4LawSchool.com Outlines Bank
Contracts
Prof John Kettle
Fall 2000
Author: Michael A. Paff
> Civil
Compensatory Contempt - money fine
>
Civil Coercive Contempt - jail time (get out when you agree to comply)
>
Criminal Contempt - undisputed jail time
In rem - action where the land is
In personam - where the party is
I REMEDIES FOR BREACH OF CONTRACT
Expectation = out of pocket at time of breach plus total profits
Restitution = to prevent unjust enrichment
Reliance = out of pocket only
Measure of Damages
Expectation or Reliance or Restitution
- benifit of bargain - reinbursement for O/O/P - P gets benifit received by D
(plus profits if applicable) (put back to point before (given over reliance if greater)
entering K) (can exceed K-price)
(usually capped @ K price)
Usual Quasi Remedy
A.
The Goals of Contract Damages
The measure of the vendee’s damages is the
difference between the value of the goods and the actual value at the time of
the sale, including gains prevented.
Hawkins v. McGee 3
Facts: Removal of scar tissue, doctor told patient he would be in hospital for 3 days and his hand would be perfect. P was in hospital for months and his hand was hairy and disfigured. P wants expectation damages. Verdict for P, D appeals.
Issue: What damages to offer.
Application: It was also erroneous and misleading to submit to the jury as a separate element of damage any change for the worse in the condition of the plaintiff’s hand resulting from the operation.
Conclusion: New Trial
Anticipaatory Repudiation (§2-610) - someone states they plan to breach
n Express
n Implied
n Retraction - party can retract if no action has yet been taken
n Request for Assurance - need to know from breaching party for sure
n UCC Rq’s writing 30 day response time
B. Limitations on Expectation
Damages
Facts: After town breached, the D continued to build the bridge.
Issue: Whether the TJ erred in instructing the jury.
Rule: A public official has a power to resign if accepted by the proper authority.
The third meeting had not been advertised.
Application: We do not think P could proceed to build the bridge and recover the contract price. After P had had received notice of the breach, it was its duty to do nothing to increase the damages flowing therefrom.
Conclusion: Reversed
The measure of recovery by a wrongfully
discharged employee is the amount of salary agreed upon for the period of
service, less the amount which the employer affirmatively proves the employee
has earned or with reasonable effort might have earned from other employment.
Parker v. Twentieth Century Fox Film
Corp. 45
Facts: P was to play in D’s production but D backed out and offered P a different role. D appeals from SJ.
Issue: Whether D was successful in mitigating damages.
Application: To prove adequate mitigation, the employer must show that the other employment was comparable. The new movie proposed to eliminate or impair the director and screenplay approvals accorded to P and thus constituted an offer of inferior employment.
Conclusion: Affirmed
Pay or Play - Shirley McClaine case, still have to pay if not used
Neri v. Retail Marine Corp. 62
Facts: P agreed to buy boat from D and down paid $4,250. P broke K and D later sold boat for same price. P sued for deposit and D counter claimed damages for deposit amount.
Issue: May a seller recover lost profits
and incidental damages when the buyer repudiates a sales K and the seller then
resells for the same price?
Held: Yes
(i) Damages for retailer = 2-708(2), Lost profit + incidental
(ii) Damages for single sale=2-706; K price - resale price + incidental
(iii) Damages if keep good=2-708(1); K price - market price
(iv) Whether seller completes unfinished product upon repudiation: 2-704(2); (Luten)
Foreseeability
(i)
Shipper is liable for consequential damages resulting from nondelivery if:
a. Resulting damages would naturally occur
from br/K
b. Resulting dams. were objectively in
parties’ minds when contracted.
(ii) D is liable if special facts were
communicated by P.
(iii) Hadley test: tries to limit scope of
promisor’s liability. UCC’s “reason to know of” vs. foreseeability.
Hadley v. Baxendale 67
Facts: D (shipper) did no realize repair of shaft was crucial to operation of mill. Late delivery of shaft resulted in mill closing.
