CONTRACTS CASES

Hunt Foods & Industries v. Doliner (New York, 1966)

UCC Facts: Hunt was in negotiations to buy the assets of ECC, 73% the stock of which is owned by Doliner. Hunt and Doliner agreed on a price, but several important terms were not agreed upon. Hunt wanted to protect its offer and so demanded an option to purchase the Doliner stock for $5.50 per share. The option was unconditional, but was made on the understanding that it would only be used if Doliner solicited an outside offer. The parties resumed negotiations but they failed. Hunt then exercised the option; Doliner refuses. Hunt moved for summary judgement for specific performance. Holding: Under the UCC, additional evidence with respect to an agreement between parties is inadmissible only where the writing of the contract contradicts the existence of the claimed additional term. The oral agreement here does not negate any express terms. The court then applies the certain inclusion test - was it impossible that this term would not have been included? Summary judgement is denied.

Columbia Nitrogen v. Royster (US CoA, 4th Cir., 1971)

UCC §2-202 LOOSELY INTERPRETED • Facts: Columbia contracted to buy phosphate from Royster. The contract required Royster purchase a minimum of 31,000 tons/year for 3 years and stated the price per ton. Phosphate prices feel steeply. for the sale of phosphate. Columbia ordered only 10% of the minimum and refuses further delivery. Royster sues for breach. Columbia wants to offer extrinsic evidence that its relationship with Royster is one of repeated and substantial renegotiation of the contract price. • Holding: You don't need an ambiguity before extrinsic evidence can be offered to interpret a clause. Seems to suggest that any evidence that explains or supplements the agreement by trade usage, course of prior dealing, and course of actual performance is admissible even if the evidence creates ambiguities

Southern Concrete Services, Inc. v. Mableton Contractors, Inc. (Georgia, 1975)

UCC §2-202 STRICTLY INTERPRETED • Facts: Mableton agrees to purchase a minimum amount of concrete from Southern to construct a power plant, but only orders 15% of the minimum. Mableton sues for breach and delivery costs of concrete to the site. Southern argues that the amount was only an estimate (based on trade custom). • Holding: Extrinsic evidence (trade custom + parties' intent to renegotiate) is inadmissible because it creates an ambiguity not present in the express terms.

Anderson Brothers v. O'Meara

UNILATERAL MISTAKE - FAILURE TO DO DD: • Facts: PL bought a barge dredge from DF, who personally designed the dredge for trench dredging. However, PL needed it for sweep dredging. DF assumed that PL needed it for trench dredging. • Holding: This is a case of unilateral mistake - the buyer failed to conduct its due diligence and that is the basis for this mistake. There is no relief when a buyer fails to do DD to ascertain readily accessible information before contracting.

ALCOA MUTUAL MISTAKE:

• Facts: ALCOA seeks equitable modification of the price in its contract with Essex. The contract provides that ALCOA will convert specified amount of alumina into aluminum for Essex, at a price calculated by reference to 3 variable components based on specific indexes. The 1970s oil prices break the pricing formula. Without relief, ALCOA stands to lose over $75 million over the duration of the contract. • Holding: The parties made a mutual mistake as to whether the pricing mechanism they used was going to work. The court modifies the contract for them - NOTE: modification is rare.

St. Peters v. Pioneer Theatre (IW 1940)

· F: Couple "bargained for" the bank night winnings by writing their names in the book and standing in front of the theater, for the theatre's promise of winnings · H: Unilateral contract is enforceable. It does not matter how trivial the "bargaining for" is.

R.E. Davis Chemical Corp. v. Diasonics, Inc

BURDEN ON PL TO DEMONSTRATE IT IS A LOST VOLUME SELLER • Facts: Diasonics contracts to buy equipment from Davis. Pursuant to that agreement, Davis paid Diasonics a $300,000 deposit. Prior to entering the contract with Diasonics, Davis had contracted with Dobbin and Valvassori to establish a facility where the equipment would be used. Dobbin and Valvassori breached their contract with Davis. Davis then breached its contract with Diasonics. Diasonics later sold the equipment to a third party for the same price it agreed with Davis. • Reasoning: Diasonics may be a lost volume seller - the burden is on Diasnoics to demonstrate that it is a lost volume seller in order to get increased damages.

Ricketts v. Scothorn:

Grandfather promises granddaughter $2000 plus 6% annual interest so she doesn't have to work. Plaintiff leaves her job, but he still pays her one installment before dying. His estate does not want to pay her. The court holds that there is an enforceable contract because the grandfather intentionally influenced her to alter her situation for the worse on the faith of the promise - it would be grossly inevitable not to pay at this point on the basis of a lack of consideration.

UAW-GM Human Resource Ctr. v. KSL Rec. Corp (Michigan, 1998)

HARD PAROL EVIDENCE RULE • Facts: PL contracts with CMC for use of its property for a convention. The letter of agreement between them included a merger clause. PL contends that there was an independent collateral promise that the hotel would be staffed with union-represented employees. Later, the hotel was sold to DFs, who replaced the staff with non-union organized employees. PL canceled its contract and demanded a refund of its down payment. DF refused to return the money, claiming that it was a portion of the liquidated damages plaintiff owed it for cancelling the contract. • Holding: When parties include an integration clause in their written contract, it is conclusive and parol evidence is not admissible to show that the agreement is not integrated except in cases of fraud that invalidate the integration clause. The dissent argues examining the written document alone is not sufficient because a document cannot prove its own completeness (soft parole evidence rule).

Hayes v. Plantations Steel Co.:

Hayes worked for DF for 25 years. One week before he retired, the employer promised him that the company would take care of him after his retirement. There was no sum of money agreed to, and the arrangement was not formally authorized by shareholders. The court held that there was no contract because there was no consideration. Promissory does not apply here because he announced his retirement before the promise was made (A.K.A. no reliance).

Hoffman v. Red Owl Stores

Holding: Justice does not require giving him store profits, but reliance damages put the promisee in as good a position before the contract was formed.

Seitz v. Mark-o-Lite (1986)

IF PERFORMANCE IS DELEGABLE, ILLNESS/DEATH IS NOT AN EXCUSE: • Facts: DF contracts with Seitz to restore and replace a neon sign marquee. After the contract was executed, DF's expert sheet metal worker (a diabetic) was hospitalized. He was the only employee who could do the work. DF cancels the contract on the basis that it was impossible to perform. It would have been economically infeasible for DF to retain another company to do this part of the work. • Holding: If the act to be performed is delegable to another, then the illness or death of the person who is expected to perform is not an excuse for non-performance

Ciaramella v. Reader's Digest:

Lawyers were negotiating a settlement. Ciarmella's attorney said 'we have a deal' but the agreement contained a merger clause. The court held that the contract was not binding because the parties did not intend for the unexecuted draft settlement to be a binding agreement.

Wolford v. Powers (1882)

Lehman contracted for PL to name his son Lehman. In return he promised to provide for the child generously and give him a good education. Later, he gave PL a note for $10,000 saying he preferred to carry out the promise that way. The court hold that there is a valid contract because DF received all of the consideration he asked for. The general rule = where there is no fraud and a party gets all the consideration he contracts for, the contract is upheld. The value of consideration is measured by the parties - the value is t/f the value they agree is correct

Wood v. Lucy

Lucy contracts with Wood to give him exclusive right to place her endorsement on other peoples' designs and sell/advertise her own designs. They agree to split all the profit. During the contract period, Lucy endorsed items without his knowledge and withheld the promises. The contract is valid and she is in breach. The court holds that DF has given consideration by implicitly promising to complete the above tasks, otherwise what is the point of the contract? DF explicitly promises to share the proceeds of any endorsements, but does not promise to get endorsements. This a Cardozo opinion - he often finds consideration where others would not. Cardozo thinks that Woods has undertaken to make a 'reasonable effort' others would find that he only needs to give minimal effort.

Webb v. McGowen (AL 1935)

MATERIAL BENEFIT RULE F: Mill worker saves employer's life and is crippled. Employer promises to provide support for worker and does so until he dies. · H: Enforceable promise. Material benefit (employer was not hurt) + moral obligation (employer affirmatively decided to pay worker) = enforceable.

