Gennaro Priolo – Contracts Outline

PART A: Promissory Liability

Contracts: The Law of Promises
Restatement Common Law (RSC) or Uniform Commercial Code (UCC)

RSC § 2 Promise; Promisor; Promisee; Beneficiary

Promise - intention to act or refrain from acting in a specified way made as a commitment to the promisee.
Promisor - person manifesting the intention
Promisee - person who was promised
Beneficiary - person who benefited other than the promisee
 
RSC § 3 Agreement Defined; Bargain Defined
Agreement - is mutual assent on part of two or more persons
Bargain - is agreement to exchange promises or to exchange a promise for a performance or to exchange
performances. - Bargain - mutually induced – manifestation of inducement (if no inducement then it’s a sham)

Types of Contracts - Is the contract unilateral or bilateral?

Bilateral Contract – includes 2 promises (Each promisor is a promisee in bilateral)

- EX: Bank promises to lend money in return promise to pay back interest

Unilateral Contract – only one promise while other party engages in performance
- EX: Hamer (paid nephew to stop smoking)

A. Express Contract: Formed by language – oral or written

B. Implied in Fact Contract: Formed by manifestations of assent rather than written or oral language
a. EX: person sits in barber’s chair and the barber cuts his hair; a contract has been formed by
the conduct
C. Implied in Law Contract or Quasi-Contract: Not contracts at all; constructed by the courts to avoid
unjust enrichment by permitting P to bring an action in restitution to recover the amount of the benefit
conferred on the D.
What body of law applies? UCC or Restatement
 UCC Article 2 applies to the sale of movable goods.
o UCC § 2-105 states “things other than money that are movable at the time of sale, including
unborn animals and growing crops, which are not actually movable”
o UCC applies to everyone who buys and sells goods - NOT ONLY MERCHANTS
o However, there may be heightened standards for merchants in certain situations

- Not covered by Article 2 - fixtures, real estate, Article 2 does not apply to services)
- UCC does gap-fill – anything but the subject matter (item) and quantity.

- Common Law (Restatement) governs all other contracts

o Common law doesn't often gap fill
 
UCC- Gap Fillers
o UCC §2-309(2) - NO SPECIFIED TIME - Determines the time if no time was specified
o UCC §2-305(A) - NO PRICE - Parties can conclude a contract even though the price is not settled
o UCC §2-308(A) - PLACE OF DELIVERY - Unless otherwise agreed the place for delivery of the goods is the sellers place of
business (the buyer must go pick it up) if the seller has not business, then the pickup will be at the sellers' residence
o UCC §2-309(1)-TERM (how long a contract last) AND TIME OF DELIVERY OR ANY OTHER TIME - if not provided
or agreed upon shall be a reasonable time
o UCC 2-310(A) - PAYMENT unless otherwise agreed payment is due at the time and place of delivery
o UCC applies to everyone who buys and sells goods - DOES NOT HAVE TO ONLY BE MERCHANTS

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  However, there may be heightened standards for merchants in certain situations
Consideration and Bargain Theory of Contract
 Consideration is what parties are promising for – quid pro quo (this for that)
o Ex: if A promises B a dollar for a book - the book is the consideration for A, the dollar is the
consideration for B.
o Consideration is a tool to indicate a red flag, but in a court the issue will not be consideration
 Rather, the issue will be identified as fraud, duress, unconscionability
- *****Courts do not inquire into adequacy of consideration in a contract*****

Bargain Theory - is an agreement to exchange promises or to exchange a promise for a performance or to exchange
performances.
Bargain - mutually induced – manifestation of inducement

RSC § 90 Detrimental Reliance - A promise which the promisor should reasonably expect to induce action or
forbearance of a definite and substantial character on the part of the promisee and which does induce such action or
forbearance is binding if injustice can be avoided only by enforcement of the promise.
- Detrimental Reliance
a. Promisee reasonably relied on the promise. Caused agreement.
b. Binding if injustice can be avoided only with enforcement.
- Remedy may be limited, as justice requires. (Promissory estoppel)

Kirksey: Sister-in-law moves to D’s land after death of husband.

- Rule- The court held this was not an example of promissory estoppel because there was no consideration.

Hamer v. Sidway- Uncle promised $5,000 to nephew if he didn’t drink or smoke until he was 21. Kid did it
(forbearance – he didn’t do something that he had the right to do)
- Rule- Forbearance does constitute detrimental reliance.

Legal Benefit-Detriment Test (Inapplicable)

 waiving a legal right or the benefit of the other. You need benefit or detriment on one side.
 Courts will not ask whether the thing which forms the consideration does in fact benefit the promisee or a third party
 any change in legal position (Hamer- (not drinking = consideration)

RSC § 71: Requirements of Exchange; Types of Exchange:

A) To constitute consideration, a performance or return promise must be bargained for
B) Bargained-for exchange theory: Bargain means that detriment must induce the promise.

- 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: (1) An act other than a promise (2) A forbearance (3) the creation, modification or
destruction of a legal relation
 The performance or return promise may be given to the promisor or to other person
 Sufficient consideration is present only when each party to the K has intended to secure something from the other party
that he was otherwise not legally entitled to.

