contracts cases

Rich & Whillock, Inc. v. Ashton Development, Inc.

Facts Ashton Development, Inc. (Ashton) (defendant) and Bob Britton, Inc. (Britton) (defendant) entered into a contract with Rich & Whillock, Inc. (Rich & Whillock) (plaintiff) for the grading and excavation of Ashton's property, for which Britton was the general contractor. The contract stated that Rich & Whillock would provide the services for $112,900, but also stated that all rocks removed would cost extra. When Rich & Whillock found rock on the site, Rich & Whillock estimated that removing the rock would cost an extra $60,000, but made clear to Britton that the rock removal could actually cost much more. Britton agreed to pay for the extra cost. Rich & Whillock received about $190,000 in payments from Britton and submitted a final invoice to Britton for another $72,286.45. Britton refused to pay the final invoice. Rich & Whillock informed Britton that Rich & Whillock would face financial ruin if not paid. Britton offered Rich & Whillock $50,000 in satisfaction of the contract, saying that Rich & Whillock would otherwise receive nothing. Rich & Whillock, calling it "blackmail," signed the $50,000 agreement and a document releasing the defendants from any further claims. Britton paid the $50,000. Rich & Whillock sued the defendants for the remaining $22,286.45, which the trial court awarded on the basis that the $50,000 agreement and release had been signed under economic duress. The defendants appealed. Issue Does economic duress occur where one party's wrongful act places pressure on the other party so as to leave the other party with no reasonable alternative but to comply? Holding and Reasoning (Wiener, J.) Yes. One party's bad-faith coercion of the other party, such that the other party has no reasonable alternative but to comply, is economic duress. The economic-duress defense places two sets of public-policy rationales at odds with one another. The rationales counseling against application of this defense are freedom of contract and private dispute resolution. The rationale counseling in favor of application of this defense is the desire to correct inequities resulting from unequal bargaining power and coercion. Economic duress has expanded the old common-law duress rule to grant relief in situations where there has not been unlawful activity or fraud. Under this expansion, an agreement is unenforceable where one party's wrongful act coerced the other party in such a way that left no reasonable alternative. Wrongful acts include making false statements and bad-faith threats to breach a contract or withhold payment. Impending bankruptcy or economic ruin may leave a party with no reasonable alternative other than agreeing to the coercive party's demands. The economic-duress defense exists to ensure a baseline of business ethics, but does not prohibit hard bargaining, efficient breach, or reasonable settlement. In this case, Britton's refusal to pay Rich & Whillock's final invoice and $50,000 settlement offer were in bad faith, as the defendants knew that Rich & Whillock needed the money. Rich & Whillock only agreed to the $50,000 settlement and release to avoid bankruptcy, and even told the defendants that it was "blackmail." This case is very similar to Totem Marine T. & B. v. Alyeska Pipeline, Etc., 584 P.2d 15 (Alaska 1978), which found economic duress where the plaintiff accepted the defendant's offer of a one-third payment while facing imminent bankruptcy. In sum, the evidence supports the trial court's finding of economic duress. Accordingly, the trial court's order that the defendants pay the remaining $22,286.45 is affirmed.

Mid-South Packers, Inc. v. Shoney's, Inc.

Facts At a meeting on April 17, 1982 between Mid-South Packers, Inc. (Mid-South) (plaintiff) and Shoney's, Inc. (Shoney's) (defendant), Mid-South presented Shoney's with a proposal letter setting out the prices and terms at which Mid-South would supply meat to Shoney's. The letter stated that Mid-South would inform Shoney's 45 days before any price change, but did not include any terms as to quantity or duration. Shoney's later began buying meat from Mid-South. Shoney's would send a purchase order to Mid-South for each desired delivery, and after every shipment, Mid-South would send an invoice to Shoney's. At a meeting on August 12, 1982, Mid-South informed Shoney's that the price per pound of meat was increasing. On August 18, Shoney's submitted another purchase order, and it continued to submit purchase orders, and Mid-South continued to deliver meat. Shoney's paid the invoices reflecting the increased price. On its final order, Shoney's offset the amount due on the invoice by $26,208, the difference between the original price and the increased price it had paid on its previous orders. Mid-South sued to recover the amount of the offset. The district court granted Mid-South's motion for summary judgment. Shoney's appealed. Issue Under the Uniform Commercial Code, may a firm offer be revoked during the three months after it is made? Holding and Reasoning (Per Curiam) No. Under the Uniform Commercial Code (UCC) § 2-205, a firm offer is held open and may not be revoked, regardless of whether there is consideration for the offer, during the time stated or for a reasonable period of time. However, in no case will the offer be open and irrevocable for longer than three months. Mid-South's letter proposal was, at most, a firm offer that could not be revoked for a period of three months starting on April 17, 1982. After July 17, 1982, Mid-South had a right to revoke the offer and raise its offered price. Shoney's argues that by its acceptance of Mid-South's proposal, a binding requirements contract was formed, and Mid-South was therefore required to notify Shoney's 45 days before any price increase. However, to form a requirements contract, the buyer must promise to purchase his requirements exclusively from the seller. Here, Shoney's had the right to purchase goods from other suppliers. Therefore, no requirements contract was formed. Instead, each purchase order constituted its own contract between the parties. Mid-South's letter proposal was an offer to sell at a certain price. Each time Shoney's submitted a purchase order, it manifested its assent to that offer, creating a new, independent contract. Mid-South's original offer was properly revoked and replaced with a new offer at the August 12 meeting between the parties. Shoney's accepted the new offer by submitting a new purchase order on August 18. Beginning with that purchase order, each time Shoney's submitted a purchase order, it created new contracts that obligated Shoney's to pay the new purchase price. The district court's judgment is affirmed.

C.I.C. Corporation v. Ragtime, Inc.

Facts C.I.C. Corporation (CIC) (plaintiff), a vending-machine company, placed four vending machines on the premises of Ragtime, Inc. (Ragtime) (defendant), a bar owned by Donald Tabatneck (defendant). The parties agreed to a five-year lease of the machines, during which revenue would be shared between CIC and Tabatneck. After a payment dispute, CIC removed the vending machines from Ragtime's premises. CIC then brought suit against Ragtime and Tabatneck, seeking to recover $41,000, constituting the total loss of CIC's revenue for the four vending machines during the 59-month period that remained on the lease when Ragtime breached. Ragtime contended that CIC had failed to mitigate damages and thus was not entitled to the damages. CIC argued that it had no mitigation duty under the circumstances. The trial judge's jury instructions directed the jury that in determining an appropriate damages award, the jury could consider what CIC should have done to mitigate damages. The jury awarded $1 in damages. CIC moved for a new trial on damages. The trial court denied the motion, and CIC appealed both the jury award and the denial of the motion for a new trial. Issue Is a lost-volume lessor who would have received the benefit of two contracts had the lessee not breached entitled to damages totaling the net profits for the period remaining on the lease after breach? Holding and Reasoning (Pressler, J.) Yes. According to § 347 of the Second Restatement of Contracts, when a lessor leases an item of which the lessor basically possesses an unlimited supply and the lessee then breaches, the lessor is considered to have lost volume if the lessor could and would have entered into another contract regardless of whether the breach of the first contract had occurred. In this situation, the second contract will not constitute a substitute transaction for the first breach, because the lessor could have enjoyed the benefit of both contracts. The lessor will be entitled to damages for the lessee's breach, equal to the net profit that the lessor would have made had the contract not been broken. When a lessee defaults under these circumstances, Chapter 2A of the New Jersey Uniform Commercial Code provides that the lessor's remedies include the amount of rent covering the entire remaining lease period. Here, a jury could have reasonably concluded that CIC owned many vending machines and could have entered into just as many lease agreements for those machines. Therefore, even if CIC re-let the four vending machines taken from Ragtime to another customer, CIC still would have experienced a loss of profits under Ragtime's contract because CIC could and would have made two separate lease deals. The second deal would not have constituted a substitute for the first deal. By instructing the jury on the duty of mitigation instead of the doctrine of lost volume, the trial judge misled the jury in its damages calculation and infringed upon CIC's right to proper damage instructions. Accordingly, CIC's motion for a new trial on damages should have been granted, and the trial court's denial of CIC's motion is reversed and remanded.

Gross Valentino Printing Co. v. Clarke

Facts Clarke (defendant) is a publisher of a magazine. Gross Valentino Printing Co. (Gross) (plaintiff) is a printer. In July of 1979, Gross sent Clarke a letter offering to print 15,000 copies of Clarke's magazine for $6,695.00. Clarke accepted this offer and began working with Gross on the layout of the magazine. Due to problems arising with the layout, Gross was required to send the print job out to a third party. This increased the total cost of printing to $9,300.00. Gross sent Clarke a letter on August 15, 1979 advising Clarke of this fact. Clarke made no objection to the price increase at that time. On August 30, 1979, Gross delivered the first 5,000 magazines to Clarke. Clarke signed the purchase order reflecting the new price and paid Gross $4,650.00. Gross later delivered the remaining 10,000 magazines to Clarke. On October 28, 1979, however, Clarke informed Gross that he would not accept the price increase and refused to pay the remaining balance. Gross brought suit against Clarke in Illinois state court alleging breach of contract. Clarke raised three affirmative defenses: lack of consideration, fraudulent or innocent misrepresentation, and business compulsion. The trial court granted summary judgment for Gross on the three defenses and awarded Gross $5,116.20. Clarke appealed. The appellate court considered the trial court's grant of summary judgment for Gross on Clarke's first and third affirmative defenses (lack of consideration and business compulsion). Issue Under the UCC, is a contract for the sale of goods as defined by the UCC enforceable even without proof of consideration offered by both parties? Holding and Reasoning (Goldberg, J.) Yes. The contract between Gross and Clarke is for the sale of goods, and thus the existence of the contract does not depend on proof of consideration offered by Gross. Clarke's affirmative defenses of lack of consideration and business compulsion fail, and the trial court's grant of summary judgment to Gross on these issues is proper. Under the UCC, a contract for the sale of goods as defined by the UCC is enforceable even without proof of consideration offered by both parties. The UCC defines "goods" as "all things, including specially manufactured goods, which are movable at the time of identification to the contract for sale." In Lake Wales Publishing Co., Inc. v. Florida Visitor, Inc., 335 So.2d 335 (1976), the Florida Court of Appeals held that this definition of "goods" under the UCC extended to books. The decision in Lake Wales Publishing turned on the fact that the books were "moveable." The transaction at issue in the present case involves the sale of printed magazines. The nature of the contract between Gross and Clarke suggests that Clarke wanted to purchase the physical printed magazines from Gross, rather than Gross' unique printing services. Any printing services performed by Gross were tied to the actual production of Clarke's desired product—the printed copies of the magazines. Printed magazines are moveable and are similar to books. Thus, this situation is governed by Lake Wales Publishing and the printed magazines are considered "goods" according to the UCC. Since the UCC applies, the contract between Gross and Clarke is enforceable even without proof of consideration offered by Gross. Thus, Clarke's affirmative defense of lack of consideration fails. Additionally, Clarke has failed to present sufficient evidence of economic duress caused by Gross to support the affirmative defense of business compulsion. The decision of the trial court granting Gross' motion for summary judgment on Clarke's affirmative defenses of lack of consideration and business compulsion is affirmed.