Parker v. Twentieth Century-Fox Film Corp. (1970)

NO DUTY TO MITIGATE IF OTHER EMPLOYMENT IS NOT EQUAL • Facts: DF contracted for PL to appear as the female lead in its contemplated motion picture production. The contract provided that defendant would pay plaintiff a "minimum guaranteed compensation" totaling $750,000 over 14 weeks. Prior to the start of the payments, DF decided not to produce the picture and notified PL, offering to employ the actress in another film - the compensation was identical, but some of the details were not (e.g. filming was to be in Australia, not California). PL had one week to accept; she allowed the offer to lapse and then commenced an action seeking recover of the agreed guaranteed compensation. • Holding: If available alternate employment if of a different or inferior kind, the terminated employee is not in violation of the duty to mitigate if they do not take the alternate employment. • VPG thinks this case is actually a play-or-pay contract and is misclassified here.

Ionics, Inc. v. Elmswood Sensors (US CoA, 1st Cir., 1997) (Overrules Roto-Lith)

(Overrules Roto-Lith) Facts: Contracts for thermostats. Multiple forms: Ionics sends a purchase order form with conditions. Elmwood sent letter to Ionics after it made its first order with other terms. Elmwood sent Acknowledgment in the receipt of each order: acknowledged receipt only upon the sellers willingness to deal with their terms and conditions; any other terms must be submitted in writing. Among the terms is a warranty. Holding: Under 2-207, where terms do not agree it is assumed that the parties do not agree to each other's versions of the terms. In this case, not responding does not constitute acceptance of a counter offer - assume that each party continues to object to the other's contradictory terms.

Mitchill v. Lath (NY 1928) - (542)

1. Facts: Defendant owned a farm that plaintiff wanted to buy. Defendant also owned a parcel across the street, on which they had an unsightly icehouse that they were capable of removing. Plaintiff agreed to buy the farm and signed a contract to that effect, but also made an oral agreement with plaintiff to remove the icehouse. 2. Court: The term to remove the icehouse is not part of the agreement. Three conditions must be present for an oral agreement to modify a written agreement: (1) the agreement must be collateral, (2) the agreement must not contradict express or implied provisions of the written contract, and (3) the contract must be one that the parties would not ordinarily be expected to embody in writing.

Haase v. Cardoza

A widow promised to pay her sister-in-law a monthly sum. When the sister-in-law asks the widower to sign a promissory note she stops paying. The court holds that for a promise to be enforceable, it must be accompanied by past consideration or there must be some subsequent change of position in reliance on the promise. Without one of these factors, the promise to make a gift is not binding.

In Re Greene (1930)

Adulterer tries to get the court to enforce a contract she and a married man made when they ended their affair. The court holds that there is no consideration because past illicit intercourse cannot be consideration. Intent to promise is not consideration.

Masterson v. Sine (Ca. 1968) - (546)

1. Facts: Plaintiff owned a ranch, which they granted to defendant. Plaintiff reserved an option to buy back the property for the same price as they sold it plus the value of any improvements made by defendant. Defendant claims that the option was meant only to be utilized by family. Plaintiff went bankrupt and his wife/trustee brought this suit against defendant to establish their right to enforce the option to pay off the debt. 2. Court: When the parties agree that a written contract is an integration of all other agreements, parol evidence cannot be used to add or vary its terms. However, parol evidence can be used when only part of the agreement is integrated (so long as the admitted evidence does not contradict any of the existing terms). The restatement permits proof of a collateral agreement if it is "such an agreement as might naturally be made as a separate agreement." The UCC allows proof of a collateral agreement to be entered in fewer situations: if the additional terms are such that, if agreed upon, they would certainly have been included...then evidence of their alleged making must be kept from the trier of fact. a. Here, the "family" stipulation was not one that would naturally have been included in the written contract

Trident CTR v. Connecticut Gen. Life Ins. Co. (US CoA, 9th Cir, 1988)

CONTEXTUALIST APPROACH • Facts: Trident sought and obtained financing for a building project from Connecticut General Life Insurance Company. The loan was for $56m at 12.14% interest, and could not be prepaid for the first 12 years of its life. Interest rates began to drop and Trident wanted to refinance. CGLI was unwilling. • Holding: Under California law, extrinsic evidence was admissible to interpret the terms of a seemingly unambiguous and integrated written instrument. Judge Kozinski says that the language could not be more clear in this contract, but that he is unfortunately bound by the precedent Traynor set in PGE to allow extrinsic evidence.

American Standard v. SchectmaN

COST OF COMPLETION: • Facts: American Standard owned industrial facilities on some land, which it hired Schetchman to destroy and grade the land to be "reasonably attractive for resale," which would cost $90,000. S did not perform, and AS sued. S argued that value of property was not diminished by unfinished work • H: Damages based on cost of completion. S did not do substantial work, and AS expected graded land (not necessarily graded-value land).

Feinberg v. Pfeiffer

Company board allegedly promised to pay PL $200 a month after her retirement. DF contends that the promise was a mere gift because there is no consideration. The court holds that plaintiff is entitled to enforcement of the contract under promissory estoppel she retired from a lucrative job (and was too old to get another job thereafter) based on the promise of payment. The promise was reasonably expected to induce reliance, thus justice requires enforcement. VPG doesn't like this - why not just write a contract?

National Farmers Organization v. Bartlett & Co., Grain (US CoA, 8th Cir., 1977)

DEMAND FOR ASSURANCE MUST BE IN WRITING: • Facts: NFO and Bartlett had 45 contracts for the sale of grain, 14 of which are at issue here. As contracts were becoming due, they were not being delivered or only partially delivered. Buyer becomes concerned and withholds some payment. Seller makes an ultimatum on January 26: it won't deliver any more grain until a substantial amount of the money due is paid. The buyer treats this as an anticipatory repudiation - it settles its due payments with the seller and considers the remaining contracts as being breached. • Holding: Seller had a right to demand assurance, but failed to do so. Without demanding assurance, Seller cannot suspend performance. Buyer's default did not substantially impair the value of the whole contract, so Buyer did not anticipatorily breach. Time was not of the essence, and Seller was the first to breach anyways.

Batsakis v. Demotsis

DF borrowed $25 from PL in exchange for a note saying she borrowed $2,000 and would pay it back plus 8% interest. There was consideration and the contract is enforceable. PL got exactly what she contracted for, and the mere inadequacy of consideration will not void a contract.

Ever-Tite Roofing Corp. v. Green:

DF had a contract to re-roof PL's residence. PL signed. The contract stated that the contract became binding either when the document was signed or when the work commenced. There was a delay between signing and work commencing which PL's credit was checked. When DF arrived to start work, another team was doing the work. In this case, the court held that there was a contract because the offer was not withdrawn before it was accepted (i.e. when DF started preparing for the job).

Courteen Seed Co. v. Abraham:

DF promised to sell and deliver seeds at 23 cents per pound in a letter. PL then contracted to resell the seeds at a profit. DF refused to complete the sale. The court holds that there is no offer, merely an invitation to negotiate. An invitation to negotiate is not an offer.

Peevyhouse v. Garland Coal & Mining Co. (Supreme Court of Oaklahoma, 1962)

DIMINUTION VALUE • Facts: PLs had a farm with coal deposits. They leased the farm to DF for 5 years for coal mining purposes. DF specifically agreed to perform certain restorative and remedial work at the end of the lease period, but did not do it. The work would have cost circa $29,000. • Holding: If the contract provision breached was incidental to the main purpose of the contract, and the economic benefit of its performance to the PL is grossly disproportionate to the cost of performance for the DF, the damages recoverable are limited to the diminution in value resulting because of non-performance.

Reed v. King (California CoA, 1983)

DUTY TO DISCLOSE MATERIAL INFORMATION Facts: Reed bought a house from King. King did not tell her there had been a brutal murder there 10 years earlier. Everyone in the neighborhood knew about it. When Reed found out she sought recission of the contract. Holding: A seller has a duty to disclose information that would materially affect the value or desirability of a property only if that information is not accessible only to the seller or is not within the diligent attention and observation of the buyer. ♣ Is the information material? Factors to consider: the gravity of the harm caused by non-disclosure, the fairness of imposing on the buyer the duty of discovery, and the impact on the certainty of contracts. ♣ The nature of the information is irrelevant as long as you can show it has a material impact on the value or desirability of the item purchased. You have to show actual harm.