Issue: Is P entitled to lost profits?
Held: No.
Victoria Laundry Ltd. v. Newman Industries Ltd. 69
Facts: D late in delivery of boiler to P (laundry co.)
(i) D liable for dams. resulting from lost use b/c it is foreseeable that the laundry co. would lose volume.
(ii) As UCC case today, buyer goes to 2-715 and rule of mitigation/cover.
C. Reliance and Restitution
Pinches v.
Facts: P built a church for D’s. The product unintentionally deviated from the plans. D took possession and used it anyway. D refused to pay unless price to rebuild the deviant parts was deducted.
Issue: If builder, in good faith, deviates from K must he be liable for reconstruction cost if building is reasonably adaptable to use and reconstruction would be an unreasonable hardship?
Holding: No, affirmed.
(i) Builder, when good faith deviation and building is still adaptable and rebuild would be great
burden, should get Kprice - diminution in value.
(ii) Builder, to sue in K law must show
D. Specific Performance
-
Irreparable injury (inadequate remedy at
law)
-
Uniqueness - no suitable substitute that $ can buy (ex land, art, people)
-
Uncertainty of Value vs Uniqueness Capable of Value
Van Wagner Advertising Corp. v. S&M
Enterprises 146
Facts: D brought property with P’s leased billboard on building and terminated the lease.
Issue: What type of damages?
Application: Billboard space could be valued and therefor specific performance is not available
Fitzpatrick v. Michael Md 1939
Issue: P wanted specific performance for nursing duties to D who promised a life estate
Holding: SOF problem, specific performance would make it uncomfortable for both D and P
E.
Frustration of purpose - would be against public policy to enforce
the contract
F. Liquidated Damages
City of
Issue: Can City keep $100K bond as contractual damages when the amount bears no relationship to actual pecuniary damages?
Holding: No
(i) Rstmt 356 pg. 139
(ii) It is a penalty, and thus not upheld.
(iii) Penalty
can be upheld if statute provides for it.
Fretwell v. Protection Alarm Co. 140
Issue: May a company limit its liability for breach of K to a token dollar amount.
Holding: Yes
(i) “liquidated damages clause” was really attempt to limit liability and is valid as such b/c K established the duty and its lawful provisions can limit the liability.
(ii) D was not an insurer and doesn’t violate pub. policy to limit
liability.
Liquidated Damages v. Penalty
n reasonable forecast - excessive
n injury w/b difficult to measure/estimate - disporportionate to K-price
Expectation v. Reliance v. Restitution
Restitution = bad faith of breacher
Liquidated Damages
n reasonable forcast - formula based
n not a penalty
n not excessive
n not disproportionate to K-price
II GROUNDS FOR ENFORCING PROMISES
A.
Consideration
Without consideration there is no agreement.
Congregation Kadimah Toras-Moshe v. Deleo 192
Facts: D made a oral promise to give plaintiff $25,000 when he died. It was never put in writing.
Issues: Whether the decedent’s oral promise is an enforceable contract.
Application: Allocation of $25,000 in its budget for the purpose of renovating a storage room, is insufficient to find reliance or an enforceable obligation.
Conclusion/Holding: In this case, there is no injustice in declining to enforce the decedent’s promise. This promise would be against public policy. Judgment affirmed.
NOTES:
Enforceable
unless proven otherwise in modern law.
Legal detriment
when you give up something.
Promissory
estoppel as a defense to non-enforceability.
In general, a waiver of any legal right at
the request of another party is a sufficient consideration for a promise.
Hamer v. Sidway 205
Facts: An uncle promised his nephew that if he refrained from drinking, using tobacco, swearing, and playing cards or billiards for money until he was 21 years old, he would pay him $5000. The uncle died and the P sued the estate. TC found in favor for the P and the court of appeals reversed.
Issues: Whether a contract was made
Application: The nephew gave up the legal right to drink and use tobacco for the opportunity to earn $5000 thus making consideration.
