Contracts Outline – Professor Murphy, Fall 199
with UCC sections and names/theories list attached.

Exam note:  Only talk about damages to the extent you are asked, most likely in promissory estoppel cases.  

Part 1:  Enforceability

I.  Remedies
A.	Expectation Damages
This is the standard remedy with ordinary bargained for promises and often for PE cases.
B.	Reliance Damages
Sometimes for PE; depends on the state.
C.	Restitution
Restores what A gave to B back to A by B.  This is mostly relevant as a remedy in restitution (quasi-contract) cases.	
D.	Specific Performance
Rarely used.
II.	Doctrines of Enforceability
A.	Bargain theory --  Rest. §71
Is enforced in any state.
What you need:
1.	a promise
2.	an act of forbearance or return promise by the p’ee
3.	which is sought by the p’or and
4.	given by p’ee in exchange for the promise     
Note:  3. and 4. are mutual inducement, not mutual obligation, which doesn’t exist in unilateral contract
No need for adequate consideration as long as it is a real (not sham/peppercorn) bargain – see Rest. §79
Real vs. Sham bargains:  It must be possible for the trier of fact to conclude that the consideration was one reason p’or promised, and the promise was one reason p’ee gave the consideration, but it need not be a necessary or sufficient reason.  see Rest §81.
B.	Promissory Estoppel – Rest. §90
Accepted in some form in all states except VA.
Restatement is treated like a statute in many states.
What you need:
A promise plus four elements:
		Very important:  First find the promise.  
It may be  implied, as in Drennan v. Star Paving.
1.	p’or should reasonably expect promise to induce reliance.
2.	p’ee did rely on it  (reliance presumed in charitable subscriptions and marriage settlements)
3.	such that injustice can only be avoided by performance
4.	remedy can be limited as justice requires
sometimes expectation, sometimes reliance (especially when expectation damages are much > reliance damages)
C.	Benefit/Detriment
This is a traditional, ancient view, originally without the bargain requirement.  PE is something of a revival, but this old view is mostly of historical interest.	
D.	Benefit/Detriment + Bargain
The consideration is the benefit and detriment.
What you need:	Everything in §71 plus:
1.	benefit of a material or legal kind to p’or, OR
2.	detriment of a material or legal kind to p’ee.
This basically means some states need a little more than §71 because consideration hinges on benefit/detriment.
This is explicitly rejected in §79, which says if you’ve got §71 requirements that’s enough.
E.	Bargain theory + PE
Everything is enforceable except:
•	purely gratuitous promises 
•	that are not relied on.
F.	Exceptions to E.
1.	Seals – in some states they make everything enforceable.
2.	Gratuitous promise can remove technical legal bars to enforceability such as SOL.  The original contract grounds the course of action, but the new promise sets the binding terms.    See §82
3.	Rule of Webb v. McGowin (note:  I lost several points on the exam for missing this; learn it well):  Moral consideration, §86:
“A promise made in recognition of a past benefit conferred on p’or by p’ee may be enforceable,” but the obligation is set by the new promise, not by the past benefit or p’ee’s loss.
G.	Priority among the doctrines:
The only class of contract enforceable under §71 but not §90 is:
	Executory agreements.
•	exchange of a promise
•	no performance
•	no reliance.	
1.	Bargain Theory.  Because it is the firmer legal ground and because PE  may not get you expectations damages, and is a less reliable ground for recovery.
2.	PE
3.	Anything else that seems plausible.
H.	Firm Offers.
Re-read Baird v. Gimbel and Drennan v. Star Paving.
1.	An offer plus
2.	a promise to hold the offer open for a period oftime.
Even if there is not consideration for (2) there PE may be ground for enforcement of firm offers.  See §87.  
§87(2)  also embraces Traynor’s theory of implied option K in Drennan.
If (2) were consideration of some kind, this would be an option contract.  
UCC 2-205 deals with formal requirements of firm offers.  
III.	Theories of Contractual Liability (Why enforce promises)
A.	Unjust enrichment
B.	Detrimental reliance
C.	Social good
Theorists disagree about which promises it is good to enforce to satisfy this goal.  But they all see the main point of K law is to allow people to make mutually beneficial promises they couldn’t otherwise make because they don’t trust each other.
D.	Morality
Justice Fried’s view.  P’or is morally obliged to keep his promise, and K law should force him to do that
Neither A nor B is enough on its one to cover all of our doctrines of enforceability, but C or D is.
Exam note:  Be able to discuss the connections between these theories and the various enforceability doctrines.  We don’t need to say which is better or defend any of the theories.
