Sarah Parker’s Contracts OutlineDr. Adams Contracts I: Fall 2010

Contract – “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”

- A promise of future enforcement; thus contracts are executory (not yet completed), NOT executed- Contracts can be written or oral- Only one promise needs to be made for a contract to come into existence

Peppercorn - "Whereas each party must promise to do or provide something to the other, even a promise to give the other a peppercorn – a nominal item or change in position – is usually enough for a court to find that a Contract exists."

Promise – A promise is an undertaking to act or refrain from acting in a specified way at some future time

- Promises may be express or implied (inferred from conduct or the circumstances of the transaction

Restatement § 2 - “Manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made”

“Duty to read” – When a writing is signed without having been read and understood, courts often express this accountability principle as “duty to read.” The person is held accountable for giving the impression of assent, even is he did not actually intend to agree.

Contracts, Quasi-Contracts, Implied in Fact, Express Contracts

Quasi-Contract - not a contract, but is a term used by courts to denote a recovery imposed by law which justice so requires, even though the parties have not made an agreement. Equity concept.Contracts implied in law – a quasi-contract, also known as quantum meruitContracts implied in fact – a real contract where an agreement is reached through parties’ actions, not by their wordsExpress Contract – An agreement manifested by words

I. Which law applies?a. UCC (Uniform Commercial Code)

i. The UCC governs the sale of goods which are tangible, moveable things (as opposed to the sale of land and services)

ii. Is this a contract for the sale of goods (thus, of things that are movable at the time of identification to the contract?)

iii. Even if the UCC applies, the common law fills gaps in the UCC.  So, if there’s no UCC rule, consult the Restatement.

b. Restatementi. The American Law Institute publishes the Restatement which organizes

and summarizes the American common law of contractsii. Common law – real estate, services

iii. Fills gaps in UCCc. CISG (Convention on the International Sale of Goods)

i. United Nations treaty whose provisions apply to contracts for the sale of goods between parties whose places of business are in different countries

ii. The places of business of both the plaintiff and the defendant must be in countries that are signatory to the CISG

iii. When it applies, the CISG takes precedence over state law, including enacted UCC provisions

d. Contracts for both goods and services i. Use predominant-purpose test

1. The language of the contractI. What do they address in their negotiations?

2. The value of the good relative to the value of the servicesI. Does it like they are making a contract for services, and

goods are incidental to services?3. The nature of the provider of goods and services

II. Manifestation of Mutual Assent a. Once you figured out what law to use, then look for mutual assentb. Look for a promise, and then offerc. Restatement 2 – Promise

i. “Manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made”

d. Parties can manifest their assent to an agreement by together adopting a joint statement of terms or it can be accomplished by a series of back-and-forth communications between the parties (offer and acceptance).

e. For a valid contract to be formed, you have to have two things:1. Objective reasonable intent to make a contract

I. What’s the setting within which the communication between the parties took place (problem #2)?

II. Were there communications between the parties that indicate intent?  Were they objectively meant in earnest? (Pepsico & Zehmer)

III. Was there a written document drafted in the language of K. (Angelou, Sun Printing, Cheever)

IV. Did one or more of the parties prepare to perform the K.V. Did one or more of the parties actually perform under the

K. (Angelou, Cheever)2. Essential terms that are Definite and Certain

I. Essential terms can includeII. There are four essential elements which an agreement

must cover (either expressly or implied) in order for it to be enforceable

I. Parties to the contractII. Subject matter of the contract, work to be done

III. Time for the delivery, performanceIV. Price/Quantity

III. You can’t accept what you don’t knowf. For a contract to be formed, the parties must reach “mutual assent.” Parties and

courts are not mind readers, so we look at the parties external manifestations, rather than the subjective intentions of each party, to determine the existence and terms of the contract.

g. Should Mutual Assent be Judged Objectively or Subjectively?i. Two Elements:

1. They must both intend to contract and they must agree on at least the main terms

I. Objective Standard with Subjective IntentI. Current law favors an objective standard for

determining a party's intent to be contractually bound. Thus, in general, communications are given the meaning that the recipient of the communication should have reasonably

understood. Nevertheless subjective intent is relevant in determining whether the parties intended to be bound - evidence of either party's state of mind can be used to determine the context of the manifestation if said evidence is reliable and compatible with the manifestation in question. Without such subjective intent, there is no contract.

I. Lucy v. Zehmer - Drunk farmer selling farm saying he was joking about the sale. Although Zehmer claims that it was all a joke, his subjective understanding of the transaction doesn’t matter. The proper inquiry is whether a person in Lucy’s position would reasonably believe that the transaction was only meant in jest.

ii. If it is clear a contract has been made, the focus is on whether their terms were agreed.

1. Raffles v. Wichelhaus – A ship named Peerless. If the parties have in mind different subject matters on a critical term of the K (delivery) and there is no basis for holding one of the parties responsible for knowing the correct term, then there is no contract (no meeting of the minds – court looked at subjective approach). The court held that parties had not mutually assented to the same thing, so no contract had been formed.

iii. If the parties have disagreed on minor terms, or have not provided for minor terms, the court may supply the missing terms

1. But the parties still must have intended to contracth. Assent to Indefinite or Incomplete Agreements

i. Indefinite Terms (Agreements to Agree)1. Traditional Common law

I. Restrictive approach - No contract formed if indefinite or incomplete terms

2. Modern ApproachI. More flexible

II. Courts fill in gaps based on intent and other common business factors (always for UCC Article 2)

III. Court finds that the parties have a K to keep bargaining in good faith

ii. Definite and Certain terms1. Required for mutual assent and enables courts to determine

remedy2. Quake v. American Airlines

I. Uncertain Commitment to the DealII. Ambiguity as to whether the parties intended to be bound

by the letter of intent.I. Short period of time to complete work, coupled

with statement that the letter of intent authorized the work, would indicate that they intended to be bound. Need for a cancellation provision indicates that the letter is binding. BUT, contemplation of a formal K between parties indicates that the letter was not binding as to its terms. Cancellation provision, read in the context of this contemplation of a future K, indicates that the

letter was not binding. The letter of intent seemed like the parties intended to be bound, but the cancellation clause contradicted the letter’s obvious intent to be bound for both of the parties. Whether parties intended to be bound is ambiguous. Remanded for jury.

I. Definite termsI. Sufficiently definite to form a K

(decision really focuses on intent though)

3. Academy Chicago Publishers v. CheeverI. Missing Terms

II. There was an objectively reasonable intent to make a K.III. A signed document evidencing terms of a purported

agreementIV. The document was written in the language of a contract

I. Had recitationsII. Purported to demonstrate terms on which the

parties agreed.V. Missing, however, were terms that were sufficiently

definite to allow the court to determine whether the agreement had been breached and what the remedy should be for the breach.

