payment for the second delivery was delayed in mail. D demanded payment within a few hours, but P failed to do so. D canceled K, and P purchased hides from other suppliers in order to meet its commitments. P spent $142,245.48 more to but these hides than it would have cost to buy them from D.  P also spent extra $3,448.95 in transportation and handling charges. P sued to recover these amounts from d, appealed, and won.
Rule/Issue: A buyer may recover the extra expense of buying goods elsewhere when the original contract seller cancels contract to sell goods.
Rationale: D’s cancellation of K was not justified by temporary delay of P’s payment. D breached  K by canceling it, P could buy goods elsewhere and recover difference between contract price and cover price, or P could recover the difference between the K price and the market price at the date of the breach. P acted reasonably and id nothing to increase its damages beyond what was necessary to meet its needs.

Davis Chemical Corp. v. Diasonics: lost profits
P contracted to buy medical diagnostic equipment.
D sold to third party but P, second party broke K.
But D got damages for lost volume sale in the end.
Rule/Issue: A lost volume seller’s damages are not limited to the market price/contract price differential provided under UCC 2-706(1).
Rationale: A lost volume seller may recover lost profits under 2-708(2)
P is entitled to recover Down payment , less 500 under 2-717(2)(b)
Under 2-718 (3)(a) this right of restitution is subject to D’s right to recover damages. A seller has four measures of general damages under UCC: 2-706, contract price less resale price; (2) 2-708 contract less market, 2-708(2) profit and 2-709 price.
2-704

U.S. v. Algernon:
Facts: P, a subcontractor suing d. P contracted with d to supply certain equipment and perform steel erection as part of D’s construction of a U.S. Naval hospital. P performed about 28% of subcontract before it terminated its performance citing D’s refusal to pay for crane rental. P sued for labor and equipment furnished. Trial court held that P’s termination was justified, but that while P was entitled to 437,000 in restitution, it would have lost a like amount had it completed performance and should therefore receive nothing. P appeals, and wins.
Rule/Issue: A plaintiff may recover in restitution even if he would have recovered nothing in a suit on the K.
Rationale: Promisee upon breach has option to forgo any suit on the K and claim only the reasonable value of his performance.

Section 2 Limitation on Damages

avoidability - gotta mitigate!!!!

Rockingham v. Luten Bridge: refusal to avoid loss 
Facts: Luten Bridge (p) contracted to build a bridge for D. After P spent about $1,900 on labor and material, D , in response to adverse public opinion, unjustifiably canceled K. P refused to accept the cancellation and continued to build; upon completion, P sued. D appeals, and wins.
Rule/Issue: The nonbreaching party may attempt to mitigate the damages caused by the breach.
Rationale: P, on notice, had duty to attempt to mitigate damages.
P did nothing to mitigate ad in fact increased damages. Economic efficiency argument also runs here.

Parker v. Twentieth Century-Fox Film Corp.: Shirley Maclaine
Facts: P was a well-known actress who had a K to appear in a certain movie production for a minimum compensation of $750,000. TCF was the producer of film and decided not to produce film. D notified P of its intent not to produce film and offered P a starring role in different movie. P let offer lapse and sued for breach. D appeals, and loses.
Rule/Issue:  A wrongfully discharged employee does not have a duty to accept any employment to mitigate damages under a contract of employment.
Rationale: Inferior job was offered. Contracts were so different and it seems as if they were just feeding her crap to win suit. Second offer was western and gave client less control than fist K.

Tongish v. Thomas: breach of K to deliver goods - market price damages for nondelivery
Facts: Tong (D) contracted to deliver sunflower seeds for a fixed price. Prior to delivery date, market price  of seeds doubled and D declined to deliver as agreed. D, instead, sold seeds to another party for more than contract price. The buyer, coop, sued D and recovered $455, which represented the profit Coop would have made for handling the seeds. The court of appeals reversed, said that proper measure of damages was UCC 2-713 (market price differential). D appeals, and . .loses.
Rule/ISSue:  The proper remedy for breach of a K to deliver goods is the difference between the contract price and the market price.
Rationale: Market price formula as specified by UCC 2-713 does not represent buyer’s actual loss. 
Market damages discourage breach of delivery contracts and encourage a  ore efficient market.

Jacob’s & Young’s, Inc. V. Cent: crybaby case
Facts: P built home for d using a substantially similar but different pipe than K required. P asked for final paymemt , but D’s architect refused to give required certificate since wrong brand of pipe was installed. Great expense would have been required to change pipe, and the home was not reduced in value due to the substitution. P sued for payment. D appeals and loses.
Rule/Issue: Where completion performance in accord with contract specifications is a condition precedent to payment, and where substantial performance has been rendered, a minor failure to perform will be excused. 
Rationale: Omission was trivial and not willful. Damages should be measured by loss in value, not to mention the economic arguments here.
Dissent: carelessness and gross negligence  

Groves V. John Wunder Co.:  coat to complete
Facts:  P leased land to D for seven years under the condition that D would remove the sand and gravel and would restore land to uniform grade at the end of term. When d failed to restore land to its existing grade, but instead turned land over to P in a rugged and uneven condition, P sued and was awarded slightly more than $15,000 based on evidence that land in its restored condition would be worth only 412,160. P appeals, and wins.
Rule/Issue: Cost to complete land rather than the diminution in value is the proper measure of damages.
Rationale: Law attempts to give injured promise as far as $ will do it in construction contract. 
Dissent: diminished value should apply unless completed product satisfies taste of promisee.

Foreseeability - consequential damages - where special circumstances aggravate economic loss to one party and were made known to both parties, breaching party must pay liability for additional damages  REST. (First) 330, UCC 2-710
Hadley v. Baxendale: lost profits
Facts: P’s stopped operation of their mill when a  cranksahft broke. They contracted with d to have it shipped for repairs, delivery to manufacturer to be made within a reasonable time. D was negligent in not completing delivery within a reasonable time, and for five days P lost profit s and wages . contrary to excerpt from lower court, D was not informed that mill would not operate until the shaft was repaired. D appeals, and wins.
Rule/Issue: The proper measure of damages for ‘special situations does not included actual damages where actual damages are greater than the natural consequences of breach.
Rationale: D did not know that mill was shut down and would be until new shaft arrived. 

Spang Industries v. Aetna Casualty Surety Co.: time for performance
Facts: parties contracted for delivery of steel for bridge construction.
Parties agreed that delivery should be in June 1970. P was unable to deliver steel until mid-Sept.
So, Torrington was forced to delay pouring concrete until late in fall when there was imminent threat of freezing which would not allow concrete to set properly. T incurred extra costs in pouring concrete on a crash basis in one day, and in unloading steel when P’s subcontractor failed t unload it. P brought suit for balance due. D sued for damages, and P recovered balance due less Torrington’s damages. P appeals, contending that special damages suffered by T were not reasonably within contemplation of parties when K was made.
Rule/Issue: when K provides for future determination of a time for performance, the knowledge of the consequences for failure to perform is imputed as of time when date for performance was set.
Rationale: It was reasonable foreseeable that a substantial delay would postpone cement work to a time in year when climate would require extra expenses and precautions.

Certainty- speculative damages

Fera v. Village Plaz, Inc.: new business
Facts: P leased a book and bottle shop in a shopping center planned by Village Plaza, Inc. (D)  The lease was to last ten years with a minimum rent plus a % of sales. D defaulted and bank assumed management. When the center opened, P discovered that his space had been leased to other tenants because his lease has been misplaced. The alternative space offered to P was unsuitable , and P sued for lost profits. At trial, P testified that he would have probably made $270,00 in profits. D’s witnesses testified that P could not obtain  liquor license, and  that proof of possible profits was too speculative. 
Rule/Issue: Lost profits may be awarded to anew bus which is prevented from starting due to breach of K.
Rationale: When proof is available it may be used.
Dissent; Proof is too speculative and did not prove with a reasonable degree of certainty P’s anticipated profits.
Evergreen Amusement v. Milstead:
Facts: P sued d for balance due on K for clearing and grading the site of D’s drive-in theatre. D counterclaimed for lost profits as a result of the delays in completing the work, based on the rental value of the theater property plus out-of-pocket costs. D appeals, and loses.
Rule/Issue: Lost profits from business not yet in operation are too speculative to permit recovery.
Rationale: 

Liquidated Damages - parties may included in the K specific provisions limiting or fixing the amount of damages that can be recovered in the event of a breach ( a liquidated damages clause).

A valid liquidated damages clause requires a reasonably forecast of loss caused by breach
Party can still set other remedies like specific performance even though these clauses limit damages.