Conclusion/Holding: The appeal is reversed.
Substantive consideration is needed to make
a contract.
Fischer v. Union Trust Co. 211
Facts: D gave two plots of land for one dollar to his incompetent daughter with the promise to pay the two mortgages when they come due. The father died and the daughter brought suit against the estate to pay the mortgages.
Issues: Whether there was a delivery and, if so, was the claimant in position to enforce the executory contract, or to recover damages at law for nonperformance.
Application: A dollar for a land deed is not sufficient consideration. It was only a gift.
Conclusion/Holding: Judgment reversed
Mere inadequacy of consideration will not
void a contract.
Batsakis v. Demotsis 216
Facts: P sued D to recover from a agreement that stated the plaintiff would give the defendant $2000 at a later date in return for 500,000 drachmae (the equivalent of $25) today.
Issues: Whether the contract was valid based on inadequate compensation.
Application:
Because the defendant has property in the
Conclusion/Holding: The court should have rendered judgment in favor of plaintiff against defendant for the principal sum of $2000. Judgment affirmed and amended.
The settlement based on a contract which is
against public policy, or which is illegal cannot form the basis of
consideration for a valid compromise settlement.
Facts: D agreed to sell 359 acres of farmland to the P with a 65 acre cotton allotment. The following year, P expected the cotton but was refused. When the plaintiff threatened suit, the defendant gave him $1500 as a settlement.
Issues: Whether the defendant breached the contract and it was a legal settlement for said breach..
Application: The plaintiff’s claim of the purchase of some nonexistent future allotment stretching perhaps into eternity was baseless, and did not rise to the dignity of consideration.
Conclusion/Holding: Judgment affirmed.
An implied contract is an agreement which
legitimately can be inferred from the intention of the parties as evidenced by
the circumstances and “the ordinary course of dealing and the common
understanding of men.”
Martin v. Little, Brown &Co. 225
Facts: P notified D of plagiarism. P demanded one-third of the settlement and the D gave him a check for $200. P sued demanding compensation for his services.
Issues: Whether there was an implied contract.
Whether the defendant was unjustly enriched by the plaintiff’s action.
Whether the defendant caused the plaintiff mental distress.
Application: The facts alleged in the complaint are insufficient to establish a contractual relationship between the parties.
Conclusion/Holding: A contract was not made. Judgment affirmed
C.
Past Consideration
A mere verbal promise, without any
consideration, cannot be enforced by action
Mills v. Wyman 231
Facts: The son of D was taken up while sick by P. After his death, D wrote a letter stating he would pay P all of the incurred expenses. TC directed a non-suit.
Issues: Whether there was a contract between the parties or just a promise.
Application: The promise appears to have no consideration.
Conclusion/Holding: Affirmed
A moral obligation is a sufficient consideration
to support a subsequent promise to pay where the promisor has received a
material benefit, although there was no original duty of liability resting on
the promisor.
Webb v. McGowin 236
Facts: P sacrificed his body to save D from falling block. In consideration, D agreed to pay him $15 every two weeks for the remainder of the P’s life. When D died, the payments stopped.
Issues: Whether the promise by the defendant was a contract.
Application: When P saved D from harm and was being paid, it became an enforceable contract. The promisor received a material benefit constituting a valid consideration for his promise.
Conclusion/Holding: Judgment reversed.
D. Reliance on a Promise
Kirksey v. Kirksey 246
Facts: D invited P to stay on his land. She abandoned her property. The defendant gave her land for two years then asked her to leave the property. Plaintiff argues they had a contract.
Issues: Whether there was consideration.
Application: The promise on the part of the defendant was mere gratuity.
Conclusion/Holding: Judgment reversed.
Dissent: The loss and inconvenience of abandoning her home and moving was sufficient consideration.
Promissory Estoppel is when the act of
reliance by the promisee to his detriment provided a substitute for
consideration.
