Embry relied on his supervisor’s statement as assent to a new contract of employment. The Court found that a reasonable man would rely on those words, and Embry did rely on them so a contract was formed. (Objective standard + subjective twist)

RULE: A meeting of the minds that is essential to the formation of a contract is not determined by the secret intention of the parties, but by their expressed intention.

Texaco v. Pennzoil

(MMA)

Texaco wanted to include as evidence certain post-board meetings between itself and Getty to show that Texaco’s intentions towards Pennzoil were different. It was not allowed because it was not an outward manifestation of intent to Pennzoil.

RULE: External manifestations must be between the parties entering into a bargain, external manifestations with a third party do not count.

One night while drinking, Zehmer drew up a paper and signed it and had his wife sign it, conveying his land to Lucy. Even though he claimed later that he was drinking and joking, his outward actions would lead a reasonable man to believe that a contract had been formed. Lucy did think that a contract was formed and did rely on it (secured money, consulted an attorney, etc.) and so a contract was found.

RULE: If his outward manifestations of assent otherwise create a contract, the claim that the assenter was not serious is not a defense to a claim on the contract.

Nebraska Seed Co. v. Harsh

(Advertisement)

Letter sent to seed company advertising seed was an invitation to bid/advertisement, not an offer. Also see preliminary negotiations.

RULE: An advertisement of a product is not an offer if it contains general, nonspecific terms

Leftkowitz v. Great Minneapolis Surplus Store

P was directed to specific subgroup to buy fur coats, so a valid offer.

EXCEPTION: An ad can be an offer if it is "clear, definite, and explicit, and leaves nothing open for negotiation."

Leonard v. Pepsico

(Advertisement)

advertisement for PepsiPoints not an offer. Also falls under jokes.

RULE: An ad is not an enforceable offer when it could not be considered by an objective reasonable person as a true offer, rather than as an obvious joke.

Nebraska Seed Co. v. Harsh

(Preliminary Negotiations)

Harsh sent a letter to P offering to sell about 1800 bushels of millet seed at $2.25 per quart.  Absent from the letter were specifications about the exact amount of seed, date of delivery - more like preliminary negotiations, not reasonably certain.

Had the letter been more specific and was offering seed to the P exclusively, UCC could fill in the terms.

P sued US mint for failure to deliver a number of coins that they had ordered.  When demand for the coins proved unexpectedly robust, a number of individuals who had sent in their orders in a timely fashion were left empty handed.

Court noted that the "well-established" advertisement rule that ads and order forms are "mere notices and solicitations for offers which create no power of acceptance in the recipient."

RULE: Order forms are mere solicitations for offers and create no power of acceptance in the recipient.

Empro v. Ball-Co Manufacturing

P contended that a letter of intent had the effect of binding D.  The letter contained the general provisions of sale of D's assets to P.

P made it clear that they had an out.  Parties may decide for themselves whether the results of preliminary negotiations bind them, but they do this through their words.  Approaching agreement by stages allows parties to agree to the basics without bargaining away their privilege to disagree on specifics.  D did not intend to be bound by its letter of intent.

RULE: Parties who have made their pact "subject to" a later definitive agreement have manifested an intent not to be bound.

Dodds offered to sell his land to Dickinson, and gave him until Friday to accept (but not an option contract). On Thursday, Dickinson received information that Dodds had offered the land to someone else, and tried to accept the offer. Court held that the offer was revoked, and Dickinson had reason to know that offer was revoked.

RULE: An offeree may not bind an offeror by accepting a revoked offer, even if the revocation had not been communicated to him prior to acceptance.

 Plaintiff sued for breach when he had begun buying material to work on suite of offices for defendants. The offer said “Upon an agreement…you can begin at once.” Court held that offer was not accepted because it had asked for a return promise, not performance. 

RULE: An offer to create a bilateral contract is not accepted by conduct that, in itself, is no indication of an acceptance.

D contracted with P for the re-roofing of their home.  Agreement became binding only upon acceptance in writing by an agent of P or upon commencement of the work.  When they arrived they found another contractor performing the work.