Wasserman’s Inc. v. Township: disproportionate liquidated damages
Facts: D owned commercial property and leased it to P for use as a store. Lease had cancellation clause that required D to pay  25% of P’s average annual gross receipts, based on a three-year average, if D canceled the lease. D canceled lease 16 yrs. later, and P and its sublessee sued for damages. P’s sublessee had an average annual gross over $1 million, but an average net profit of only around $1,00. D sought declaration that cancellation clause was invalid. 
Rule/Issue: A liquidated damages clause can not be enforced if it awards the non-breaching party nearly $300,000 when that party’s actual losses is only around $1,000.
Rationale: Penalty clauses are a No-No.
To qualify as liquidated damages clauses, clause must constitute a reasonable forecast of provable injury resulting from breach.

Dave Gustafson v. State: no provable actual damages
Facts: P performed highway construction work for state. The k provided for liquidated damages of $210 per day o delay. The work was delayed 67 days, and D withheld $14,070 from total contract price of $530, 724. P sued for difference. P appeals, and loses.
Rule/Issue: A liquidated damages clause can e enforced where there is no way to measure actual damages.
Rationale: L.D.C. should be enforced when they are fair and reasonable attempts to fix just compensation for anticipated loss caused by breach of K. No way to measure actual damages for delay in highway- as long as clause if fair it may be deemed reasonable.

Chapter 6 Finding the Contract: Contract Interpretation

Parole Evidence Rule: When an agreement has been reduced to writing which the parties intend as the final and complete expression of their agreement, evidence of any earlier orla or written expressions is not admissible to vary the terms of the writing.

Integration - a written K that is a final and complete expression.

Rationale: The law favors written K (as more reliable).

Parole evidence rule applies only where the parties intended the writing as a final expression of their agreement. Two tests used.

Face of the agreement Test: The old view was that the parties’ intent must be determined from the face of the agreement itself.

Many courts now hold that any evidence may be admitted to determine whether the parties intended the K as a final and complete expression of agreement.

Gianni v. R. Russell & Co.: - prior oral agreement
Facts: P operated a concession in an office building, D acquired the property and signed P to a lease whereby P was allowed to sell “only fruit, candy, soda water, etc.” but was prohibited , on the penalty of instant forfeiture of the lease  from selling tobacco. D then leased adjoining room to a drug company without a restriction on the sale of soda water and soft drinks. P, claiming that D had agreed to give P the sole right to sell soda in the building at the time of lease negotiations, through such alleged agreement was not incorporated in the written lease, brought suit against D for breach of the alleged oral agreement in that D allowed the drug store to sell soda water.  D appeals, and wins.
Rule/Issue: P not allowed recovery on a an oral agreement when no mention of the oral agreement is made in subsequent written agreement.
Rationale: Writing was subsequent to oral negotiations, and admittedly read by P and two others before P signed it, constitutes K. P is attempting to reform document, but there is no fraud, accident, or mistake involved here.
2-202

Masterson v. Sine: - partially integrated agreement
Facts: Ps transferred real property to D by deed, reserving an option to repurchase for same consideration for a period of 10 years and to pay the depreciated value of the improvements. Dallas Masterson filled for bankruptcy and his trustee and wife brought this declaratory action to determine the right to exercise option. Trial court admitted parole evidence to explain meaning of consideration and depreciated value but excluded evidence indicating that the option was intended to keep property in family and was therefore nonassignable and not exerciseable by trustee in bankruptcy. Ds claimed that the option was too uncertain to be enforced and that the extrinsic evidence as to it meaning should not have been admitted . Ds appeal, and win.
Rule/Issue: When a term is such that it must necessarily be included in the agreement, the contract is not integrated with respect to the term.
Rationale: The parole testimony as to the limitation of assignment should have been admitted since that term would not necessarily have been included.  The parole testimony as to the other terms was properly admitted to explain the meaning of terms not clear on the face of the instrument.
Traynor: says parole evidence rule must accommodate several policies. Written evidence is more accurate. Fear that fraud or unintentional invention by witnesses interested in outcome of litigation will hinder facts. 

Lee v. Joseph E. Seagram & Sons, Inc.: - contemporaneous oral agreement
Facts: P had served D for 36 yrs. before acquiring a 50% interest in DC, wholesale liquor distributorship. P offered to sell business to D on condition that D relocate P in a new distributorship in a different city, in a location acceptable to P. The sale was put in writing and performed but the promise to relocate was never written or performed, and P sued for damages. D appeals, and wins.
Rule/Issue: A contemporaneous oral agreement, not integrated into the written agreement, may be enforced if it is separate, independent, and complete.

Bollinger v. Central Penn Quarry Stripping and Construction Co: - application
Facts: P contracted to allow the disposal of waste from the construction of the Penn turnpike on their property. They alleged that the original oral agreement required D to remove topsoil. D followed this procedure for a while and ceased doing it. P protested and was informed that the written K did not required to follow the sandwich procedure. P filed an action in equity to reform the K and to enforce it as reformed. D appeals, and loses.
Rule/Issue: A court of equity may reaffirm a written K when a provision is excluded by mutual mistake.
Rationale: Evidence of the practice of D initially in removing and replacing the topsoil indicates that the provision was initially intended to be included. The fact that one of the parties changes his mind after the mistake is made is immaterial to P’s right to reformation.

Interpreting K language

latent ambiguity- terms appear certain, but because of extrinssic facts more than 1 interpretation is possible 
vs. patent - uncertainty is obvious.

-if both parties are unaware------> no K
-if both parties are aware--------> there is K if they both agree on same interpretation.
-if one knows-----> binding on terms interpreted by innocent party

Frigaliment v. B.N.S.:  -chix case
Facts: D contracted to sell “chicken” to P. D shipped stewing chicken under both contracts instead of the boiling and frying chicken desired by P. D wins.
Rule/Issue: To enforce a particular meaning of a common term used in a K, P must prove either D’s actual knowledge of the particular meaning or a widespread, universal usage in the particular manner asserted.
Rationale: Making of a K requires tow minds- not one. What parties said is the essence of the K.

Raffle V. Wichelhaus: no K, latent
Facts: D agreed to buy 125 bales of cotton to be shipped by P to England from India aboard the ship “Peerless.” there were two ships named “Peerless” though. When second ship arrived, D refused to accept delivery, and P sues for breach of K, and loses.
Rule/Issue: Where K is subject to two equally possible interpretations and the parties contracted with different interpretations in mind, there is no mutual assent.
Rationale :  There can  be no K if a term used to express an agreement is ambivalent and parties understand it differently.  There was no meeting of the minds.
 
Pacific Gas Electric: - evidence to prove own interpretation
Facts: D contracted to replace a metal cover on P’s steam turbine, agreeing to perform all of the work at its own risk and to indemnify P against all loss or liability arising from performance. d agreed to obtain an insurance policy covering liability for injury to property. The liability clause 
indicated that only third party property was covered, but P argues that intention was to cover its property as well. During the work, P’s property was damaged; P sues to recover. D argues that its prior contracts with P indicate that only third party property was to be covered and that admissions of P’s agents indicate that this was to be the case. Trial court found for p and denied admission of D’s evidence, but D won in the end.
Rule/issue D may offer parole evidence to show the meaning of terms of a K where the language of the K is susceptible to the interpretation argued for by D.
Rationale: Evidence as to meaning must be admitted if language is reasonably susceptible to meaning argued for by the evidence. Extrinsic evidence may only be excluded when it is feasible to determine the meaning of words from instrument itself; this is seldom case since language is often inexact in conveying the intention of the parties.

Steuart v. McChesney: - refusal to consider parole evidence
Facts: The Steuarts gave the McChesney’s a right of first refusal on farm under which “should said Steaurts obtain a Bona Fide Purchaser for Value, the said M’s may exercise their right to purchase said premises at a value equivalent to the market value of the premises acc. to the assessment rolls as maintained by the County of Warren.”  In 1977, a broker appraised the farm at market value of  $50,000. Later S’s received tow offers of $35K and $30K for farm and M’s sought to exercise right by tendering $7,820 the assessed value acc. to rolls. S’s said no and that agreement should be read to require that exercise price be that of the third party offer or fair market value determined independently of assessed value.  M’s sought specific perf. and failed, but Superior Ct. held that plain language of agreement required that assessed market value determine the exercise price. S’s appealed.
Rule/Issue: Language here is plain and clear and is not in need of interpretation by reference to extrinsic evidence. Even if it is unfair to one party, a court must apply the plain meaning of the language in a K.
Rationale: Plain meaning rule reinforces the reliability of K and minimizes the fear that a court may later construe the k to mean something else than what parties clearly expressed. It prevents a party from fabricating a new meaning.