Facts: D borrowed money from P and held their car as collateral. When P received notification that insurance payment was overdue, P stated they would pay the premiums and add it to the loan. The car was totaled in a accident and there was no insurance. P filed a civil action to collect on the promissory note and the defendants filed a counterclaim. The TC found for P. D appealed.
Issues: Whether or not the plaintiff is precluded from recovering on its loan contract by reason of its failure to fulfill a promise to defendants to pay the overdue insurance premium.
Rule: 1. Was there a promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee?
2. Did the promise induce such action or forbearance?
3. Can injustice be avoided only by enforcement of the promise?
Application: P made more than a mere gratuitous or unrecompensed promise. We believe that the promise by the P to pay the insurance premium on D car was one made in exchange for valid consideration.
Conclusion/Holding: Judgment affirmed
Forrer v. Sears, Roebuck & Co., 272
Facts: P sold his farm at a loss on the promise of permanent employment by D. P was hired and a few months later fired. P brings action on a claim of promissory estoppel.
Issue: Does
detriment taken on by P to accept perm. employment from D constitute
consideration additional to services of employment that makes the employee
unfireable w/out cause? Holding: No.
(ii) Offer of permanent employment is offer to provide employment terminable at will.
(iii) For an action, P must prove benefit to D in addition to his own detriment. i.e. if the P had contributed capital to the enterprise.
The statue of frauds for real estate transactions and anything over one year to be in writing.
Seavey v. Drake 266.
Facts: P had a note against his father estate which he gave to the testator and he received a plot of land. He placed a house and other improvements on the land. D moved to dismiss the bill because it had no consideration.
Application: The expenditure in money or labor in the improvement of the land induced by the donor’s promise to give the land to the party making the expenditure, constitutes, in equity, a consideration for the promise and the promise will be enforced.
Conclusion/Holding: Contract was in force.
An employee cannot avoid the Statute of
Frauds b/c of his detrimental reliance on an employer's oral promise of
continued employment.
Stearms v. Emery-Waterhouse Co., 276
Facts: P was given oral K by D to work at $85k/yr for 5 yrs. 2 yrs. later he was cut to $68K/yr at a different position. 6 mths. later P was fired.
(i) If P can prove D had an intent to commit fraud, P may avoid the SoF.
(ii) The ct. must focus on the employer's conduct, not the employee's reliance. There was no fraudulent conduct by D.
(iii)
Goodman v. Dicker, 279
Facts: P hired salesmen and received orders for radios b/c of D's promise that a radio franchise would be granted and radios delivered. Franchise was not granted.
Issue: Was P's reliance on D's representations sufficient to estoppel D from denying a K?
Holding: Yes. Affirmed judgment for P's expenses but reversed for lost profits.
(i) P wins b/c D did not keep promise to even let P start and thus could have never fired at will.
- In franchises you must have time to recoup
your investment before you can be terminated at will (
- Franchisee has a better claim than an
employee.
- Could sue in equitable estoppel b/c of
misrepresentation of facts
- Could sue for neg. misrep. (fraud) Must
show at time of promise, D had no intent of keeping promise. In some States
only liable if you do that job for a living.
An agreement to alter the terms of a lease
is not enforceable if no additional consideration is given?
Levine v. Blumenthal 289
Facts: P is suing for back rent. D made an oral agreement with P to keep paying $175/month even though the K called for an increase to $200/month. D skipped out on the last mnth’s rent.
(i) There was no consideration for the oral agreement, thus it is not legally enforceable.
(ii) The
preexisting legal duty rule does not apply where there is a bona fide dispute
that the parties agree to settle, but there was no such dispute in this case.
E. Conditional Promises
Solving the Mutuality
Problem (Use when one party has power to cancel K)
1. Imply limitation of that
power: i.e. Wood, b/c P must use
reasonable efforts.
2. Alternative
Consideration: i.e. Petroleum
Refractionating Corp.
3. Declare any impediment on
that power to be consideration: i.e. Gerfein
4. Abolish requirement of
consideration for options.
