8/19/14 4:16 PMContractsChapter 1 A roadmap for contract lawLUCY v. ZEHMERSupreme Court of Virginia, 1954.196 Va. 493, 84 S.E.2d 516.

FactsW. O. Lucy and J. C. Lucy (brother of W. O.) sued Ida S. Zehmer and A. H. Zehmer (husband of Ida) for specific performance of a contract that the Zehmers sold the Fegurson Farm W. O. owned by A. H. Zehmer for $50,000J. C. Lucy was transferred a half interest in the alleged purchase by W.O. LucyWritten by A. H. Zehmer, signed by A. H. and Ida S. (on back of bar check)A. H. stated they had several drinks, wrote it in jest, induced his wife to sign itBut testimony and evidences supports that A. H. was not drunk enough to being unable to comprehend the nature of the contractA. H. did not display this jest to LucyA. H. told W. O. that he had no intention of selling the farm afterwards

Procedural HistoryTrial court stated the complainants had failed to establish their right to specific performance. Appeals court reversed and ruled the complainants have a right to specific performance.

Issues Is there a binding agreement between the parties?Did the complainants establish the right to specific performance? Did the Zehmers intend to sell the farm and enter into a contract? Were the Zehmers sober enough to enter into the contract?

Holding and RuleCoherent minds, no fraud, misrepresentation, sharp practice and dealing between unequal parties. Zehmer admitted the $50,000 was a good price. Restatement of the Law of Contracts: The mental assent of the parties is not requisite for the formation of a contract. If the words or other acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial (irrelevant) except when an unreasonable meaning which he attaches to his manifestations is known to the other party. Undisclosed intent does not matter.The decree is therefore reversed and the cause is remanded for the entry of a proper decree requiring the defendants to perform the contract in accordance with the prayer of the bill.

NotesSpecific performance is not a matter of absolute or arbitrary right, but is addressed to the reasonable and sound discretion of the court. First Nat. Bank. V. Roanoke Oil Co., supra, 169 Va. At p. 116, 192 S.E. at p. 71.

The discretion which may be exercised is not an arbitrary or capricious one, but one which is controlled by the established doctrines and settled principles of equity; and, generally, where a contract is in its nature and circumstances objectionable, it is as much a matter of course for courts of equity to decree a specific performance of it as it is for a court of law to give damages for a breach of it. Bond v. Crawford, 193 Va. 437, 444, 69 S.E. (2d) 470, 475.

We must look to the outward expression of a person as manifesting his intention rather than to his secret and unexpressed intention. The law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. First Nat. Bank v. Roanoke Oil Co., 169 Va. 99, 114, 192 S.E. 764, 770.

The mental assent of the parties is not requisite for the formation of a contract. If the words or other acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial (irrelevant) except when an unreasonable meaning which he attaches to his manifestations is known to the other party. Restatement of the Law of Contracts, Vol. I, SS 71, p. 74.

If his words and acts, judged by a reasonable standard, manifest an intention to agree, it is immaterial what may be the real but unexpressed state of his mind.

A person cannot set up that he was merely jesting when his conduct and words would warrant a reasonable person in believing that he intended a real agreement. Avoidance of a contract depends on a showing that the other party induced the drunkenness or that the consideration was inadequate or that the transaction departed from the normal pattern of similar transactions; if the particular transaction in its result is one which a reasonably competent person might have made, it cannot be avoided even though executory Restatement 2d, Contracts SS 16, comment b. In Lucy v. Zehmer, maybe the court would have reached a different outcome because Lucy brought alcohol to help get Zehmer drunk. Mental illness for adults is the other main reason for lack of capacity (restatement 2d SS15). It is voidable if a person with a mental illness is unable to understand in a reasonable manner the nature and consequences of the transaction, or is unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of this condition.

Expectation interest expected each other to act in performance with the contractReliance interest has acted (spent money, time, etc.) expecting the performance of the contractRestitution interest profit from the promise at the expense of the other party (but it is enforceable on the expectation interests alone)Is there a legally binding contract between these two parties?Statute of Fraud some contracts (including sale of land) requires a writing signed by the party against whom a promise is to be enforcedDefault terms off the shelf contractual provisions when the contract is too vague and is enforced despite the vaguenessContract of adhesion prepared by one party and presented to the other, who has no choice but to sign the form if it wishes to do businessRestatements are not statutes

Pepsico - A reasonable person would not presume to be able to purchase a $23 million plane for $700,000.

Northern Indiana Public Service Co. v. Carbon County Coal Co. United States Court of Appeals, Seventh Circuit, 1986. 799 F.2d 265.

FactsNIPSCO (an electric utility regulated by the Indiana Public Service Commission) owned and operated a coal mine in WY. NIPSCO agreed to purchase and Carbon County agreed to sell 1.5 million tons of coal every year for 20 years at a price of $24 a ton subject to various provisions for escalation in 1978 by 1985 the price rose to $44 a ton. NIPSCO was directed by the Indiana Public Services Commission to purchase electricity for a lower price from other companies for resale to its customer. NIPSCO was able to buy electricity at prices below the cost of generating electricity from coal bought under the contract. On April 24, 1985, NIPSCO brought a diversity suit against Carbon County in a fed. District court in Indiana seeking to be excused from its obligations permanently or at least until the economy purchase orders ceased preventing it from passing on the cost to its ratepayers. (took the risk to secure an assured supply of coal)May 17, 1985 Carbon County counterclaimed for breach of contract and moved for a preliminary injunction requiring NIPSCO to continue taking delivery under the contract. June 19 district court granted preliminary injunction. Scheduled court for August 26 resulted in a jury verdict for Carbon County of $181 million and dissolved the injunction.

Procedural HistoryTrial court found Carbon County $181 million to be paid by NIPSCO.

IssuesCan NIPSCOs obligations be excused or suspended by the force majeure (extraordinary event) clause, doctrines of frustration or impracticability? Did the Public Service Commissions economy purchase orders prevent NIPSCO from using the coal it agreed to buy?Carbon County entitled to specific performance of the contract?

Holding and RuleAll of these doctrines (impracticability, force majeure, frustration) cannot help NIPSCO because the shifting of risk is to the party better able to bear it, either because they are in a better position to prevent it or because they can better reduce the disutility of the risk. The fact that costs decrease steeply cannot allow the buyer to walk away from the contract. As far as the cross-appeal by Carbon County (seeking specific performance), there is no merit. The only way to go around the damages award is if the award is not an adequate remedy. In this case, they are.

The court of appeals turned down both parties appeals.

NotesForce majeure clause to stop taking delivery of coal for any cause beyond its reasonable control including but not limited to orders or acts of civil authority which wholly or partly prevent clause. Meant to protect against unpredictable and catastrophic events that may very adversely affect them. The very purpose of a fixed price agreement is to place the risk of increased costs on the promisor (Carbon County) and the risk of decreased costs on the promisee (NIPSCO).

Krell v. Henry, 1903Krell rented Henry a suite of rooms to watch coronation of Edward VII. Henry refused to pay and the court allowed him to do so because his purpose in renting had been frustrated by postponement, outside of the power of either of the parties. Which party did the contract (implicitly) allocate the risk? Krell could always relet the room for the coronations new date. So Henry was excused. All of these doctrines (impracticability, force majeure, frustration) cannot help NIPSCO because the shift risk to the party better able to bear it, either because they are in a better position to prevent it or because he can better reduce the disutility of the risk.

Possible hardships to workers in Hanna, WY none of these people were parties to the contract or third-party beneficiaries. In Mississippi Power & Light Co v. United Gas Pipe Line Co., the customers were the real parties in interest on the plaintiff side of the case and had to be taken into account. Carbon County does not stand in a rep. relation to the workers and businesses of Hanna. NIPSCO did not assume such liability of them when signing the contract.

Reading of 32-65The Bargain Theory of ContractExecutory neither party will yet have performed or be performingWithout consideration (each promise is the others promise), executor contracts are not enforceable. Contracts 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 a duty. Mainly oriented toward future performance, and law must recognize the promise as resulting in legal duties and remedies. Formal contract contract under seal is an example, one that is legally enforceable not because of its content or because of the circumstances in which it was given, but chiefly because of way in which it was made. Consideration requirements:To constitute consideration, a performance r a return promise must be bargained for. A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.The performance may consist of (a) an act other than a promise or (b) a forbearance, or (c) the creation, modification or destruction of a legal relation

Hamer v. Sidway, Court of Appeals of New York, 1891.

Facts: On, March 20, 1869 William E Story agreed to give $5,000 to his nephew if he refrained from drinking, tobacco, swearing and playing cards or billiards for money until he was 21. At such time, he would pay his nephew. The nephew ended up performing as stated. Defendant says the contract was without consideration.