Husrt v. W.J. Lake: custom or usage
Facts:  P k’ed to sell D 350 tons of horse meat scraps at $50 a ton. Specs. stated “min. 50% protein” and the k provided that if any of the scraps “analyzes less than 50% 
of  protein” Lake was to have a discount of $5 a ton. Lake paid only $45 a ton for 140 tons that contained protein varying from 49.53 to 49.96 per cent. Husrt sued to recover balance of $5  ton alleging that both parties were members of a group of traders that understood that “min 50%” required buyer to accept all scraps containing 49.5 per cent protein or more. Trial ct. entered for def.
Rule/Issue: Even if k is unambiguous upon its face, there is no reason nec. to exclude the evidence of custom. A trade custom may be used to interpret the meaning of K terms.
Rationale: In dealings with tradesmen, the meanings of terms of the trade should take precedence. Parole evidence is admissible in order to explain the trade meanings. 

Section 3 Filling Gaps

implication - court may imply  a term in K because of some belief as to the practice of the community or of a class, or because of some opinion as to policy, or in short, because of some attitude of yours upon a mater not capable of exact quantitative measurement, and therefore not capable of founding exact logical conclusions.

percentage leases - fixes rent as a stated percentage of the lessee’s receipts or profits. Under such a lease, the lessor has a useful hedge against infection and also shares to some extent the lessee’s risk of success or failure.     

Eastern Air Line, Inc. v. Gulf Oil Corp:  failure to object
Facts: fuel freighting K case
Rule/Issue: An established course of performance and dealing between parties, which is also an established usag of the trade, becomes part of the terms of the K when not objected to.
Rationale: Evidence shows that practice of fuel freighting is common to industry. D never objected over the years until price problem arose under current contract.

Dickey v. Philadelphia Minit-Man Corp.  
Facts: P, Sam Dickey, leased to D a vacant piece of land in 1947 in Milbourne, DE County for a term of 10 yrs. w/ an option to lessee of additional 10 yr. term. The lease provided that  prems. were to be occupied by lessee “ in the business of washing and cleaning automobiles within the scope of the businesses of  the Philadelphia Mini-Man Corp. and for no other purpose.”   The lessee’s rent was 12.5% on the amount of the annual gross sales but a min. of 18,000 per yr. “Gross sales” in this case, included sales price for all merchandise sold and charges for all services performed by the lessee. Lessee agreed to erect the building and all equipment needed to perform buss; all fixtures and building erected by lessee become property of the lessor as and hen the lease agreement should expire for any reason whatever. If default were made in observance for performance of any conditions of the agreement, the lessor had the right of termination and of reentry.   Def followed agreement , erected buildings, installed nec, equipment, washed cars until Aug. 1952. when it stopped performing featured services.
Def never failed to pay min. rent, but in Sept of ‘53, P filed ejectment because def. did perform buss. specified in the lease. The court below dismissed the complaint.
Issue: Was there any obligation on the part of the lessee to continue to conduct its bus. open the prems. of washing and drying cars if its failure to do so resulted in lower rental payments to the lessor?
Rule: No, Def has not moved any part of buss anywhere and it’s decision to change its bus. practices is a legitimate buss. judgment, not one made to decrease the percentage of rent paid to plaintiff.
Rationale: An implied duty restricts D’s ability to exercise its business judgment. D did not act in bad faith, and P is protected by the minimum rent provision.

Market Street  Associates v. Free: duty to remind other party of K term
Facts: P was the successor under a lease that allowed it to buy the leased property in the event D, representing the pension fund lessor, failed to provide financing for improvements to the property. P desired to buy the property and formally requested financing from D, without mentioning lease paragraph giving P the purchase option. D declined to provide the requested financing, which was below D’s deal threshold. P notified D it was exercising its option to buy. D refused to sell, and P sued for specific performance. Trial court gave S.J. for D on the theory that P had not acted in good faith. P appeals, and wins.
Rule/Issue: The requirement of good faith does not require a party to alert the other party to a k to any terms of the contract that might be unfavorable to the other party.
Rationale: Good faith does not require complete candor. The market gives people superior knowledge of the market.

Bloor V. Fastaff:  best efforts caluse 
Facts: D acquired trademarks, labels, and other assets from Ballentine and sales agreement required D to “use best efforts to promote and maintain a high volume of sales.”  D was to pay 50 cents a barrel royalty for the use of mane. A separate provision specified liquidated damages if D substantially discontinued distribution Of ballentine. D continued for 3 yrs. and lost $22 million on the brand. A new experienced brewer took control of D, reduced advertising, changed distribution, and pursued profit over volume. Ballentine sales plummeted but D became profitable. P sued for liquidated damages and best efforts. Award given for efforts ,but not damages.
Rule/Issue: In a  suit for a “best efforts” clause, the performing party show that there was nothing significant it could have done to perform that would not have been financially disastrous.
Rationale: P can not recover liquidated damages cause D did not substantially discontinue distribution even though it changed the type of distribution.

Zilg v. Prentice-Hall:
Facts: Zilg wrote about Dupont Family. Publisher had last minute changes cause book was controversial. P sued for breach of K.
Rule/Issue: A contractual agreement to publish  book, reserving the right to the publisher to exercise its discretion, does not included an implied obligation to aggressively promote book.
Rationale: Publishers need to retain flexibility so that they can react to actual marketing conditions as they develop. Good faith works here.  Business decisions were made and should not be second guessed.    

Bak-A -Lum Corp. of America v. Alcoa Building Products,Inc.: exclusive dealership
Facts: P entered into verbal agreement with Alcoa Building Products, Inc. (D), whereby P was to be D’s exclusive distributor.  About six years later D decided to terminate P’s exclusive distributorship by appointing additional distributors. D did not inform P of this decision, even though it knew P was significantly expanding its warehouse facilities by entering a new five-year lease in anticipation of more business. About a year later, when the new distributors were ready to start business, D announced the termination of P’s exclusive distributorship. P sued for injunction and damages. Trial court ruled that D could not terminate the agreement with P but only after giving reasonable notice of seven months. P was awarded $35,000 lost profits for the seven-month period, appeals, and loses.
Rule/Issue: A party to a K has an implied duty not to do anything which will have the effect of destroying the right of the other party to receive the fruits of the K.
Rationale: Although D could terminate, good faith and fair dealing was required as not to cause detriment to P.

Lockewill Inc. v. United States Shoe Corp: reasonable time for exclusivity
Facts:  In 1965, P acquired exclusive right to sell to Pappagalllo products in St. Louis area. P sent lots of money and effort to market goods. D acquired Pappagallo  and in 1974 began selling products through another store in area. P sued, awarded  damages, and loses.
Rule/Issue: Where term of an exclusivity agreement is not spelled out, courts may infer a reasonable time.
Rationale: Exclusivity agreements that so not specify a duration are construed to be terminable at will of either party. When agent has in good faith incurred expense and spent time and effort in developing business without having had sufficient opportunity spent $ and time developing business without having had sufficient opportunity to recoup the investment from the undertaking, the law will require the principle to compensate agent upon termination. Nine years is more than reasonable time. Quasi-k did exist,

Sheets v. Teddy’s Frosted Foods: limitations on at-will employment
Facts: P was employed as quality control director and as pertains manager. He saw that some food was not packaged in compliance with state regulations, and that possible criminal violations existed cause of false labeling. P told D and was discharged in retaliation. P brought suit for wrongful discharge, but d sought to dismiss the complaint. P appeals, and wins.
Rule/Issue: An employee may not be discharged for calling the employers attention to possible criminal violations by the employer.
Rationale: Public policy places some limits on employer’s rights to terminate. P had responsibility and could have been criminally sanctioned.

Nanakuli Paving v. Rock Co. v. Shell Oil Co.:
Facts: P was asphalt paver that bought all of asphalt requirements from D. The supply contracts between P and D’s specified that the price would be D’s posted price at the time of delivery. However, all material suppliers to the asphalt paving industry followed a trade practice of price protection, whereby suppliers would charge pavers the price in effect when the pavers bid on the particular projects involved. Most K were with government agencies that did not permit escalation clauses. On 2 prior occasions, D in fact provided price protection for P be extending the old price for four and three months. D suddenly raised the price of asphalt  fro 44 to 76 after P already had K for which it needed 7,200 tons of asphalt. P sued, claiming that D breached K. P appeals, and wins.
Rule/Issue: A k term that specifically provides for a price to be established as of the date of delivery be modified by the trade usage and course of performance of parties.
Rationale: D had duty to act in good faith, specifically a duty to fix price in good faith, UCC 2-305. While a  posted price normally satisfies this requirement, D’s manner of carrying out the price increase did not give appropriate advance notice and did not price protect P.
The practice of price-protection was a well-established one that parties knew about, or should have known about.