5. Alternative theories -
Restitution, Reliance, Unilateral K
Facts: P claimed D used her recipe and did not pay her for it.
Nat Nal Service Stations, Inc. v. Wolf, 295 (Stat. o' Frauds case)
Facts: D promised P rebate on gas if purchased through them.
The fact that a promise is conditional upon a future event does not invalidate the agreement for lack of mutuality
Obering v. Swain-Roach Lumber Co., 296
*Contingent Ks: Once contingency has
occurred, both parties are bound.
Facts: P
(Swain) had a K with D (Obering). P was going to buy a tract of land and then
sell it to D for $8,000 but reserve the timber rights for four years. P bought the land but D refused to then
purchase it from P.
Contingent contracts not enforceable by either party prior to the occurrence of the contingency. However, once contingency occurs, both parties equally bound.
Wood v. Lucy, Lady Duff-Gordon, 299
*Promise to use reasonable efforts is
implied. Now in UCC 2-306(2).
Facts: Exclusive agreement btwn. P and D for D's endorsement of clothing and D would get 1/2 profits. D endorsed other clothing and kept profits w/out telling P.
Issue: Where P did not specifically promise to use reasonable efforts to promote D's goods, and D's compensation was to come from such promotion, is there a valid K?
Holding: Yes, judgment reversed.
UCC s2-306(2) imposes the implied duty used
by the court. Now called "best efforts".
A party cannot create an enforceable
contract by waiving the condition which renders his promise illusory.
Omni Group, Inc. v. Seattle-First Nat’l Bank 302
Facts: D sold real estate to P. P wanted Ds to procure a engineer and architect’s report and notify them of the report was OK. P sent a notice to D stating that they forgo the report. D backed out stating the report was not done. Judgment for defendants. Plaintiff appeals.
Application: Because the condition was for its benefit, the plaintiff could waive the condition and enforce the agreement as written.
Conclusion/Holding: Reversed.
A general duty of good faith
A seller under an output K has a good faith duty to produce for the K term even if no production level was specified
Feld v. Henry S. Levy & Sons, Inc., 307
*Seller must
act in good faith to satisfy output K's. UCC
2-306.
Facts: D had a K w/ P to supply all bread crumbs it produced w/ a 6 mth. notice required to cancel. P refused to pay 7 cents/ton instead of 6. D dismantled the crumb machines and sold them, thus breaking K. D claims no liability b/c K only called for it to sell the crumbs that it made.
(i) Seller
must act in good faith to satisfy the K. UCC
2-306
(a)Not good faith if D shuts down when profits are less than expected.
(b)Good faith if production is stopped b/c it imperils insolvency.
(c)Good faith if D shuts down for more than trivial losses. (Question of fact)
Corenswet, Inc. v. Amana Refrigeration, Inc., 311
Facts: P (Corenswet) was a franchise distributor of Amana. The K was terminable by either party "at any time for any reason" w/ten days notice. Amana terminated the franchise. P seeks to enjoin termination b/c it was arbitrary and capricious.
Issue: Was the termination permissible?
Holding: Yes
"Good Faith" requirement of UCC
is overridden by UCC 2-309(2) which allows termination at any time by either
party.
-Franchisees have a strong good faith argument under UCC
(i) 1-203 Every K has a duty of good faith
(ii) 2-103(1)(b) For merchants good faith is reasonable commercial standards of fair dealing.
Discharges in violation of public policy
Sheets v. Teddy's Frosted Foods , Inc.,
315
Facts: P was fired for trying to get his employer to obey food quality standards set out by law.
Issue: May an employee hired for an indefinite term be fired for pointing out possible criminal violations by the employer.? Holding: No
(i) Public policy places limits on rt. of employer to fire at will i.e. can't fire for pointing out criminal violations of employer.
(ii) Public policy claims that are valid for action against a firing:
(a) Statutes that prohibit firing an employee for filing a workers comp claim.
(b) An employer that fires an employee for refusal to commit perjury.
