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Formation
Contract Analysis: See analysis flowchart.
Before you analyze formation ask yourself the following questions.
o What type of transaction is occurring? If it is a good than UCC is invoked
and it may differ from the common law. See UCC 1-103 Unless displaced
by the particular provisions of this Act, the principles of law and equity
apply.
Ask yourself if the offer is in writing, if it is not, then statute of Frauds may be
invoked.
o Statute of Frauds: a writing is required for
Marriage contracts
Contracts that take longer than a year
Sale or transfer of land
Contract by an executor to pay a debt of an estate with their own
money
Anything that costs $500 or more
Contracts where one party acts as a surety for another party.
Chapter 2: Formation
Section 1: What is a Contract?
o See Re 2d 1 A contract is a promise or a set of promises for the breach
of which the law gives a remedy, or the performance of which the law in
some way recognizes as a duty.
Cases:

Steinberg v. Chicago- applicant sues school for breach of

contract for failing to uphold their admission standards
stated on promotional material put out by the school. The
court held that there was a contract because there was an
offer(the bulleting), acceptance (proven through conduct),
and consideration (application fees).
Section 2: Manifestation of assent and the objective theory of contracts.
o Def: See Re 18 Manifestation of mutual assent to an exchange requires
that each party either make a promise or begin or render a performance.
o
Cases
Lucy v. Zehmer- Mutual assent is determined by the outward
manifestations of behavior. In this case Zehmer was forced
to sell his property because a reasonable person could
conclude that he intended to go through the sale, and his
secret undisclosed intent did not affect the formation of a
contract.
Leonard v. Pepsi Co- A humorous ad doe not meet the
standards for assent, because a reasonable person would
not assume that the offer was serious.
Stepp v. Freeman- See Re2d 4 A promise may be stated in
words either oral or written, or may be inferred wholly or
partly from conduct. Stepp was a member of the lottery
group and could not be kicked out because even though
they had no written agreement, their conduct was enough
to establish that a contract in fact existed between the
parties.

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Andersen v. FCOA- A letter of intents does not equal an

offer, it is a preliminary negotiation. If there are specific
provisions within an agreement that would prevent
acceptance by oral contract, than a signed written
agreement is required to form a contract. See Re 2d 26 A
manifestation of willingness to enter into a bargain is not an
offer if the person to whom it is addressed knows or has
reason to know that the person making it does not intend to
conclude a bargain until he has made a further
manifestation of assent.

Section 3 : Offer
o Invitations to Assent- for a contract to form their must be an invitation for
the offeree to accept an offer. See Re 2d 26 A manifestation of
willingness to enter into a bargain is not an offer if the person to whom it is
addressed knows or has reason to know that the person making it does not
intend to conclude a bargain until he has made a further manifestation of
assent.
o
Cases
Lonergan v. Scolnick- Form letters are generally not offers
because there is no intent to enter into a bargain, they are
merely offers to make an offer, like an ad. In this case an
exchange of form letters does not equal an offer to purchase
land because the offeror never had any intention of being
bound and it was clear to all parties that no such intention
could be inferred through conduct or words.
Craft v. Elder- Ads as a rule of thumb do not rise to the level
of a manifestation of assent. They are merely offers to make
an offer. There are some public policy reasons for this, first if
ads were offers than a merchant could open themselves to
unlimited liability.
Lefkowitz v. Great Minneapolis Surplus Store- Clear and
Definite Terms - See Re 33 an offer is valid if the terms
are clear and definite leaving nothing open for negotiation
so that a court can determine if a breach has occurred and
fashion a remedy for the breach. In Lefkowitz the
Merchants ads were specific enough to constitute an offer
that was accepted when Lefkowitz appeared at the store to
accept. ** Note** See Arnold v. Phillips: While an ad is
generally not an offer, if the merchant accepts the terms of
the ad through conduct, then the ad can become an
enforceable contract. Phillips sued Arnold when he refused
to take St. Clair notes for payment contrary to an ad Arnold
placed in a local newspaper.
o Clear and Definite Terms
See Re 2d 33 (1) Even though a manifestation of intention is
intended to be understood as an offer, it cannot be accepted so as
to form a contract unless the terms of the contract are reasonably
certain.
(2) The terms of a contract are reasonably certain if they provide a
basis for determining the existence of a breach and for giving an
appropriate remedy.

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Cases
Yoder v. Rock Island Bank- The banks agreement on a deal
constituted an offer because it was clear and definite in all of its
terms so that a court could determine if a breach has occurred and
fashion a remedy for said breach.
Lucy v. Hero- In Lucy an option to buy additional land was denied
because the offer was not definite enough in its terms. In this case
the description of which property that was to be sold was vague
and left for future negotioations.
Fairmount Glass v. Crunden-Martin: The offeror is the master of
their own offer. They can set the terms of acceptance. A price quote
that is specific in all of its details and contains words similar to for
immediate acceptance generally are considered an offer.
Section 4: Acceptance
o Knowledge of the Offer: For an offer to be valid the offeree has to have
knowledge of the offer.
Cases
Glower v. Jewish War Veterans- the court ruled that a reward
from a private party should be treated like a private contract
and that you need to be aware of the offer for it to be
formed upon performance. In this case a person gave
information leading to the arrest of a murderer without
knowledge of the reward, and when she tried to collect the
reward after finding out about it she was denied.**Note**
government rewards do not fall under this rule and as a
matter of policy are considered statutory and must be paid.
o Power of Acceptance and the Mirror Image Rule
A valid offer gives the offeree the power of acceptance. The
acceptance needs to mirror the offer in order for it to be valid.
Changing terms invalidates the acceptance and creates a
counteroffer.
Re 30. Form Of Acceptance Invited
Link to Case Citations
(1) An offer may invite or require acceptance to be made by an
affirmative answer in words, or by performing or refraining from
performing a specified act, or may empower the offeree to make a
selection of terms in his acceptance.
(2) Unless otherwise indicated by the language or the
circumstances, an offer invites acceptance in any manner and by
any medium reasonable in the circumstances.
o Cases
Greenberg v. Stewart- Greenberg accepted most of Stewarts offer
but proposed a couple of changes that were in her best interest.
The court ruled that there was no contract because an acceptance
must comply with the terms of the offer, it must be unequivocal
and unconditional.
Rule v. Tobin- Tobin claimed that no contract was formed because
Rule added a proviso about attorneys fees. The court ruled that
rights guaranteed under the law are not additional terms.
Example if I add to an offer that I need clear title, it is assumed that
I want clear title to something that I bought.
o