Columbia Nitrogen Corp. v. Royster Co.:
Facts: P contracted to sell a minimum of 31,0000 tons of phosphate each year for 3 yrs. to D. The K stated that the price per ton, subject to an escalation clause related to production costs. The market price of phosphate soon dropped greatly, and D ordered less than one-tenth of the K amount, although it would have ordered the full amount at current market price. P sold phosphate elsewhere at a price significantly below K price, and sued for breach of damages. D tried unsuccessfully to introduce evidence on usage of trade and course of dealing between parties. D appeals, and wins.
Rule/Issue:  The evidence of usage of trade and course of dealing may be admitted to show that a specific K price was not to binding on parties.
Rationale: extrinsic evidence may not be used to explain ambiguous K, but UCC 2-202 authorizes evidence of usage of trade and course of dealing between parties to explain or supp. a K. P claims that evidence should be excluded cause it is inconsistent with express terms of complete K. The test of admissibility is not completeness but whether evidence can reasonably be construed as consistent. K does not prohibit use of such extrinsic evidence. See UCC 1-205, 2-208, and 2-209.

Chapter 7 Performance and Breach
 Conditions
Effects of Conditions

Conditions - means of assuring a party’s expectations, such as permitting the party to defer or withhold its own performance whne a threat of a certain order arises that it will not receive what was promised in exchange.

According to Restat.  224 “A condition is an event, not certain to occur, which must occur, unless its nonoccurrence is excused, before  performance under a contract becomes due.”

condition subsequent - one in which the occurrence of the condition extinguishes the previously absolute duty to perform

condition concurrent - mutually dependent performances which are capable of nearly simultaneous performance by the parties.

Luttinger v. Rosen:
Facts: P’s k’ed to buy $85,000 premises in city of Stamford owned by D’s and paid deposit of $8500.  K was “subject and conditional upon the buyers obtaining the fist mortgage financing on the premises from bank or other lending institution in the amount of $45,000 for a term of no less than 20 yrs. and at an interest rate no higher than 8.5 per cent per yr.’ P’s agreed to use due diligence in attempting to find such financing, and parties agreed that if P’s were unsuccessful and notified the seller within a specific time, all sums paid on K would be refunded and K would be terminated with no obligations on either side.   P’s found a bank that would lend $45,000 but not for less than 8.75%. Timely notice was given to D’s.  D’s counsel offered to make up diff. between interest rates by a funding arrangement.  P’s said no, and D’s refused to refund deposit. 
D’s claims: They claim that P’s did not use due diligence. They thought that P’s should  have applied to other banks other than the ones  recommended by their attorney.
Issue/Rule: One Party’s offer to compensate for the failure of a condition precedent does not prevent the operation of the condition. 
Court Rationale: Language of K indicates that purchase intended on obtaining mortgage on condition as specified in K.  The law does not require the performance of a futile act.

Internatio-Rotterdam, Inc. v. River Brand Rice Mills, Inc.
Facts: D. rice-processor, entered into agreement with P-appellant, an exporter, for the sale of 95,600 pockets of rice. Terms of agreement said that price per pocket was to be $8.25 F.A.S. Lake Charles and/or Houston, Texas.” that shipment was to be on Dec. 1952 with two weeks call from the buyer and that payment against dock receipts and other specified docs. In fall, P, who already k’ed with Jap. buyer was confronted with U.S. export restrictions upon De. shipments and was attempting to get an export licensee from govt.  Dec. is peak month  in rice and cotton seasons in both Louisiana and Texas, and D was concerned about shipping instructions under K cause of congested conditions at the mills and docks. Thus, D delivered 50,000 pockets at lake Charles and on Dec. 10 it received from P instructions for Lake Charles shipments.  D made shipments to L.Charles until Dec. 23.  Dec 17 was the last day in Dec. which allowed D the 2 week period provided in K for delivery of rice to ports and ships designated. on Dec. 17, D had still received no shipping instructions and the next morning rescinded the k for Houston deliveries. 
Issue: Was the condition of giving notice by appellant for appall to ship performed?
When the sales K specifies a delivery time and requires the buyer to provide delivery instructions, the buyer is obligated to provide timely delivery instructions as a condition precedent to receiving the goods.
Rule: No. Evidence suggested that Dec. delivery date was of the essence and was not merely a duty, it was condition precedent to the performance which might be required of the appall.
Rationale: Evidence that D’s mills were working to full capacity in Dec. and that D had other K’s in Jan. to fill. Price market was fluctuating; it was unreasonable for P to infer that process may carry over to Jan.  Plus, P’s arguments that there was sub. part performance was not held cause Houston shipments were preparatory to expectation to perform later.

b.  problems of interpretation

Peacock Construction Co. v. Modern Air Conditioning, INC.  judicial interpretation
Facts: Peacock Contraction, builder of condo project.  Mac sub’ked with PCC to do the heating and air conditioning work and Overly manufact sub’ked with PCC to do “rooftop swimming pool” work. Both written subk’s provided that PCC would make final payment to subker’s.
within 30 days after work was done in subK, written acceptance by Architect and full payment therefore by the Owner.  After both Subk’s finished work in K, PCC refused to pay.  PCC said  that it had not yet received from the owner full payment for subk’s work. Claimed that payment by owner was a condition by express terms of final payment provision.
Issue: What was the intent of the parties as to the condition of payment?
Rule: The relationship between subk’s and k’s is usually that payment by the owner 
The courts may determine the intention of the parties from written K, as a matter of law, when the nature of the transaction lends itself to judicial interpretation.
Rationale: The K provision may be interpreted as a setting a condition precedent or as fixing a reasonable time for payment. The relationship between generals and subs is common and their intent will not differ from trisection to transaction.

Gibson v. Granage: personal satisfaction
Facts: P agreed to make a portrait of the deceased daughter (D) on a small picture. When P resented picture, D refused to accept it, claiming that he had agreed to accept it, claiming he had agreed to accept the picture from P only if it was “perfectly satisfactory” to him. P was unable to find from D what his objections were. D wrote P a letter stating that the picture was unsatisfactory and that he declined to take it or any similar picture. Court found for D, and appeals, and loses.
Rule/Issue: Contractual liability can be conditioned on subjective personal satisfaction.
Rationale:  No rule of public policy was violated and the K was free from all fraud and mistake.

Doubleday & Co. Inc. v. Curtis: good faith satisfaction
Facts: D contracted to provide 2 novels to P/ Parties used standard industry form that required P to pay royalties on hardcover sales and a share of the proceeds of the sale of paperback rights if D delivered manuscripts  “satisfactory” to P in content and form. P published the first novel and renegotiated the deal on the second novel to give D a $100,000 advance, half on signing and half on acceptance by P of a complete satisfactory manuscript. d delivered a partial first draft, which P’s editor reviewed and commented on. D refused to have additional portions reviewed , and when he delivered the complete manuscript, P deemed it worthless. P terminated the K and sued to recover the advance. D counterclaimed for the balance of the advance and other damages on the theory that P had a duty to provide editorial services. 
Rule/Issue: A publisher does not have a duty to assist an author in the preparation of a manuscript where the K requires the author to provide a manuscript that is satisfactory to the publisher.
Rationale: The law requires the party who terminates a K to cat in good faith. Where a K contains a satisfaction clause , it may be terminated only as a result of honest dissatisfaction.

Laurel Race Course, Inc. v. Regal Construction Co.:
Facts: D contracted with Regal Construction Co. (P) to reconstruct its race track. The K specified that engineer, Watkins, was responsible for deciding all engineering questions which arose in the execution of the agreement. Watkins also was responsible for interpreting the K and deciding all disputes, unless both parties submitted any dispute to arbitration or resorted to legal action. Watching would also issue a final certificate upon completion of the work, whereupon the final payment from D to p would be made. After P claimed it had completed the work, Watkins refused to issue a final certificate cause P permitted rock and oversize material to be mixed with the clay and sand on the track.  P sued for the balance of the K price. Trial court found for p despite Watkin’s failure to issue the certificate. D appeals, and wins.
Rule/issue court may not order a party to make full payment despite the engineer’s refusal to issue a certificate of completion, where there is no showing of bad faith or collusion.
Rationale: There is a general rule that where payments under a K are due only upon certification by an architect or engineer, production of the certificate becomes a condition precedent to the owner’s liability for materials and labor, so long as there is no fraud or bad faith.
      