Dover Shopping Center, Inc. v. Cushman's Sons, Inc.

Facts Cushman's Sons, Inc. (Cushman's) (defendant) entered into a written lease in 1956 with Dover Shopping Center, Inc. (Dover) (plaintiff). The lease obligated Cushman's to operate its bakery business on the premises, to be open for regular business during customary hours, and to maintain its window displays in "an attractive and dignified manner." The lease also provided for a minimum annual rent plus a shifting percentage of gross sales and for Dover to have the right to an injunction if Cushman's breached the lease. Cushman's opened its business in 1957. In 1959, Cushman's informed Dover that Cushman's was permanently ceasing operations because the enterprise was unprofitable, but would continue to pay the minimum rent. Dover filed suit for a mandatory injunction specifically directing Cushman's to perform the covenants of operating a business during customary hours and maintaining the store window. The trial court granted the injunction, ordering Cushman's to (1) reopen and resume its business, (2) display its name outside the premises, (3) keep the store open during customary business hours, and (4) have a manager or salesperson in charge. The trial court expressly stated that it gave no directions as to the method of operation or the quality of products or services. Cushman's appealed, arguing that the injunction should have been denied because (1) money damages would be adequate and (2) specific performance of a contract requiring court supervision for a long period of time should not be granted. In reply, Dover argued that money damages would be difficult to ascertain for a percentage lease, particularly because the nature of a shopping center made each store's success dependent on the operation of other stores. Dover further argued that recent court cases ordered specific performance where feasible, and that Dover did not seek judicial supervision of the conduct of Cushman's in this case. Instead, Dover would rely on the self-interest of Cushman's in maintaining its reputation to ensure that the business would be well conducted. Dover asked only that Cushman's be required to keep its business open. Issue Shall specific performance be granted for a clear breach of contract if the difficulties of enforcement are not great and money damages are inadequate? Holding and Reasoning (Goldmann, J.) Yes. Specific performance shall be granted where there is a clear breach of contract, if the difficulties of enforcement are not great and money damages are inadequate. A court will not order specific performance where the performance continues over a long period of time and is difficult to supervise. However, where enforcement is not difficult and money damages are inadequate, courts will grant specific enforcement in cases of clear breach. Courts have long recognized that percentage leases, in which a tenant owes a particular percentage of gross sales as additional rent to a landlord, create difficulties in computing damages. Furthermore, in a shopping center, the success of all of the stores depend on the operation of each individual store, making the damages to the shopping center from a store closing difficult to calculate. Here, Dover is a shopping center and has a percentage lease with Cushman's. The injunction imposed by the trial court does not require supervision or onerous or complicated performance, but merely requires Cushman's to remain open with one employee, with no limitations or conditions on the store's conduct. Accordingly, the difficulties of enforcement do not outweigh the importance of awarding specific performance, because money damages are inadequate. The trial court's injunction is affirmed.

Odorizzi v. Bloomfield School District

Facts Donald Odorizzi (plaintiff) was hired by Bloomfield School District (Bloomfield) (defendant) to teach elementary school. While he was still under contract to teach, he was criminally charged with engaging in homosexual activities. Following his release on bail, Bloomfield's district superintendent and the school principal visited Odorizzi at his home. They told Odorizzi that if he did not resign immediately, they would suspend him and publicize his dismissal proceeding, as they were required to do by statute. They told him this would cause "extreme embarrassment and humiliation." He was also told that he had no time to talk to a lawyer and that if he resigned immediately, the arrest and suspension would not be publicized. At the time of this meeting with the superintendent and principal, Odorizzi had gone without sleep for 40 hours from the time of his arrest through his release on bail. Odorizzi agreed to tender his resignation. However, after being cleared of the criminal charges against him, he asked to be reinstated in his employment. When Bloomfield refused, Odorizzi filed an action against Bloomfield, alleging duress, menace, fraud, mistake and undue influence. The trial court dismissed Odorizzi's amended complaint and he appealed that decision. Issue May a contract be rescinded for undue influence by a party whose weakened mental state made him especially susceptible to persuasion and the dominant party employed excessive pressure? Holding and Reasoning (Fleming, J.) Yes. Where excessive pressure is used to persuade a party in a weakened mental state, such that the will of the dominant party replaces the will of the servient party, the agreement may be rescinded as obtained by undue influence. The first condition of undue influence is met if a party's judgment is so impaired that his mental state prevents him from freely contracting. The second condition requires excessive pressure or over-persuasion, indicated by several of the following characteristics: the people representing the dominant party outnumber the weaker party; the time and/or location of the discussion is unusual or inappropriate; the dominant party claims the agreement must be reached immediately, that there is no time to consult an attorney or third party, that delay will have serious negative consequences; and/or the weaker party does in fact fail to seek the advice of counsel or a third party. Here, Odorizzi was approached in his home shortly after his release from prison after 40 hours without sleep. Further, Odorizzi was told that there was no time for him to consult an attorney and that he would suffer severe embarrassment if he did not resign immediately. Under these circumstances, he resigned immediately without consulting counsel. Odorizzi alleges sufficient facts to state a claim for rescission due to undue influence. The trial court's dismissal of the amended complaint is reversed.

Donovan v. RRL Corp.

Facts Donovan (plaintiff) is suing RRL Corp. (RRL) (defendant) for breach of contract. RRL advertised the sale of a used car in a local newspaper. Unfortunately, the newspaper made a typographical error, listing the sale price well below what RRL intended. Donovan attempted to buy the car based on representations in the advertisement but was rejected by RRL. The municipal court found for RRL, holding that a contract could not be formed because of the mistake in the advertisement. The court of appeals reversed based on a statute of the Vehicle Code making it illegal for a dealership to refuse to sell a car at the advertised price. Further, the court of appeals held that a valid contract had been formed between the parties. The advertisement was an offer and plaintiff accepted the offer when attempting to purchase the car. Issue Whether one party is required to fulfill a contract when he made a good faith mistake regarding a material fact of the agreement and the contract would result in a substantial loss to that party. Holding and Reasoning (George, C.J.) No. Under § 153(a) of the Restatement Second of Contract, in order to get out of a contract, a defendant who has made a unilateral mistake of fact must show: (1) the mistake was a fundamental assumption of the agreement, (2) the mistake materially effects the value of the agreement, (3) the defendant did not assume the risk of the mistake, and (4) it would be substantively unconscionable to enforce the contract in light of the mistake. While a contract had been formed by the parties, it is unenforceable if it fulfills every element of the § 153(a) unconscionability doctrine. RRL here made a mistake about the advertised price. Price is a fundamental assumption of a contract in addition to materially impacting the value of that contract. Further, it is unreasonable to place the risk upon RRL. The mistake was made in good faith and consumers cannot realistically expect absolute accuracy in every price listed in advertisements. Imposing such a high standard of accuracy upon automobile dealers would amount to strict liability for even the slightest mistake. In the context of modern transactions, strict liability is an unreasonable standard to put upon businesses. Lastly, due to the loss that would be suffered by RRL for its minor mistake, it would be unconscionable to enforce this contract. RRL would lose more than $9,000 while Donovan would reap a $12,000 advantage. This amounts to substantive unconscionability because RRL would be unduly penalized and Donovan would be rewarded simply for taking advantage of RRL's vulnerability. Accordingly, RRL is allowed to rescind the contract. The judgment of the court of appeals is reversed.

Dougherty v. Salt

Facts Dougherty (plaintiff), an eight-year-old boy, was given by his aunt, Salt's (defendant) testatrix, a note promising to pay him $3,000 at the aunt's death or before. The aunt asked Dougherty's guardian to draft the note after she expressed to him her desire to take care of Dougherty. Dougherty's guardian drafted the note as specified, and added the words "value received." The aunt handed the note to Dougherty and told him that she had signed the note for him, and that he should not lose it. At the aunt's death, Dougherty sought to recover on the note. A jury held that consideration had been provided by Dougherty and that the note was enforceable. It entered a verdict for Dougherty. The trial judge set aside the verdict, however, and dismissed the case. The appellate court reversed and reinstated the verdict. Salt appealed. Issue Whether a promise made without consideration by all parties involved constitutes an enforceable contract. Holding and Reasoning (Cardozo, J.) No. Dougherty provided no consideration for his aunt's promise to pay $3,000, and thus the note constituted an unenforceable executory gift rather than a binding contract. A promise becomes an enforceable contract only when some consideration is provided by all parties involved. Consideration does not exist unless it is regarded as such by all parties to the contract. The testimony of Dougherty's guardian at trial indicates that Dougherty's aunt intended to give Dougherty a gift of $3,000 for the purpose of taking care of him. She asked nothing from Dougherty in return, and thus Dougherty provided no consideration in exchange for his aunt's promise. It does not matter that Dougherty's guardian included the words "value received," as no actual value was provided by Dougherty. Thus, the note constituted an unenforceable executor gift rather than a binding contract. The decision of the appellate court reinstating the verdict is reversed.

Drennan v. Star Paving Co.

Facts Drennan (plaintiff), a general contractor, was preparing a bid for a school construction project. As was customary, Drennan solicited bids from subcontractors to perform the paving work necessary for the project. Star Paving Co. (Star) (defendant) contacted Drennan and submitted a bid of $7,131.60 for the paving work. This was the lowest bid, and Drennan relied on Star's bid when computing his own bid for the project. Drennan's bid was lowest and he was ultimately awarded the general contract. Drennan promptly informed Star it was awarded the subcontract. However, Star informed Drennan that it had made a mistake in computing its bid and could only complete the work for $15,000. Drennan stated this was unacceptable and proceeded to look for another subcontractor to perform the paving work. After months of searching, Drennan awarded a new subcontract to a company bidding $10,948.60 for the project; the lowest bid found by Drennan. Drennan brought suit against Star to recover damages caused by Star's failure to perform work as specified in its bid. The trial court awarded Drennan $3,817.00, or the difference between Star's bid and the final cost of paving to Drennan, plus costs. Star appealed. Issue Whether detrimental reliance by one party on another party's offer, without formal acceptance of the offer, is sufficient to make the offer irrevocable. Holding and Reasoning (Traynor, J.) Yes. Star should have reasonably expected Drennan to rely on its bid when making his own bid, and Drennan did rely on the bid such that enforcement of the terms of Star's bid is necessary to prevent injustice to Drennan. An offer which the offeror should reasonably expect to induce definite and substantial reliance by the offeree, and which does induce such reliance is binding on the offeror and enforceable even without consideration if enforcement is necessary to prevent injustice to the offeree. When reasonable reliance on the offer by the offeree results in a foreseeable negative change in the offeree's position, a promise not to revoke the offer is implied on behalf of the offeror. This reasonable reliance serves a substitute for the consideration ordinarily required to form a bilateral contract. It thus does not matter that Drennan provided no consideration for the agreement between himself and Star, as it was reasonably foreseeable for Star that Drennan would rely on its bid if it was the lowest bidder. It was in Star's business interests for Drennan to rely on its bid, as doing so resulted in Drennan winning the general contract and Star winning the subcontract. Additionally, it does not matter that Star made a mistake in calculating its bid, as it had a duty to exercise reasonable care in bid preparations. This duty of care is heightened by the fact that the negative consequences for Drennan stemming from an erroneous subcontractor bid were reasonably foreseeable to Star. Finally, Drennan could not reasonably know that Star made an erroneous bid, as there is often significant variation among subcontractor bids. Star should have reasonably expected Drennan to rely on its bid when making his own bid, and Drennan did rely on the bid such that enforcement of the terms of Star's bid is necessary to prevent injustice to Drennan. Drennan already fulfilled his duty to mitigate damages by searching for months for the next lowest bidder, and thus the trial court's award of $3,817.00, or the difference between Star's bid and the final cost of paving to Drennan, is affirmed.