(3) The fact that one or more terms of a proposed bargain are left
open or uncertain may show that a manifestation of intention is not
intended to be understood as an offer or as an acceptance.

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Termination of the Power of Acceptance

Lapse of Time
41. Lapse Of Time
Link to Case Citations
(1) An offeree's power of acceptance is terminated at the
time specified in the offer, or, if no time is specified, at the
end of a reasonable time.
(2) What is a reasonable time is a question of fact,
depending on all the circumstances existing when the offer
and attempted acceptance are made.
(3) Unless otherwise indicated by the language or the
circumstances, and subject to the rule stated in 49, an
offer sent by mail is seasonably accepted if an acceptance is
mailed at any time before midnight on the day on which the
offer is received.

Cases
Akers v. Sedberry- Established that an offer in a face to face
conversation normally does not last past the conversation. In this
case Akers offered his resignation to Sedberry in a conversation,
Sedberry said nothing so the offer was rejected.
Minnesota Linseed Oil v. Collier White- Established that a
reasonable time is dependent upon the facts of the case and should
be determined by the court. In this case waiting for 24 hours to
accept an offer of a product that had extreme market volatility was
unreasonable and therefore the offer lapsed.
Death or Incapacitation- Re 36 death or incapacity removes the power of
acceptance.
Direct and Indirect Revocation- Generally, offers without consideration,
may be withdrawn at any time prior to acceptance.
Cases
Dickinson v. Dodds: Indirect revocation. See Re 43 An
offeree's power of acceptance is terminated when the
offeror takes definite action inconsistent with an intention to
enter into the proposed contract and the offeree acquires
reliable information to that effect In this case Dodds
actions indicated to Dickinson that his offer was withdrawn.
Petterson v. Pattberg: In a unilateral contract, if the form of
acceptance is through performance, than the offer is not
accepted until the full performance has occurred. (this is
generally not true under the UCC),
Counter offer and Rejections: a counter offer revokes the original offer and
creates a new offer granting the power of acceptance.
RE 39. Counter-Offers
(1) A counter-offer is an offer made by an offeree to his
offeror relating to the same matter as the original offer and
proposing a substituted bargain differing from that proposed
by the original offer.
(2) An offeree's power of acceptance is terminated by his
making of a counter-offer, unless the offeror has manifested
a contrary intention or unless the counter-offer manifests a
contrary intention of the offeree.
Cases

o
o

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Livingston v. Evans: a buyer's rejection of a counteroffer was
determined to be a counter offer because it specified the
terms of the original offer.
UCC and the Battle of the forms: The UCC's goal is to make entering into
and enforcing contracts easier, than it is under the common law. The UCC
allows a contract to be formed even if both writings are not in perfect
agreement. This is to end the so called battle of the forms where each
party sends out boilerplate with specific provisions that do not necessarily
match the forms of the other. So long as both parties act as if a contract
has been formed, than generally under the UCC a contract has been
formed. The UCC displaces the common law last shot rule which states the
last writing is the contract. 3 Part Analysis
Part (1) Is there a contract? (if no skip to step 3, if yes go to step
2)an agreement that has a
a definite and seasonable expression of acceptance, or
written confirmation sent in a reasonable time
Operates as acceptance, unless otherwise expressly made
conditional on assent to conditional terms
Part (2) if there is a contract what are its terms? Additional terms
are
additional terms are mere proposals.
Between merchants such terms become part of the contract
unless
the offer expressly limits acceptance
additional terms materially alter the contract
an objection is given before acceptance
Part (3) if the writings do not establish a contract is there conduct
that recognizes a contract? If there is conduct that indicates that
some agreement has occurred (ie a sale of a good, etc) then the
courts look to:
Terms in writing which all parties agree
together with any supplementary terms under the UCC
UCC 2-207 Terms of Contract; Effect of Confirmation.
Subject to Section 2-202, if (i) conduct by both parties
recognizes the existence of a contract although their records
do not otherwise establish a contract, (ii) a contract is
formed by an offer and acceptance, or (iii) a contract formed
in any manner is confirmed by a record that contains terms
additional to or different from those in the contract being
confirmed, the terms of the contract are:
(a) terms that appear in the records of both parties;
(b) terms, whether in a record or not, to which both parties
agree; and
(c) terms supplied or incorporated under any provision of
this Act.
Cases
Hill v. Gateway 100 inc.: The court determined that Jill's
keeping the computer past 30 days was sufficient conduct
to establish a contract, then it went on to apply UCC 2-207
as if hill were a merchant and enforced the binding
arbitration clause.