Hicks v. Bush: pleading and proof
Facts:  P brought action for specific performance of a written agreement pursuant to which D and P and others had intended to merge into a stock holding company. The written agreement, however, made no mention of the condition that the sum of $672,500 had to be raised in order for the written document to take effect. P claims that Ds breached the agreement by not transferring their stock to the holding company, in that written document embodies the entire agreement between the parties. Trial court allowed the introduction of testimony which related to the oral agreement that was allegedly binding on the written agreement in question. P appeals, and loses.
Rule/Issue: Parole evidence may be introduced to supplement a written agreement.
Rationale: P.E. is admissible to prove a condition precedent to the legal effectiveness of a written agreement. The condition was mot fulfilled, thus, no K.

Kingston v. Preston: development of dependent covenants
Facts: P agreed to work for d for one and one-quarter years as a servant, and then D, upon P’s presenting good security, would transfer his business and stock in trade to P at a “fair valuation.” When the time arrived, D refused to perform the transfer. P sued for non-performance, claiming that he had begun performance and was willing to continue to perform but that D refused to perform. D claimed that P did not offer sufficient security.
Rule/Issue:  A party must fully perform before the other may be forced to perform.
Rationale: Before receiving the business from D, P was required to show good security for the payment of the $.

Stewart v. Newbury: progress payments may not be inferred
Facts: P contracted to do some construction work for D. The time for payment was not mentioned in the written contract, but P argued that there was an oral understanding that payment would be made according to custom, which was to pay 85% of work completed each month. After three months, P submitted a bill. D refused to pay, P discontinued work and sued for the amount due. D appeals, and loses.
Rule/Issue: A contractor is not entitled to part payment if the K makes no provision for it.
Rationale: Where a construction K makes no provision for installment payments, then the work must be substantially performed before payment can be demanded.

Plante v. Jacobs: defects in construction
Facts: P contracted to build D’s house for $26,750; D’s paid $20,000 and refused to pay more, on the basis that there was faulty construction. P refused to complete the job and sued for breach of the entire K: Ds defended on the basis that p had not D substantially performed the K. There had not been any detailed plans for the construction. Ds appeal, and lost.
Rule/Issue: P has substantially performed on the K.
Rationale: There were no detailed plans for construction. Since P performed to the substantial purpose of the K, P rendered substantial performance and is due the K price.. However, D should receive damages for P’s failure to perform in finishing the home. The misplaced living room wall did not diminish the value of the home and so does amount to a material breach.

Moulton Cavity & Mold, Inc. v. Lyn-Flex Industries, Inc.:
Facts: The president of  P orally agreed to produce 26 inner sole molds for D. D would uses them to produce salable inner soles. The time for delivery was approximately three to five weeks., and the price was $600 per mold. P created a sample and began testing it on D’s equipment. After 10 weeks, several problems still existed, including flashing, or seepage of plastic along the seam where the two parts of mold meet. Flashing prevented the production of a salable inner sole. At one point, D’s officials allegedly stated that the molds were satisfactory and P made all 26 molds. D claimed it did not give final approval because of the flashing problem. P’s evidence showed that D revoked its prior approval and demanded that P design the molds. D’s evidence showed that it had never approved the molds and instead bought replacements from Italy for $650 apiece. P billed D for the K price, and D counterclaimed for the extra cost of the replacements. At P’s request and over D’s objection, the judge instructed the jury on the doctrine of substantial performance. D appeals, and wins.
Rule/Issue: The doctrine of substantial performance does not apply to a K for the sale of goods under the UCC.
Rationale: The common law rule as to the seller’s tender of goods under a sales K permitted a buyer to reject the tender if it in any way failed to conform to the specifications of the K. This perfect tender rule was continued under UCC 2-601.

B. Divisibility- a party to a K has no right to refuse performance due to a breach by the other party of a separate contract between them.

Gill v. Jonhnstown Lumber Co.:
Facts: P agreed to drive on a river 4 million feet of logs for D at the rate of $1 per thousand feet of oak, .75 per thousand feet of all others,.03 for ties driven to Bethel, and .05 for ties driven to all points below Bethel. A flood caused a number of logs to be swept past D’s boom at the point of extraction and D refused to pay for those delivered. Trial court gave judgment for d on the basis that the K was entire and P’s failure to deliver all the logs barred recovery for those delivered. P appeals, and wins.
Rule/Issue:  The K is severable so that P may recover for those logs actually delivered.
Rationale: An assignment for the benefit of creditors acts as a breach of the K cause it makes performance impossible for the insolvent party. Such an assignment prevented recovery where the debtor had fulfilled all the preparation phases of a K that was not divisible. see Penn Exchange Bank v. U.S.

Britton v. Turner: employment K
Facts: P worked for D under a K to work for one year. P only worked for 9 and a half months and then left without cause. D refused to pay P anything for his work and D sued in quantum meruit to recover the value of his services. D did prove any damages from P’s early departure and jury awarded $95. D appeals, and loses.
Rule/Issue: Am employee who voluntarily leaves the employ of an employer before termination of an employment K can recover the net benefit received by his employer but not exceeding the contract amount.
Rationale: To deny recovery would place the party committing the earlier breach in a better position than one who substantially completes the K, thus defeating the policy of encouraging the fulfillment of K. the employee should not be allowed to receive a windfall at the expense of the employee.

Kirchland v. Archbold: construction K
Facts: P contracted to make alterations and repairs of D’s dwelling. Payment was to be  received after each 10 days of satisfactory work. The k called for lining the outside walls with rock lathe and rock wool and P lined the walls with wood lathe and plaster. D refused to allow P to continue with the work after she had paid $800. P used to recover the value of the work done, which he asserted was $2,985. Trial court found p in breach but hold that D’s payment of $800 was admission that the first installment was sued and awarded. P appeals, and wins.
Rule/Issue: A  party who has not willfully abandoned performance or broken his K can recover the benefit conferred on the other party less damages caused by inadequate performance.   
Rationale: A negligent breach should not be treated the same as a willful breach where forfeiture of the value of the work is a punishment. P should be awarded the reasonable value of the work done less the damages suffered by D through the improper and incomplete work performed by P.

Walker & Co. v. Harrison
Facts: D rented an electric sign from P. The K provided  that d would own the sign at the end of the term. Shortly after installation, sign was hit with a tomato and become dirty. D refused to make further payments until P cleaned sign. P sued for breach and won. D appeals, and loses.
Rule/Issue: A party’s breach must be material before it can justify the other party’s repudiation of the K.
Rationale: Repudiation is a permissible response to a material breach, but the injured party’s determination that there has been a material breach is fraught with peril. A court may not view  the breach as material, thus rendering the repudiator guilt of a material breach. P’s delay was irritating but not material enough to warrant repudiation.

K&G Construction Co. v. Harris: : failure of performance as excuse
Facts: D, subK, performed excavation work for P. P was required to pay d by the 10th of each month for work done per requisitions submitted by D by the 25th of each preceding month. D did work in July and submitted a timely requisition. On August 9, one of the D’s men negligently damaged P’s house to the extent of $3,400, and P refused to make August 10 payment of $1,484. D quit working in September, despite P’s request that D continue work, because of  P’s refusal to pay. P hired another contractor to finish D’s work at $450 above K price. P sued for damages to the house and for $450. D counterclaimed for the $1,484 and lost profits of $1,340. P recovered the $3,400 but D recovered the $2,824. P appeals, and wins.
Rule/Issue: An owner’s promise to pay is dependent on the contractors performing in workmanlike manner.
Rationale: Mutual promises in a K are presumed dependent.
These promises are clearly dependent, and by the terms of the K, D’s promise to perform is precedent to P’s promise to make monthly payments.

Iron Trade Products Co. v. Wilkoff Co.: performance made difficult
Facts: P contracted to but rails from D , but failed to perform due to an increase in market price of rails. P sued for the added amount which it had to pay to buy the rails elsewhere. D claimed that the increase in price was due to P buying additional rails from D’s supplier, which reduced the available supply so much that the price became exorbitant. D also showed that P had contracted to sell the rails to a third party who had agreed to let p out of the K without paying damages. D appeals, and loses.
Rule/Issue: A seller’s performance is in not excused if the buyer makes the goods more expensive by making additional purchases from the seller’s supplier.
Rationale: A party who prevents the other party from performing may excuse the other party’s performance. D did not show that P had knowledge that the supply was limited and that p intended to prevent or interfere with D’s performance or cause D to default.

