b'\x0cThe Story of Contract Law:\nFormation\nFourth Edition\n\nby Val Ricks\nProfessor of Law\nSouth Texas College of Law Houston\n\nCALI eLangdell\xc2\xae Press 2021\n\n\x0cAbout the Author\nVal Ricks has taught Contracts since 1996. His scholarship on contract law appears in the Georgetown LJ, Indiana LJ, BYU LR, George Mason LR, Baylor LR,\nFlorida St U LR, Texas A&M LR, U. Kan. LR, and South Texas LR. He claims\nthe original discovery that Isaac Kirksey actually made a bargain with Antillico.\nProfessor Ricks also teaches, and writes about, business associations and other\nintersections of law and business. Before teaching, he clerked for Judge Charles\nWiggins of the 9th Circuit and practiced transactional and appellate law in Salt\nLake City. Professor Ricks received a B.A. summa cum laude in Philosophy and a\nJ.D. summa cum laude, both from BYU. He and his bride are the parents of seven\nbeautiful children.\n\ni\n\n\x0cNotices\nThis is the fourth edition of this casebook, revised and updated June 2021. Visit\nhttp://elangdell.cali.org/ for the latest version and for revision history.\n\nThis work by Val Ricks is licensed and published by CALI eLangdell Press under\na Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International\n(CC BY-NC-SA 4.0).\nCALI and CALI eLangdell Press reserve under copyright all rights not expressly\ngranted by this Creative Commons license. CALI and CALI eLangdell Press do\nnot assert copyright in US Government works or other public domain material\nincluded herein. 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The CALI graphical logo is a\ntrademark and may not be used without permission.\nShould you create derivative works based on the text of this book or other Creative Commons materials therein, you may use this book\xe2\x80\x99s cover art and the aforementioned logos, as long as your use does not imply endorsement by CALI. For\nall other uses beyond the scope of this license, please request written permission\nfrom CALI.\nii\n\n\x0cThe author and CALI acknowledge permission from the following authors to use\ntheir limericks and haikus in this book:\nJim Woodward, Stacey Severovich, Amy Hebert Craft, and George Kelley.\nThis material does not contain nor is intended to be legal advice. Users seeking\nlegal advice should consult with a licensed attorney in their jurisdiction. The editors have endeavored to provide complete and accurate information in this book.\nHowever, CALI does not warrant that the information provided is complete and\naccurate. CALI disclaims all liability to any person for any loss caused by errors\nor omissions in this collection of information.\n\niii\n\n\x0cAbout CALI eLangdell\nPress\nThe Center for Computer-Assisted Legal Instruction (CALI) is: a nonprofit organization with over 200 member US law schools, an innovative force pushing legal\neducation toward change for the better. There are benefits to CALI membership\nfor your school, firm, or organization. ELangdell\xc2\xae is our electronic press with a\nmission to publish more open books for legal education.\nHow do we define "open?"\n\xe2\x80\xa2\n\nCompatibility with devices like smartphones, tablets, and e-readers; as\nwell as print.\n\n\xe2\x80\xa2\n\nThe right for educators to remix the materials through more lenient copyright policies.\n\n\xe2\x80\xa2\n\nThe ability for educators and students to adopt the materials for free.\n\nFind available and upcoming eLangdell titles at elangdell.cali.org. Show support\nfor CALI by following us on Facebook and Twitter, and by telling your friends\nand colleagues where you received your free book.\n\niv\n\n\x0cTable of Contents\nABOUT THE AUTHOR ........................................................................................ I\nNOTICES.............................................................................................................. II\nABOUT CALI ELANGDELL PRESS .............................................................. IV\nPREFACE ......................................................................................................... XIII\nINTRODUCTION............................................................................................ XIV\nSOURCES OF CONTRACT LAW ............................................................................ XIV\nHOW THIS BOOK IS ORGANIZED ........................................................................ XV\nCONTRACT LAW THEORIES............................................................................... XVII\nBYRNES v. MANN\xe2\x80\x99S ESTATE ................................................................ xx\nCHAPTER 1. CONSIDERATION: CONTRACT & BARGAIN ..................... 1\nA. INTRODUCTION ................................................................................................ 1\n1. Medieval Law of Promise Enforcement ....................................................... 2\n2. Changes in the Renaissance ........................................................................ 4\nB. THE GENERAL TEST ......................................................................................... 6\nJoseph VIAN v. Mariah CAREY ................................................................. 6\nPROBLEM 1....................................................................................................... 9\nPROBLEM 2....................................................................................................... 9\n\nC. CONSIDERATION THEORY AND POLICY............................................................. 9\nChristopher St. German, DOCTOR AND STUDENT ................................ 9\nSHARINGTON v. STROTTON ................................................................ 10\nD. MORE ON BARGAIN OR EXCHANGE ............................................................... 12\nHUNT v. BATE .......................................................................................... 12\nHildegard Lee BORELLI v. Grace G. BRUSSEAU.................................. 13\nPROBLEM 3..................................................................................................... 24\nRestatement (Second) of Contracts \xc2\xa7 71(1)-(2) & cmt. b ............................. 24\n\nE. PROPER FORM ................................................................................................ 24\n1. Benefit ........................................................................................................ 25\nGAME v. HARVIE .................................................................................... 25\nRICHES v. BRIDGES ............................................................................... 27\nREYNOLDS v. PINHOWE ....................................................................... 29\nPROBLEM 4..................................................................................................... 30\n\nASSOCIATED BUILDERS, INC. v. William M. COGGINS et al. .......... 30\n\xe2\x80\x94A long aside: Moral Obligation ................................................................. 32\nEx parte: Iris ODEM .................................................................................. 33\nPROBLEM 5..................................................................................................... 35\n11 U.S.C. \xc2\xa7 524. Effect of discharge ............................................................. 35\n\nHUNT v. BATE .......................................................................................... 38\nWEBB v. McGOWIN ................................................................................ 38\nWEBB v. McGOWIN ................................................................................ 43\nv\n\n\x0cHARRINGTON v. TAYLOR ..................................................................... 44\n2. Detriment ................................................................................................... 44\nWEBBS CASE........................................................................................... 44\nChristopher St. German, DOCTOR AND STUDENT .............................. 45\nSTORER\xe2\x80\x99S CASE ..................................................................................... 46\nKEYME v. GOULSTON ........................................................................... 46\nSettlement Cases ............................................................................................ 47\nJinsoo KIM v. Stephen SON ...................................................................... 47\nFannie B. KALIS v. COLGATE-PALMOLIVE COMPANY.................... 51\nUniform Commercial Code \xc2\xa7 1-308. Performance of Acceptance Under\nReservation of Rights, and cmt. 3. ................................................................ 54\nUniform Commercial Code \xc2\xa7 3-104. Negotiable Instrument........................ 54\nUniform Commercial Code \xc2\xa7 3-311. Accord and Satisfaction by Use of\nInstrument. .................................................................................................... 54\n\nSteven D. HAVARD and Judy A. Havard v. KEMPER NATIONAL\nINSURANCE COMPANIES et al. ............................................................ 55\n3. Mutual Promises ........................................................................................ 58\nWEST v. STOWELL ................................................................................. 58\nSTRANGBOROUGH v. WARNER .......................................................... 60\nNICHOLAS v. RAYNBRED ..................................................................... 60\nPROBLEM 6..................................................................................................... 61\n\nESSENTIAL ACCOUNTING SYSTEMS, INC. v. DEWBERRY ........... 61\nJOHNSON ENTERPRISES OF JACKSONVILLE, INC. v. FPL GROUP,\nINC. ............................................................................................................ 62\nIn re ADIRONDACK RAILWAY CORPORATION ................................. 62\nRIDGE RUNNER FORESTRY v. VENEMAN ........................................ 63\nPROBLEM 7..................................................................................................... 65\nPROBLEM 8..................................................................................................... 65\nPROBLEM 9..................................................................................................... 66\nPROBLEM 10................................................................................................... 66\nPROBLEM 11 ................................................................................................... 67\nUniform Commercial Code \xc2\xa7 2-306. Output, Requirements and Exclusive\nDealings, and cmt. 2...................................................................................... 67\nUniform Commercial Code \xc2\xa7 1-304. Obligation of Good Faith. .................. 67\nUniform Commercial Code \xc2\xa7 1-201(20). General Definitions. .................... 67\nUniform Commercial Code \xc2\xa7 2-102. Scope * * *......................................... 67\nPROBLEM 12................................................................................................... 68\n\nFORRESTER\xe2\x80\x99S CASE (1661) .................................................................. 68\nNote on Assent .............................................................................................. 69\nNote on Remedies in Contract Actions ......................................................... 72\nPROBLEM 13................................................................................................... 73\n\nCHAPTER 2. ASSENT-BASED NICHES OF PROMISE ENFORCEMENT:\nMODIFICATION AND WAIVER ..................................................................... 74\nA. MODIFICATION............................................................................................... 74\n1. Modification of Judgment Liabilities......................................................... 74\nJohn Weston FOAKES v. Julia BEER ....................................................... 74\n\nvi\n\n\x0cSUGARHOUSE FINANCE COMPANY v. Eugene L. ANDERSON and\nColleen W. Anderson ................................................................................. 77\n2. Modification of Contractual Liabilities ..................................................... 80\nALASKA PACKERS\xe2\x80\x99 ASS\xe2\x80\x99N v. DOMENICO ......................................... 80\nSCHWARTZREICH v. BAUMAN-BASCH, INC. ................................... 84\nAlfred L. ANGEL v. John E. MURRAY, Jr. .............................................. 90\nUniform Commercial Code \xc2\xa7 2-209. Modification, Rescission and Waiver,\nand cmts. 1 and 2. ......................................................................................... 95\nUniform Commercial Code \xc2\xa7 2-104(1). Definitions: \xe2\x80\x9cMerchant\xe2\x80\x9d * * * . ..... 95\n\nGROSS VALENTINO PRINTING COMPANY v. Frederick S. CLARKE\n.................................................................................................................... 96\nUniform Commercial Code \xc2\xa7 2-105. Definitions: * * * \xe2\x80\x9cGoods\xe2\x80\x9d * * * . ..... 99\nUniform Commercial Code \xc2\xa7 1-201(20). General Definitions: * * * \xe2\x80\x9cGood\nfaith\xe2\x80\x9d * * * . .................................................................................................. 99\nUniform Commercial Code \xc2\xa7 1-304. Obligation of Good Faith. .................. 99\n\nLUMBER ENTERPRISES, INC. v. Duane F. HANSEN and Peggy Hansen\n.................................................................................................................... 99\nNote on Modification of Consumer Transactions ....................................... 101\nNote on the Relationship Between Duress and Good Faith for a Modification\n.................................................................................................................... 103\n\nJane PITTSLEY v. Donald HOUSER...................................................... 104\nB. WAIVER ....................................................................................................... 106\nR. CONRAD MOORE & ASSOCS., INC. v. LERMA ........................... 106\nNote: Retraction of Waivers ........................................................................ 111\nPROBLEM 14................................................................................................. 112\nPROBLEM 15................................................................................................. 112\n\nCHAPTER 3. ALTERNATE THEORIES OF RECOVERY: PROMISSORY\nESTOPPEL & UNJUST ENRICHMENT .......................................................113\nA. PROMISSORY ESTOPPEL ................................................................................113\nKIRKSEY v. KIRKSEY ...........................................................................113\nPROBLEM 16................................................................................................. 116\n\nRICKETTS v. SCOTHORN .....................................................................116\nRestatement (Second) of Contracts \xc2\xa7 90 ..................................................... 120\n\nJohn GROUSE v. GROUP HEALTH PLAN, INC. ................................. 121\nFrank LEONARDI v. CITY OF HOLLYWOOD .................................... 123\nB. UNJUST ENRICHMENT .................................................................................. 127\nWHORWOOD v. GYBBONS ................................................................. 127\nIRELAND v. HIGGINS ........................................................................... 127\nEDMUNDS v. BARRE ............................................................................ 128\nNote on the Ancient History of Unjust Enrichment .................................... 128\n\nGIKAS v. NICHOLIS .............................................................................. 130\nLOWE v. QUINN .................................................................................... 131\nHESS v. JOHNSTON .............................................................................. 132\nPROBLEM 17................................................................................................. 134\n\nCOTNAM v. WISDOM ET AL. .............................................................. 135\nCHAPTER 4. LIMITS ON BARGAINS: DEFENSES ................................. 138\nvii\n\n\x0cA. INTRODUCTION: LIMITS ON BARGAINS? ...................................................... 138\nHAMER v. SIDWAY ............................................................................... 138\nPROBLEM 18................................................................................................. 141\n\nBATSAKIS v. DEMOTSIS ...................................................................... 141\nPROBLEM 19................................................................................................. 144\n\nB. DURESS ........................................................................................................ 144\nRestatement (Second) of Contracts \xc2\xa7 175. When Duress by Threat Makes a\nContract Voidable ........................................................................................ 144\nRestatement (Second) of Contracts \xc2\xa7 176. When a Threat is Improper ...... 144\nPROBLEMS 20-26 ......................................................................................... 144\n\nALLIED BRUCE TERMINIX CO., INC. v. GUILLORY ...................... 146\nPROBLEM 27................................................................................................. 147\n\nIn re the MARRIAGE OF John W. MILLER and Debra K. Miller ........ 147\nNataliya HOLLER v. William HOLLER ................................................. 149\nBETHLEHEM STEEL CORPORATION, Plaintiff v. Sheldon H. SOLOW,\netc., et al., ................................................................................................. 154\nC. MUTUAL MISTAKE ....................................................................................... 156\nCHANDELOR v. LOPUS ....................................................................... 156\nSHERWOOD v. WALKER ...................................................................... 157\nNote: Consideration, Fairness of Exchange, and How Contract Breach\nLitigation Works.......................................................................................... 164\n\nD. UNILATERAL MISTAKE................................................................................. 166\nFIRST BAPTIST CHURCH OF MOULTRIE v. BARBER\nCONTRACTING COMPANY et al......................................................... 166\nE. MISREPRESENTATION ................................................................................... 171\nC. Willard HENDRICK and Hazel E. Hendrick v. Catherine A. LYNN . 172\nJeffrey M. STAMBOVSKY v. Helen V. ACKLEY ................................. 174\nF. UNCONSCIONABILITY ................................................................................... 179\nGloria JAMES v. NATIONAL FINANCIAL, LLC ................................. 179\nPROBLEM 28................................................................................................. 207\nUniform Commercial Code \xc2\xa7 2-302. Unconscionable Contract or Clause, and\ncmts. 1, 2, and 3. ......................................................................................... 207\nFederal Trade Commission Regulation\xe2\x80\x94Door to Door Sales, especially \xc2\xa7\xc2\xa7\n429.1 and 429.2 ........................................................................................... 208\n\nCHAPTER 5. THE PUSH TOWARD ASSENT ............................................. 209\nA. A SEAL OR WRITING .................................................................................... 209\nPILLANS v. VAN MIEROP .................................................................... 209\nSeals and Statutes ........................................................................................ 212\nTex. Code Ann. \xc2\xa7 121.015. Private Seal or Scroll Not Required ................ 212\n\nWRIGHT v. ROBERT & ST. JOHN MOTOR CO. ................................. 212\nJohn W. TAYLOR v. FRED CLARK FELT COMPANY ........................ 212\nIowa Code \xc2\xa7 537A.1. Seals abolished......................................................... 213\nIowa Code \xc2\xa7 537A.2. Consideration implied .............................................. 213\nIowa Code \xc2\xa7 537A.3. Failure of consideration ........................................... 214\n\nSKF USA, INC. v. WORKERS\xe2\x80\x99 COMPENSATION APPEAL BOARD\n(SMALLS) ............................................................................................... 214\n\nviii\n\n\x0cB. NOMINAL AND RECITED CONSIDERATION GENERALLY, AND IN OPTION\nCONTRACTS ..................................................................................................... 216\nSCHNELL v. NELL ................................................................................. 216\nLEWIS v. FLETCHER ............................................................................ 219\nREAL ESTATE CO. OF PITTSBURGH v. RUDOLPH ......................... 221\nC. IMPLIED INDUCEMENT ................................................................................. 224\nDE CICCO v. SCHWEIZER et al............................................................ 224\nD. THE STATUTE OF FRAUDS ............................................................................ 228\nRANN v. HUGHES ................................................................................. 229\nBENJAMIN FULTON et al. v. MARY E. ROBINSON et al. ................. 230\nMikio NAKAMURA v. Masaki FUJII..................................................... 234\nThe COLEMAN COMPANY, INC. v. CARGIL INTERNATIONAL CORP.\n.................................................................................................................. 237\nPROBLEMS 29-33 ......................................................................................... 238\n\nHOOKS v. BRIDGEWATER ................................................................... 238\nW. L. TANENBAUM v. BISCAYNE OSTEOPATHIC HOSPITAL, INC.\n.................................................................................................................. 243\nRestatement (Second) of Contracts \xc2\xa7 139. Enforcement by Virtue of Action\nin Reliance. ................................................................................................. 248\nUniform Commercial Code \xc2\xa7 2-102. Scope; Certain Security and Other\nTransactions Excluded From This Article. .................................................. 248\nUniform Commercial Code \xc2\xa7 2-201. Formal Requirements; Statute of Frauds,\nand cmt. 1. ................................................................................................... 248\nPROBLEMS 34-45 ......................................................................................... 248\n\nE. THE FINAL PUSH: WHEN DOES A CONTRACT FORM? ................................... 249\nCOOKE v. OXLEY ................................................................................. 249\nPAYNE v. CAVE ...................................................................................... 250\nUniform Commercial Code \xc2\xa7 2-328. Sale by Auction. ............................... 252\n\nADAMS v. LINDSELL ........................................................................... 252\nHistorical Note on Assent v. Consideration ................................................ 254\nNote and Questions on the Mailbox Rule ................................................... 254\nCISG Article 16........................................................................................... 255\nCISG Article 18........................................................................................... 256\nCISG Article 22........................................................................................... 256\n\nF. WHAT IS ASSENT, REALLY, IN CONTRACT LAW? ........................................... 256\nW. O. LUCY and J. C. Lucy v. A. H. ZEHMER and Ida S. Zehmer ....... 256\nJacob F. KELLER v. Jacob HOLDERMAN ............................................ 264\nRAFFLES v. WICHELHAUS ................................................................. 265\nRestatement (Second) of Contracts \xc2\xa7 20. Effect of Misunderstanding ....... 266\n\nCHAPTER 6. OFFERS .................................................................................... 267\nA. WHAT IS AN OFFER? .................................................................................... 267\nJohn D.R. LEONARD v. PEPSICO, INC. ............................................... 267\nUniform Commercial Code \xc2\xa7 2-204. Formation in General. ...................... 285\n\nFOSTER v. OHIO STATE UNIVERSITY .............................................. 286\nPROBLEM 46................................................................................................. 288\n\nB. TERMINATION OF THE POWER OF ACCEPTANCE ............................................ 288\nDICKINSON v. DODDS ......................................................................... 289\nix\n\n\x0cRestatement (Second) of Contracts \xc2\xa7 43. Indirect Communication of\nRevocation. ................................................................................................. 291\n\nCharles William AKERS v. J. B. SEDBERRY, Inc., et al........................ 291\nIn Re the Estate of Helen SEVERTSON, Deceased. ............................... 297\nRestatement (Second) of Contracts \xc2\xa7 45. Option Contract Created by Part\nPerformance or Tender & cmt. e. ................................................................ 302\n\nLouis W. and Sylvia V. RAGOSTA v. Allen S. WILDER, Jr. .................. 