Plowman v. Indian Refining Co.

Facts Eighteen employees, including Plowman (the employees) (plaintiffs), of Indian Refining Co. (Indian Refining) (defendant) were let go from the company and began receiving pension checks. These employees had all worked for Indian Refining for a number of years before they were let go. The employees were retained on the payroll, but did not render any further services for the company. Most of the employees testified that they were told they would receive the pension checks throughout the rest of their lives. A letter from Indian Refining to the employees stated that the pension checks were being paid in recognition of many years of faithful service and in order to shield the employees from the effects of having to let them go. In order to receive their pension checks, the employees needed to pick them up from the main office. A year after promising the pension checks, Indian Refining discontinued the payments. The employees filed suit for breach of contract. Issue Can one enforce a promise when it has not been supported by consideration? Holding and Reasoning (Lindley, J.) No. A contract must be supported by consideration in order to be enforceable. Past consideration, something delivered before the promise is executed, is not legally sufficient consideration to form a contract. Moral consideration, a sense that one has a moral duty to act, is not sufficient consideration unless it was once a legal duty. In the current matter, the employees contend that their faithful service as employees and the company's belief that it had a moral duty to pay are sufficient consideration. However, these facts cannot support a finding of consideration because they constitute past and moral consideration, respectively. Past and moral consideration are not recognized by the law. Additionally, the employees' action in picking up their checks did not constitute consideration. This action was not a detriment to the employees, but was a benefit to them. It was a detriment to Indian Refining, not a benefit. The act of picking up their checks was merely a condition imposed upon the employees in obtaining the checks, which is not sufficient to support a finding of consideration. Accordingly, the promise to pay the pension is not enforceable for lack of consideration.

Gianni v. R. Russell & Co.

Facts Frank Gianni (Gianni) (plaintiff) rented a room in an office building where he conducted a business selling tobacco, fruit, candy and soft drinks. After R. Russell & Co. (Russell) (defendant) acquired the office building, its agents entered into leasing negotiations with Gianni with regard to Gianni's continued rental of the room. A lease was signed for a three-year term and provided that Gianni could use the premises only for the sale of fruit, candy and soda water, but could not use it to sell tobacco. There was no stipulation in the lease that Gianni had an exclusive right to sell soft drinks in the building. Shortly after the lease was signed, Russell leased a room, adjoining Gianni's room, to a drug company without restricting its right to sell soda water and soft drinks. Gianni commenced an action against Russell for breach of an alleged oral contract alleging that the drug company's sale of these beverages had greatly reduced his revenue. Gianni contended in the action and offered the testimony of a witness at trial that several days prior to the execution of the lease Russell's agent made an offer, which he accepted, that he would have the exclusive right to sell soda water and soft drinks. Gianni did not produce a witness to support his contention that this offer was repeated at the time the lease was executed. Russell's agents denied making any such offer either prior to or at the execution of the lease. The trial court entered judgment for Gianni. Russell appealed. Issue May a court consider the existence of an oral agreement made during negotiations between the parties prior to execution of their written agreement where the terms of the alleged oral agreement closely relate to, or are the same as, the subject matter in the written agreement? Holding and Reasoning (Schaffer, J.) No. Preliminary negotiations and verbal agreements are merged into and become part of a subsequent written contract. Parol evidence will be excluded where it is clear that the written contract was intended to be the entire and complete agreement between the parties. Under this rule a preliminary oral agreement is superseded by, and becomes part of, the written contract when, after comparison of the terms, it appears that the former was intended to be covered within the latter. Here, since the restriction against Gianni's selling tobacco appeared in the written contract, it could be anticipated that the parties could have also included the provision for Gianni's alleged exclusive right to sell soda water and soft drinks. It is presumed that the parties had intended that the written agreement embrace all of the rights and restrictions of the parties concerning Gianni's sales of tobacco, soda water and soft drinks. The written lease is the complete contract of the parties and it encompasses the alleged oral agreement. Therefore, the parol evidence rule precludes evidence of the oral agreement. Russell's appeal is granted, and the judgment of the lower court is reversed.

Frigaliment Importing Co. v. B.N.S. International Sales Corp.

Facts Frigaliment Importing Co. (Frigaliment) (plaintiff), a Swiss company, offered to buy chicken for $0.33/lb. from B.N.S. International Sales Corp. (BNS) (defendant), an American corporation. The negotiations were primarily in German, but Frigaliment used the English word "chicken" to mean young chickens, instead of the German word "huhn," which includes stewing chickens (fowl). Frigaliment intended to purchase only young chickens suitable for broiling and frying (broilers). BNS, which was new to the trade, interpreted Frigaliment's order for "chickens" as encompassing all types of chicken. The market rate for fowl at the time was $0.30/lb., while broilers were between $0.35 and $0.37/lb. Both the cablegrams exchanged by the parties and the contracts stated that the chicken was to be "Grade A, Government Inspected," and the Department of Agriculture's regulations were incorporated by reference. BNS shipped primarily fowl to Switzerland. After the first shipment, Frigaliment complained but allowed BNS to make the second shipment. After Frigaliment found fowl in the second shipment, Frigaliment sued BNS for breach of warranty, claiming that BNS delivered goods that did not meet the description in the contract. At trial, Frigaliment's expert claimed that "chicken" meant broilers in the trade, but his testimony was undermined by the fact that his own contracts specifically requested "broilers" when he wanted younger birds or "fowl" when he wanted older birds. One of BNS's suppliers argued that "chicken" did not include fowl, but admitted that it asked whether BNS wanted "fowl or frying chickens" when BNS asked for "chickens." Frigaliment offered evidence that at least some suppliers and journals differentiate between "chickens" and "fowl." Nevertheless, BNS's experts testified that in the trade, the term "chicken" encompasses broilers and fowl. Further, BNS pointed out that the Department of Agriculture's grading regulations include broilers and fowl in the definition of the term "chicken." The United States District Court for the Southern District of New York considered the question. Issue If the parties to a contract subjectively, but in good faith, construe an ambiguous term differently, may courts look to external factors to determine the proper interpretation of the term? Holding and Reasoning (Friendly, J.) Yes. If the parties to a contract subjectively, but in good faith, construe an ambiguous term differently, courts may look to external factors to determine the proper interpretation of the term. To aid in the interpretation, courts may consider the plain meaning of the term, the negotiations between the parties, trade usage, other contract provisions, market factors, and the course of dealing between the parties. With respect to trade usage, when one party is not a member of the trade, the other party must show either (1) actual knowledge or (2) that the usage is so pervasive that the party's acceptance of it may be presumed. In this case, the word "chicken" is ambiguous. The dictionary includes the definitions offered by both parties. A review of the negotiations does not provide a definitive answer as to the correct interpretation. BNS was new to the trade and had no actual knowledge of what Frigaliment argues is the trade usage of the term. Frigaliment has not shown that the usage of "chickens" to mean only broilers is sufficiently notorious and universal to presume BNS's acceptance of it. Further, the contract specifically referenced the Department of Agriculture's regulations, which define "chicken" as including fowl. BNS's argument that it was impossible to obtain broilers for the price agreed in light of market rates was persuasive. Lastly, Frigaliment allowed the second shipment of chickens after receiving the first shipment that included fowl. Accordingly, BNS's interpretation of the word chicken was consistent with "an objective meaning" of the word, and Frigaliment has not met its burden of persuading the court that its narrower interpretation should apply. Frigaliment's complaint is dismissed.

Lee v. Joseph E. Seagram & Sons, Inc.

Facts Harold Lee and his sons Lester and Eric (plaintiffs) owned a 50 percent interest in Capitol City Liquor Company (Capitol City), a wholesale liquor distributor which sold a significant amount of Seagram products. Harold's brother and nephew owned the other 50 percent. The owners desired to sell the business and in May 1970, Harold approached Jack Yogman, an executive of Joseph E. Seagram & Sons, Inc. (Seagram) (defendant) to discuss a sale. Harold had known Yogman for 13 years and had supported Seagram for 36 years prior to his ownership of Capitol City. Harold offered to sell Capitol City to Seagram on the condition that Seagram would relocate Harold and his sons in a new distributorship. Approximately one month later, the owners of Capitol City met with John Barth, an assistant of Yogman, and began negotiations for the sale of Capitol City. A written agreement for the sale was finalized in September 1970. No new distributorship was secured for the Lees. They filed suit against Seagram in January 1972, alleging that Seagram had breached the oral agreement formed by Harold and Yogman. The trial judge denied Seagram's motion for summary judgment, concluding that the parol evidence rule would not preclude evidence of the oral agreement because it was unclear whether the oral agreement was meant to be integrated into the written contract. The written contract contained no integration clause. At trial, Seagram did not present evidence regarding integration. The jury found in favor of the Lees, and the court denied Seagram's post-trial motions. Seagram appealed. Issue Should evidence of an oral agreement, which relates in part to a later written agreement, be excluded under the parol evidence rule where (1) the parties to the agreements are not identical, (2) the agreements were negotiated by different persons, (3) the negotiators of the oral agreement had a close relationship, (4) the terms of the oral agreement do not contradict the written agreement, and (5) the written agreement lacks an integration clause? Holding and Reasoning (Gurfein, J.) No. The parol evidence rule precludes proof of an oral agreement if, under the circumstances, such oral agreement should have been expected to be part of a contemporaneous or later written agreement. In this case, the circumstances support the Lees' position that the oral agreement was not expected to be part of the written sales contract. First, the agreements applied to different parties. The oral agreement applied to individuals—Harold and his two sons—in contrast to the written agreement which was a sale of corporate assets. Second, different Seagram personnel negotiated the different agreements, and it was not evident that the Seagram negotiators of the written agreement even knew about the oral agreement made between Harold and Yogman. Third, given the longstanding relationship between Harold and Yogman, their entering into an oral arrangement is not suspicious. Fourth, the terms of the oral agreement do not contradict the terms of the written agreement. Finally, the written agreement does not contain an integration clause even though such clauses are customary and the contract contains other boilerplate. In light of the above considerations, the decisions in the lower court are affirmed.