I. Some terms missingII. Some terms vague

VI. “A contract may be enforced even though some contract terms may be missing or left to be agreed upon, but if the essential terms are so uncertain that there is no basis for deciding whether the agreement has been kept or broken, there is no contract”

I. “Although the parties may have had and manifested the intent to make a contract, if the content of their agreement is unduly uncertain and indefinite, no contract is formed.”

I. But courts are reluctant to strike down contracts for indefiniteness if the intent of the parties can be ascertained. Courts may supply missing terms by looking at the actions, implied payment

4. BPL v. AngelouI. Vague Terms – filled in by good faith and fair dealing

II. As in Cheever, intention was there to make a contract.III. Angelou tried to maintain that the terms were too

indefinite to have created a contractI. Price: court determined was not indefinite

I. 50-50 split between A and BLP. II. BLP to pay all costs.

III. Partial performance by BLP gave contour to the term.

IV. Duration: I. A contract of indefinite duration is simply a

contract at will and may be terminated at any time.  Thus the law gives a remedy for this indefiniteness.

V. Subject matter:

I. Parties understood they were working together to get Angelou’s writings into greeting cards

II. Partial performance confirms what the language was intended to mean. BLP secured a contract from Hallmark for greeting cards and related products.

VI. “Where…the parties have attempted to put in writing an agreement fixing the rights and duties owing to each other, courts will not deny relief because of vagueness and uncertainty in the language used, if intent of the parties can be ascertained.”

VII. No statement as to quantity of work to be provided by Angelou/No statement of duty owed by BLP to Angelou

I. Wood v. Lucy, Lady Duff-Gordon: duty of good faith performance inherent in every contract requires the use of best efforts to perform. Generated a body of law in which the duty of good faith upheld binding agreements with scant details.

II. This applies to both parties and acts as a gapfiller for missing term.

VIII. Rule: Deficiencies (vagueness) or gaps in the agreement regarding the parties’ obligations may be filled by the obligation of good faith and fair dealing

5. Sun Printing v. RemingtonI. Terms left for future resolution

II. Court held it was an agreement to agreeIII. Time and price were missing in the agreement, which

Cardozo held were essential terms (traditional common law view – restrictive)

I. Dissent argues the law should compel the parties to contract in the light of fair dealing and terms were not so indefinite (modern approach – more flexible)

6. UCC 2-204I. Even though one or more terms are left open a contract for

sale does not fail for indefiniteness if the parties intended to make a contract and there is a reasonably certain basis for remedy

III. Mutual Assent by Offer and Acceptancea. Offer

i. An offer is statement or act that creates a “power of acceptance”ii. Restatement § 24:

1. “An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it”

2. Every offer is a promise and it invites assent. iii. No definition of offer in UCC, rather the Restatement section 24 will be the

definition of offer under common law and UCC.iv. An offer must contain these elements:

1. An offer must be communicated to the offeree. An offer can not take effect unless it is known the offeree

2. The offer must indicate a desire to enter into a contract. The offeror is the master of the offer. The offeror decides on the performances to be exchanged and the terms that will govern the

relationship. The offer may also describe the manner and time for an effective acceptance.

3. The offer must be directed at some person or group of persons.4. The offer must invite acceptance.5. The offer must create a reasonable understanding that upon

acceptance, a contract will arise without any further approval being required from the offeror

v. Advertisements1. General rule is ads do not constitute offers because they are usually

invitations to offer2. Exception when the terms of the ad are clear, definite, explicit,

and leave nothing open for negotiation and if it is seen by an objectively reasonable person as an offer

I. Lefkowitz v. Great Minneapolis Surplus Store – the ad said the first person to show up at store will get a fur stole. Acceptance was limited to one possible person. The quantity of the item was set forth. There is nothing left to negotiate. There must be language of commitment for an ad to be an offer like, “first, come, first, served.”

vi. Advertisements - Offer made in jest1. An offer which the offeree knows or should know is made in jest is

not a valid offer2. Leonard v. Pepsico - Harrier jet for Pepsi points; offer was not

definite, commercial did not specify the steps one had to take to accept, the separate writing did not mention the jet, commercial didn’t specify who could accept, and the commercial sought a reciprocal promise, expressed through acceptance of, and in compliance with, the order forms.

I. Rewards as offersI. Carbolic Smoke Ball – Ads offering rewards

become binding when anyone who performs the conditions named in the ad. Anyone who does perform the condition ‘accepts’ the offer

vii. Price quotes 1. Price quotes are generally not offers, but rather suggestions to

induce offersI. Exception: unless it is definite, explicit (addressed to

particular person, quantity, price, duration) and reasonably appears that assent is all that’s needed to ripen the offer into a contract. Look at how many people to whom the price quote is communicated, the completeness of the terms, and extent of prior inquiry.

II. Nordyne v. ICM, PQ for air conditioning control boards; price quote limited power of acceptance on further acceptance by home office. ICM later removed condition and created a power of acceptance.

viii. UCC says you pretty much need only quantity and description, gap fillers will fill in the rest

b. Acceptancei. When an offer is made, the offeree gains the “power of acceptance”—the

right to complete the process of mutual assent simply by saying “yes” and communicating that affirmative answer to the offeror

ii. The offeree can make a counter-offer, reject the offer, or let it lapseiii. Like an offer, an acceptance should be

1. Clear and definite

2. Manifest the party’s willingness to be bound to the terms3. Be communicated to the other party

iv. Distinguishing between Acceptance and Counter-offer1. Restatement (Second) § 50 Acceptance

I. “A manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer”

2. Restatement (Second) § 39 Counter-offersI. (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.

II. (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 to the offeree

I. A counter-offer is therefore both a rejection of the offer and a new offer by the former offeree for a contract on different terms

II. An offeree can express “grumbling” and still assent to the offer, meaning it is not a counter-offer

3. Ardente v. HoranI. Horans offered a bid to Ardente to buy his home through a

purchase and sale agreement. Ardente returned document to confirm furniture was a part of the sale. Horans refused to sell home. Court held it was an acceptance with a condition (a conditional acceptance), so it was a counter-offer.

II. Rule: An acceptance may not impose additional conditions (acting as a qualified acceptance) on the offer, not may it add any limitations. However, an acceptance may be valid despite conditional language if the acceptance is clearly independent of the condition (proposal, request, suggestion). So long as it is clear that the meaning of the acceptance is positively and unequivocally to accept the offer whether such request is granted or not, a contract is formed.

v. Common Law1. Mirror image rule

I. Common law requires that the acceptance assent to nothing more or less than the offer.I. Mirror-image rule is rigid. Offer and acceptance

must mirror each other. II. Modern approach - allows minor changes,

immaterial changes. Contemporary approach is to tolerate minor discrepancies and to apply the rule only where the response makes material changes in the transaction to the proposed offer.

I. RI v. RR co – acceptance didn’t differ in material respect (the parties names changed, but not the content) from the offer

II. If variation in terms is too great, the purported acceptance will be construed

as a counter-offer, but the mere addition of a collateral or immaterial matter will not prevent the formation of a contract.