303\nWilliam A. DRENNAN v. STAR PAVING COMPANY ......................... 306\nUniform Commercial Code \xc2\xa7 2-205. Firm Offers, and cmts. 1 and 2......... 313\nNote on Terms of Art................................................................................... 314\n\nCHAPTER 7. ACCEPTANCES ...................................................................... 315\nA. ACCEPTANCES: WHAT ARE THEY? ............................................................... 315\nB. CHOICE OF PROMISE OR PERFORMANCE ...................................................... 315\nCharles L. GLEESON v. Chris F. FRAHM and Olga K. Frahm ............. 315\nC. ISSUES OF INTENT ........................................................................................ 318\nSIMMONS v. UNITED STATES ............................................................ 318\nD. NOTICE ........................................................................................................ 320\nCARLILL v. CARBOLIC SMOKE BALL CO. ...................................... 320\nELECTRIC STORAGE BATTERY CO. v. BLACK............................... 322\nCraig ASMUS et al. v. PACIFIC BELL et al. .......................................... 325\nE. SILENCE ....................................................................................................... 339\nGary F. KASKISTO v. NORTH AM. EQUITABLE LIFE ASSURANCE\nCO. ........................................................................................................... 339\nJames R. LEE v. SHELLER GLOBE CORP. .......................................... 340\nJOSEPHINE AND ANTHONY CORP. et al. v. Norman P. HORWITZ . 341\nDEN NORSKE STATS OLJESELSKAP, A.S. v. HYDROCARBON\nPROCESSING, INC. ............................................................................... 342\nLOUISVILLE TIN & STOVE CO. v. LAY............................................. 345\nAUSTIN v. BURGE................................................................................. 347\n39 U.S.C. \xc2\xa7 3009 ......................................................................................... 349\nNegative Option Plans ................................................................................ 349\n\nF. THE BATTLE OF THE FORMS .......................................................................... 352\nUniform Commercial Code \xc2\xa7 2-207. Add\xe2\x80\x99l Terms in Acceptance or\nConfirmation, and all cmts. ......................................................................... 352\nPROBLEM 47................................................................................................. 352\nPROBLEM 48................................................................................................. 354\n\nThe GARDNER ZEMKE COMPANY v. DUNHAM BUSH, INC. ....... 357\nNote: More Battles About Battle of the Forms ........................................... 366\n\nG. WEB CONTRACTS ........................................................................................ 372\nCONTRACTING ONLINE: THE UBER CASES ................................................ 372\nCHAPTER 8. DEFINITENESS....................................................................... 382\nA. THE GENERAL PRINCIPLE ............................................................................ 382\nACADEMY CHICAGO PUBLISHERS v. Mary W. CHEEVER ........... 382\nJOSEPH MARTIN, JR., DELICATESSEN, INC. v. Henry D.\nSCHUMACHER ...................................................................................... 386\nJohn CASSINARI v. Charles W. MAPES and Gloria Mapes Walker ..... 389\nx\n\n\x0cUniform Commercial Code \xc2\xa7 2-305. Open Price Term. ............................. 391\nUniform Commercial Code \xc2\xa7 2-307. Delivery in Single Lot of Several Lots.\n.................................................................................................................... 391\nUniform Commercial Code \xc2\xa7 2-308. Absence of Specified Place for Delivery.\n.................................................................................................................... 391\nUniform Commercial Code \xc2\xa7 2-309. Absence of Specific Time Provisions;\nNotice of Termination. ................................................................................ 391\nUniform Commercial Code \xc2\xa7 2-310. Open Time for Payment or Running of\nCredit; Authority to Ship Under Reservation. ............................................. 391\nUniform Commercial Code \xc2\xa7 2-311. Options and Cooperation Respecting\nPerformance. ............................................................................................... 391\nPROBLEM 49................................................................................................. 392\n\nB. THE PRELIMINARY AGREEMENT .................................................................. 392\nThe DACOURT GROUP, INC. v. BABCOCK INDUSTRIES, INC. ..... 392\nCHANNEL HOME CENTERS v. Frank GROSSMAN .......................... 396\nCHAPTER 9. LIMITS ON THE REACH OF CONTRACT LAW ............. 407\nA. PUBLIC POLICY ............................................................................................ 407\nHazel Virginia REHAK v. Archie S. MATHIS ........................................ 407\nCampaign Promises ..................................................................................... 410\nB. PLEA BARGAINS ............................................................................................411\nBROOKS v. UNITED STATES ................................................................411\nWATKINS v. COMMONWEALTH of Virginia ...................................... 414\nC. EMPLOYMENT AT WILL ................................................................................ 418\nBANAITIS v. MITSUBISHI BANK, LTD. ............................................ 418\nD. COVENANTS NOT TO COMPETE.................................................................... 426\nStephen FREIBURGER v. J-U-B ENGINEERS, INC. ........................... 426\nCHAPTER 10. WARRANTIES ....................................................................... 434\nUniform Commercial Code \xc2\xa7 2-312. Warranty of Title and Against\nInfringement; Buyer\xe2\x80\x99s Obligation Against Infringement. ........................... 434\nUniform Commercial Code \xc2\xa7 2-313. Express Warranties by Affirmation,\nPromise, Description, Sample, and cmts. 1, 3, 4, and 8. ............................. 434\nUniform Commercial Code \xc2\xa7 2-314. Implied Warranty: Merchantability;\nUsage of Trade. ........................................................................................... 434\nUniform Commercial Code \xc2\xa7 2-315. Implied Warranty: Fitness for Particular\nPurpose........................................................................................................ 434\nUniform Commercial Code \xc2\xa7 2-316. Exclusion or Modification of\nWarranties. .................................................................................................. 434\nUniform Commercial Code \xc2\xa7 2-317. Cumulation and Conflict of Warranties\nExpress or Implied. ..................................................................................... 434\nUniform Commercial Code \xc2\xa7 2-318. Third Party Beneficiaries of Warranties\nExpress or Implied, Alternatives A, B, and C. ............................................ 434\nUniform Commercial Code \xc2\xa7 2-719. Contractual Modification or Limitation\nof Remedy. .................................................................................................. 434\n\nKaren BENTLEY v. Charles SLAVIK and Rosemary Slavik ................. 435\nThe Estate of Martha NELSON v. Carl RICE and Anne Rice................. 440\nPriscilla D. WEBSTER v. BLUE SHIP TEA ROOM, INC. .................... 444\nMichael CATANIA et al. v. Charles J. BROWN ..................................... 449\nxi\n\n\x0cMOHASCO INDUSTRIES, INC. v. ANDERSON HALVERSON\nCORPORATION...................................................................................... 451\nDOW AGROSCIENCES, LLC v. Dennis BATES .................................. 454\nJohn MURRAY and Alice Murray v. HOLIDAY RAMBLER, INC. ...... 456\nAPPENDIX\xe2\x80\x94ANSWERS TO PROBLEMS 7-12 ...................................................... 465\nPROBLEM 7 ANSWER ................................................................................. 465\nPROBLEM 8 ANSWER ................................................................................. 465\nPROBLEM 9 ANSWER ................................................................................. 466\nPROBLEM 10 ANSWER ............................................................................... 467\nPROBLEM 11 ANSWER ............................................................................... 468\nPROBLEM 12 ANSWER ............................................................................... 468\n\nxii\n\n\x0cPreface\nContract law is famously baffling\xe2\x80\x94put together haphazardly, with no central theory or goal. Welfare theorists, Kantians, and moralists have been battling for decades over whose theory ought to trump, and some commentators have given up.\nSixteen years ago, I wondered whether teaching the materials chronologically\nwould allow a better understanding. After some study, I composed a book that\ntaught the doctrines of contract law from original materials, roughly chronologically, but confirmed and expanded on the way with contemporary cases and statutes. Teaching from this book revealed a remarkable coherence in contract doctrines, mostly centered around bargain, a concept that, in itself, is neither theory\nnor goal. The coherence is primarily doctrinal\xe2\x80\x94it is legal coherence. The policies\nand goals of the law differ from judge to judge, lawyer to lawyer, and among litigants. But the doctrine remains coherent despite its ability to absorb and instantiate the various theories and ends of contracting parties, arguing lawyers, and opining judges. In this, contract law is an incredible achievement.\nThe issues contract law addresses have not changed in the nearly 500 years during\nwhich the doctrines have developed. These issues include which promises to enforce, how much evidence to require of a plaintiff before the defendant must answer, and what evidence of hard bargaining and hard bargain will suffice to unwind what would otherwise be a binding promise. Given the length of time we\nhave addressed these issues, it is perhaps not surprising that the law has worked\nout a coherent structure. Given the length of time, however, it is also not surprising that parts of that structure remain obscure.\nThanks to Jody Pratt, Sarah Humphrey, Jeff Kaiser, John Bohannan, and Derick\nLancaster for helping with the search for cases and reading the manuscript. And\nthanks also to the hundreds of law students who have already learned from its\npages. Learning with you has been one of the delights of my life.\nVDR, 2015\n\nxiii\n\n\x0cIntroduction\nSources of Contract Law\nBefore the American Revolution, the American states were British colonies. English law, including English contract law, applied in each of the thirteen colonies.\nThe Revolutionary War freed the colonies from the British crown, but each of the\nnew states continued to apply primarily English contract law. The federal government came into existence in the 1780s as a government of limited powers. Various attempts have since been made to promulgate a federal contract law, but none\nhave as yet succeeded.\nThat means that states control contract law. Contract law is fashioned by state\ncourts and state legislatures. The English law of contracts was created one case at\na time in England\'s courts, and our states have generally carried on that tradition.\nCourt-created law is usually called "common law" because English medieval royal courts supposedly adopted as law the common customs of the people, and also\nbecause that law applied nationally. The name stuck several hundred years ago.\nNow, our court-made law is called "common law" even if it is contrary to the customs of the people and applies only in a single jurisdiction within the United\nStates. State legislatures also get in the act by passing statutes that codify or\nchange the common law. Law promulgated by legislatures is called "statutory"\nlaw as opposed to "common law.\xe2\x80\x9d Most of the law we study will be common or\nstatutory law, adopted or promulgated by state courts or state legislatures. Here\nand there a federal statute or regulation will intrude.\nIn the last hundred years, two groups of lawyers have somewhat successfully influenced the process of contract-law-making in America. The first is the National\nConference of Commissioners on Uniform State Laws (NCCUSL). The Conference includes 50 state-appointed commissioners who draft and recommend legislation to state legislatures. Please look over NCCUSL\'s website at\nhttp://www.uniformlaws.org/.\nThe second group is the American Law Institute (ALI). The ALI is an organization of lawyers, judges, and legal academics dedicated to clarifying, simplifying,\nand reforming law. Please look at the ALI website also, at http://www.ali.org/.\n(The "About ALI" link is especially helpful.) The ALI\'s primary vehicle for accomplishing its mission is to "restate" the common law; that is, to boil down all\nthe common law from court opinions into black letter rules that lawyers can better\nunderstand. The first Restatement of Contracts was published in 1932. The Restatement (Second) of Contracts was published in 1981. Sometimes the ALI merexiv\n\n\x0cly restates the common law. The first Restatement of Contracts tried to do that.\nBut often the ALI "restates"(?) as law what isn\'t yet law, in the hope that courts\nwill adopt the ALI position. The Restatement (Second) (affectionately referred to\nas \xe2\x80\x9cR2K\xe2\x80\x9d) proposed more of this reforming than did the first Restatement. But\ncourts have drawn (and will draw) on the wisdom of both documents. The Restatement and Restatement (Second) are not law but only commentary, unless\nsomething in them has been adopted by courts. The common law comes from decided cases, as it always has. Sections and comments of the R2K are sometimes\nreferred to in bold in this book. When you find a reference in bold (for examples,\nsee pages listed with a R2K section in the Table of Contents), please find the materials referred to in the statutory supplement recommended by your teacher and\nstudy them as if they were written out in this book itself.\nBetween 1940 and 1952, NCCUSL and the ALI teamed up to draft the Uniform\nCommercial Code (UCC), which they then proposed to state legislatures. This\nstatute has been wildly successful: eventually all fifty state legislatures passed it,\nwith only some local variation (though Louisiana did not pass Article Two). The\nresult is that for most commercial transactions, the law of all fifty states is uniform. The UCC governs such things as sales of goods (Article 2), negotiable instruments (Article 3), and secured transactions (Article 9). Excerpts from the\nUCC are included in your statutory supplement. When you see an excerpt from\nthe UCC referred to in bold in this book (for examples, see pages listed with a\nUCC section in the Table of Contents), please find it in the statutory supplement\nand study it as if it were written out in this book.\nThe rest of contract law is unspoken. It exists in the practices, morals, prejudices,\ntheories, and goals of the lawyers, judges, litigants, and facts involved in its making and application. In this course you will study not only the rules themselves,\nwhich make up the body of contract law proper, but also the culture in which contract law exists, is applied, and is a part.\nHow This Book Is Organized\nTo understand the materials that follow, you must first know something about the\nhistory of American contract law. Our law of contracts includes (1) several hundred rules, formulated in both case law and statutes (I estimate we will study\nroughly 350 in this book, depending on what one counts as a rule); (2) the application of those rules in many thousands of cases (of course we won\xe2\x80\x99t read all of\nthem, just those in the Table of Contents); and (3) a good deal of theory and culture.\nThe rules, applications, theory, and culture of contract law have developed over\nroughly four and a half centuries. Some of the authorities we study will be reports\nof cases from the 1500s\xe2\x80\x94these are the authorities that created the rules, and they\nstill give the best descriptions of those rules and the reasons the rules exist. Most\nof our common law of contract is traceable to one of two sources: (1) English\nxv\n\n\x0ccommon law developed from the practices of the English royal courts between\n1500 and 1800, and (2) the combination of Roman law and Aristotelian personality theory worked out by sixteenth century scholars in Spain and later adopted as\nan overarching legal theory by European scholars in the 1600s and 1700s. These\ntwo sets of authority were then combined in the 1800s as judges in the new American republic gathered what they thought was the best in legal wisdom from\naround the world.\nYou must read carefully what is here. Most of it is case law, but some is statutes.\nYou will be unable to understand the materials adequately unless you ask and answer questions of the material. For instance, for both cases and statutes you will\nhave to ask such questions as \xe2\x80\x9cWhat is the issue here?\xe2\x80\x9d \xe2\x80\x9cWhat rule is the court\nfollowing?\xe2\x80\x9d \xe2\x80\x9cWhich facts determine the result under this rule?\xe2\x80\x9d \xe2\x80\x9cHow can I\nchange the facts so that the rule does not (or does) apply?\xe2\x80\x9d These kinds of questions will guide your learning so that the knowledge you take from the materials\nwill be useful to you on the class exam, on the bar exam, and in practice. I have\nlisted questions below many items in the reading, also. These are questions that I\nask in class, and they are the kinds of questions that a lawyer should be able to\nanswer from the materials. Near the beginning of the semester, I would expect\nsome of you to need help determining the answers to these questions from the materials. As the semester progresses, however, you should become able to answer\nthese questions from the materials yourself. If you cannot, you have missed something and you should study harder (or smarter?) for the next assignment so that\nyou can.\nThe organization of the casebook reflects the way that contract law developed.\nStudying chronological development helps you make sense of contract law. But\nthe law of contract formation breaks down into different but easy (though slightly\nfalse) categories around which you can begin to build an outline of the law.\n(These categories did not develop chronologically, so your outline of the law\nshould not follow the Table of Contents exactly.) First, three different theories of\nliability exist: I. Consensual Contract (often called simply \xe2\x80\x9cContract\xe2\x80\x9d), II. Promissory Estoppel, and III. Unjust Enrichment. I suggest you begin your outline of the\ncourse as soon as possible, with these three general categories.\nSecond, I suggest you have two main categories under Consensual Contract: A.\nElements, and B. Defenses to Formation. A consensual contract has at least five\nelements, all of which are necessary for a binding contract. Four of these regularly\nappear in lists in judicial opinions. For example: \xe2\x80\x9cThe fundamentals of a legal\ncontract are competent parties, legal subject-matter, valuable consideration, and\nmutual assent. There can be no contract if any of these elements [is] lacking.\xe2\x80\x9d\nVirginian Export Coal Co. v. Rowland Land Co., 131 S.E. 253, 262 (W.Va. 1926)\n(italics added). To these four, I would add definiteness (or specificity), a topic we\nwill study near the end of the semester. You also need to fit defenses in your outline. Sometimes things happen to prevent a contract from coming into existence\neven when the elements of a contract exist, and rules that capture these facts are\nxvi\n\n\x0ccalled defenses to formation. Nearly every rule we study will fit in your outline if\nit includes all of these categories. The Table of Contents may help you place the\nrule in the right category, though this will not always be true.\nContract Law Theories\nI always wonder just how much theory to push on first-semester students. I propose to give you just a little theory here so that you can discuss it occasionally as\nwe move along through the course. For the most part, contract law decisions can\nbe theorized as applications of three sets of ideas:\n1) Autonomy\nAutonomy theorists propose that the exercise of human will is a good in itself and\nthat enhancing the ability of individuals to determine their own future is a worthy\ngoal of law. The Kantian who believes that all reasoning beings are inherently deserving of the respect that we ourselves desire is an example of an autonomy theorist. Contract law, under this view, aids individuals in their attempts at selfdetermination. People can\xe2\x80\x94without contract law\xe2\x80\x94make commitments to each\nother, but contract law allows them (1) to make commitments that a court will enforce and (2) to receive legally enforceable commitments from others. The law\nthus confers on them extra power to influence others and create change. Under\nthis theory, liability is based on individuals\xe2\x80\x99 consent.\n2) Welfare\nWelfare theorists are not content to spend public resources on contract enforcement solely for the benefit of individuals and their autonomy. They believe that\nonly a public benefit can justify action by the state. Adam Smith, the founder of\nclassical economics, posited a relationship between the individual pursuit of selfinterest and the public welfare under certain conditions:\nEvery individual necessarily labours to render the annual revenue\nof the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is\npromoting it. ... [B]y directing that industry in such a manner as its\nproduce may be of the greatest value, he intends only his own gain,\nand he is in this, as in many other cases, led by an invisible hand to\npromote an end which was in no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing\nhis own interest he frequently promotes that of society more effectually than when he really intends to promote it. I have never\nknown much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need to be employed in dissuading\nthem from it.\nxvii\n\n\x0cADAM SMITH, An Inquiry into the Nature and Causes of the Wealth of Nations\n423 (1776).\nThe primary conclusion of classical economics is that "there is a sort of preestablished harmony between the good of all and the pursuit by each of his own\nselfish economic gain."* Some legal scholars in the last century have retained this\ncentral conclusion of Smith\'s argument, then examined it in detail to show that it\nrests on certain premises. Here is one list of premises:\n1) people act in their own self-interest;\n2) in the pursuit of self-interest, people act rationally;\n3) people have access to perfect information (meaning the information\nnecessary to act rationally);\n4) people and resources are freely moveable;\n5) there are no artificial restrictions on entry to the marketplace.\xe2\x80\xa0\nIf these assumptions (or ones like them) hold in a transaction or set of transactions,\nthese scholars conclude that such transactions will put resources (including labor)\nto a more efficient use, meaning that the transactions will generate greater economic wealth than if those assumptions were not true. That does not mean that\nboth parties or even either party will gain from any individual transaction. Nor\ndoes it mean that the smarter will get richer faster: it assumes all parties are rational and have access to perfect information. Also, these scholars take the current\ndistribution of wealth and resources as a given. (The theory does not try to change\nthat distribution. Thus, the theory does not mean that anyone gets a bigger slice of\nthe pie. Instead, it means that the pie itself gets bigger; that is the claimed public\nbenefit.)\nAs you might expect, others raise a number of objections to this paradigm:\n\xe2\x80\xa2 No one can agree on what counts as wealth (though the theory is useful\nin practice only if it rests on something quantifiable; most law and economics scholars agree that ability and willingness to pay in money is the\nmost useful surrogate for expression of preferences; most decision makers\nare greedy enough or wealthy enough not to care if other ends are not\nserved; also, other ends are frequently served by other areas of law than\ntransactional law).\n\xe2\x80\xa2 Similarly, the values people attach to things exchanged differ depending\non what other resources those people have (e.g., a person\xe2\x80\x99s only dollar is\nprobably worth a lot more than someone else\xe2\x80\x99s millionth dollar). This\nmakes it hard to conclude much about the efficiency of certain kinds of\ntransactions.\n\xe2\x80\xa2 For a variety of reasons\xe2\x80\x94individual preferences and needs, current\nwealth, the epistemological challenges of getting into someone else\xe2\x80\x99s mind,\n*\n\nMorris Cohen, The Basis of Contract, 46 Harv. L. Rev. 553, 558 (1933).\nRobin Paul Malloy, Law and Economics: A Comparative Approach to Theory and Practice 54-55 (1990).\n\xe2\x80\xa0\n\nxviii\n\n\x0cand that values assigned to things usually extend over a range and are dependent on unrevealed other preferences and conditions, for example\xe2\x80\x94it\nis unlikely that any person\xe2\x80\x99s wealth (the value they attach to anything) is\nmeasurable on the same scale as or measurable against any other person\xe2\x80\x99s\nwealth. Individuals\xe2\x80\x99 wealth is incommensurable. This fact probably makes\nit impossible to draw conclusions about the efficiency of individual transactions, the very transactions that contract law judges are asked to address.