(c) TX: Only allows action when employee is fired for not committing a crime or for refusing to do what the law forbids. Argument must be grounded in statute and judge decides whether it is sufficient for a claim.
III THE MAKING OF AGREEMENTS
General Rules:
1. Terms of offer that specifies it is made to several offerees means “invitation”
2. Form Letters “invitation”
3. Price quotes not equal offer (except per U.C.C)
4. First 10 customers……. Offer
5. Offer time period starts when received unless otherwise stated
6. Except for option K’s - revocation anytime before acceptance
7. Options terminate -
n after time specified (or reasonable time if not stated)
n destruction of subject matter
n intervening illegality
n death of essential person to offer
8. Consideration not required if “firm offer” (UCC)
9. Rejection by offeree
n express - counter offer (not mere injury)
A.
Mutual Asset - Meeting of the Minds
A meeting of the minds may not be literally or universally true.
Embry v. Hargadine - McKittrick Dry Goods Co. 325
Facts: P was an employee of D. When asking about a new contract, president told him, “Go ahead, you’re all right, don’t let that worry you.” Two months later, he was discharged
Issues: Whether the court erred in giving the wrong jury instructions by stating there had to be intent by both sides.
Application: We think no reasonable man would construe the defendant’s answer to mean anything but that the plaintiff would be employed for another year.
Conclusion/Holding: The court erred in making the formation of a contract depend on a finding that both parties intended to make one. Judgment reversed.
Using objective theory, a contract has,
strictly speaking, nothing to do with the personal, or individual, intent of
the parties.
Kabil Developments Corp. v. Mignot 329
Facts: Oral agreement that Ds would provide helicopter service to P. Ds denied that there was a contract because the site was not deemed safe or economical. Decision for the P, D appeals.
Issues: Whether the trial court’s ruling on certain testimony and instructions permitted the jury erroneously to find a contract on the basis of subjective intentions and expectations rather than on the objective manifestations of mutual assent.
Application: The witness was permitted to testify that he did, indeed, act in the belief that he was making a contract.
Conclusion/Holding: Affirmed.
An employee handbook that has employment
guidelines, and also says that employment is terminable at will by either
party, modify an at-will employment.
McDonald v. Mobil Coal Producing, Inc., 335
Facts: P was
forced to resign from D's
(i) The disclaimer must be conspicuous and it was not.
(ii) Objective standard is used and all manifestations by D suggested an intent to make legally binding promises.
Kari v. General Motors Corp., 341
Facts: P brought suit to recover separation pay allegedly guaranteed by D's handbook.
Issue: Is there a K? Holding: No
(i) D wins b/c disclaimer is clear and conspicuous. No intent to be bound is obvious.
Pine River State Bank v. Mettille, 342
(i) When new or changed conditions are made in a handbook this may become contractual and is accepted by the employee if he stays on the job. By staying, while free to leave, the employee has given the necessary acceptance to make a K.
Ad vs. Offer
A letter stating that certain goods are available for sale at a specified price does not constitute an offer
Moulton v. Kershaw 343
Facts: D, a salt dealer, wrote to P that they could offer full car loads (80-95 barrels) of salt at 85 cents/barrel. P sent a wire the next day and ordered 2,000 barrels. The following day the D withdrew their offer. P sued for $800 dams. and D’s demurrer to the complaint was refused.
(i) D’s letter does not indicate a quantity and thus would be difficult to interpret.
-Today, UCC 2-201 would be used to fill in the terms. Under 2-201 K is not enforceable beyond quantity shown in writing.
(ii) The letter was simply a notification to salt dealers that D had salt available for order.
(iii)Cannot look to P’s writing to fill in quantity for a stat. o’ frauds defense.
A mere agreement to agree, in which a
material term is left for future negotiations, is enforceable; however, a bald
agreement to agree on a future rental was unenforceable for uncertainty as a
matter of law.
Joseph Martin, Jr. Delicatessen v. Schumacher 347.