Obde v. Schlemeyer (Washington, 1960)

DUTY TO DISCLOSE UNDISCOVERABLE MATERIAL INFORMATOIN Facts: The Obde's bought an apartment from the Schlemeyers. Schlemeyers did not disclose that the apartment was infested with termites. Holding: Schlemeyers had a duty to inform. There is a duty to disclose when one party knew about material facts, the other party did not know about the material facts, and the party that did not know could not have found out. If you don't disclose in this circumstance = fraudulent concealment.

Henningsen v. Bloomfield Motors, Inc. (NJ 1960) - (504)

DUTY TO INFORM Facts: Plaintiff bought a Chrysler for his wife for Mothers' Day. The contract stated that defendant's liability was limited solely to defectively manufactured parts, and that all other implied or express warranties were void. 10 days after plaintiff bought the car, the steering mechanism failed, and the plaintiff's wife totaled the car and injured herself. Court: Where the motive of a warranty is to avoid the warranty obligations that are usually incidental to the sale of a good, that warranty is unenforceable. The implied warranty of merchantability is only malleable where stipulations are arrived at freely by parties of equal bargaining power. Here, the disparity in bargaining power is clear; the liability/warranty disclaimer is thus invalid.

Howell v. Coupland (1876)

EXCUSE WHEN AN IMPLIED CONDITION MAKES PERFORMANCE IMPOSSIBLE: • Facts: Contract for the purchase of potatoes. Disease attacks DF's potato crop and causes it to fail. PL sues to recover damages for non-delivery. • Holding: If a contract is premised on the continued existence of the contracted for product, and that product stops existing due to a factor outside of either party's control, then the contract has become impossible and is void.

Taylor v. Caldwell (1863)

EXCUSE WHEN IMPLIED CONDITION MAKES PERFORMANCE IMPOSSIBLE: • Facts: Contract to use a specific music hall for 4 days of concerts. Hall burns down at no fault of either party. • Holding: Where a performance of a contract depends on the continued existence of a specific person/thing/condition, the non-existence of that person/thing/condition excuses performance. Usually requires a sign of uniqueness of the thing or specificity in the contract.

In re. Soper (Minnesota, 1935)

FORESAKING THE PLAIN MEANING RULE 'AS JUSTICE SO REQUIRES' • Facts: Soper married Wife 1 but then disappeared, ran away and married Wife 2. When he died, his life insurance plan specified that the proceeds of his policy would go to his partner. The proceeds were paid to Wife 2, but shortly thereafter Wife 1 appears and sues for the money. • Holding: It seems beyond debate that Wife 2 was the intended beneficiary given that she was the Wife known to all contracting parties (= contextualist approach). Plain meaning here should be forsaken so as to do justice to the true intentions of the parties involved. The goal of contractual interpretation is to ascertain the intention of the parties themselves, and thus, that sometimes the plain meaning must give way to rational consideration of extrinsic factors. The dissent argues that 'wife' is a legal term and that Wife 1 is the rightful beneficiary (= plain meaning rule).

Spang Industries, Inc. Ft. Pitt Bridge Div. v. Aetna Casualty & Surety.

FORSEEABLE T/F NO BURDEN TO WARN • Facts: Torrington contracted with the NY Department of Transport to build a bridge. They then subcontracted with Spang Industries for the steel. The initial agreement stated that timing for delivery of the steel was to be "mutually agreed upon". Torrington requested the steel in late June 1970, and Spang tentatively agreed. Spang did not make that schedule, and didn't deliver enough steel for the work to start until mid-September. Because the weather had dropped, Torrington faced additional regulations and needed to get the work done ASAP before temperatures dropped any lower. As a result, they incurred extra costs (overtime pay, extra equipment, protection of the concrete from freezing.) • Holding: When parties enter into a contract which, by its terms provides that the time for performance is to be set at a later date, the knowledge of the consequences of a failure to perform is imputed to the defaulting party as of the time when the parties agreed upon the date of performance. It was reasonably foreseeable that delay would lead to these extra costs (Spang would have known about the extra difficulties relating to cold weather) and so Torrington had no special duty to warn. Damages are awarded.

Dannan Realty Corp. v. Harris (New York, 1959)

FRAUD AND MERGER CLAUSES: • Facts: Harris alleges that he was induced to enter into a contract based on falsely made oral representations by Dannan as to the operating expenses of a building and profits to be derived from the investment. However, Harris also signed a contract with Dannan in which he stipulates that he is not relying on any representations other than those expressly written in the contract (merger clause). • Holding: A disclaimer clause (merger clause) is only enforceable if it is sufficiently specific - no boilerplate merger clauses. A general merger clause does not preclude parol evidence on allegations of fraud. However, if a merger clause explicitly specifies that the parties did not rely on oral representations - the parties t/f cannot now admit evidence of fraudulent oral representations. • Dissent: A defendant may use this opinion to justify using language in a contract that would shield against fraud. The guiding rule of contracts is that "fraud vitiates every agreement that it touches"

Krell v. Henry (1903)

FRUSTRATION MANDATES EXCUSE: • Facts: Henry agrees to hire a flat on Pall Mall to watch coronation procession. Puts down a 25 pound deposit. Coronation is cancelled. Krell brings a claim for the remaining 50 pounds. Henry denies liability and counter-claims for his deposit back. • Holding: Frustration doctrine applies to cases where performance is prevented due to cessation of a factor that was implicit in and foundational to the contract. It was not foreseeable that the coronation would be cancelled and so performance is excused.

Kiefer v. Fred Howe Motors (Wisconsin, 1968):

Facts: 20-year-old purchases a car and signs a contract saying he is 21+ years. Salesman never asked or confirmed his age. Plaintiff later sought to return the car and sued to recover the purchase price. Holding: The contract of a minor, other than for necessities, is either void or voidable at his option. The minor's status as emancipated does not affect this rule. The only exceptions to the general rule are those supplied by statutes, such as a marriage exception or an agreement to support an illegitimate child.

Wagner Excello Foods, Inc. v. Fearn Int'l, Inc. (Illinois Appellate Ct., 1992):

Facts: 5-year contract to buy concentrate with a minimum quantity requirement. Contract did not specify a price, but provided a system by which Defendant and Plaintiff would continually review and accept the price based on changing circumstances. Plaintiff files for breach of contract on the basis that Defendant did not meet its minimum quantity requirement. Defendant contends there is no contract, merely an agreement to agree, because there was no settled price. Holding: Under UCC § 2-305, a contract can exist even when there is no definite price term so long as all other essential elements are present and defined. A contract must show a manifestation of agreement between the parties and be definite and certain in its terms. The essential element is whether the parties intended to be bound absent the enumeration of the price. In this instance, the price is the only essential element lacking, and there is no evidence that the parties did not intend to be bound, so there is a contract.

Brown v. Cara (US CoA, 2nd Cir., 2005)

Facts: Brown and Cara write a memorandum of understanding to develop a plot of Cara's land together. Brown takes on the first $175,000 in development costs before final terms have been negotiated. The proect gets zoning approval in Dec. 2001. In Spring 2003, Brown sends a proposed construction management agreement, the terms of which apparently offended Cara so much that he refused to continue any negotiations or collaboration. Brown wants specific performance or, failing that, damages. Holding: Where parties have reached agreement on certain major terms but left others open to later negotiation, the parties are bound to negotiated the open issues in good faith in an attempt to reach the objective they were contracting for. (Type 2 Leval Agreement). Goldberg thinks it would have been very easy for the parties to write an enforceable contract in this case and that they should not have had to rely on the court.

Transatlantic Financing Corp. v. United States (1966)

Facts: Contract for Transatlantic to carry cargo from US to Iran. Contract did not specify a route. After the contract was executed, Suez Canal was closed. PL t/f had to go around Africa, making their journey much more expensive. They are suing for damages to cover the additional cost. • Holding: The closure of the Suez Canal was foreseeable, and Transatlantic was well positioned to insure against it (e.g. by raising the price before it made the journey) - does not pass factor 1 of the commercial impracticability test.