Dallas Cowboys Football Club v. Harris

Facts Harris (defendant) entered into a contract with the Los Angeles Rams Football Club (the Rams) under which he agreed to play football for them for the 1958 season. The contract provided that, at the end of that one-year term, the Rams had the option to renew the contract for an additional year. The contract additionally provided that Harris had "special, exceptional and unique knowledge, skill and ability as a football player" and that he would be enjoined from playing football for any other entity. Harris performed under the contract for the 1958 season. However, Harris and the Rams disagreed about the option and Harris chose not to play football during the 1960 season. For the 1961 season, Harris entered into a contract with the Dallas Texans Football Club (the Texans). The Rams assigned the contract to The Dallas Cowboys Football Club (the Cowboys) (plaintiff). The Cowboys filed suit, seeking an injunction to enforce the contract, including the option, and thus to enjoin Harris from playing for the Texans. The trial court granted the preliminary injunction. Harris filed an interlocutory appeal to the Court of Civil Appeals of Texas regarding the injunction. Before the appeals court could hear the matter, the trial court tried the merits of the case. The trial court submitted to the jury the issue of whether Harris possessed exceptional and unique knowledge and skill as a professional football player. The Cowboys introduced the New Century Dictionary definition of "unique," representing that uniqueness means there is only one, with abilities that are unparalleled. Harris testified that he did not meet the dictionary definition, but that he possessed a certain amount of skill and ability. The general manager of the Texans also testified that Harris possessed skill and ability that was exceptional and that Harris was above average. Others testified that, though there were better players than Harris, the Cowboys would not have been able to hire those players. The jury returned a verdict in Harris's favor and the trial court entered a judgment against the Cowboys. The Cowboys motioned the trial court for a new trial, averring that the jury's ruling was against the weight of the evidence. The trial court denied the motion. The Cowboys appealed the jury's ruling to the Court of Civil Appeals of Texas. Issue Can a clause in a contract enjoining a party from performing for others be enforced? Holding and Reasoning (Dixon, C.J.) Yes. An injunction will be granted to enforce a negative covenant in a contract for personal services when the breaching party possesses "exceptional and unique knowledge, skill and ability in performing the service called for in the contract." Uniqueness is broader than the strict dictionary definition requiring that there be only one, with unparalleled abilities. The breaching party possesses "unique knowledge" when it would be difficult to obtain the same service from others. Moreover, one's uniqueness is a matter of opinion and thus one cannot be estopped from disputing a contract clause showing an agreement that one is unique. With regard to requesting a new trial when it is submitted that the jury's verdict is improper, a court can grant a new trial if the record reflects that the verdict is overwhelmingly against the weight and preponderance of the evidence. In the current matter, Harris is not estopped from disputing the stipulation that he is unique because that is an opinion, rather than a material fact. With regard to Harris's uniqueness, there is not sufficient evidence to support the jury's finding that Harris is not unique. The dictionary definition of "unique" that was submitted to the jury is too narrow. Moreover, all of the testimony submitted shows that Harris possesses unique knowledge and abilities as a professional football player. All of the evidence submitted shows that Harris would be difficult to replace. In this matter, the verdict was not against the weight and preponderance of the evidence, and the trial court was correct in denying the Cowboys's motion for a new trial. Accordingly, the trial court's award of the preliminary injunction is affirmed. However, the contract should be enforced in equity. Therefore, the trial court's judgment on the merits of the case to the effect that the Cowboys recover nothing is reversed and the matter is remanded for a second trial.

Crabtree v. Elizabeth Arden

Facts In September 1947, Nate Crabtree (plaintiff) entered into negotiations with Elizabeth Arden Sales Corp. (Arden) (defendant) for employment as a sales manager. Elizabeth Arden, president of Arden, agreed to offer Crabtree a two year contract with a salary of $20,000 for the first six months, $25,000 for the next six months, and $30,000 for the second year. Crabtree replied that the offer was "interesting." Ms. Arden directed her personal secretary to draft a memorandum of the agreement as discussed with Crabtree. The agreement stated the salary, party names, and position to be offered to Crabtree. It did not expressly state the duration of the contract, but included the notation "2 years to make good." The memorandum was not signed. Crabtree accepted the position via telephone. When Crabtree reported to work, Mr. Johns, executive vice president of Arden, drafted and initialed a "payroll change card" outlining Crabtree's agreed-upon salary agreement. After six months of employment, Crabtree's salary was increased to $25,000. After the next six months, however, Crabtree did not receive an additional increase. He contacted Mr. Carstens, Arden's comptroller, who drafted and signed an additional payroll change card detailing Crabtree's salary arrangement. Ms. Arden refused to approve the increase, and Crabtree terminated his employment and brought suit against Arden in New York state court for breach of contract. The trial court held for Crabtree and awarded $14,000 in damages, and the appellate court affirmed. Arden appealed, arguing that the employment contract for two years did not exist, and that even if it did, it was barred by the statute of frauds. Issue Whether multiple documents taken together may constitute a signed writing sufficient to fulfill the statute of frauds if all documents refer to the same subject matter or transaction and at least one is signed by the party to be charged with the contractual obligations. Holding and Reasoning (Fuld, J.) Yes. The memorandum drafted by Ms. Arden's secretary, combined with the two payroll change cards signed by Arden's senior staff, constitutes sufficient evidence of an enforceable written agreement made by Arden to employ Crabtree for two years. Multiple documents taken together may constitute a signed writing sufficient to fulfill the statute of frauds if all documents refer to the same subject matter or transaction and at least one is signed by the party to be charged with the contractual obligations. Parol evidence may not be used to supply any missing material terms in the documents, but may be admissible to demonstrate the connection between the documents or the assent of the party to be charged to the contents of the unsigned documents. The two payroll cards outline the terms of Crabtree's salary agreement, the party names, and contain the signatures of Arden's senior staff members. They each constitute a sufficient written, signed memorandum to support the existence of a contract under the statute of frauds. The only material term missing is the duration of Crabtree's employment agreement. The original, unsigned memorandum drafted by Arden's secretary does not constitute a sufficient memorandum under the statute of frauds, but contains the notation "2 years to make good". This can reasonably be interpreted as creating the existence of a two-year contract with Crabtree. Aside from the two-year term, the other terms are identical among the three writings. Thus, they are all clearly discussing the same subject matter and transaction. Although the relationship between the documents is fairly clear, parol evidence may also be admitted to show the connection between the documents as all relating to Crabtree's employment terms. Parol evidence may also be introduced to show the assent of Arden (whose senior staff signed the two payroll cards) to the unsigned document containing the comprehensive terms of the agreement. When taken together, these three documents show the existence of an enforceable employment contract for a period of two years with Crabtree. The decision of the trial court is affirmed.

Halbman v. Lemke

Facts James Halbman (plaintiff), a minor, entered into a contract to buy a car from Michael Lemke (defendant). The car was to be paid for in installments and after Halbman had paid $1,100 on the $1,250 purchase price, a connecting rod on the car's engine broke. Halbman repaired it at a cost of over $600. He then sent a letter to Lemke disaffirming the contract and asking for his money back. Lemke refused. Between the time the car was repaired and the contract was disaffirmed, vandalism made the car unsalvageable. Halbman brought suit for the $1,100 he had paid on the car, and Lemke counterclaimed for the $150 left on the purchase price. The trial court ruled in favor of Halbman and the appellate court affirmed. Lemke appealed. Issue When a minor disaffirms a contract for the sale of a car, must he pay for damage done to the car while it was in his possession so that it is returned to its prior condition? Holding and Reasoning (Callow, J.) No. A minor has an absolute right to disaffirm a contract for the purchase of an item that is not a necessity, such as a car. Upon doing so, the minor must give back as much of the consideration as is in his possession at the time of disaffirmance. Requiring the minor to give back more than is in his possession would require him to pay for the carelessness that the infancy doctrine is seeking to insulate. Thus, in this case, Halbman is entitled to recover the full $1,100 he paid for the car upon his disaffirmance of the contract. Although Lemke seeks restitution for the depreciation in value to the car, this would require Halbman to give back more than he possesses; he is not required to give back what he no longer possesses—a working car. Forcing Halbman to pay for the depreciation would strip the infancy doctrine of its meaning by making Halbman pay for the contract he entered into as a minor. As a result, Halbman is entitled to recover the price he paid in full. The trial court is affirmed.

Webb v. McGowin

Facts Joe Webb (plaintiff) and J. Greeley McGowin were both employed at a lumber mill. On August 3, 1925, Webb was dropping large, pine blocks from the upper floor of the mill to the ground. This was the usual and ordinary method of clearing the mill floor. Just as Webb was about to drop a block, he saw McGowin on the floor below and knew that if the block dropped, it could seriously harm McGowin. Webb chose to fall with the block and thus divert it from striking McGowin. In doing so, however, Webb suffered serious bodily harm that left him unable to perform physical labor for the rest of his life. McGowin recognized that Webb saved his life and agreed to pay Webb $15 every two weeks to sustain him since he could not work. McGowin paid these payments until his death, at which point the executors of his estate, N. Floyd McGowin and Joseph F. McGowin (defendants), refused to continue making payments to Webb. Webb brought suit to recover the unpaid installments accruing from the time payments stopped to the time of the suit. The McGowins demurred. The trial court entered a judgment of nonsuit against Webb. Webb appealed to the Alabama Court of Appeals. Issue Whether the conferring of a material benefit or undertaking of a detriment by a promisee is sufficient consideration to enforce a promisor's subsequent promise to pay based on the benefit or detriment. Holding and Reasoning (Bricken, J.) Yes. When a promisor receives a material benefit from a promisee, the promisor is morally bound to compensate the promisee for services rendered. If the promisor subsequently promises to make payment on the basis of that moral obligation, that promise is valid and enforceable. Such moral obligation constitutes valid consideration for a subsequent promise if the promisor received a real pecuniary or material benefit. State ex rel. Bayer v. Funk, 209 P. 113 (1922). In Boothe v. Fitzpatrick, 36 Vt. 681 (1864), a bull owner's subsequent promise to repay the plaintiff for caring for the bull after its escape was held valid and enforceable. Saving a person from death or serious bodily harm is a much more substantial benefit than caring for a bull and is certainly valid consideration for a subsequent promise to pay. In this case, McGowin received a material benefit when Webb saved McGowin from grievous harm, likely serious injury or death. McGowin acknowledged this benefit, promise to pay Webb for the remainder of his life, and did so until his death eight years later. Webb suffered severe bodily injuries from his actions undertaken to save McGowin's life. Thus, McGowin's promise to pay bi-weekly payments to Webb is a valid, enforceable contract and is not barred by the statute of frauds. The judgment of nonsuit is reversed, and the case is remanded. [Editor's Note: The McGowins subsequently petitioned the Alabama Supreme Court for certiorari, which as denied.] Concurrence (Samford, J.) This is a gray area, and strictly applying the letter of the law might result in the plaintiff being denied recovery. However, as Chief Justice Marshall made clear, the law should not be "separated from justice, where it is at most doubtful." The court reaches the right result.