Facts: Lease stated that, “the tenant may renew this lease for an additional period of five years at a rate to be agreed upon.” At renewal, D stated rent of $900 a month for a $545 building. The tenant filed suit for specific performance to extend the lease at the appraised value. for P
Application: The renewal clause leaves no room for legal construction or resolution of ambiguity.
Conclusion/Holding: Reversed with costs.
Intent in contract law is objective rather
than subjective.
Empro Mfg. Co. v. Ball-Co Mfg., Inc. .352.
Facts: The two parties reached a agreement in principal or “letter of intent.” The defendant’s purchase of the plaintiff’s company was subject to certain conditions. While the two parties were sorting out their indifferences, the plaintiff discovered the defendant was dealing with someone else and they filed suit. The district judge dismissed the compliant for failure to state a claim. Plaintiff appeals.
Issues: Whether the binding effect of a document depends on the parties’ intent.
Application: The defendant’s actions did not indicate an objective intent to bind itself to a contract.
Conclusion/Holding: Affirmed
Raffles v. Wichelhaus 359
Facts: The plaintiffs agreed to sell 125 bales of cotton to the defendant. The plaintiff said the cotton would come in October on the ship “Peerless”; instead, the cotton came in December on another ship. The defendant refused to buy and the plaintiff sued.
Issues: Whether there was a contract when the delivery date was two months late.
Application: It does not appear that the plaintiff had any goods on the earlier ship. The difference in time was minimal and the time of sailing is no part of the contract.
Conclusion/Holding: There was no consensus as idem, and therefore no binding contract.
Where a promisee acts to his detriment in
reasonable reliance upon an otherwise unenforceable promise, courts in other
jurisdictions have recognized that the disappointed party may have a
substantial and compelling claim for relief.
Wheeler v. White 355
Facts: P alleged that D had breached a contract to secure a loan or furnish the money to finance the construction of improvements upon land owned by the P. The D pleaded the contract was insufficient to establish any grounds of recovery. The TC dismissed the case and the P appealed.
Issues: Whether promissory estoppel is a remedy for the plaintiff.
Application: D assured P that the money would be available and urged him to proceed with the necessary task of demolishing the buildings presently on the site so as to make way for construction of the new building.
Conclusion/Holding: Judgment reversed.
B. Control Over Offer
Cobaugh v. Klick-Lewis, Inc. 363
Facts: P made a hole in one. D had a new car displayed w/a sign that said to win it you had to make a hole in one. D refused to give it up b/c the car was for a tournament two days before.
Issue: Was there a valid offer? Yes
(i) Promoter’s offer remains open until it is withdrawn and any person who acts upon it binds the promoter to perform his promise.
- General rule:Can’t accept an offer after specified time in offer has expired. If no spec. time specified use “reasonable” time standard. (Rstmt. 2d Sec. 40)
When an offeree fails to comply with the
suggested method of acceptance, but instead begins performance, a K is formed
Allied Steel & Conveyors, Inc. v. Ford Motor Co. 368
Facts: D (Allied) got a purchase order from Ford that also had an indemnity clause in it. D did not accept the K as suggested in the PO but began performance anyway. D’s employee was injured by P’s employee and D’s employee sued P who counterclaimed D through the indemnity clause. D claimed that it didn’t formally accept the K as suggested, thus no K, thus no indemnity.
(i) Intent to accept a K is
manifested by beginning performance with knowledge of offeror and in accordance
with material terms of K
(ii) General rule:Acceptance
must be by a means authorized by the offeror.
Terminating an offer
Davis v. Jacoby 371
Facts: P seeks spec. performance to get the inheritance of a close friend. P’s contend that the decedent promised to will them all of their property if they come to help them. The will did not reflect this but the evidence did.
Issue: Was there a bilateral K that will justify spec. perf.?
Holding: Yes, reversed.
(i) When difficult to determine whether unilateral or bilateral, the presumption is for bilateral K.
Unilateral K- requires actual performance to bind offeror.
Bilateral K - acceptance of offer or performance binds offeror.