Bloor v. Falstaff brewing Corp. (US CoA, 2nd Cir., 1979):

Facts: Defendant bought out plaintiff's failed brewing company, including his entire inventory. He explicitly agreed to sell the remainder of plaintiff's beer with his best efforts and pay a royalty of 50 cents per barrel. To save his company money (as it was nearing bankruptcy), defendant restructured the business and decreased advertisements of plaintiff's beer. As a result, sales of plaintiff's beer declined devastatingly. Defendant ultimately turned its finances around but continued not to promote plaintiff's product. Holding: Losing money is not enough to overcome the best efforts obligation, you must show commercial impracticability. A "best efforts" clause imposes an obligation to act with good faith in light of one's own capabilities. The party meets the obligations under a "best efforts" contract by performing as well as the average prudent comparable businessperson. A best efforts clause would not require a company to spend itself into bankruptcy to promote the sales of products, but it does prevent a company from emphasizing profit without fair consideration of the effect on volume of sales. Once defendant recovered financially, he should have continued to promote plaintiff's beer.

Coley v. Lang

Facts: Defendant contracts to buy the outstanding shares of stock in plaintiff's company (really he is buying the company's name and reputation). They signed a letter prepared by defendant's attorney, stating that the defendant was to purchase the stock for $60,000 over a period of a few years in installments, with other conditions. The letter contained a clause that stated that the letter was to be considered a binding agreement. The deal ultimately falls through. Holding: The letter constitutes a mere 'agreement to agree' which is not binding. There is no contract here. In order to be binding, a preliminary agreement must demonstrate that there was a 'meeting of the minds' on all of the terms, as well as the subject matter, of the contract. Promissory estoppel is unwarranted here because equitable estoppel requires misrepresentation or deliberate conduct designed to consciously and unfairly mislead the other party and there is no evidence of that here.

Eastern Air Lines Inc. v. Gulf Oil Corp (US District Ct, Southern District of Florida, 1975):

Facts: Eastern and Gulf Oil have a requirements contract for Gulf Oil to provide Eastern with oil in specific US cities. The price of the fuel was set based on a market indicator which was at the time controlled by various US government price controls. In the 1970s, in response to OPEC, the US moved to an unprecedented 'two-tier' indexing system. The result was that the index price was now substantially lower than the market price. Gulf Oil demands a price increase, threatening to cut off Eastern otherwise. Holding: Under UCC § 2-306, requirements contracts do not fail for indefiniteness because they are measured by the actual good faith requirements of a party. These contracts envisage reasonable elasticity, and the test for whether a party is in breach is not tied to quantities, but to whether the party was acting in good faith. The court uses evidence of past and industry-wide dealings to determine that Eastern's performance under the contract does not constitute breach and is consistent with good faith and established commercial practices as under UCC § 2-306(1). Consequently, Gulf Oil is in breach by refusing to produce. i. What is good faith: 1. UCC § 1-201: Between merchants, good faith means "honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade". 2. Good faith = commercial reasonability. You have to show that a contract is commercially impracticable.

Empire Gas Corp. v. American Bakeries Co. (US CoA, 7th Cir., 1988):

Facts: Empire and American Bakeries enter into a requirements contract by which Empire would provide American Bakeries with propane to be used to convert AB's truck fleet to propane. AB never ordered any propane, and Empire brings suit for breach of contract. Holding: Read literally, UCC §2-306(1) prevents a buyer from taking disproportionately more or less of a product than the original estimate. However, the dominant approach is to read the clause differently in cases of under versus over-demand - it only prevents a buyer from ordering disproportionately more than the original estimate (to prevent the buyer from going into competition with the seller by taking advantage of a favorable price). The buyer can order disproportionately less than estimated as long as he does so in good faith, i.e. as long as he has a valid business reason for doing so. In this case, American Bakeries loses this cases because it has not demonstrated a valid business reason for reducing its propane requirements to zero.

Valley Med. Specialists v. Farber (Arizona, 1999):

Facts: Farber leaves Valley Med and begins practicing within the area of the restrictive covenant, which was agreed to last for 3 years after the date of termination. Valley Med brings a suit against Farber. Holding: Restrictive covenants are not enforceable when the restrictions are overly broad or when the public policy interest outweighs the employer's legitimate interest in enforcing the agreement. The burden is on the party wishing to enforce the covenants to show that: (1) the restraint is no greater than necessary to protect the employer's legitimate interests, and (2) such an interest is not outweighed by the hardship to the employee and likely injury to the public. Valley Med did not reach that burden so the restrictive covenants are not enforceable. ♣ Blue Pencil Rule: Courts can strike portions of a non-compete clause so as to render it enforceable, but it cannot add or amend the clauses (red line rule). ♣ Courts do not like restrictive covenant clauses, but are more partial to severance pay clauses. A non-compete covenant will not be applied - it must be explicit in the language of the contract and will be strictly interpreted.

Feld v. Levy (New York, 1975): STILL GOOD LAW

Facts: Feld and Levy make a 1-year renewable contract for provision of breadcrumbs. Levy agrees to give Feld all of the breadcrumbs he produces. He then realizes that producing the breadcrumbs costs more that he though, and that he cannot recover his costs. He stops making the breadcrumbs. Levy claims that this constitutes breach of contract. The contract gave each party the right to cancel the contract with 6-months' notice. Holding: Short of a cancellation with 6-months' notice, Levy was bound to perform in good faith and could only cease producing the breadcrumbs in accordance with good faith. A bankruptcy or genuine imperiling of the very existence of Levy's entire business would have warranted non-performance, but the unprofitability of this one deal does not warrant non-performance. Losing money is not enough to get you out of a requirements contract, unless you start losing so much that it imperils your business. i. Goldberg does not like this rule.

Grumman Allied Industries v. Rohr Industries (US CoA, 2nd Cir.. 1984):

Facts: Grumman bought Flxible, a subsidiary of Rohr. During the negotiation period, 2 of Flxible's key prototypes failed and testing was suspended. Grumman knew of those facts, and signed a contract waiving reliance on any warranty or representation not made int eh contract. After the sale was consummated, structural defects arose and the buses were removed from operation. Now Grumman alleges misrepresentation and failure to disclose material facts regarding the testing of the prototypes. Holding: No fraud. There is a merger clause between sophisticated parties. Grumman had unlimited access to Rohr's facilities, employees, and documents. It had the duty to do due diligence.

Dannan Realty Corp v. Harris (NY, 1959):

Facts: Harris alleges that he was induced to enter into a contract based on falsely made oral representations by Dannan as to the operating expenses of a building and profits to be derived from the investment. However, Harris also signed a contract with Dannan in which he stipulates that he is not relying on any representations other than those expressly written in the contract (merger clause). Holding: A disclaimer clause (merger clause) is only enforceable if it is sufficiently specific - no boilerplate merger clauses. ♣ Link to parol evidence rule.

• Austin Instrument, Inc v. Loral Corp (CoA of NY, 1971)

Facts: Having been awarded a Navy contract, Loral sub-contracts with Austin for provision of some of the needed parts. The Navy contract included a strict delivery schedule and a liquidated damages clause re: late or cancelled deliveries. After shipping some of the parts, Austin refused to deliver the remaining parts unless Loral agreed to a retroactive and prospective price increase and unless Loral give Austin the contract for all of the Navy parts. Loral tried to source the parts from other subcontractors, but nobody but Austin could meet the tight timeframe and so Loral eventually agreed to Austin's demands. Holding: This is a classic case of duress. A case is voided on the grounds of duress when it has been established that the party making the claim was forced to agree to the contract by means of a wrongful threat precluding his free will. Economic duress is proved by demonstrating that one party has threatened to breach the contract by withholding goods unless the other party agrees to some further demand. Mere threat, however is not enough. The threatened party also has to show that it could not obtain the goods from another source and that the ordinary remedy for an action of breach of contract would not be adequate.

Hill v. Gateway 2000 (US CoA, 7th Cir., 1997): MAJORITY VIEW, Consumer Buyer

Facts: Hill bought a Gateway computer that turned out to be defective. Inside the box was a set of terms provided by Gateway, including a clause that the computer must be returned within 30 days if the purchaser did not accept all of the terms, and an arbitration clause. Plaintiff did not want to arbitrate and sued in federal court. Holding: Battle of the forms does not apply because there was only one form! UCC § 2-207 does not apply to contracts that exist only in one form. The offer was the shipment with the terms attached, the acceptance was keeping the computer for more than 30 days. The buyer could have returned the computer after reading the form, could have asked for the terms to be sent ahead etc.