HYPOS: CONSIDERATION
 Buy a coffee from Starbucks?
o Yes; consideration; promise to pay $ with promise to receive coffee
 Ask for free cup of water?
o No- no consideration on part of person asking
 Ask for a cup of hot water but they charge a few cents?
o Yes—value of consideration is irrelevant
 Ask for water and cashier says can’t give hot water b/c the boss is there but give a nickel and he puts in tip jar?
o Not giving the $ for the water but unrelated reason is it consideration? Under benefit/detriment test yes BUT if
reason for exchange is to make pretext for consideration, then NO CONSIDERATION. This would be a sham
consideration.

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Langer v Superior Steel Corp – company promised to pay D after retirement, stopped
o P won judgment – legal detriment – can’t get competing job – satisfies consideration
o Promissory estoppel – receive justice based on action

Pennsy v American Ash – disposal costs and concrete

o Bargain – reciprocal conventional inducement, each for the other (mutuality of
inducement) – past consideration = no consideration
o Rule: consideration must be bargained for as part of promise
o Exception: detriment of promisee creates valid contract

Sufficiency of Exchange & Nominal Consideration

Nominal Consideration – Not worth a lot; small in amount
o Nominal consideration can be valid if (1) the item is worth that price or (2) the bargain element is met
(meaning induced – the party wanted the item
2. Nominal consideration cannot be valid when used just to bind a contract
o Ex: Bob gave painting away for one dollar just so that it was binding – not valid consideration
 In option contracts, nominal amounts are sufficient consideration

- Hamer v Sidway – uncle incentivized nephew to stay away from bad habits for money
o Although the legal detriment was beneficial to health of nephew – legal detriment
nonetheless – nephew awarded – forbearance (forbearance is consideration)
o COURT—ruled in favor of P bc the nephew gave up a legal right at the request of another party =
consideration
o RULE: look to objective position of the party; one party giving up a legal right for promise of
another
- Apfel v Bache – idea had value at time of contract formation (that was not a novel idea) even
though it is free now, contract binds at time of creation
o Creation of contract is when consideration is made
 Consideration = Legal Value + Bargain
 Condition consequent prevents situations like this
o Takeaway - Consideration is sufficient even if it becomes worthless after the formation
of the contract
Insufficient Consideration - What does not count as consideration?
I. Gratuitous promises (promisee gives nothing up)
a. Kirksey – D offered free land and house to P (widow of his brother) if she moved onto
his land, later D “breached” but ct found it was merely a gratuitous offer b/c P gave
nothing up, did not bargain.

o Past consideration typically NOT consideration – Moral obligation RSC §86

 If benefit has previously been received, subsequent promise for those benefits is not binding
 Moral obligation is sufficient consideration to support a subsequent promise to pay where
promisor has received material benefit although there is no original duty or liability resting on
promisor.

*Past services/consideration: Events that already happened can’t be considered consideration because
they weren’t induced by the promise – they happened anyway, without the promise (RSC §86)(a)
Exception: A promise in recognition of a benefit received is enforceable to the extent that it is
needed to prevent injustice. It is not binding if the promisee meant the benefit to be a gift (or other

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reasons that mean the promisor is not unjustly enriched) OR if the promise is disproportionate to the
benefit received. (Rest. §86)
Webb v. McGown (Quasi-contract) - D fell with block in order to not drop block on P
o P morally bound to D because D saved P from serious harm
 D received a material benefit and made a subsequent promise and has moral
obligation to P, this can be sufficient to enforce promise (can be valid
consideration)
 Material benefit with moral obligation can add up to valid
consideration

*NOT consideration: gifts, stipulations, past services, unenforceable/illusory promises. Conditional

gifts: They sometimes look like consideration because of the conditions but if the giver wasn’t induced to
give by some promise, then it is just a conditional gift. Gifts can’t be taken back after they’ve been given,
but they can be revoked if they haven’t been given yet. §71
 (Promise to give $100 to the school to pay down the debt was not a contract because the school
didn’t do anything to induce the promise. ... If they had promised to give him something, such as
a brick or something, then it would be different).

Conditional gift promises are NOT consideration. (Ex. A promises to give B his truck if B will drive
30 minutes away to pick the truck from A’s home. Here, A’s promise to give B his truck is not induced by
B coming to pick the truck up. Thus, A is not bargaining for B to come. This is a conditional gift, not
bargained for consideration

Pre-Existing Legal Duty: Any performance or promise to do (or refrain from doing) what
one already has a legal duty to do does not constitute legally sufficient consideration.
o Example: An athlete cannot make a contract enforceable for same contract unless alter
performance to make consideration.