Issue: Whether by virtue of a contract defendants testator William E Story became indebted to his nephew William E Story, 2d, on his twenty-first birthday in the sum of five thousand dollars? Is forbearance from permissible legal conduct sufficient consideration to create a valid and enforceable contract?

Rule: It is enough that something is promised, done, forborne or suffered by the party to whom the promise is made as consideration for the promise made to him. In Lakota v. Newton (Superior Court of Mass.), defendant promised to pay $100 if the plaintiff didnt drink for one year. Plaintiffs assent thereto, performance of the condition by him and demanded judgment therefor. Contract was enforceable. Consideration, then, was established in this case. January 31, 1875 defendant was indebted to his nephew in the sum of $5,000. Key thing here: only ONE party must suffer/benefit in order for there to be consideration. Refraining from something that one is entitled to do is a detriment. The order appealed from should be reversed and the judgment of the Special Term affirmed, with costs payable out of the estate.

Lake Land Employment Group of Akron, LLC, v. ColumberSupreme Court of Ohio, 2004.

Facts: Lake Land claimed that its ex-employee, Columber, breached a noncompetition agreement that the parties had executed. 3 years after termination, Columber would not engage in any business within a 50 mile radius of Akron, Ohio that would compete with the business of Lake Land. Lake Land claimed he was fired in 2001. Lake Land is seeking money damages and an order prohibiting Columber from engaging in any activities that violated the noncompetition agreement. Columber plead lack of consideration. Columber stated he vaguely remembers signing the agreement in September 1991, but did not talk to an attorney or anyone else about it.

Procedural History: Trial court granted summary judgment in Columbers favor (stated it was unenforceable and lacked consideration). Appeals court confirmed. However, it did certify a conflict between a previous judgment of the Eighth District Court of Appeals in Swagelok Co. v. Young; Is subsequent employment alone sufficient consideration to support a covenant-not-to-compete agreement with an at-will employee entered into after employment has already begun?

Elements of a contract include:An offerAcceptanceContractual capacityConsideration (bargained-for legal benefit or detriment)A detriment to the promisee (employer) or a benefit to the promisor (employee) (in this example)Mutual promises to employ and to be employed on an ongoing at-will basis, according to agreed terms, are supported by consideration (the promise of one serves as consideration for the promise of the other) The presentation of a noncompetition agreement is an attempt to renegotiate the terms of the parties at-will employment.As is, requesting a raise or demanding a pay cut The employees assent to the agreement is given in exchange for forbearance on the part of the employer from terminating the employee. RULETherefore, consideration exists to support a noncompetition agreement when, in exchange for the agreement of the at-will employee, the employer continues an at-will employment relationship. Manifestation of mutual assentLegality of object and of consideration

We recognize that weighing of these factors (validity of a restraining contract) should not be performed in the context of an inquiry concerning the sufficiency of consideration. It does remain the law that noncompetition agreements, like other contracts, may be voidable or unenforceable for reasons other than lack of consideration. A covenant not to compete which imposes unreasonable restrictions upon an employee will be enforced to the extent necessary to protect an employers legitimate interests. A covenant restraining an employee from competing with his former employer upon termination of employment is reasonable if the restrain is no greater than is required for the protection of the employer, does not impose undue hardship on the employee, and is not injurious to the public.

Issue: Is simply not firing an at-will employee consideration for a noncompetition contract?

Rule: Summary judgment in Columbers favor should not have been entered on the basis of lack of consideration. The trial court must determine whether the noncompetition agreement is reasonable pursuant to controlling precedent. We therefore reverse the judgment of the court of appeals and remand the cause for further proceedings. Dissent: Judge Resnick continued employment does not constitute consideration in an at-will relationship.

Petroleum Refractionating Corp. v. Kendrick Oil Co. Circuit Court of Appeals, Tenth Circuit, 1933.

January 15, 1932, Kendrick gave an order to Petroleum Corp ship to Omaha, Nebraska, 1.5 million gallons (10% more or less) of 35-37 straight run gas oil, meeting Metropolitan Utilities District specifications. Price 45cent barrel. FOB-Pampa, TX. Seller may cancel any unshipped portion of this order on five days notice, if for any reason, he should discontinue making this grade of oil.The Petroleum Corporation accepted such order and delivered thereunder 62,601 gallons of such oil. February 16, 1932, Kendrick Company notified Petro Corp that it would not accept further deliveries under such order for the reason that the grade of oil being shipped was not of standard stipulated in the order. Petro Corp, on Feb 21, 1932, resold the portion of the oil remaining undelivered at 25 cents a barrel. Petro sought damages for the difference between the contract price and the resale price of such oil. Trial court no consideration for the promise of the Kendrick Company to purchase, and sustained the demurrer. The Petroleum Corporation elected to stand on its amended petition, and the trial court entered judgment for the Kendrick Company.

A benefit to the promisor or a detriment to the promise is a sufficient consideration for a contract. Detriment, as used in the definition, means legal detriment as distinguished from detriment in fact. It is the giving up by the promise of a legal right; refraining from doing what he has the legal right to do, or the doing of what he has the legal right not to do And where there is a detriment to the promise, there need be no benefit to the promisor.

Issue: Would discontinuance by the Petroleum Corporation to manufacture the grade of oil contracted for result in such a detriment to it as would constitute a consideration for the promise of the Kendrick Company to purchase? Was Petro Corps discontinuation of production adequate consideration?

Rule and Holding: City of Marshall v. Kalman (1922) Kalman agreed to purchase all the street improvement certificates. Court held that, although the city had not agreed to issue any certificates, it had restricted its freedom to sell to others any certificates which it might issue, and that such restriction was a valid consideration for the promise of Kalman to purchase. The discontinuance by the Petroleum Corporation to manufacture the grade of oil specified in the contract would constitute a detriment to it, and the promise so to do would be a sufficient consideration for the promise of the Kendrick Company to purchase. The judgment is reversed with instructions to overrule the demurrer.

Harrington v. Taylor Supreme Court of North Carolina, 1945.

Defendant assaulted his wife, who took refuge in plaintiffs house. The next day he went to the house and assaulted her again. The defendants wife was about to injure him with an axe when the plaintiff intervened, the axe came into contact with the plaintiffs hand, causing it to be mutilated very badly, but saved the defendants life. Defendant orally promised to pay the plaintiff her damages. But, after paying a small sum, failed to pay anything more. Defendant demurred to the complaint as not stating a cause of action, and demurrer was sustained.

Issue: Was there a consideration recognized by our law as sufficient to support the promise?

Rule and Holding: Court is of the opinion that the defendant should be compelled by gratitude to alleviate the plaintiffs misfortune, a humanitarian act of this kind, voluntarily performed, is not such consideration as would entitle her to recover legally. The judgment sustaining the demurrer is Affirmed.

Hamilton Bancshares, Inc. v. LeroyAppellate Court of Illinois, Fourth District, 1985.

Plaintiff is seeking specific performance. Two stock purchase options 80 day limit. Within the option period, defendants gave notice of their withdrawal of the options. Plaintiff sought to exercise the options, and subsequently commenced this action. Defendants maintained they had the right to withdraw the option offers before exercise, plaintiff maintained they had no such right. President signed two checks for $5,000 to be applied to the purchase price of the shares subject to the options in the event that the option is exercised and to be refunded to me in the event that the option is not.Trial court granted defendants motion for summary judgment, concluding consideration was insufficient to support the options, and thereafter denied plaintiffs post-trial motion. Court ruled that the earnest money was of no benefit to defendants as it had to be returned if the options were not exercised.

When a person accepts possession of personal property with the express or implied understanding to hold it for certain specific purposes or specified persons, a valid and enforceable trust exists. Defendants claim that they were trustees and could derive no benefit from said money. Valid express trust requires:Intent of the parties to create a trust as shown by a writing or by circumstancesDefinite subject matter of trust property Ascertainable beneficiaries A trusteeSpecifications of a trust purpose and how the trust is to be performedDelivery of the trust property to the trustee.

Appellate court rejects defendants theory. There was no record to support intent of parties to create a trust. Checks were made payable to both defendants using their names. Option contract has two elements: Offer to do something, or to forbear (not do something), which does not become a contract until accepted An agreement to leave the offer open for a specified timeDetriment, legally, means giving up something which immediately prior thereto the promise was privileged to retain, or doing or refraining from doing something which he was then privileged not to do, or not to refrain from doing. Benefit, legally, must mean the receiving as the exchange for his promise of some performance or forbearance which the promisor was not previously entitled to receive. That the promisor had no previous right to it is enough to show that it is beneficial.

Common sense dictates that plaintiffs parting with $5,000 earnest money under each option contract for more than 30 days constituted a legal detriment to plaintiff. Circuit court erred in granting summary judgment. It should only be granted when the pleadings, depositions and admissions, together with any affidavits, show there is no genuine issue as to a material fact. Holding: The judgment must be reversed, and cause remanded for further proceedings consistent with this opinion.