IV.	Different Interpretations of Bargain Theory & PE
A.	Kinds of legal rules:
1.	Substantive –  e.g. §71 because it insist on “real” bargains
2.	Formal – Evidentiary rule of thumb.  e.g. Mansfield’s interpretation in Pillans and Rose.  Consideration is for evidence only.  It’s ok that there’s no bargain, because there is evidence of a different kind.
3.	Strict form – seals, etc.  e.g. the seal in Warren v. Lynch.  Alternative evidence isn’t enough because it doesn’t satisfy all three.
a.	evidentiary
b.	cautionary
c.	channeling
To accept the alternative evidence (“L.S.” instead of an actual wax seal) would undermine the channeling and evidentiary functions.
Williams & Kennedy articles discuss preferences for more (Wms.) or less (Kndy.) formalistic approach.
B.	Substance v. form wrt. Bargain Theory:  Not everyone agrees w/ §71.
Look at what gets enforced under substantive v. formal understandings:
“Should gratuitous promises be enforced?”
1.	Substantive:  Gratuitous promises are not worthy of enforcement because they are not wealth creating.  This idea is rejected by most economists; they think gratuitous promises do maximize utility.
2.	Formal:  Gratuitous promises should be enforced because bargain is purely for evidence.  But you need some kind of evidence because otherwise we should be doubtful that the gratuitous promise was actually made.
3.	Disagreement between 1 & 2 will be important in hard cases, e.g. sham bargain cases.
C.	Interpretations of PE
1.	Substantive:  compensation for detrimental reliance. Problem:  this is at odds w/ the fact that expectation damages are the usual remedy.
2.	Formal/Evidentiary ROT:  the fact that the promise was relied upon is evidence that the promise was made. 
The part of §90 that requires “reasonably expected” has an evidentiary as well as cautionary function 
3.	Disagreement between 1 & 2 could come up in hard cases; it is also important in easy cases for figuring out the appropriate remedy.
V.	Restitution cause of action:  Implied-in-law contract
A.	Criteria:
1.	 must show he conveyed a benefit
2.	he wasn’t an officious intermeddler
3.	not a gratuitous promise
4.	measurable
B.	This is a distinct cause of action:  “Quasi contract is no contract at all”
But…
talking about restitution that way makes sense because conditions 2, 3, and 4 are more easily met in the kinds of circumstances where you would normally expect to see a contract.
C.	Where  provided a service which isn’t guaranteed to benefit , we don’t 
measure the actual benefit received; we measure cost avoided.  (e.g. medical fees for service.)  Cost avoided can also be used where the actual benefit is hard to measure.
VI.	Limits on Enforceability
A.	Pre-existing legal duty rule
1.	Promise made in consideration of performance of pre-existing legal duty of p’ee is typically not enforceable.  See §73.  justification is public policy.  We will discuss this on Mon 11/9.
2.	If the pre-existing duty comes from an ongoing deal that is being renewed and/or modified, we justify unenforceability on grounds of duress, good faith, and coercion.  Rest §89 and UCC 2-209 (1)
B.	Intention not to enter legal relations.
C.	Statute of Frauds
Determines when the absence of writing makes an otherwise enforceable oral contract unenforceable.  You ask three questions:
1.  Does the agreement fall within the statute? 
Marriage:  in consideration of marriage, not just in contemplation of it.
Year:  Interval between making the agreement and earliest possible
performance  1 year.
Land:  sale or lease of interest in land.
Executor answering for debts of deceased
Goods >$500
Suretyship:  p’or is secondarily liable for debts of another who is primarily 
  liable.
2.  If it is within the statute, then it must be
a.	signed by 
b.	oral modifx should be written iff the K as modified falls w/in SOF
c.	under common law, parties must be identified.  See Rest. §131
d.	UCC 2-201 (1) and (2)
3.	If SOF is not satisfied, then what?
a.	 agreement is unenforceable
b.	if relied on, PE can beat SOF – see Rest §139
c.	Alaska Airlines required promise to reduce the agreement to writing in addition to (b).  Also see Monarcho.
D.	Public Policy Limitations
Appeals to public policy can be made at any point in the argument.  Some Ks won’t be enforceable because they violate the interests of society:
1.	Illegal contracts are not enforceable; e.g. a contract on someone’s life
2.	Some legal contracts are also void on public policy grounds where there is a clear expression of the policy goal by legislature.  e.g. Hewitt v. Hewitt
See Rest. §78 
When deciding whether a K will be unenforceable on PP grounds, think not only about whether the policy goal is valid but also whether or not you are promoting the policy by either enforcing or not enforcing K.  (e.g. Hewitt)