RSC § 89 - Contract can only be modified if:

1. Parties must voluntarily agree (expresses willingness of the parties)
2. Promise modifying the contract made before the contract was fully performed on either side
3. Underlying circumstances that prompted modification were not anticipated by the parties
(unforeseen difficulties)
4. Modification was fair and equitable

I. Unforeseen Difficulties exception (encourages parties to do their research)

a. Exception to the rule can be seen in ANGEL V. MURRAY (Garbage collector request to
be paid for more work)

o UCC § 2-209 – agreement for modifying contract needs no consideration to be binding

o RSC § 73 – performance of legal duty owed
o RSC § 89 – if modification made is fair and equitable (not anticipated at contract
formation), then modification is binding
o Executory Contract – performance obligation exists on both sides (typically bilateral)
o Fixed-Price Contract – exchange performance for fixed amount (number stays the
same) despite changes in performance (if work changes too bad)

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Unconscionability
UCC § 2-302 Unconscionable contract or Clause (UCC)
(1) If the court as a matter of law finds the contractor any clause of the contract to have been
unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the
remainder of the contract without the unconscionable clause, or it may so limit the application of any
unconscionable clause as to avoid any unconscionable result.
(2) When it is claimed or appears to the court that the contractor any clause thereof may be
unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its
commercial setting, purpose and effect to aid the court in making the determination.
- UCC § 2-302 (Own Words)
o Contract is so one-sided, suppresses one party.
o Court has complete control to enforce or not enforce any part of the contract.

Substantive: Forced to agree because there is no competition (Typically involves a necessity)

(Type of customer is important)
Remedy: P pays avg. mkt price for Fridge.

Procedural: Hidden bomb, unfair surprise, and micro print clause. Language inserted with small print, so
a party doesn’t see it (applies to any good customer)

 Jones v Star Credit – welfare recipients overpaid for fridge

o UCC § 2-302 – enacts moral sense into law
 Rule- A contract can be made unconscionable if there is a clear inequality of
bargaining power of necessities.
o Caveat Emptor – buyer alone is responsible for checking quality of goods – court
attempts to prevent these practices

RSC § 208-Restitution Where Party Withdraws or Situation Is Contrary to Public Interest

- 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 the unconscionable term or may
so limit the application of any unconscionable term as to avoid any unconscionable result.

Mutuality of Obligation
 Arises in a bilateral contract (a promise in exchange for a promise) 
 Unless party is capable of breaching a contract – there is a lack of consideration.
o Only applies to bilateral contracts
 Rehm-Zeiher v Walker – whiskey case about lack of delivery for “unforeseen reason” The clause
in K meant Rehm could have backed out of K at any time; b/c of this, K was never binding in the
first place 
o Illusory promise – looks like promise, but isn’t – can’t be breached
o No mutuality of obligation
 Wood v Lady Duff Gordon – Wood is the only one to sell Lady’s items – even Lady can’t do it –
exclusive arrangement

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 o No endorsements / no incentives / milestones – Wood is not able to breach contract -
Therefore no consideration
o UCC 2-306(2) – employ best efforts – this does not apply to this case; this case was
service NOT goods

Moral Obligation (Past Consideration)

Binding if injustice can be avoided only with enforcement.
RSC § 86- PROMISE FOR BENEFIT RECEIVED
(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 Subsection 1 if:
(a) 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.
- (Webb v. McGowin) - a moral obligation is sufficient consideration to support a subsequent promise to pay where the promisor has
received a material benefit, although there was no original duty or liability resting on the promisor.
1. Subsequent promise confirms the past consideration

Promissory Estoppel
RSC § 90 Detrimental Reliance - A promise which the promisor should reasonably expect to induce action or
forbearance of a definite and substantial character on the part of the promisee and which does induce such action or
forbearance is binding if injustice can be avoided only by enforcement of the promise.
- Detrimental Reliance
a. Promisee reasonably relied on the promise. Caused agreement.
b. Binding if injustice can be avoided only with enforcement.
- Remedy may be limited, as justice requires. (Promissory estoppel)

Kirksey: Sister-in-law moves to D’s land after death of husband.

- Rule - The court held this was not an example of promissory estoppel because there was no consideration.
(Today, a court will likely rule differently if she sold her home and then moved)

Promissory Estoppel (used as a word) - a person's promise if it induces reasonable reliance will be enforced to prevent injustice.
 Promisor cannot claim that contract lacked consideration

Requirements of Reliance
2. Promise
3. Expect for promisee to rely on it
4. Promisee has to actually do that

Blinn v Beatrice – guy refuses to take another job in assurance that he will keep current job
o Definiteness – if terms are not definite, how will court decide breach and
remedies
 ‘at least 5 more years is not definite terms’

Unjust Enrichment (aka Quasi K or Contract Implied in law) - Not a real contract
 Based on restitution not contract, based on fairness and equity
5. There needs to be a benefit (it's determined if a reasonable person would classify that as a benefit)
6. There is no promise
7. With restitution you must pay back or pay the value back

Elements of Unjust Enrichment

o D needs to have received a benefit from P

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 oD must have knowledge or appreciation of the benefit (didn’t decline)
oD must have accepted or retain that benefit unjustly (meaning they didn’t pay back)
 It would be unjust for the D to retain benefit w/o reimbursing P
REMEDY- VALUE OF REMEDY TO THE D
 Ex. Just had your house painted didn’t want it done again
If a P wins the lawsuit and the D can’t pay back the money - PAY AMOUNT CONFERRED (subjective)
- Value of benefit to D, not what it cost for the person to provide the benefit/not service price

Bailey v West – horse caretaker as a volunteer

 There was not Quasi-Contract
 D received a benefit – passes
 D appreciated knowledge of such benefit – passes
 D did not accept and retain the benefit unjustly - fails

Elements of Contract implied in fact (Real Contract)

a. D requested the benefit
b. P provides benefit and expects to be paid
c. D knows or should’ve known that P wants to get paid

Beginning of performance is an acceptance

1. Remedy - If P wins lawsuit based on contract implied in fact P get the benefit of the bargain
(what the P charges, value in eyes of P)
 Ex. If you mow my yard ill pay u $50. Nobody accepts but comes and moves the
yard you're impliedly agreeing to finish it. If you leave before finishing. So, the
payment will be up to you.