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Klocek v. Gateway: Reversing Hill, the court applied the UCC
in favor of the plaintiff arguing that gateway's actions
created a contract absent the binding arbitration clause
when they shipped him the computer, thus the only terms
that could be used to determine a contract are the terms in
writing which both parties had agreed to at the time of the
transaction.
C. Itoh v. Jordan International: the court ruled that no
contract was formed, therefore they had to determine if a
contract existed by conduct. They found that it did, but such
contract contained no provisions requiring binding
arbitration.
Preservation of the Power of Acceptance
Option contracts limits the offeror's power of revocation. For an
option contract to be binding under the common law consideration
for the option must be given, and each renewal of the option must
have new and separate consideration. Under the UCC not
consideration is needed for an option contract to be formed.
RE 87. Option Contract

(1) An offer is binding as an option contract if it

(a) is in writing and signed by the offeror, recites a
purported consideration for the making of the offer,
and proposes an exchange on fair terms within a
reasonable time; or
(b) is made irrevocable by statute.
(2) An offer which the offeror should reasonably expect to
induce action or forbearance of a substantial character on
the part of the offeree before acceptance and which does
induce such action or forbearance is binding as an
option contract to the extent necessary to avoid injustice.
UCC 2-205. Firm Offers.
An offer by a merchant to buy or sell goods in a signed
record that by its terms gives assurance that it will be held
open is not revocable, for lack of consideration, during the
time stated or if no time is stated for a reasonable time, but
in no event may such period of irrevocability exceed three
months; but in no event may the period of irrevocability
exceed three months. Any such term of assurance in a form
supplied by the offeree must be separately signed by the
offeror.
Cases
Beall v. Beall: Cousin in law attempted to force the sale of a
land pursuant to a written agreement that contained an
option clause. The court determined that no option contract
existed because the extension of the last option lacked
consideration.
Partial Performance Option Contract
45. Option Contract Created By Part Performance Or
Tender

(1) Where an offer invites an offeree to accept by

rendering a performance and does not invite a
promissory acceptance, an option contract is created
when the offeree tenders or begins the invited
performance or tenders a beginning of it.

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(2) The offeror's duty of performance under any

option contract so created is conditional on
completion or tender of the invited performance in
accordance with the terms of the offer
Ragosta v. Wilder Jr.: in a unilateral contract (acceptance
only possible by specific performance), partial performance
acts as an option under RE 90: (1) A promise which the
promisor should reasonably expect to induce action or
forbearance on the part of the promisee or a third person
and which does induce such action or forbearance is binding
if injustice can be avoided only by enforcement of the
promise. The remedy granted for breach may be limited as
justice requires. Defendant won because he proved that P's
actions were not part performance, but merely preparation
to perform.
o Detrimental Reliance: a contract may be binding if the promisor can
reasonably expect the promisee to be induced into action based on his
promise. The damages may be limited by justice and this is not a contract
issue, it is an equity issue.
Re 87 (2): (2) An offer which the offeror should reasonably expect
to induce action or forbearance of a substantial character on the
part of the offeree before acceptance and which does induce such
action or forbearance is binding as an option contract to the extent
necessary to avoid injustice.
Drennan v. Star Paving: Detrimental Reliance: Drennan recovered
damages after Star Paving refused to honor their bid because
drennan detrimentally relied upon their promise in their own bid.
In Re Wheeling-Pittsburgh Steel Corp: suit over whether or
not an option contract was created under the UCC. While 2205 allows for the creation of an option contract without
consideration for a period not to exceed 3 months, this case
there was no such option, because the P had repudiated the
contract when they asked for spot quotes.
Manner, Method, and Modes of Acceptance
o Bilateral v. Unilateral:
Bilateral Contract: An agreement formed by an exchange of a
promise in which the promise of one party is consideration
supporting the promise of the other party.
Most common type of contract. Sample: I promise to pay
you $500 for your truck and you agree to sell me the truck.
Unilateral Contract: a promise made by one party in exchange for
the performance of some act by the other party.
Less common type of contract. Sample: reward offers,
acceptance is only through performance.
In the modern era, a unilateral contract is binding if part
performance has begun. According to RE 32 the courts will
loosely interpret a contract as bilateral when in doubt.
Cases
Ever-Tite Roofing v, Green: Ever-Tite formed a
contract when they began performance by leaving
their office. This put Green on the hook for their costs
and lost profits.

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Davis v. Jacoby: a bilateral contract is formed at the

moment the promise were exchanged and accepted.
Performance not required for acceptance to occur.
Marchionado v. Scheck: Re 45 "(1) Where an offer
invites an offeree to accept by rendering a
performance and does not invite a promissory
acceptance, an option contract is created when the
offeree tenders or begins the invited performance or
tenders a beginning of it.
(2) The offeror's duty of performance under any
option contract so created is conditional on
completion or tender of the invited performance in
accordance with the terms of the offer.
o Acceptance in a Manner invited or Requested
Prescriptions as to time, place, and manner: The offeror is master of
the offer, they may impose any conditions on acceptance that they
desire.
Cases
Town of Lindsay v. Cook County Elec. Coop: Since the
D declined to accept the offer in the manner
established by the offer, the power of acceptance
was terminated and no contract was formed.
La Salle National Bank v. Vega: No contract was
formed because the offer was not accepted in the
manner specified in the written offer.
Notice of Acceptance:
o An offer may only be accepted by the person the offer invites to accept it.
(52)
o 50. Acceptance Of Offer Defined; Acceptance By Performance;
Acceptance By Promise