New England Structures Inc. v. Loranger: notice of breach
Facts: P hired D to do roofing work on a school it was building. The k called for d top provide sufficient skilled workers and spelled out the specifications for the work. The K also allowed P certain termination rights if D failed to perform the work properly or provide sufficient workers. After D had completed most of the work, P complained about the way it was done and also bout a shortage of workers. P exercised its option under the K and sent a telegram terminating the K for Failure to provide sufficient workers. D responded that delays were occasioned by P’s failure to provide approved plans and by unauthorized changes. P refused to allow D to continue work during the five-day notice period preceding termination. P hired another contractor to finish work at a price in excess of the K price and sued for the difference. D counterclaimed for breach of k, P appeals, and wins.
Rule/Issue: When notification of a ground for termination is sent to a party deemed to be in breach, the notified is not limited to that ground in defending his action in terminating.
Rationale: The five-day notification period was not intended to give an opportunity for curium but was intended to give D time to protect itself from injury by removing its equipment and releasing its employees.

Anticipatory Repudiation:

Introduction: If neither party to an executory bilateral K, in advance of the time set for performance, repudiates the K by words manifesting his apparent intent not to perform as he has promised, the other party may treat such anticipatory repudiation as a present, material breach of K and bring an immediate action for the entire value of the promised performance
 Rest. (First) 318

Hochster v. De La Tour:
Facts: P was hired by D to accompany him on a tour to begin June 1. On may 11, D wrote to P repudiating the agreement. P sued for Breach on May 22. P was hired for another job between May 22 and June 1. D appealed a judgment for P and loses.
Rule/Issue: The promisee can bring an immediate action for damages when the promisor repudiates the K before the date set for performance.
2-713

New York Life Insurance Co. v. Viglas: good faith repudiation
Facts:  P had life insurance policy with D that had disability provision providing that, if P were permanently disabled, the policy premiums would be waived and monthly disability payments would be made. P became disabled and D made payments for two years; then D in good faith claimed that P was no longer disabled and would have to make premium payments. When P refused, the policy lapsed. P sued D for repudiation of the K, claiming all disability payments that would have been made under the policy and for the cash value of the policy if it were to have been kept in force. D appeals, and wins.
Rule/Issue: The good faith dispute over disability in an insurance policy and refusal by D to make further payments is not a repudiation.
Rationale: D acted in good faith. 

Kanavos v. Hancock Bank &Trust:
Facts:  P had option to purchase the stock of a corporation that owned an apartment building. D agreed to pay P $40,000 to surrender this option, in addition to a 60-day right of first refusal on the stock should D decide to sell it. The building was worth 4 million and the balance on the mortgage was 2.5 million. D later sold the stock for $760,000 to a third person without giving P notice and an opportunity to buy it first. P sued for breach of K. Court awarded P promised $40,000. plus difference b/n the sales price and the equity in the building, which totaled $740,000. D appeals on the ground that judge failed to instruct jury that p could not recover unless he proved that he was ready, willing , and able to buy stock for $760,000.
Rule/Issue: To recover for breach of k, the owner of a right of first refusal must prove that, had he been notified of the impending sale, he would have been ready, willing ,and able to exercise his right.
Rationale: In bilateral K containing simultaneous obligations, one party’s repudiation does not relieve the other from proving that he could perform his obligation. One party cannot put another in default unless he is ready, willing, and able to perform.

McCloskey &Co. v. Minweld Steel Co.: equivocal prospective ability to perform
Facts:  P contracted with D to have D supply and erect structural steel for a hospital. the K allowed P to set up schedules for delivery and erection of steel. P sent the specifications and plans to D and asked for a delivery estimate. D’s schedule was not quick enough for P so P requested assurance that the work would be completed within thirty days. D replied that it would like to meet that deadline but required P’s assistance in acquiring the steel, since steel was in short supply. P terminated the K and hired another subcontractor w/o difficulty. P sued for anticipatory breach, and loses.
Rule/Issue: To show anticipatory breach, the party breaching , must express an absolute and unequivocal refusal to perform.
Rationale: Failure to make timely preparations to perform is not an expression of anticipatory breach. P must wait until the time for performance to ascertain whether D is in breach absent absolute and unequivocal refusal to perform.

Codsen Oil: anticipatory repudiation
Facts: P sued Codsen (D) for anticipatory repudiation. The district court found for P and warded damages based on the market price at a commercially reasonable point after D informed P that it was canceling the orders.
Rule/Issue: When a seller anticipatory repudiates a K, the buyer’s damages should be based on the market price at a commercially reasonable point after the seller notifies the buyer of the repudiation.
Rationale: 2-713 refers to Mkt. price at time buyers learned of breach. It has been interpreted in 3 ways: When buyers learns of the repudiation, when he learns of the repudiation plus a commercially reasonable time, and (3) when performance is due under the K. When the buyer learns of the breach at or after the time of performance, it is clear that the damages dend on the market price at the time the buyer learns of the breach. 
Section 2-610 permits buyer to await performance. 2-611 allows seller to retract repudiation.

U.S. v. Seacoast Gas Co.:
Facts:  U.S. Contracted with D for supply of gas to federal housing project. D later notified that it would no longer supply gas and P took bids for a replacement supplier. after opening the bids, P requested that D withdraw its repudiation within three days or the low bid would be accepted. D refused to do so and P accepted the low bid. Before the final k was signed, D attempted to withdraw the repudiation. P refused to accept the withdrawal and sued for damages from the repudiation.
Rule/Issue: When a party repudiates a sales K, he may withdraw that repudiation until the injured party indicates that the repudiation is accepted as final, or detrimentally relies on the repudiation.
Rationale: UCC 2-611 provides that the repudiating party may withdraw its repudiation unless the aggrieved party has canceled or changed its position or otherwise indicates that he considers the repudiation final.

Assurance of Due Performance

A promisee generally has no right to demand that the promisor provide reassurance of performance. 2-609, however, provides that either party is entitled to demand adequate assurance of performance if there are reasonable grounds for insecurity with respect to performance by the other party.

Pitts-Des Moines Steel Co v. Brookhaven Manor Water Co.:inadequate grounds for insecurity
Facts: P proposed to build an elevated tank for D. d rejected the proposal because it called for progress payments. P’s second proposal required payment within 30 days of completion and final testing. D accepted this proposal. P contacted D’s creditor and asjed for assurance that the necessary funds had been put in escrow, but D did not get the loan. P then asked for the personal guarantee of D’s president, but did not get it. P ceased performance and sued on ground hat D repudiated the K. P appeals, and loses.
Rule/Issue: Before a party may terminate a K for failure to obtain adequate assurance of performance, there must be reasonable grounds for insecurity.
Rationale: P’s demand for assurance was based only on 2-609 and not K. It did not need money now. There was no change on the other side, their credit did not worsen.

Chapter 8 Impossibility of Performance and Frustration

Mutual Mistake -Obstacles to performance that exist at the time of K was entered but are not known by the parties at that time are referred to as mutual mistakes. Generally, where a mutual mistake exists that is material to the K, the party who is adversely affected may obtain recission, unless that party assumed the risk of the mistake.

Stees v. Leonard: unknown land conditions
Facts: D k’ed with P to construct a building on P’s property. D attempted to perform the K but the unfinished building collapsed twice due to wet soil conditions.  D then quit work, alleging that construction was impossible because P had not drained the land and that without drainage, a building to P’s specifications could not be built. They also alleged that after the K was signed, P had orally agreed to drain the land. D appeals, and loses.
Rule/Issue: If a contractor contracts to build a building which collapses through no fault of his own, the contractor must complete the building.
Rationale:  Where a party creates a duty by K, he is bound to it unless there is an absolute impossibility of performance. Building could be built on this land, if land was drained, so performance was not impossible. 

Dover Pool racquetball Club, Inc. V. Brooking: mistake regarding zoning laws
Facts:  Ds owned land which they contracted to sell to P for use as a nonprofit tennis and swim club. At time of agreement was entered, the applicable zoning ordinances allowed P’s intended use; however, four days previously, the local town planning board published notice of a public hearing on proposed amendments to the zoning ordinances which would have required P to obtain a special permit. Neither P nor Ds were aware of the notice, but P learned about it before closing the sale. P refused to proceed with the purchase. P sued for recission of the K and the return of its deposit. D appeals, and loses.
Rule/Issue: Where parties to a real estate transaction were both mistaken regarding the applicable zoning laws, the buyout may obtain recission.
Rationale: Land k’s may be rescinded for mutual mistake.

Impossibility of Performance

A promisor’s duty to perform is discharged where, after the k is entered into, that which he promised to do has become - without- his fault - objectively impossible to fullfill. Further, if the promised performance is the major undertaking of the K, this will discahrge both parties from all duties under the K.
Rest. (First) 457

Taylor v. Caldwell:  performance requiring continued existence of person or thing
Facts: P contracted with D for a music hall for four days in order to give concerts. The K provided that the existence of the hall in a state fir for a concert was essential. Before the concerts were to be given, the hall was destroyed by fire. Neither party was responsible for the fire. 
Rule/Issue: D is excused from performance by the accidental destruction of the hall which made his performance by the K impossible.
Rationale: Both parties are excused. In K where performance depends on the continued existence of a person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance of  the K.
UCC 2-613 states that where a specified thing is destroyed, K is voided, or if the thing is goods which have deteriorated so as to no longer conform to the requirements set forth by K, then the K can be avoided or the goods can be accepted with an allowance for their lesser value.