\n\xe2\x80\xa2 If all of the assumptions listed above were true, the courts would have no\nrole to play at all. Parties would maximize wealth without government intervention, and that is all anyone would care about. In some ways the very\nexistence of contract law is contrary to this kind of lassez faire approach.\n(The rebuttal to this objection is that sometimes one or more of the assumptions listed above do not hold, and that contract law\'s purpose is to\ncorrect such failures in order to ensure efficiency.)\n\xe2\x80\xa2 No one has access to perfect information. Therefore, neither courts nor\nparties to transactions can decide clearly whether a transaction (or a rule\nemployed in a decision) promotes wealth or not. Other assumptions may\nalso break down: people may not act rationally, or people and resources\nmay not be freely moveable. Artificial restrictions on the market may exist.\nSome participants begin with less wealth or information than others, creating inequalities in the marketplace that inhibit free bargaining and influence the values attached to what is exchanged (making it difficult or impossible to determine whether wealth is created in a given set of transactions).\n\xe2\x80\xa2 Occasionally, especially given that information is not perfect, people act\nopportunistically, meaning that they try to take advantage of others\' lack of\nperfect information, failure to act rationally, inability to move, artificial restrictions on the marketplace, or poorer distribution of wealth.\nEconomic theories of contract law are called \xe2\x80\x9cconsequentialist,\xe2\x80\x9d meaning that\nthey seek a public benefit beyond a benefit to the contracting parties, and if one is\nnot obtained by a law, the law is not justified under the theories.\nOne thing welfare theories do that other theories do not is recognize explicitly that\nexchanges have social value.\n3) Justice/Morality\nA common and ancient meaning of the term justice is giving to each according to\nhis due. This very unhelpful definition has been augmented to include a number\nof moral rules that reflect ways in which a person might fail to give another their\ndue. For instance, the first, \xe2\x80\x9ckeep your promises,\xe2\x80\x9d reflects that failure to keep a\npromise might do real harm to another. That harm should be remedied by requiring the person who caused harm and perhaps gained by breaking a promise to\nrecompense the person harmed. This is a just result. Consider the following:\nxix\n\n\x0c\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\nKeep your promises.\nDo not deceive.\nDo not coerce.\nProtect reasonable reliance. Ensure that no one is enriched unjustly (which\nmeans roughly that A gets something for nothing from B and B did not intend to give it to A as a gift).\nHave concern for the other party\xe2\x80\x99s interest.\nDo not cheat: Do not violate a rule of any social practice that you are engaged in, unless the rule has been clearly waived by the other party.\nCommunicate before taking action that may impair the other party\xe2\x80\x99s interests.\nCompromise disputes; acknowledge that the other party may have a differing but reasonable interpretation.\nFollow contractual intent.\n\nCan you think of any others?\nReady, Set . . .\n\nBYRNES v. MANN\xe2\x80\x99S ESTATE\nSupreme Court of the State of Relative Clarity\n65 R.C. Rptr. 67 (2017)\n[\xc2\xb61] Attorney Timothy Mann was driving his longtime friend, orthopedic neurosurgeon Dr. Sandra Byrnes, in a very fast boat along one of our rockier coastlines. The boat hit an unexpectedly large wave and flipped over. The boat was\nwrecked. Both Mann and Byrnes were thrown from the boat. Byrnes skidded\nacross the water and landed where it was deep; though shaken, she was essentially\nunharmed. Mann was thrown high into the air and landed in a shallow section.\nPassing quickly through the water, Mann\xe2\x80\x99s body hit sharp rocks. The impact severed Mann\xe2\x80\x99s spinal cord in two places, and he suffered multiple lacerations and\ncontusions. The accident immediately paralyzed him from the chest down.\n[\xc2\xb62] Amazingly, both Byrnes and Mann remained conscious. Both were wearing flotation devices. Byrnes, emerging from the water, quickly found Mann floating face down about twelve feet away. The shallow rocks under the water were\nkeeping Mann\xe2\x80\x99s flotation device from flipping his face above water. Swimming\ntoward Mann then climbing over the rocks, Byrnes gently turned Mann face up.\nHe sputtered, saw Byrnes, and said, \xe2\x80\x9cThanks. Please help me. Please he . . . .\xe2\x80\x9d\nMann then lost consciousness.\n[\xc2\xb63] By this time, passersby had noticed the accident and called for help. Within 30 minutes, an emergency crew arrived, and Byrnes and EMTs carefully lifted\nMann from the water. Within another 45 minutes, Mann had arrived at the operating room at St. Matthews, the nearest hospital offering neurosurgical services, and\nxx\n\n\x0cDr. Byrnes and a team of doctors set about doing what they could to treat Mann\xe2\x80\x99s\ninjuries. After four hours of procedures, the team moved Mann to post-op and\nlater to intensive care.\n[\xc2\xb64] Mann regained consciousness two days later. Dr. Byrnes was in the room\nat the time. The following conversation occurred:\nMann: \xe2\x80\x9cSandra?\xe2\x80\x9d\nByrnes: \xe2\x80\x9cTim? You\xe2\x80\x99re awake!\xe2\x80\x9d\nMann: \xe2\x80\x9cI\xe2\x80\x99m so sorry.\xe2\x80\x9d (Tears welled up in Mann\xe2\x80\x99s eyes.)\nByrnes: \xe2\x80\x9cTim, no! Please don\xe2\x80\x99t! This is not your fault! I\xe2\x80\x99d do anything to\nhelp you.\xe2\x80\x9d\nMann: \xe2\x80\x9cI\xe2\x80\x99m so sorry.\xe2\x80\x9d (He began to sob.) \xe2\x80\x9cI will make this up to you. You\nmust have saved me. I will make this up to you! I\xe2\x80\x99ll repay you! I am so\nsorry!\xe2\x80\x9d\n[\xc2\xb65] As Mann began to sob uncontrollably, Byrnes leaned over and gently put\nher arms around Mann.\n[\xc2\xb66] Five seconds later, Mann\xe2\x80\x99s body went limp, his heart stopped, and he\npassed away. Byrnes and her team later determined that the cause of death was\nsubarachnoid hemorrhage in the brain stem area that developed after the surgery\nbut was worsened by Mann\xe2\x80\x99s sobbing.\n[\xc2\xb67] Some weeks later, Byrnes\xe2\x80\x99s office billed Mann\xe2\x80\x99s estate for his medical\nbills. Mann\xe2\x80\x99s insurance covered everything in excess of $45,000, but the $45,000\nremains unpaid. Mann\xe2\x80\x99s executor is Mann\xe2\x80\x99s widow, Amanda Allan. Allan refused\nto pay the bill. When Byrnes sued, Allan moved to dismiss under Rule 12(b)(6)\nfor failure to state a claim. The trial court granted the motion. Byrnes has appealed. We reverse.\nCALEB, Justice.\n[\xc2\xb61]\nOn waking, Mann recognized his friend; appeared to recall the accident;\nacted as if he were at fault (he was driving at the time, after all); seemed to recall\nByrnes\xe2\x80\x99s role in flipping him over; and appeared to feel the moral pull of gratitude\nfor Byrnes\xe2\x80\x99s help. All of these facts suggest Mann understood his situation. Despite Mann\xe2\x80\x99s injuries, that he had just awakened from a coma, and his obvious\nvulnerability\xe2\x80\x94all of which limited his capacity to act, he volunteered a promise\nto Byrnes that he would pay her. This promise, moreover, followed his two-dayold request for help. Mann had plenty of motive to promise. Enough evidence exists, therefore, to allow a jury to decide whether Mann, an adult citizen, exercised\nhis autonomy to express an intent to be bound. Mann (through his estate) has\nwealth; he can do with it as he pleases. Our respect for his dignity as a fellow citizen requires us to respect that right.\nxxi\n\n\x0c[\xc2\xb62] Mr. Mann owns his own property. He earned it. Mr. Mann through his own\ninitiative bartered his natural talents and hard work for the wealth he accumulated.\nIt was not given to him, not discovered in or leveraged from some other property\nother than his own person\xe2\x80\x94it was earned by him in free exchange with others\nwho deemed his services worth their money. Autonomous decisions with regard\nto this kind of wealth above all others deserve our respect. For all of these reasons,\nthe decision of the trial court should be reversed.\nDUNN, Justice.\n[\xc2\xb61] Dr. Byrnes was Mann\xe2\x80\x99s friend, but she was also a doctor, granted a license\nto practice medicine by the state. Though under the law she was not required to\nassist the injured Mann, our laws should encourage licensed medical persons to\ndo so. The law shields from civil damages any person who in good faith administers emergency care during an emergency. R.C. Civ. Prac. & Rem. Code \xc2\xa7 74.151.\nBut the law has an additional interest in encouraging the medically trained and\nlicensed to assist. We are all better off if doctors trained and licensed to help with\nmedical emergencies actually do so. Dr. Byrnes was a licensed physician and\nMann was in obvious need of services she could render. Mann himself recognized\nDr. Byrnes\xe2\x80\x99s power to assist him when he asked for her help.\n[\xc2\xb62] When a medically trained and licensed individual assists another who reasonably appears to require her professional skills, under the law she has a reasonable expectation of compensation for the service rendered and therefore the right\nto that compensation. See Cotnam v. Wisdom, 104 S.W. 164 \xc2\xb6\xc2\xb6 5-6 (Ark. 1907).\nDr. Byrnes was medically trained and licensed. Mann reasonably appeared to require her professional skills. This is true even though Mann did not ask for any\nparticular care and was unconscious during all of it. The source of Dr. Byrnes\xe2\x80\x99s\nright is not Mann\xe2\x80\x99s promise or the exercise of his will but the law\xe2\x80\x99s desire to encourage physicians to assist and the justified assumption that a reasonable person\nin need of medical assistance would ask for it. See id. \xc2\xb66.\n[\xc2\xb63] After such medical services were provided, who should pay for them? As\nbetween the doctor and the patient, the burden should fall on the patient if he has\nthe assets. To place the burden on the doctor when the patient has the means to\npay would discourage doctors from assisting and encourage the ill to manipulate\nthe medically-trained.\n[\xc2\xb64] These laws encourage us to treat each other fairly and to work together to\nflourish. For these reasons, the trial court\xe2\x80\x99s judgment should be reversed and Byrnes\xe2\x80\x99s case should go forward.\n[\xc2\xb65]\n\nJustices Caleb, Fadel, and Gonzalez concur in this opinion.\nxxii\n\n\x0cELLIOTT, Justice.\n[\xc2\xb61] I am sympathetic to the policies Justice Dunn celebrates, but I believe in\nthe principles Justice Caleb articulates, too. In a clash, Caleb\xe2\x80\x99s principles destroy\nDunn\xe2\x80\x99s, for what if the ill person wakes and says not, \xe2\x80\x9cI will repay you\xe2\x80\x9d but \xe2\x80\x9cwhy\ndid you not let me die?\xe2\x80\x9d Cotnam overrides basic autonomy. We are presuming a\nlot when we presume that everyone wants a doctor to save her life; that presumption cannot help but override the autonomy of the patient from time to time. I\nwould overrule Cotnam.\n[\xc2\xb62] Justice Dunn, on the other hand, would give people what he thinks they\nwant. But it is very difficult to say with any certainty what Mr. Mann wanted, given his ambiguous statements and state of mind. That is flimsy evidence on which\nto order the payment of $45,000. Moreover, as much as we like to think of ourselves as free people, we do not have unfettered autonomy. We especially do not\nhave the right to law backing up our unfettered autonomy. The mere evidence that\na person made a promise has never, by itself, warranted a recovery under the\ncommon law. A mere promise does not give the state any reason to interfere with\nprivate persons\xe2\x80\x99 lives.\n[\xc2\xb63] Unlike Justice Fadel, I believe that neither judges nor litigants can say\nwhether a transaction is, on net, beneficial. The litigants will say in litigation what\nis in their favor legally, and a judge\xe2\x80\x99s imagining that he can tell what the litigant\nvalued is just that\xe2\x80\x94imagination. Relying solely on evidence of a party\xe2\x80\x99s assent at\nthe time of the transaction collapses analysis of utility into an examination of autonomy. Besides, this transaction impacted not just the parties but also the public.\nTo examine the true cost of the transaction, the judge must know all of its impacts,\nincluding its true effects on Mann\xe2\x80\x99s physical well-being, but that is something no\njudge could know. The judge should also take into account the cost of emergency\nservices that rescued Mann and Byrnes, the cost of transporting him to the hospital, the cost imposed on other medical persons and facilities, and the opportunity\ncosts of whatever else all of those other persons would be doing if they were not\ncaring for Mr. Mann, and that is just a beginning. Facts introduced in litigation\nbetween two individuals do not begin accurately to catalog these costs. Absent\nthis information, there is no way to discover whether the persons involved were\nmade better off and no one else was made worse off.\n[\xc2\xb64] I would affirm. Byrnes would have helped Mann even had he never asked\nfor help. She was his friend. He did not offer to pay her when he asked for help.\nShe offered the help without any promise of reward, and he received it without\never promising one. Generally, contract law is about trust. When a promise is\nmade under circumstances that justify a costly response to it, the law should protect that reliance. In this case, however, Byrnes helped her friend regardless, and\nthe promise was not made until after the services were given. The law should enxxiii\n\n\x0ccourage trust (and encourage doctors to assist), but the law also should encourage\nfriendship, not cheapen it by encouraging friends to sue each other over payment\nfor gifts freely given.\n[\xc2\xb65] I am somewhat sympathetic to Justice Gonzalez\xe2\x80\x99s argument, but I believe\nthe ground of that line of cases is that the request and later promise induce the action just as much as a promise made at the time of the action taken in reliance. In\nthis case, however, Byrnes had already begun to help her friend when he asked for\nhelp, and she would have helped him, anyway. No one, I think, would or should\nassume that Byrnes suddenly was induced to help her friend only by his pleading\nand her anticipation that he might later promise to repay. His request played no\nrole at all in inducing her actions; she would have done just the same. Because\nnothing here was done in reliance on a request or a promise that needs the law\xe2\x80\x99s\nsupport, there should be no recovery.\n[\xc2\xb66] I am authorized to say that Justices Hagopian and Jurgens concur in this\nopinion.\nFADEL, Justice.\n[\xc2\xb61] I vote to reverse, but I lack the moral intuitions of my fellow judges. Enforcement is best when a transaction is beneficial\xe2\x80\x94specifically, when the transaction, here the provision of medical services, benefits one party and at least does\nnot make anyone else worse off.\n[\xc2\xb62] Obviously Mann meant for Byrnes to assist him in a medical emergency,\nand he intended to pay her. Byrnes, for her part, meant to assist and charge Mann.\nAs they said it, Byrnes was to do what was necessary to help Mann, as she saw fit,\nand Mann was to compensate Byrnes. Though Mann\xe2\x80\x99s judgment on the value of\nthe benefits he would receive is expressed only in his request for assistance and in\nhis promise to pay after assistance was received, this is sufficient to raise the issue.\nThat Byrnes\xe2\x80\x99s efforts benefitted Mann are suggested by his waking up to thank\nher and by the assistance of so many other medical professionals who concurred\nimplicitly in her decisionmaking. The transaction as contemplated would benefit\neach. As between the parties and the government, the parties know best whether\ntheir own transactions benefit them, and the expressions of Mann and Byrnes are\nsufficient to show that judgment.\n[\xc2\xb63] The evidence is not conclusive. After all, Mann is dead from a cause Byrnes did not see, and Mann in the ocean and in the hospital was hardly in the state\nof mind or with the necessary information to judge conclusively whether the\ntransaction provided a benefit to him, particularly before it had occurred. Having\nwrecked the boat he was driving in a spectacular crash that broke his own back in\ntwo places, only to be barely rescued from certain drowning, Mann was probably\nxxiv\n\n\x0cnot able to make a difficult decision about his own medical care. His instability\nwas only confirmed by the emotional upheaval displayed when he awoke two\ndays later.\n[\xc2\xb64] Mann\xe2\x80\x99s knowledge is also questionable. When he was rolled over in the\nwater, he could obviously sense his helplessness, though what else is unclear.\nLater, when he awoke in the hospital, it was obvious something had been done to\nhim, though he remained helpless and could have had no awareness of the care\ngiven him other than his transport to the hospital. We might strongly suspect\nMann lacked knowledge to judge the value of what was given him. It is possible\nByrnes made Mann worse off, overall. We might know how we would value Byrnes\xe2\x80\x99s services, but our preferences are less reliable than Mann\xe2\x80\x99s in determining\nwhether he was made better or worse off.\n[\xc2\xb65] The inconclusivity of the evidence regarding Mann\xe2\x80\x99s expressed preferences creates an issue for the finder of fact. Mann\xe2\x80\x99s estate can certainly try to\nprove the transaction made him worse off, or even that it was, on net, negative.\nBut Byrnes has shown enough to get a hearing.\n[\xc2\xb66] In short, we have sufficient reasons to believe that Mr. Mann was not\nmade worse off by this transaction, though the issue is not free from doubt. If no\none was made worse off by this voluntary transaction, then it should be enforced.\nBut that is an issue ultimately for the factfinder.\nFor these reasons, and because I concur with Justices Dunn and Gonzalez,\nI vote to reverse.\nGONZALEZ, Justice.\n[\xc2\xb61] I would reverse. I also concur in Justice Dunn\xe2\x80\x99s opinion but write to add\nanother line of cases in support.\n[\xc2\xb62] For nearly five hundred years, a prior request to do something, followed\nby the requestee\xe2\x80\x99s fulfillment of the request, followed by the requestor\xe2\x80\x99s promise\nto the requestee to pay for the action taken in fulfillment has by law been the\nequivalent of promise and consideration. See Hunt v. Bate, 3 Dyer 272a (C.P.\n1568). This is clear precedent. In this case, Mr. Mann requested his friend, a doctor, to help. He was in obvious medical need. She helped as best she knew how.\nWhen he later awoke, found his friend, and realized she had fulfilled his request,\nhe promised to pay her for it. The law requires that we grant her a recovery.\n[\xc2\xb63] Some on this court act as if this case presents an open question. It does not.\nMoreover, we are not legislators. Our constitution requires that legislative power\nrest with the Legislature. Nor are we Platonic philosopher-kings paid to impose\nxxv\n\n\x0cour wisdom on the unlearned masses. We are judges in a republic, and we took an\noath to uphold the laws of this state. There are certainly times when we must call\non our learning, experience, and judgment to fill in the interstices of the common\nlaw and even of statutes and constitutional provisions, but this is not one of them.\n[\xc2\xb64]\n\nThe law requires reversal, so I vote to reverse.\nThe judgment is reversed.\n\nQuestions:\n1. With which opinion do you most agree?\n2. Please pick out what you believe is the main theme of each opinion\xe2\x80\x94the motivating idea, the "big" idea that causes each judge who wrote to vote for the result\nthat judge chooses. Please be prepared to report for each opinion.\n3. Do you find in any of the opinions a statement that looks like a rule of law? I\ncan find at least two in particular.\n4. If a judge does not decide according to law (in other words, if the judge in making a decision is not following a rule), then how is the judge deciding? Do you\nthink it more appropriate for the judge to follow the law or something else?\n5. Why do the facts identify Mann as an attorney? Byrnes as an orthopedic neurosurgeon?\n6. Why does Justice Dunn refer to Byrnes as "Dr. Byrnes"?\n7. From what sources did the law cited by the judges come? Where did it come\nfrom before that? Where do legal arguments come from before they become law?\n\nxxvi\n\n\x0cChapter 1. Consideration:\nContract & Bargain\nA. Introduction\nThe doctrine of consideration is somewhat of a mystery for many law students.\nMany never get it. I introduce it first partly because your understanding of it will\nbecome clearer with several weeks to think about it. But I also introduce it first\nbecause it came first chronologically and the logic of contract doctrine is based on\nit.\nOriginally, the common law of contract was very simple. The plaintiff had to\nshow only three things:\nGolding\xe2\x80\x99s Case (1586)\n2 Leon. 72, 74 ER 367\n... [Egerton, Solicitor-General:] In every action on the case [upon an assumpsit], there are three things considerable: consideration, promise and\nbreach of promise. ....\nBesides promise (a commitment to do or not do something) and breach (breaking\nthe promise), about which you should have some understanding, only consideration had to be shown. Why? Briefly put, the doctrine of consideration was used to\ndetermine which promises should be enforced. Only a promise with consideration\nwas enforceable.\nSome historical background is helpful for you to understand why the word consideration came to be so important in contract law. Consideration in a general\nsense can mean something like \xe2\x80\x9can important reason for doing something,\xe2\x80\x9d as in\n\xe2\x80\x9cI decided for all these considerations to do X.\xe2\x80\x9d This is most likely the way contract law originally used the word, in the mid-1500s.\nCourts in England in 1539 first required that consideration be alleged by plaintiffs\nin order to show an actionable promise. English contract law retains the requirement to this day. When American states became independent, state legislatures\nand courts adopted the contract law of England, including the consideration requirement. That means that in order to recover damages for breach of a promise in\nan American court, the plaintiff usually must prove that the promise was given for\n1\n\n\x0ca consideration. To understand why a consideration was first required, one must\nknow something of English law regarding the enforcement of promises.\n1. Medieval Law of Promise Enforcement\nIn medieval England, promise enforcement law was grounded in agreement, custom, and religion. Many courts could hear contract disputes: manor courts (e.g., a\nlord\xe2\x80\x99s court), borough courts, county and hundred courts, ecclesiastical courts,\nsome civil law courts with very limited geographical jurisdiction (such as at Oxford), the court of England\xe2\x80\x99s chancellor, and the royal courts. Each of these medieval courts revolved around a power center: the local lord, the city government,\nthe county government, the church, a university, or the king or queen. Also, each\nof these courts had its own jurisdiction, so that disputes did not arise between\nthem, but each was empowered to enforce promises to some degree or another.\nBy the fourteenth century, three distinct royal courts had formed: the Common\nPleas, the King\xe2\x80\x99s (or Queen\xe2\x80\x99s) Bench, and the Exchequer. (Each court had a distinct history and original purpose, but by 1539 those purposes had largely disappeared and other differences existed. When differences in the courts\xe2\x80\x99 jurisdictions\nand practices are relevant, they are noted below.) The royal courts gained preeminence among these other courts, for a number of reasons: backing by the monarch\n(who eventually came to dominate all other institutions in England), national geographical jurisdiction, and jurisdiction over broad subject matters. By 1539, the\nroyal courts were by far the most prominent in England. The contract law of both\nEngland and the United States developed first in these royal courts.\nBeginning law students often think that legislatures make law and that courts enforce laws, but medieval England had no legislature as we understand that term.\nOccasionally, the king would meet with powerful lords and heads of other powerful institutions, and these people in power would agree to change existing custom,\nwriting out their decisions. But in the medieval period this happened relatively\nrarely. Most law resulted from the less powerful people seeking help from the\nmore powerful people, each of which sat in his (and it was nearly always a man)\n\xe2\x80\x9ccourt.\xe2\x80\x9d When too many people sought help for the powerful person to grant relief\nin person, the powerful person appointed ministers to hear pleas for help. The\nEnglish king\xe2\x80\x99s ministers to hear pleas were called \xe2\x80\x9cjusticiars\xe2\x80\x9d or \xe2\x80\x9cjustices.\xe2\x80\x9d The\njustices could receive pleas for help even when the king was not around, but the\nking was said to be \xe2\x80\x9cin court\xe2\x80\x9d where his justices sat to receive pleas. Eventually,\nall the justices sat at Westminster, near London, the largest city in England. The\npractices of these justices in response to pleas became law.