(1) Acceptance of an offer is a manifestation of assent to the terms

thereof made by the offeree in a manner invited or required by the
offer.
(2) Acceptance by performance requires that at least part of what
the offer requests be performed or tendered and includes
acceptance by a performance which operates as a return promise.
(3) Acceptance by a promise requires that the offeree complete
every act essential to the making of the promise.
Cases
Hendricks v. Behee: An offeree's acceptance must be
communicated to the offeror before it becomes valid. At any
time prior to the acceptance the offer may be withdrawn.
(see mailbox rule for exception)
Fujimoto v. Rio Grande Pickle Co: Employees accepted a
written offer of employment by performance.
54. Acceptance By Performance; Necessity Of
Notification To Offeror
o
(1) Where an offer invites an offeree to
accept by rendering a performance, no
notification is necessary to make such an
acceptance effective unless the offer requests
such a notification.

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(2) If an offeree who accepts by rendering a
performance has reason to know that the
offeror has no adequate means of learning of
the performance with reasonable promptness
and certainty, the contractual duty of the
offeror is discharged unless
(a) the offeree exercises reasonable
diligence to notify the offeror of
acceptance, or
(b) the offeror learns of the
performance within a reasonable time,
or
(c) the offer indicates that notification
of acceptance is not required.
Mailbox Rule: For acceptance only, when negotiations for a contract are via
post, then an offer is accepted the moment the acceptance is put in the
mail, not when received. This rule does not apply to rejections,
revocations, or other elements of the negotiation process, only
acceptance. If you want to avoid this rule than the written offer must
contain a provision prohibiting the use of mail for acceptance. This rule
applies to other forms of communication such as email. The caveat is that
the form must be as quick as the form of negotiations.
Cases
Adams v. Lindsell: an offer was accepted the moment it was
placed in the mail, and not when it reached the offeror.
Morrison v. Thoelke: Same as above, acceptance occurs
when the letter of acceptance is deposited in the mailbox,
and not upon receipt.
Acceptance by Silence: Silence is never acceptance, but silence in
conjuction with conduct can be acceptance.
Re 69 "acceptance by silence or exercise of dominion"
(1) Where an offeree fails to reply to an offer, his silence and
inaction operate as an acceptance in the following cases
only:
(a) Where an offeree takes the benefit of offered
services with reasonable opportunity to reject them
and reason to know that they were offered with the
expectation of compensation.
(b) Where the offeror has stated or given the offeree
reason to understand that assent may be manifested
by silence or inaction, and the offeree in remaining
silent and inactive intends to accept the offer.
(c) Where because of previous dealings or otherwise,
it is reasonable that the offeree should notify the
offeror if he does not intend to accept.
(2) An offeree who does any act inconsistent with the
offeror's ownership of offered property is bound in
accordance with the offered terms unless they are
manifestly unreasonable. But if the act is wrongful as
against the offeror it is an acceptance only if ratified by him.
Cases
o

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Day v. Caton: Homeowners silence regarding his neighbor

building a common wall was ruled consent when his
neighbor came after him for his half of the wall. If one sees a
valuable service where the reasonable man would expect
compensation on his property, than he has a duty to tell the
person to stop, otherwise he accepts the agreement.
Hobbs v. Massasoit Whip Co: Conduct that indicates
acceptance, creates actual acceptance when the other party
is silent.

Consideration
o A promise, Performance, or forbearance
Consideration is some right, interest, profit, ore benefit accruing to
one party, or some forbearance, detriment, loss of responsibility
given, suffered, or undertaken by another. The courts as a general
rule do not consider the adequacy of consideration. Consideration
is a bargain, their must be mutuality of agreement.
Re 71 "Consideration"
(1) To constitute consideration, a performance or a return
promise must be bargained for.
(2) A performance or return promise is bargained for if it is
sought by the promisor in exchange for his promise and is
given by the promisee in exchange for that promise.
(3) The performance may consist of
(a) an act other than a promise, or
(b) a forbearance, or
(c) the creation, modification, or destruction of a
legal relation.
(4) The performance or return promise may be given to the
promisor or to some other person. It may be given by the
promisee or by some other person.
Cases
Hammer v. Sidway: def of consideration: Consideration is
some right, interest, profit, ore benefit accruing to one
party, or some forbearance, detriment, loss of responsibility
given, suffered, or undertaken by another.
Fiege v. Boehm
o Requirement of a Bargain: see Re 71
Cases
Kirksey v. Kirksey: Woman who moved to her brother-in-laws
property and was later forced to move was out of luck
because their was no consideration for her agreement. Gifts
are not consideration because they lack the quid pro quo
necessary to establish a bargain.
Mills v. Wyman: Good Samaritan offered money by
deceased's father who repudiates deal. No contract because
no consideration. A promise to pay someone after
something has happened is not binding because their was
no bargain and exchange.
Webb v. McGoin (2): Webb injured saving McGoin's life.
Where a party promises to pay out of a moral obligation and
has benefited materially from the act, there is sufficient
consideration to create a contract.