Transatlantic Financing Corp. V. United States: more costly performance
Facts: D chartered a vessel operated by D to carry a cargo of wheat from the U.S. to Iran. The charter did not specify a route. Six days after the vessel left port, the Egyptian government closed the Suez canal. through which P’s vessel intended to sail, and the vessel made the extended voyage around the Cape of Good Hope to reach its destination. P sought to recover additional compensation for its increased expenses but its action was dismissed. P appeals, and loses.
Rule/Issue: When a performance is rendered more difficult or expensive by unforeseen events, the injured party may not proceed with performance, recover the contract price, and in addition, recover for its extra costs.
Rationale: Legal impossibility is really commercial impracticability. First foreseeability is required. Second, foreseeability must not have derived by either custom or agreement, and third, the occurrence of event must have rendered performance commercially impracticable.

Canadian Industrial Alcohol Co. V. Dunbar Molasses Co.: Foreseeable risk not an excuse
Facts: D agreed to sell to P, CIAC, 1.5 million gallons of molasses “of the usual run from National Sugar refinery.” D shipped only 344,000 gallons because total output of refinery that year was only 485,000, much below plant’s capacity. P sued for damages. D claimed that K contained an implied term that delivery was conditioned on the refinery producing enough molasses, so that D’s duty was discharged when the output was reduced. D appeals, and loses.
Rule/Issue: A seller may not be discharged from performance merely because its usual supplier reduced its production below what the seller had anticipated.
Rationale: D relied on the mere chance that the refinery would produce enough. Business dealings require more certainty. The impossibility doctrine really exists to allocate risk between parties. Thus, where a court believes that the risk was foreseeable and under control of one of the parties, court will not relieve performance due to impossibility. If refinery were destroyed, then D would be in clear since that would not have been risk assumed by D.

Eastern Air Lines , Inc. v. Gulf Oil Corp.: commercial impracticability is not excuse
Facts: D claims that the escalation indicator in the K cannot work as intended cause of government controls, and that when crude oil prices increased  dramatically w/o an increase in the escalation indicator, performance becomes commercially impracticable.
Rule/Issue: A party to a K may not avoid performance due to commercial impracticability when its care largely due to intracompany transfers.
Rationale: UCC-2-615. A mere showing of unprofitability is not enough. D also failed to show how much it costs to make fuel for P, or whether it loses money on its sales to P. Energy crisis was also foreseeable, and they still probably made lots of $.

Frustration

PFC:
a. some intervening act or event
b. the supervening act or event was not reasoanbly foreseeable at time K was entered into
c. the allowed purpose or object of the K was known and recognizeable by both parties at the time they contracted; and
d. the supervening act or event totally or nearly totally destroys the purpose or object of the contract.

Krell v. Henry: - unforeseeable event 
Facts: D contracted to hire P’s apartment for 2 days. Both knew that the purpose was to see the King’s coronation parade which would have been visible from the window ; this purpose was not stated in the K. The parade was postponed when King became sick. P sued for balance due on K. P appealed, and lost.
Rule/Issue: frustration of purpose excuses performance of K.
Rationale:  Where the purpose of the K is frustrated by an enforceable supervening event, and the purpose was within the contemplation of both parties when the K was made, then performance is excused. The purpose of the K may be implied from extrinsic sources. It was clear, for example, in this case that the purpose of the high rent for the room was to view the parade.
Dissent: Where possible, the parties to a K should be left where their bargaining puts them. the room could still be rented to D. Thus, the K was not impossible to perform.

Swift Canadian Co. v. Banet: notice or refusal to accept performance excuses performance
Facts:  P contracted to sell lamb pelts to D, f.o.b. P’s plant in Toronto. After making the first delivery , a change in government import regulations occurred and D refused to accept any further deliveries, claiming that the change in regulations frustrated the K. P then sold the pelts to the other buyers for lower than the K price. P sued D, P appeals, and wins.
Rule/Issue: In a k where the risk of loss transfers from the seller to the buyer at the seller’s plant, a change of import regulations in the buyer’s country which adversely affects the buyer’s ability to resell the goods  does not operate as a frustration of purpose of the K.
Rationale: Seller’s obligation under K was to deliver pelts at f.o.b. and such delivery would have fully completed its performance.

Chase Precast Corp. v. John J. Paonessa Co.:  - government intervention
Facts: D obtained 2 contracts from Department of Public Works to resurface and improve highway, including replacing a grass median strip with concrete median barriers. D hired P to supply the barriers. After the project began, the Department would modify the work, D notified P to stop producing the barriers. P promptly did so, but by then it had produced about one-half of the barriers required in the contracts. Subsequently, the Department deleted the barriers from the contracts with D. D paid P at the K price for the barriers P had produced. P sought to recover its anticipated profits on the balance of the barriers, but D refused to pay. P appeals, and loses.
Rule/Issue: If a government entity eliminates certain requirement \s of a construction K, the private contractor is excused from paying its subcontractor who was to supply those requirements.
Rationale: The doctrine of  frustration of purpose means that when an event neither anticipated nor caused  by either party, the risk of which was not allocated by the K, destroys the object or purpose of the K and thereby the value of performance, the parties are excused from further performance- comparable to UCC defense of commercial impracticability.

Northern Indiana Public Service v. Carbon County Coal Co.:
Facts: P was an electric utility which in 1978 contracted to buy 1.5 million tons of coals each year for 2o yrs. from D. When P discovered that it could buy electricity cheaper than it could produce it, and that psc would not allow p to recover costs of buying coal from D, P stopped accepting coal  from D and sought declamatory relief from k obligation, on ground that psc’s economy purchase orders frustrated the purpose of the K. D counterclaimed for breach of k and sought a preliminary injunction requiring P to take delivery. The district court granted D’s motion. Shortly thereafter, trial began and resulted in a verdict for D for $181 million, which judge approved in lieu of specific performance. P appeals the damage judgment and  D appeals the denial of specific performance, and loses.
Rule/Issue: The buyer in a fixed K is not excused from performance when the market price drops so as to render the k unprofitable for the buyer.
Rationale: The frustration doctrine is to shift risk to party who was in a better position to prevent the risk from happening or who could better insure against the loss. Risk is shifted in accordance with parties’ presumed intentions. When K expressly allocates the risk to one party, that risk cannot be shifted to the other through frustration doctrine.
The force majeure clause in K allows P to stop taking delivery of coal if a civil authority’s orders prevent it from utilizing the coal. Under UCC 2-615 delayed performance is not a breach if it is infeasible, as long as the promisor did not create the unfeasibility. 

Young v. City of Chicopee:
F: P contracted with D to furnish materials and to do repairs on a wooden bridge on a public highway. The contract also required P to assemble the materials on the site prior to beginning work, and P complied. After part of the work had been completed, the bridge and some of P’s materials were destroyed by fire without fault of either party. P sued to recover the value of the materials destroyed by fire and the value of the work he had done prior to the fire. Trial court allowed recovery of all damages requested and D appealed with respect to the value of materials which had not yet been incorporated into the structure when destroyed by the fire.
I: When an object upon which work is being performed is destroyed without fault of the parties, the party performing the work may not recover the value of his work as well as the materials purchased in contemplation of performing the work.
R:D assumed the risk of loss of work and materials incorporated into the bridge, but P retained title and possession of materials assembled for work and could have exchanged or removed them without being liable to D, so P had the risk of loss as to those materials.

Oglebay v. Norton Co. v. Armco, Inc.:
F: D and P entered into long-term K in 1957 whereby P would reserve shipping capacity and D would use the capacity to ship iron ore from the Lake Superior district to D’s steel plants in the lower Great Lakes region. the K required D to pay the “regular net K rates” as recognized by leading iron ore shippers, but if there was no such rate, the parties would mutually agree upon a rate. The parties modified the K four times by 1980, extending the term through 2010 and requiring P to upgrade and expand its fleet through significant capital expenditures. P had a seat on D’s board of directors and owned a portion of D’s stock. Until 1983, the parties determined the shipping rate by preference to a published rate. In 1983, D objected to P’s quoted rate and the parties negotiated a lower rate for 1984. The parties were unable to agree to  rate for 1985; P billed $7.66 per ton, but D changed the invoice amount to $5 and only paid $5.
More details... too long...
I: A party may enforce a long-term service K when price is not specified and parties must periodically resort to the court to determine a reasonable price.
R: If the parties intend to conclude a K but the price is not settled, the price is a reasonable price at the time of delivery if the K requires the price to be set by some standard and it is not set.
REST.33; UCC 2-305 (1)
A term which appears to be indefinite may be supplied by factual implication.