Fisher v. JacksonSupreme Court of Connecticut, 1955.

Plaintiff seeks to recover damages for the breach of an oral agreement of employment.

The defendant has appealed from the judgment rendered upon a plaintiffs verdict. Oral agreement alleged defendant induced the plaintiff to give up his current job of making $50/week with bakers for being a reporter where he would make $40/week, keep the job for his life or until disabled, and a salary increase of $5 per week annually.

Defendants contention no evidence that the parties had agreed upon such a contract. The job under discussion was a permanent one rather than for a definite term and was terminable at will by either party.

Plaintiff was hired in January of 1944 worked for the New Haven Register (newspaper owned by defendant). He was fired on or about January 7, 1949. Initial contact between parties magazine ad that said permanent position as a reporter awaited an all-around male newsman with experience on several beats, and educational background that would stand up in a University city. Managing editor, who hired plaintiff, died before trial.

Issue: Was the court in error in denying the defendants motion to set the verdict aside on the ground that it is not supported on the issue of liability, and in denying the defendants motion for judgment notwithstanding the verdict?

Rule: In absence of a consideration, in addition to the rendering of services incident to the employment, an agreement for a permanent employment is no more than an indefinite general hiring, terminable at the will of either party without liability to the other.

Holding: It seems clear to us that the job was more than just a mere temporary place, not for the duration of ones life. Hiring was indefinite as to time and terminable by either party at his will. Plaintiff argues he suffered a detriment by giving up his job. To constitute sufficient consideration for a promise, an act or promise not only must be a detriment to the promisee but must be bargained for and given in exchange for the promise. Nowhere does it suggest that the plaintiff was asked to give up his job with the bakery firm. The court should have directed judgment for the defendant notwithstanding the verdict. There is error, the judgment is set aside and the case is remanded with direction to render judgment for the defendant notwithstanding the verdict.

Reading of Reliance, p. 65-90 August 31Ricketts v. ScothornSupreme Court of Nebraska, 1898Andrew Ricketts executor of the last will and testament of John Rickets (grandfather) Katie Scothorn granddaughterCopy of promissory note: I promise to pay to Katie Scothorn on demand, $2,000, to be at 6 per cent per annum. J.C. Ricketts. Katie states that her grandfather and the promise induced her to quit her job, which she did (none of his other grandchildren had to work and neither did she). She gained employment a year later (1892). Her grandfather died about 2 years later (1894). Estoppel definition: a right arising from acts, admissions, or conduct which have induced a change of position in accordance with the real or apparent intention of the party against whom they are alleged. (or who in good faith relied upon such conduct, and has been led thereby to change his position for the worse, and who on his part acquires some corresponding right, either of property, of contract, or of remedy) Procedural History: District court allowed Katie to recover against the defendant. Issue: Is the promise enforceable? Holding and Ruling: Having intentionally influenced the plaintiff to alter her position for the worse on the faith of the note being paid when due, it would be grossly inequitable to permit the maker, or his executor, to resist payment on the ground that the promise was given without consideration. Evidence establishes an equitable estoppel. The judgment is correct and is affirmed. Section 90: 1) the promisor should anticipate reliance by the promise 2) that such reliance then occurs 3) the remedy for breach may be limited as justice requires.

Cohen v. Cowles Media Co. Supreme Court of Minnesota, 1992. Case comes as remand from SCOTUS. Previously held that plaintiffs verdict of $200,000 could not be sustained on a theory of breach of contract. On remand, we now conclude the verdict is sustainable on the theory of promissory estoppel and affirm the jurys award of damages.

Oct 28. 1982 Minneapolis Star and Tribune and St. Paul Pioneer Press both published a story about the DFL nominee for lieutenant governor, stating he had been charged in 1969 for three counts of unlawful assembly and in 1970 for shoplifting. Both papers revealed Dan Cohen (member of the Independent-Republican gubernatorial candidate) supplied this info to them. Cohen then sued both papers (Cowel Media Co and NW Publications Inc.). Cohen was fired the same day the stories were published. Issues: 1) Does Cohens failure to plead promissory estoppel bar him from pursuing that theory now? 2) does our state constitutional guarantee of a free press bar use of promissory estoppel to enforce promises of confidentiality? 3) does public policy bar Cohen from enforcing the newspapers promises of confidentiality? 4) if Cohen may proceed under promissory estoppel, should the case be remanded for retrial or should the jurys award of compensatory damages be reinstated? 1- Appellate courts may review any matter as the interest of justice may require. We conclude it would be unfair not to allow Cohen to proceed under promissory estoppel. 2 not barred by Minnesotas constitution 3/4 Retrial is unnecessary. Promissory Estoppel a promise which is expected to induce definite action by the promise, and does induce the action, is binding if injustice can be avoided only by enforcing the promise. The newspaper promised to treat Cohen as an anonymous source. Is it unjust? We agree that denying Cohen any recourse is unjust. Absent the showing of any compelling need in this case to break the anonymous promise, we conclude that the resultant harm to Cohen requires a remedy here to avoid an injustice. Defendants are liable in damages. $200,000 is appropriate.

Midwest Energy Inc. v. Orion Food Systems, Inc. Court of Appeals of Missouri, Eastern District, Division Five, 2000.

Trial court granted summary judgment on all three counts on the plaintiffs petition. Those being 1) Breach of contract by Orion in failing to grant a franchise to Midwest 2) Promissory estoppel against Orion in accordance with the provisions of Section 90 of the Restatement 3) Fraud and deceit against Ries for willfully misstating the extent of his authority. Midwest MO service station corporation, Orion South Dakota corporation developed recipes and equipment for several fast food systemsTed Ries, defendant, visited Laura Younghouse (Fruitland, MOs sole stockholder and president of the service station) after her request to have a franchise of Orions product line. Count I the franchise agreement was not signed by Orion therefore, it is unenforceable. Thus, there was no error in granting summary judgment.Count II see the elements of promissory estoppel as (1) a promise; (2) foreseeability of reliance; (3) reliance; and (4) injustice absent enforcement. Are the actions of Ries, on behalf of Orion, sufficient to provide a basis for the relief Midwest seeks? 1) Promises shown by the proffers are sufficient to establish a promise. 2) Ries had every reason to believe Midwest would rely on his directions, for fear the franchise would be withdrawn. 3) Midwest did not investigate other franchisors and made changes in its plans for the fast food area as instructed by Ries. 4) Parties will have to work with the trial court in determining the appropriate route for damages. Perceive genuine issues of material fact on each of the essential elements of an action under Section 90 sufficient to withstand a motion for summary judgment. Count III Judgments on Count II and III are reversed and the case is remanded for appropriate proceedings consistent with this opinion.

Bailey v. WestSupreme Court of Rhode Island, 1969

Plaintiff alleges defendant is indebted to him for his care of a racehorse from May 3, 1962 July 3, 1966. Justice of a superior court decided for the plaintiff for his cost of boarding the horse for five months immediately subsequent to May 3 and for certain expenses incurred by him in trimming its hoofs. Both the plaintiff and the defendant are appealing. The horse was purchased in April, was lame and thus was left on the farm of the plaintiff (because it could not be sold back and the plaintiff willingly accepted it) until July 3, 1966, when it was sold by plaintiff to a third party. Defendant alleges that the trial judge erred in finding a contract implied in fact between the parties. We agree. There was no intent to promise or mutual agreement between the plaintiff and defendant as to establish a contract implied in fact. We believe that there never existed an essential element to the formulation of the contract, namely, an intent to contract. Issue: Was the plaintiff acting as a volunteer at the time he accepted the horse for boarding at his farm (enough to establish a quasi contract)? May a volunteer recover for a benefit conferred under quasi contract? No. If a performance is rendered by one person without any request by another, it is very unlikely that this person will be under a legal duty to pay compensation. A person should not be required to become an obligor unless he so desires. It is clear the plaintiff cannot recover. It is our judgment that the plaintiff was a mere volunteer as he knew at the time he accepted the horse for boarding that a controversy surrounded its ownership. And, the evidence shows that upon receipt of first bill, the defendant notified him that he was not the owner of the horse.

Plantiffs appeal is denied and dismissed, defendants cross appeal is sustained, and the cause is remanded to the superior court for entry of judgment for the defendant.