II. Common Law mirror image rule still applies to contracts not governing the sale of goods

III. Last Shot Rule –under the last shot rule, a party implicitly assented to and thereby accepted a counter-offer by conduct indicating lack of objection to it.I. Basically, whoever sends a form last gets the last

shot and its terms are accepted over the parties. It honors the terms of the party who sends the last form. The performance acts as an acceptance of the party that sent the last form’s counter-offer. Thus, the last sent document determines the contract terms.

vi. UCC1. UCC does away with two Common Law rules

I. UCC applies only to contracts dealing with sales of goodsI. Commercial transactions are often governed by

standard, pre-printed forms.II. One reason for this may be that commercial

transactions are frequently concluded by non-lawyers and pre-printed forms are a way of channeling the conduct of salespeople, and thereby the liability of the company.

III. Pre-printed forms and the mirror image rule are incompatible and the application of the former would make concluding a contract close to impossible.

IV. The UCC gives greater weight to the ability to use pre-printed forms than it does to the exact concurrence of the offer and acceptance on all material points.

2. Battle of the FormsI. When a contract has been concluded, and

II. What its terms are.III. That’s where 2-207 comes in.

3. 2-207 has two parts:I. 2-207 only applies if there is some written documentation.II. 2-207 only has applicability when talking about written

manifestations of assent to an offeror’s offer or the exchange of documentation following the conclusion of an oral contract.

4. Look for a purchase order by the buyer (offer) and an acknowledgement form by the seller (acceptance)

5. UCC contains no definition of offer, so its common law definition applies

I. Rest (2d) § 24: “Manifestation of willingness to enter into a bargain so made as to justify another person in understanding that his assent to the bargain is invited and will conclude it.”

6. 2-207(1) & 2-207(2)I. 2-207(1) looks at whether a contract has been formed

II. 2-207(2) looks at what are the terms of that contract7. 2-207(3)

I. Does both, but in a different context.8. 2-207(1): has two parts of its own, applies to two different

conceptsI. 2-207(1) can be acceptance by language or by writing

II. Definite and seasonable expression of acceptanceI. Definite: language must show a willingness to

commit to the contract by accepting the offer. Offeree has manifested assent to dickered terms (terms on which the parties negotiated or are not in the pre-printed form language like quantity, price, nature of the good, item number, color, delivery date)

II. Seasonable: was assent manifested within the time frame specified by the offeror or, in the absence of such specification on the offeror’s part, within a reasonable period of time?

III. Steps in definite and seasonable expression analysisI. Is correspondence a definite and seasonable

expression of acceptance?I. Yes: move along to the rest of 2-207(1)II. No: correspondence is a counteroffer or

rejection. Look at 2-207(3) to determine if parties’ conduct concludes a contract has been formed.

I. Itoh v. Jordan – parties’ didn’t create a contract under 2-207(1), but their conduct concluded a contract under 2-207(3), so a contract implied-in-fact was formed.

IV. Does the correspondence state additional terms?I. Yes: go 2-207(2)

II. No: do they state different terms? No. You have a contract, the terms of which are contained in the offeror’s offer.

V. Distinguishing different terms from additional terms.I. You have to look at each term of the

correspondence independently for this step of the analysis

II. A term is additional if it is stated in the offeree’s correspondence and is not addressed in the offeror’s offer.

III. A term is different if it is stated in the offeree’s correspondence and IS addressed in the offeror’s offer.

VI. Are BOTH parties to the contract merchants?I. If yes: go to 2-207(2)(a)(b)(c)

II. If no: then additional terms are mere proposals to the contract

VII. Is the term additional?I. If yes, go to 2-207(2)

I. In Itoh v. Jordan II, the court held that the seller’s additional terms (arbitration clause) was not a UCC gap filler, so the

court determined it was left out of the contract

II. If no, then the term is differentVIII. 2-207(2)(a) - Did the offeror’s offer expressly limit

acceptance to the terms of the offer?I. If yes, then the additional term falls away.

II. If no, go to 2-207(2)(b)IX. 2-207(2)(b) - Does the additional term materially alter

the offer? You can determine this by looking at how big is the change? Would it create hardship or surprise?

I. If yes, then the additional term falls away.II. If no, go to 2-207(2)(c)

X. 2-207(2)(c) - Has the offeror already given notice of objection to the additional term or does the offeror gives notice of objection within a reasonable time after receiving the additional term?

I. If yes, then the additional term falls away.II. If no, then the additional term becomes part of the

contract.  The contract is then composed of:I. The terms of the correspondence on

which the parties agreeII. The additional term or terms, and

III. Supplementary terms provided by the UCC that are not inconsistent with (1) and (2).

XI. Is the term different?I. Between Merchants

I. If yes: Courts interpret in three ways:I. Majority Rule - Under the Knock-

Out Rule, the different terms cancel each other out and the gaps left behind are replaced by supplementary terms of the UCC.

II. Minority Rule – Under the First-Shot Rule, the offeror as master of the offer prevails and the different terms in the acceptance are dropped

III. Another Approach – apply additional terms application (likely to be found as a material change)

II. Not Between MerchantsI. Courts have not fashioned a definite

answer perhaps because situation so rarely arises

III. 2-207 does not provide any mechanism whereby different terms in an acceptance become part of the contract automatically or "knock out" the inconsistent term in the offer. But as we know, some commentators and a number of courts think the statute would be better if it provided for knocking out the different terms in both the offer and acceptance, so they pretend that's what 2-207(2) does.  We need to

know both, the true meaning of 2-207 and the alternative "interpretation" that may be the majority view, and we should clearly distinguish them in any exam answer.

9. 2-207(3)I. Applies when no contract formed under 2-207(1) because

parties’ writing don’t establish a contractII. But the conduct of the parties recognizes that a contract

has been formed (implied-in-fact)I. This conduct will most often be the seller shipping

the goods and the buyer accepting them.II. It is important to have both because the buyer,

upon the seller’s delivery of the goods, has a right to return the goods.

III. If the goods are returned, the buyer may be indicating to the seller that no contract was concluded.

I. Be careful though: there are many reasons why a buyer might return goods.  If the buyer returns the goods AND informs the seller that the goods are defective, that they were not delivered in a timely manner, or other reason that would otherwise be a breach of the contract, that indicates that there was a contract in the first place (no breach without a contract).

III. The terms of the contract are those terms on which the writings of the parties agreed, along with any gap fillers (supplementary terms) provided by the UCC. I. Supplementary terms include gap fillers provided

by UCC or can include any established patterns of performance in the parties’ previous course of dealings and trade customs

vii. Written confirmation of concluded contract1. 2-207(1) also provides for written confirmations that are sent

within a reasonable time. You can only get a written confirmation AFTER the contract was formed!

viii. Steps in written confirmation analysis1. Was a contract formed (likely orally) prior to the sending of

correspondence?I. Yes: look to see whether it contained additional terms

II. No: The written confirmation analysis is inapplicable without the existence of a concluded contract. Try analysis through “definite and seasonable expression of acceptance”

2. Does the written confirmation state additional terms or different terms?

I. Yes: distinguish between them.3. Distinguishing different terms from additional terms in the context

of a concluded contract.I. You have to look at each term of the correspondence

independently for this step of the analysis.