Wood v. Lucy, Lady Duff-Gordon (New York, 1917)

Facts: Lucy considers herself a creator of fashions and hires Wood to help her monetize this. The contract gives him the exclusive right - subject to her approval - to place her endorsement on others' designs and advertise/place for sale her own designs. They will split all profit from that activity. During the contract period, Lucy endorses items without Wood's knowledge and withholds profits. Woods sues for damages. Holding: A promise - express or implied - to use "reasonable efforts" or "best efforts" to merchandise products of pursue some business objective creates a legally enforceable obligation. Plaintiff's implicit promise to use "reasonable efforts" to procure profits is sufficient consideration to make this a binding exclusive dealings contract. Exclusive dealings contracts are governed by UCC § 2-306(2), which creates an "obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale".

Wagenseller v. Scottsdale Memorial Hospital (Arizona, 1985):

Facts: Plaintiff is an at-will employee at a hospital. She goes on a corporate camping trip but does not fit in with the rest. She is fired shortly thereafter. She claims she was fired for reasons that contravene public policy and without legitimate cause related to job performance. Holding: In the absence of contractual provisions to the contrary, an employee with an at-will employment contract can be fired for good cause or no cause, but cannot be fired for bad cause. An employee manual can be incorporated into the employment contract such that failure to abide by the manual is a breach of contract - this is a question of fact for a jury to decide. There are 3 exceptions to the 'at will' rule (these always apply, even when not included in the employment contract): • Public policy - cannot fire someone for bad cause a.k.a. a cause against public policy. • Implied in fact - If there is a promise of employment for a specific duration. • Implied in law - employers can be found liable for breaching the covenant of "good faith and fair dealing"

Trimmer v. Van Bomel (NY, 1980):

Facts: Plaintiff left a modestly-paying job to work for Defendant, who allegedly agreed to support him in luxurious fashion if he devoted all of his time and attention to her. For 5 years he was her ever-present companion and adapted to a much more luxurious lifestyle than he was used to. Then suddenly she ended this. Plaintiff seeks recover on an alleged express oral agreement, pursuant to which he agreed to give up his business and render services to plaintiff if she paid his costs relating to and during his period of service and to pay "within a reasonable time" an amount sufficient to pay for his sumptuous living for the rest of his life. Holding: In an agreement terminable at will, and with no clear bounds and parameters set forth, an alleged obligation which would survive beyond the termination of the agreement must appear with specificity. The agreement here is too vague for the courts to give it an exact meaning or for it to be enforceable.

Merit Music Service, Inc. v. Sonneborn (Maryland CoA, 1967):

Facts: Sonneborns entered into a loan agreement with Merit Music. A clause was added that they would only rent vending machines from MMS, which D did not read but signed. Merit did not give copy of the contract to the DF. DF rented other machines, and Merit sues for breach. Holding: Doctrine of Duty to Read: If you sign contract you are bound by it, even if you did not read it (even an illiterate would be bound). EXCEPTION: when one party knows or should have known that the dissenting party did not read the contract.

Spiess v. Brandt (Minnesota, 1950):

Facts: Spiess contracts to buy a summer resort from Brandt on a payment schedule with a liquidated damages clause by which Brandt would retain any money paid before default. Spiess is unable to keep up with the payments. Spiess alleges that Brandt fraudulently concealed the fact that the resort had lost money each year, knowing that the only way Spiess could keep up with the payments was if the resort made a profit. Holding: A person is liable for fraud if she: ♣ makes a false representation of a past or existing material fact susceptible to knowledge; ♣ knowing it is false or without knowing whether it is true or false; ♣ with the intention to induce the person to whom the representation is made into relying on it, ♣ and the other party is deceived and induced to act in reliance upon it, to his pecuniary damage.

Step-Saver Data Systems, Inc. v. Wyse Technology (US CoA, 3rd Cir., 1991): MINORITY VIEW, Merchant Buyer

Facts: Step-Saver sent Wyse written purchase orders for 142 copies of Wyse's software program. The purchase order specified price, product shipping instructions and payment terms - nothing further. Wyse shipped the product with an invoice reflecting Step-Saver's terms. The software program did not work with the relevant computers, and customers were filing suit. However, all boxes were stamped with a box-top license disclaiming all warranties and stating that opening the box indicated acceptance of all of the box-top's T&Cs. Holding: The box-top license was equivalent to a written acceptance containing additional terms. These additional terms are merely 'proposals' because they would materially alter the contract, and under the UCC, additional terms that materially alter the agreement must be assented to by both parties in order to be binding. Opening the box did not constitute assent to the warranty disclaimer by Step-Saver - the language on the box-top stating that opening equals accepting the terms is not sufficient because the seller did not demonstrate an unwillingness to proceed with the transaction unless that term was included.

Consumers Int'l. v. Sysco Corp:

Facts: Sysco agreed to provide up to 80% of plaintiff's food products. Consumers Int'l claims that its business relationship with Sysco was wrongfully terminated on the basis that the contract included an implied agreement that the right of termination would be exercised only in good faith. Holding: In the absence of a contrary contractual provision, a franchisor's enforcement of a no cause termination clause need not be for good cause. A no cause termination does not amount to bad faith. Good faith is not equal to "good cause" - you can fire someone in good faith for no cause. The court will not imply a "good cause" requirement where (1) the companies had equal bargaining power, (2) the contract contains an explicit no cause provision, or (3) where there was no evidence of bad faith termination.

Wolf v. Marlton Corp. (New Jersey, 1959):

Facts: The Wolfs contracted to buy a house that Martlon was to build for them. The sale was never consummated and Marlton sold the house to a third party. The Wolf's claim that Marlton unilaterally and unjustifiably terminated the contract without returning their down payment. Marlton claims that the Wolf's breached the contract first by threatening to resell the house to an undesirable buyer. Holding: Whether duress exists in a particular transaction is generally a matter of fact. What in a given circumstance will constitute duress is a matter of law. A threat can be wrongful even if the threatened act is lawful - duress is assessed based on the state of mind induced on the victim, not the legality of the threatened acts. Thus, an otherwise legal act, if used for an outrageous purpose or purely malicious or unconscionable motives (such as to injure the builder's business) constitutes a wrongful act due to considerations of fundamental fairness. If a threat is in fact made, and if the defendant actually believes that the threat would be carried out, and as a result of that belief defendant's will to perform was overborne, then defendant is justified in treating the contract as breached and is entitled to recover damages. ♣ Duress is a fact-intensive inquiry: Was the threatened act wrongful? Was defendant's will actually overborne?

Williams v. Walker Thomas Furniture Co.

Facts: Williams is an uneducated mother of 7 who is separated from her husband. She bought furniture on an installment plan. The contract states that all the purchases are still the company's even if Williams more than paid for them, until she pays off the entirety of her balance. She went into default on her payments and the company seized her items. Holding: Where the element of unconscionability is present at the time a contract is made, the contract should not be enforced. Unconscionability requires an absence of meaningful choice on the part of one of the parties, together with terms that unreasonably favor the other party. Here, there was a gross inequality of bargaining power, which negated the meaningfulness of the choice. Furthermore, the key term was "hidden in a maze of fine print." It was thus hardly likely that plaintiff's consent was ever given to all of the terms

Hoffman v. Red Owl Stores (Wisconsin, 1965) MINORITY RULE:

MINORITY RULE: This approach has not been widely followed by courts. If we followed this rule it would dramatically alter contracts by making people liable at the negotiation stage. o Facts: Hoffman, a small-town bakery owner, negotiates with Red Owl to open a Red Owl franchise. He is encouraged by Red Owl to incur several expenses, including selling his bakery at a loss, buying and then selling a small grocery store for no profit, putting money down in a neighboring town where the franchise would be built, and incurring personal moving expenses. Red Owl maintained its promise that a franchise would be offered once its conditions were met. After 3 years, Red Owl indicated that Hoffman's required capital investment was now $34,000 not $18,000 and that a proposed equity investment would have to be in the form of a gift. Hoffman abandoned efforts to meet Red Owl's demands and sued. o Holding: It is not necessary for there to be a binding contract for a court to award promissory estoppel. Promissory estoppel is used to impose fair-dealing requirements on parties engaged in pre-contractual negotiations, even before an enforceable promise has been made by either side. If a promisor has through foreseeably induced the other party to make reliance losses, promissory estoppel can be used if justice so requires. Restatement § 90.

Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging Co. (California, 1968)

MINORITY/CONTEXTUALIST APPROACH • Facts: DF contracted with PL to provide the labor and equipment to remove and replace the upper metal cover of PL's steam turbine. Contract included a clause in which DF agreed to perform the work at its own risk, and to indemnify the PL against all loss, damage, expense and liability. During the work, $25k worth of damage was caused to the turbine. PL sued for damages. DF claims that the clause was intended only to apply to third parties, not to PL's own property. • Holding: Parol evidence is admissible to ascertain the true intent of the contractual parties even when the writing seemed clear and unambiguous. The test for admissibility is not whether the wording appears plain on its face, but whether the proffered evidence can help prove a meaning to which the language of the contract is reasonably susceptible.

Cherwell-Ralli Inc. v. Rytman Grain Co. (Connecticut, 1980)

MUST BE REASONABLE BASIS TO DEMAN ASSURANCE • Facts: Cherwell has an installment contract with Rytman to sell it Cherco Meal and C-R-T Meal, with payments to be made within 10 days of delivery. Rytman almost immediately falls behind on payments. Based on a tip, Rytman then becomes concerned that Cherco might not complete performance. Buyer demands and receives assurance from seller. Buyer stops making payments, the seller made not further deliveries and the inability to deliver goods forced seller to close its plant. • Holding: If there is reasonable doubt as to whether a buyer's default is substantial, the seller is advised to temporarily suspend further performance until it can ascertain whether the buyer can offer adequate assurance. In this case, Buyer had no right to demand assurance because the grounds for insecurity were not reasonable (truck driver's tip). Buyer's default substantially impaired the value of the whole contract (promised to pay but did not, so it undermined the trust) à Buyer breached the whole contract.

Sherwood v. Walker

MUTUAL MISTAKE: • Facts: 2 parties contract to sell a cow which they believe is barren. The cow is actually pregnant, and is therefore worth much more than the contract price. • Holding: Because there was no ex ante consensus on a material term there is no binding contract. To prove this you need to show that there was (1) a lack of awareness of a material fact (mutual mistake) and (2) a resulting imbalance

Drews Co. v. Ledwith-Wolfe Associates, Inc.

NEW BUSINESS RULE - LOST PROFITS ARE TOO UNCERTAIN • Facts: Contractor agrees to renovate building for Ledwith-Wolfe to turn into a restaurant. After disagreements and delays, Contractor stops work and sues for lien, and Owner finishes the work and sues for damages. As part of this, he tries to recover for the profits the restaurant would have made. • Holding: PL did not present sufficient evidence as to what the profits would have been had the restaurant opened on time and so they cannot get damages based on that. It was too speculative.

Rockingham County v. Luten Bridge Co. (1929)

NO COMPENSATION FOR DAMAGES YOU COULD HAVE MITIGATED • Facts: PL contracted with the defendant to build a bridge. After the contract was completed, the board voted to rescind the earlier offer. By this point, the plaintiff had incurred costs of about $1900. PL was notified of the board's action shortly thereafter, but continued work on the bridge. PL filed sued alleging damage of $18,301. • Holding: Once a party has received notice of a breach, it has a duty to do nothing to increase the damages flowing therefrom as much as he can without incurring loss to himself. A PL cannot hold a DF liable for damages which need not have occurred. Parties have a right to breach by directing the other party to stop performance, instead opting to pay damages. Luten is t/f entitled only the cost of work done up until the time they learned of DF's breach.

Lloyd v. Murphy (1944) `

NO FRUSTRATION: • Facts: Lloyd leased premises to Murphy for a five-year term starting in 1941 for the express purpose of displaying and selling new cars and without a subletting option. In 1942, the government ordered that the sale of new cars was to be discontinued. The PL orally waived the strict rules as to what Murphy could do on the premises and offered to reduce rent if Murphy couldn't operate profitably. Nevertheless, Murphy vacated the premises. PL brings an action for declaratory relief to determine their rights under the lease, and for judgement for unpaid rent. • Holding: No frustration. War was foreseeable. The lot was leased quickly to another tenant. Lloyd lowered rent and waived restrictions. Murphy sold cars successfully at other locations.

Peerless Ship Case

NO MUTUAL ASSENT: • Facts: 2 ships both called Peerless. The parties had a contract re: shipping on the Peerless ship, but they were thinking of two different Peerless ships. The contract price wound up being higher than the market price. • Holding: There was never any mutual assent. Therefore, there is no contract.

Norcon Power Partners, L.P. v. Niagara Mohawk Power Corp. (NY CoA, 1998)

NOT UNDER UCC EXTENDS RIGHT TO DEMAND ASSURANCE TO COVER LONG-TERM CONTRACTS UNDER NY COMMON LAW • Facts: Niagara contracts to purchase electricity generated by Norcon Power over 25 years. There are 3 pricing periods. In terms 2 and 3, Norcon was to repay Niagara if the price went over Niagara's avoided cost. Niagara revises its avoided cost estimates and, anticipating that Norcon will not be able to satisfy the daily escalating credits in the third period, demands assurance that it will be able to perform. Norcon sues on the basis that Niagara has no contractual right to demand adequate assurance. Niagara counterclaims. • Holding: While other states have adopted UCC §2-609 reasoning into their common law, New York state has not extended the right to demand adequate assurance of performance beyond UCC cases. The Court here extends the policies of 2-609 to apply to long-term commercial contracts between corporate entities such as the contract as issue here.

Globe Refining Co. v. Landa Cotton Oil (U.S. 1903)

ODL RULE - TACIT ASSUMPTION (STILL USED IN NY) *INCIDENTAL DAMAGES · F: Company agreed to purchase 10 tank cars of crude cotton oil and sends cars from Texas to Kentucky, but is turned away at the refinery. Buyer sues for difference between contract and market price + costs of sending trucks out. · H: Damages for only difference between contract and market price. Buyer did not prove that Seller would assume the risk of liability.

Hamer v. Sidway

Old Rule - Detriment Rule · F: Rich uncle promises to pay nephew if he gives up smoking and swearing. · H: Enforceable promise. Nephew gave up his legal right in exchange for the promise.

Hadley v. Baxendale

PL MUST WARN THAT A BREACH WOULD CAUSE UNFORSEEABLE LOSSES TO RECOVER • Facts: Hadley delivered a broken shaft for mill owners, but it arrived late due to carrier's negligence and led to few days' lost profits. PL was unable to operate the entire mill without the shaft, but did not tell Baxendale that. PL sued for damages. • Holding: Recovery is limited to those injuries which the parties could reasonably have anticipated at the time the contract was entered into. If certain damages do not normally flow from the breach, you have to warn the other party about them at the time of contracting to be able to recover from a breach. PL cannot get indirect damages for lost days of operation Late delivery causing lost profits was not a "reasonably foreseeable" consequence. o General damages - arise from the breach itself. Consequential/Special damages - only those that are reasonably supposed can be awarded.

Fairmount Glass v. Crunden-Martin

PL asks for a quote on Mason jars. DF send back a quote. PL orders the jars, but DF has already sold them to another party. DF is in breach - PL made a specific proposition which was closed by DF's acceptance. NOTE: THE DEFAULT RULE ON SITUATIONS LIKE THIS IS THAT THEY AREN'T CONTRACTS - ONLY IN CASES LIKE THIS WHERE IT IS VERY SPECIFIC.

W.W.W. Assocs. V. Giancontieri

PLAIN MEANING RULE • Facts: PL contracted with DF to purchase a plot of land. Written contract included a reciprocal cancellation provision, but Investor wanted to bring in extrinsic evidence that would interpret the provision as added only for investor's benefit (re: the ongoing litigation). • Holding: The clause is not ambiguous on its face. Therefore, extrinsic evidence is not admissible and the plain language of the clause holds.