*          *          *

Part 2:  Formation and Interpretation

I.  	General Questions:
A.	When do you have an agreement and what are its terms?  
B.	How do you reconcile the objective approach to formation and interpretation with the purpose of contract law which is to get at intentions of parties?  The idea is that taking the objective approach actually results in a result closer to what the parties would have intended.  
C.	What did the parties have reason to know?  
D.	How flexible & how formal should formation be?  Is it a good idea that the UCC is flexible and allows supplying terms/gap-filling?  (This is a departure from common law tradition; is it an improvement?)
II. 	Formation in General
A.	A promise is more than a statement of intention; it’s a commitment to act.
B.	An offer is not a promise but a conditional promise.  It is conditional on the offeree’s promise or performance prior to revocation of the offer by offeror.  Once accepted the offer is converted to a promise; it’s too late to revoke.
C.	Q of whether an offer/promise is made and on what terms.
Look at:
•	ordinary meaning of words
•	context/circumstances
Words alone are not dispositive; you can make and offer w/o saying “I offer;” ask what is the most plausible interpretation of totality of behavior, both linguistic and otherwise.
D.	Sometimes it’s reasonable to say an offer is made even when there is little or no language to go by.
Implied-in-fact.  The offer/agreement was really there but wasn’t explicit.  
Courts use evidentiary presumptions, such as:  Cooperative behavior in close relationships is NOT evidence of an agreement.  the presumption can be rebutted.
E.	When parties have materially different understandings, look at what they knew or had reason to know about each other’s intent.  
See Rest §20 and UCC §2-201
Qualification:  Rest §20(1)(b) need not be read too strongly.
Where A & B each have reason to know the meaning attached by the other, but A has greater reason to know than B, it may be appropriate that B’s meaning prevail. 
III.	Technicalities of Assent:  Common Law Background
A.	Offer
1.	Person makes an offer (as opposed to an invitation to make an offer) where the only answer needed is “I accept” -- no further negotiation needed.  See Rest. §24
2.	Ads are typically not offers, but invitations to offer.  Same w/ price quotes.
But some ads and price quotes are offers e.g. Lefkowitz, Fairmount Glass
B.	Definiteness
1.	For court to enforce K, it must be definite enough to be able to determine whether there is a breach and to fashion a suitable remedy.  Common Law and the UCC agree on this.
2.	You can use definiteness as a criterion for finding an agreement at all.
a.	Cardozo’s opinion in Sun Printing:  Express and implied terms must be sufficiently definite on their own to allow enforcement.  Rest §33 seems to adopt this view.  
b.	Crane’s dissent in Sun Printing and UCC §2-204:  Allow a court to find an agreement made even if express and implied terms are not sufficiently definite.  
•	The difference between this view and Cardozo/Rest §33 view is in the question of whether the court can fill gaps of missing terms.  Under Cardozo’s approach even perfectly reasonable terms could not be supplied w/o evidence the parties actually had those terms in mind.  Crane and UCC would allow supplying appropriate terms with no pretense that the parties actually had them in mind.  Supplied terms would be those that are reasonable under the circumstances.
C.	Revocation of Offers
1.	Ordinary (i.e. not firm) offers can be revoked any time prior to acceptance.
2.	Revocation can be indirect as in Dickinson (p 316; offeror says “you are too late; I sold it to someone else.”)  See Rest §43.
3.	Revocation of an offer made to the public at large:  Rest §46. Revocation requires notice or ad equal to the notice of the original offer.
4.	After acceptance, the offeror cannot revoke.
5.	If offeree rejects the offer, it lapses, without need for revocation by offeror.
6.	Firm offers are irrevocable according to the terms of the promise to hold the offer open, if that promise is enforceable.
D.	Mode of Acceptance
1.	Return promise or performance (depending on whether it’s a bilateral or unilateral agreement) – See Rest. §30,32.  Unilateral agreement is accepted by performance; offer can be revoked any time prior to complete performance.
2.	The offeror is master of the offer and can prescribe conditions on the time and manner of acceptance.
3.	Generally silence is not acceptance; for exceptions see Rest. §69.  In addition to exceptions in §69, it will often be possible to construe conduct as promissory acceptance.
4.	Acceptance need not restate terms of the offer, nor need it say “I accept;” it just needs to manifest acceptance.
5.	Where acceptance is by mail it is effective once out of the control of the offeree.
E.	Mirror Image Rule
1.	If acceptance states terms, it will not be effective if the terms vary from those in the offer.
2.	If acceptance states variant terms it is a counter-offer, which may be accepted by the other side.
3.	If it states variant terms it is also a rejection of the original offer.
4.	Be careful to distinguish variant terms from mere requests/suggestions (precatory language) which don’t reject the offer.
5.	Last-shot rule:  Where a counter-offer is not responded to in express terms but conduct of parties indicates there was an agreement, the terms of the agreement are those of the counter-offer.
F.	Revocation of an offer that invites acceptance by performance after performance is started but before completion (offeree is halfway up the greasy flagpole):  There are three solutions:
1.	See if you can imply promissory acceptance, resulting in a bilateral K.
2.	If the offer doesn’t allow promissory acceptance (only performance), maybe you can imply an option K.  See Rest §24
3.	In some cases it may be reasonable to subdivide the contract to find complete performance of part of the agreement and be able to enforce that part of the contract.
G.	Standard Form Contracts
1.	In general, you are bound to the terms of a form you sign.
2.	Where a term is inconspicuous, there may be lack of assent to that term even though the form is signed.
3.	in some cases where the person signing has reason to believe that “like writings are regularly used to embody terms of agreements of the same type” the court may appeal to Rest §211.