No unreasonable delay by P in receiving, processing, accepting contract or commencing work. Evidence shows P proceeded with due diligence.  D breached contract by having others perform the work.

RULE: If the offer does not specify the mode of acceptance, the acceptance may be given in any reasonable method.

Pattberg offered to discount the mortgage on Petterson’s estate on the condition that it be paid on a certain date. Pattberg then sold the mortgage before Petterson could pay him. The court ruled that Pattberg had withdrawn his offer before it was accepted—performance asked was “tender”—so needed completed performance. 

RULE:  An offer to enter into a unilateral contract may be withdrawn at any time prior to performance of the act requested to be done.

Carbolic Smoke Ball Co. placed an ad offering a sum to any person who became ill after using its product, Carlil tried to collect. Trial court found that the offer intimated that it would be sufficient to act on the proposal, performance was the invited form of acceptance, and notification was not necessary. 

RULE: A continuing offer may be accepted by performance of the condition named in the offer.

Hobbs sued Massasoit Whip Co. to recover for eelskins he had shipped to them. Defendant retained the skins for several months and then destroyed them, without notifying the plaintiff whether they had been accepted. Plaintiff had made several prior shipments to defendant, which it had accepted and paid for. The court held that Hobbs could reasonably infer that silence on the company’s part meant that they had accepted the eelskins that met certain specifications. 

RULE: Silence may constitute acceptance in appropriate cases.

Ardente was to buy the Horan’s property. When returning a signed purchase agreement, Ardente’s attorney also included a letter inquiring as to whether certain items in the house were included in the purchase. The court found that a contract did not exist because Ardente’s letter was a counteroffer, which modified the terms of the original offer and required acceptance by the Horans. 

RULE: An acceptance that is equivocal or upon condition or with a limitation is a counteroffer and requires acceptance by the original offeror before a contractual relationship can exist.

Plaintiffs downloaded software from Netscape, which contained a license agreement containing an arbitration clause. The district court held that the clause was not enforceable because a reasonable prudent person would not be aware of its presence—would have to scroll down and click through pages to read it.

RULE:  Adequate notice of a license agreement is required in order for to find an enforceable contract.

Verio used an automated program to make repeated requests for information from Register. Accompanying the information was a heading conditioning the release of information on that information not being used to solicit business, which is what Verio used it for. The court held that Verio assented to the agreement because they were aware of it, and continued to query Register’s database.

Apple stand analagy 

RULE: When a benefit is offered subject to stated conditions, and the offeree makes a decision to take the benefit with knowledge of the terms of the offer, the taking constitutes an acceptance of the terms, which accordingly became binding on the offeree.

The court failed to find a contract due to lack of assent where the contract referred to the ship “Peerless,” and there were two ships with the same name, each party believing the contract referred to a different ship. Neither party knew nor had reason to know that the other thought the contract referred to a different Peerless.

RULE: When neither party knows or has reason to know or has reason to know of the ambiguity or where both know or have reason to know, the ambiguity is given the meaning that each party intended it to have.

Contract for sale of rare coins failed where parties entered into an agreement, and each party thought the agreement referred to a different coin collection. 

RULE: When any terms used to express an agreement are ambivalent and the parties understand it in different ways, there cannot be a contract unless one of them should have been aware of the other's understanding.

Weinberg v. Edelstein

A shop owner had a restrictive covenant with his landlord which did not allow the landlord to rent space to other merchants selling dresses. Another merchant was selling skirt and blouse combinations. To determine whether a skirt and blouse combination was considered a dress, the judge first looked at the plain meaning of the word “dress,” then the terms of the trade to determine that skirt and blouse combinations are not dresses—different design houses, different unions, different uses, etc.

What is dress case

RULE: If it isn't possible from the contract, course of performance, or course of dealings to determine what the meaning of a term is, the terms of the trade should control the term's meaning.

“Chicken case” Dispute between the buyer and seller of chicken as to what the definition of chicken was. The buyer was trying to get a narrower definition of chicken based on the usage of trade. The court looked at the contract, then the dictionary, then usage of trade, then course of dealings, and lastly, the Dept. of Agriculture definition. The court could not find adequate evidence to justify narrowly defining chicken, and found for the seller-defendant.