Lewis v. Mobil Oil Corporation

Facts Lewis (plaintiff), a sawmill operator, decided to convert his sawmill to hydraulic equipment. He purchased a used hydraulic system which was in good working order. After Lewis installed this system, he consulted with Frank Rowe (Rowe) who was a local oil dealer for the Mobil Oil Corporation (Mobil) (defendant) with regard to what type of hydraulic oil was needed to operate the equipment. The only information Lewis gave Rowe was that his equipment used a Commercial gear-type pump and Rowe did not request further information. Neither Lewis nor Rowe knew what oil was needed for the hydraulic equipment and Rowe knew that Lewis did not have this type of information. Rowe sold Lewis Mobil's Ambrex 810, a mineral oil without additives. Rowe relied upon a recommendation of a superior at Mobil in selling Ambrex 810. Using this oil for approximately two years, Lewis had trouble with his equipment. Lewis then changed the pump from the Commercial brand to the Tyrone brand, but still used Ambrex 810 after confirmation from Rowe that Ambrex 810 was recommended for the Tyrone pump. After the Tyrone pump broke down three weeks later, Lewis met with representatives from Mobil and Tyrone. Lewis' equipment was flushed and cleaned, a new Tyrone pump installed and a new oil was used which included a defoamant. After switching to the new oil, Lewis' equipment operated properly. Judgment was entered upon a jury verdict in favor of Lewis and Mobil appealed. Issue Does a seller who knows the specific use or purpose intended by the buyer for the good sold breach the implied warranty of fitness for a particular purpose by recommending a good which is not fit for the intended purpose? Holding and Reasoning (Gibson, J.) Yes. The warranty of fitness for a particular purpose will be implied if the seller knows the specific use or purpose that the buyer intends for the purchased goods, and has reason to know the buyer is relying on the seller to provide the correct product. It is not necessary that the buyer demonstrate that the seller had actual knowledge, but rather that the seller had sufficient information to know of the buyer's intended purpose for the purchased goods and of his reliance on the seller's recommendation. Here, Rowe knew that Lewis did not know what type of oil was required for his hydraulic equipment. Rowe also knew, or had reason to know, that Lewis was relying on his recommendation for the appropriate hydraulic oil. When the oil that Rowe recommended was used, the equipment malfunctioned, and when the proper oil with a defoamant was used, the equipment did not malfunction. The facts in this case establish that an implied warranty of fitness for a particular purpose arose from the parties dealings and that Mobil breached this warranty. The trial court's grant of summary judgment is affirmed.

Hamer v. Sidway

Facts Louisa Hamer (plaintiff) received several assignments of $5,000 and interest from William E. Story II (Story). Story made the assignments based on money he was to receive from his uncle, William E. Story, Sr. Several years previously, Story's uncle promised him that if he would abstain from "drinking, using tobaccos, swearing, and playing cards or billiards for money" until he reached 21 years of age, he would be paid $5,000. Story agreed and fully honored the promise by abstaining from these things until after his twenty-first birthday. At that time, Story wrote to his uncle and informed him that he had upheld his promise. His uncle wrote back and said that he was entitled to the $5,000 and that the money was being held for him at a bank. However, Story's uncle said that it would not be paid to him until he felt Story was capable of "taking care of it." Story agreed, and the money remained at the bank. Story's uncle died without paying him the money, and this claim was brought by Hamer to Franklin Sidway (defendant), the executor of Story's uncle's estate. The executor rejected the claim, and Hamer brought suit in New York state court seeking to enforce the promise to Story. The trial court upheld the promise, but the appellate court reversed. Hamer appealed to the New York Court of Appeals. Issue Does a party's agreement to incur a detriment constitute adequate consideration? Holding and Reasoning (Parker, J.) Yes. A party's agreement to incur a detriment constitutes adequate consideration. Adequate consideration sufficient to form a valid and enforceable contract may consist of either a right, interest, profit, or benefit accrued to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other. It does not matter whether one party actually received a benefit or whether the thing that forms the consideration is of any substantial value to either party. Adequate consideration does not depend so much on a promisor's benefit from a contract as it does on the promisee's voluntary limitation of his legal rights or freedoms in exchange for the promise. In this case, in exchange for his uncle's promise of $5,000, Story voluntarily restricted his legal freedom to engage in drinking, smoking, swearing, and gambling. It is irrelevant whether his uncle actually received any benefit from Story's actions. Story's voluntary agreement to incur these limitations constitutes adequate consideration to form a valid and enforceable contract with his uncle. The decision of the appellate court is reversed, and the decision of the trial court is affirmed.

hawkins v mcgee

Facts McGee (defendant), a surgeon, performed a procedure on Hawkins (plaintiff) designed to remove scar tissue from Hawkins' hand and replace it with a skin graft from Hawkins' chest. When asked by Hawkins and his father for more information about the operation, McGee allegedly said that he guaranteed to make a "one hundred percent good" hand. Hawkins and his father agreed to the operation, but it was performed unsuccessfully. Because McGee had grafted skin from Hawkins's chest, the graft caused thick hair to grow on Hawkins's palm. Hawkins brought suit against McGee on the ground that McGee violated an alleged warranty for the success of the operation. The trial court instructed the jury that if it found Hawkins was entitled to relief, it should award him damages based on his pain and suffering from the operation, as well as the additional ill effects he suffered from the operation beyond his existing injury. The jury awarded damages to Hawkins, but McGee moved to set aside the verdict because it was excessive. The trial court agreed with McGee and said that if Hawkins did not return the damages awarded above $500, the verdict would be set aside. Hawkins refused and the trial court set aside the verdict. Hawkins appealed. Issue Whether a non-breaching party to a contract may recover damages for unforeseen losses based on another party's breach of contract. Holding and Reasoning (Branch, J.) No. The trial court and jury incorrectly assessed Hawkins' damages based on McGee's breach. When one party breaches a contract, the non-breaching party may recover damages based on the difference between the value of the contract as fully performed and the actual value of the non-breaching party's present condition, plus any incidental damages reasonably foreseeable to all parties at the time of contract formation. The purpose of this is to put the non-breaching party in as good a position as he would have been in had the breaching party kept the contract, and thus any additional losses not reasonably foreseeable to the parties at the time of contract formation cannot be considered when calculating damages. There is no basis for holding that the jury acted erroneously in finding that McGee breached an implied warranty for the success of the operation based on his statements to Hawkins. However, after concluding that a breach occurred, the jury incorrectly considered damages based on irrelevant factors. It should not have awarded damages for Hawkins' pain and suffering, as this was a necessary part of the operation that was endured by Hawkins as consideration for McGee's performance of the operation. Additionally, no damages should have been awarded for any worsening of Hawkins' hand by the operation, as damages can be sufficiently awarded based on McGee's failure to follow through with his guarantee of producing a "one hundred percent good hand." Both the jury and the trial court incorrectly considered these additional factors, and the decision to set aside the verdict for damages over $500 should be remanded for reconsideration of damages under the proper standard.

Wright v. Newman

Facts Newman (plaintiff) has two children, a son and a daughter. Wright (defendant) is the natural father of Newman's daughter, but is not the natural or adoptive father of Newman's son. However, Wright is listed on the son's birth certificate as the natural father, and the child was given Wright's last name. Wright always knew that he was not the child's natural father, but Newman contends that Wright assumed the responsibilities of a father for 10 years. Wright contends that he has not provided financial support for the child for the past seven years, that for five years of the child's life he did not have contact with him, and that only in the last two years has he visited with the child. Newman never attempted to identify her son's natural father and never sought support from him. Wright and Newman split. Wright refused to provide support for the children. Newman filed suit, seeking support for both children. Wright admitted paternity only as to Newman's daughter. The trial court, however, ordered Wright to pay child support for both children. Wright appealed to the Georgia Supreme Court. Issue Can an obligation to provide child support be enforced through promissory estoppel? Holding and Reasoning (Carley, J.) Yes. An obligation to provide child support may exist through parentage or contract. An enforceable contract right to child support may be created through promissory estoppel. Promissory estoppel requires "a promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise." In the current matter, the facts are clear that Wright has an enforceable obligation to pay child support to Newman's son. Wright's actions were effectively a promise to Newman and her son that Wright would assume all responsibilities of fatherhood, including financial support. Those actions include listing himself as the father on the birth certificate, giving the child his last name, and acting as a father to the child for 10 years. He took all of these actions despite knowing that he was not the child's natural father. Wright's actions also induced Newman and her son to rely upon Wright's promise. Newman did not try to identify or seek support from her son's natural father as a result of Wright's promise. Allowing Wright to renege on his promise now would result in an injustice to Newman and her son, who could have been receiving financial support from the natural father. Accordingly, Wright's obligations to provide financial support for Newman's son are enforceable under the doctrine of promissory estoppel. The decision of the trial court is affirmed. Concurrence (Sears, J.) This concurrence addresses the dissent's argument that Newman did not rely upon Wright's promise to her detriment. The doctrine of promissory estoppel may apply to any promise. In this case, the promise at issue is one of financial support. The facts reveal that Newman relied upon Wright's promise of financial support to her detriment. Wright should have known that Newman would rely on his promise, especially after fulfilling his promise for 10 years. Wright also could not have failed to notice that Newman did not seek out the identity of or support from the natural father. Relying upon Wright for 10 years in this manner is clearly to Newman's detriment. Also, promissory estoppel requires Newman's reliance to be reasonable and the facts establish that it was. It was reasonable to assume that Wright would continue support that he had been paying for 10 years. Additionally, promissory estoppel does not require an injured party to exhaust all other possible sources of benefit before attempting to enforce the promise. Not only does case law not impose this requirement, but in this matter, such a burden is impossible. Newman would be required to locate the natural father after 10 years and institute a costly legal action to obtain support from him. Requiring this is akin to penalizing Newman for reasonably relying on Wright's promise. Moreover, there is no doubt that injustice will result unless Wright's promise is enforced. After 10 years, it will be impossible for Newman to identify the natural father, successfully bring a paternity action, and obtain support. Allowing Wright to renege on his promise will leave Newman without any support for the child. The child will also suffer an even greater injustice because he has been led to believe that he can rely on Wright. Under these facts, it is clear that Wright's promise can and should be enforced. The decision of the trial court should be enforced. Dissent (Benham, C.J.) An obligation to pay child support may be based upon promissory estoppel. However, neither party raised this issue before the court. Additionally, Newman failed to show that she relied on Wright's promise to her detriment. Newman has provided no evidence that she would be unable to identify and seek support from her son's natural father. There is no evidence that she does not know the identity of the natural father, that he is dead, or that he is unable to be found. Moreover, Wright contends that he has not paid support for the child for the last seven years, that for five years of the child's life he did not have contact with him, and that only in the last two years has he visited with the child. Based upon these facts, Newman has not suffered a detriment, as she has not been receiving support for seven years, which is no different than the position she finds herself in now. For these reasons, the decision of the trial court should be reversed.

Oppenheimer & Co., Inc. v. Oppenheim, Appel, Dixon & Co.