IV.	Technicalities of Assent – UCC specifics
A.	UCC builds on the common law and only displaces those parts of the common law where it conflicts with it.  See §1-103.
Exam note:  Where the UCC governs, we don’t need to rehearse what the common law is in our answer.
B.	How do we know then the UCC governs?  Article 2 of the UCC only applies to transactions for goods.  See §2-102.  Some sections are further limited to transactions where one or both parties are merchants.  Both “goods” and “merchant” are defined; see §2-104 & §2-105.
C.	§2-204 sets out a more relaxed approach to formation esp. wrt definiteness.
D.	Part 3 of Art. 2 has gap filler mechanisms. 
§2-305 deals w/ open price terms.
§2-314-316 deal w/ implied warranties.
V.	Battle of the Forms
A.	First ask whether the writings establish a K.  UCC §2-207(1) & 2-204(1)
1.	Was the variation so fundamental that it wouldn’t be reasonable for the offeror to construe it as acceptance?  See second paragraph p 269.

Under subsection (1), there are two instances in which a contract may not have been formed.  First, if the offeror could not reasonably treat the response of the offeree as an acceptance there is no contract. [§2-204(1)] Second, if the offeree’s acceptance is made expressly conditional on the offeror’s assent to variant provisions, the offeree has made a counter-offer. [§2-207(1)]  However, under section 2-207(3) either situation may result in contract formation by subsequent conduct of the parties.

2.	Then ask did the offeree make acceptance expressly conditional on offeror’s assent to new terms?  If not, the counter-offer is an effective acceptance, so go to §2-207(2).  If it was expressly conditional, go to §2-207(3) to see if conduct establishes a contract.

UCC Sections to know:

1-102	Purpose of UCC		
1-205		Course of dealing
2-102		Scope of application of UCC
2-104		“Merchants” defined.
2-105		“Goods” defined.
2-201		SOF
2-204		Formation
2-205		Firm Offers
2-206		Acceptance
2-207	Additional Terms
2-209		Modification doesn’t need consideration
2-305		Gap filler:  Open price term
2-311		Gap filler:  Leave particulars open for specification by parties
2-314-316	Gap filler:  Implied Warranty

Names & Doctrines

Sidgwick	individualistic ideal.  K law allows a world of individuals to engage in mutually beneficial exchanges.  K law provides a progressive force.