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Harrington v. Taylor: contradicts Webb, and says moral
obligation that materially benefits another party is
insufficient consideration. Depends on which jurisdiction you
are in.
o Adequacy: as a general rule the courts do not evaluate the adequacy of
consideration, but not all agreements are consideration.
Cases
Collins v. Collins: love and affection is insufficient
consideration for a contract.
Schum v. Berg: Refraining from exercising a legal right and
naming of a child are both legally sufficient consideration.
Schnell v. Nell: In cases of straight money transfer, nominal
consideration is insufficient to create a contract. In this case
the P offered to pay D 1 cent for $200, no consideration.
o Illusory Promise: A promise that only binds one party is illusory and
therefore insufficient consideration.
Cases
American Ag. Chem. Co. v. Kennedy & Crawford: a clause
that gives one party the ability to unilaterally withdraw from
a contract with no restrictions is illusory and therefore no
consideration exists.
Pre-existing Duties and Modification
o Cases
Pinnel's Case: Modification of a contract under the common law
requires new consideration. In Pinnel the court ruled that payment
of a sum owed prior to its due date was sufficient consideration to
establish a new bargain.
Alaska Packers v. Domenico: completion of pre-existing duties is not
consideration. In Alaska Packers the breaching party tried to extort
more money to complete a job they already agreed to perform. The
new agreement was not binding.
Angel v. Murray: a good faith renegotiation based upon new
conditions is sufficient consideration for a modification.
Re 89 " 89. Modification Of Executory Contract"
A promise modifying a duty under
a contract not fully performed on either side is binding
(a) if the modification is fair and equitable in view of
circumstances not anticipated by the parties when
the contract was made; or
(b) to the extent provided by statute; or
(c) to the extent that justice requires enforcement in
view of material change of position in reliance on the
promise.
Promissory Estoppel
o For the sake of equity a contract can be binding if it lacks consideration
under the following conditions. Under promissory estoppel there is no
contract, only an enforcement of a promise sufficient to prevent injustice.
(1) clear and definite promise
(2) Foreseeable reliance: where the promisor has the reasonable
expectation that the offer will induce action or forbearance on the
part of the promisee
(3) Reliance in fact: The offeree was induced into action or
forbearance.

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(4) Injustice Absent enforcement: the promise causes an unjustice

which can only be solved by enforcement
The application may be limited to what is needed to prevent
injustice, full contract privileges not granted

Use
Normally used as a way to substitute for consideration
Typically used when a contract has not been created, and
the D made a promise which P acted upon to his detriment.
90. Promise Reasonably Inducing Action Or Forbearance

(1) A promise which the promisor should reasonably expect to

induce action or forbearance on the part of the promisee or a third
person and which does induce such action or forbearance is binding
if injustice can be avoided only by enforcement of the promise. The
remedy granted for breach may be limited as justice requires.
(2) A charitable subscription or a marriage settlement is
binding under Subsection (1) without proof that the promise
induced action or forbearance.

o
Cases
Ricketts v. Scothorn: Grandaughter promised income to stop
working and she did. Even though no contract, her
detrimental reliance on the promise was sufficient for
promisory estoppel claim.
Katz. v. Danny Dare inc.: Katz quit his job and was given a
pension. Dare tried to kill the pension, but the courts applied
detrimental realiance and came up with a promissory
estoppel claim.
Midwest Energy v. Orion Food: promissory estoppel cannot
overturn statute of frauds.
Hybrid Transactions: When there is a doubt about whether the transaction is for a
good or service you can apply two different tests. When you use each test is determined by
the jurisdiction you are in, so for exams apply both analysis.
Predominant Purpose Test: Is the transaction's predominant purpose the rendition
of a service or a sale of a good? 3 part analysis
o (1) Contract Language?
o (2) How was the transaction billed?
o (3) Mobility of the subject matter?
Graveman Test: Whether the graveman (substantial pt or essence of the claim)
involves a good or service. Analysis:
o What is the material or significant part of the grievance of complaint?
Remedies
Remedies-General: three goals of remedies
o (1) expectation damages: the goal is to put the non-breaching party back
into the same position as they would have been if the contract was fully
performed. You first look for expectancy damages, but they must be
sufficiently certain to establish, and no party is allowed to be put into a
better position than they would have been if the contract was fully
performed.

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(2) Reliance Damages: The goal is to put the non-breaching party back into
a position they would have been in if the contract had not been created.
This remedy is used when the non-breaching party cannot establish their
expectancy damages and therefore only have reliance damages. Again the
non-breaching party cannot be unjustly enriched and is not allowed to be
put into a better position than if the contract had been fully performed.
(3) restitution damages: The goal of this remedy is equity to prevent
unjust enrichment. For the sake of equity a party (breaching or nonbreaching) may recover the benefit accrued to the other party, and may
be limited by justice. This is not a contract remedy, instead it is an equity
remedy.