Facts Olympia offered to pay the rent for the remaining three years of Oppenheimer & Co., Inc.'s (Oppenheimer) (plaintiff) lease at One New York Plaza if Oppenheimer could not sublease the space. Olympia hoped that Oppenheimer would then agree to move into Olympia's World Financial Center. In 1986, Oppenheimer and Oppenheim, Appel, Dixon & Co. (OAD) entered into a conditional letter agreement under which OAD would lease Oppenheimer's space at One New York Plaza. The agreement required Oppenheimer to first obtain written consent of the landlord by a set date to proposed construction by OAD. The agreement provided that if Oppenheimer failed to obtain written consent, the agreement was to be deemed null and void. Oppenheimer's attorney telephone OAD's attorney on the day of the deadline and informed him that the landlord's consent had been obtained. The following day, OAD informed Oppenheimer that the agreement and sublease were invalid for failure to timely deliver the landlord's written consent. Oppenheimer filed suit for breach of contract, asserting that OAD waived or was estopped by virtue of its conduct from insisting on the physical delivery of the landlord's written consent and that Oppenheimer had substantially performed the conditions set forth in the letter agreement. The jury awarded Oppenheimer damages of $1.2 million, but granted a motion for judgment notwithstanding the verdict on the substantial-performance issue. The appellate division reversed, allowing the jury verdict. Issue Whether substantial performance is applicable to excuse the nonoccurrence of an express condition precedent. Holding and Reasoning (Ciparick, J.) No. A condition precedent is an act or event, other than a lapse of time, which must occur before a duty to perform a promise in the agreement arises, unless the condition is excused. Express conditions are those agreed to and imposed by the parties themselves. Implied or constructive conditions are those imposed by law to do justice. The condition here was clearly an express condition precedent. However, Oppenheimer could not claim substantial performance, because there is no mitigating standard of substantiality available under the law to the nonoccurrence of an express condition precedent. Conversely, substantial performance only provides relief through excuse of the non-occurrence of the condition to avoid forfeiture. In this matter, there was neither forfeiture by Oppenheimer nor unjust enrichment of OAD. Olympia had offered to pay the rent on Oppenheimer's lease if it could not sublease, so Oppenheimer suffered no damages. Accordingly OAD did not breach the contract. The order of the appellate division is therefore reversed.

Batsakis v. Demotsis

Facts On April 2, 1942, George Batsakis (plaintiff) offered Eugenia Demotsis (defendant) 500,000 drachmas if she would sign a letter agreeing to pay him back the sum of $2,000 in American currency at a future date, with eight percent interest per year added from 1942. Batsakis later brought suit to recover on the signed agreement. In her answer, Demotsis alleged that the agreement failed for lack of consideration because the actual value of the 500,000 drachmas provided to her by Batsakis was only $25. The trial court held for Batsakis and awarded him a $750 principal, plus interest at the rate of eight percent per year from 1942 to the judgment date, or $1163.83 total. Batsakis appealed. Issue Whether an agreement between two parties where one party provides very minimal consideration relative to consideration provided by the other party constitutes a valid contract. Holding and Reasoning (McGill, J.) Yes. The $25 provided by Batsakis constitutes valid consideration in support of a valid contract with Demotsis, and the contractual terms should be enforced as written. Although a valid contract requires all parties to provide consideration, mere inadequacy of consideration will not void a contract. Thus, it is irrelevant that the amount of consideration provided by Batsakis is very small when compared to the consideration provided by Demotsis (agreement to pay Batsakis $2,000 plus interest in exchange for his loan of $25). A valid contract exists because both parties provided some consideration. Demotsis testified that she agreed to a contract with these terms, and her receipt of $25 is thus exactly what she contracted for based on this testimony. Batsakis fulfilled his contractual obligations, and the trial court should enforce the terms of the agreement as written. The decision of the trial court is amended to include a judgment for Batsakis against Demotsis for the full contractual amount of $2,000 plus interest. The judgment, as amended, is affirmed.

Rockingham County v. Luten Bridge Co.

Facts On January 7, 1924, the board of commissioners of Rockingham County (the County) (defendant) hired Luten Bridge Co. (Luten) (plaintiff) to construct a bridge. Three commissioners voted to go forward with the bridge project, and two opposed. After the contract was formed, one of the commissioners voting in favor of the bridge project resigned, and was replaced by a new commissioner who opposed the bridge project. On February 21, 1924, the commissioners passed a resolution holding that the bridge contract was not enforceable, and informed Luten that the County would not honor the contract. The County directed Luten to not proceed with building the bridge, and stated that any further work completed by Luten would be done at the company's own risk and expense. At the time Luten was informed that the County would not proceed, it had performed approximately $1,900 worth of work on the bridge. However, Luten continued construction and finished the bridge project. Luten then brought suit against the County for the contract price. The trial court held for Luten, and the County appealed. Issue Whether, after receiving notice of a party's breach of a contract for services, the non-breaching party may continue to perform the contract to completion and recover the full contract price. Holding and Reasoning (Parker, C.J.) No. After Luten received notice of the County's refusal to go forward with the contract, it did not have the right to continue performance and pile up additional damages and then sue to recover for the price of full performance. When a non-breaching party in a contract for services receives notice of another party's breach, the non-breaching party must treat the contract as broken when notice is received, cease performance, and sue for any losses sustained from the breach as well as profits that would have been realized upon performance. The non-breaching party may not incur additional costs after notice is provided and then hold the breaching party for damages which did not need to be incurred. Once Luten received notice of the County's breach, it had a duty to cease performance and seek only compensatory damages for the labor and materials expended and expense incurred in the part performance of the contract prior to the County's repudiation, as well as profits that might have been realized from full performance. The decision of the trial court is reversed and remanded.

Lucy v. Zehmer

Facts On the evening of December 20, 1952, A.H. Zehmer (defendant) was drinking alcohol in a bar and was approached by his acquaintance, W.O. Lucy (plaintiff). Lucy was also drinking, and bought additional drinks for Zehmer. The two began conversing, and Lucy offered to purchase a farm owned by Zehmer for $50,000. Lucy had offered to purchase the same farm several times on previous occasions, and Zehmer always refused. On this particular occasion, Zehmer and Lucy spoke for forty minutes about Lucy's purchasing the farm, and Zehmer expressed doubt that Lucy could come up with the $50,000. Lucy stated he could, and invited Zehmer to write out a contract for sale. Zehmer drafted an agreement on the back of a bar receipt stating his intention to sell the farm to Lucy for $50,000. Lucy examined it, and requested that Zehmer rewrite the agreement to include his wife's agreement to sell the property, and have his wife signed it. Zehmer obliged and asked his wife (who was also in the bar) to sign the agreement. When she initially refused, Zehmer whispered to her that the whole matter was merely a joke. Zehmer's wife signed the agreement, but neither party communicated to Lucy that they intended it to be a joke. The agreement also contained a provision for examination of title, and a description of what would be included in the sale. Zehmer completed the agreement and gave it to Lucy, who offered Zehmer $5 to close the deal. At this point, Zehmer realized Lucy was serious and stated that he intended the agreement to be a joke. Lucy left the bar, and enlisted his brother to help him raise the $50,000 pursuant to the agreement. They were successful and upon completion of a title check, Lucy again stated his intention to purchase the farm from Zehmer pursuant to their agreement. Zehmer refused, and Lucy sued for specific performance. The trial court held Lucy was not entitled to specific performance, and Lucy appealed. Issue Whether the actual mental assent of the parties to an agreement is necessary to form a valid and enforceable contract. Holding and Reasoning (Buchanan, J.) No. Zehmer's outward actions, when interpreted by a reasonable person, indicate a willingness to be bound in his agreement to sell his farm to Lucy, and Lucy is thus entitled to specific performance of that agreement. The objective, outward expression of a party's intent to be bound in an agreement, as opposed to that party's subjective mental assent to the agreement, is all that matters when determining the existence of a valid and enforceable contract. If the words or actions of one of the parties has only one reasonable meaning, any undisclosed intentions have no bearing on the existence of a valid and enforceable contract unless they reflect an unreasonable meaning that is actually disclosed to the other party. The facts surrounding the creation of Zehmer's agreement to sell his farm to Lucy, when interpreted by a reasonable person, indicate an outwardly-expressed desire by Zehmer to be bound to that agreement. It does not matter that his subjective desire was that the agreement should be a joke, as this was never communicated to Lucy. The agreement itself was discussed between the two parties for over forty minutes before it was signed, was redrafted at the request of Lucy to contain provisions for title examination and what was included in the sale, and was signed by both Zehmer and his wife with no indication that it was not complete and binding. Additionally, although Zehmer and Lucy were drinking alcohol, the elaborate and detailed manner in which they discussed and drafted their agreement suggests they were not so drunk as to be unaware of their actions. Thus, equity does not justify voiding the contract on these grounds, and Lucy is entitled to specific performance of the contract. The decision of the trial court is reversed and remanded.

Leonard v. Pepsico

Facts Pepsico (defendant) began a promotional campaign that encouraged its customers to collect "Pepsi points" and trade them in for merchandise. As a part of this campaign, Pepsico created a commercial that showed some of the available merchandise along with the number of points it would take to acquire it. One item in the commercial was a Harrier Jet, which was said to require seven million points. Pepsico also released a catalog containing the promotional merchandise. Pepsico provided an order form with the catalog, which listed items that could be redeemed with Pepsi points. The jet was not listed in the catalog or on the order form. Leonard (plaintiff) wanted to redeem the jet, which he was aware at the time cost approximately 23 million dollars. He consulted the catalog, which contained directions for claiming merchandise. These directions included that, in the event someone does not have enough Pepsi points for an item, the additional points could be purchased for ten cents each so long as at least 15 Pepsi points are sent in with the order. Leonard was not able to collect seven million points through purchasing Pepsico products. He raised enough money to purchase the requisite number of points for the jet (i.e. $700,000) and submitted his order, which included 15 points and the money. Leonard sent a letter with his submission explaining that the money was for the purpose of buying additional Pepsi points to be used to redeem the jet shown in the commercial. Pepsico rejected the submission, stating that only items in the catalog or on the order form could be redeemed. Leonard exchanged demand letters with both Pepsico and the advertising company responsible for the commercial. Pepsico filed suit in the United States District Court for the Southern District of New York for declaratory judgment that it was not required to provide the jet under the campaign. Issue Can accepting the terms of an advertisement that is not clear and intended to be a joke create an enforceable contract? Holding and Reasoning (Wood, J.) No. Generally, an advertisement presumably does not constitute an offer, even when a price for an item is provided therein. The advertisement must contain a commitment or an invitation to take further action. Simply including an order form is not sufficient to transform an advertisement into an offer. However, when an advertisement is "clear, definite, and explicit, and leaves nothing open for negotiation," it is an offer for which acceptance will create a contract. An advertisement that is detailed suggests that an offer is being made. However, the use of limiting words, such as "first come, first served," suggests that the advertisement is too indefinite to be considered an offer. Whether an advertisement is to be considered an offer must be determined by considering whether an objective, reasonable person would deem the advertisement as an offer. If the advertisement was clearly meant as a joke then it is not an offer. In the current matter, Leonard's completion of the order form and submitting it constituted the first offer in this matter, rather than acceptance, because Pepsico had not made an offer through its commercial. The commercial was not sufficiently detailed to be deemed an offer. Additionally, even if the jet had been included in the catalog, there existed limiting language that would suggest that it was merely an advertisement. Additionally, the commercial was clearly intended as a joke for many reasons, including that no objective, reasonable person could believe that he could pay $700,000 for an approximately $23 million aircraft. The jet was included in the commercial as a tongue-in-cheek joke, even though there was no distinction in the commercial between it and the other merchandise and no Pepsico promotional material explicitly stated the jet was a joke. Accordingly, Pepsico's motion for summary judgment is granted.