Sept. 9th reading, 91-117Sun Printing & Publish. Assoc. v. Remington Paper & Power Co., Court of Appeals NY, 1923 P agreed to buy 1,000 tons of paper per month during the months of September, 1919, to December, 1920, inclusive, 16,000 tons from D. Payment to be made on the 20th of each month. The price was to be fixed for the first four months, then adjustable based on terms they would agree upon in re-negotiations, but capped at a certain standard (no higher than what is charged by Canadian Export Paper Company to the large consumers). The contract stated that the price should be agreed upon between the parties fifteen days prior to the expiration of the previously agreed term Before the designated renegotiation time, D stopped delivering. P demanded that D supply them with paper at the price ceiling, and renewed that demand monthly based on the Canadian Export Paper standard for the rest of the year. Agreement to agree. Issue: Was the defendant within its rights to release itself from the contract due to lack of specificity of the length of the pricing period? Holding: The lack of specified term length in the contract makes Remington, D, able to release itself. Legal Rule: Even if they agree upon the price at which to buy, and the standard at which to cap the price, that is not enough to be legally binding; it lacks a specified term during which to buy at that price. Without specifying the term, the contract has functionally morphed into an options contract, offering the option to accept or deny the benchmark maximum price every month. Without specifying the term, they have functionally only made an agreement to agree, an agreement from which Remington could release itself without consequence. Cardozo says the court shouldnt fill in the blanks at all. The black-letter contract, when its got all the necessary parts, is sacrosanct, and once a court starts stepping in and dictating what they think the contract reasonably should have been, the force and certainty of all contracts comes into question. The order of the Appellate Division should be reversed and that of the Special Term affirmed, with costs in the Appellate Division and in this court, and the question certified answered in the negative.

Ford Motor Credit Co. v. Russell, Court of Appeals Minn., 19941. Appellants Dawn Russel and David Russel challenge entry of summary judgment in favor of respondents Ford Motor Credit Co and Monticello Fod and Mercury on appellants claims for breach of contract. 1. Because we find that the automobile advertisement did not constitute an offer to the general public, and that Ford Credit complied with various Acts in question and resold the automobile in a commercially reasonable manner, we affirm. 1. Car purchased in 1988 through a loan established by Ford Motor Credit1. Ms. Russells father cosigned the loan. 1. In 1990, Ms. Russell defaulted on numerous payments. After numerous failed attempts to work out a payment schedule, Ford Credit sent the Russells a notice of default and intent to repossess. 12. They repossessed on Feb. 13, 1991 and resold for $2,200 to a used car dealer. 1. The district court granted Ford Credit Cos motion for summary judgment on its deficiency claim, and Monticello Fords motion for summary judgment on the Russells third party complaint. 1. Do genuine issues of material fact exist? Did the district court correctly apply the law? The evidence must be viewed in the light most favorable to the nonmoving party. 14. Generally, if goods are advertised for sale at a certain price, it is not an offer and no contract is formed; such an ad is merely an invitation to bargain rather than an offer. 14. We conclude that the ad did not constitute an offer of sale to the general public. (an ad may constitute an offer where it is clear, definite, explicit, and leaves nothing open for negotiation). 1. Not everyone qualifies for financing and there is not an unlimited amount of cars to sell, it would be unreasonable to believe the ad was an offer binding the advertiser. 14. The ad did not constitute an offer to the public so as to bind the advertiser. Summary judgment was proper. Affirmed. Davis v. Satrom, Supreme Court of North Dakota, 19861. P appeals from a district court summary judgment dismissing his complaint against Gayle E. Satrom and D. C. Blair for specific performance of an alleged contract for the sale and purchase of a mobile home park or damages for breach of the contract. We affirm. 1. After negotiating to buy a mobile home park from Satrom and Blair, Davis sent to a real estate agent, Wisdom, a letter of intent dated July 24, 1986 to purchase the park. 16. Blair changed some of the terms and returned it to Davis. 16. Davis then submitted an unsigned commercial purchase agreement and deposit receipt containing terms not present in the letter of intent. 16. Blair signed it after inserting several handwritten conditions, including one making the agreement subject to the approval of the sellers attorney. 16. By letter dated Sept. 7, 1984, Blair told Wisdom they would pass Davis offer and terms. Wisdom forwarded this letter to Blair. 16. On Sept. 25, 1984, Davis sent a letter to Satrom stating, I am ready to fully perform under the terms of the purchase agreement that you and Mr. Blair signed. Included a $10,000 check. 16. Davis sued for specific performance or damages trial court entered summary judgment dismissing the action. 1. Issue: Was summary judgment properly granted?17. The purpose of s.j. is to promote expeditious disposition of cases without trial when there is no dispute as to material facts or inferences to be drawn from undisputed facts, or when only a question of law is involved. 17. A conditional or qualified acceptance is itself a counter offer and rejects the original offer so that no valid contract is made. 17. Whenever a modification of the terms of a proposal, made in response to a proposal, changes the terms of the original proposal, the modification is a new proposal or counter offer.17. The contract never became effective because the condition precedent, lawyers approval, never occurred. Merced County Sheriffs Employees Assn v. County of Merced, Court of Appeal of California, 19871. The trial court ruled that the salary increase formula in the Sheriffs MOU was ambiguous and that the parties consent to that formula was based on a mutual good faith mistake in its meaning; it ordered the paragraph rescinded and renegotiated. The Firefighters Association salary formula, however, with additional explanatory language, was found to be unambiguous and binding on the parties in accordance with its express terms. The appeal and cross-appeal followed.1. We reverse the judgment. Sheriffs A. agreement to be enforceable according to the interpretation by the S.A. The F.A. agreement to be unenforceable because of its irreconcilable ambiguity and the failure of the parties to reach a meeting of the minds. 1. With S.A.: the S.A. understood the percentages would apply to the differential between the existing salary and the survey average, while the County understood the percentages would apply to the survey average itself. 20. Section 20 of the restatement: There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and0. (a) neither party knows or has reason to know the meaning attached by the other; or0. (b) each party knows or each party has reason to know the meaning attached by the other20. Without mutual assent, no contract is formed. Therefore, under the rules of Section 20, no contract is formed if neither party is at fault or if both parties are equally at fault. 20. What a reasonable person would believe from the outward manifestations of consent.20. Here, we have a written integrated contract which reasonably can be interpreted as meaning exactly what the S.A. intended it to mean. mutual assent is gathered from the reasonable meaning of words and the acts of the parties, NOT their unexpressed intentions or understandings20. Section 20 again: The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if that party has no reason to know any different meaning attached by the other, and the other has reason to know the meaning attached by the first party. A party may thus be bound by a negligent manifestation of assent if the other party is not equally negligent. 20. The interpretation espoused by S.A. is appropriate. 1. With F.A.21. We conclude that both parties are at fault in their understanding of the meaning of the firefighters agreement. The County improperly advised the firefighters that the purpose of the language added to paragraph 7d was to insure that the firefighters would remain 5 percent below the deputies salary. The firefighters were equally at fault in light of the countys testimony that Mr. Gnass told them their percentages would apply to the survey salaries and not to a differential between salaries. 21. The parties will have to renegotiate the salary increase. There was no objective manifestation of assent. 21. Judgment is reversed.

September 10 Reading, Ardente v. Horan, Mid-South v. Shoneys, Double AA Builders v. Grand State Const.

Ardente v. Horan, Supreme Court of Rhode Island, 1976 In August 1975, P made a bid of $250,000 on residential property in Newport owned by D Horan, D, notified Ardente, P, that the offer was accepted and forwarded a formal written agreement. P signed the agreement and returned it with a $20,000 check and a request for confirmation that certain items of furniture would be included in the transaction. D refused to sell those items or the property and did not sign the purchase and sales agreement. P is suing for specific performance and D moved for summary judgment on the grounds that no contract had formed. Court held that Ps request for confirmation regarding additional items was conditional acceptance and therefore a counteroffer. Court granted Ds motion for summary judgment and P is appealing. Issue: Must an acceptance be definite and unequivocal to be effective? Holding and Rule: Yes. In this specific case, the mere execution of the agreement alone would have operated as acceptance. However, the terms of the letter conditioned that acceptance upon the inclusion of furniture. An acceptance may not impose additional conditions on the offer, nor may it add limitations. An acceptance, which is equivocal or upon condition or limiting, is a counteroffer and requires acceptance by the original offeror before a contract exists. However, an acceptance may be valid despite conditional language IF the acceptance is clearly independent of the condition.The court held that the letter of acceptance by P was NOT consistent with an absolute acceptance accompanied by a request for a gratuitous benefit and therefore was a conditional acceptance or counteroffer. Affirmed.