\nIn this system, a plaintiff (one who complains) might complain to the royal justices about a breach of promise in a couple of different ways. The most obvious way\nwas to allege that the defendant promised or agreed to do something and had not\ndone it. If the plaintiff\xe2\x80\x99s case rested solely on the breach of promise, the justices\ncalled this a case of covenant. (Covenant is a translation of the Latin word con2\n\n\x0cventiones, which means literally agreements.) If the plaintiff\xe2\x80\x99s case appeared to be\none of covenant, then the justices applied the following rules (at least after about\nthe year 1350): (i) Trial of factual issues was by jury in the county where people\nwould know something related to the transaction. The jury could be counted on to\nknow the customs of the country. (ii) The plaintiff\xe2\x80\x99s case failed unless the promise\nor agreement was in a sealed writing. (Other courts might grant relief on an unwritten promise, but not the king\xe2\x80\x99s courts.) (iii) The jury would set damages for\nthe breach. (iv) The justices would not order the defendant to perform the promise.\nThere were other ways to allege breach of promise. Another way was to allege\nthat the defendant was indebted to the plaintiff. The justices called this a case of\ndebt. Debt was a property-related concept in medieval England: If a transaction\noccurred which indebted the defendant to the plaintiff, the plaintiff could go to\ncourt to get the defendant to pay the property owed. Various transactions would\ncause the defendant to be in debt, and most involved some sort of breach of promise: i.e., an informal sales contract in which the goods had been delivered, a loan,\na service agreement performed, a lease. But if these transactions involved breach\nof promise, why were they not cases of covenant? Because they also involved one\nother element: a quid pro quo, a \xe2\x80\x9csomething for which\xe2\x80\x9d the defendant\xe2\x80\x99s promise\nwas made and the plaintiff\xe2\x80\x99s action was appropriate. In the case of a loan, the\nlender had already lent the money, and, coupled with the agreement to pay, this\nquid pro quo justified the lender\xe2\x80\x99s suing for the property owed. The quid pro quo\nseparated debt from covenant.\nWhen a plaintiff alleged a debt, the justices applied the following rules: (i) The\nplaintiff could not proceed unless the amount of damages was certain. (ii) Trial of\nfactual issues was by jury or by \xe2\x80\x9cwager of law,\xe2\x80\x9d as the defendant may elect. A defendant waged his law by (a) swearing an oath that he was not indebted to the\nplaintiff and (b) producing eleven other \xe2\x80\x9ccompurgators\xe2\x80\x9d or oath-helpers to swear\nthat the defendant\xe2\x80\x99s oath was credible. If the defendant could swear and find eleven others to swear with him, he could go free and never pay. It was possible to lie\none\xe2\x80\x99s way out of a debt, though in practice this probably did not happen often. But\nonly fear of God and possible loss of reputation kept defendants from lying. The\ncommon law courts did not punish perjury until 1563. Naturally, plaintiffs would\nhave preferred another method of recovery to debt had one been available.\nYou would think that given the uncertainty of debt actions, potential plaintiffs\nwould have been wise to put their transactions in writing and under seal. In fact,\nmany transactions were put in writing and under seal. Cautious people even went\none step further and, instead of having the person promising (the \xe2\x80\x9cpromisor\xe2\x80\x9d)\nmerely promise something in the writing, they would have the promisor promise\nto pay a penalty if the promisor did not do the desired act. For instance, if the cautious plaintiff had sold the defendant a house for 40\xc2\xa3, the cautious plaintiff would\nhave the defendant promise to pay 80\xc2\xa3 if the defendant had not paid 40\xc2\xa3 by a certain date. The defendant\xe2\x80\x99s writing, called a penal bond, was enforceable in a special debt action called debt sur obligacion. No wager of law was available in a\n3\n\n\x0ccase of debt sur obligacion, and the defendant had very few defenses. Factual issues went to the jury, but the bond itself set the damages.\nThis state of the law kept contract law from developing further. In covenant actions, the sealed document answered all the hard questions about whether a promise was made and made fairly, and the jury answered all the difficult questions\nabout damages. In debt actions on a penal bond, the bond itself set both the obligation and the damages, and occasionally a jury was allowed to step in to grant a\ndefense. In other debt actions, all factual disputes either went to the jury or disappeared when the defendant waged his law. In fact, if a difficult legal issue arose\nwhen the lawyers were discussing the plaintiff\xe2\x80\x99s debt claim for the first time, the\ndefendant would opt to wage his law rather than risk a decision against him; lawyers opted not to force the court to decide legal questions. Thus, nearly all questions were settled by the parties, the jury, or by wager of law. If a defendant\nwaged his law unfairly, God punished. Agreement, custom, and God were in the\nend the arbiters of nearly all disputed cases. No one either asked or answered\nmany of the questions we will ask for the rest of this semester.\n2. Changes in the Renaissance\nThe situation changed in the early 1500s, when the royal courts settled on another\nmeans for remedying a breached promise. The common law had long given a\nremedy for a trespass. You know what trespass means: it\xe2\x80\x99s when you walk on\nsomeone else\xe2\x80\x99s property against that person\xe2\x80\x99s express will. But trespass also\nmeans more generally to commit some other wrong against another personally (as\nin \xe2\x80\x9cFor if ye forgive men their trespasses, your heavenly Father will also forgive\nyou: But if ye forgive not men their trespasses, neither will your Father forgive\nyour trespasses.\xe2\x80\x9d\xe2\x80\x94Matt. 6:14-15, KJV). The English lawyers came to think of a\nbreach of promise as a trespass in the sense used in the KJV of Matthew. When\nplaintiffs alleged a trespass in the royal courts, a jury resolved the factual disputes\nand set the damages. The trespass action was very broad, and the royal courts\npurposefully allowed one strand of it, called trespass on the case, to expand to\ncover pleas warranting relief not covered by any other action. It is this strand of\ntrespass on the case that came to cover breaches of promise.\nThis occurred in some cases by 1500. The resulting sub-category of trespass on\nthe case was called \xe2\x80\x9ctrespass on the case in assumpsit,\xe2\x80\x9d or simply \xe2\x80\x9cassumpsit,\xe2\x80\x9d\nwhich means in Latin literally \xe2\x80\x9che has undertaken.\xe2\x80\x9d The gist of the assumpsit action was that the defendant had undertaken to do something and had not done it,\nto the plaintiff\xe2\x80\x99s damage. The defendant could undertake a task by promising to\ndo it. Thus, to promise a performance and then later not perform it warranted relief in assumpsit\xe2\x80\x94it could be a trespass. By 1500, the king\xe2\x80\x99s courts had approved\nthis kind of action in cases of breach by a building contractor, and other kinds of\ncases soon followed. Assumpsit cases involving breach of promise became commonplace by the late 1530s. Assumpsit proved a great boon to plaintiffs. In the\nassumpsit action, the defendant was not allowed to wage law, no sealed writing\n4\n\n\x0cwas required, oral promises were routinely actionable, and the jury set the damages according to the plaintiff\xe2\x80\x99s proof of injury. (Assumpsit grew to cover other actions as well, including many now called unjust enrichment.)\nThere may have been social reasons for the rise of assumpsit: One is perhaps that\nthe Reformation and Henry VIII\xe2\x80\x99s break with the Catholic Church and confiscation of church lands decreased the authority of ecclesiastical courts in England.\nThe courts of the Catholic Church in England are known to have enforced many\nkinds of promises, including commercial arrangements, on penalty of excommunication. With ecclesiastical courts out of power, plaintiffs previously seeking relief there would have had to seek it elsewhere. Henry also began appointing\ncommon lawyers as chancellors. Chancellors had generally been ecclesiastics\npreviously. Common lawyers as chancellors were more likely to enforce common\nlaw than ecclesiastical law in the chancellor\xe2\x80\x99s court, and thus more likely to send\nsuitors back to the royal common law courts if they could.\nStill another reason may have been that the economy was growing. From 1540\nuntil 1600 the size of the English economy doubled several times. The population\nalso increased by sixty percent, from 2.5 million to around 4 million. On the other\nhand, the supply of coinage did not keep up with the general economic growth\n(although the supply of coins did increase substantially during this time). The result was that the increased wealth took the form of credit (which, of course, is only a promise to pay). Credit became increasingly important in local, national, and\ninternational economies during this period, so much so that the royal courts probably felt the need to adapt the law to contracting parties\xe2\x80\x99 expectations.\nThey probably felt this need particularly when they saw loopholes in the law that\nleft some deserving plaintiffs without remedy. For instance, actions on installment\ncontracts breached after some but before all installments came due could not be\nbrought in debt. The debt action assumed that the debt was just one thing, not a\nnumber of things put together. In waging law the defendant would swear he owed\nnothing, but he was not allowed to swear he did not owe part of something. Thus,\na plaintiff could not bring an action of debt until after the last installment had already become due. In the mid-sixteenth century the courts remedied this problem\nby granting relief in assumpsit on installment contracts breached midstream. The\ncourts used assumpsit to patch other leaks in the debt-covenant dam. At any rate,\nbreach of promise eventually became actionable in assumpsit.\nSoon after it did, the requirement of a consideration arose. At first, the problem\nwas rather formal. Plaintiffs\xe2\x80\x99 lawyers wanted to make sure that the covenant and\ndebt rules did not apply to their cases, because they preferred the assumpsit rules.\nHow were courts to tell whether the action arose in covenant, debt, or trespass\nwhen each of those involved an allegation that a promise had been breached? The\nassumpsit action could not rest on mere agreement, for then the action was based\non a covenant and the covenant rules should apply. Lawyers resolved this problem\nby omitting any reference to agreement in their pleadings in assumpsit. But this\n5\n\n\x0craised another difficulty. A bare promise did not overlap with any other action, but\nwhy should the court enforce a bare promise? The common law courts had for\ncenturies been claiming that on a nudum pactum or bare promise no action would\nlie. To allege a wrong worth remedying, the plaintiff had to allege something besides the promise or undertaking that would make the promise worth enforcing.\nAt first they alleged quid pro quo or consideration or just for (pro), but eventually\n(in the 1550s and 60s), they realized that quid pro quo should be off limits, because that was the requirement for a valid debt action when no sealed writing existed. For (or pro) may not have been specific enough, and it was part of quid pro\nquo. So courts instead required that a consideration be alleged. The word initially\nmeant something like \xe2\x80\x9cany good reason for an act that had legal consequences,\xe2\x80\x9d\nbut that is not its meaning today. The word as used by the courts in breach of\npromises cases in assumpsit quickly developed a more specialized, complicated\nmeaning which we will study in our next few classes. Today, still, a promise, to be\nenforceable, must be given for a consideration:\nRegions Bank v. Bric Constructors, LLC (2011)\nTenn. Ct. App.\n380 S.W.3d 740, 761\nConsideration is indeed a necessary element to the formation of a legal\ncontract, and in general a contract that is unsupported by consideration is\nunenforceable.\n\nB. The General Test\nJoseph VIAN v. Mariah CAREY (1993)\nNot Reported in F. Supp.\nUnited States District Court, S.D. New York\nNo. 92 Civ. 0485 (MBM)\nOPINION AND ORDER\n[\xc2\xb61] Defendant Mariah Carey is a famous, successful and apparently wealthy\nentertainer. Plaintiff Joseph Vian was her stepfather before she achieved stardom,\nbut at the start of this litigation was in the process of becoming divorced from defendant\xe2\x80\x99s mother. He claims defendant agreed orally that he would have a license\nto market singing dolls in her likeness, and sues for breach of that agreement. Defendant moves for summary judgment pursuant to Fed.R.Civ.P. 56, claiming that\nno contract existed and that the damages plaintiff seeks are not recoverable as a\nmatter of law. For the reasons discussed below, defendant\xe2\x80\x99s motion is granted.\n\n6\n\n\x0cI.\n[\xc2\xb62] Plaintiff claims that he and Carey had an oral contract for him to receive a\nlicense to market \xe2\x80\x9cMariah dolls.\xe2\x80\x9d These dolls would be statuettes of the singer and\nwould play her most popular songs. Plaintiff claims that the contract was in consideration of his financial and emotional support of defendant, including picking\nher up from late-night recording sessions, providing her with the use of a car, paying for dental care, allowing her to use his boat for business meetings and rehearsals, and giving her various items, including unused wedding gifts from his\nmarriage to her mother, to help furnish her apartment. (Complaint \xc2\xb6 6)\n[\xc2\xb63] The alleged basis of the oral contract is that on at least three occasions,\ntwice in the family car and once on Vian\xe2\x80\x99s boat, Vian told Carey \xe2\x80\x9cDon\xe2\x80\x99t forget the\nMariah dolls,\xe2\x80\x9d and \xe2\x80\x9cI get the Mariah dolls.\xe2\x80\x9d (Liebman Aff. Exhs 2, 4, 5, 6.) According to Vian, on one occasion Carey responded \xe2\x80\x9cokay\xe2\x80\x9d and on other occasions\nshe merely smiled and nodded. (Id.) Although Carey admits Vian mentioned the\ndolls two or three times, she testified that she thought it was a joke. (Carey Depo.,\nLiebman Aff. Exh. 7.) For 30 years plaintiff has been in the business of designing,\nproducing, and marketing gift and novelty items. (Pre-Trial Order at 3.)\nII.\n[\xc2\xb64] Summary judgment will be granted if \xe2\x80\x9cthere is no genuine issue as to any\nmaterial fact and the moving party is entitled to judgment as a matter of law.\xe2\x80\x9d Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 250 (1986). \xe2\x80\x9cSummary judgment is\nproperly regarded not as a disfavored procedural shortcut, but rather as an integral\npart of the Federal Rules as a whole, which are designed to \xe2\x80\x98secure the just,\nspeedy and inexpensive determination of every action.\xe2\x80\x99\xe2\x80\x9d Celotex Corp. v. Catrett,\n477 U.S. 317, 327 (1986) (quoting Fed.R.Civ.P. 1).\n[\xc2\xb65] In determining whether there is a genuine issue of material fact, a court\nmust resolve all ambiguities, and draw all inferences, against the moving party.\nSee United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam). * * * *\n[\xc2\xb66] [Here], the necessary consideration for the contract is wholly lacking.\nConsideration is a bargained for exchange. \xe2\x80\x9cIn other words, the promise and the\nconsideration must purport to be motive each for the other, in whole or at least in\npart; it is not enough that the promise induces the detriment or that the detriment\ninduces the promise if the other half is wanting.\xe2\x80\x9d Banque Arabe et Internationale\nD\xe2\x80\x99Investissement v. Bulk Oil (USA), Inc., 726 F. Supp. 1411, 1419 (S.D.N.Y. 1989)\n(citations omitted) (emphasis in original). Plaintiff admits that he did not express\nto defendant that his help to her was a quid pro quo for a license. (Liebman Aff.\nExhs 13 & 14.) Plaintiff specifically acknowledged that the household gifts and\npermission to use the car plaintiff purchased for defendant\xe2\x80\x99s mother were bestowed out of affection, not in consideration for a vague share in defendant\xe2\x80\x99s financial success or a more specific license for \xe2\x80\x9cMariah dolls.\xe2\x80\x9d (Liebman Aff. Exhs\n7\n\n\x0c16 & 20.) Nor did plaintiff ever tell defendant that her use of the boat was in consideration for a contract. (Liebman Aff. Exh. 22.) As to the dental care, plaintiff\ndoes not claim that he told defendant he expected anything in return for the money he gave her through her mother to go to a dentist. (Liebman Aff. Exh. 24.)\nPlaintiff further concedes that defendant may have repaid her mother. (Liebman\nAff. Exh. 23.) Particularly when plaintiff was acting in a quasi-parental relationship to defendant, it is impossible to interpret plaintiff\xe2\x80\x99s gifts and acts as consideration for a contract.\n[\xc2\xb67] In sum, plaintiff has not raised a triable issue of fact as to the existence of\na contract. * * * * [Among other objections,] consideration is lacking * * * *\n[\xc2\xb68]\n\n[D]efendant\xe2\x80\x99s motion for summary judgment is granted.\nSO ORDERED.\n\nQuestions:\n1. Is there consideration for Carey\xe2\x80\x99s promise? (Again, please formulate in your\nanswer the rule of law that the court applies.)\n2. Does the court discuss why it requires a consideration\xe2\x80\x94the policies underlying\nthe consideration requirement?\n3. Do you think the court knows why it must require a consideration?\n4. Does the court note that the consideration requirement is now 450 years old,\nand that times have changed?\n5. Do you think this court reached the wrong result? Vian v. Carey is a very typical example of a modern consideration decision. In another part of the decision,\nthe court held that Carey also failed to assent and that the contract as described\nhere did not have the required definiteness.\n\n8\n\n\x0cPROBLEM 1. Mona v. Harry: Harry and Mona, both widowed and elderly, met,\ndated, and married. One year later, Harry contracted Alzheimer\xe2\x80\x99s disease. He\nsteadily went downhill until he died eleven years later. Mona cared for him during\nall his years of illness and gave him some financial assistance. Two years after he\ncontracted the disease, Harry signed a promissory note in which he promised to\npay Mona $2 million. Six months later, Harry was declared incompetent and Mona was appointed as his guardian. After Harry died, his children, who controlled\nhis estate, refused to pay Mona the $2 million, so Mona sued Harry\xe2\x80\x99s estate.\nWhen the estate\xe2\x80\x99s lawyer deposed Mona, he asked her why Harry gave her the\nnote. Mona replied, \xe2\x80\x9cI was his wife. He wanted to take care of me.\xe2\x80\x9d When asked\nwhether she took care of Harry because of the note, Mona said, \xe2\x80\x9cNo. I gave him\nmy life, my love, my devotion, taking care of him because I loved him and he\nloved me.\xe2\x80\x9d Is there any consideration for Harry\xe2\x80\x99s promise? See Wagner v. Golden,\n1993 WL 350027 (Ct. App. Ohio 1993).\n\nPROBLEM 2. Leah v. Samuel: Samuel, a married man, promised in writing to\npurchase an apartment for Leah, his female companion, in return for the \xe2\x80\x9clove and\naffection\xe2\x80\x9d that she provided him during the prior three years. Is there consideration for Samuel\xe2\x80\x99s promise? See Rose v. Elias, 576 N.Y.S.2d 257 (N.Y. Supr. App.\n1991). Whether Samuel\xe2\x80\x99s promise formed a contract or not, why might the court\nhave frowned on this agreement?\nC. Consideration Theory and Policy\nWhy do we have this rule focused on exchange? The following materials, mostly\nfrom the 1500s, give reasons for why the courts formulated the consideration requirement as they did. Even today these are the most accurate set of materials describing the doctrine\xe2\x80\x99s purposes.\nChristopher St. German, DOCTOR AND STUDENT (1531)\nSecond Dialogue, ch. 24\n(punctuation and spelling modernized)\n[\xc2\xb61] [Question from the Doctor of the civil law:] What is a nude contract or a\nnaked promise after the laws of England, and whether any action may lie thereupon.\n[\xc2\xb62] Student [of the common law]: .... And a nude contract is where a man\nmaketh a bargain or a sale of his goods or lands without any recompense appointed for it. As, if I say to another, \xe2\x80\x9cI sell thee all my land (or all my goods),\xe2\x80\x9d and\nnothing is assigned that the other shall give or pay for it, that is a nude contract,\nand (as I take it) it is void in the law and conscience. And a nude or a naked promise is where a man promiseth another to give him certain money such a day or to\n9\n\n\x0cbuild him a house or to do him such certain service and nothing is assigned for the\nmoney, for the building, or for the service. These be called naked promises because there is nothing assigned why they should be made. And I think no action\nlies in those cases, though they be not performed.\nQuestions:\n1. Does an action lie on\xe2\x80\x94meaning \xe2\x80\x9ccan suit be brought to remedy\xe2\x80\x9d\xe2\x80\x94a \xe2\x80\x9cnaked\xe2\x80\x9d\npromise or contract?\n2. What is a naked or nude promise? Or, conversely, what clothes a promise? Why\nuse the nudity metaphor?\n3. What\xe2\x80\x99s so bad about a naked promise? Could anything else clothe a promise?\n4. Why would anyone make a naked promise?\n5. In this passage the doctor is a Doctor of the Civil Law and the student is a Student of the Common Law. By \xe2\x80\x9ccivil law,\xe2\x80\x9d St. German meant the law in force in\ncontinental Europe, as opposed to the common law of England. Does either the\nDoctor or the Student say anything about the promise being in writing?\n6. Recently, US federal district court judge Philip Simon opined, \xe2\x80\x9cThere is no socially useful reason for a legal system to enforce agreements that are not supported by consideration.\xe2\x80\x9d Yessenow v. Hudson, Opinion and Order, 2012 WL 2990643\n*10 (N.D. Ind., July 18, 2012). In what sense is this true?\n\nSHARINGTON v. STROTTON (1565)\nQueen\xe2\x80\x99s Bench\nPlowden 301, 75 English Reports [ER] 454\n[\xc2\xb61] [Arguments of Fletewood and Wray, counsel for one of the parties:] ...\n[N]othing new is here done on one side or the other, as is requisite in contracts\nand also in a covenant upon consideration. For instance, if I sell my horse to\nsomeone for money, or for some other recompense, here is a thing given on both\nsides (namely, one gives the horse and the other the money or other recompense),\nand therefore it is a good contract. Likewise in the case of the covenant upon consideration: for instance, if I covenant with you that if you marry my daughter you\nwill have my land, ... here is an act on each side (namely, you shall marry my\ndaughter, and in return for that I grant you the use). Thus there is an act done and\na fresh cause arising from each side. .... The common law ... requires a new cause,\nwhereof the country may have intelligence or knowledge for trial if need be; and\nthus it is necessary for the public good ...\n\n10\n\n\x0c[\xc2\xb62] [Argument of Plowden, counsel for the Christopher Wray (1524-92) beopposing party:] ... [T]he law of the land has two came a law student at Lincoln\xe2\x80\x99s\nways of making contracts or agreements for land Inn at age 20 or 21. He served in\nor chattels. One is by words, which is the lower, Parliament from 1553-67. In\nand the other is by [sealed] writing, which is the 1571, he was appointed Speaker.\nWray was appointed justice of the\nhigher.\nAnd Queen\xe2\x80\x99s Bench in 1572, at about\nEdmund Plowden (1518-85)\nbecause words age 48, and chief justice in 1574.\nwas a skilled and admired atare often spo- He remained chief justice for\ntorney. He produced the first\nken or uttered 17\xc2\xbd years, until he died in 1592.\nmodern law reports, Les\nby a man withcomentaries, ou les reportes de\nout great adEdmunde Plowden, written in\nlaw French. It is rumored that\nvisement or deliberation, the law has provided\nPlowden would have been apthat a contract by words shall not bind without\npointed judge had he not reconsideration. Thus, if I promise to give you\nmained a Catholic.\n\xc2\xa320 to rebuild your hall, here you shall not\nhave an action against me for the \xc2\xa320 ..., for it\nis a naked pact, et nudo pacto non oritur actio.\nAnd the reason is because the agreement is by words, which pass from men lightly. But where the agreement is made by deed [that is, by sealed writing,] there is\nmore stay. .... ... [T]here is great thought and deliberation in the making of deeds,\nand therefore we receive them as a final tie of the party and adjudge them to bind\nthe party without thinking what cause or consideration there was for making it.\nQuestions:\n1. Here you have no decision by a court, but only some of the arguments of counsel in a case you know nothing about. We can learn a few things from the arguments of counsel, however, if you will read closely. What do Fletewood & Wray\nargue should count as a consideration (see if you can find at least three descriptions of it)?\n2. What reasons do Fletewood & Wray give for requiring a consideration?\n3. What reason does Plowden give for requiring a consideration?\n4. Are the reasons given by Fletewood, Wray, and Plowden for the consideration\nrequirement different from the policy concern with naked promises shown in\nDOCTOR AND STUDENT?\n5. Which policy trusts promisors more, DOCTOR AND STUDENT\xe2\x80\x99s or Plowden\xe2\x80\x99s?\n(Which question by a parent trusts a child more: (i) \xe2\x80\x9cWhy did you do that?\xe2\x80\x9d\n(\xe2\x80\x9cWhat were you thinking?\xe2\x80\x9d) or (ii) \xe2\x80\x9cDid you think about that carefully before\nyou did it?\xe2\x80\x9d)\n\n11\n\n\x0cD. More on Bargain or Exchange\nNow we will take a closer look at two other famous applications of the rule requiring bargain or exchange.