II. A term is additional if it is stated in the correspondence under examination and has not been expressly agreed to by the parties.

III. A term is different if it is stated in the correspondence under examination and HAS been expressly agreed to by the parties.

4. Are BOTH parties to the contract merchants?I. If yes: go to II(d)(iv)(5).

II. If no: whether term additional or different, it falls away [check that with Adams].

5. Is the term additional?I. If yes, go 2-207(2) – Additional terms are governed by the

rules in 2-207(2), except that (2)(a) does NOT pertain to written confirmations

I. If it meets the criteria of (2)(b) and (2)(c), the contract includes the terms of the correspondence on which the parties agree, the additional term or terms, and supplementary terms provided by the UCC

II. If no, it must be a different term6. Is the term different?

I. If yesI. Based on the rules governing mutual assent, a

different term does not become part of the contract unless the other party later assents to it. If the parties both send confirmations, and those confirmations contain terms that differ with each other, comment 6 says that neither differing term becomes part of the contract

Additional Terms in Acceptance or Confirmation (UCC §2-207): 1. A definite and seasonable expression of acceptance or a written confirmation which is sent

within a reasonable time operates as an acceptance even though it state terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

o Express conditions are usually flagged by phrases like “conditional on,” “subject to,” “but only if,” and “provided that”

2. The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

o The offer expressly limits acceptance to the terms of the offer;o They materially alter it; oro Notification of objection to them has already been given or is given within a

reasonable time after notice of them is received. 3. Conduct by both parties which recognizes the existence of a contract is sufficient to

establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writing of the parties agree, together with any supplementary terms incorporated under any other provisions of this act

Notes on UCC §2-207 Remember that the exceptions for when additional terms become a part of a

contract only apply to dealings between merchants Conditioned acceptances (i.e. expressly limiting acceptance to the terms stated

within the offer) prevent additional terms from becoming a part of a contract

between merchants. If there is a conditioned acceptance in a form, it is a counter-offer and not an acceptance.

“Express” assent – must be very clear that you are assenting to the specific terms “Seasonable” – within the time agreed upon or within a reasonable time “Materially alter” – under 2-207(2)(b) means the additional term would “result in

surprise or hardship” Subsection 3 – if, despite the indefiniteness of the provisions, the court is still

convinced that the parties intended to agree, the court can take the terms which the parties agreed upon and fill in the gaps to make the contract. Gap fillers:

o Trade Usageo Course of Dealingo Course of Performance

UCC 2-207 usually applies in a battle of the forms when the two parties are using boilerplate forms

When different terms are involved between merchants instead of additional terms, courts have adopted a variety of resolutions:

o Infer that the different terms were never accepted and thus are not a part of the contract and not enforceable

o Knockout Rule – the two different terms cancel each other out and the court inserts gap fillers to determine a reasonable term

c. Which manner of acceptance is effective?i. As the master of the offer, the offeror may specify the exclusive manner of

acceptance. (If you say acceptance only through e-mail and I call you to accept, that phone call is a counter-offer and now the offeror can accept)

ii. If the offer is silent on how to accept or if it includes only a preference or suggestion, then the offeree is free to accept in any reasonable manner that is not precluded by the offer

d. Acceptance by Promise or by Performancei. Restatement 32 – if an offer is ambiguous in terms of how offeree can

accept as to whether it requests a promise or performance, offeree can accept by either promise or performance

ii. Bilateral contract – a contract formed by a mutual exchange of promises1. At the moment the promises are exchanged, a contract is created

and both parties are boundiii. Unilateral contract – a contract formed by one party making a promise

and the other party performing the specified act1. No contract is formed until the offeree completes the performance.

I. That means the offeror can withdrawal the offer at any time before the offeree has fully performed

I. Ex. Brooklyn Bridge Hypothetical2. Ex. Offer for rewards like Carbolic Smoke BallI, or an offer to an

employee if they remain for a period of time at their job, they will get a bonus, or Hamer v. Sidway

iv. Courts have fashioned two ways to deal with unilateral contracts and the Brooklyn Bridge Hypothetical

1. Assume bilateral unless expressly stated that unilateral is desired2. So, offeree can accept by express promise or by implied promise,

which means that by performing or beginning to perform, the offeree is accepting the offer’s terms and promising that performance will be completed. Once the offeree begins performance, both parties are bound. This is what Restatement 62 says.

I. Under 62 – if offer is explicit and gives a choice, then beginning a performance, or tendering a beginning… This applies to situations where offeree is given a choice. If offeree accepts by promise in consideration for an offer, you are bound to do that thing. If you have accepted by performance, you are bound to performance because when you being tendering, that acts like a promise that he is going to finish it (acts kind of like a promise)

v. If offeree clearly specifies that only performance will count as an acceptance, then the offeree can be protected from withdrawal of the offer prematurely

1. Restatement 45 – Revocation of Offer for Unilateral Contract; Effect of Part Performance or Tender

I. “If an offer for a unilateral contract is made, and part of the consideration requested in the offer is given or tendered by the offeree in response thereto, the offeror is bound by a contract, the duty of immediate performance of which is conditional on the full consideration being given or tendered within the time stated in the offer, or, if no time is stated therein, within a reasonable time.

II. In effect, this makes an offer for a unilateral contract temporarily irrevocable once the offeree begins performance. So, the offeree is not bound to perform, but once the offeree begins performance (by tendering part of the consideration requested), the offeror must allow the offeree a reasonable time to finish performing. If performance is completed, the offeror is bound to perform. If performance is not completely performed, offeror has no duty to perform.

III. Only performance, not preparation for performance will do!

e. Silence or Inaction as Acceptancei. Silence or inaction is generally not an acceptance except

1. Silence operates as an acceptance when the offeror proffers property or services with the offer, and the offeree, having a reasonable opportunity to return or refuse them, exercises ownership rights over the property or accepts the benefit of the service

2. Silence may operate as an acceptance if prior dealings between the parties or other circumstances make it reasonable for the offeror to expect the offeree to give notice of rejection

3. Houston Dairy v. John Hancock – acceptance after specified time constituted counter-offer; contract not accepted by deposit of cashier’s check as offeree had no way of knowing check had been deposited

f. Electronic Offer and Acceptancei. “Media neutrality” – the rules of law ought to apply uniformly across

various mediaii. Follows the mailbox rule, acceptance effective upon acceptanceiii. An electronic record has the same effect as writingiv. Electronic offers are either offers or invitations to offerv. A user/customer has not assented until the following steps have occurred

in the order listed: (this requirements exists in non-electronic transactions as well)