What is chicken case

RULE: When all else fails, truly vague and ambiguous terms are construed against the drafter of the contract - they had the power to not make it vague.

P sued D to recover damages resulting from Ds refusal to deliver rolls of paper to P. The court failed to find an enforceable agreement because it was lacking terms for how long a specific market price would be in place—did not want to impose a contract where there wasn’t one 

RULE:  A contract is not enforceable if the agreement is so incomplete that it indicates an intent not to be bound.

Texaco v. Pennzoil 

(Filling the Gaps)

Pennzoil tried to argue that even if the parties intended to be bound, the contract was not binding because the terms were not definite enough. The court disagreed because they demonstrated an intent to be bound, and the terms were not essential to the contract, so the argument was irrelevant.

RULE: For a contract to be enforceable, the terms of the agreement must be ascertainable to a reasonable degree of certainty.

Pre-UCC case (would have fallen under UCC). Requirements contract in which D agreed to furnish P with P’s entire radiator needs for 1899, and P agreed to expand D’s market. D refused to fill P’s order past what P had ordered in previous years, arguing that the contract only called for the usual amount of goods. The court held that D was obligated to furnish P’s orders, as long s P was not engaging in speculation or bad faith, which there was no evidence of—P had agreed to expand the market for D. 

RULE: A buyer in a requirements contract may enforce the contract even if its requirements increase beyond the parties' contemplation.

Gulf was trying to claim that there was no contract for them to supply Eastern with jet fuel. The court found that there was a requirements contract and as long as Eastern was acting in good faith, and its requirements were not exceeding any estimates, etc. under the UCC, it was enforceable. 

RULE: A requirements contract is binding where the purchaser has an operating business.

Lady Duff-Gordon and Wood entered into an exclusive dealing agreement in which Wood would market her designs. Duff-Gordon argued that it was not an enforceable contract because there was no requirement for Wood to do this, just an illusory promise to do so. The court implied a promise from Wood to use his best efforts, and found a contract, especially since the contract was certain and had definite terms. 

RULE: An agreement for exclusive dealing in goods imposes, unless otherwise agreed, an obligation to use best efforts by both parties.

Slip and fall case on a cruise ship. The form contract included on the cruise tickets contained a forum selection clause limiting disputes to Florida. SCOTUS upheld the validity of the forum selection clause, noting that both parties benefited from limiting fora the fora in which Carnival can be sued (lower prices of tickets, etc.). 

RULE: Form contracts are valid unless they are found to be unconscionable/unreasonable.  Presumption is that if you have the form contract, you've read it.

Court upholds the validity of a forum selection clause found within a form contract because the plaintiffs were free to click through at their leisure, could easily have read the provisions, and the clause met the requirements of fundamental fairness.

RULE: Notice of Provisions: A contracting party may be bound by the terms of a form contract even if he has never read it, as long as it meets the reasonableness requirements.

Step-Saver brought suit against TSL, alleging that the terms of their agreement did not include a box top license included with TSL’s software. The court held that the license materially altered their agreement, and therefore, could had to be expressly accepted. Step-Saver objected to the terms of the box-top license, yet TSL continued to accept their purchase orders (offers)—so they did not make their acceptance of the orders conditional on accepting the terms of the box-top license. 

RULE:  A writing will be a final expression of, or a binding modification to, an earlier agreement only if the parties so intend.

Union Carbide sued Oscar Mayer to recover back taxes they paid, saying Oscar Mayer agreed to indemnify them in tax liability under a provision on their order form. The court found that if the provision in question really required Oscar Mayer to indemnify Union Carbide, it would be a material alteration to the contract that would require Oscar Mayer to assent to. 

RULE: An additional term to a contract between merchants does not become part of the contract where the term constitutes a material alternation to which consent cannot be inferred. (UCC 2-207)

ProCD offered the same product at two different prices to consumer and corporations, however the licensing agreement that came with the product was different. Zeidenberg bought the consumer version and used it in a commercial context, claiming that he was not bound by the licensing agreement. The judge said there was one form, the licensing agreement, which made ProCD, as the offeror, the master of the offer, and that a contract was formed when Zeidenberg kept the software for the prescribed period without returning it, and therefore was bound by the terms. 