\nHUNT v. BATE (1568)\nCommon Pleas\nDyer, 272a, 73 ER 605, B&M 494\nThe servant [let\xe2\x80\x99s call him Employee] of a man [let\xe2\x80\x99s call him Employer] was arrested, and imprisoned in the Compter* in London for a trespass; and he [Employee] was [let out of the Compter when two other citizens of London (one of whom\nwas plaintiff; let\xe2\x80\x99s call him Pledge) who knew Employer took Employee\xe2\x80\x99s place in\njail],\xe2\x80\xa0 in consideration that the business of [Employer] should not go undone. And\nafterwards, before judgment and condemnation [of the two citizens], [Employer] ... upon the said friendly consideration promised and undertook to [Pledge] ...\nto save him harmless against the party plaintiff from all damages and costs if any\nshould be adjudged, as happened afterwards in reality; whereupon the surety\n[Pledge] was compelled to pay the condemnation, s. thirty-one pounds, &c. And\nthereupon he [Pledge] brought an action on the case ... [against Employer, and the\njury found for Pledge]. And now in arrest of judgment it was moved that the action does not lie. And by the opinion of the Court it does not lie in this matter, because there is no consideration wherefore the defendant [Employer] should be\ncharged for the debt of [Employee], unless [Employer] had first promised to discharge the plaintiff [Pledge] before the enlargement, and ... [Pledge became human bail], for [Employer] did never make request of the plaintiff [Pledge] for\n[Employee] to do so much, but he did it of his own head ....\nListen to a summary of the facts here: http://cca.li/QI\nQuestions:\n1. Why wasn\xe2\x80\x99t Employer\xe2\x80\x99s promise enforceable? (You should be able to formulate\nyour answer as a declarative sentence, a rule of law: There is no valid consideration when ___________.)\n2. The court gives no policy reason for this rule, but why is it a good rule? (Use\nyour moral sense, however finely or poorly developed, and speculate as to why a\ncourt would require what this court does. I will ask you to do this mental exercise\noften, because imagining up a policy to support a rule that doesn\xe2\x80\x99t appear to have\n\n*\n\nThe Compter was a jail in London, probably on Wood Street.\nApparently, the jail was having a 2-for-1 special. By taking the servant\xe2\x80\x99s place in jail, Pledge and\nhis fellow citizen became guarantors or sureties for the servant\xe2\x80\x99s debt to the plaintiff in the trespass case.\n\xe2\x80\xa0\n\n12\n\n\x0cone is a routine task of good lawyers.)\n3. Fill in the blank: This is a case of [one word] consideration.\n4. Pledge took Employee\xe2\x80\x99s place in jail in order that Employer\xe2\x80\x99s work not go undone. Why did Pledge allege that Pledge did this \xe2\x80\x9cin consideration\xe2\x80\x9d that that business not go undone?\n5. What caused Employer\xe2\x80\x99s promise? What does Pledge allege caused Employer\xe2\x80\x99s\npromise?\n\n6. William Fulbecke, in THE SECOND PART OF THE PARALLELE, OR CONFERENCE OF\nTHE CIVILL LAW, THE CANON LAW, AND THE COMMON LAW OF THIS REALME OF\nENGLAND 18b (Thomas Wight 1602), reported that \xe2\x80\x9cour Law requireth in all contractes a mutuall consideration, and one part of the contract challengeth and begetteth the other.\xe2\x80\x9d His first illustration for this principle was Hunt v. Bate.\n\nThink English translations of Law French from the 1500s are difficult? See if you\ncan figure out what is really going on in this decision.\nHildegard Lee BORELLI v. Grace G. BRUSSEAU, as Executor (1993)\nCalifornia Court of Appeal, First District, Division 4\n16 Cal. Rptr.2d 16\nOPINION\nPERLEY, J.\n[\xc2\xb61] Plaintiff and appellant Hildegard L. Borelli (appellant) appeals from a\njudgment of dismissal after a demurrer was sustained without leave to amend to\nher complaint against defendant and respondent Grace G. Brusseau, as executor\n13\n\n\x0cof the estate of Michael J. Borelli (respondent). The complaint sought specific\nperformance of a promise by appellant\xe2\x80\x99s deceased husband, Michael J. Borelli\n(decedent), to transfer certain property to her in return for her promise to care for\nhim at home after he had suffered a stroke.\n[\xc2\xb62] Appellant contends that the trial court erred by sustaining the demurrer on\nthe grounds that the \xe2\x80\x9calleged agreement [appellant] seeks to enforce is without\nconsideration and the alleged contract is void as against public policy.\xe2\x80\x9d We conclude that the contention lacks merit.\nFACTS\n[\xc2\xb63] The only \xe2\x80\x9cfacts\xe2\x80\x9d we can consider on this appeal from the sustaining of a\ndemurrer are those \xe2\x80\x9cmaterial facts properly pleaded, but not contentions, deductions or conclusions of fact or law.\xe2\x80\x9d * * * * Since both parties\xe2\x80\x99 briefs wander far\nfrom the allegations of the complaint we will set out those allegations in some detail.\n[\xc2\xb64] On April 24, 1980, appellant and decedent entered into an antenuptial contract. On April 25, 1980, they were married. Appellant remained married to decedent until the death of the latter on January 25, 1989.\n[\xc2\xb65] In March 1983, February 1984, and January 1987, decedent was admitted\nto a hospital due to heart problems. As a result, \xe2\x80\x9cdecedent became concerned and\nfrightened about his health and longevity.\xe2\x80\x9d He discussed these fears and concerns\nwith appellant and told her that he intended to \xe2\x80\x9cleave\xe2\x80\x9d the following property to\nher.\n1. \xe2\x80\x9cAn interest\xe2\x80\x9d in a lot in Sacramento, California.\n2. A life estate for the use of a condominium in Hawaii.\n3. A 25 percent interest in Borelli Meat Co.\n4. All cash remaining in all existing bank accounts at the time of his death.\n5. The costs of educating decedent\xe2\x80\x99s stepdaughter, Monique Lee.\n6. Decedent\xe2\x80\x99s entire interest in a residence in Kensington, California.\n7. All furniture located in the residence.\n8. Decedent\xe2\x80\x99s interest in a partnership.\n9. Health insurance for appellant and Monique Lee.\n[\xc2\xb66] In August 1988, decedent suffered a stroke while in the hospital.\n\xe2\x80\x9cThroughout the decedent\xe2\x80\x99s August, 1988 hospital stay and subsequent treatment\nat a rehabilitation center, he repeatedly told [appellant] that he was uncomfortable\nin the hospital and that he disliked being away from home. The decedent repeatedly told [appellant] that he did not want to be admitted to a nursing home, even\nthough it meant he would need round-the-clock care, and rehabilitative modifications to the house, in order for him to live at home.\xe2\x80\x9d\n14\n\n\x0c[\xc2\xb67] \xe2\x80\x9cIn or about October, 1988, [appellant] and the decedent entered an oral\nagreement whereby the decedent promised to leave to [appellant] the property\nlisted [above], including a one hundred percent interest in the Sacramento property. ... In exchange for the decedent\xe2\x80\x99s promise to leave her the property ... [appellant] agreed to care for the decedent in his home, for the duration of his illness,\nthereby avoiding the need for him to move to a rest home or convalescent hospital\nas his doctors recommended. The agreement was based on the confidential relationship that existed between [appellant] and the decedent.\xe2\x80\x9d\n[\xc2\xb68] Appellant performed her promise but the decedent did not perform his.\nInstead his will bequeathed her the sum of $100,000 and his interest in the residence they owned as joint tenants. The bulk of decedent\xe2\x80\x99s estate passed to respondent, who is decedent\xe2\x80\x99s daughter.\nDISCUSSION\n[\xc2\xb69] \xe2\x80\x9cIt is fundamental that a marriage contract differs from other contractual\nrelations in that there exists a definite and vital public interest in reference to the\nmarriage relation. The \xe2\x80\x98paramount interests of the community at large,\xe2\x80\x99 quoting\nfrom the Phillips case [Phillips v. Phillips (1953) 41 Cal. 2d 869] is a matter of\nprimary concern.\xe2\x80\x9d * * * *\n[\xc2\xb610] \xe2\x80\x9cThe laws relating to marriage and divorce (Civ. Code, [former] \xc2\xa7\xc2\xa7 55-181)\nhave been enacted because of the profound concern of our organized society for\nthe dignity and stability of the marriage relationship. This concern relates primarily to the status of the parties as husband and wife. The concern of society as to the\nproperty rights of the parties is secondary and incidental to its concern as to their\nstatus.\xe2\x80\x9d * * * *\n[\xc2\xb611] \xe2\x80\x9cMarriage is a matter of public concern. The public, through the state, has\ninterest in both its formation and dissolution. ... The regulation of marriage and\ndivorce is solely within the province of the Legislature except as the same might\nbe restricted by the Constitution.\xe2\x80\x9d * * * *\n[\xc2\xb612] In accordance with these concerns the following pertinent legislation has\nbeen enacted: Civil Code section 242-\xe2\x80\x9dEvery individual shall support his or her\nspouse ....\xe2\x80\x9d Civil Code section 4802-\xe2\x80\x9d[A] husband and wife cannot, by any contract with each other, alter their legal relations, except as to property. ...\xe2\x80\x9d Civil\nCode section 5100-\xe2\x80\x9dHusband and wife contract toward each other obligations of\nmutual respect, fidelity, and support.\xe2\x80\x9d Civil Code section 5103-\xe2\x80\x9d[E]ither husband\nor wife may enter into any transaction with the other ... respecting property, which\neither might if unmarried.\xe2\x80\x9d Civil Code section 5132-\xe2\x80\x9d[A] married person shall\nsupport the person\xe2\x80\x99s spouse while they are living together. ...\xe2\x80\x9d\n\n15\n\n\x0c[\xc2\xb613] The courts have stringently enforced and explained the statutory language.\n\xe2\x80\x9cAlthough most of the cases, both in California and elsewhere, deal with a wife\xe2\x80\x99s\nright to support from the husband, in this state a wife also has certain obligations\nto support the husband.\xe2\x80\x9d * * * *\n[\xc2\xb614] \xe2\x80\x9cIndeed, husband and wife assume mutual obligations of support upon\nmarriage. These obligations are not conditioned on the existence of community\nproperty or income.\xe2\x80\x9d * * * * \xe2\x80\x9cIn entering the marital state, by which a contract is\ncreated, it must be assumed that the parties voluntarily entered therein with\nknowledge that they have the moral and legal obligation to support the other.\xe2\x80\x9d\n[\xc2\xb615] Moreover, interspousal mutual obligations have been broadly defined.\n\xe2\x80\x9c[Husband\xe2\x80\x99s] duties and obligations to [wife] included more than mere cohabitation with her. It was his duty to offer [wife] his sympathy, confidence [citation],\nand fidelity.\xe2\x80\x9d * * * * When necessary, spouses must \xe2\x80\x9cprovide uncompensated\nprotective supervision services for\xe2\x80\x9d each other. * * * *\n[\xc2\xb616] Estate of Sonnicksen (1937) * * * * and Brooks v. Brooks (1941) * * * *\neach hold that under the above statutes and in accordance with the above policy a\nwife is obligated by the marriage contract to provide nursing-type care to an ill\nhusband. Therefore, contracts whereby the wife is to receive compensation for\nproviding such services are void as against public policy; and there is no consideration for the husband\xe2\x80\x99s promise.\n[\xc2\xb617] Appellant argues that Sonnicksen and Brooks are no longer valid precedents because they are based on outdated views of the role of women and marriage. She further argues that the rule of those cases denies her equal protection\nbecause husbands only have a financial obligation toward their wives, while\nwives have to provide actual nursing services for free. We disagree. The rule and\npolicy of Sonnicksen and Brooks have been applied to both spouses in several recent cases arising in different areas of the law.\n[\xc2\xb618] Webster\xe2\x80\x99s New Collegiate Dictionary (1981) page 240 defines consortium\nas \xe2\x80\x9cThe legal right of one spouse to the company, affection, and service of the\nother.\xe2\x80\x9d Only married persons are allowed to recover damages for loss of consortium. * * * *\n[\xc2\xb619] Rodriguez v. Bethlehem Steel Corp. (1974) * * * * held that a wife could\nrecover consortium damages. The Supreme Court\xe2\x80\x99s reasoning was as follows.\n\xe2\x80\x9cBut there is far more to the marriage relationship than financial support. \xe2\x80\x98The\nconcept of consortium includes not only loss of support or services, it also embraces such elements as love, companionship, affection, society, sexual relations,\nsolace and more.\xe2\x80\x99 [Citation.] As to each, \xe2\x80\x98the interest sought to be protected is\npersonal to the wife\xe2\x80\x99 [citation] ....\xe2\x80\x9d * * * * \xe2\x80\x9cThe deprivation of a husband\xe2\x80\x99s physical assistance in operating and maintaining the family home is a compensable\nitem of loss of consortium.\xe2\x80\x9d * * * *\n16\n\n\x0c[\xc2\xb620] In Krouse v. Graham (1977) * * *, an action for the wrongful death of the\nwife, the husband was allowed to recover consortium damages \xe2\x80\x9cfor the loss of his\nwife\xe2\x80\x99s \xe2\x80\x98love, companionship, comfort, affection, society, solace or moral support,\nany loss of enjoyment of sexual relations, or any loss of her physical assistance in\nthe operation or maintenance of the home.\xe2\x80\x99\xe2\x80\x9d The wife \xe2\x80\x9chad recently retired as a\nlegal secretary in order to care for her husband, Benjamin, whose condition of\nemphysema, in turn, caused him to retire and necessitated considerable nursing\nservices.\xe2\x80\x9d\n[\xc2\xb621] The principal holding of Watkins v. Watkins (1983) * * * * was that a marriage did not extinguish a woman\xe2\x80\x99s right to recover the value of her homemaker\nservices rendered prior to the marriage. Much of the opinion is devoted to a discussion of Sonnicksen and Brooks. Those cases are approved by the court but not\nexpanded to cover the period before marriage. * * * *\n[\xc2\xb622] Vincent v. State of California (1971) * * * * held that for purposes of benefit payments spouses caring for each other must be treated identically under similar assistance programs. In reaching such conclusion the court held: \xe2\x80\x9cAppellants\nsuggest that one reason justifying denial of payment for services rendered by ATD\nattendants who reside with their recipient spouses is that, by virtue of the marriage\ncontract, one spouse is obligated to care for the other without remuneration. (Civ.\nCode, \xc2\xa7 5100; Estate of Sonnicksen * * *) Such preexisting duty provides a constitutionally sound basis for a classification which denies compensation for care\nrendered by a husband or wife to his spouse who is receiving welfare assistance.\n[Citations.] ... [\xc2\xb6] ... But insofar as one spouse has a duty created by the marriage\ncontract to care for the other without compensation when they are living together,\nrecipients of aid to the aged, aid to the blind and aid to the disabled are similarly\nsituated.\xe2\x80\x9d * * * *\n[\xc2\xb623] These cases indicate that the marital duty of support under Civil Code sections 242, 5100, and 5132 includes caring for a spouse who is ill. They also establish that support in a marriage means more than the physical care someone could\nbe hired to provide. Such support also encompasses sympathy * * * * [,] comfort\n* * * * [,] love, companionship and affection * * * *. Thus, the duty of support\ncan no more be \xe2\x80\x9cdelegated\xe2\x80\x9d to a third party than the statutory duties of fidelity\nand mutual respect (Civ. Code, \xc2\xa7 5100). Marital duties are owed by the spouses\npersonally. This is implicit in the definition of marriage as \xe2\x80\x9ca personal relation\narising out of a civil contract between a man and a woman.\xe2\x80\x9d (Civ. Code, \xc2\xa7 4100.)\n[\xc2\xb624] We therefore adhere to the long-standing rule that a spouse is not entitled\nto compensation for support, apart from rights to community property and the like\nthat arise from the marital relation itself. Personal performance of a personal duty\ncreated by the contract of marriage does not constitute a new consideration supporting the indebtedness, alleged in this case.\n17\n\n\x0c[\xc2\xb625] We agree with the dissent that no rule of law becomes sacrosanct by virtue\nof its duration, but we are not persuaded that the well-established rule that governs this case deserves to be discarded. If the rule denying compensation for support originated from considerations peculiar to women, this has no bearing on the\nrule\xe2\x80\x99s gender-neutral application today. There is as much potential for fraud today\nas ever, and allegations like appellant\xe2\x80\x99s could be made every time any personal\ncare is rendered. This concern may not entirely justify the rule, but it cannot be\nsaid that all rationales for the rule are outdated.\n[\xc2\xb626] Speculating that appellant might have left her husband but for the agreement she alleges, the dissent suggests that marriages will break up if such agreements are not enforced. While we do not believe that marriages would be fostered\nby a rule that encouraged sickbed bargaining, the question is not whether such\nnegotiations may be more useful than unseemly. The issue is whether such negotiations are antithetical to the institution of marriage as the Legislature has defined\nit. We believe that they are.\n[\xc2\xb627] The dissent maintains that mores have changed to the point that spouses\ncan be treated just like any other parties haggling at arm\xe2\x80\x99s length. Whether or not\nthe modern marriage has become like a business, and regardless of whatever else\nit may have become, it continues to be defined by statute as a personal relationship of mutual support. Thus, even if few things are left that cannot command a\nprice, marital support remains one of them.\nDisposition\nThe judgment is affirmed. Costs to respondents.\nPOCHE, J., Dissenting.\n[\xc2\xb61] A very ill person wishes to be cared for at home personally by his spouse\nrather than by nurses at a health care facility. The ill person offers to pay his\nspouse for such personal care by transferring property to her. The offer is accepted,\nthe services are rendered and the ill spouse dies. Affirming a judgment of dismissal rendered after a general demurrer was sustained, this court holds that the contract was not enforceable because-as a matter of law-the spouse who rendered\nservices gave no consideration. Apparently, in the majority\xe2\x80\x99s view she had a\npreexisting or precontract nondelegable duty to clean the bedpans herself. Because I do not believe she did, I respectfully dissent.\n[\xc2\xb62] The majority correctly read Estate of Sonnicksen (1937) * * * * and\nBrooks v. Brooks (1941) * * * * as holding that a wife cannot enter into a binding\ncontract with her husband to provide \xe2\x80\x9cnursing-type care\xe2\x80\x9d for compensation.\n* * * * It reasons that the wife, by reason of the marital relationship, already has\na duty to provide such care, thus she offers no new consideration to support an\nindependent contract to the same effect. (See Civ. Code, \xc2\xa7\xc2\xa7 1550, 1605.) The logic of these decisions is ripe for reexamination.\n18\n\n\x0c[\xc2\xb63] Sonnicksen and Brooks are the California Court of Appeal versions of a\nnational theme. (See, e.g., [several precedents from around the country].) Excerpts\nfrom several of these decisions reveal the ethos and mores of the era which produced them.\n[\xc2\xb64] \xe2\x80\x9c\xe2\x80\x98It would operate disastrously upon domestic life and breed discord and\nmischief if the wife could contract with her husband for the payment of services\nto be rendered for him in his home; if she could exact compensation for services,\ndisagreeable or otherwise, rendered to members of his family; if she could sue\nhim upon such contracts and establish them upon the disputed and conflicting testimony of the members of the household. To allow such contracts would degrade\nthe wife by making her a menial and a servant in the home where she should discharge marital duties in loving and devoted ministrations, and frauds upon creditors would be greatly facilitated, as the wife could frequently absorb all her husband\xe2\x80\x99s property in the payment of her services, rendered under such secret, unknown contracts.\xe2\x80\x99\xe2\x80\x9d (Brooks v. Brooks * * *.)\n[\xc2\xb65] \xe2\x80\x9cA man cannot be entitled to the services of his wife for nothing, by virtue\nof a uniform and unchangeable marriage contract, and at the same time be under\nobligation to pay her for those services .... She cannot be his wife and his hired\nservant at the same time. ... That would be inconsistent with the marriage relation,\nand disturb the reciprocal duties of the parties.\xe2\x80\x9d (In re Callister\xe2\x80\x99s Estate (1897) *\n* *.)\n[\xc2\xb66] \xe2\x80\x9c[I]t is not within the power of husband and wife to contract with each\nother for the payment for such services .... It is the duty of husband and wife to\nattend, nurse, and care for each other when either is unable to care for himself. It\nwould be contrary to public policy to permit either to make an enforceable contract with the other to perform such services as are ordinarily imposed upon them\nby the marital relations, and which should be the natural prompting of that love\nand affection which should always exist between husband and wife.\xe2\x80\x9d (Foxworthy\nv. Adams * * *.)\n[\xc2\xb67] Statements in two of these cases to the effect that a husband has an entitlement to his wife\xe2\x80\x99s \xe2\x80\x9cservices\xe2\x80\x9d * * * * smack of the common law doctrine of\ncoverture which treated a wife as scarcely more than an appendage to her husband.\nAccording to the United States Supreme Court, \xe2\x80\x9cAt the common law the husband\nand wife were regarded as one. The legal existence of the wife during coverture\nwas merged in that of the husband, and, generally speaking, the wife was incapable of making contracts, of acquiring property or disposing of the same without\nher husband\xe2\x80\x99s consent. They could not enter into contracts with each other, nor\nwere they liable for torts committed by one against the other.\xe2\x80\x9d * * * * The same\ncourt subsequently denounced coverture as \xe2\x80\x9cpeculiar and obsolete\xe2\x80\x9d * * * *, \xe2\x80\x9ca\ncompletely discredited ... archaic remnant of a primitive caste system\xe2\x80\x9d * * *\nfounded upon \xe2\x80\x9cmedieval views\xe2\x80\x9d which are at present \xe2\x80\x9coffensive to the ethos of\n19\n\n\x0cour society.\xe2\x80\x9d * * * * One of the characteristics of coverture was that it deemed\nthe wife economically helpless and governed by an implicit exchange: \xe2\x80\x9c\xe2\x80\x98The\nhusband, as head of the family, is charged with its support and maintenance in return for which he is entitled to the wife\xe2\x80\x99s services in all those domestic affairs\nwhich pertain to the comfort, care, and well-being of the family. Her labors are\nher contribution to the family support and care.\xe2\x80\x99\xe2\x80\x9d * * * * But coverture has been\ndiscarded in California * * * *, where both husband and wife owe each other the\nduty of support. (Civ. Code, \xc2\xa7\xc2\xa7 242, 5100, 5132.)\n[\xc2\xb68] Not only has this doctrinal base for the authority underpinning the majority opinion been discarded long ago, but modern attitudes toward marriage have\nchanged almost as rapidly as the economic realities of modern society. The assumption that only the rare wife can make a financial contribution to her family\nhas become badly outdated in this age in which many married women have paying employment outside the home. A two-income family can no longer be dismissed as a statistically insignificant aberration. Moreover today husbands are\nincreasingly involved in the domestic chores that make a house a home. Insofar as\nmarital duties and property rights are not governed by positive law, they may be\nthe result of informal accommodation or formal agreement. (See Civ. Code, \xc2\xa7\n5200 et seq.) If spouses cannot work things out, there is always the no longer infrequently used option of divorce. For better or worse, we have to a great extent\nleft behind the comfortable and familiar gender-based roles evoked by Norman\nRockwell paintings. No longer can the marital relationship be regarded as \xe2\x80\x9cuniform and unchangeable.\xe2\x80\x9d * * * *\n[\xc2\xb69] It is true that public policy seeks to foster and protect that institution\n* * * * in recognition that the structure of society itself depends in large part upon\nthe institution of marriage * * *. Yet the recognition that marriage is \xe2\x80\x9cintimate to\nthe degree of being sacred\xe2\x80\x9d * * * * does not mean that the law is oblivious to what\noccurs within that relationship. Solicitude for domestic harmony is no longer synonymous with blindness to crimes spouses commit against each other * * * *,\neven when those crimes involve the previously sacrosanct realm of sexual relations. (See Pen. Code, \xc2\xa7 262.) Similarly, civil actions are allowed for intentional\nor negligent torts committed by one spouse against the other. * * * * The same is\ntrue for breached contracts. * * * * Thus, when the simple justice of redressing\nobvious wrongs is involved, the arguments for domestic harmony have been rejected and are now in full retreat, not only in California * * * * , but throughout\nthe entire nation. * * * *\n[\xc2\xb610] Restraints on interspousal litigation are almost extinct. With the walls supposedly protecting the domestic haven from litigation already reduced to rubble, it\nhardly seems revolutionary to topple one more brick. Furthermore, in situations\nsuch as this, where one spouse has died, preserving \xe2\x80\x9c\xe2\x80\x98domestic life [from] discord\nand mischief\xe2\x80\x99\xe2\x80\x9d (Brooks v. Brooks * * *) seems an academic concern that no modern academic seems concerned with.