1. Reasonable notice to the user that the proposed agreement exists2. Reasonable opportunity for the user to review the terms of the

proposed agreement3. Reasonable notice that a particular action will manifest the user’s

assent, and4. The user takes action that manifests assent5. Uniform Electronic Transactions Act (UETA)

I. Federal Statute6. Electronic Signatures in Global and National Commerce Act

I. (E-SIGN) – adopted by states7. Click-wrap - terms of use are presented to the user and the user

must click an assent to the terms before continuing; "I Agree" button; flaws: terms are drafted in favor of the seller and users often do not read them

8. Browse-wrap - terms are available on the site but not presented to the user, and no active assent is required; often found unenforceable by the courts because of hidden or difficult to locate/recognize links to terms

g. Time of Effectiveness of Acceptancei. The Mailbox Rule

1. Created by Adams v. Lindsell2. An offer is considered to be effective when the offeree learns of the

offer3. Acceptance is considered effective the day the acceptance is

dropped in the mailbox (correctly addressed and with proper postage)

4. Doesn’t apply if the acceptance follows a counteroffer or rejection5. Mailbox rule only applies to acceptances. A rejection or

counteroffer sent by the offeree, and a revocation sent by the offeror, is effective only on receipt

6. If mailbox rule DOES NOT APPLY, acceptance takes effect only on receipt – the writing must come into the possession of the addressee

7. CISG and UNIDROIT don’t follow mailbox ruleI. Both of which say acceptance is effective when “the

indication of assent reaches the offeror”h. Terminating the Power of Acceptance

i. Death of Incapacity of Offeror or Offeree1. An offeree’s power of acceptance is terminated upon the death or

incapacity of either the offeror or the offereeI. This is a rule about termination of an offer, not a contract

I. If offeror dies before contract is created, the offer terminates

II. If offeror dies after contract is created, the contract survives the death

ii. Lapse of Offer1. An offer can not be accepted after it lapses

I. An offeree’s power of acceptance is terminated at the time specified by the offeror, and if no time is specified, at the end of a reasonable time

iii. Rejection by Offeree1. Rejection can be express or implied (by conduct) or by virtue of a

counter-offer

iv. Revocation by the Offeror1. Revocation can be express or implied (by conduct)

I. The offeror has the power to revoke the offer at any time before acceptance

II. Revocation on becomes effective when it is communicated to the offeree

I. When the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract.

I. When the offeree receives notification of revocation from the offeror, or it can be revoked indirectly if the offeror takes action clearly inconsistent with the continued intent to enter a contract, and the offeree obtains reliable information of this action

i. Which Offers are Irrevocable?i. Option Contracts (Restatement)

1. Can arise when one party makes an offer to enter a contract and also offers to keep the underlying contract offer open, for a stated period of time, for separate consideration to be supplied by the offeree (usually in the form of money, BUT CAN BE A PROMISE since a promise can be consideration just like money can be consideration)

I. Courts will often consider what looks like nominal consideration (5 or 10 dollars, or even a promise to pay that amount) to be sufficient to create a contract because the value of the right to take time to consider the offer is hard to quantify

2. Options are not governed by the mailbox rule and so is effective only when it reaches the offeror

ii. Firm Offers (UCC) 2-2051. An offer by a merchant to buy or sell goods in a signed writing

which by its terms gives assurance that 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 any such term of assurance on a form supplied by the offeree must be separately signed by the offeror

2. Pavel v. Johnson - IV. Consideration

a. Contracts are grounded in promises – assurances or declarations that one will do (or refrain from doing) some act

i. A mere promise does not give rise to an action. But some promises are desirable to enforce

b. Promise: Restatement § 2: “A manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.”

i. A promise leads a promisee to understand that the promisor has made a commitment to him

ii. A commitment to do what?1. To intend to act in a specified way2. To intend to refrain from acting in a specified way

iii. Note the act of forbearance is specific. A promise that is too vague may be no promise at all

iv. Note also, the act of forbearance is intended. Thus, the act or forbearance has not yet been performed

v. How is the commitment made?1. It is manifested: It may be oral or written or may be inferred

wholly or partly from the conduct of the promisor. It is somehow demonstrated.

c. Considerationi. Test developed by the common law for determining the enforceability of

promises is the doctrine of consideration. ii. Benefit-Detriment

1. “Any benefit accruing to him who makes the promise, or any loss, trouble, or disadvantage undergone by or charge imposed upon him to whom the promise is made, is sufficient consideration” (a benefit to the promisor or a detriment to the promisee)

2. Appeal of Clark - $700 dollar note given from Sheldon Clark to Charles Clark and his wife after he died for services rendered while he was sick. Court said this was sufficient consideration under benefit-detriment and inadequacy of consideration is no ground for avoiding the contract.

3. Dougherty v. Salt - Mere recitation that consideration has been received is not sufficient for consideration; note said “value received.” Although a note states that value has been received, if value has not in fact been received, the note is unenforceable as a contract for lack of consideration because it was considered an executory gift (a gift promised but not yet delivered). A promise to make a future gift at some date is not enforceable (bc the party could change its mind, have a change in her financial situation later on – so the law is protecting her)

4. Hamer v. Sidway - Relinquishing a legal right constitutes consideration because it includes a detriment and forbearance. The consideration does not have to also provide a benefit to the promisor. The forbearance of legal rights by Story II, namely the consensual abstinence from "drinking liquor, using tobacco, swearing, and playing cards or billiards for money until he should become 21 years of age" constituted consideration in exchange for the promise given by Story I. Because the forbearance was valid consideration given by a party (Story II) in exchange for a promise to perform by another party (Story I), the promisee was contractually obligated to fulfill the promise.

iii. Bargained-for-Exchange 1. Benefit-detriment replaced by “bargain” theory. The promise must

induce the detriment and the detriment must induce the promise.2. A “reciprocal conventional inducement”, each for the other,

between consideration and promise” Oliver Wendell Holmes3. Restatement § 71: Requirement of Exchange: – “To constitute

consideration, a performance or a return promise must be bargained for. A performance or a 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.

4. Baehr v. Penn-O-Texx Oil – “If … (consideration is given), … then I promise that…” - Plaintiff argues that agreeing not to sue or to delay bringing suit is sufficient consideration. The Court agrees that this may be consideration, but under these facts, the Court determined that it is not consideration. The Court focuses on the fact that Defendant did not ask Plaintiff to delay in bringing the suit

and that it is likely that Plaintiff’s delay was motivated by personal convenience.

5. USA v. Meadors – “A promise to teach the daughter or the actual teaching of the daughter can count as consideration.” A promise serving as consideration is most common because contracts are formed by an exchange of promises. Meadors’s signature wasn’t bargained for. Also, she received no benefit because the loan would have been made anyway and the government suffered no detriment.

iv. Distinguishing Bargain from Conditional Gift1. A promise to make a gift is not supported by consideration because

the promise is not part of the bargain and because there is not detriment suffered by the promisee. (A conditional gift is where an action is undertaken in order to receive a promised gift)

2. Tomczak v. Koochiching – The County promises to gratuitously provide a pump on condition that the Ts would operate the pump (which was of no benefit to the county). A gratuitous conditional promise is unenforceable; An aid to help determine a conditional gift…Will the happening of the condition be a benefit to the promisor? If so, it is a fair inference that the happening was requested as consideration.