 Bailey v West – horse caretaker as a volunteer

o There was not Contract Implied in Fact
 D didn’t request benefit by P - fails
 P expected to be paid, but didn’t know by who – fails
 D should have known that P wants paid – passes
 Wrench v Taco Bell – the chihuahua commercial
o Contract Implied in Fact
o Offer + Acceptance + Consideration = Contract
 Implied in Fact Contract – arise where one accepts benefit from another for which compensation
is customarily expected

PART B – THE BARGAIN RELATIONSHIP: OFFER AND

ACCEPTANCE
The Objective Nature of “Assent”
Lucy v. Zehmer - P and D drunk and D “jokingly” sold land to P
 Held contract binding
o Subjective intention of D does not matter (outward intention matters) - Objective
 40 minutes of negotiations
1. Outward actions indicated to P that contract was real
 Reliance by P

Hole in One Case - Golfer performed

Dealer's position- evidentiary problem (they can’t prove make)
 He’s not an offeree, the sign wasn’t intended for this.
 Offer was for a previous tournament. The offer is lapsed (expired)

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 o The offer is ambiguous and ambiguous offer can’t be accepted.

Hypos: ASSENT
 If D said “I’m joking” through negotiations
o Not likely binding because disclosed intent
 What if negotiations took place at lawyer’s office with attorneys' present?
o Binding because investment of time and money
 Shows seriousness of negotiations
o Moment you sign, contract becomes irreversible

Offer: Creation of the Power of Acceptance

Offer (O) + Acceptance (A) + Consideration (C) = Contract (K)

o General Ads– usually invitation to make offer, not an actual offer

 an advertisement can represent a binding offer (and create a binding
contract), if (1) Leaves nothing to negotiate (2) The ad is clear,
definite, and explicit (3) Promises performance (i.e. the sale) in
return for something requested

Leonard v. Pepsico- Rule- A television commercial is not an offer of goods; any objective person cannot
reasonably conclude that a commercial was an actual offer of a military jet of which consumers could
accept; a television commercial that was an alleged contract did not satisfy the New York statute of
frauds.

- Pepsico: P sees ad to get jet with Pepsi points. Gain points and claims pepsi owes him jet.
(Merely an advertisement RSC § 26(b) i. Objective Reasonable Person Standard: what an
objective reasonable person would have understood the commercial to mean.
• No words of consideration, no unilateral contract
 What a reasonable person would think – it isn’t on the order form

OFFER Restatement RSC § 24

I. Offerer- is the master of the offer.
a. The offeror is the master of the offer, which means that the offeree MUST accept the offer
according to the rules of the offer (regardless of the offer being bilateral or unilateral)
 They can specific and craft the deal anyway they want.
 An offer is revocable, are generally revocable anytime until the offer is accepted

a. For bilateral contracts, the start of performance manifests acceptance

b. For unilateral contracts, the start of performance only makes the offer irrevocable, the offer is only accepted once
performance is complete

RSC §26 Preliminary Negotiations- waiting for offer to accept

o The longer negotiations go on the more they intensify the more likely it is that the D will interpret
words to manifest a deal/ acceptance.
o Even if very close to settlement no deal if we said not an offer capable of being accepted (if it's
explicit)
 
o General advertisements made to the public
o UCC § 2-204(3) Advertisements
 Good (must be decided) and the quantity (must be decided)
 Where to pick out up and other things can be decided
 If an advertisement is clear and specific enough - the court can find that the ad crosses the
line of solicitation to actual offer
 

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 o Revocation of General Offer (RSC § 46)
o If you place an ad to the general public then change your mind and want to terminate that ad publicly.
o Ex. Ad in newspaper first 50 customers can purchase scooter for 50 dollars. That’s a clear
offer - if want to revocate you will have to place an ad in the newspaper CANCELED

RSC § 46 – Revocation of General Offer

o a manifestation of willingness to enter into a bargain is not an offer if the person to whom
it is addressed knows or has reason to know that the person making it does not intend to
conclude a bargain until he has made a further manifestation of assent
- JW Southworth v Oliver – letter with land specs was considered an offer based on
previous communication
o 4 Guides to see if an Offer was Made
 Objective Test – would a reasonable person believe offer is made
 Words of Commitment – words that lead hearer to believe an offer
was made
 Identity of Offeree – if your words are directed to specific people
likely be to constitute offer
 Definiteness – more definite more reasonable to be an offer
 