\n\n20\n\n\x0c[\xc2\xb611] Fear that a contract struck between spouses \xe2\x80\x9cdegrades\xe2\x80\x9d the spouse providing service, making him or her no better than a \xe2\x80\x9chired servant\xe2\x80\x9d justifies the result\nin several cases. * * * * Such fears did not prevent California from enacting a\nstatute specifying that \xe2\x80\x9ceither husband or wife may enter into any transaction with\nthe other, or with any other person, respecting property, which either might if unmarried.\xe2\x80\x9d (Civ. Code, \xc2\xa7\xc2\xa7 5103, subd. (a), 4802.) This is but one instance of \xe2\x80\x9cthe\nutmost freedom of contract [that] exists in California between husband and\nwife ....\xe2\x80\x9d * * * *\n[\xc2\xb612] Reduced to its essence, the alleged contract at issue here was an agreement\nto transmute Mr. Borelli\xe2\x80\x99s separate property into the separate property of his\nwife.* Had there been no marriage and had they been total strangers, there is no\ndoubt Mr. Borelli could have validly contracted to receive her services in exchange for certain of his property. The mere existence of a marriage certificate\nshould not deprive competent adults of the \xe2\x80\x9cutmost freedom of contract\xe2\x80\x9d they\nwould otherwise possess.\n[\xc2\xb613] Then there is the concern about \xe2\x80\x9cfrauds upon creditors.\xe2\x80\x9d (E.g., Brooks v.\nBrooks * * *.) Our Supreme Court has repeatedly rejected the notion that the mere\npossibility of interspousal fraud or collusion at the expense of third parties bars an\nentire category of interspousal litigation. Instead, the truth finding role of the judiciary has been deemed adequate to deal with the problem in individual cases. In\nother words, whether or not a contract was induced by fraud is decided by not\ndemurrer, but by human beings called jurors after they hear evidence. * * * * This\nmodern approach completely undercuts one more of the doctrinal underpinnings\nof Sonnicksen and Brooks and is obviously applicable here. Since this shift in the\nlaw occurred after those cases were decided, it is one more reason to reconsider\nthem and to reject their contemporary force. As Justice Holmes put it: \xe2\x80\x9cIt is revolting to have no better reason for a rule of law than that so it was laid down in\nthe time of Henry IV. It is still more revolting if the grounds upon which it was\nlaid down have vanished long since, and the rule simply persists from blind imitation of the past.\xe2\x80\x9d (Justice Oliver Wendell Holmes, Collected Legal Papers (1920)\np. 187.)\n[\xc2\xb614] No one doubts that spouses owe each other a duty of support or that this\nencompasses \xe2\x80\x9cthe obligation to provide medical care.\xe2\x80\x9d * * * * There is nothing\nfound in Sonnicksen and Brooks, or cited by the majority, which requires that this\nobligation be personally discharged by a spouse except the decisions themselves.\nPlaintiff makes reference in her complaint to a \xe2\x80\x9c1980 written antenuptial contract\xe2\x80\x9d that she alleges she \xe2\x80\x9csigned ... one day before her wedding.\xe2\x80\x9d Although the record does not include a copy of this\ncontract, it seems obvious from the context of this litigation that its general import was to segregate and preserve substantial assets as to Mr. Borelli\xe2\x80\x99s separate property.\nThe possibility that the agreement is ineffective to transmute the character of Mr. Borelli\xe2\x80\x99s property because of noncompliance with various statute of frauds provisions (see Civ. Code,\n\xc2\xa7\xc2\xa7 1624, 5110.730; Code Civ. Proc., \xc2\xa7\xc2\xa7 1971-1972) need not be addressed here in light of plaintiff\xe2\x80\x99s allegation that defendants are estopped to claim the benefit of these provisions. * * * *\n*\n\n21\n\n\x0cHowever, at the time Sonnicksen and Brooks were decided\xe2\x80\x94before World War\nII\xe2\x80\x94it made sense for those courts to say that a wife could perform her duty of\ncare only by doing so personally. That was an accurate reflection of the real world\nfor women years before the exigency of war produced substantial employment\nopportunities for them. For most women at that time there was no other way to\ntake care of a sick husband except personally. So to the extent those decisions\nhold that a contract to pay a wife for caring personally for her husband is without\nconsideration they are correct only because at the time they were decided there\nwere no other ways she could meet her obligation of care. Since that was the universal reality, she was giving up nothing of value by agreeing to perform a duty\nthat had one and only one way of being performed.\n[\xc2\xb615] However the real world has changed in the 56 years since Sonnicksen was\ndecided. Just a few years later with the advent of World War II Rosie the Riveter\nbecame not only a war jingle but a salute to hundreds of thousands of women\nworking on the war effort outside the home. We know what happened thereafter.\nPresumably, in the present day husbands and wives who work outside the home\nhave alternative methods of meeting this duty of care to an ill spouse. Among the\nchoices would be: (1) paying for professional help; (2) paying for nonprofessional\nassistance; (3) seeking help from relatives or friends; and (4) quitting one\xe2\x80\x99s job\nand doing the work personally.\n[\xc2\xb616] A fair reading of the complaint indicates that Mrs. Borelli initially chose\nthe first of these options, and that this was not acceptable to Mr. Borelli, who then\noffered compensation if Mrs. Borelli would agree to personally care for him at\nhome. To contend in 1993 that such a contract is without consideration means that\nif Mrs. Clinton becomes ill, President Clinton must drop everything and personally care for her.\n[\xc2\xb617] According to the majority, Mrs. Borelli had nothing to bargain with so\nlong as she remained in the marriage. This assumes that an intrinsic component of\nthe marital relationship is the personal services of the spouse, an obligation that\ncannot be delegated or performed by others. The preceding discussion has attempted to demonstrate many ways in which what the majority terms \xe2\x80\x9cnursingtype care\xe2\x80\x9d can be provided without either husband or wife being required to empty a single bedpan. It follows that, because Mrs. Borelli agreed to supply this personal involvement, she was providing something over and above what would fully\nsatisfy her duty of support. That personal something\xe2\x80\x94precisely because it was\nsomething she was not required to do\xe2\x80\x94qualifies as valid consideration sufficient\nto make enforceable Mr. Borelli\xe2\x80\x99s reciprocal promise to convey certain of his separate property.\n[\xc2\xb618] Not only does the majority\xe2\x80\x99s position substantially impinge upon couples\xe2\x80\x99\nfreedom to come to a working arrangement of marital responsibilities, it may also\nfoster the very opposite result of that intended. For example, nothing compelled\nMr. Borelli and plaintiff to continue living together after his physical afflictions\n22\n\n\x0cbecame known. Moral considerations notwithstanding, no legal force could have\nstopped plaintiff from leaving her husband in his hour of need. Had she done so,\nand had Mr. Borelli promised to give her some of his separate property should she\ncome back, a valid contract would have arisen upon her return. Deeming them\ncontracts promoting reconciliation and the resumption of marital relations, California courts have long enforced such agreements as supported by consideration.\n* * * * Here so far as we can tell from the face of the complaint, Mr. Borelli and\nplaintiff reached largely the same result without having to endure a separation.* fn.\n3 There is no sound reason why their contract, which clearly facilitated continuation of their marriage, should be any less valid. It makes no sense to say that\nspouses have greater bargaining rights when separated than they do during an unruptured marriage.\n[\xc2\xb619] What, then, justifies the ban on interspousal agreements of the type refused enforcement by Sonnicksen, Brooks, and the majority? At root it appears to\nbe the undeniable allure of the thought that, for married persons, \xe2\x80\x9cto attend, nurse,\nand care for each other ... should be the natural prompting of that love and affection which should always exist between husband and wife.\xe2\x80\x9d * * * * All married\npersons would like to believe that their spouses would cleave unto them through\nthick and thin, in sickness and in health. Without question, there is something profoundly unsettling about an illness becoming the subject of interspousal negotiations conducted over a hospital sickbed. Yet sentiment cannot substitute for common sense and modern day reality. Interspousal litigation may be unseemly, but it\nis no longer a novelty. The majority preserves intact an anomalous rule which\ngives married persons less than the utmost freedom of contract they are supposed\nto possess. The majority\xe2\x80\x99s rule leaves married people with contracting powers\nwhich are more limited than those enjoyed by unmarried persons or than is justified by legitimate public policy. In this context public policy should not be equated with coerced altruism. Mr. Borelli was a grown man who, having amassed a\nsizeable amount of property, should be treated\xe2\x80\x94at least on demurrer\xe2\x80\x94as competent to make the agreement alleged by plaintiff. The public policy of California\nwill not be outraged by affording plaintiff the opportunity to try to enforce that\nagreement.\nQuestions:\n1. What is the rule of law the court applies?\n2. Which opinion do you think has the better argument?\n\nPlaintiff\xe2\x80\x99s allegation in her complaint that she forewent the opportunity \xe2\x80\x9cto live an independent\nlife in consideration of her agreement\xe2\x80\x9d with Mr. Borelli carries the clear implication that she\nwould have separated from him but for the agreement.\n*\n\n23\n\n\x0c3. How would this case come out if the rationales for the doctrine of consideration,\nand not the doctrine itself, were the law?\n4. Are you interested in the political leanings of the judges in this case? Which\njudge do you think leans which way?\n5. If Mrs. Borelli came to you and asked you to write an enforceable contract requiring Mr. Borelli to pay according to his agreement, what sort of agreement\nwould you write? [The answer to this question is not in the reading, but it is the\nkind of question you should be thinking about. Please ask me this question in\nclass. I will answer it.]\n\nPROBLEM 3. Abe v. Juanita: Abe is a police officer. Juanita owns a jewelry\nstore in Abe\xe2\x80\x99s jurisdiction, where Abe patrols. Juanita\xe2\x80\x99s store was burglarized, and\nJuanita offered a $5,000 reward to anyone with information leading to the arrest\nand conviction of the burglars. Abe, while working part-time as a security guard at\na nearby store, found evidence that led to the arrest and conviction of the burglars.\nCan Abe claim Juanita\xe2\x80\x99s reward, based on the rule from Borelli v. Brusseau? Is\nthere some other public policy that counsels against Abe\xe2\x80\x99s recovering the reward?\nRestatement (Second) of Contracts \xc2\xa7 71(1)-(2) & cmt. b (1981)\nQuestions:\n1. What does \xe2\x80\x9cbargained for\xe2\x80\x9d mean in the language of the Restatement (Second)\nof Contracts (affectionately known as \xe2\x80\x9cR2K\xe2\x80\x9d)?\n2. Is Hunt\xe2\x80\x99s promise in Hunt v. Bate bargained for?\n3. Comment b mentions mutual assent. As noted in the Introduction, assent is considered to be one element of contract formation. We will study assent later, in\nChapters 5, 6, and 7.\n4. The comment also mentions promises enforceable without consideration. We\nwill study these, too, some in this Chapter, in Chapters 2 and 3, and others sprinkled throughout the book.\n\nE. Proper Form\nNotwithstanding a clear requirement of a bargain, courts from early on expressed\nthe consideration rule primarily in terms of consideration\xe2\x80\x99s form. Consideration\nwas (and still is) also required to be in a certain form: benefit to the promisor, detriment to the promisee, or mutual promise.\n24\n\n\x0cSTONE v. WITHEPOOLE (1588)\nQueen\xe2\x80\x99s Bench\n1 Leon. 113, 74 ER 106, Cro. Eliz. 126, 78 ER 383, Owen 94, 74 ER 924,\nLatch, 82 ER 254\n... [Edward Coke (pronounced Cook):] .... The consideration is the ground of every action on the case, and it ought to be either a charge to the plaintiff or a benefit\nto the defendant ....\nPLAINS BUILDERS, INC. v. STEEL SOURCE, INC. (2013)\nTexas Court of Appeals\n408 S.W.3d 596, 602\nConsideration is a present exchange bargained for in return for a promise. It consists of either a benefit to the promisor or a detriment to the promisee. The detriment must induce the making of the promise, and the promise must induce the\nincurring of the detriment.\nNote: Coke\xe2\x80\x99s pronouncement of the rule in Stone was fairly typical for the time.\nThe rule you see recited in Plains Builders is a typical statement of the consideration rule as it is used today. They are the same rule. In 16th century procedure, the\npromisor was always the defendant, and the promisee was always the plaintiff\xe2\x80\x94in\nall assumpsit, debt, and covenant actions: all actions on contracts. So it makes\nsense for us to pronounce the same rule as we do now, as benefit to the promisor\nor detriment to the promisee. We also include the element of bargain, because we\nhave recognized that bargain was implicit in the law at least since the\ntime of Hunt v. Bate.\n\n1. Benefit\nGAME v. HARVIE (1605)\nKing\xe2\x80\x99s Bench\nYelverton 50, 80 ER 36\n[Plaintiffs loaned defendant money, to be paid back on request. Defendant refused\nto pay when requested, so plaintiffs sued in assumpsit, winning a judgment.] ...\n[I]n arrest of judgment, Yelverton shewed that the consideration was not sufficient;\nfor it is to pay ... upon request; so that it appears that the defendant was not to\nhave any benefit by it, for it might be lent with one hand, and immediately demanded .... But tota Curia clearly contra; for when the intent of the parties may\nstand with the law, it shall be expounded accordingly; ... and ... here ... (as Popham [J.] said) the promise is grounded upon an accommodation, viz. a loan,\nwhich implies an use of the [money] by the defendant. .... But if a man delivers to\nJ.S. a bag sealed with money, and the defendant promises to redeliver it upon re25\n\n\x0cquest, no assumpsit lies upon this; for the defendant has not any benefit by it, for\nthe money being in a bag has only a charge imposed by the keeping, vide P. 44\nEliz. before, the case of Riches and Brigges, which Yelverton cited to be reversed,\nand Gaudy and the Court [the King\xe2\x80\x99s Bench] said it was erroneously reversed. ....\n\n[Translation guide from legal to common English: In arrest of judgment means,\nmore or less, \xe2\x80\x9con appeal.\xe2\x80\x9d Shewed means \xe2\x80\x9cargued.\xe2\x80\x9d Tota curia is Latin for \xe2\x80\x9cthe\nwhole court.\xe2\x80\x9d Contra means \xe2\x80\x9cagainst.\xe2\x80\x9d Viz. is an abbreviation for the Latin \xe2\x80\x9cvidelicet,\xe2\x80\x9d which is a contraction of \xe2\x80\x9cvidere licet,\xe2\x80\x9d which means \xe2\x80\x9cyou may see;\xe2\x80\x9d in\nEnglish writing, viz. often is a synonym for \xe2\x80\x9cnamely\xe2\x80\x9d or \xe2\x80\x9cthat is.\xe2\x80\x9d J.S. is short for\nJohn of Style, a fictitious name lawyers used in their reports to describe anyone\nwhose name wasn\xe2\x80\x99t really relevant. John Doe is the equivalent. Assumpsit is a\ncause of action or suit for breach of promise or for unjust enrichment, as the historical intro described; assumpsit is still current usage in many states. See, e.g.,\nNevarez v. USAA Federal Savings Bank, No. 08-19-00120-CV, 2021 WL 837624\nat *4 (Tex. App.\xe2\x80\x94El Paso Mar. 5, 2021) (\xe2\x80\x9cMoney had and received is a category\nof general assumpsit.\xe2\x80\x9d).]\nQuestions:\n1. As a young associate, I used to examine loan\ndocuments to determine their enforceability.\nMany loans I examined were based on demand\nnotes, promissory notes that required the borrower to pay the money back whenever it was\ndemanded by the creditor. \xe2\x80\x9cWhat a silly provision,\xe2\x80\x9d I thought, \xe2\x80\x9cThe borrower could have the\nmoney tied up in a building project and have no\nmeans to pay it back! If we took this demand\nprovision literally, the borrower would be unable\nto use the money, and the loan would be of no\nuse to her.\xe2\x80\x9d That is exactly Yelverton\xe2\x80\x99s objection.\nWhat is Popham\xe2\x80\x99s response?\n\n26\n\nChristopher Yelverton (1536-1612)\nwas a younger son of a lawyer and\nentered law school in his late teens.\nHis break into public service came\nwhen he married Margaret Catesby.\nMargaret\xe2\x80\x99s father used his influence to\nget Yelverton elected to Parliament,\nwhere he served several times, eventually as Speaker. He and Margaret had\ntwelve children. Queen Elizabeth appointed him to the Queen\xe2\x80\x99s Bench,\nwhere he served until he died.\nhttp://www.oxforddnb.com/view/printa\nble/30213\n\n\x0c2. How does the court describe the category of things that will count as a consideration?\n3. The defendant possessed the money. That is a sort of detriment or \xe2\x80\x9ccharge,\xe2\x80\x9d the\nword the court uses for detriment. Is the promisor\xe2\x80\x99s possession of the money the\nkind of detriment that will make a promise enforceable?\n4. What does \xe2\x80\x9cintent of the parties may stand with the law\xe2\x80\x9d mean? (Clue: Comment b to Restatement (Second) of Contracts \xc2\xa7 71 says the same thing.)\n\nRICHES v. BRIDGES (1602)\nQueen\xe2\x80\x99s Bench & Exchequer Chamber\nCro. Eliz. 883, 78 ER 1108\n[\xc2\xb61] Assumpsit. For that [the plaintiff] was indebted to J.S. in twenty combs of\nbarley, to be delivered unto [J.S.] at such a day, in consideration that [the plaintiff]\nwould deliver it to the defendant before the day; the defendant assumed, and\npromised to deliver it at the day to J.S.: and alledgeth in fact, that [the plaintiff]\ndelivered it to the defendant, and the defendant had not delivered it to J.S. It was\nmoved in arrest of judgment, that this was not any consideration to deliver the\nsame corn which he had received, for he cannot have any use of it, nor any benefit\nby it.\n[\xc2\xb62] But the whole Court [the Queen\xe2\x80\x99s Bench] held it to be a good consideration; for in regard he received it, and made such a promise, it shall be intended\nthat he had some benefit thereby, viz. that he had the better credit to retain it in his\nhands; or otherwise he would not make such a promise: and if by any intendment\nit can be, the law will well intend it. Wherefore it was adjudged for the plaintiff.\nNote, afterwards upon a writ of error in the Exchequer Chamber, it was reversed\nfor this cause; for that there was not any sufficient consideration whereof the law\ntakes any regard.\nYelverton 4, 80 ER 4:\n... [by the whole Queen\xe2\x80\x99s Bench:] the very possession of the wheat might be a\ncredit and good countenance to the defendant to be esteemed a rich farmer in the\ncountry, as in case of the delivery of the 1000l. in money to deliver again upon\nrequest; for by having so much money in his possession he may happen to be preferr\xe2\x80\x99d in marriage. Quaere, for it seems a hard judgment; for the defendant has not\nany manner of profit to receive but only a bare possession. .... But nota, the judgment was reversed in the Exchequer, ... as Hitcham told Yelverton.\nListen to a summary of the facts here: http://cca.li/QJ\n27\n\n\x0cQuestions:\n1. The Queen\xe2\x80\x99s Bench found consideration in this case. Was the consideration set\nforth in the plaintiff\xe2\x80\x99s allegations (which are all set forth in the first sentence)?\n2. Do we know for what reason the defendant made this promise? Why would the\ndefendant make such a promise (you may speculate on this one)?\n3. Do we know that the defendant deliberated before making the promise?\n4. Does the consideration relied on by the court show that a promise probably was\nmade?\n5. What does \xe2\x80\x9cshall be intended\xe2\x80\x9d mean? How does a court \xe2\x80\x9cintend\xe2\x80\x9d something?\n6. Is there any reason to think that this transaction was efficient?\n7. What happened to this case in the Exchequer Chamber, which was the court of\nappeals that in 1602 reviewed cases from the Queen\xe2\x80\x99s Bench?\n8. Why does Croke, the first reporter, report that both barley or corn are at issue\nbut Yelverton reports that it was wheat? [This is a trick question, and a non-legal\none.]\n\n28\n\n\x0cREYNOLDS v. PINHOWE (1594)\nQueen\xe2\x80\x99s Bench\nCro. Eliz. 429, 78 ER 669\nAssumpsit. Whereas the defendant had [obtained a judgment of] five pounds\nagainst the plaintiff;* in consideration of four pounds given him by the plaintiff, ...\nthe defendant assumed to acknowledge satisfaction of that judgment\xe2\x80\xa0 before such\na day; and ... he had not done it. And it was thereupon demurred: for it was moved,\nthat there was not any consideration. \xe2\x80\x94But all the Court held it to be well enough;\nfor it was a benefit unto him to have it without suit or charge: and it may be there\nwas error in the record, so as the party might have avoided it. Wherefore it was\nadjudged for the plaintiff.\nMoore 412, 72 ER 663:\n... But it was adjudged good, because speedy payment excuses & prevents travail\n& expense of suit.\nListen to a summary of the facts here: http://cca.li/QK\nQuestions:\n1. What form must the consideration take, says the Queen\xe2\x80\x99s Bench?\n2. Is there any mention of \xe2\x80\x9cbargain\xe2\x80\x9d in Reynolds, Riches, and Game?\n3. Does a \xe2\x80\x9cbargain\xe2\x80\x9d exist in these three cases?\n4. How is this case different from Borelli?\n5. Reynolds has the right rule, but the application of it is controversial. Some\nAmerican jurisdictions would follow Reynolds, but most would have held that no\nconsideration existed here. They would follow Borelli on these facts. We will\nstudy those jurisdictions later. Please remember that Reynolds is a minority position.\n\nMost disputed lawsuits end with a \xe2\x80\x9cjudgment,\xe2\x80\x9d a document signed by a judge dismissing the suit\nor directing the defendant to do something such as pay money. After the court issues a judgment\nthat a defendant pay money to a winning plaintiff, if the defendant refuses to pay then the plaintiff\nmust initiate collection procedures, which are separate from and collateral to the lawsuit that resulted in the judgment. The defendant in Reynolds was a winning plaintiff in a prior lawsuit. He\nhad obtained in that prior suit a judgment against the Reynolds plaintiff.\n\xe2\x80\xa0\nAcknowledging satisfaction of the judgment debt probably meant that the defendant give the\nplaintiff a signed and sealed writing that would have provided the Reynolds plaintiff with a defense to any further collection procedures by the Reynolds defendant.\n*\n\n29\n\n\x0cPROBLEM 4. A tractor dealer sells a tractor to a farmer. The farmer takes immediate possession, and in return promises to pay for the tractor over the next five\nyears. Is there consideration?\n\nASSOCIATED BUILDERS, INC. v. William M. COGGINS et al. (1999)\nSupreme Judicial Court of Maine\n722 A.2d 1278\nDANA, J.\n[\xc2\xb61] Associated Builders, Inc. appeals from a grant of a summary judgment\nentered in the Superior Court * * * * in favor of the defendants William M. Coggins and Benjamin W. Coggins, d/b/a Ben & Bill\xe2\x80\x99s Chocolate Emporium. Associated contends that the court erred when it held that despite a late payment by the\nCogginses, an accord and satisfaction relieved the Cogginses of a contractual liability. The Cogginses argue that the three-day delay in payment was not a material\nbreach of the accord and, even if the breach was material, Associated waived its\nright to enforce the forfeiture. We agree with the Cogginses and affirm the judgment.\n[\xc2\xb62] Associated provided labor and materials to the Cogginses to complete a\nstructure on Main Street in Bar Harbor. After a dispute arose regarding compensation, Associated and the Cogginses executed an agreement stating that there existed an outstanding balance of $70,005.54 and setting forth the following terms of\nrepayment:\nIt is agreed that, two payments will be made by [the Cogginses] to [Associated] as follows: Twenty Five Thousand Dollars ($25,000.00) on or before June 1, 1996 and Twenty Five Thousand Dollars ($25,000.00) on or\nbefore June 1, 1997. No interest will be charged or paid providing payments are made as agreed. If the payments are not made as agreed then interest shall accrue at 10% [ ] per annum figured from the date of default.\nThere will be no prepayment penalties applied. It is further agreed that Associated Builders will forfeit the balance of Twenty Thousand and Five\nDollars and Fifty Four Cents ($20,005.54) providing the above payments\nare made as agreed.\nThe Cogginses made their first payment in accordance with the agreement. The\nsecond payment, however, was delivered three days late on June 4, 1997. Claiming a breach of the contract, Associated filed a complaint demanding the balance\nof $20,005.54, plus interest and cost. The Cogginses answered the complaint raising the affirmative defense of an accord and satisfaction and waiver. Both parties\nmoved for a summary judgment. The court granted the Cogginses\xe2\x80\x99 motion and\nAssociated appealed.\n30\n\n\x0c[\xc2\xb63] The trial court must enter a summary judgment \xe2\x80\x9cif the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, referred to in the statements required by [M.R. Civ. P.] 7(d) show that\nthere is no genuine issue as to any material fact set forth in those statements and\nthat any party is entitled to a judgment as a matter of law.\xe2\x80\x9d M.R. Civ. P. 56(c).