Lonergan v. Scolnick

Facts Scolnick (defendant) placed an ad in the newspaper offering property for sale. Lonergan (plaintiff) inquired for further details. Scolnick wrote Lonergan a letter describing the property, giving directions, and asking for a price. Lonergan wrote Scolnick back, stating that he was not sure he had found the property, asking for a legal description, asking about certain physical characteristics, and suggesting a bank as an escrow agent should he decide to purchase. On April 8, Scolnick wrote a letter confirming that Lonergan had found the property and approved the bank as an escrow agent, but explaining that Lonergan had to act fast because Scolnick had another interested buyer. Scolnick sold the property to a third party on April 12. On April 14, after Scolnick had already sold the property, Lonergan received Scolnick's April 8 letter. Lonergan wrote to Scolnick, stating that he would proceed to deposit the asking price in escrow. When he learned that the property had been sold, Lonergan filed suit. Judgment was granted to Scolnick on the basis that no contract had been formed. Lonergan appealed. Issue Has a property owner who asks another person if he is interested in purchasing the property made an offer to the other person? Holding and Reasoning (Barnard, P.J.) No. Merely asking a person whether he is interested in purchasing a property does not constitute an offer to sell the property to that person. There is no contract until the parties have agreed to some specific thing. If the person interested in the property knows or has reason to know that the owner is not expressing an intent to sell but is in fact waiting for further agreement, the property owner has not made an actual offer. The correspondence here indicated that Scolnick intended to find out whether Lonergan was interested in the property, and not to make a definite offer to sell the property to Lonergan. The April 8 letter was notice that Scolnick had to make some further expression of assent. Lonergan knew or should have known that he was not being given time in which to accept an offer that was being made, but that some further assent on Scolnick's part was required. The judgment below is affirmed.

Watts v. Watts

Facts Sue Ann Evans (Sue) (plaintiff) and James Watts (James) (defendant) lived together for twelve years in a "marriage-like" relationship and had two children. Sue claims she quit her job and gave up her plans to become a nurse on James's promise to provide for her. Sue took James's last name, and the couple shared expenses, bank accounts, and tax returns, and held themselves out as husband and wife. Sue contributed to the partnership through housekeeping, childrearing, working at James's office, and starting a family business, for which she was not compensated. Eventually, the couple broke up, and Sue moved out of their home. Sue brought claims for breach of contract, unjust enrichment, and partition, claiming that she is entitled to her fair share of the wealth accumulated during the couple's relationship. The Dane County Circuit Court dismissed Sue's complaint for failure to state a claim. Sue appealed to the Court of Appeals of Wisconsin. The Supreme Court of Wisconsin took jurisdiction over the case after a certification from the court of appeals. Issue Are cohabiting partners each entitled to a share of the wealth acquired over the term of their relationship if they carry on as a married couple, but never get married? Holding and Reasoning (Abrahamson, J.) Yes. An unmarried cohabitant may be entitled to a fair share of accumulated wealth during the cohabitation. There is no evidence that the legislature intended for the provisions of the Family Code dedicated to property division after marriage to apply to unmarried cohabiting couples. For that reason, the doctrine of marriage by estoppel will not be applied to unmarried cohabitants. Nevertheless, unmarried cohabitants are free to enter express or implied contracts with one another, and the contract will not be unenforceable on the basis of public policy so long as there was some consideration other than sexual activity. See In Matter of Estate of Steffes, 290 N.W.2d 697 (1980). This court rejects the approach taken by the Illinois Supreme Court in Hewitt v. Hewitt, 394 N.E.2d 1204 (1979), refusing to give judicial recognition to illegal and immoral nonmarital relationships by extending property and contract rights to unmarried cohabiting couples. Wisconsin permits no-fault divorce and has decriminalized nonmarital cohabitation, and thus its laws are distinguishable from Illinois's. Additionally, a claim for unjust enrichment may be proper when (1) a benefit is conferred on a party, with (2) knowledge or appreciation of the benefit, and (3) the party unjustly accepts or retains the benefit. Unmarried cohabitants may properly bring a claim for unjust enrichment based on benefits conferred during the relationship. Refusing to allow such marriage-like claims would essentially allow one equally guilty party to keep all assets and property acquired during the relationship, which is plainly inequitable. Lastly, partition is a claim for division of any property that is jointly held. When parties act jointly financially and socially while living together, it is strong evidence that they intended to share property equally. Here, Sue and James acted as a married couple. They lived together, had children, shared financial accounts and responsibilities, and were listed as husband and wife on legal documents. Sue provided services and contributed to the couple's wealth. Sue has pleaded sufficient facts to state a cause of action for breach of contract, unjust enrichment, and partition. The circuit court's dismissal of the complaint is reversed. The case is remanded for a determination of the merits of Sue's claims.

Lenawee County Board of Health v. Messerly

Facts The Messerlys (defendants) purchased a tract of land on which an apartment building was located. Prior to the transfer the owner had installed a septic tank on the property without a permit and in violation of the health code. Later the Messerlys sold the property to the Pickleses (plaintiffs). The contract for sale stated that "Purchaser has examined this property and agrees to accept same in its present condition. There are no other or additional written or oral understandings." The Pickleses later discovered raw sewage seeping from the land and the Lenawee County Board of Health condemned the property for violation of the health code. The Pickleses alleged failure of consideration and willful concealment and failure to disclose the sanitation condition and asked that the land contract be rescinded. The trial court found there was no fraud or misrepresentation, as none of the parties knew of the transgression of the earlier owner, and the property was purchased "as is" after inspection. The trial court ruled that the Pickleses lacked a cause of action and foreclosure was ordered along with a judgment in the amount of $25, 943. The court of appeals affirmed in part but reversed on the finding of no cause of action. Certiorari was granted. Issue Whether a land sale contract may be rescinded if the land is intended for a particular use and both parties are unaware of a condition that makes it unsuitable for such use. Holding and Reasoning (Ryan, J.) Yes. The parties were under a mistake of fact. A contractual mistake is a belief that is not in accord with the facts, held at the time the contract is executed. Here, the mistake was the belief that the property was suitable for residential purposes, which it was not, because the sewage system rendered it inadequate. A contract may be rescinded because of a mutual misapprehension of the parties, but this remedy is granted only in the sound discretion of the court. Rescission is appropriate when the mistaken belief relates to a basic assumption of the parties upon which the contract is made, and which materially affects the agreed performances of the parties. Rescission is not available, however, to relieve a party who has assumed the risk of loss in connection with the mistake. In the current case, the contract was made upon the assumption that the apartment was suitable for residential use. The performance of the contract was valuable for the Messerlys because the property was worth less on discovery of the mistake. Nonetheless, both parties are innocent and thus rescission cannot be granted to the Pickleses. The risk of loss should be allocated to the purchasers. The Pickleses had agreed to the term in the contract stating that the "[p]urchaser has examined this property and agrees to accept same in its present condition. There are no other or additional written or oral understandings." The court below was correct in holding the Pickleses purchased the property "as is" and assumed the risk of any mistakes. The decision of the court of appeals regarding cause of action is reversed.

Carlill v. Carbolic Smoke Ball Co.

Facts The owners of Carbolic Smoke Ball Co. (Carbolic) (defendants) manufactured the Carbolic Smoke Ball and advertised it as a preventative measure against influenza. Carbolic placed an advertisement in several London newspapers saying that one hundred pounds would be paid to any person who purchased a Carbolic Smoke Ball and still contracted influenza. The advertisement further stated that Carbolic had deposited one thousand pounds in a local bank to demonstrate its seriousness in the matter. Carlill (plaintiff) purchased a Carbolic Smoke Ball and later contracted influenza despite using the ball as directed by Carbolic's instructions. Carlill brought suit to recover the one hundred pounds. The trial court held she was entitled to the one hundred pounds, and Carbolic appealed. Issue Whether a general advertisement of a reward constitutes an offer capable of being accepted and binding the offeror in a valid contract. Holding and Reasoning (Lindley, L.J.) Yes. Carbolic's advertisement constitutes an offer that was validly accepted by Carlill, thus creating a binding contract supported by consideration. A general advertisement of an award constitutes an offer that is capable of being accepted and binding the offeror in a valid contract, provided at least contemporaneous notice and some consideration are present. While most acceptances are not valid unless notice of acceptance is communicated to the offeror, acceptances of offers contained in general advertisements should be treated differently as it is unlikely the advertisers expected any advance notice beyond notice that an advertised condition had been fulfilled. In stating that it deposited one thousand pounds in a local bank to prove its seriousness in the matter, Carbolic clearly made an offer that was capable of being accepted by any person who buys a Carbolic Smoke Ball, uses it as directed, and contracts influenza. Carlill accepted this offer by fulfilling the advertised condition. This acceptance does not fail simply because Carbolic only received notification of the acceptance with notification of the condition's fulfillment. Additionally, both parties presented adequate consideration in furtherance of the contract. Carbolic received a benefit from the advertisement by promoting and increasing confidence in its products among the general public that would most likely lead to increased sales. Carlill experienced a detriment as she was inconvenienced by the requirement that she use the Carbolic Smoke Ball three times per day. Thus, Carbolic's general advertisement constitutes an offer that was validly accepted by Carlill, thus creating a binding contract supported by consideration. The decision of the trial court is affirmed.