 Exceptions - Restatement RSC § 25 (Option Contract) promise meets requirement
o limits ability to revoke offer (promise meets requirements)
 If paid then there is consideration to keep contract open (for specified time*)
Ex. Seller gives two days to accept offer. Pay the seller 500
to keep offer open for longer. The seller grants you the
right to buy offer for longer in return for an option
payment of $500. Sold revoking offer for $500. Option
Contract is a mini contract (paying u to give up legal right
to revoke) (Gives consideration to not revoke)

RSC § 87(1) Option contracts need to be in writing

- Nominal consideration (small dollar amount) can be good consideration as long as the bargain
element is there
- Short term options supported by nominal amounts are sufficient
- Acceptance has to be received during the option period
- No mailbox rule in this case - §63(B)
- If you reject the offer during the option period and the offeror sells then or materially changes his
position. - deal still good. However, if the offeror has not materially changed his position and
there is still time then the contract is still good
- Materially altering the position - means selling it (not like he can just change his mind and say he
wants to hold onto it)

 If you reject the offer during the option period and the offeror sells then or
materially changes his position. - deal still good. However, if the offeror has not
materially changed his position and there is still time then the contract is still good

Hypos: Option Contract

 What if P not paid $50?
o No option contract because no consideration
 What if consideration was $1 instead of $50?
o Enforceable option contract (2R §87 cmt b)
 What if P asked for diff price in May 2 letter?
o Doesn’t kill contract

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  What if D said it would take diff price?
o Probably new contract with new consideration for D would forbear rights to old contract
 What if P rejected D’s option contract?
o Possible reliance claim if rely on reject, but P could accept still until end of reasonable time
 Could D change mind?
o No, stuck until end the time period (June 4)
 What if option contract failed to specify final purchase price?
o No contract because no mutual assent (failed to specify final purchase price which is material term)
 What if failed to specify time period? - Not smart on D’s part
o Court should apply reasonable duration 
Exception: (Merchant Firm Offer)
- UCC § 2-205
An offer by a merchant to buy or sell goods in a signed writing which by its terms gives
assurance that it will be held open is not revocable, for lack of consideration (no
consideration needed), 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.
o Merchant puts offer for a certain amount of time in writing signed
 Must keep it open for agreed time (rejects the need of consideration)
 Merchants are people who are in an industry selling particular
goods
o If you are not merchant, unless paid to keep offer open -
cannot keep offer open bc not merchant
 If merchant does not speculate or mention how long
the deal will be left mention then a reasonable
amount of time the offer will be left open not
exceeding 3 months (more than 3 months
consideration is needed)
 Must have specialize skill or knowledge to be a
merchant. A person who buys and sells (even
though its not there day job can be considered a
merchant) can be held to this
Merchant selling goods rather than land
- Under UCC - What would apply (Land is not a good under the UCC)?
o The merchant firm offer stays open until the time period specified. If there is no time period, then they
use a reasonable amount of time under the circumstances.

Hypo 1) - Suppose Liam offers to sell Kyle his watch for $500. He tells her his offer is open for 5 days. Before the 5
days Myle learns from a reliable source that she purchased a new watch. The next day Liam sold his watch to
someone else. Then she calls the next day to accept the offer.
Q: IS the offer binding?
A: In some jurisdictions indirect rejection is embraced. But Indirect rejection we don’t know what the intentions of
the offeree (Myle) this creates an issue.

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Hypo 2) - Kanye sent a letter to Kim on Oct 12 offering to buy Kim's eyebrow kit for $75. The offer states that the
offer is open for 10 days. But she didn’t get the letter until the 14th. Is the offer binding until the 22 or the 24th?
Ans: The answer is that it’s binding from when she receives the letter. So the 24th.
o Rule If the offeror wanted the letter to say that it's open until this date the offer can explicitly say
that.

Termination of Power of Acceptance

UCC § 2-104 (1)- Definition of Merchant- (1) "Merchant" means a person who deals in goods of the kind or
otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods
involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or
broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.

UCC § 2-205- Firm Offers- An offer by a merchant to buy or sell goods in a signed writing which by its terms
gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no
time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any
such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

RSC § 25. Option Contracts- An option contract is a promise which meets the requirements for the formation of a
contract and limits the promisor's power to revoke an offer.

RSC § 36. Methods Of Termination Of The Power Of Acceptance- (1) An offeree's power of acceptance may be
terminated by (a) rejection or counteroffer by the offeree, or
(b) lapse of time, or (c) revocation by the offeror, or (d) death or incapacity of the offeror or offeree. (2) In addition,
an offeree's power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms
of the offer.

RSC § 37. Termination Of Power Of Acceptance Under Option Contract- Notwithstanding §§ 38-49, the power
of acceptance under an option contract is not terminated by rejection or counteroffer, by revocation, or by death or
incapacity of the offeror, unless the requirements are met for the discharge of a contractual duty.

RSC § 38. Rejection- (1) An offeree's power of acceptance is terminated by his rejection of the offer, unless the
offeror has manifested a contrary intention. (2) A manifestation of intention not to accept an offer is a rejection
unless the offeree manifests an intention to take it under further advisement.

RSC § 39. Counter-Offers- (1) A counteroffer 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 to what from that proposed by the original
offer. (2) An offeree's power of acceptance is terminated by his making of a counteroffer, unless the offeror has
manifested a contrary intention or unless the counteroffer manifests a contrary intention of the offeree.