CHAPTER 8   THIRD PARTY BENEFICIARIES

- 2 persons may validly K for a performance to be rendered to a third person. The question normally raised is whether that third person, who was not  a party to the K and gave no consideration for the promise, may enforce the promise which was made for his benefit.

Common law said no benefit could be enforced cause no privity

Modern law says third party may normally enforce the promise made for his benefit.

Classification of Beneficiaries:
donee ben. - a gift was conferred

creditor ben. - promisee’s primary intent was to discharge an obligation owed to third party

Rest 2nd substitutes “intended beneficiary” for both creditor and donee beneficiary, the purpose being to eliminate the distinctions which presently exist between the vesting of rights for creditor as opposed to donee beneficiaries.

Lawrence v. Fox: - creditor beneficiary
F: Holly loaned $300 to Fox(D) with instructions that D was to repay by giving the money to P, Lawrence, Holly’s creditor. P sued to recover the sum from D and won. D appeals, and loses.
I: A third party beneficiary may enforce the K of which he is the beneficiary but not a party.
R: The consideration for D’s promise to pay was Holly’s loan to D. It is a long-recognized principle of law that once a promise is made to one for the benefit of another, he for whose benefit it is made may bring an action for its breach. Although this principle has been applied to that type of case. The rule applies even where there is no privity between the promisor and the third-party beneficiary.
D: The general rule requires privity, with exceptions where a trust or agency is involved. These exceptions do not apply here.

Seaver v. Ransom: - Donee beneficiary
F: Decedent’s wife was dying and so he redrafted her will, providing that her home was to go to him. The wife wanted the house to go to Seaver (P), her niece, and so the decedent promised her that he would leave enough in his will to compensate P for the loss of the house. Decedent did not leave anything to P who sues (D), the executor of decedent’s estate, as a third party donee of the wife-decedent K.
I: A third party to whom a gift was intended may enforce the  contracting party’s obligation to make the gift.
R: Contracts made for the benefit of a third party may be enforced by the third party. It is just and practical to permit the person for whose benefit the K is made to enforce it against one whose duty it is to pay.

Septembertide:
F: P was owned by Harry Patterson, who wrote the novel Confessional under the pseudonym  “Jack Higgins.”  P granted exclusive  licensing rights to Stein &Day, Inc. (D), a New York publisher, to publish a hardcover edition of the book in the United States. D was to pay P an advance of $375,000 in three equal installments, plus two-thirds of any reprints rights. D became insolvent while still owing P $152,000 on the advances. D had also entered a paperback agreement with New Library to publish the paperback edition of the book. New Library paid D (Stein and Day) $385,000 out of a k price of $750,000. In the meantime, D had assigned all of its contract rights to Bookcrafters as security for financing. P had not made a UCC filing of its interest in payments from NEW LIBRRARY to D. P terminated D’s rights for failure to make the final hardcover payment and requested that N.L. send all of its future payments to it instead of to D. N.L. refused, and P sued. Bookcrasters intervened, claiming that it had prior rights to the proceeds of the paperback agreement through its security agreement with D. The court gave one-third of the paperback money to Bookcrafters and the otherc two-thirds to P. Both appeals, and lose.
I: A party may be a third party beneficiary  where only one of the original parties to the K clearly intended to benefit the third party.

Lucas v. Hamm:
F: Ps were to be designated as beneficiaries under a will and were to receive 15% of the residue. D was the attorney who agreed with the testator to prepare the will which was to so provide for Ps. Upon admission of the will to probate following the death of the testator, it was determined that the provision regarding Ps was invalid and Ps were forced into settlement with the blood relatives of the testator. Ps received $75,000 less than they would have received if the provision drafted by D had been valid. Ps sued D as third-party beneficiaries under the K between the testator and D. 
I: Intended heirs can recover as third-party beneficiaries of the K b/n the testator and the attorney who was to prepare the will.
R: Bens of a will who lose rights cause of negligence of a lawyer who prepared the will may recover as third party bens to K b/n testator and attorney.

Shatz v. Rosenberg:
Ps sold their businesses to D and received $1.5 million in promissory notes, personally guaranteed by D. Ps relied on D’s financial statements that showed D’s net worth in excess of $7 million. These statements contained misrepresentations, however, and D eventually filed for bankruptcy. the businesses were worthless by then. Ps sued D’s attorney for not disclosing D’s true financial situation. The attorney never made any affirmative misstatements or other misrepresentations. Ps appeal, and lose.
I: An attorney does not have a duty to disclose information to persons other than his clients or third-party beneficiaries.
R: Attorneys have a duty to avoid negligence in dealing with their clients.

Hampton v. Federal Express Corp.: Carrier’s liability to 3rd party beneficiary
F: P’s son was a cancer patient waiting for a bone marrow transplant. To determine which donor was the most suitable, the hospital took samples of his blood and shipped them to the hospital where the operation was to take place. The hospital contracted with D to ship the blood samples. The shipping K limited D’s liability to no more than $100 per package in the event of  loss or damage, although the shipper had the option of purchasing additional coverage. the blood samples never made it to the hospital, and P’s son never obtained transplant, died, and P sued for wrongful death, seeking $3 million in damages. P appeals, and loses.
I: A third party beneficiary of a shipping K is bound by the provisions of that K including limiting liability for loss of the package shipped.
R: P can only get what D could have gotten.

Davis v. United Air Lines, Inc.:
F: Federal law requires all government contracts over $2,500 to include a provision requiring affirmative action to employ qualified handicapped individuals. United Air Lines, Inc. (D), which was a government contractor, hired Davis (P) as a ramp serviceman. Three years later, P was diagnosed as having epilepsy; over time D gardually restricted P’s employment, then put P involuntarily on sick leave, and finally fired him. P sued, claiming that D’s actions were unjustified by his disability and that they violated federal law, which required contractors with the federal government to take affirmative action to employ qualified handicapped individuals. P claimed standing as a third-party beneficiary of the statutory contract provisions.
I: An individual member of a class which Congress intended to protect through affirmative action clauses in government contracts can not sue an employer as a third-part beneficiary.
R: Under REST 2 , a third party beneficiary may have a cause of action for breach if (I) recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and (ii) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.

Karo v. San Diego Symphony Orchestra:
F: P hoped to audition for a position with the Orchestra. D’s employees were represented by a collective bargaining agreement that required auditions for open positions. Before the position was filled, however, D and the union modified the agreement to allow hiring without auditions. P was not hired, sued, and lost.
I: A third-party does not have a cause of action for a change to the K where the beneficiary did not rely on the previous version of the K.
R: P had no right to the audition - no benefit.

Jardeel Enterprises, Inc. v. Triconsulants, Inc.:
F: P contracted for the construction of a fast-food restaurant. Brooks, the general contractor, engaged D as the subcontractor to stake out the foundation corners. D made a mistake and located the foundation in the wrong position, resulting in a 65-day delay in the opening of the restaurant. P recovered liquidated damages of $6,500 from Brooks. Brooks in turn sued DS and settled for $25,000 giving D a full release. P then sued D for breach of K and negligence, seeking lost profit damages. Trial court granted D S.J., holding that the release from Brooks barred P’s suit. P appeals, and loses.
I: A third party creditor beneficiary does not have a direct right to sue under the K.

Table of Contents

TOPIC                                                                  page #
Acceptance...........................................................14                                                              
Anticipatory Repudiation.....................................49
Assent ..................................................................11
Assurance of Peformance.................................... 51
Battle of the Forms..............................................17
Capacity...............................................................23
Certainty...............................................................5
Conditions.............................................................43
Consideration.......................................................4
Damages.............................................................1-4
Divisibility..........................................................47
Filing Gaps.........................................................40
Frustration...........................................................54
Illegality.............................................................29
Illusory promises..................................................9-11
Impracticability..................................................54
Impossibility........................................................52
K interpretation...................................................38
Limitation on Damages.......................................33
Liquidated Damages............................................36
Modification........................................................
Offer.....................................................................12
Overreaching........................................................24
Parole Evidence..................................................36
Precontractual Liability.......................................19
Problems of Interpretation....................................45
Promissory Estoppel.............................................9
Quasi-K.................................................................7
Reliance................................................................8
Remedies for Breach............................................31
Statute of Frauds.................................................20
Termination of Power Of Acceptance..................15
Third Party Beneficiaries......................................56
Unconscionability................................................27
Unfairness............................................................23