\n\xe2\x80\x9cOn appeal from a grant of summary judgment, we view the evidence in the light\nmost favorable to the nonprevailing party, and review the trial court decision for\nerrors of law.\xe2\x80\x9d * * * *\n[\xc2\xb64] \xe2\x80\x9cAn accord \xe2\x80\x98is a contract under which an obligee promises to accept a\nsubstituted performance in future satisfaction of the obligor\xe2\x80\x99s duty.\xe2\x80\x99\xe2\x80\x9d * * * * Settlement of a disputed claim is sufficient consideration for an accord and satisfaction. * * * * Here, the court correctly found the June 15, 1995 agreement to be an\naccord.\n[\xc2\xb65] Satisfaction is the execution or performance of the accord. See Restatement (Second) of Contracts \xc2\xa7 281(1) (1981). If the obligor breaches the accord,\nthe obligee may enforce either the original duty or any duty pursuant to the accord.\nSee id. \xc2\xa7 281(2) (1981); see also Arthur L. Corbin, 6 Corbin on Contracts \xc2\xa7 1271,\nat 93-94 (1961). * * * *\n[\xc2\xb68] Even if the [Cogginses breached and Associated had a right to disregard\nthe accord and enforce the original obligation (\xe2\x80\x94Ricks)], Associated waived that\nright when it accepted the late payment. A waiver is a voluntary or intentional relinquishment of a known right. * * * * If a party in knowing possession of a right\ndoes something inconsistent with the right or that party\xe2\x80\x99s intention to rely on it,\nthe party is deemed to have waived that right. * * * * A party waives a contractual right arising from a breach because of a late payment when that party accepts\ntender of the late payment. * * * * Here, because Associated accepted the final\n$25,000 payment, it waived its right to enforce the forfeiture.\n[\xc2\xb69] The trial court, therefore, did not err when it held that a satisfaction of the\naccord occurred when Associated accepted the final payment.\nThe entry is:\nJudgment affirmed.\nQuestions:\n1. What is an accord?\n2. What is consideration for the accord in this case?\n3. Was consideration here a performance or a promise?\n\n31\n\n\x0c4. If the obligor breaches the accord, what remedies does the obligee have?\n5. What act constituted waiver?\n6. What should Associated have done after it received the check if it wanted to sue\nfor the other $20,005.54?\n\n\xe2\x80\x94A long aside: Moral Obligation\n\nPlease review Hunt v. Bate, supra.\nEDMONDS CASE (1587)\n3 Leon. 164\nIn an action upon the case against Edmonds, the case was, that the defendant being [a minor], requested the plaintiff to be bounden for him to another, for the\npayment of 30l., which he was to borrow for his own use; to which the plaintiff\nagreed, and was bounden, [as requested]; afterwards, the plaintiff was sued for the\nsaid debt [of Edmonds], and paid it; and afterwards, when the defendant came of\nfull age the plaintiff put him in mind of the matter aforesaid, and prayed him that\nhe might not be damnified so to pay 30l., it being the defendant\xe2\x80\x99s debt: whereupon\nthe defendant promised to pay the debt again to the plaintiff; upon which promise,\nthe action was brought. And it was holden by the Court, that although here was no\npresent consideration upon which the assumpsit could arise; yet the Court was\nclear, that upon the whole matter the action did lie, and judgment was given for\nthe plaintiff.\nQuestions:\n1. What was consideration for the second promise?\n2. The word consideration is by 1587 a technical legal word. Commonly, or nonlegally, it may mean \xe2\x80\x9ca thing to consider.\xe2\x80\x9d Does this report use it technically or by\nits common meaning?\n\nThis next case is an aside (technically an aside to an aside). It deals with a problem of capacity. Can a minor contract? Or, why did the infant in Edmonds Case\nneed to promise again? Ex Parte Odem discusses the capacity of infants.\n\n32\n\n\x0cEx parte: Iris ODEM\n(Re: The CHILDREN\xe2\x80\x99S HOSPITAL OF BIRMINGHAM v.\nVincent KELLEY and Iris Odem) (1988)\nSupreme Court of Alabama\n537 So.2d 919\n[\xc2\xb61] We granted this petition for writ of certiorari in order to review the limited\nissue of whether a minor who executes a contract for a \xe2\x80\x9cnecessary\xe2\x80\x9d is obligated to\ncomply with the express terms of the entire contract, including those provisions\nregarding attorney fees and waiver of personal exemptions.\n[\xc2\xb62] The facts of this case are set forth in the opinion by the Court of Civil Appeals, 537 So.2d 917, and we agree that medical services provided to an infant\nchild of a minor are \xe2\x80\x9cnecessaries\xe2\x80\x9d for which the minor parent may be obligated to\npay, but we hold that the attorney fees for enforcing the contract are not \xe2\x80\x9cnecessaries\xe2\x80\x9d for which the minor is legally obligated to pay.\n[\xc2\xb63] The general rule of law is that contracts of minors are voidable. That is,\nthe contract may be avoided or ratified at the election of the minor. Flexner v.\nDickerson, 72 Ala. 318 (1882). In the instant case, Iris Odem disaffirmed, or\navoided, the contract she had executed with Children\xe2\x80\x99s Hospital. Consequently,\nIris Odem\xe2\x80\x99s obligation to pay for necessaries, i.e., the medical services rendered to\nher infant son, is not the result of the express contract between the parties, but\narises from a quasi-contractual relationship created by operation of law which enforces the implied contract to pay. 43 C.J.S. Infants \xc2\xa7 180 (1978). Therefore, a\nminor is not liable on any portion of the contract, or for what was agreed to be\npaid, except that the minor is liable for the just value of the necessaries.\n[\xc2\xb64] In Wiggins Estate Co. v. Jeffery, 246 Ala. 183, 19 So.2d 769 (1944), this\nCourt, with approval, quoted the following from 18 Am.St.Rep. p. 650 et seq.:\n\xe2\x80\x9cIt is for the court to determine, as a matter of law, in the first place,\nwhether the things supplied may fall within the general classes of necessaries, and if so, whether there is sufficient evidence to warrant the jury in\nfinding that they are necessary. If either of these preliminary inquiries be\ndecided in the negative, it is the duty of the court to nonsuit the plaintiff\nwho seeks to recover from the [minor]. If they be decided in the affirmative, it is then for the jury to determine whether, under all the circumstances, the things furnished were actually necessary to the position and condition of the [minor], as well as their reasonable value, and whether the [minor] was already sufficiently supplied....\xe2\x80\x9d\nTherefore, the class and character of articles that are necessaries are issues of law.\nWiggins Estate Co., supra.\n\n33\n\n\x0c[\xc2\xb65] Do the attorney fees in this case fall within the general classes of necessaries? Stated differently, are the attorney fees necessary to the position and condition of the minor?\n[\xc2\xb66] Under Alabama law, attorney fees are recoverable from an opposing party\nonly when provided for by contract or by statute. * * * * Thus, any contractual\nprovision regarding the recovery of attorney fees in this case is for the benefit of\nChildren\xe2\x80\x99s Hospital, because the attorney fees would not otherwise be recoverable.\nAccordingly, attorney fees are not necessary to the position and condition of the\nminor and are not recoverable from Iris Odem.\n\xe2\x80\x9cIt is the policy of the law to protect infants against their own mistakes or\nimprovidence, and from designs of others, and to discourage adults from\ncontracting with an infant.\xe2\x80\x9d 43 C.J.S. Infants \xc2\xa7 180 (1978).\nAccordingly, when an infant executes a contract, the infant is liable only on his\nimplied promise to pay for necessaries, and all other provisions of the contract are\nvoidable at the election of the infant. Further, attorney fees are not necessaries,\nbecause they are not necessary for the position and condition of the infant. We\nreverse the judgment of the Court of Civil Appeals to the extent that it holds that\nIris Odem is obligated under all of the terms of the contract, and we affirm that\nportion of the judgment that holds that she is obligated for the reasonable value of\nthe medical services rendered to her infant son.\nAFFIRMED IN PART; REVERSED IN PART; AND REMANDED.\nTORBERT, C.J., and MADDOX, JONES, BEATTY, ADAMS, HOUSTON and\nSTEAGALL, JJ., concur.\nQuestions:\n1. Is a contract by a minor void?\n2. Is medical care for a minor a necessary?\n3. Are attorney\xe2\x80\x99s fees specified in the contract for medical care necessaries?\n4. Are clothes necessaries?\n5. Is an apartment a necessary?\n6. Infancy and intoxication (the rule for which is described later) are actually as\nclose as we will get to incapacity. Other than in these cases, you should presume\ncapacity to contract. The age of majority for contract is 18 for most states. Every\nindividual of the age of majority and over is presumed competent to contract unless they are proved incompetent in court. Business entities (corporations, limited\nliability companies, limited partnerships, etc.) in good standing with the state have\ncapacity to contract. Also, please note: If a contract is voided for infancy, normal34\n\n\x0cly the infant or new adult must return the item purchased, if possible; exact rules\nfor restitution of benefits received by infants under avoided contracts differ state\nto state.\n\nAside to the aside over\xe2\x80\x94now we are going back to moral obligation.\n\nThe next source, from the U.S. Bankruptcy Code, addresses the status of promises\nto pay debts that have previously been discharged in bankruptcy.\n\nPROBLEM 5. J.S. takes possession of a truck and promises in return to pay for it\nin installments. Then J.S. is laid off from work, abandons his $400,000 home (on\nwhich he owes $390,000), and drinks heavily. He fails to make his truck payments.\nHe also does not pay his credit card bills. The bank takes the house back. The\ntruck dealer takes the truck back, but J.S. owes more for the truck than the truck is\nworth. J.S.\xe2\x80\x99s creditors, including the truck note claim holder, file suits against him.\nTo escape liability to them, J.S. files for bankruptcy. Soon after J.S. files a bankruptcy case, the bankruptcy court grants him a discharge (http://cca.li/QL). This\nmeans that J.S. is no longer liable to pay for the truck or the credit cards. But, J.S.\nis plagued by guilt and wants to live an honorable life. He also wants to drive a\ntruck again, and he hopes that paying off the truck debt, even though it is discharged, will influence someone to lend to him again. J.S. writes to the truck note\nclaim holder and promises to pay the debt for the truck. Is this promise enforceable? See the following statute.\n11 U.S.C. \xc2\xa7 524. Effect of discharge\nQuestions:\n1. What is the consideration for the agreement mentioned in subsection (c)?\n2. May J.S. rescind the agreement? Why?\n3. Must the debtor have an agreement in order to repay a debt that has been discharged in bankruptcy?\n4. The following excerpt from In re Ray, 26 B.R. 534, 537 (Bankr. D. Kan. 1983),\ndetails why \xc2\xa7 524 was passed. Bankruptcy was thought to bar only collection of\nthe debt, but the moral obligation to pay it remained. Note that the court names a\nthird exception to the moral-obligation-is-no-consideration rule, besides the two\nwe have studied. What is it?\n\n35\n\n\x0c[\xc2\xb61] At common law, it was generally believed \xe2\x80\x9cthat a promise made in\nrecognition of a moral obligation, arising out of a benefit previously received, was not enforceable.\xe2\x80\x9d Comment, Reaffirmation Agreements: A\nFight for Enforceability Under the New Bankruptcy Code, 12 Cumberland\nL. Rev. 431, 433-34 (1982) (hereinafter cited: Comment, Reaffirmation\nAgreements). Exceptions, however, were developed. In Ball v. Hesketh, 90\nEng.Rep. 541 (K.B.1697), a promise to pay a debt contracted during infancy was enforced. In Hyleing v. Hastings, 91 Eng.Rep. 1157 (K.B.1699),\na promise to pay a debt barred by the statute of limitations was enforced.\nEnglish attorneys then began arguing that a bankrupt had a moral obligation to repay discharged debts. See generally, Boshkoff, The Bankrupt\xe2\x80\x99s\nMoral Obligation to Pay His Discharged Debts: A Conflict Between Contract Theory and Bankruptcy Policy, 47 Ind. L.J. 36, 39-44 (1971) (hereinafter cited: Boshkoff, Moral Obligation). In Truemon v. Fenton, 98\nEng.Rep. 1232 (K.B.1777), Lord Mansfield declared that a bankrupt was\nmorally obligated to pay discharged debts, and a new promise to pay a\ndischarged debt was sufficient consideration to revive the enforceability of\nthe debt.\n[\xc2\xb62] After Truemon, \xe2\x80\x9ccreditors began to use reaffirmations to escape\n[the effect of] the bankruptcy discharge. . . .\xe2\x80\x9d Comment, Reaffirmation\nAgreements, supra at 435. In an effort to control the problem, Parliament\nfirst required that the reaffirmation agreement must be in writing, 5 Geo. 4,\nc. 98, \xc2\xa7 128 (1824), and later declared unenforceable all such reaffirmation\nagreements. 12 & 13 Vict. c. 106, \xc2\xa7 204 (1849). Comment, Reaffirmation\nAgreements, supra at 435, n.21-23.\n[\xc2\xb63] Just before reaffirmations were banned in England, their use began\nto grow in the United States, helped by Scoutland v. Eislord, 4\nN.Y.Com.L.Rep. 241, 7 Johns. 36 (1810), in which Lord Mansfield\xe2\x80\x99s doctrine of moral obligation was followed. Even after Congress passed the\nBankruptcy Act of 1898, most states, \xe2\x80\x9cby statute or case law, recognized\nthe theory that a discharge did not prohibit collection of the debt or erase\nthe debt.\xe2\x80\x9d Comment, Reaffirmation Agreements, supra at 436.\n[\xc2\xb64] Often, creditors harassed debtors by using the doctrine of moral\nobligation and the theory that discharged debts were not erased. Sometimes, creditors would sue debtors on the discharged debt in state court \xe2\x80\x9cin\nthe hope that the debtor would rely upon the discharge and fail to appear\nin the subsequent action.\xe2\x80\x9d Comment, Reaffirmation Agreements, supra at\n437. Other times, secured creditors would obtain a reaffirmation agreement from the debtor under threat of repossession of collateral. H.R. Rep.\nNo. 95-595, 95th Cong., 1st Sess. 164 (1977), U.S. Code Cong. & Admin.\nNews 1978, p. 5787. Thus,\n(t)he resulting practices under the 1898 Act were similar to those\nexperienced by the English courts in the eighteenth century. Reaf36\n\n\x0cfirmations tended to frustrate severely the debtor\xe2\x80\x99s purpose for\nseeking a discharge from the bankruptcy court.\nComment, Reaffirmation Agreements, supra at 437. Where the secured\ncreditor used the threat of repossession as leverage to coerce the discharged debtor into reviving and reaffirming his entire personal liability to\nthe creditor, the collateral was generally worth only a portion of the\namount owed. The secured creditor did not want to enforce its in rem\nrights against the collateral. Rather, the secured creditor desired to use the\nthreat of enforcing its in rem rights as a means of coercing the debtor into\nreviving his in personam obligation which had been discharged. See\nBoshkoff, Moral Obligation, supra at 37, n.5.\n[\xc2\xb65] Consider, for example, In Re Thompson, 416 F. Supp. 991\n(S.D.Tex.1976). A secured creditor was scheduled by the bankrupt in his\nbankruptcy petition, and filed a proof of claim. The bankrupt was discharged, and was purportedly relieved of any personal liability to the secured creditor. After discharge, the secured creditor began sending letters\nto the debtor, threatening civil and criminal action if the discharged debt\nwas not paid. Id. at 993. The simple fact is that such coercion by creditors\nhas always been built into the system of debtor-creditor relations, and nonjudicial coercion has always been viewed by creditors as an effective and\ncertainly inexpensive method of enforcing and reviving a debtor\xe2\x80\x99s in personam obligations. See Leff, Coercive Collection, supra at 5-9.\n[\xc2\xb66] In 1970, Congress attempted to curtail creditor abuse. Under the\nAct of Oct. 19, 1970, Pub.L. No. 91-467, sec. 2, 14, 15, 17, 38, 58, 84 Stat.\n990 (amending 11 U.S.C. sec. 11, 32, 33, 35, 66, 94 (1964)), bankruptcy\ncourts were given exclusive jurisdiction to determine the right to and effect of a discharge, removing jurisdiction from state courts. No longer\ncould creditors sue debtors in state court on discharged obligations hoping\nfor default judgments. But reaffirmations by non-judicial leverage or coercion were not controlled. See, e.g., In Re Thompson, supra.\n[\xc2\xb67] It is with this history of creditor coercion and abuse in mind that\nCongress sat down to draft \xc2\xa7 524 of the Code. See H.R. Rep. 95-595, supra at 164.\n5. Many lawyers have rationalized these moral obligation cases on a ground other\nthan moral obligation. They claim that moral obligation is not the true ground of\nthese decisions. What is their argument? Well, these lawyers take note that infancy,\ndischarge in bankruptcy, and the statute of limitations are legal defenses to a creditor\xe2\x80\x99s breach of contract case against the promisor. These lawyers then argue that\nsomething happened to the defense when the second promise was made by the\npromisor to pay the prior debt. They claim that the second promise did something\nto the defense. What happened to the defense? Can you finish this argument? You\nhave the necessary bits of information to finish it.\n37\n\n\x0cNow here is one more possible moral obligation exception, from the rest of the\nHunt v. Bate report:\nHUNT v. BATE (1568)\nCommon Pleas\n3 Dyer 272a\n* * * * But in another like action on the case brought upon a promise of twenty\npounds made to the plaintiff by the defendant in consideration that the plaintiff, at\nthe special instance of the said defendant, had taken to wife the cousin of the defendant, that was good cause, although the marriage was executed and past before\nthe undertaking and promise, because the marriage ensued at the request of the\ndefendant. * * * * And therefore the opinion of the Court in this case this Term\nwas, that the plaintiff should recover upon the verdict, &c. And so note the diversity between aforesaid cases.\nQuestions:\n1. What was consideration for the promise?\n2. Was there a bargain?\n\nThe meaning can be hard to wrench\nFrom cases that were in Law French\nIn language so dense\nThey rarely made sense\nTo anyone not on the bench\n\xe2\x80\x94Jim Woodward, STCL Class of 2003\nWEBB v. McGOWIN (1935)\nCourt of Appeals of Alabama\n168 So. 196\nBRICKEN, Presiding Judge.\n[\xc2\xb61] This action is in assumpsit. The complaint as originally filed was amended.\nThe demurrers to the complaint as amended were sustained, and because of this\nadverse ruling by the court the plaintiff took a nonsuit, and the assignment of errors on this appeal are predicated upon said action or ruling of the court.\n\n38\n\n\x0c[\xc2\xb62] A fair statement of the case presenting the questions for decision is set out\nin appellant\xe2\x80\x99s brief, which we adopt.\n[\xc2\xb6a] \xe2\x80\x9cOn the 3d day of August, 1925, appellant while in the employ of the\nW.T. Smith Lumber Company, a corporation, and acting within the scope\nof his employment, was engaged in clearing the upper floor of Mill No.2\nof the company. While so engaged he was in the act of dropping a pine\nblock from the upper floor of the mill to the ground below; this being the\nusual and ordinary way of clearing the floor, and it being the duty of the\nplaintiff in the course of his employment to so drop it. The block weighed\nabout 75 pounds.\n[\xc2\xb6b] \xe2\x80\x9cAs appellant was in the act of dropping the block to the ground below, he was on the edge of the upper floor of the mill. As he started to turn\nthe block loose so that it would drop to the ground, he saw J. Greeley\nMcGowin, testator of the defendants, on the ground below and directly\nunder where the block would have fallen had appellant turned it loose.\nHad he turned it loose it would have struck McGowin with such force as\nto have caused him serious bodily harm or death. Appellant could have\nremained safely on the upper floor of the mill by turning the block loose\nand allowing it to drop, but had he done this the block would have fallen\non McGowin and caused him serious injuries or death. The only safe and\nreasonable way to prevent this was for appellant to hold to the block and\ndivert its direction in falling from the place where McGowin was standing\nand the only safe way to divert it so as to prevent its coming into contact\nwith McGowin was for appellant to fall with it to the ground below. Appellant did this, and by holding to the block and falling with it to the\nground below, he diverted the course of its fall in such way that McGowin\nwas not injured. In thus preventing the injuries to McGowin appellant\nhimself received serious bodily injuries, resulting in his right leg being\nbroken, the heel of his right foot torn off and his right arm broken. He was\nbadly crippled for life and rendered unable to do physical or mental labor.\n[\xc2\xb6c] \xe2\x80\x9cOn September 1, 1925, in consideration of appellant having prevented him from sustaining death or serious bodily harm and in consideration\nof the injuries appellant had received, McGowin agreed with him to care\nfor and maintain him for the remainder of appellant\xe2\x80\x99s life at the rate of $15\nevery two weeks from the time he sustained his injuries to and during the\nremainder of appellant\xe2\x80\x99s life; it being agreed that McGowin would pay this\nsum to appellant for his maintenance. Under the agreement McGowin paid\nor caused to be paid to appellant the sum so agreed on up until McGowin\xe2\x80\x99s\ndeath on January 1, 1934. After his death the payments were continued to\nand including January 27, 1934, at which time they were discontinued.\nThereupon plaintiff brought suit to recover the unpaid installments accruing up to the time of the bringing of the suit.\n\n39\n\n\x0c[\xc2\xb6d] \xe2\x80\x9cThe material averments of the different counts of the original complaint and the amended complaint are predicated upon the foregoing\nstatement of facts.\xe2\x80\x9d\n[\xc2\xb63] In other words, the complaint as amended averred in substance: (1) That\non August 3, 1925, appellant saved J. Greeley McGowin, appellee\xe2\x80\x99s testator, from\ndeath or grievous bodily harm; (2) that in doing so appellant sustained bodily injury crippling him for \xe2\x80\x98life; (3) that in consideration of the services rendered and\nthe injuries received by appellant, McGowin agreed to care for him the remainder\nof appellant\xe2\x80\x99s life, the amount to be paid being $15 every two weeks; (4) that\nMcGowin complied with this agreement until he died on January 1, 1934, and the\npayments were kept up to January 27, 1934, after which they were discontinued.\n[\xc2\xb64] The action was for the unpaid installments accruing after January 27, 1934,\nto the time of the suit.\n[\xc2\xb65] The principal grounds of demurrer to the original and amended complaint\nare: (1) It states no cause of action; (2) its averments show the contract was without consideration; (3) it fails to allege that McGowin had, at or before the services\nwere rendered, agreed to pay appellant for them; (4) the contract declared on is\nvoid under the statute of frauds.\n[\xc2\xb66] 1. The averments of the complaint show that appellant saved McGowin\nfrom death or grievous bodily harm. This was a material benefit to him of infinitely more value than any financial aid he could have received. Receiving this benefit, McGowin became morally bound to compensate appellant for the services\nrendered. Recognizing his moral obligation, he expressly agreed to pay appellant\nas alleged in the complaint and complied with this agreement up to the time of his\ndeath; a period of more than 8 years.\n[\xc2\xb67] Had McGowin been accidentally poisoned and a physician, without his\nknowledge or request, had administered an antidote, thus saving his life, a subsequent promise by McGowin to pay the physician would have been valid. Likewise,\nMcGowin\xe2\x80\x99s agreement as disclosed by the complaint to compensate appellant for\nsaving him from death or grievous bodily injury is valid and enforceable.\n[\xc2\xb68] Where the promisee cares for, improves, and preserves the property of the\npromisor, though done without his request, it is sufficient consideration for the\npromisor\xe2\x80\x99s subsequent agreement to pay for the service, because of the material\nbenefit received. Pittsburg Vitrified Paving & Building Brick Co. v. Cerebus Oil\nCo., 79 Kan. 603, 100 P. 631; Edson v. Poppe, 24 S.D. 466, 124 N.W. 441, 26\nI.R.A.(N.S.) .534; Drake v. Bell, 26 Misc. 237, 55 N.Y.S. 945.\n[\xc2\xb69] In Boothe v. Fitzpatrick, 36 Vt. 681, the court held that a promise by defendant to pay for the past keeping of a bull which had escaped from defendant\xe2\x80\x99s\n40\n\n\x0cpremises and been cared for by plaintiff was valid, although there was no previous\nrequest, because the subsequent promise obviated that objection; it being equivalent to a previous request. On the same principle, had the promisee saved the\npromisor\xe2\x80\x99s life or his body from grievous harm, his subsequent promise to pay for\nthe services rendered would have been valid. Such service would have been far\nmore material than caring for his bull. Any holding that saving a man from death\nor grievous bodily harm is not a material benefit sufficient to uphold a subsequent\npromise to pay for the service, necessarily rests on the assumption that saving life\nand preservation of the body from harm have only a sentimental value. The converse of this is true. Life and preservation of the body have material, pecuniary\nvalues, measurable in dollars and cents. Because of this, physicians practice their\nprofession charging for services rendered in saving life and curing the body of its\nills, and surgeons perform operations. The same is true as to the law of negligence,\nauthorizing the assessment of damages in personal injury cases based upon the\nextent of the injuries, earnings, and life expectancies of those injured.