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

RSC § 42. Revocation By Communication From Offeror Received By Offeree- An offeree's power of
acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into
the proposed contract.

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RSC § 43. Indirect Communication of Revocation- An offeree's power of acceptance is terminated when the
offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree
acquires reliable information to that effect.

RSC § 46. Revocation Of General Offer- Where an offer is made by advertisement in a newspaper or other
general notification to the public or to a number of persons whose identity is unknown to the offeror, the offeree's
power of acceptance is terminated when a notice of termination is given publicity by advertisement or other general
notification equal to that given to the offer and no better means of notification is reasonably available.

Indirect Revocation - Dickinson v Dodds - D gives P until Friday for acceptance. D sells to another
before Friday. P loses land to another owner. - Need meeting of minds for offer to be accepted. P knows
D sold land before accepting. No point in time where P & D mutually agreed to the sale

Buyer was told by his agent that Dobbs was no longer selling him the property
(indirect revocation- he didn’t directly tell him)
 (§43) The D took definite action informing the D that he didn’t want to sell
(information must be reliable)
8. There was no consideration for the offeree to keep the contract open
 Dobbs was incorrect to believe the offer was still open

 Nutum Pactum - bare promise that is not binding

 Rule: D allowed to revoke offer before acceptance if not bound.

o RSC: 42 Power of acceptance terminated when offeree receives manifestation to not
intend the deal.
o RSC: 43 Power of acceptance terminated when Offeree hears of intent to not manifest
from a reliable source.
 Rule: Revocation can be indirect if from a reliable source.
o No consideration paid to offeror to keep deal open. Not bound.

 Period commences when offeror receives letter.

What can terminate a valid offer? How can offeree’s acceptance can be terminated?
 Lapse of time (§41)
- If offeree fails to accept in agreed amount of time
 Or if the offeee fails to accept in reasonable time (within 3
months)
 In Capacity or death
 offer for or offeree becomes incapacitated or dies
 If either one dies offer is over
 Counteroffer (§39)
 Rejects and makes a new offer (keeps hope alive)
o Original offeror now has power to accept the new offer, making
him the offeree
 Condition to acceptance

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  If any condition to acceptance doesn’t occurs the offer is not valid
o Some school makes offer is she receives a good
enough score if she doesn’t receive one offer is over
 Revocation (§46)
 Offeror revokes the offer
 Indirect revocation is valid if there is knowledge of revocation from
reliable source (Dickinson)
o Exception: Option contract - Paid to keep open
o Exception: Merchant firm offer
 Rejection (§38)
 If offeree rejects offer then the offer is over

Acceptance: Method and Communication

 RSC 50(1) – Acceptance of Offer
 RSC 52 – offer only accepted by offeree

 For bilateral contracts, the start of performance manifests acceptance

 For unilateral contracts, the start of performance only makes the offer irrevocable, the offer is
only accepted once performance is complete

 Acceptance is governed by an objective test, meaning that outward appearances of words and
actions are determinative—not hidden intentions
 The offer must be specifically directed to the person trying to accept it—it cannot be accepted if
the offer is directed elsewhere (for open-to-all contests and rewards offers, the person must know
about the contest or reward offer in order to accept it)

RSC § 30 Form of Acceptance (Up to the offeror as master)

 An offer may invite or require acceptance to be made by an affirmative answer in words, or by
performing or refraining from performing a specified act, or may empower the offeree to make a
selection of terms in his acceptance.
 Unless otherwise indicated by the language or the circumstances, an offer invites
acceptance in any manner and by any medium reasonable in the circumstances.

UCC § 2-206(1) Offer and Acceptance (Up to the offeror as master)

(1) 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;
(b) an order or other offer to buy goods for prompt or current shipment shall be construed as
inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of
conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute
an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an
accommodation to the buyer.
 (2) Where the beginning of a requested performance is a reasonable mode of acceptance
an offeror who is not notified of acceptance within a reasonable time may treat the offer
as having lapsed before acceptance.

RSC § 54 Acceptance by Performance; Necessity of Notification to Offeror

(1) Where an offer invites an offeree to accept by rendering a performance, no notification is necessary to

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make such an acceptance effective unless the offer requests such a notification.
(2) If an offeree who accepts by rendering a performance has reason to know that the offeror has no
adequate means of learning of the performance with reasonable promptness and certainty, the contractual
duty of the offeror is discharged unless:
(a) the offeree exercises reasonable diligence to notify the offeror of acceptance, or
(b) the offeror learns of the performance within a reasonable time, or
(c) the offer indicates that notification of acceptance is not required.