RULE: A buyer accepts goods when, after an opportunity to inspect, he fails to make an effective rejection.

Court used the same approach, making Gateway the offeror, and so Hill’s keeping the computer after reading the terms of use meant that Hill had assented to an arbitration agreement contained within.

RULE: Terms sent in the box with a product that state that they govern the sale unless the product is returned within 30 days are binding on a buyer who does not return the product.

Judge declined to hold plaintiff to the terms of use, because 2-207 applied (do not need multiple paper forms, 2-207 allows for oral discussion as well). Did not see how making the seller the offeror was justified, and pointed out that it was not unreasonable for vendor to communicate to buyer at the time of sale the fact that vendor will propose additional terms as a condition of sale

RULE: A purchaser does not necessarily accept the standard terms and conditions agreement, which may include an arbitration clause, located in the package containing a mail order product.

Contract for the sale of logs. Issue before the court is whether there was a warranty of quality included in the agreement. In applying the PER, and declining to admit extrinsic evidence of such a warranty, the court applied the four corners rule to see if the writing was completely integrated. The language in the agreement comported a complete legal obligation, including all of the terms of the agreement, so the court found it to be completely integrated. 

RULE: Parol contemporaneous evidence is inadmissible to contradict or vary the terms of a valid written instrument.

Vagueness and ambiguity were claimed, so extrinsic evidence admitted by Judge Traynor for purposes of interpretation only, not to add, detract from, or vary the terms of the contract. “Words alone have no meaning” case.

RULE: Test of admissibility o extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meanings to which the language of the instrument is reasonably susceptible.

Buyer of property trying to claim that there was an oral contract in which furniture came with the sale of land with a hotel on it. Parol evidence was admitted by the judge to determine whether the parties intended the writing to be a final, integrated expression of their agreement.

RULE: Parol evidence that bears upon the question of the intent of the parties to integrate their transaction into a writing may be admitted when the writing does not conclusively establish the intent.

Judge Kozinzki applying Judge Traynor’s rule, but objecting to Traynor’s dicta. Allowing extrinsic evidence for interpretation of the contract only. 

RULE: Parol evidence is admissible to raise an ambiguity in a contract even where the writing itself contains no ambiguity.

Plaintiff was asking that the annuity provisions of a life insurance policy issued to defendant be reformed due to a mistake. The reformation was permitted because the plaintiff was able to establish that they did not even offer a policy like the type created by the mistake, there was an actual mistake (policy mistyped), and defendant did not act in detrimental reliance on the policy (all he did was age). 

RULE: Where an antecedent contract has been established by the requisite measure of proof, equity will act to bring the erroneous writing into conformity with the true agreement.

D made a verbal contract with plaintiffs in which he would rent them his farm in Texas for a year. Plaintiffs, in reliance, moved from Kentucky to Texas and incurred expenses. The court held that the contract fell under the Statute of Frauds (parol lease of land for one year), and that since D did not receive any benefit from the plaintiffs’ move, the court could not enforce the oral contract.

Verbal contract for Riley to supply Capital Airlines with water methanol (used for deicing) over 5 years. Since the contract could not be performed within one year, it fell within the Statute of Frauds. Even though there was no contract, the court awarded Riley damages for losses incurred when Riley built special machinery to make the water methanol, in reliance on his agreement with CA. 

RULE: Part performance does not take an executory portion of a contract out of the SoF.

Plaintiffs were trying to enforce an agreement to buy the defendant’s land. Defendants sent a signed offer to sell the land, which plaintiffs accepted over the phone to D’s lawyer. The court found that the agreement, not the offer, was insufficient because the plaintiffs could not accept to the D’s lawyer. 

RULE: Absent partial performance or grounds for estoppel, the SoF requires that a contract for the sale of land is invalid unless it, or some written note or memorandum, is subscribed to by the parties to be charged.

P and others brought suit alleging trespass to property and invasion of privacy.  D sough dismissal on grounds that arbitration was required.  A writing can include electronic writings.