Seabrook v. Commuter Housing Co. (NY 1972)

PROCEDURAL AND SUBSTANTIVE UNCONSOINABILITY/ HIGHER STANDARD FOR MERCHANTS/DUTY TO INFORM Facts: PL signed a rental agreement with defendant for an apartment in an incomplete building. The contract was long and contained clauses that stated—should the building not be completed or habitable on time, the lease would still be in full effect and defendant would not be liable; the tenant would just take possession once the building was complete/habitable, and the lease term would begin on that date instead of on the date specified. These clauses were not pointed out or explained to PL. The building was not ready until four months after the specified date. Holding: The landlord is a merchant in the seller's marketplace because he possess superior knowledge and a rare commodity. A merchant is held to a higher standard of conduct. The concept of laissez faire has no application to this relationship because the lessor and lessee do not deal on equal terms and the lessee does not have the option of shopping around. Landlords have an affirmative duty to (1) set forth a reasonable time limit and (2) bring the clauses to the attention of their lessee. An expert cannot hide behind legal clauses of this kind when dealing with an occasional lessee that has neither any knowledge of real estate law nor the advice of counsel.

Pavel Enterprises, Inc. v. A.S. Johnson Co., Inc.:

Pavel uses a Johnson bid to win a government renovation project. Johnson realized that it had mistakenly quoted too low a price, but did not warn Pavel because it did not think Pavel would win the work. Having won the work, Pavel requested revised bids from subcontractors, and chose Johnson. On receiving notification that they had been chosen, Johnson informed Pavel that the price was too low and that Johnson sought to withdraw. The court holds that there is no enforceable contract here. Plaintiff never explicitly accepted defendant's sub-bid and never showed proof that it had been relied upon during the bid-shopping period. Defendant is consequently not liable for the cost difference (note: adopted the Drennan analysis).

Kirksey v. Kirksey

Plaintiff gets sister-in-law to abandon her house then kicks her off his land 2 years later. This is not a contract because plaintiff's promise lacked consideration, and without consideration a promise is a mere gratuity. There is no action for breach of a promise.

Freund v. Washington Square Press

REASONABLY CERTAIN PROOF REQUIREMENT NOT MET • Facts: Writer grants Publisher exclusive rights to publish and sell his book on modern drama. Contract gives writer $2,000 advance and promises royalties. Publishing owner changes and does not publish book. Writer sues for specific performance and damages. • Holding: Damages are 6¢. Writer failed to prove expectation damages to a reasonably certain degree (royalties he would have received if the book were published).

Sedmak v. Charlie's Chevrolet

SPECIFIC PERFORMACE GRANTED UNDER 'OTHER PROPER CIRCUMSTANCES' • Facts: Sedmaks had put down an initial deposit on a limited edition Chevrolet. They requested some changes to the stock model. The seller assured them that they would be owners, and told them that after their changes had been made, a contract would be mailed to them. There was no fixed price because the seller said he wasn't sure what the number would come out to. However, no contract was mailed. Later, the seller told them that he could not sell it to them for the amount discussed because demand had inflated the value. He invited them to bid on the car. PL moved for specific performance. • Holding: Specific performance is granted. The car is not a one-of-a-kind, but fits under the "in other proper circumstances" category - factors include the difficulty in obtaining the product elsewhere without considerable expense, delay, inconvenience.

O.W. Grun Roofing & Construction v. Cope (Texas CoA, 1975)

SUSBTANTIAL PERFORMANCE NOT MET • Facts: Cope sues DF for alleged failure to perform on a contract for construction of a roof. The roof was to be uniform in color, but the one DF built is streaky. This can only be remedied by completed destroying the present roof and re-starting. • Holding: DF did not substantially perform in this case. Doctrine of substantial performance = a promisor who has substantially performed is entitled to recover, although he has failed in some particular way to comply with his agreement. This is a case-by-case, fact driven inquiry. ♣ To meet substantial performance the performer must have in good faith intended to comply with the contract, and substantially have done so in the sense that (1) the defects are not pervasive, (2) do not constitute a deviation from the general plan contemplated in the work, (3) and are not so essential that the object/purpose of the parties in making the contract cannot - without difficulty - be accomplished by remedying them. ♣ T/f, acceptable omissions are (1) inadvertent and unintentional, (2) not due to bad faith, (3) o not impaire the structure as a whole, (4) are remediable without doing material damage to the other parts of the building.

Alaska Packers' Ass'n v. Domenico (US CoA, 9th Cir., 1902 PRE-EXISTING DUTY RULE:

THIS CASE IS PRE-UCC AND USES THE COMMON LAW RULE. Facts: Domenico entered into a contract with Alaska Packers' to work for them on the ship sailing to and from Alaska for a price of $50 plus a bonus for every salmon they caught. Once the sailors got to Alaska they refused to work unless their flat rate was raised. Defendant's commissioner signed a new contract, but told plaintiff that he had no authority to do so. On return to San Francisco, plaintiff demanded the amount from the new contract, which was refused to them. Holding: The modified contract is not enforceable for lack of consideration. There was no consideration for the modified agreement because the fishermen's obligations under the new contract were identical to those under the original contract (pre-existing duty rule).

Frigaliment Importing Co. v. B.N.S. International Sales Corp (New York, 1960)

TRADE USAGE & BURDEN OF PROOF • Facts: PL contracted to purchase 100,000 pounds of fresh frozen chicken from DF over 2 shipments. When the first shipment arrived, it contained lower quality fowl. PL sued DF for breach of contract on the ground that chicken meant 'broiler chicken' as per widely accepted trade standards. DF argues that chicken in the contract included all types of chicken. • Holding: Trade usage: when one the parties is not a member of the trade, his acceptance of the standard must be shown via proof that he (1) actually knew of the usage, or (2) the usage is so widely known that his knowledge of it could be inferred. [In this case the seller is new to the industry.] The burden of evidence is on the PL. In this case the PL did not meet this burden so the trade usage is not used.

Pakas v. Hollingshead (NY CoA, 1906):

VPG THINKS THIS WOULD COME OUT DIFFERENTLY NOW • Facts: Buyer Pakas has a contract to buy 50,000 bike pedals from Hollingshead, which were to be delivered and paid for in installments. Hollingshead delivers 2,609 pedals, then refuses to send any more. Pakas brings a suit for the breach of the due deliveries and wins. Pakas then brings another suit for breach of the future installments. • Holding: There can only be one action for damages for a total breach of an entire contract to deliver goods - the fact that they were to be delivered in installments does not change that rule. Two options for a party in an installment contract: party can either sue and recover all his damages in the first suit, or wait until the contract has matured or when all the goods of the installment contract have arrived

(ALCOA) Aluminum Co. of America v. Essex Group, Inc. (1980)

• Facts: ALCOA seeks equitable modification of the price in its contract with Essex. The contract provides that ALCOA will convert specified amount of alumina into aluminum for Essex, at a price calculated by reference to 3 variable components based on specific indexes. The 1970s oil prices break the pricing formula. Without relief, ALCOA stands to lose over $75 million over the duration of the contract. • Holding: Under doctrine of commercial impracticability: increased cost alone is not enough to excuse performance UNLESS the rise in cost is due to some unforeseen contingency which alters the essential nature of the performance. ALCO meets that standard, so performance is excused. 1. Also, ALCOA is also excused under the doctrine of frustration of purpose.

Cosden Oil & Chemical Co. v. Karl O. Helm Aktiengesellschaft (US CoA, Fifth C., 1984):

• Facts: Anticipating that the market will tighten, Helm contracts to purchase 4 orders of polystyrene from Cosden. Cosden ships the first order with an invoice containing a force majeur clause. Cosden experiences technical difficulties with its plants, and informs Helm that delivery for order 04 may be delayed. Cosden ships part of order 04. Helm refuses to pay until it receives the balance. Cosden informs Helm that it is cancelling the balance on order 04. • Holding: In assessing market price for damages under 2-713, the appropriate time for measuring the market price is the time at which the buyer learns of the breach PLUS a commercially reasonable time, as under 2-610.