The offeror is master of the offer.An offer may invite or require acceptance to be made by an affirmative answer in words, or by performing or refraining from performing, or may empower the offeree to make a selection of terms in his acceptance. Offeror can control the form in which acceptance occurs. Unless otherwise unambiguously indicated by the language or circumstances (a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances

Mid-South Packers, Inc. v. Shoneys, Inc., US Court of Appeals, 5th circuit, 1985 In the spring of 1982, P and D engaged in negotiations for D to purchase pork products from P. Eventually, they agreed that P would sell to D on an as-ordered-basis. Part of the agreement was that there would be a 45-day notice of any price increase. D made an order, P informed D of a 10 cents per pound increase. Shoneys protested, but purchased anyway. D ordered several more times. On the last order, Shoneys deducted $26,208 to offset what Shoneys believed to be Mid-Souths improper price increases. Mid-South sued for breach, and the trial court granted it summary judgment. Shoneys appealed. Issue: In the absence of a requirements contract, does each sale of a product to a purchaser carry its own contractual terms? Holding and Rule: Yes. Unless a purchaser has agreed to buy all its requirements from a supplier, each sale order is a contract unto itself and carries its own terms. Here, there was no such requirements contract. Therefore, the clause stating that an increase in price would be made only after 45 days notice was, at most, a firm offer which expired when the first sale was made. Each sale thereafter was based on such terms as were negotiated then. Here, Mid-South offered a sale at higher prices and Shoneys accepted. A contract was made, and Shoneys was liable for the full price. Affirmed.

Double AA Builders, Ltd. V. Grand State Const. LLC, C of A of Arizona, 2005 D is a subcontractor appealing a judgment awarding damages to P, a general contractor, on a promissory estoppel claim. Double AA cross appeals the trial courts denial of attorneys fees under Arizona Revised Statutes We affirm the judgment in favor the general contractor because the evidence is sufficient to support the trial courts implied findings of each element of promissory estoppel. We also conclude that ARS section 12-341.01(A) is not applicable to a promise made enforceable by the doctrine of promissory estoppel and we therefore affirm the trial courts denial of attorneys fees to the general contractor. Dec. 18, 2001 Grand State faxed a written but unsigned bid to Double AA in the amount of $115,000 for installation of the Exterior Insulation Finish System on the project IT stated, Our price is good for 30 days. Double AA received other bids for the same work. On December 21, Home Depot advised Double AA that Double AA was the successful bidder for the project. On January 11, Double AA sent a subcontract to Grand State to be signed and returned. Grand State responded that it would not be performing or working on the project. From the time we received a contract from your office, we signed four other contracts that were bid around the same time period. Double AA entered into a subcontract with another group that cost $16, 449 more. Double AA demanded Grand State pay the difference between its bid and General Contractors ultimate cost. Grand State refused, Double AA filed suit based upon promissory estoppel After a one day bench trial, court ruled in favor of Double AA, P. The appeal followed. Holding and Rule: A subcontractors refusal to honor its bid can be financially disastrous for the general contractor, because it will typically be bound by the bid price submitted to the owner. Promises binding under promissory estoppel: A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promise 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. This doctrine has been used to require the subcontractor to perform according to the terms of its bid to the contractor if the contractor receives the contract award, SINCE the contractor has relied on the subcontractors bid and must perform for a price based on that reliance. To prove it, Double AA must prove Subcontractor made a promise and should have reasonably foreseen that the general contractor would rely on that promise and Further that the general contractor did in fact rely on that promise. Also must show that the general contractor had a justifiable right to rely on the promise. If those elements are proven, the promise is binding if injustice can be avoided only by enforcement of the promise. Affirmed. Reading p. 141-169, Sept. 12, Negotiation and ClosureSituation Management Systems v. Malouf, Inc., Supreme Judicial court of Mass., 2000 Malouf (LMA) was considering purchasing Kasten Company as SMS was not able to meet their asking price. SMSs president, Earl Rose, encouraged Malouf to purchase Kasten. Malouf stated they would need a five-year agreement with SMS before LMA could afford to commit to the purchase of Kasten. Based on a statement from Alex Moore, chairman of SMS, agreeing to alter their existing contract to a five-year term, Malouf negotiated an agreement to purchase Kasten. Feb 1920 By June 1990, LMA had not received a written contract from SMS. Malouf telephoned Earl Rose and told him he needed confirmation of the 5 year agreement Rose expressed his assurance of a long-term agreement of at least five years and his support of Malouf purchasing Kasten. Significant changes to the contract occurred after Malouf purchased Kasten. In February 1991, SMS terminated negotiations and advised LMA that their contract would expire in December 1992. After that, LMAs sales declined from 2.7 mil to $500,000 in 1993. LMA sued SMS for breach of contract. Judge instructed jury LMA had to show that it was more probable than not that there was an offer, an acceptance of that offer, and an agreement between LMA and SMS as to the essential elements of the contract. To create an enforceable contract, there must be agreement between the parties on the material terms of the contract, and the parties must have a present intention to be bound by that agreement. If all the material terms have been agreed upon, it may be inferred that the writing to be drafted and delivered is a mere memorial of the contract. An award of expectancy damages may include lost profits. AS such, the jury were warranted in awarding lost profits to LMA.

Arnold Palmer Golf Co. v. Fuqua Industries, US Court of Appeals for the Sixth Circuit, 1976 Palmer appealed the judgment of the US District Court for the ND of Ohio granting summary judgment in favor of Fuqua and dismissed its breach of contract action against Fuqua, based on its finding that a document denominated as a memo of intent was not a contract. Palmer filed a breach of contract against Fuqua after Fuqua informed Palmer that it did not intend to go through with a deal between the parties, which was culminated in a document denominated as a memo of intent. The district court granted summary judgment in defendants favor, finding that the document was not a contract and the parties were not bound until a definitive agreement satisfactory to both parties had been prepared. Plaintiff appealed. Memo of intent was signed by both parties. Context matters. The court held that whether the parties contractually obligated themselves to prepare a definitive agreement in accordance with the memorandum of intent was a question of fact, which could not have been decided on a motion for summary judgment. The court held that the issue of the parties intention was for resolution by the trier of fact, and consideration of the entire document and the relevant circumstances surrounding its adoption, including outside evidence, was required to determine the parties intention. Court held that whether Palmer could recover lost profits required further proof. Reversed and remanded for trial.