(ii) Death revokes any unilateral offer. Jordan v. Dobbins 383
An offer of a unilateral K may be revoked at any time prior to performance, even if the offeror knows that the offeree intends to perform
Petterson v. Pattberg 377
Facts: P claims a loss of $780. D accepted a mortgage from P and paid him cash. D offered to deduct $780 if P paid off the principal before May 31. Before that date, P went to pay cash for the balance but before he could give the money, D told him he had sold the mortgage.
(i)The offer of a unilateral
K may be revoked at any time prior to performance of the act required as acceptance.
(ii) Modern rule: When there
is substantial performance, unilateral offer can’t be revoked by offeror.
Rstmt. 2d Sec. 45 (390)
(iii) Also, w/out condition
in K negating such need, offeree must know of revocation for offer to be void.
Where D offers to convey property when an act is performed, a K formed when the offeree begins performance of the act
Brackenbury v. Hodgkin 384
Facts: D promised to give her daughter and son in law the farm when she died if they would move to her and take care of her. D later wanted them to leave so she deeded the land to her son and he evicted P’s. P’s want the land reconveyed to D, D’s son enjoined, and a ruling that there is a trust in favor of P’s.
(i) Where the offer calls for an act as acceptance and the offeree makes a substantial beginning of performance, a K is formed.
(ii) UCC 2-206: bilateral K can be accepted by performance instead of a promise to perform.
C. Option Contracts (UCC 2-205)
An option under seal, given without
consideration, becomes enforceable upon notification of acceptance by the
optionee
Thomason v. Bescher 391
Facts: D gave an option under seal to P to buy a tract of timber if he tendered $6,000 w/in 60 days. P, a few days later, said he would take the tract and would pay the money the following week. D withdrew the option.
(i) At common law, instruments under seal do not require consideration. (Seals only enforced if covering options)
(ii) Acceptance of the option under seal created a bilateral K, which is legally and equitably enforceable.
Marsh v. Lott 393
(i) Court enforced the option even though only 25 cents was given for the option and says any money is enough for consideration on options.
(ii) Both this case and Thomason use different theories to enforce options. They are accepting formalities (seal and nominal consideration) to enforce options.
Smith v. Wheeler 394
(i) Even thought the written consideration of $1 was not paid, the ct. says the promise to pay was binding. Thus, there is consideration that makes the option enforceable.
(ii) Rstmt 2d Sec. 87 (Option Contract) pg. 401- reflected by all 3 cases above.
Reliance on offers
When a general contracter relies on a
sub-contracter’s bid, the K is vaild
Drennan v. Star Paving Co. 398 (Modern view)
Facts: P sued for breach of K. D was awarded a K to build a school. D used P’s bid to pave the school w/in his bid for the whole K. When P was awarded the K he went to tell D who refused to perform and wanted more money.
(i) Sec. 90 of Rstmt. promissory estoppel. used to enforce offer of sub.
(ii) P’s reliance was reasonable and foreseeable to D, and P relied to his detriment.
E.A. Coronis Associates v. M. Gordon Constr. Co. 402
Facts: D a general contractor, solicited bids from subcontractors. P offered to supply and erect the structural steel. P then telegraphed a revocation of its offer and P rejected it. Summary judgment for P.
Holding: Reversed for promissory estoppel.
Reliance on negotiations
If a D can forsee that the P will rely on
the promise to his detriment, P can recover damages.
Hoffman v. Red Owl Stores, Inc. 408
Facts: D promised P a grocery store franchise in the fall for $18K. P sold his bakery and bought a small grocery store to get experience. P later sold the small store at a loss of $500, at the behest of D. D kept raising the price to get a franchise and P finally broke off negotiations.
(i) Rstmt. Sec. 90 (promissory estoppel) applies.
(ii)There was no offer, only negotiations. This case implies that parties must bargain in good faith; when they don’t and there is detrimental reliance, promissory estoppel will apply and dams. will be awarded to prevent injustice.