RULE: A contract required to be "in writing" or "written" may include electronic writings.

D contracted P to package materials for use in making D's toys.  D refused to accept products manufactured by P.  P sued alleging D was contractually obligated to pay for the products.  Written modification had occurred here, in emails and written notes.  P clearly could have been more prudent but failure of prudence is not unreasonableness.

RULE: An electronic version of your name in an email is a sufficient signature.

Johnson promised to give the university money in 3 years, asked that they used it to pay off their debts. Court found that the promise was lacking consideration because it did not seem like Johnson was giving them the money to induce them to pay off the debt, but that it seemed more like a conditioned promise.

RULE: Gratuitous Promises:  A promise to give a gift is not a bargained for exchange, and therefore does not meet the requirements of consideration.

Uncle promises his nephew $5,000 to give up drinking and smoking until the age of 21. At the time, the nephew did have a legal right to do so, and he gave both up to induce his uncle to give him the $5,000. The court found bargained-for consideration in that the uncle promised $5,000 to induce his nephew to give up drinking and smoking, and the nephew gave up his legal right to drink and smoke to induce his uncle to give him $5,000. 

RULE: Forbearance of a Legal Right: A waiver of a legal right at the request of another party may serve as sufficient consideration for a promise.

Brother-in-law writes to sister-in-law, promising that if she came to where he was with her family, he would give her some land. Consideration was found to be lacking because there was a lack of the brother making a promise in order to induce something from his sister-in-law, it seemed more like he was making the promise from the goodness of his heart. 

RULE: A bargained for exchange requires consideration on both sides.  A one-sided exchange is more of a gratuitous promise.

Consideration found in plaintiffs’ participation in a clinical study—they completed their performance, and were entitled to HEM’s promise, which was what induced them to participate. 

RULE: A unilateral contract with completed performance is enforceable.

Plaintiff predicted decedent’s death. Decedent wrote a note stating if she was correct, he would pay her mortgage. Plaintiff sued decedent’s estate to collect. The court found consideration lacking because there was nothing in the note which suggested that decedent promised to pay in order to induce plaintiff to do the sittings, so therefore it was past consideration, and unenforceable.

RULE: Services rendered upon request support a later promise to pay for such services only in cases where the original request implies an agreement to make payment for such services.

Defendant promised to pay good Samaritan plaintiff for caring for D’s son when he was ill. The court found consideration lacking because D was not legally bound to pay his adult son’s debts, and the plaintiff’s actions had taken place before promise was made, which was past performance. 

RULE:  The general position that moral obligation is sufficient consideration for an express promise is limited to cases where good or valuable consideration previously existed.

Webb saved McGowin’s life, and was permanently disabled in doing so. McGowin promised to pay Webb for the rest of Webb’s life. McGowin’s estate tried to back out. Court said that there was adequate consideration because McGowin received a substantial material benefit from Webb’s past performance created a presumption that McGowin would have requested the performance had he had the chance. 

MATERIAL BENEFIT EXCEPTION: A moral obligation is a sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit.

Captain promised sailors extra wages after two sailors deserted while on a trip. The court refused to recognize the modification for lack of consideration because the sailors had already agreed to get the ship to and from its destination—there were no added duties, and a couple of sailors deserting was foreseeable. 

RULE: Modifications of employment contracts which are occasioned by emergency or duress are unenforceable.

Fisherman contracted to bring ship from San Francisco to Alaska and back, and catch fish, for a set payment rate. While in the midst of their duties, stopped work and demanded more money. Court neglected to enforce the higher payment rate because of the pre-existing duty rule. 

RULE: When a party refuses to perform and thereby coerces a promise from the other party to the contract to pay him an increased compensation for doing that which he is already legally bound to do, there is no consideration for the promise for extra pay.

Subcontract to do excavation, contracted to do everything requisite and necessary, certain payment rate set. When subcontractor set out to do job, found that it would take extra work to do. Contractor agreed to pay him extra. Subcontractor got what he wanted, worked a few days, then stopped work and left. Contractor sued to enforce modification. Modification was enforceable due to unanticipated, burdensome conditions arising. 