Empro Manufacturing Co inc v. Ball-Co Manufacturing inc., Us Court of Appeals, Seventh Circuit, 1989 D, Ball-Co, made specialty valve components and sought a buyer for its assets. Empro, P, expressed interest in buying the assets and the title to the land under Ball-Cos plant; and after preliminary negotiations submitted a three page letter of intent to purchase Ball-Co for $2.4 million. The letter conditioned the purchase upon certain conditions precedent including the approval of Empros board of directors. Negotiations ended when Empro refused Ball-Cos request for a security interest in the land upon which the plant was situated. Empro later learned Ball-Co was negotiating to sell the assets to another party and Empro brought an action in diversity, asserting that the letter of intent was a binding agreement. Empro sought a temporary restraining order and the trial court dismissed the complaint for failure to state a claim upon which relief could be granted. Empro appealed. Issue: What is the test for establishing intent to be bound in contract formation? Holding and Rule: An objective test is used to determine intent in the context. Intent in contract law is evaluated under an objective rather than subjective standard. A party who makes a deal subject to a later definitive agreement has manifested an objective intent not to be bound. Under the parol evidence rule this become the definitive intent even if one party later claims that its true subjective intent at the time was different. Empros letter states twice that it was subject to a later definitive agreement. It also states twice that it contains general terms and conditions but that each side retains the right to make additional demands. Empro insulated itself further from the transaction by making the deal subject to board approval. The letter was not a one sided commitment to buy Ball-Co because from the beginning Ball-Co assumed it could negotiate terms different from those contained in the letter. While approaching agreement in stages is a valuable method of doing business, in this case there was no binding agreement. Affirmed. Copeland v. Baskin Robbins USA, 2002 Baskin Robbins intended on closing one of its manufacturing plants in Vernon, Cali. Copeland expressed an interest in acquiring it. The parties commenced negotiations. Copeland made clear from the outset his agreement to purchase the plant was contingent on an agreement to purchase the ice cream he manufactured there. With co-packing, the deal doesnt work (according to Copeland). Several months of negotiations an agreement took place where Copeland would purchase the plants manufacturing assets and sublease the plant property. Baskin Robbins would purchase seven million gallons of ice cream from Copeland over a three-year period. May 1999 letter - $3,000 deposit was sent along with the signed letter back to Baskin Robbins. Baskin Robbins broke off negotiations in July 1999 for the co-packing agreement. Could not agree upon the price of the ice cream, flavor, quality, control standards, spoilage responsibility, etc. BR returned Copelands deposit and informed Copeland that it would continue negotiations on the sale of the plant and the lease of the plants assets, but not on the part of the agreement for purchase of the ice cream. Copeland sued BR for breach of contract by refusing to reach agreement on the terms for the co-packing agreement. Baskin Robbins claimed the agreement to agree could not be made the basis of a cause of action. Trial court granted BRs motion for summary judgment based on the fact that the essential elements of the co-packing deal were never agreed upon, and, consequently, there was no enforceable contract. Issue: Can a contract to negotiate an agreement be formed and breached like any other contract? Holding and Decision: Yes, a contract to negotiate an agreement can be formed and breached like any other contract. It is still a general rule that where the essential elements of a promise are reserved for future agreement that no legal obligation arises until that future agreement is reached. However, persons are free to enter into contracts for anything that does not involve illegal or immoral subject matter, and a valid contract to negotiate for the remaining terms of a contract can be entered into by the parties. This is distinguishable from an unenforceable agreement to agree for two reasons. A contract to negotiate terms of an agreement is not of the same substance as a mere agreement to agree in that such a contract is discharged as long as the parties negotiate in good faith. Second, performance is ascertainable in that sufficient terms of the negotiation can be articulated creating the required substantive elements of the contract. In this instance, where the negotiations concern the sale of goods, the correspondence between the parties sufficiently identified the subject matter as more than just an idea and binds the parties to complete the negotiations. Consequently, the covenant of good faith and fair dealing applies. Sound public policy reasons exist for protecting parties from bad faith practices during business negotiations. Slow forming contracts are time consuming and costly and the parties investments should be protected from bad faith dealing. Damages lie only on the basis of reliance theory because expectation damages are not ascertainable. Here, Copeland cannot recover because there is no way to know what the ultimate terms of the agreement would have been if there had ever been an agreement. Judgment affirmed.Reading 169-180, 180-227 for the week of Sept.15-19Racine & Laramie, LTD., Inc. v. department of Parks and Recreation, C of A of CA, 19921. Contract was executed in 1974 for a term of 40 years, thus extending until the year 20141. Racine negotiated with the Parks department for modifications in the concession contract which would permit expanded operations of the premises. 10. Originally limited to the operation of a tobacco shop and wine tasting facility, the negotiations contemplated operation of a restaurant and selling alcohol within.1. When negotiations broke down in 1988, Racine brought suit for Breach of Implied Covenant of Good Faith and Fair Dealing11. Jury found that the Department was guilty of breach of the covenant in its negotiations of an amendment/new contract to the concession agreement with the plaintiff11. Resulted damages of $592,1101. Department appeals on two grounds: (1) there can be no breach of covenant of good faith by a refusal to enter into a new contract and (2) the damage award is speculative and excessive. 12. Since we rule in favor of the department, we do not reach the damage issue.1. Any contract which would permit on-premises sale of alcohol must receive approval by the State Park and rec Commission, which has power to guide the Department1. On March 31, 1983 the Commission authorized the Department to permit the requested expansion, provided the concession contract be amended to conform to other contracts which had been negotiated with other Old Town concessionaires and include such other terms as may be required. 1. The parties continued to negotiate until August 1985, had a 32 month hiatus and restarted negotiations1. June 9, 1988, Racine proposed a different restaurant than the one in the 1983 draft16. 300 seater compared to 45-70 seats and sought to close the tobacco store completely16. The department responded on August 3 rejecting the proposal1. They felt the then constituted Commission would probably not accept full alcoholic sale privileges. 1. The department also favored only a quick food restaurant1. We reverse because we conclude that the Department had no obligation to negotiate new terms of the concession contract, that its commencement and continuance of negotiations over a long period of time had no effect upon this lack of obligation, and that its assumption of an arbitrary stance at some point in the negotiations cannot therefore be a breach of any contract term. 17. The covenant of good faith is read into contracts in order to protect the express covenants or promises of the contract, not to protect some general public policy interest not directly tied to the contracts purpose. 17. There is no obligation to deal fairly or in good faith absent an existing contract. If there exists a contractual relationship between the parties, as was here, the implied covenant is limited to assuring compliance with the EXPRESS terms of the contract, and cannot be extended to create obligations not contemplated in the contract. 17. The fact that parties commence negotiations looking to a contract, or to amend an existing contract, does not by itself impose any duty on either party not to be unreasonable or not to break off negotiations, for any reason or for no reason. 1. There was in this case simply no contractual basis upon which to extract implied conditions of good faith bargaining.

New England Insulation Co v. General Dynamics Corp., Appeals Court of Mass, 1988.1. New England appeals from dismissal of its action as against D. We reverse in view of the generous reading which must be accorded to a complaint in passing on a motion to dismiss.1. Defendants quite rightly assert that requests for bids are usually nonbinding invitations for offers. And that it retained discretion to choose the insulation company with which it would contract. 20. It does not follow, however, that General Dynamics could not limit its freedom to act by making representations in its invitations to bid which it knew or should have known would be reasonably relied upon b the plaintiff. 1. Where the bid solicitor is a governmental entity, numerous cases impose liability on an implied contract theory. 21. In the public contracting domain, an invitation to bid upon certain conditions followed by the submission of a bid on those conditions creates an implied contract obligating the bid solicitor to these conditions. 21. There is surely no policy which would be served by allowing solicitors of bids in the private sector to ignore the conditions they themselves set and ask others to rely upon. 1. The defendants, private solicitors of bids, were held bound by the terms of their notice as modified by an oral agreement with the bidders. Although the holding related to the condition requiring the defendants to accept the low bid from the invited bidders, the discussion suggests that the agreed upon terms, e.g., the opening of bids in the presence of all bidders, were also binding on the solicitors of bids 1. The judgment dismissing the complaint against the defendants is reversed.

UCC 2-207 is all about the intersection between the process of contract formation and contract interpretation.