Holmes	K as risk allocation; doesn’t matter if p’or has power over the outcome; the effect of legal promise is that p’or will pay if x doesn’t happen.
	This is a utilitarian/social good approach.  K law is amoral.  casebk p 1064

Harriman	Objects to Holmes’ position on 3 grounds:  (1) payment of damages is only a procedural convenience; the law tries it’s best to provide specific relief.  (2)  the doctrine is “not equitable.”  (3)  it is a departure from “ethical principles.”  casebook p 1065

Fuller	3 principle purposes for K law.  In order of importance:  (1) Restitution;  
& Perdue	undo unjust enrichment.  (2) Compensate detrimental reliance.  (3) Protect expectation interest.  Fuller thinks unjust enrichment/detrimental reliance are the main reasons for K; thinks it doesn’t make sense that we usually award expectation damages.  casebook p1172  On Formalism, see below.

Atiyah	Benefit-detriment theory:  we should only enforce promises that are paid for or relied on.  We should not enforce executory agreements.  Shoots down each of 3 reasons for enforcing executory agreements:  (1) to protect expectation interest:  says disappointed expectations are psychological only as long as there’s no detrimental reliance.  (2)  Ks as risk allocating devices:  says true risk allocating Ks are rare (certain bets and insurance) and maybe they should be binding, but most Ks are not risk allocation devices.  (3)  the principle of promissory liability:  Atiyah says this argument is based on ben/det because it says that if we uphold the principle then people are more likely to honor promises that have been paid for or relied on.  FCL p4

Fried		The reason for K law is to enforce morality.
The remedy that would result would be specific performance plus punitive damages.  Don’t invoke trust and then break it; that’s bad for society.  This is not a utilitarian argument; Fried cares about individual moral duty in a Kantian sense.   Fried distinguishes promise from statement of intention.  FCL p9

Cohen	Cultural importance of formality; form as ceremony.  Maintenance of 
forms may be an end in itself.  p705 casebook

Fuller	Formalism & 3 functions:  evidentiary, cautionary, and channeling. casebook p706.   
Also quoted in FCL p 251 re cautionary & channeling functions of consideration as form.

Ames	Historical background of formalism.  Silly to say a seal “imports” consideration; seals have been around longer than bargain theory.  Casebook p723

Kennedy	Prefers substantive approach (vs. formal).  Forms are manipulable and can lead to greater unfairness than if you allow greater judicial discretion.  Strict formalism leads to both over- and under-inclusion.

Williams	Likes forms because they protect her from race and gender bias.  Form equalizes.  Her white male colleague avoids form (e.g. written lease agreement) because he feels they increase the power differential and discourage trust.

Eisenberg	Bargained for promises should be enforced because they create wealth (social good approach).  Firm offers should be enforced because they facilitate exchange.  Unrelied upon gratuitous promises don’t need to be enforced; we could use formal mechanisms to make them enforceable (should allow an out for change in p’or’s circumstances or gross ingratitude by p’ee) but it wouldn’t be worth admin costs b/c gratuitous promises don’t create wealth.  Murphy & the book take issue with the idea that gratuitous promises are sterile.

Feinman	Promissory Estoppel.  Strict requirements are not usually met but courts enforce anyway.  e.g. construction bidding cases.  Traynor in Drennan v. Star Paving held that the bid is not a revocable offer; the court infers a promise to hold open (which invites reliance and is subject to PE).  Availability of §90 remedy depends on p’or having “reason to know” the promise would induce reliance (foreseeability).  This reflects a modern view of economic interdependence contrasting with the classical, individualist view of K law (e.g. Fried).

Yorio & Thel	PE looks like it’s to protect p’ee’s reliance but if that were the case courts would award reliance damages not expectation damages.  The real reason for PE is to identify serious promises (seriousness contemplated by p’or) by looking to reasonable expectation of reliance.  This catches serious promises not covered by bargain theory.

	Thoughts on Yorio & Thel:  Reliance damages for PE would be more like tort than contract.  PE could also be seen as an interpretation doctrine – inviting reliance suggests intent to be bound.  What Y&T might say about bargain theory:  bargained for consideration is evidentiary (evid. that serious promise was made).