California & Hawaiian Sugar Co. v. Sun Ship Inc. (1986)

• Facts: C & H transports raw sugar. It has an imperative need for available transport because sugar is a seasonal crop which, left on the ground or unharvested, will go to waste. In 1979, C and H's shipping company withdrew its services. C and H contracted with Sun to build a barge, and Halter to build a tug. The parties agreed to a liquidated damages clause of $17,000 per day that the vessel was late. Both parties were late in delivery. • Holding: In a case of concurrent causation, each defaulting contractor is liable for the breach and for the substantial damages which the joint breach occasions. Although technically neither breach (taken concurrently but separately) caused an "anticipated or actual loss" each defaulting party is liable for its own respective breach.

Lake River Corp v. Carborundum Co.

• Facts: Carborundum manufactures Ferro Carbo, an abrasive powder used in making steel. It contracts with Lake River to provide distribution services. Ask part of this agreement, Lake River agreed to install a new bagging system to handle the contract, at a cost of $89,000. Lake River insisted on a minimum-quantity guarantee. If this is not met, Carborundum agreed to pay for the difference between the minimum and the quantity ordered. Carborundum failed to meet the minimum. By virtue of the minimum-guarantee clause, it owed $241,000. Lake River demanded payment, Carborundum refused on the grounds that the formula imposed a penalty. Lake River offered to sell product is was storing and place profits into escrow until the dispute was solved. Carborundum rejected the offer and trucked the product at an additional $31,000 cost. • Holding: Penalty clause, so unenforceable. Lake River would stand to gain profit anytime Carborundum breaches. Lake River is entitled to expectation damages (unpaid contract price - costs saved by not having to complete contract).

Carlson v. Rysavy:

• Facts: Carlson ordered a Town & Country mobile home from Rysavy's store. On delivery, Carlson discovered apparent defects, which he noted on the delivery receipt returned to Town & Country. Over the next few months, the Carlsons faced many problems and provided notice of that fact many times. • Holding: In this case, some of the damage to the tender was irreparable and could not be adequately repaired so as to put the Carlsons in the same position as performance of the contract would have. Therefore, the measure of damages to be paid by Town & Country should not be the cost of repairs. Court grants compensatory damages (difference in value) + consequential damages (costs that the party took to repair the home themselves) + incidental damages (living in a home that was damaged, suffering in the cold)

Truman L. Flatt & Sons Co. v. Schupf (Illinois, 1995):

• Facts: Contract stipulated that PL could back out of a contract with DF if couldn't get rezoning rights. PL says it's unlikely to get the rights, and tries to negotiate lower price. D states that it will not accept plaintiff's lower offer and takes this as repudiation. • Holding: PL did not clearly threaten non-performance - it was an ambiguous implication/threat. T/F there was no repudiation. Even if there had been, Truman did not do any of the 3 requirements to finalize repudiation, so PL still had the opportunity to retract repudiation.

Jacobs v. Young

• Facts: Contractor agreed to build a house using Reading pipes, and $3,400 was unpaid after completion. After a year later, D realizes the house was installed with Cohoes instead of Reading pipes and refuses to pay the remainder. Contractor sues. • Holding: There was substantial performance done in good faith. It doesn't seem like D really cared about the difference but just wanted to get out of paying. Remedying the mistake would require tearing down the entire house. Provides diminished value damages, which is $0.

Eastern Air Lines v. Gulf Oil

• Facts: Eastern had a requirements contract with Gulf Oil to purchase fuel. Conditions changed and the agreed-to pricing formula no longer yielded profits for Gulf Oil. Gulf Oil threatened to cut off supply unless Eastern agreed to higher prices. Eastern filed complaint, alleging breach of contract and demanding specific performance. Gulf replies that performance was commercially impracticable under UCC §2-615. • Holding: There is no commercial impracticability here: the price changes were foreseeable, and Gulf Oil has not demonstrated sufficient hardship under Factor 3 to constitute impracticability.

Howard v. Federal Crop Ins. Corp (US CoA, 4th Cir., 1976)

• Facts: Howard had 3 insurance policy contracts with FCIC covering its tobacco crops. The crops were destroyed by alleged rain damage and Howard sought to recover under their policy. However, before an FCIC inspector could come to assess the land, Howard plowed the fields to prepare for another season. The issue relates to interpretation of contract clause 5(f) - if it creates a condition, its violation causes a forfeiture of PL's coverage; if it creates a promise, DF can recover for damages it sustained due to elimination of the stalk evidence, but the policy is not forfeited. • Holding: The generally accepted common law rule is that when there is doubt as to whether words create a promise or a condition precedent, they will be construed as creating a promise. The provisions of a contract will not be construed as creating a condition in the absence of language plainly requiring such a construction. In this case, the lower court erred in holding that 5(f) created a condition.

Haymore v. Levinson (Utah SC, 1958):

• Facts: PL Haymore contracted to build a house for Levinson. $3,000 of the purchase price was held in escrow until "satisfactory completion" of an agreed written list of items. DF argues that this is a subjective condition - to their satisfaction. PL rebuts that it is a 'reasonable under the circumstances' standard. • Holding: There are 2 kinds of contracts where one party agrees to perform to the satisfaction of another: (1) contract to do something to the personal taste or sensibility of another = apply subjective standard; (2) contract to do things of operative fitness, mechanical utility or structural completion in which personal sensibilities do not predominate = apply objective standard to avoid unconscionable results. This is a type 2 performance contract - PL has met satisfactory completion. NOTE - the boundary between function and aesthetics is not clear.

Clark v. West (NY, 1908)

• Facts: PL has a contract to write a law book. He gets 2 cents per page, or 6 cents per page if he does not drink while writing it. He drinks, but alleges that the DF waived the condition and sues for 6¢/page. • Holding: "Not drinking" is a condition, not a consideration of the contract. Therefore, if P proves that D actually waived the condition, then P is entitled to get 6¢/page.

Hochster v. De La Tour (England 1853)

• Facts: PL is a courier who contracted to go on tour with DF. Shortly before the tour, De La Tour changed his mind and refused to compensate Hochster. PL mitigates by finding another (albeit briefer) job and makes a claim for the loss of earnings. • Holding: The Hochester Rule = If you have contracted to do something at a later date and the other party signals that they are breaching, the breaching party is immediately liable and you are immediately free to mitigate. Once you have mitigated, the other party cannot change his mind and retract its repudiation.

O'Connor v. Sullivan:

• Facts: Plaintiff, an entertainer, had a contract with a surgeon by which he would perform surgery on her nose to enhance her beauty and improve her appearance. He did surgergy, but botched her nose irreparably. PL could not show that her change of appearance resulted in loss of employment. • Holding: Reliance damages. Expectation damages would have to be based on difference in value between a beautiful nose and the nose she started with = too arbitrary. Reliance damages = medical fees (restitution), pain and suffering from the 3rd operation, and the loss caused by her worsen appearance.

Ramirez v. Autosport (NJ SC, 1982):

• Facts: Ramirez agreed to buy a new camper from Autosport and trade in their old one. On delivery date, the camper • Holding: The UCC preserves the perfect tender rule to the extent of permitting a buyer to reject goods for any nonconformity. Nonetheless - that rejection does not automatically terminate the contract. A seller can still effect a cure - even after the time for performance has passed - and preclude an unfair rejection and cancellation by the buyer within a reasonable time frame. (UCC 2-508) o NOTE - Oil Contracts: It is often hard to tell what the quality of the oil will be at the time when it is sold. Often it is judged by sulfur content.

Rodriguez v. Learjet, Inc.

• Facts: Rodriguez contracted with Learjet to purchase a model 60 jet aircraft on a payment schedule. He paid a deposit of $250,000 on the day he executed the contract, but no further payment. Rodriguez was buying the jet on behalf of the company he worked for, which had changed its mind about the purchase. Rodriguez called Learjet to inform that he was not going to buy the jet, and to request his initial deposit back. Learjet wrote back that the initial contract allowed Learjet to retain all payments made before a breach as liquidated damages. Learjet managed to sell the plane for a larger profit to a third party. • Holding: Learjet is a lost volume seller and so damages are calculated under 2-708(2). It met its burden of demonstrating lost volume status (operating at 60%, showed that an additional sale would have been possible). Liquidation damages clause was judged to be reasonable in light of the harm caused by the breach.