Gardner Zemke Co. v. Dunham Bush, Inc., Sup Ct of NM, 19931. Zemke, general contractor on a Department of Energy project, ordered air-conditioning equipment from Dunham Bush to be used in connect with the project. Order contained a one-year manufacturers warranty provision and the requirement that the units comply with the specifications attached to the order. 1. Bush responded with its preprinted acknowledgement form containing extensive warranty disclaimers and a provision stating that silence was deemed acquiescence to the terms of the agreement. 1. Neither party addressed the discrepancies in the forms exchanged and proceeded with the transaction. Several months after the units were installed, DOE notified Zemke of problems with two of the units, and they in turn contacted Bush for on-site warranty repairs. 1. Bush informed Zemke that prior to service they would need a purchase order from the DOE as payment for the repair services. 27. Zemke rejected the proposal asserting that DOE had a warranty to cover the repairs, and DOE, eventually hired an independent contract at a cost of $24,245. 1. DOE then withheld $20,000 from its contract with Zemke and Zemke field suit against Bush for breach of contract. 1. Trial court found that the acknowledgment form sent by Dunham was a counteroffer that Zemke accepted by silence, so they were therefore not covered by warranty or entitled to damages. On appeal, Zemke argued that the trial court erred in finding the acknowledgment as a counteroffer. 1. Issue: Where clauses on confirming forms sent by both parties conflict, must each party be assumed to object to a clause of the other conflicting with one on the confirmation sent by themselves? 1. Rule: Where clauses on confirming forms sent by both parties conflict, each party must be assumed to object to a clause of the other, and the contract then consists of the terms originally expressly agreed to and terms on which the confirmations agree. UCC 2-2071. Holding and Decision: Yes, where clauses on confirming forms sent by both parties conflict, each party must be assumed to object to a clause of the other and the contract then consists of the terms originally expressly agreed to and terms on which the confirmations agree. 32. On remand, should the trial court conclude a contract was formed under 2-207(1), the conflicting warranty provisions in the parties forms will cancel out, and the warranty provisions of Article 2 will control. 32. Furthermore, whether an acceptance is made expressly conditional on assent to different or additional terms is dependent on the commercial context of the transaction. 32. This requires consideration of both parties activities during the making of the bargain and, when available, relevant evidence of the course of performance. 32. These are questions of fact to be determined on remand. Remanded.Step-Saver data Systems v. Wyse Technology, US C of A, Third Circuit, 19911. Trial judge held that the terms of the Limited Use License Agreement governed the purchase of the package, and, therefore, granted the software produce, The Software Link, Inc, a directed verdict on claims of breach of warranty brought by a disgruntled purchaser, Step-Saver. 1. We disagree and reverse and remand the warranty claims for further consideration. We do affirm in all other effects. 1. Step-saver orders computer programs, D promises to ship, P sends purchase order, D ships with invoice & box-top license, P pays (box-top license said opening box implies you accept the terms; if one disagrees, return the unopened package for a refund) 35. no reference was made during the calls or on the purchase orders or the invoices with regard to a disclaimer of any warranties.1. Step-Saver ended up selling about 142 systems, and soon after the systems were installed, they began to receive complaints36. The box-top license, argues Step-Saver, was a material alteration to the partiess contract which did not become a part of the contract under UCC 2-20736. TSL argues that the contract between TSL and Step-Saver did not come into existence until Step-Saver received the program, saw the terms of the license, and opened the program packaging. 1. ISSUE: Will an additional term detailed in a box-top license be incorporated into a parties contract if the terms addition to the contract would materially alter the partiess agreement?1. Holding and Decision: No, an additional term that materially alters the parties agreement from a box-top license will not be incorporated into a parties contract. 38. The terms of the box-top license were not incorporated in to the agreement. The license was a written confirmation containing additional terms and since such terms would materially alter the parties agreement, they did not become part of the parties agreement. 38. TSL never mentioned during the parties negotiations leading to the purchase of the programs, nor did it, at any time, obtain Step-Savers express assent to, the terms of the box-top license. 38. The box-top license in this case is best seen as one more form in a battle of forms. 38. We hold that contract was sufficiently definite without the terms provided by the box-top license. (it held specific goods involved, quantity and the price)38. Proceeding with a contract after receiving a writing that purports to define the terms of the parties contract is not sufficient to establish the parties consent to the terms of the writing to the extent that the terms of the writing either add to, or differ from, the terms detailed in the parties earlier writings or discussions. 38. The terms of the license were not sufficiently important so that TSL would forgo its sales to Step-Saver if TSL could not obtain Step-Savers consent to those terms. TSL assured Step-Saver that the license did not apply to Step-Saver because it was not the end user. 38. TSL also allowed Step-Saver to transfer the program despite the license prohibiting that. The repeated sending of a writing which contains certain standard terms, without any action with respect to the issues addressed by those terms, cannot constitute a course of dealing which would incorporate a term of the writing otherwise excluded under the UCC. 38. Therefore, P is not bound by the license simply because it placed its orders for copies of the program with notice of the terms of the license. Reversed and remanded. Material alterations after the contract is formed are not incorporated into the parties agreement. Hill v. Gateway 2000, Inc. US C of A, 7th circuit, 19971. The Hills ordered a computer from Gateway by phone, apparently without being told anything about the detailed terms that would govern the purchase. They paid by credit card before shipment. 39. Computer arrived at their home, and inside the box was a contract document containing a variety of terms, including a mandatory-arbitration clause. 39. The document recited that all terms in it would become the parties contract unless the customer returned the computer for a full refund within 30 days. 39. A contract need not be read to be effective; people who accept take the risk that the unread terms may in retrospect prove unwelcome. 39. Hills kept the computer, then were unhappy with the performance; brought a federal court class action on behalf of themselves and similarly situated owners, claiming that Gateway was a racketeer and seeking treble damages.39. Gateway sought to dismiss the suit on the theory that the contract was not formed until the Hills kept the computer for 30 days, thereby agreeing to the terms-in-the-box, including the arbitration clause. 39. Hills argued, inter alia, that the contract was formed at the time they ordered, case was governed by 2-207, and that under that section the arbitration clause never became part of the contract. 1. Issue: In order for an arbitration clause to be valid, must the purchaser receive notice of the clause apart from the terms and conditions of sale included in a box, or must the clause be otherwise prominent to stand out?40. Does an allegation that an arbitration clause is part of a scheme to defraud render that clause unenforceable? 1. Holding and Rule: In order for an arbitration clause to be valid, the purchaser need not receive notice of the clause apart from the terms and conditions of sale included in a box, and the clause need not be otherwise prominent or stand out. 41. An allegation that an arbitration clause is part of a scheme to defraud does not render that clause unenforceable. 41. The terms included in the box stand or fall together if the terms constitute the contract between the parties then all must be enforced.1. Judge Easterbrook found for Gateway, accepting the argument that the contract was only formed when the Hills kept the computer for 30 days, thus making the arbitration clause part of the contract. Easterbrook concluded that none of the distinctions urged by the Hills should make a difference. 42. 2-207 argument rejected: When there is only one form, section 2-207 is irrelevant. C & J Fertilizer, Inc. v. Allied Mutual Insurance Co., SC of Iowa, 1975 C&J Fertilizer operated a fertilizer plant and was insured by Allied Mutual Insurance. The insurance contract defined burglary as the felonious abstraction of insured property from within the premises by a person making felonious entry therein by actual force and violence, of which force and violence there are visible marks made by tools, explosives, electricity or chemicals upon, or physical damage to, the exterior of the premises at the place of such entry. Employees reporting for work one morning found the front office door unlocked. The door could be forced open without leaving visible marks or damage. The door to an interior room used to store chemicals was damaged and had marks apparently made by tools. Chemicals worth $9,582 and other property valued at $400 was taken from the building. The plaintiff brought this suit against Allied because they refused payment on its claim. The trial court entered judgment in favor of Allied on the grounds that the definition o burglary as stated in the contract was unambiguous. Evidence that the burglary was an inside job was negated by the fact that the thief was required to break into the interior room. Issue: Will a contract term in an adhesion contract be enforced if the strict enforcement of that term results in forfeiture? Does the doctrine of reasonable expectations apply to insurance contracts? Holding and rule: No. Yes, the doctrine of reasonable expectations applies to insurance contracts. The court held that an insurance policy carries an implied warranty of fitness for its intended purpose and the reasonable expectations of the policy holder are to be enforced. In construing and applying a standardized contract, courts seek to effectuate the reasonable expectations of the average policy holder. An insurance company tenders the insurance upon a take it or leave it basis. Policy holders do not read the detailed, cross-referenced, standardized, mass-produced insurance forms, and would not understand them if they did. Therefore, the courts have adopted the doctrine of reasonable expectations. The objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated those expectations. The court held that customers are not bound to unknown terms beyond the range of reasonable expectation. A party who adheres to the other partys standard terms does not assent to a term if the other party has reason to believe the adhering party would not have accepted the agreement if he had known that the agreement contained that term. Reason to believe may be inferred from the fact that the term is bizarre or oppressive, eviscerates the non-standard terms explicitly agreed to, or eliminates the dominant purpose of the transaction. The court held that the definition of burglary stated in this policy comports neither with the concept a layman might have of that crime, nor with a legal interpretation. Although implied warranties of fitness for intended purpose have traditionally been attached only to sales of tangible products, there is no reason why it should not be attached to sales of promises as well. The court held the insurance policy breached the implied warranty of fitness for its intended purpose. Standardized contracts such as insurance policies are carefully scrutinized to avoid enforcement of unconscionable clauses. If a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without said term, OR may so limit the application of any unconscionable term as to avoid any unconscionable result Gross inequality of bargaining power, together with terms unreasonably favorable to the stronger party may confirm indications that the transaction involved elements of deception or compulsion, or may show that the weaker party had no meaningful choice, no real alternative, or did not in fact assent or appear to assent to the unfair terms. The court held that in this case the Ps evidence demonstrated that definitional provision was unconscionable. Reversed and remanded.

C.R. Klewin, Inc v. Flagship Properties, Inc., SC of Connecticut 1991 Construction Manager (P) v. Contractor (D) D, Flagship, representatives held a dinner with P representatives P suggested what fee it would require to serve as a construction manager At the end, D agent said that they had a deal and the agents from both parties shook hands. No other terms or conditions were conclusively established Agreement was publicized and a press conference was held. Construction began on May 4, 1987 on 1st phase of project. March 1988 D retained another contractor for the next phase. P filed suit in district court for breach of an oral contract. Ds motion for summary judgment was granted. P appealed. 2nd circuit court of appeals certified questions to the Conn. SC on issues not addressed in CT case law. Issue: Will the Statute of Frauds, requiring a writing for an agreement that is not to be performed within one year from the making thereof, render unenforceable an oral contract that fails to specify explicitly the time for performance when performance of that contract within on year of its making is very unlikely? Holding: No. The Statute of Frauds, requiring a writing for an agreement that is not to be performed within one year from the making thereof, will not render unenforceable an oral K that fails to specify explicitly the time for performance (even if it will take longer than 1 year. The Statute of Frauds excludes Ks except those whose performance cannot possibly be completed within one year. CT case law has narrowly construed the statute of frauds in this area. In this case, the oral agreement did not specify a time for completion. When an oral K does not expressly dictate that performance will last beyond one year, the K will be construed as a matter of law to be a K of indefinite duration for purposes of the Statute of Frauds. Given that narrow interpretation, it is enough that the agreement left open the possibility of completion within one year. The K is enforceable. MIGEROBE, INC. v. CERTINA USA, INC., US C of A, 5th circuit, 1991 D is a watch manufacturer breached an oral contract to deliver an order of watches, liable for $157,133 in damages P is a Mississippi corporation that owns and operates jewelry stores K started in October 1987 Gerald Murff was a sales rep of Certina. P contacted Murff (who they had a history of doing business with) and told him that P would be interested in purchasing watches if D would decide to sell a large portion of its inventory at reduced prices On October 21, Murff was provided with a listo f watches from Ds inventory that Murff could offer to P at a price of $45 each. Murff scheduled a meeting on October 29 with P to present the offer. Prior to the meeting Murff requested and received an additional list of watches to present to P. After negotiating quantities and styles, payment terms, and a shipping date, P agreed to purchase 2,000 watches at a price of $45 each. Which was recorded on an order form in the home office the same day. Nov 4 the national accounts manager called P to say they would not be shipping the watches President said the order was rejected because the price was lower than what it gave other customers and afraid it may violate Robinson-Patman act. P filed suit awarded $157,133 in damages Writing must meet three requirements in order for it to be valid: (1) it must be sufficient to indicate that a contract for sale has been made between the parties (2) the writing must be signed by a party against whom enforcement is sought (3) the writing must specify a quantity Taken together, all of these documents, some of which are signed by D, show all three elements. A writing may consist of separate writings, connected together by express reference to each other or internal evidence of their unity. Thus, there is a K. The two signed writings taken with the unsigned writing constitute a K. In one signed document, Murff was authorized to sell Certina watches at the discounted price. In the other signed document, a promotion code was set up to cover the special price for P. The unsigned writing contains the quantity, styles, prices, etc. Affirmed.