3. Pennsy v. American Ash - The plaintiff provided consideration because the promise of the free aggregate was intended to induce the promise of disposing of the aggregate, thus relieving the defendant of the disposal costs.

I. Williston’s tramp – If you walk around the corner to the clothing shop, you can purchase a coat on my credit. No reasonable person would understand that the short walk was requested as consideration for the promise, but that in the event that the tramp going to the shop the promisor would make a gift. The walk was not requested as the price of the promise, but was merely the condition of a gratuitous promise. The promisor didn’t seek for her walk around the corner in exchange for the coat.

v. Refining the Requirement for Consideration1. Batsakis v. Demotsis – “Mere inadequacy of consideration will

not void a contract” A promise is enforceable even if the consideration is inadequate. It is not nominal because there was a bargained for exchange and a manifestation of mutual assent. The consideration of $25 was not a disguised gift. Typically the inadequacy of consideration may be relevant in the application of capacity, fraud, or duress, but a court will not attempt to discern the value of the consideration to the bargainers at the time of the bargain.

2. Schnell v. Nell – Nominal consideration won’t due because it is a pretense to make it look like promise supported by consideration. Once cent will not suffice as consideration unless the penny was rare, unique, etc. Past consideration and moral considerations don’t suffice either. Past performance cannot constitute consideration.  If a thing is already done, it is not a future act and so cannot be a promise.  Also, past consideration is without present value and cannot induce the promisor’s promise.

3. Dyer v. National By-Products – P lost foot on job and claims oral agreement with D that he would have a job for life if he didn’t press a tort claim. He lost his job and sued. Workers comp law says he

has no tort claim, but Dyer didn’t know his claim was invalid. Forbearance to press a claim, or a promise of such forbearance, may be sufficient consideration even thought the claim is wholly unfounded/invalid (P must have a good faith belief and be reasonable that he does have a claim). In contrast, Compromise of a doubtful (uncertain) right asserted in good faith is sufficient consideration for a promise.

4. Vassilvoska v. Woodfield Nissan – Plaintiff waived right to sue Woodfield in court of law, Woodfield retained the right to sue for many reasons. Illusory promises (deceptive, based on false pretenses) - do not serve as consideration because it is a promise that does not actually require that the promisor do something. And “agreement at will” is an illusory promise. In this case, Nissan’s promise to arbitrate was an empty one because it exempted itself from arbitration in almost every instance, but P had to arbitrate any of her claims. For A.A., employer needs to limit its legal freedom.

I. Illusory promise - promise conditioned on an event within the promisor's control; for example: I will give you ten dollars if I feel like it

II. Termination-for-cause clauses – gives one or both parties the right to end performance obligations when the party has “cause.” Common in loan documents where creditor can accelerate payments upon events such as debtor’s conduct that makes the creditor concerned the debtor is losing credit-worthiness

III. Termination-for-convenience clauses – gives one or both parties the right to end performance obligations for any reason. Common in contracts of indefinite duration, such as long-tern distributorship arrangement between a manufacturer and distributor of goods.

I. Pose special challenges because of the danger that the contract promises will be considered “illusory,” a reflected in the Woodfield case. If the party could end the contract at any time, that party may have made no commitment to any performance or promise, so the would-be contract would be void for lack of consideration. If contracting parties appear to have reached an agreement of economic substance, however, and there is no over-reaching (as there was in Woodfield), courts may try to uphold the agreement by looking for any real commitment, no matter how small, to support a finding that consideration exists.

vi. The promisee gave up something of value, or circumscribed her liberty in some way (this is called the legal detriment requirement)

vii. The promisor made his promise as part of the bargain, that is, he made his promise in exchange for the promisee’s giving of value or circumscribing of liberty (this is the bargain requirement)

d. Contract Modification and the Pre-Existing Duty Rulei. If both promises are executory (not fully performed) both parties can agree

to modify the contract.ii. Modification Under Traditional Common Law

1. Under traditional common law, the requirement that a promise have consideration to be enforceable applies not only to formation of a contract, but also to its modification, because the agreement to modify is itself a contract that must satisfy that must satisfy the rules on contract formation (modification must have consideration).

2. Easy to find consideration if both parties to the contract change their duties because each party’s promise to undertake new responsibilities is supported by the other party’s promise to perform new duties (ex. Contract to build a new structure – builder agrees to add another interior wall to original plans and owner agrees to pay for additional amount of work). But sometimes, due to performance being unexpectedly burdensome to one of the parties, one party agrees to a change in responsibility (ex. Natural disaster causes lumber prices to rise and costs for construction contractor become more expensive, but homebuilder agreed to fixed price at the outset. The work already promised under the original contract—the structure promised by the builder—is already owed to the other party. It is a pre-existing duty and under traditional common law principles, it can not serve as consideration for a new promise to pay more than originally pledged under the contract).

3. A pre-existing duty cannot be consideration.  If you do something more than the existing duty (and that something more is not merely a pretense), the pre-existing duty + the something more can be consideration (in reality though, it’s just the something more that’s the consideration).

I. Pre-existing duty rule is to prevent to “hold-up game,” deterring parties from using coercion and duress to obtain additional compensation. Courts will hold parties to their original contract regardless of whether it is profitable or unprofitable. (Modern Rule - However, courts have been reluctant to apply to pre-existing duty rule when a party to a contract encounters unanticipated difficulties and the other party, not influenced by coercion or duress, voluntarily agrees to pay additional compensation for work already required to be performed under the contract.)

4. Birdsall v. Saucier – The assignment of the note constituted new and valid consideration because the brokers were receiving an amount greater than the commission due because of the interest and were content with the arrangement until the third party defaulted. There was an accord and satisfaction when the brokers signed the receipt "paid in full."  The brokers could not subsequently recover against the sellers just because their bargain turned out to be bad. Neither party intended that the original debt would continue after assignment of the note.

I. Modification requires the consent of each contracting party and must be supported by consideration. An obligation is discharged by accord and satisfaction where performance other than that originally agreed to is accepted as full satisfaction of a claim. An ''accord'' is an agreement for substituted performance, whereas ''satisfaction'' refers to the performance of the terms of the accord. In an accord contract it is typical that the

consideration supplied is less than bargained for in the original contract. In accord contracts that require an amount of consideration that is less than the original, the consideration must be of a different type, i.e. instead of money, debtor offers a car or a boat. (horse, hawk, or robe).

iii. Modification Under Modern Common Law1. Angel v. Murray – Maher contracted a 5-year contract with city to

remove waste. In year three, he asked for more money because of the increase in houses that was unanticipated. The city agreed. Did Maher have a pre-existing duty to remove the extra waste? Court used modern rule by looking at Restatement 89.