RULE:  Doctrine of Unforeseen Circumstances: Where unforeseen circumstances make the performance of a contract unduly burdensome, and the parties agree in view of the changed conditions to an adjustment in price, a new contract supported by consideration is formed.

Widow exchanged her husband’s worthless note at the bank for her own worthless note because she believed that she was under an obligation to do so. The court found that consideration was lacking because all she did was exchange one worthless note for another. 

RULE:  In order for a contract to be valid, VALUABLE consideration must be exchanged between parties.

Dyer gave up a questionable legal claim against National in exchange for lifetime employment. The court found consideration to be adequate because Dyer gave it up in good faith, and since both parties agreed, they both seemed to think that Dyer’s claim had some merit. 

RULE: If a person who in good faith believes he has a legal claim promises to forbear or in fact forbears from pursuing the claim, he has provided sufficient consideration for a return promise even if the claim turns out to be wholly ill-founded.

Husband’s late wife left money to plaintiff in her will, didn’t actually have the money. Husband promised to fulfill his wife’s wish; consideration was one cent. The court declined to enforce the contract because one cent for $200 was unconscionable. 

RULE:  Pretended Exchange: Disparity in value sometimes indicates that the purported consideration was not in fact bargained for but was a mere formality or pretense.  Such a sham or "nominal consideration" does not satisfy the requirements.

Ricketts v. Scothorn

Grandfather promised his granddaughter $2,000 because he didn’t want any of his grandchildren to have to work (wrote a note). Granddaughter quit her job in reliance on the promise, was unemployed for a year, got another job with approval of grandfather. Estate tried to get out of paying the balance on the note due to a lack of consideration, but were estopped because the grandfather reasonably induced his granddaughter’s reliance. Granddaughter got expectation damages.

RULE: When the payee changes her position to her disadvantage, in reliance on a promise, a right of action on the promise arises.

Son awarded specific performance when his mother promised to give him some of her land, and he relied on it by moving his family and giving up a homestead somewhere. He also made improvements to the land—the promisor would have been unjustly enriched. 

RULE: 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.

Company promised longtime employee a pension in consideration of her years of service (past consideration). Years later they tried to get out of it. Court gave expectation damages because the company should expect that its promise would induce reasonable reliance, and it did—employee retired a year later, and expectation damages were needed to avoid injustice because employee had reached an age where she could not go back to work, also had cancer. 

Judge Learned Hand rejected using promissory estoppel to enforce the defendant’s offer to sell linoleum at a specified price to whichever contractor was awarded the general contract—he found that the offer was revoked before acceptance could take place and considered promissory estoppel inappropriate if there was no MMA.

RULE: Doctrine of promissory estoppel shall not be applied in cases where there is an offer for exchange as an offer is not intended to become a promise until a consideration is received.

Promissory estoppel used to award expectation damages when contractor relied on a subcontractor’s bid in computing his own bid for the general contract—locks in subcontractors when they bid, brings more reliability to the contracting process.

RULE: Reasonable reliance on a promise binds an offeror even if there is no other consideration.

Plaintiffs reasonably relied on representations from defendants that their application for a franchise would be granted, to their detriment. The court awarded reliance damages and rejected expectation.

RULE: Justice and fair dealing require that one who by  his language or conduct leads another to do what he would not otherwise have done, shall not subject such person to loss or injury by disappointing the expectations upon which he acted.

Plaintiff took many actions in reasonable reliance on a representative of Red Owl’s representations that he would be awarded a Red Owl grocery franchise. Reliance damages awarded. 

RULE: A promise that 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, is binding if injustice can be avoided only by enforcement of the promise.

Hawkins v. McGee

(The Hairy Hand)

P was promised a 100% perfect hand, got a hairy hand. The court awarded expectation damages: value of 100% perfect hand - value of hairy hand.

Expectation Damages = Value of the promise - value delivered.

P was promised access to some iron mills, and in anticipation of that, he spent 500 pounds so that was the amount of damages he got. Ct gave reliance damages, what he expended in reliance on the bargain, 500 pounds.

RELIANCE DAMAGES = All promisee's expenditures based on reliance on the contract.