o
344. Purposes Of Remedies
Judicial remedies under the rules stated in this Restatement serve to protect one
or more of the following interests of a promisee:
o (a) his expectation interest, which is his interest in having the benefit of
his bargain by being put in as good a position as he would have been in
had the contract been performed,
o (b) his reliance interest, which is his interest in being reimbursed for loss
caused by reliance on the contract by being put in as good a position as he
would have been in had the contract not been made, or
o (c) his restitution interest, which is his interest in having restored to him
any benefit that he has conferred on the other party.
Damages
o Measuring Expectation Damages
o 347. Measure Of Damages In General
o Subject to the limitations stated in 350-53, the injured party has a right
to damages based on his expectationinterest as measured by
(a) the loss in the value to him of the other party's performance
caused by its failure or deficiency, plus
(b) any other loss, including incidental or consequential loss,
caused by the breach, less
(c) any cost or other loss that he has avoided by not having to
perform.
Cases
Leingang v. City of Mandan: See Re 347. Leinangang sued
over expectancy damages and the D claimed that the tax
forms were an accurate measure of his profits, not true.
Jacobs & Young v. Kent: Jacobs accidently used the wrong
brand of pipe, but the substituted pipe was of the same
quality, so the non-breaching party had no claim for
damages. Rule: Trivial breaches do not allow the nonbreaching party to obtain full replacement costs.
Groves v. John Wunder: John Wunder Co. failed to grade a
leased property per agreement, and in the suit for breach
claimed that since the value of the property was less than
the costs of the repair, they should only be on the hook for
the cost of the property. The court ruled that they were on
the hook for the repair and stated that fulfilling a contractual
obligation is by definition not unjust enrichment.

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Peevyhouse v. Garland Coal: Coal company screwed over
Peevyhouse and got away with because of a dick judge who
could not find his penis with a magnifying glass and a
flashlight. Rule: some courts will look at the relative
economic benefit of the contract to determine expectation
damages.
Reliance Interest
349. Damages Based On Reliance Interest
As an alternative to the measure of damages stated in 347, the
injured party has a right to damages based on his reliance interest,
including expenditures made in preparation for performance or in
performance, less any loss that the party in breach can prove with
reasonable certainty the injured party would have suffered had the
contract been performed.
cases
DPJ v FDIC: DPJ sued when their line of credit was cancelled.
They sued and ultimately were allowed to claim reliance
interests in the loan agreement.
Limitations on Recovery
Certainty
352. Uncertainty As A Limitation On Damages
Damages are not recoverable for loss beyond an amount
that the evidence permits to be established with reasonable
certainty
Cases
ESPN v . MLB: Baseball sued ESPN for not showing 6
games. Baseball lost because they could not
establish their damages with sufficient certainty.
Kenford Co. v. County of Erie: P tried to recover
damages for a domed stadium, but was unable to
establish with reasonable economic certainty what
their future profits would have been.
Foreseeability
351. Unforeseeability And Related Limitations On Damages

(1) Damages are not recoverable for loss that the party in breach
did not have reason to foresee as a probable result of the breach
when the contract was made.
(2) Loss may be foreseeable as a probable result of a breach
because it follows from the breach
(a) in the ordinary course of events, or
(b) as a result of special circumstances, beyond the ordinary
course of events, that the party in breach had reason to
know.
(3) A court may limit damages for foreseeable loss by excluding
recovery for loss of profits, by allowing recovery only for loss
incurred in reliance, or otherwise if it concludes that in the
circumstances justice so requires in order to avoid disproportionate
compensation.
Cases

o
o

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Avoid ability
350. Avoidability As A Limitation On Damages
(1) Except as stated in Subsection (2), damages are not
recoverable for loss that the injured party could have avoided
without undue risk, burden or humiliation.
(2) The injured party is not precluded from recovery by the rule
stated in Subsection (1) to the extent that he has made reasonable
but unsuccessful efforts to avoid loss.
Cases
Rockingham County v. Luten Bridge: Bridge company
was dinged because they could have mitigated their
losses by not performing a contract after they were
told to stop.
Parker v. 20th Century Fox: Parker was not required
to take a different gig for the same amount of pay
because it would have been an undue burden or
humiliation.
Equitable Remedies
o Specific Performance
o 357. Availability Of Specific Performance And Injunction
o
(1) Subject to the rules stated in 359-69, specific performance of a
contract duty will be granted in the discretion of the court against a party
who has committed or is threatening to commit a breach of the duty.
o (2) Subject to the rules stated in 359-69, an injunction against breach of
a contract duty will be granted in the discretion of the court against a
party who has committed or is threatening to commit a breach of the duty
if
(a) the duty is one of forbearance, or
(b) the duty is one to act and specific performance would be denied
only for reasons that are inapplicable to an injunction.
o Specific performance is only granted on rare occasions when it would be
difficult to establish economic damages and specific performance would
not be an undue burden.
Cases
Van Wagner v. S&M Enterprises: P sued for specific
performance to force the use of a building. Specific
performance was not appropriate because another
economically viable method of restitution was available.
Centex v. Boag: Specific performance for the sale of real
property was not a correct remedy because the property
was not unique and damages could be established with
reasonable certainty.
The Case of Mary Clark: specific performance does not apply
for employment contracts, no slavery.
o Injunctions
Cases

Hadley v. Baxendale: Mill owner sued for lost profits

when a transport company took too long to ship a
broken shaft. The court ruled that Baxendale had no
reason to foresee the liability of Hadley's lost profits
when they took the deal, therefore they were off the
hook.

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Walgreen v. Sara Creek: The injunction was appropriate

because the non-breaching party could later establish the
value of the non-compete clause through negotiation, but
the courts could not.
Lumley v Wagner: The court could issue an injunction to
prevent someone from working for someone else even when
they could not force them to perform.