I. Restatement 89 – Enforces a modification if (1) the parties voluntarily agree and (2) If both promises, offer and acceptance, are still executory (not yet fully been performed) (3) the underlying circumstances which prompted the modification were unanticipated by the parties (unexpected and unforeseeable difficulties arise) (4) modification was fair and equitable, or (5) to the extent that justice requires enforcement in light of a material change of position in reliance on the modification.

II. UCC – an agreement modifying a contract (for the sale of goods) needs no consideration to be binding. Modification must meet the test of good faith and can’t be obtained by coercion.

I. Waiver – UCC. A failed modification may operate as a waiver. A waiver is the voluntary relinquishment or abandonment-express or implied-of a legal right or advantage. Unlike a modification which is binding, a waiver can be retracted by the party who waived the right, unless there has been material and reasonable reliance by the other party

First determine whether the contract is supported by consideration. If it is not, then look at the exceptions to consideration to see if those will work to make the contract enforceable.

V. Damagesa. Expectation Damages

i. The amount putting the promisee in the position she would have been if the promise had been performed

b. Reliance Damagesi. Putting the promisee in the position she would be in today if the promise

had not been madec. Restitution Damages

i. If benefits have been conferred on one party, a court may award to the other party the value of those benefits to the recipient

VI. Alternative to Considerationa. Promissory Estoppel

i. Theory of liability that rests on reliance damages, but courts may (and often do) award full expectation damages rather than eliminating the award “as justice requires” to reliance damages as invited in § 90. Flexible; courts can award varied remedies to provide the best fit for fairness and justice

ii. A promise exists, but lacks consideration. Promissory estoppel is a contract implied in law

iii. In addition to taking action to obtain the promised gift (conditional gift - something that does not constitute consideration), a promisee may incur expenses or in other ways act in reliance on the promise that the gift will be delivered

1. Courts were somehow convinced that the unbargained-for promise should be enforced

iv. Elements1. Clear and definite promise 2. Promisor intended to induce reliance by the promisee and should

have reasonably expected the promisee to rely on the promise3. The promisee actually relied on the promise and thereby incurred

some detriment4. Justice demands that the promise be enforced.

I. Kirksey v. Kirksey – Court held a promise by a man to give his sister-in-law a house if she would move to his land was not a valid contract because it lacked consideration. D made a promise to give a gift of a place to live, conditioned on plaintiff moving to that residence, so it constituted a conditional gift. She moved after two years, he kicked her off his land.

I. A modern court would most likely say that the sister-in-law could get damages based on the doctrine of promissory estoppel

II. Ricketts v. Scothurn – Katie quit her job because he grandpa gave her a promissory note. She suffered loss and inconvenience in reliance on the promise of 2000 when she went without unemployment. Grandpa’s actions induced Katie to quit, and it would be unjust to not have him pay the note.

v. Restatement (Second) Section 901. “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.”

I. Differs from Restatement First § 90 I. Second § 90 limits definite and substantial

reliance and creates a situation in which we start with expectation damages but court can limit those damages to reliance damages. Enhancing recovery damages is also limited.

vi. Conrad v. Fields – (Law School Tuition) D offered to pay for P’s law school tuition if she went to law school (conditional gift). She quit her job to attend law school. Court found she met the elements of promissory estoppel because it was reasonable for her to rely on the promise.

vii. Hayes v. Plantations Steel – (Pension) A promise must induce reasonable reliance upon it in order for promissory estoppel to apply. The defendant’s promise was given as a token of appreciation and without consideration from the plaintiff. The promise also did not induce reliance by Hayes because he had decided to retire before any promise that he would receive a pension was made. The promise did not induce his action or forbearance and Plantations Steel’s promise did not shape his thinking.

viii. Ramone v. Lang – (Swimming pool case) PE used to compensate for pre-contractual reliance. P met elements of PE. P entitled to reliance damages, the quintessential remedy for PE. Damages, the court says, should not put the promisee in a better position than performance of the promise would have put him in.

ix. In Re Fields Estate - The charitable pledge by the D, having been relied on and accepted by P, U of Chicago, as evidenced by its continuance of the fund-raising campaign, became a valid (contract?) enforceable against the decedent in his lifetime.

Alternatives to Consideration – No contract, no consideration!

VII. Promissory Restitutiona. Can be invoked when a promise is made not to induce action by the promisee, but to

reward or compensate the promisee for actions already taken or expenses already occurred.

i. Benefits already incurred by the promisee cannot constitute consideration. Past consideration is thus an oxymoron. To be consideration, the benefit must be in the future. Yet courts concluded that some promises of this kind were worthy of enforcement.

ii. Elements - (1) benefit conferred (2) party who benefit was conferred upon make a promise to pay for that benefit (3) justice and fairness

iii. Restatement 86 – (1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. (2) A promise is NOT binding under (a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or (b) to the extent that its value is disproportionate to the benefit.

b. Drake v. Bell – Mechanic repaired wrong house and work that was done was irrevocable like plastering and painting. (Note if it was delivery of a fridge, we would just give back the fridge. The key is that you couldn’t remove what was installed.) Court says a subsequent promise founded on a former enforceable obligation (which obligation it revives), or on a value previously had (promisor never had an obligation, but received an antecedent valuable consideration) from the promisee is binding.

i. What if owner had never promised, would Drake have a restitution claim? Some courts talk about intent to charge this person. Was there intent to charge the owner of this house? The answer is yes and no. It depends on how you look at it. There was intent to charge the owner of the house that he worked on. Drake just thought it was the guy who hired him. Officious intermeddler – would it be unjust to allow the homeowner to keep these benefits? We know these are improvements that can’t be returned. The advantage of promissory restitution is that it simplifies so many questions. How would the case turn out if there was no promise? It would be unlikely that the court would uphold a restitution remedy.

c. Webb v. McGowin - Plaintiff fell with a 75 lb. pine block from an upper deck to the floor to avoid dropping the block on the defendant and seriously injuring him. Plaintiff was crippled and subsequently unable physically or mentally to work. Defendant promised to pay him a stipend every two weeks for the rest of plaintiff’s life. Then defendant died and payments stopped. A moral obligation is sufficient consideration if the defendant received a material benefit, but moral obligations usually do not suffice. Saving another’s life constitutes a material benefit (wages, etc.). Defendant’s subsequent promise to pay for the benefit implies that he requested it to begin with. Third parties can’t promise! (ex. Father promising to pay woman after she took care of his adult son is not

enforceable). Promise can not be gratuitous - significant time lapse between event and promise and partial performance of promise in Webb are both evidence that promise was not gratuitous

VIII. Restitution a. Not based on the existence of a promise – there is no promise!b. AKA quantum meruit, quasi-contract, implied in law – applies to absence of a

contract, prevents unjust enrichment, there is no real contract between the parties, so the courts will apply a quasi-contract

c. “A person that has been unjustly enriched at the expense of another is required to make restitution to the other.” (that is, restore the benefit to its rightful owner, the plaintiff)

d. (1) benefit conferred (2) justice and fairness requires compensation, although a promise is absent

e. This is promissory restitution WITHOUT the promisei. If no contract exists, but an individual confers a benefit on another without

being asked, when, if ever, should that individual, when no promise was ever made?