CONAGRA INC v. NIERENBERG, SC of Montana 2000 D (farmers) contracted with P (grain elevator owner) over the phone to sell wheat to P Had agreement on amount, time of shipment and price. 12,500 bushels at $5.01 a bushel P sent written confirmation to D, D never signed, and then D sold wheat to someone else Oral contract P is seeking expectation damages of $14,125 District court entered judgment for Nierenbergs. Court found P had failed to sufficiently establish that an enforceable oral agreement existed between the parties, and thus the Ds prevailed on their statute of frauds defense. P appealed. Raba, manager of Conagras Shelby, Montana grain elevator, filled out a customary order sheet memorializing the terms discussed during the phone call. Undisputed that D requested a written contract to be prepared for his signature and that Raba followed this instruction. Contract provided price, quantity and time of shipment. After D sold the wheat to someone else, P called in May to follow up D put him off by telling Raba that he would deliver the wheat one of these days. Issue: Did the district court err by finding and concluding that Dennis Nierenberg, an agent for the Nierenbergs, did not admit making a contract to sell wheat to ConAgra? Did the district court err by concluding that the Nierenbergs did not receive written confirmation of the sale and purchase of their grain within a reasonable time? Holding: 2-201(1) contract over $500 is not enforceable unless it is reduced to writing and signed by the party against whom enforcement is sought. Exceptions: 2-201(3)(b) if a party admits that an oral contract for sale was made by way of his pleadings, testimony or otherwise in court, then he can no longer assert a statute of frauds defense. 2-201(2) if both parties are merchants, if within a reasonable time a writing in confirmation of the oral contract is sent to the other which, if received within a reasonable time, provides that the receiving party has 10 days to object in writing. Should the receiving party fail to object, he can no longer assert a statute of frauds defense. Here, pursuant to 201(3)(b), Dennis did not deliberately, clearly, and unequivocally admit in his testimony that a K for sale was made by phone with ConAgra on April 9, 1996. Dennis never objected to the written writing he received within 10 days as pursuant to 201(2)(1). Was the confirmation sent within a reasonable time? He received the confirmation on April 19, 1996 (10 days after the phone call). District court held that given the price fluctuations in the market, 10 days was not a reasonable time. Not the proper metric, court must examine (1) the merchants usual practice or policy for such transactions, and (2) the merchants excuse for not following its practice or policy Ps usual practice was to either old the confirmation until the farmer came in, or mail it to the farmer, depending on the farmers preference. D deliberately delayed, without informing P of their true intentions, the K sat around until it was mailed as in normal practice. Therefore, the time was reasonable and D is barred from a statute of frauds defense. Reversed and remanded.

LIGE DICKSON CO. v. UNION OIL CO. OF CALIFORNIA, SC of WA 1981 May an oral promise otherwise within the statute of frauds nevertheless be enforceable on the basis of promissory estoppel? P and D had a long standing relationship dating from 1937. P was a general contract and purchased oil-based products from defendant. In 1964, D encouraged P to enter the asphalt paving business. P purchased all its liquid asphalt from D over the next 9 years. Normal course of business: P telephoned orders to D, P was invoiced, and all bills were paid. P & D never executed a written K providing for the sale and purchase of liquid asphalt. In 1971, P requested, and D provided, an oral guaranty against further increases insofar as would affect those Ks which committed the P to manufacture and sell asphalt paving at fixed, agreed sums. Ds sales reps visited P and ascertained tonnage of liquid asphalt needed for P to fulfill existing paving Ks and also promised P that the price for that liquid tonnage would be protected. (1971-Nov. 1973) In November 1973, D wrote to P that the price of liquid asphalt was rising by $3 per ton and P was informed on December 6 and 13, 1973 of further increases. To be applicable to all purchases made after December 31. Without a firm supplier, P was unable to seek new paving Ks during the first part of 1974. P incurred a total increased out-of-pocket cost of $39,006.50 in acquiring liquid asphalt to perform existing Ks. P brought suit against D for breach of contract. Trial court rendered it unenforceable according to 2-201. P appealed. May an oral promise otherwise within the statute of frauds nevertheless be enforceable on the basis of promissory estoppel? Court: Dispute is about whether UCC 2-201(3) displaces estoppel principles, in which case promissory estoppel cannot be applied to enlarge the means of avoiding the statute of frauds. 1-103: principles of common law supplement unless otherwise displaced. Idea is that there a number of estoppel principles already built into the exception to the UCC statute of frauds rule, so they displace the use of other estoppel principles. Majority of courts say you can find promissory estoppel to overcome writing requirement. promissory estoppel claim fails, 2-201(3) states all exceptions, need uniformity, dont want an increase in litigation (minority view) (1) Is the oral agreement within the Statute of Frauds? If NO, it is enforceable If YES, (2) Is the agreement evidenced by a writing? If YES, it is enforceable If NO, (3) Is there an exception? If YES, it is enforceable If NO, it is not enforceableMY LEGS (determining if statute of frauds applies) Marriage Year, or more Land sale Executor (for the will of a decedent) Goods sale > $500 Surety (guarantor) contract to answer for the duty of anotherPAROL EVIDENCE RULE A rule that governs the extent to which parties to a case may introduce into court evidence of a prior or contemporaneous agreement in order to modify, explain or supplement the contract at issue. The rule states that where the parties to a K intended for their written agreement to be the full and final expression of their bargain (i.e., the writing is an integration), other written or oral agreements that were made prior to or simultaneous with the writing are inadmissible for the purpose of changing the terms of the original agreement. Baker v. Bailey, SC of Montana, 1989 Trial court found Bakers liable for breach of the covenant of good faith and fair dealing and further found their claims for damages arising out of breach of contract should not be fully granted. We reverse in party and affirm in part. P filed a lawsuit to recover for the value of a refrigerator and certain unpaid expenses which they felt were owed by the Baileys. D counterclaimed and sought damages for breach of the Water Well Use Agreement. Classic parol evidence problem In the absence of fraud, duress, or mutual mistake, all extrinsic evidence must be excluded if the parties have reduced their agreement to an integrated writing. Under this rule, all prior and contemporaneous negotiations or understandings of the contract are merged, once that contract is reduced to writing. The fact that there may have been further oral understandings between the parties is not admissible. The Baileys land was not worth as much when they couldnt include the well in the sale of the land. The Water Well Use Agreement clearly stated that the agreement would terminate in the event the Baileys no longer occupy the land. Bakers did not breach the terms of the Water Well Use Agreement. Masteron v. Sine, 1968, SC of Californiaaaaaaaa Dallas and Rebecca Masterson owned a ranch as tenants in common which they conveyed by grant deed to Dallas sister and her husband (i.e. Sine, D). P reserved an option to repurchase the ranch within 10 years in exchange for the consideration paid by Sine, plus the depreciation value of any improvements. Dallas later went bankrupt. Rebecca and Dallas trustee in bankruptcy brought a declaratory judgment action to establish their right to exercise the option. At a bench trial, the court decided that the parol evidence rule precluded admission of extrinsic evidence offered by Ds to show that the parties wanted the property kept in the Masterson family, and that the option was therefore personal to the grantors and could not be exercised by the trustee in bankruptcy. The court entered judgment in favor of P and D appealed on the grounds that the option provision was too uncertain to be enforced and extrinsic evidence as to meaning should not have been admitted. Issues: Under what circumstances should evidence of oral collateral agreements be excluded? How must the court determine whether a collateral agreement is such that it might naturally have been made as a separate agreement? Holding and Rule: Evidence of oral collateral agreements should be excluded ONLY when the fact finder is likely to be misled. When determining that a collateral agreement is such that it might naturally be made as a separate agreement, the court must look to the actual experience and dealings between the parties as they view the status of such a collateral agr