Restitution
370. Requirement That Benefit Be Conferred
A party is entitled to restitution under the rules stated in this Restatement only to
the extent that he has conferred a benefit on the other party by way of part
performance or reliance.
371. Measure Of Restitution Interest
If a sum of money is awarded to protect a party's restitution interest, it may as
justice requires be measured by either
o (a) the reasonable value to the other party of what he received in terms of
what it would have cost him to obtain it from a person in the claimant's
position, or
o (b) the extent to which the other party's property has been increased in
value or his other interests advanced.
o Restitution for Breach of Contract
Cases
US v Algernon Blair: allowed restitution damages for nonbreaching party.
o The breaching plaintiff
Cases
Britton v. Turner: allowed restitution damages for the
breaching party. Britton worked for 9.5 months of a 1 yr
contract, he was entitled to his compensation for that time.
o Restitution when there is no contract: Quasi Contract: you are able to get
restitution damages even if no contract existed.
Cases
Maglica v. Maglica: pseudo wife sued for restitution
damages, court was told to look at the value of the services,
not the benefit received.
Remedies under the UCC: UCC damages should be inline with CL damages.
o Buyer's Damages: buyers damages are generally the the market value of
the good at the time of breach.
Case
Jewell Rung v Haddad
Breach of Warranty
Cases
AM/PM Franchise Assn. v. Arco
o Seller's Damages Sellers generally receive the damages for the loss of the
contract price of the good in question.
Case
BAII v. ARCO
Lost Volume Seller
Case
Teradyne v. Teledyne
Contract Price
o Equitable Doctrines
Specific Performance:

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2-716. Buyer's Right to Specific Performance or Replevin.
(1) Specific performance may be decreed if the goods are unique or
in other proper circumstances. In a contract other than a consumer
contract, specific performance may be decreed if the parties have
agreed to that remedy. However, even if the parties agree to
specific performance, specific performance may not be decreed if
the breaching party's sole remaining contractual obligation is the
payment of money.
(2) The decree for specific performance may include such terms
and conditions as to payment of the price, damages, or other relief
as the court may deem just.
(3) The buyer has a right of replevin or similar remedy
for goods identified to the contract if after reasonable effort the
buyer is unable to effect cover for such goods or the circumstances
reasonably indicate that such effort will be unavailing or if the
goods have been shipped under reservation and satisfaction of the
security interest in them has been made or tendered.
(4) The buyer's right under subsection (3) vests upon acquisition of
a special property, even if the seller had not then repudiated or
failed to deliver.
case
Laclede Gas v. Amoco Oil
Restitution for Breaching Buyer
Replevin
Punitive Damages: punitive damages are not awarded, unless a tort action is
mingled with the breach action.
o case
Hibschman Pontiac v. Batchelor: punitive damages are appropriate
because the tortfeasor was committing fraud.
Damages by agreement (liquidated damages)
2-718. Liquidation or Limitation of Damages; Deposits.
(1) Damages for breach by either party may be liquidated in theagreement but
only at an amount which is reasonable in the light of the anticipated or actual
harm caused by the breach, the difficulties of proof of loss, and the inconvenience
or nonfeasibility of otherwise obtaining an adequate remedy. Section 2719determines the enforceability of a term that limits but does not liquidate
damages.
(2) If the seller justifiably withholds delivery of goods or stops performance
because of the buyer's breach or insolvency, the buyer is entitled to restitution of
any amount by which the sum of the buyer's payments exceeds the amount to
which the seller is entitled by virtue of terms liquidating the seller's damages in
accordance with subsection (1)
(a) the amount to which the seller is entitled by virtue of terms liquidating the
seller's damages in accordance with subsection (1), or
(b) in the absence of such terms, twenty per cent of the value of the total
performance for which the buyer is obligated under the contract or $500,
whichever is smaller.
(3) The buyer's right to restitution under subsection (2) is subject to offset to the
extent that the seller establishes:
(a) a right to recover damages under the provisions of this Article other than
subsection (1), and
(b) the amount or value of any benefits received by the buyerdirectly or indirectly
by reason of the contract.

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(4) Where a seller has received payment in goods their reasonable value or the
proceeds of their resale shall be treated as payments for the purposes of
subsection (2); but if the seller has notice of the buyer's breach before reselling
goods received in part performance, his resale is subject to the conditions laid
down in this Article on resale by an aggrieved seller (Section 2-706).

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Liquidation Damages

Common Law
must not violate the principles of
just compensation
if the sum is so excessive to
exceed all reasonable
apprehension of loss, then we
should disregard the intentions of
the contracting parties.
Where a larger sum is payable
solely as a consequence of a
breach of a smaller sum, then no
liquidated damages
Where a larger sum applies even
for trivial breaches, then it is
punitive
Whether the stipulated sum
equals a penalty.

Page Break

UCC 2-718 & 356

Liquidated damages must
be reasonable in light of
the anticipated or actual
loss caused by the
breach
the difficulties of proving
loss
the inconvenience or
non-feasibility of
otherwise obtaining an
adequate remedy
A term fixing an unreasonably
large liquidated damages is
unenforceable on grounds of
public policy as a penalty.