 LaSalle National Bank v Mel Vega – amended contract for real estate – trust never signs
 What P sent to D was not an offer – ultimate power of acceptance held by offeror

 Ever-Tite Roofing Corp v GT Green –workers loading car was enough to accept performance
 RSC (§54) If offer does not invite acceptance in any particular manner and you choose to accept
by performance.
 You must alert the offeror a reasonable amount of time before the commencement.
 Least Cost Avoider – who was in the best position to avoid the dilemma
 In this case the homeowner could’ve told him that the offer was off
 Damages - Expectation damages for P - profit as if the job was fully performed (not full contract
price only the profit)

 Mary Glover v Jewish War Veterans – P gives away information to cops without knowing the
award
 Claimant must know about award before completing performance

 Corinthian Pharmaceutical Systems v Lederle Laboratories – vaccine price increase during

order shipment
 Price quotations – not offers – merely invitations to make offers
 Tracking number was not acceptance – mere confirmation that offer was received
 Accommodation is simply a favor (gratuitous), no consideration

 Acceptance: The Mailbox Rule

 Determining Acceptance under the Mailbox Rule: If a valid offer is terminated at any time BEFORE
acceptance, the offer is invalidated. It CANNOT be accepted or revived unless a new offer is made. The
mailbox rule establishes the moment in time that an acceptance becomes effective
 The mailbox rule states that an ACCEPTANCE that is sent by mail, email, or fax is VALID at the moment
of dispatch (not when the letter is received), UNLESS:
o a. The offeree-sender uses the wrong address or has improper postage. Ex: the offeree- sender
forgets to put a stamp on the envelope
o b. The offeror expressly stipulates that acceptance is only valid upon receipt
o c. An optional contract is involved
o d. The offeree-sender sends a termination letter BEFORE the acceptance letter OR
 i. If the offeree-sender places a counteroffer/rejection letter in the mailbox a moment
later, places an acceptance letter in the mailbox whichever letter the offeror receives and
opens first controls the outcome. Notably if the offeree-sender places an acceptance letter

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 in the mail FIRST the acceptance becomes effect at moment of dispatch (moment it was
sent out)
o e. The offeror detrimentally relies on a termination BEFORE he receives the acceptance letter

I.   RSC § 63 Mailbox Rule

a. Offer – effective upon receipt by offeree
b. Acceptance – effective upon dispatch
c. Rejection/Counteroffer – effective upon receipt
d. Revocation of Offer – effective upon receipt – RSC 42
II. RSC § 66 – misdirect acceptance – not binding if sent to wrong person
a. RSC § 67 EXCEPTION – misdirect but still arrives in time – mailbox rule holds
III. Acceptance over the Phone/Email/Face-to-Face – effective upon dispatch and receipt – ordinarily
same thing
a. RSC § 64 – EXCEPTION – communication glitch – upon receipt is when effective NO
email box rule
Acceptance and the “Battle of the Forms”
 DTE Energy Tech v Briggs Electric – subcontractor troubles
 UCC 2-204(1) – conduct by parties acknowledge contract – shipped
generator and send money. Purchase offer is contract – Order
acknowledgment forum is not (subcontractor never signed)
Rule – If new contract materially alters previous, then new contract is not valid (old
one still binding) UCC 2-207
- Affirmative assent is needed performance is not enough.

Between merchants such terms become part of the contract unless:

(a) the offer (1st form) expressly limits acceptance to the terms of the offer;
(b) they materially alter it; or
(c) 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 recognize 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
a case the terms of the particular contract consist of those terms on which the writings of the
parties agree, together with any supplementary terms incorporated under any other provisions of
this Act

 Mirror Image Rule RSC § 58

 Mirror Image Rule UCC – 2-206
 Acceptance must copy with the requirements of offer
 You get what you ask for (simple)

Knockout Rule – UCC § 2-207 will gap fill for the missing information of an agreement
o Everything disagreed upon gets knocked out (knockout rule)
o If one party is silent and one party includes it then it's not in the contract
 If agreed, then part of deal

- Not covered by UCC - fixtures, real estate, Article 2 does not apply to services)
- UCC does gap-fill – anything but the subject matter (item) and quantity.

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UCC- Gap Fillers
o UCC §2-309(2) - NO SPECIFIED TIME - Determines the time if no time was specified
o UCC §2-305(A) - NO PRICE - Parties can conclude a contract even though the price is not settled
o UCC §2-308(A) - PLACE OF DELIVERY - Unless otherwise agreed the place for delivery of the goods is the
sellers place of business (the buyer must go pick it up) if the seller has no place of business, then the pick-up will
be at the seller's residence
o UCC §2-309(1)-TERM (how long a contract last) AND TIME OF DELIVERY OR ANY OTHER TIME - if
not provided or agreed upon shall be a reasonable time
o UCC 2-310(A) - PAYMENT unless otherwise agreed payment is due at the time and place of delivery

 UCC applies to everyone who buys and sells goods - DOES NOT HAVE TO ONLY BE MERCHANTS
- However, there may be heightened standards for merchants in certain situations

HYPO: Wholesale liquor in Albany enters a contract with a restaurant - I calls for them to supply ten cases of
champagne once every 5 months. The terms are silent except subject matter and quality.
If the terms are not mentioned, then the UCC will gap fill. (Like if no time is mentioned on contract the UCC will
determine a reasonable time) §2-309(2)
- COMMON LAW (DOES NOT LIKE TO FILL GAPS)
o No gap filler - Restatement is not forgiving
o §33 (1) reasonably certain terms in a contract
o (2) Defines Reasonably certain - IF they determine existence for
breach of contract and if they determine appropriate remedy (If the
terms are ambiguous then no good)
o If one or more terms are uncertain - then there may be no offer or
Acceptance - this may indicate negotiations - Therefore there is no
contract