1. Nursing Care v. Dobos - Nursing Care failed to prove an express contract or a contract implied in fact. However, there is sufficient evidence to support a contract implied in law entitling plaintiff to recovery. The defendant would be unjustly enriched at the expense of the plaintiff if she were allowed to escape payment for services rendered or work performed. Where services are rendered by one person for another which are knowingly and voluntarily accepted, the law presumes that such services are given and received in expectation of being paid for, and will imply a promise to pay what they are reasonably worth. Dobos was clearly in need of emergency care, and there was no question of her doctor's professional judgment. Dobos would have been unjustly enriched if Nursing Care was not compensated for the services that saved her life.

I. Officious Intermeddler Doctrine - Where a person performs labor for another without the latter’s request or implied consent, however beneficial it may be, he cannot recover therefore.

I. Exceptions

I. Emergency Aid Exception - if there is an emergency and immediate action is required to prevent harm or destruction and the conferor has no reason to believe, and advanced assent is impossible, then that person who confers is not an officious intermeddler (Classic example is doctor because he intends to charge and is acting unofficiously) (People who save other people’s pets, they conferred a benefit upon the pet owner)

II. Moral Obligation Exception – A moral obligation is a duty that cannot be legally enforced. It is more than a desire to be charitable. (Ex. In family situations, but be careful because if you get too close in proximity, it is not objectively reasonably

for you to give aid to your dying parent and expect to be paid – this would be gratuitous.)

ii. Estate of Cleveland v. Gordon – Moral Obligation. Family members are not intermeddlers. They are generally precluded from recovering for services provided to their close relatives because the law presumes that they were a gratuitous part of the relationship when the relatives live together as part of the same family. Exception: in this case, the niece expected to be reimbursed, and she was not close at all with her aunt. She kept detailed records of expenses incurred and her help to her aunt was not gratuitous.

1. Watch out for gratuitous, imposed (officious intermeddler), intent to charge (not officious intermeddler)

Defensesf. Infancy

i. Rationale1. Minors deserve protection because they can be taken advantage of

by adults and so will be discouraged from trying if courts will not enforce resulting contract

2. And, they are not fully capable of making choices for themselves ii. Total bright line – age of majority in your jurisdiction.

iii. Disaffirmance 1. General Rule

I. Minor can disaffirm any contract into which he enters. II. If a person enters into contract while he is a minor, and

once he turns of-age, he can disaffirm in a reasonable amount of time, so disaffirmance happens after reaching age of majority.

III. It’s possible that if a person entered into a contract as a minor, but performed on the contract in some way after reaching the age of majority that the performance could ratify the contract and extinguish the person’s right to disaffirm.

I. Ratification terminates your power to avoid can be by an express action or by an implied ratification. Ratification means K was voidable, but now I have affirmed in some way that I want this contract to say in place. (Kobe Bryant).

iv. Necessity1. Something that minor has an actual need for and has to get for

himself, useful and suitable to actual need. Food, clothing, shelter, transportation to and from work, medical services, dental services.

2. Minor remains liable for necessities. He is liable under a quasi-contract theory.

I. When a minor avoids a contract, he has to return what is left of the consideration exchange. You have to give the beat up tv once you disaffirm. If it is not a necessity, the minor has no liability.

II. Nec LiablityIII. Minor emancipated? --- No. Parents liabilityIV. Minor emancipated? --- Yes. Minor Liable

3. Minor is entitled under general rule, to recover everything that the minor gave to the adult. If he gave 500 for tv, he can receive 500 back. Minor is expected to return consideration as much as he has.

4. Lemke case – doesn’t have to take into account depreciation - adult can still maintain a tort claim against the child if you were negligent, grossly negligent, intentionally, damage the property.

g. Mental Incapacityi. Mentally incapacitated people are easily taken advantage of, they can be

exploited. Different than a minor. There are varying degrees of mental incapacitation. You can have full possession of your mental faculties and three days later you can be without those faculties. At the time of contracting, were you mentally incapacitated.

ii. People who are incompetent mentally deserve to be protected. Law isn’t as draconian on mental incompetence as it is on age-related invalidation.

iii. A person incurs a voidable contractual duty if the person cant understand what he’s doing OR understand what the consequences of what he’s doing are that is going to implicate mental incapacity. If the person is not able to act in a reasonable manner (so out of character) and if the party with whom that mentally incapacitated person has reason to know there is some mental illness or defect, that will also implicate mental incapacity.

1. a – cognitive2. b - volitional

h. Intoxicationi. Sometimes intoxication is voluntary, sometimes it’s as a result of a disease

and so is not.ii. In either circumstance, the contract is voidable by the intoxicated person he

is so drunk that1. He is unable to understand what he’s doing or the consequences of

his actions, OR2. He is unable to act like a reasonable person in the transaction.

i. Public Policyi. Rationale

1. Unlike minority, incapacity, or intoxication, this defense is not about protecting a vulnerable individual, but rather is about protecting policies of the state that serve the public.

2. What are the bases for a violation of public policyI. Legislative action (statutes, ordinances, etc.)

I. What the statute specifically makes illegalII. The policies that animate the statute

II. Constitution (state and federal)III. Administrative agency regulations (in some jurisdictions)IV. Judicial decisions (in some jurisdictions)

3. Licensing statutes: whether a statute that requires a person to have a license to do a particular kind of work can be the basis for determining a violation of public policy depends on the purpose of the statute

I. If the purpose is raise revenue for the state, then a violation of the statute will likely not be a valid basis for finding a violation of public policy.

II. If the purpose is certify skill or fitness to perform the work, then a violation of the statute will likely be a valid basis for finding a violation of public policy.

III. How can you tell?  Look at what the statute requires of the applicant for the license. 

I. If it requires that the applicant pass a test of one or more skills related to the work to be performed, then it will fall under (b).

II. If it just requires the filling out of a form and paying over some money to the certifying agency, then it falls under (a).

ii. Application1. Balancing Test

I. Importance of policyI. How strongly does the law favor this policy?

II. Will denial of enforcement support the policy, further its goals?

III. Was there any bargaining misconduct involved?IV. Would the party have agreed to the term absent

the bargaining misconduct?II. Impact of avoidance on contracting party

I. What were justified expectations of the parties?II. What will the party denied enforcement lose?

2. If the contract calls for the performance of an illegal act, it’s void.iii. Remedies – a court can

1. Find the entire agreement void2. Find the specific provision void3. Reform the provision via the blue-pencil rule

I. Blue-pencil rule: if the court can strike out the language that violates public policy and leave an intelligible, non-offensive agreement, it may do so.