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Remedies Formulas (@ time of breach)

Expectation Damages
UCC w/ Cover (buyer)
(2-711) price already paid
(2-712)+(cost of cover-contract
price)
+ (incidental +
consequentials)
- expenses saved
Expectancy damages

Expectation Damages
Common Law
347 loss in value of promise
+ consequential costs
+ incidental costs
- costs saved
350 - losses avoided or should
have been avoided if mitigated
Expectancy Damages

UCC w/o Cover(buyer

(2-711)
price already paid
(2-713) +(mkt. price contract
price)
+(incidental +
consequential)
- expenses saved
Expectancy damages

Expectation Damages
UCC (Seller)
2-708(1) (contract price mkt price)
+ incidentals
+ consequential
- costs saved
Expectation damages
or if the above is inadequate to make the seller whole,
then
2-208(2) (profit (including reasonable overhead)
+ incidental
- (payments made + value of resale [unless
volume seller))
expectation damages

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Reliance Damages CL
(when you cannot prove your expectancy damages with sufficient
certainty 347)
344 Goal: to be put into the place you would have been if the contract
had not been made
349

Expenditures made in prep for performance

+ Expenditures made in performance
- loss that the injured party would have suffered if contract was
perfromed
- the value of benefits received for salvage or otherwise
Reliance damages

Defenses and other Doctrines of Avoidance

Statute of Frauds (SOF)
o General Rule
Satterfield v. Missouri Dental Ass'n
o Statutory Application
Crabtree v Elizabeth Arden
o UCC SOF
Johnson Controls Inc. v TRW
DF Activities v. Brown
Incapacity
o Infancy
Sternlieb v. Normandie
Valencia v. White
o Mental Incapacity
Simmons First National Bank v. Luzader
o Intoxication
Van Horn v Persinger
Misunderstanding / Mistake
o Misunderstanding
Raffles v Wichelhause
o Mutual Mistake
Sherwood v Walker
Wood v Boynton
Lenawee v Messerly
o Unilateral Mistake
Donovan v RRL Corp
Mcough v Lamb
Misreprepresentation / Fraud

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Misrepresentation
Yarborough v Back
Halpert v Rosenthal
o Passive Concealment
Swinton v Whitinsville Savings
o Active Concealment
Jenkins v McCormick
Stambovsky v Ackley
o Opinion
Vokes v Arthur Murray
Duress and Undue Influence
o Duress
Hackley v Headley
Austin Intruments v Loral
Totem Marine and tug v Alyeska
o Undue Influence
Odorizzi v Bloomifield School District
Kase v French
Unconscionability
o Williams v Walker-Thomas Furniture
o Weaver v American Oil Co.
o NEC Tech v Nelson
Illegality and Public Policy
o Cowan v Milbourne
o Bovard v American Horse Enterprises
o Thorpe v Carte
o Noice v Brown
o Merril V. Peaslee
o Carnes v Sheldon
o The Case of Monopolies
o Valley Medical Specialists v Farber
Impossibility
Taylor v Caldwell
Eastern Airline v Mcdonnel Douglas
Nissho v Occidental
Krell v Henry
Chase v Paonessa
o

Breach

Seller Remedies UCC

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Buyers
Buyers Breach
Breach

Damages
(2-706, 2-708)
Damages (2-706,
2-708)

Action
for Price
Action for
Price (2-709)
(2-709)
Cancel
Cancel && Withold
Withold (2-703)
(2-703)

IfIf seller
seller isis unable
to
unable to
mitigate
mitigate
Recovery
Recovery price
price ++
Incidental
Incidental Damages
Damages

The
diff between
The diff
between the
the mkt
mkt
price
at
time
and
place
price at time and place of
of
tender
and the
the unpaid
tender and
unpaid
contract
price pluse
contract price
pluse
incidentals
less
incidentals less expenses
expenses
saved
saved
Lost
Volume Seller
Seller may
Lost Volume
may
recover
the
lost
recover the lost profit
profit on
on
the
transaction
plus
the transaction plus
reasonable
reasonable overhead.
overhead. (1)
(1)
seller
must
have
capacity
seller must have capacity
to
sell, (2)
(2) seller
seller must
to sell,
must
estqblish
demand
estqblish demand

Contracted
for rem
Contracted for
rem
(2-718-19)
(2-718-19)

Seller
Seller may
may resell
resell (in
(in good
good
faith)then
the
diff
between
faith)then the diff between
teh
resale price
teh resale
price && teh
teh
contract
price
plus
contract price plus
incidentals less
less costs
costs
incidentals
saved
saved

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Contract formation
requirements

90: promissory
estoppel
remedy to avoid
an injustice and
limited as
required by
justice

Contract
Formation
17: a contract
requires a
bargain in which
there is a
manifestation of
mutual assent to
the exchanges
and a

offer
Power24,
of 33
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acceptance may
be terminated by:
rejection
counteroffer
power
of
lapse
of
offer and
acceptance
time
acceptance
35 revocation
oral or written
death or
words
incapacity
non
acceptance
occurrence
signed agreement 50, 54, 56, 58,
of condition
Manifes
60. 62
36, 2-207
tation
of
Mutual
Assent
Hammer v. Sidway: "some right, interest,
profit or benefit accruing to one party, or
"conduct"
forbearance, detriment, loss or
acts orsome
failures
to
responsibility given, suffered, or
act undertaken by the other . . ."
19

Bargain for exchange of

consideration
71" the promise or performance
must be bargained for, the
performance may consist of an
act, forbearance, the creation,
modification, ore destruction of a
legal relation

Courts will not ask whether the thing

which forms consideration does in fact
benefit, . .legally
or is of any substantial value to
anyone." sufficient

consideratio
Fiege v. Boehm:
forbearance of a aright
n in(focus
on to be lawful
understood
good faith
consideration.
the
Collins v.vpromises)
Collins: love and affection is not
71, 73-79
sufficient consideration
Schnell v. Nell consideration in name only
is not sufficient
American Agr. v. Kennedy illusory
bargained
forconsideration.
promises are
not sufficient
Both parties
3,must
86 be bound.
Alaska Packers pre-existing duty to
perform does not constitute sufficient
consideration for a modified contract.
2-203

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