The Counter Offer

RSC §40 Rejection/Counteroffer - Counteroffers are effective upon receipt (when received)
(§59) Conditional acceptance is a counteroffer. However, there is such a thing as accepting as saying -
Wil you please also do this - not do this or no deal
HYPO: Counter
1. A offers to paint house for 200 dollars. Jill says ill accept if it's for 1000 dollars.
 Answer - we do not have a contract because she changed the terms (so she made a
counteroffer) (§59)
2. Ann offers to paint Jills house next week for 2000. Jill says I accept but can you paint the house this
week or next week?
 Answer :(§61) This is an acceptance with an immediate proposal to amend/modify contract
o Not a demand its more of a proposal
Minneapolis & St Louis Railway Co v Columbus Rolling – seller offers 2000 buyers responds
back w/ 1200. Seller rejects then the buyer says he'll do it for the 2000.
 Counteroffer – the buyer loses power of acceptance to original offer
o Acceptance with condition/stipulation becomes a counteroffer
o RSC § 39 – power of acceptance is eliminated under counteroffer

UCC § 2-206 - Was it reasonable to determine a tracking number as a result of acceptance?

 IT was not acceptance it was just a notification that their offer had been received

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UCC § 2-206 1(B) - When an order placed and something else is sent, then it doesn’t live up to the offer
9. This Is a counteroffer (it notified them that it wasn’t an acceptance it was a mere
accommodation Corinthian)
1. P was told that the 50 bottles were accommodation
1. P had a choice wither accept or reject the offer
1. The P rejected
2. Remedy - depends on the uniqueness of the vaccine
1. If other companies had the vaccine, they could have bought them and
sued this company for the difference
**If an offeree sends a rejection from counteroffer and then before that missive is received, sends an
acceptance.
3. Ans: RSC § 40 If acceptance arrives before rejection, the acceptance will be
effective upon actual receipt
4. If received at the same time, rejection would be effective
 Acceptance after rejection can be viewed as a counteroffer

Non destructible Powers of Acceptance

I. Humble Oil & Refining v Westside Investment Corp – D gave P exclusive and
irrevocable option to purchase land (bind option contract)
a. Option contract binds seller from selling to others for the duration specified
b. RSC 87(1)(a) – Option Contracts need to be in writing
i. EXCEPTION to mailbox rule – letter has to be received not in transit
II. Marchiondo v Scheck – sell land and broker gets commission – buyer rejected offer
a. Partial performance creates consideration for option contract formation
b. In a unilateral option contract, offeror has right to revoke until Offeree begins
partial performance
c. RSC 45(1) – Part Performance Option Contract
III. William Drennon v Star Pacing Co – bids for subcontractors – one backs out
a. Reliance on cost – promissory estoppel
b. RSC 90
c. RSC 87(2)
IV. Generally, the mere use of a subcontractor’s bid by a general contractor bidding on a
prime contract does not constitute acceptance of the subcontractor’s bid and imposes no
obligation upon the prime contractor to accept the subcontractor’s bid
*A sub can reject to bid unless general contractor will use him
Assent in Electronic Commerce
 UETA - Uniform Electronic Transactions Act (adopted by 47 states)
I. UETA 7 – Electronic Record qualifies as writing
II. UETA 9 – signature is attributable if it is you, not hacker or someone else w/o knowing
III. UETA 14(1) – stock exchanges – computers interacting with each other

Defective Formulation - Indefinite or Incomplete Contracts

RSC § 20 Effect of Misunderstanding
1. There is no manifestation of mutual assent to an exchange if the parties attach materially
different meanings to their manifestations and

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 a. neither party knows or has reason to know the meaning attached by the other;
or
b. Each party knows or each party has reason to know the meaning attached by the
other.
2. The manifestations of the parties are operative in accordance with the meaning attached to
them by one of the parties if:
c. that party does not know of any different meaning attached by the other, and the
other knows the meaning attached by the first party; or
d. that party has no reason to know of any different meaning attached by the other,
and the other has reason to know the meaning attached by the first party.
Ruffles (Pierless ship case) 2 ships same name
- No contract due to ambiguity – No contract between parties intend different things (no mutual
assent/meeting of the minds)
Martina (5-year lease renewal price to be agreed upon is illusory)
- Agreement to agree is unenforceable

Oglebay: Two parties with 30-year relationship have a contract price set based on other market
prices. Intend to be bound.

i. Rule: If terms of contract are reasonably certain and intend to be bound can be inferred, court can step in
to create contract.
- Exact price based on expert testimony for jury, question of fact.
- Parties intended to be bound based on language, contract.

Remedies for Breach of Contract

- Types of remedies:
o Expectation Measure: attempt to put the injured party in as good as a position
had the K been performed as expected.
 This is the one P will usually go for since its pays the most

 Reliance Measure: The goal of reliance damages is to put the non-breaching

party in the same economic position that it would be in if the contract had never
been created. Reliance damages restore the losses.

- Restitution Measure: reimburse injured party for whatever benefit he/she has
conferred on the breaching party; same thing as an implied-in-law K (prevents
unjust enrichment)

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