Farnum v. Silvano

Facts Viola Farnum (plaintiff), a 90-year-old woman with dementia, sold her home for approximately half of the home's market value to Joseph Silvano (defendant), a 24-year-old man who frequently mowed Farnum's yard. In completing the sale, Farnum was represented by an attorney selected and paid for by Silvano. After learning of the sale, Farnum's nephew, Harry Gove (plaintiff) filed suit against Silvano on Farnum's behalf seeking to rescind the sale. At trial, the evidence showed that Farnum's mental competence had begun to deteriorate three years prior to the sale. Farnum was frequently confused and often asked why her long-deceased siblings no longer called her. Additionally, while at home Farnum often inquired about the "noise upstairs," but the home had no second story. Nevertheless, the trial court found that, at the time of executing the deed, Farnum was lucid and was aware of what she was doing. Gove appealed. Issue In Massachusetts, is a contract for the sale of real estate voidable if entered into by a person who (1) is unable to understand in a reasonable manner the nature and consequences of the transaction; or (2) is unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of the person's mental disease or defect? Holding and Reasoning (Kass, J.) Yes. In Massachusetts, an individual's competence to enter into a contract for the sale of real estate involves something more than a mere transient surge of lucidity. It involves an ability to truly understand and comprehend the nature and quality of the transaction, together with an understanding of the transaction's significance and consequences. In Krasner v. Berk, 319 N.E.2d 897 (Mass.1974), the Massachusetts Supreme Judicial Court noted that a contract is voidable if entered into by a person who (1) is unable to understand in a reasonable manner the nature and consequences of the transaction; or (2) is unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of the person's mental disease or defect. Here, while the trial court could have found that Farnum was lucid enough to know she was selling her home to Silvano for approximately half of the home's value, the court failed to consider whether Farnum lacked the ability to understand the consequences and reasonableness of doing so. The evidence showed that Farnum suffered a mental disease which manifested itself in erratic and irrational conduct and was confirmed by diagnostic tests. Moreover, Silvano knew, or had reason to know of, Farnum's medical condition at the time of the sale. Consequently, Farnum is entitled to rescission of the conveyance. The judgment of the trial court is vacated and the matter is remanded to the Probate Court for the entry of a judgment of rescission consistent with the opinion.

Williams v. Walker-Thomas Furniture Co.

Facts Walker-Thomas Furniture Co. (Walker) (plaintiff) owned and operated a retail furniture store. It routinely leased items to customers under lease agreements which provided that customers would make a series of installment payments. Walker would retain title to the items until all payments were made, at which time title would pass to the customer. All Walker's lease agreements also contained a unique provision that every time a new item was leased by a customer, a balance would become due on all items previously leased by that customer until the entire balance for all items was liquidated. The effect of this provision was that if a customer defaulted on his most recent purchase, Walker could attempt to repossess all previous purchases by that customer. Williams (defendant) purchased a stereo from Walker and defaulted shortly thereafter. Walker brought suit to recover on the stereo as well as all other items previously purchased by Williams. The trial court granted judgment for Walker, and the appellate court affirmed. Williams and other defendants appealed to the District of Columbia Court of Appeals. Issue Whether a contract which contains unconscionability at the time of contract formation is enforceable. Holding and Reasoning (Skelly Wright, C.J.) No. When an element of unconscionability exists when the contract is formed, the contract is not enforceable. "Unconscionability" is defined as the absence of meaningful choice on the part of one of the parties to a contract, combined with contractual terms which are unreasonably favorable to the other party. Whether a meaningful choice is present in a particular case depends upon a consideration of all the circumstances surrounding the transaction. These circumstances can include gross inequality of bargaining power, as well as the manner in which the contract was entered. The terms of the contract must be considered "in the light of the general commercial background and the commercial needs of the particular trade or case," and should not be enforced if they are "so extreme as to appear unconscionable according to the mores and business practices of the time and place." The lower courts did not conclude that holding the contract unenforceable was a viable option, and thus made no findings of fact as to the presence of unconscionability. The cases are thus remanded for consideration of the contracts under this new test for unconscionability. Dissent (Danaher, C.J.) The appellate court clearly stated its view that the contracts made between Walker and Williams and Walker and the other defendants were unconscionable as a matter of public policy. However, that court did not see fit to hold that any actual grounds existed upon which the contracts should be overturned. The appellate court recommended a change in legislation by Congress to better protect vulnerable consumers from such contracts, but declined to create a judicial solution. The findings and decision of the appellate court should be affirmed.

Raffles v. Wichelhaus (Peerless)

Facts Wichelhaus (defendant) entered into a contract to buy 125 bales of cotton from Raffles (plaintiff). Under the terms of the contract, the cotton was to arrive from Bombay via the ship Peerless. Raffles delivered the cotton to a ship named Peerless, which departed from Bombay in December. Wichelhaus refused to pay. Wichelhaus argued that the cotton was to be delivered by a different ship also called Peerless, which had departed Bombay in October. Raffles sued for breach of contract. Issue Whether a mutual misunderstanding of the parties invalidates a contract. Holding and Reasoning (Mellish) [Editor's Note: the court in this case issued a per curiam judgment with no written opinion. Because the court found in favor of the defendant, the arguments put forth by the defense attorneys, Mellish and Cohen, are summarized here.] Yes. There is no contract if there is a mutual misunderstanding by the parties as to the meaning of a term of the agreement. There is nothing on the face of the contract to indicate which Peerless ship was to deliver the cotton. Where there is a latent ambiguity as to meaning, parties may offer parol evidence to explain the terms. In this case, the evidence shows that Wichelhaus meant one Peerless and Raffles meant another. Thus, there was no meeting of the minds and, hence, no binding contract. The judgment is thus for Wichelhaus. Dissent (Milward) [Editor's Note: no formal dissent was issued in this case. Nevertheless, the (unsuccessful) arguments offered by the plaintiff's attorney, Milward, are summarized here.] Wichelhaus has no right to contradict by parol evidence a contract that on its face is valid. Wichelhaus does not argue misrepresentation or fraud, and the contract makes no mention of when the ship would depart, only that it was to be named Peerless.

Wood v. Lucy, Lady Duff-Gordon

Facts Wood (plaintiff) entered into a contract with Lucy, Lady Duff-Gordon (Lady Duff-Gordon) (defendant), whereby Lady Duff-Gordon agreed to grant Wood the exclusive right to place her endorsement on others' clothing designs. She also granted Wood the exclusive right to market her designs and sell them. In return, Lady Duff-Gordon would receive 50 percent of the profits from Wood's efforts with regard to her endorsements and designs. Wood agreed to keep records of all accounts and to take out all patents, copyrights, and trademarks necessary to protect Lady Duff-Gordon's designs. Lady Duff-Gordon later entered into a contract with another company whereby she placed her endorsement on others' clothing designs. Wood filed suit, claiming breach of contract. Lady Duff-Gordon filed a motion for demurrer, arguing that there was no enforceable contract for lack of consideration. The trial court denied the motion. Lady Duff-Gordon appealed. The Appellate Division reversed and entered judgment for Lady Duff-Gordon. Wood appealed to the Court of Appeals of New York. Issue (1) Can a contract be enforced when there is no evidence of a promise, exchanged as consideration, in the explicit terms of the contract? (2) Whether a promise to use reasonable efforts may be implied from the entire circumstances of the contract. Holding and Reasoning (Cardozo, J.) (1) Yes. A promise, exchanged as consideration, may be implied and enforceable, even though it is not provided in the explicit terms of the contract. In the current matter, the facts reveal that Wood made a promise to use reasonable efforts to place endorsements and market Lady Duff-Gordon's designs. Because Lady Duff-Gordon gave an exclusive privilege, Wood's acceptance of the privilege assumed its duties, one of which was to use sufficient reasonable efforts. Also, because Lady Duff-Gordon would receive 50 percent of all sales, it is clear that both parties intended that Wood would use sufficient reasonable efforts because, without them, Lady Duff-Gordon could not have expected any payment. Additionally, Wood's agreement that he would keep track of accounts and take out protections necessary for the designs implies he would promise to use sufficient reasonable efforts. Based upon these facts, it is clear that a promise to use reasonable efforts to place endorsements and market the designs is a term of the contract and should be implied. Accordingly, the judgment of the appellate division is reversed. (2) Yes. The agreement between Wood and Lucy contains an implied promise by Wood to use reasonable efforts, and thus constitutes sufficient consideration by Wood to form a valid and enforceable contract. A promise to use reasonable efforts may be implied from the entire circumstances of a contract. Once successfully implied, that promise may constitute sufficient consideration to create a valid and enforceable contract. Wood's promise to use reasonable efforts in performing his contract with Lucy may be implied from many circumstances. Lucy gave Wood an exclusive privilege to place her endorsements on products and market her designs. The acceptance of this exclusive right by Wood equaled an assumption of the basic duties encompassed in that right. Additionally, Lucy was not to receive any compensation other than one-half of all agreements formed by Wood's efforts. Thus, unless Wood used reasonable efforts, Lucy would not receive any compensation, and there would be no basis for the parties to have entered into such an agreement. Finally, Wood agreed to provide a monthly accounting of his profits and activities to Lucy. If he was not under a duty to use reasonable efforts to earn profits, this accounting would be meaningless. Thus Wood's promise to pay Lucy one-half of the profits and revenues resulting from his exclusive privilege to use her endorsement, as well as his promise to provide a monthly accounting of his profits supports the implication that Wood had a duty to use reasonable efforts to create profits and revenues. This promise by Wood constitutes sufficient consideration to form a valid and enforceable contract with Lucy, and the decision of the appellate court is reversed.

Alaska Packers' Ass'n v. Domenico

Rule of Law Where parties enter a new agreement under which one party agrees to do no more than he was already obligated to do under an existing contract, the new agreement is unenforceable for lack of consideration. Facts Alaska Packers' Association (APA) (defendants) contracted with a group of sailors (plaintiffs) to sail between San Francisco and Alaska, and en route perform regular duties as well as other duties requested by the captain or agents of APA. APA agreed to pay each sailor $50 for the season and two cents per salmon they assisted in catching. After arriving in Alaska, the sailors stopped working and demanded $100 for the season in order to resume their work. Being unable to hire replacement sailors, an APA representative in Alaska signed a new contract agreeing to the higher pay. However, upon returning to San Francisco, APA paid only the original contract price of $50. The sailors sued APA in admiralty to recover the full amount payable under the new agreement, alleging they had demanded the new contract price because APA had provided them faulty fishing nets. This fact was heavily contested and the trial court determined that APA had not provided faulty fishing nets to the sailors. Judgment was entered for the sailors and APA appealed. Issue Is an agreement made between parties who have obligations to one another under an existing contract enforceable if one party is required to perform only what he or she was already obligated to perform under the original contract? Holding and Reasoning (Ross, J.) No. A contract that obligates a party to perform what he or she has a prior existing duty to perform under an earlier agreement is not enforceable for lack of consideration. A party cannot benefit from his or her own bad faith by refusing to perform a contract in order to coerce another party relying on that performance into a new agreement that requires no additional performance in exchange for more beneficial terms. Therefore, a promise to pay a party to perform what he or she is already obligated to do is not enforceable for lack of consideration. For this reason, the promise by the APA representative to pay $100 instead of $50 to each sailor was not enforceable even though the sailors relied on this promise. The sailors were already obligated to perform the duties for which the additional pay was promised, and there was no new consideration for the additional pay. Since the sailors refused to perform the original contract and agreed to do no more in the new contract than perform what they had already obligated themselves to do in the original contract, the promise by the APA representative to pay $100 is not enforceable. The trial court is reversed.

Fisher v Bell (1961)

The defendant had a flick knife displayed in his shop window with a price tag on it. Statute made it a criminal offence to 'offer' such flick knives for sale. His conviction was quashed as goods on display in shops are not 'offers' in the technical sense but an invitation to treat. The court applied the literal rule of statutory interpretation.