\n[\xc2\xb610] In the business of life insurance, the value of a man\xe2\x80\x99s life is measured in\ndollars and cents according to his expectancy, the soundness of his body, and his\nability to pay premiums. The same is true as to health and accident insurance.\n[\xc2\xb611] It follows that if, as alleged in the complaint, appellant saved J. Greeley\nMcGowin from death or grievous bodily harm, and McGowin subsequently\nagreed to pay him for the service rendered, it became a valid and enforceable contract.\n[\xc2\xb612] 2. It is well settled that a moral obligation is a sufficient consideration to\nsupport a subsequent promise to pay where the promisor has received a material\nbenefit, although there was no original duty or liability resting on the promisor.\nLycoming County v. Union County, 15 Pa. 166, 53 Am.Dec. 575, 579, 580 j Ferguson v. Harris, 39 S.C. 323, 17 S.E. 782, 39 Am.St.Rep. 731, 734; Muir v. Kane,\n55 Wash. 131, 104 P. 153, 26 L.R.A. (N.S,) 519, 19 Ann.Cas. 1180; State ex rel.\nBayer v. Funk, 105 Or. 134, 199 P. 592, 209 P. 113, 25 A.L.R. 625, 634; Hawkes v.\nSaunders, 1 Cowp. 290; In re Sutch\xe2\x80\x99s Estate, 201 Pa. 305, 50 A 943 Edson v.\nPoppe, 24 S.D. 466, 124 N.W. 441, 26 L.R.A(N. S.) .534; Park Falls State Bank v.\nFordyce, 206 Wis. 628, 238 N.W. 516, 79 AL. R. 1339; Baker v. Gregory, 28 Ala.\n544, 65 Am.Dec. 366. In the case of State ex rel. Bayer v. Funk, supra, the court\nheld that a moral obligation is a sufficient consideration to support all executory\npromise where the promisor received an actual pecuniary or material benefit for\nwhich he subsequently expressly promised to pay.\n[\xc2\xb613] The case at bar is clearly distinguishable from that class of cases where the\nconsideration is a mere moral obligation or conscientious duty unconnected with\nreceipt by promisor of benefits of a material or pecuniary nature. Park Falls State\nBank v. Fordyce, supra. Here the promisor received a material benefit constituting\na valid consideration for his promise.\n\n41\n\n\x0c[\xc2\xb614] 3. Some authorities hold that, for a moral obligation to support a subsequent promise to pay, there must have existed a prior legal or equitable obligation,\nwhich for some reason had become unenforceable, but for which the promisor\nwas still morally bound. This rule, however, is subject to qualification in those\ncases where the promisor having received a material benefit from the promisee, is\nmorally bound to compensate him for the services rendered and in consideration\nof this obligation promises to pay. In such cases the subsequent promise to pay is\nan affirmance or ratification of the services rendered carrying with it the presumption that a previous request for the service was made McMorris v. Herndon, 2\nBai1ey (S.c.) 56, 21 Am.Dec. 515; Chadwick v. Knox, 31 N.H. 226, 64 Am.Dec.\n329; Kenan v. Holloway, 16 Ala. 53, 50 Am.Dec. 162; Ross v. Pearson, 21 Ala.\n473.\n[\xc2\xb615] Under the decisions above cited, McGowin\xe2\x80\x99s express promise to pay appellant for the services rendered was an affirmance or ratification of what appellant had done raising the presumption that the services had been rendered at\nMcGowin\xe2\x80\x99s request.\n[\xc2\xb616] 4. The averments of the complaint show that in saving McGowin from\ndeath or grievous bodily harm, appellant was crippled for life. This was part of the\nconsideration of the contract declared on. McGowin was benefited. Appellant was\ninjured. Benefit to the promisor or injury to the promisee is a sufficient legal consideration for the promisor\xe2\x80\x99s agreement to pay. Fisher v. Bartlett, 8 Greenl. (Me.)\n122, 22 Am.Dec. 225; State ex rel. Bayer v. Funk, supra.\n[\xc2\xb617] 5. Under the averments of the complaint the services rendered by appellant\nwere not gratuitous. The agreement of McGowin to pay and the acceptance of\npayment by appellant conclusively shows the contrary. * * * *\n[\xc2\xb618] From what has been said, we are of the opinion that the court below erred\nin the ruling complained of; that is to say in sustaining the demurrer, and for this\nerror the case is reversed and remanded.\nReversed and remanded.\nSAMFORD, Judge (concurring).\nThe questions involved in this case are not free from doubt, and perhaps the strict\nletter of the rule, as stated by judges, though not always in accord, would bar a\nrecovery by plaintiff, but following the principle announced by Chief Justice Marshall in Hoffman v. Porter, Fed. Cas. No. 6,577, 2 Brock. 156, 159, where he says,\n\xe2\x80\x9cI do not think that law ought to be separated from justice, where it is at most\ndoubtful,\xe2\x80\x9d I concur in the conclusions reached by the court.\n\n42\n\n\x0cWEBB v. McGOWIN (1936)\nSupreme Court of Alabama\n168 So. 199\nFOSTER, Justice.\n[\xc2\xb61] We do not in all cases in which we deny a petition for certiorari to the\nCourt of Appeals approve the reasoning and principles declared in the opinion,\neven though no opinion is rendered by us. It does not always seem to be important\nthat they be discussed, and we exercise a discretion in that respect. But when the\nopinion of the Court of Appeals asserts important principles or their application to\nnew situations, and it may be uncertain whether this court agrees with it in all respects, we think it advisable to be specific in that respect when the certiorari is\ndenied. We think such a situation here exists.\n[\xc2\xb62] Neither this court nor the Court of Appeals has had before it questions\nsimilar to those here presented * * * *. * * * *\n[\xc2\xb63] The opinion of the Court of Appeals here under consideration recognizes\nand applies the distinction between a supposed moral obligation of the promisor,\nbased upon some refined sense of ethical duty, without material benefit to him,\nand one in which such a benefit did in fact occur. We agree with that court that if\nthe benefit be material and substantial and was to the person of the promisor rather than to his estate, it is within the class of material benefits which he has the\nprivilege of recognizing and compensating either by an executed payment or an\nexecutory promise to pay. The cases are cited in that opinion. The reason is emphasized when the compensation is not only for the benefits which the promisor\nreceived, but also for the injuries either to the property or person of the promisee\nby reason of the service rendered.\nWrit denied.\nANDERSON, C.J., and GARDNER and BOULDIN, JJ., concur.\nQuestions:\n1. What is the law in Alabama after these two decisions?\n2. Why is the Supreme Court\xe2\x80\x99s decision important if it simply approves the reasoning and principles set forth in the Court of Appeals\xe2\x80\x99 decision?\n3. How is this case different than Hunt v. Bate 1?\n\n43\n\n\x0cHARRINGTON v. TAYLOR (1945)\nSupreme Court of North Carolina\n36 S.E.2d 227\nPER CURIAM.\n[\xc2\xb61] The plaintiff in this case sought to recover of the defendant upon a promise made by him under the following peculiar circumstances:\n[\xc2\xb62] The defendant had assaulted his wife, who took refuge in plaintiff\xe2\x80\x99s house.\nThe next day the defendant gained access to the house and began another assault\nupon his wife. The defendant\xe2\x80\x99s wife knocked him down with an axe, and was on\nthe point of cutting his head open or decapitating him while he was laying on the\nfloor, and the plaintiff intervened, caught the axe as it was descending, and the\nblow intended for defendant fell upon her hand, mutilating it badly, but saving\ndefendant\xe2\x80\x99s life.\n[\xc2\xb63] Subsequently, defendant orally promised to pay the plaintiff her damages;\nbut, after paying a small sum, failed to pay anything more. So, substantially, states\nthe complaint.\n[\xc2\xb64] The defendant demurred to the complaint as not stating a cause of action,\nand the demurrer was sustained. Plaintiff appealed.\n[\xc2\xb65] The question presented is whether there was a consideration recognized by\nour law as sufficient to support the promise. The Court is of the opinion that,\nhowever much the defendant should be impelled by common gratitude to alleviate\nthe plaintiff\xe2\x80\x99s misfortune, a humanitarian act of this kind, voluntarily performed,\nis not such consideration as would entitle her to recover at law.\n[\xc2\xb66] The judgment sustaining the demurrer is\nAffirmed.\nQuestion: Can you find a factual distinction between Harrington and Webb v.\nMcGowin?\n\n2. Detriment\nWEBBS CASE (1576)\n4 Leonard 110, 74 ER 763\nIn action upon the case, the plaintiff declared, that whereas Cobham was indebted\nto J.S. and J.S. to the defendant, the said defendant in consideration that the plaintiff would procure the said J.S. to make a letter [or power] of attorney to the de44\n\n\x0cfendant to sue the said Cobham, promised to pay and give to the plaintiff 10\xc2\xa3. It\nwas objected, here was not any consideration for to induce the assumpsit; for the\ndefendant by this letter of attorney gets nothing but his labour and travel. But the\nexception was not allowed of. For in this case not so much the profit which redounds to the defendant, as the labour of the plaintiff in procuring of the letter of\nattorney, is to be respected.\nQuestions:\n1. This opinion is not really that difficult, but all of the words matter. Diagraming\nthe relationships between the parties in this case helps understanding greatly. Who\nis J.S.\xe2\x80\x99s creditor?\n2. A power of attorney is a document in which one person, called a principal, appoints another to be her agent, usually for a certain purpose(s) named in the document. In Webbs Case, the power of attorney was to be signed by J.S., the principal, who would appoint the defendant to be J.S.\xe2\x80\x99s agent to sue Cobham. The defendant claims that the power of attorney is worth nothing. That\xe2\x80\x99s plausible, isn\xe2\x80\x99t\nit, given that the defendant may never obtain anything from Cobham? The counterargument is that if it were actually worth nothing, the defendant never would\nhave promised 10\xc2\xa3 for it. If the plaintiff has given defendant nothing, then\nshouldn\xe2\x80\x99t the court agree that no consideration exists? Is there a bargain here?\n\nChristopher St. German, DOCTOR AND STUDENT (1531)\nSelden Soc. vol. 91, pp. 230-31, B&M 483\nStudent: ... [A]fter divers that be learned in the laws of the realm, all promises\nshall be taken in this manner, that is to say: if he to whom the promise is made\nhave a charge by reason of the promise, which he hath also performed, then in that\ncase he shall have an action for that thing that was promised, though he that made\nthe promise have no worldly profit by it. As, if a man say to another, \xe2\x80\x98Heal such a\npoor man of his disease\xe2\x80\x99, or \xe2\x80\x98Make such a highway, and I shall give thee thus\nmuch\xe2\x80\x99, and if he do it I think an action lieth at the common law.\nQuestions:\n1. This is not a case, but St. German mentions two actual cases. What are they?\n2. In this passage, what counts to make a promise actionable (enforceable)?\n3. Do the two cases involve enforceable promises?\n\n45\n\n\x0cSTORER\xe2\x80\x99S CASE (1615)\nDyer 272a, 272b n.32, 73 ER 605, 607\nIn an action upon the case, on assumpsit against one Storer, an agreement was between A. and B. that A. should have a lease of B. with [various] covenants; at the\nday of sealing A. refused, on account of the insertion of a new covenant concerning repairs, whereupon [Storer], standing by, took upon himself, if A. would seal\nit, to make the repairs; and it was adjudged for the plaintiff a good consideration,\nalthough the sealing of the deed was of no consequence to [Storer].\nQuestions:\n1. This is a very brief report, just one sentence long. I\xe2\x80\x99m pretty sure that B is the\nplaintiff, but it could be A. What about the application of consideration doctrine\nwould make A or B a proper plaintiff?\n2. Can you be sure there was a bargain here? Did Storer\xe2\x80\x99s promise induce A to\nsign the lease? Did the prospect of A\xe2\x80\x99s signing the lease induce Storer to promise?\nWhy would Storer care?\n\nKEYME v. GOULSTON (1664)\nKing\xe2\x80\x99s Bench\n1 Levinz 140, 83 ER 338\nAssumpsit, [in which the plaintiff alleged that] in consideration [that] the plaintiff\nwould put out the plaintiff\xe2\x80\x99s daughter\xe2\x80\x99s daughter to a school-mistress, he the defendant would pay for her board for a year. And that he put out his daughter for\nthree quarters of a year, which came to 101. and that the defendant had not paid:\nafter verdict for the plaintiff, it was moved in arrest of judgment, that the consideration is not performed, for when he promised to pay for a year, it ought to be\nintended, that he should put her out to school for a year, otherwise the plaintiff\nmight put her out for a week only, and yet oblige the plaintiff [defendant?] to pay\nfor a year. But by Twysden and Wyndham, it may be intended, Put her there to\nschool, and I will pay for a year, stay she more or less; and by Hyde, Chief Justice,\nit may be intended, Set her to school, and I will pay for a year or less, according\nto the rate she stays. And thereupon by all the three, judgment was given for the\nplaintiff.\nQuestions:\n1. Is there a bargain here? What induced the room and board for nine months?\nWhat induced the promise?\n2. Did the possibility of the lack of a bargain trouble the judges at all?\n46\n\n\x0cNote: Just as non-bargained-for benefit sometimes counts as a reason to enforce a\npromise, so does non-bargained-for detriment. But non-bargained-for detriment is\nnow not thought of as consideration as much as part of the doctrine of promissory\nestoppel, an alternate theory of liability that we study in the next chapter.\n\nSettlement Cases\n\nThis case and the next are somewhat difficult, but only because their analyses depend on non-contract law that we have not studied. The non-contract law in both\ncases is extremely clear and not in dispute. The first case, Kim v. Son, relies on\nrules from corporate law. A corporation is, in the law, a person or entity separate\nfrom and not dependent for its existence on any real person, including its shareholders, directors, officers, or employees. So a shareholder of that corporation is\nno more liable for the debts of the corporation than you are for your neighbor\xe2\x80\x99s\ndebts, absent special circumstances not relevant here. In Kim v. Son, a party with\nno right thought it had a right and proceeded to bargain away what it thought it\nhad. Whether this activity has any legal effect is the issue.\nThe second case is more straightforward, and you should be able to determine the\nvalidity of the plaintiff\xe2\x80\x99s claims from the case\xe2\x80\x99s context. Did the plaintiff in the\nsecond case have anything to bargain with?\nJinsoo KIM v. Stephen SON\n2009 WL 597232\nCourt of Appeal, Fourth District, Division 3, California\nNo. G039818\n(Super. Ct. No. 06CC02419).\nMarch 9, 2009\nOPINION\nO\xe2\x80\x99LEARY, J.\n[\xc2\xb61] Jinsoo Kim begins his opening brief by stating, \xe2\x80\x9cBlood may be thicker\nthan water, but here it\xe2\x80\x99s far weightier than a peppercorn.\xe2\x80\x9d* Kim appeals from the\ntrial court\xe2\x80\x99s refusal to enforce a gratuitous promise, handwritten in his friend\xe2\x80\x99s\nown blood, to repay money Kim loaned and lost in two failed business ventures.\nHe faults the trial court for not discussing or deciding in its statement of decision\nthe issue of whether Kim\xe2\x80\x99s forbearance (waiting over a year to file a meritless\nlawsuit against his friend, Stephen Son), supplied adequate consideration for\n*\n\nThe obscure peppercorn reference can be found in Hobbs v. Duff (1863) 23 Cal. 596, 602-603\n[\xe2\x80\x9c\xe2\x80\x98What is a valuable consideration? A peppercorn; and for aught that appears by the pleadings in\nthis case, there was no greater consideration than that for the supposed assignment,\xe2\x80\x99 etc.\xe2\x80\x9d].\n\n47\n\n\x0cSon\xe2\x80\x99s blood-written document. We conclude the trial court\xe2\x80\x99s statement of decision\nsufficiently set forth the facts and law supporting its ultimate conclusion Son\xe2\x80\x99s\npromise to repay the money was entirely gratuitous and unenforceable, even when\nreduced to blood. Forbearance to sue cannot supply consideration to what the trial\ncourt determined was an invalid claim. In the context of this contract dispute,\nSon\xe2\x80\x99s blood was not weightier than a peppercorn.\nI\n[\xc2\xb62] Son was the majority shareholder (70 percent owner) and operated a South\nKorean company, MJ, Inc. (MJ). He was also the sole owner of a California corporation, Netouch International Inc. (Netouch). After several months of investigation, Kim loaned money and invested in these companies. It was undisputed he\nwired the money directly to the corporate bank accounts. Son did not personally\nreceive any of the funds. Kim invested 100 million won,* and later loaned 30 million won to MJ. He loaned $40,000 to Netouch. There was no evidence these investments or loans were personally guaranteed by Son.\n[\xc2\xb63] Unfortunately, these businesses failed and Kim lost his money. In October\n2004, Son and Kim met in a sushi bar where they consumed a great deal of alcohol. When they were at the bar, Son asked the waiter for a safety pin, used it to\nprick his finger, and then wrote a \xe2\x80\x9cpromissory note\xe2\x80\x9d with his blood. The document, translated from Korean to English, reads, \xe2\x80\x9cSir, please forgive me. Because\nof my deeds you have suffered financially. I will repay you to the best of my ability.\xe2\x80\x9d At some point that same day, Son also wrote in ink \xe2\x80\x9cI hereby swear [promise]\nthat I will pay back, to the best of my ability, the estimated amount of\n170,000,000 [w]ons to [Kim].\xe2\x80\x9d\n[\xc2\xb64] Well over a year later, in June 2006, See copies of the promises at\nthis blood-written note became the basis for http://cca.li/QC.\nKim\xe2\x80\x99s lawsuit against Son alleging: (1) default of promissory note; (2) money had and received; and (3) fraud. He claimed\nSon agreed in the \xe2\x80\x9cpromissory note\xe2\x80\x9d to pay Kim 170 million won, which is approximately equivalent to $170,000.\n[\xc2\xb65] After holding a bench trial, the court ruled in Son\xe2\x80\x99s favor. In its statement\nof decision, the court determined the \xe2\x80\x9cblood agreement\xe2\x80\x9d was not an enforceable\ncontract. The court made the following findings: There was no evidence Son\nagreed to personally guarantee the loan or investment money. Son wrote the note\nin his own blood \xe2\x80\x9cwhile extremely intoxicated and feeling sorry for [Kim\xe2\x80\x99s] losses.\xe2\x80\x9d The blood agreement lacked sufficient consideration because it \xe2\x80\x9cwas not a\nresult of a bargained-for-exchange, but rather a gratuitous promise by [Son] who\ntook personally that [Kim], his good friend, had a failure in his investments that\n[Son] had initially brought him into.\xe2\x80\x9d The court reasoned the agreement lacked\n*\n\nThe won (\xec\x9b\x90) (sign: \xe2\x82\xa9; code: KRW) is the currency of South Korea.\n\n48\n\n\x0cconsideration because Son \xe2\x80\x9cwas not required to and did not guarantee these investments and loans. The [c]ourt refuses to enforce a gratuitous promise even\nwhen it is reduced to blood.\xe2\x80\x9d The court also rejected the fraud claim, relying on\n\xe2\x80\x9ccredible evidence\xe2\x80\x9d Son intended for the businesses to succeed, and he never\nmade any promises to Kim without the intent of performing them.\n[\xc2\xb66] Kim filed objections to the statement of decision, claiming inter alia, the\ncourt failed to address whether Kim\xe2\x80\x99s forbearance from suing Son in 2003 and\n2004 was consideration for the blood written promissory note. The court did not\nmodify its statement of decision and entered the final judgment in July 2007. Kim\nappealed.\nII\n[\xc2\xb67] Kim raises two issues on appeal: (1) Did the trial court erroneously fail to\nconsider or apply Kim\xe2\x80\x99s forbearance as consideration of Son\xe2\x80\x99s blood agreement?\nand (2) Did the statement of decision adequately address the forbearance issue?\n(1) Forbearance\n[\xc2\xb68] \xe2\x80\x9cConsideration may be forbearance to sue on a claim, extension of time, or\nany other giving up of a legal right, in consideration of some promise. [Citations.]\xe2\x80\x9d (1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, \xc2\xa7 211, p. 246.)\n\xe2\x80\x9cThe slightest forbearance will suffice: \xe2\x80\x98Even though the forbearance is for one\nday only, there is sufficient consideration as the law does not weigh the quantum.\xe2\x80\x99\n[Citations.]\xe2\x80\x9d (Id. at pp. 246-247.) Moreover, \xe2\x80\x9cThe compromise of a claim, either\nvalid, doubtful, or disputed (but not void) is good consideration, the claimant giving up his or her asserted right to recover the whole amount as consideration for a\npromise to pay a lesser amount. [Citations.]\xe2\x80\x9d (Ibid.)\n[\xc2\xb69] \xe2\x80\x9cHowever, if the forbearance has no value, it will not suffice. [Citation.]\xe2\x80\x9d\n(1 Witkin, Summary of Cal. Law, supra, Contracts, \xc2\xa7 211, p. 247.) And relevant to\nthis case, \xe2\x80\x9cIf a claim is wholly invalid, neither forbearance to sue nor a compromise thereof can be good consideration. (Union Collection Co. v. Buckman (1907)\n150 C[al]. 159, 164 . . . .) City Street Imp. Co. v. Pearson (1919) 181 C[al]. 640,\n[649] . . . applied this doctrine with great strictness. A promissory note was given\nin consideration of forbearance to foreclose a lien upon a street assessment, which\nboth parties believed was valid. However, the assessment was void for technical\nreasons that were ascertainable from the public record. Held, the note was unsupported by consideration. . . . (See Orange County Foundation v. Irvine Co. (1983)\n139 [Cal. App.]3d 195 . . . [promise to compromise wholly unfounded claim is not\nvaluable consideration . . .] . . . .)\xe2\x80\x9d (1 Witkin, Summary of Cal. Law, supra, \xc2\xa7 220,\npp. 253-254.)\n\n49\n\n\x0c[\xc2\xb610] Here, the purported forbearance to sue cannot be good consideration because Kim\xe2\x80\x99s claims against Son were wholly invalid. As determined by the trial\ncourt, any claim Son personally owed Kim money was invalid. The statement of\ndecision noted it was undisputed the corporations (MJ and Netouch) were valid\nseparate corporate entities and those businesses received Kim\xe2\x80\x99s loans and investment money. The court concluded Son did not guarantee the money on behalf of\nthe two corporations. He did not personally receive any of Kim\xe2\x80\x99s money. And,\nKim does not dispute a shareholder/owner generally is not personally liable for\nthe debts of a corporation. (See Mesler v. Bragg Management Co. (1985) 39\nCal.3d 290, 301 [society legally recognizes the benefits of individual limitation of\nbusiness liability through incorporation, so \xe2\x80\x9cthe corporate form will be disregarded only in narrowly defined circumstances,\xe2\x80\x9d and only when justice so requires];\nPacific Landmark Hotel, Ltd. v. Marriott Hotels, Inc. (1993) 19 Cal.App.4th 615,\n628.) Consequently, any debt collection or breach of contract claim Kim may\nhave had against the corporations, could not be legally imputed to Son, individually. In other words, Kim\xe2\x80\x99s forbearance in filing a meritless lawsuit cannot supply\nadequate consideration for Son\xe2\x80\x99s gratuitous promise.\n[\xc2\xb611] Moreover, Kim does not dispute the trial court\xe2\x80\x99s conclusion credible evidence established Son was not liable for fraud. Accordingly, his alleged forbearance to sue on the clearly unfounded tort claim would not constitute valuable consideration. We conclude the trial court properly decided Kim\xe2\x80\x99s lawsuit was based\nentirely on a gratuitous unenforceable promise, and as such, the court did not need\nto address the immaterial issue of forbearance.\n(2) Statement of Decision\n[The court determined that the trial court\xe2\x80\x99s opinion adequately addressed the forbearance issue.]\nIII\nThe judgment is affirmed. Respondent shall recover his costs on appeal.\nWE CONCUR: SILLS, P.J., and RYLAARSDAM, J.\nQuestions:\n1. Did the court ask whether Kim believed in good faith that Son was liable for\nthe debts at and after the time the money was invested and lent? Did the court ask\nwhether Kim believed in good faith, before Son signed the document in the bar,\nthat Kim had valid grounds to sue Son with regard to the investments and the loan?\n2. The court addressed whether forbearance to sue was consideration, but Kim\nprovided Son\xe2\x80\x99s companies with $170,000 in financing. Why wasn\xe2\x80\x99t Kim\xe2\x80\x99s making\n50\n\n\x0cthe investment and loan consideration?\n3. Did it matter that the contract was in writing?\n4. Son was drunk when he wrote this document, but is there any doubt that, at the\ntime he wrote the document, he intended to create a binding legal document? Did\nthat matter?\n\nFannie B. KALIS v. COLGATE-PALMOLIVE COMPANY\nIll. App., 1st District\n787 N.E.2d 182\nMarch 10, 2003\nJUSTICE McNULTY delivered the opinion of the court:\n[1]\nThe instant appeal arises from a simple set of undisputed facts: a plaintiff\nin a products liability action received an offer of settlement from the defendant\nmanufacturer, but did not respond before the defendant prevailed in its motion for\nsummary judgment. Since the settlement proposal had contained no time limit or\nother conditions for acceptance, the plaintiff notified the defendant that she would\ntake the offer and was promptly informed that the offer was no longer open.\nWhile the products liability litigation continued, the plaintiff filed the action underlying this matter: a claim against the defendant for breach of the settlement\nagreement. The question presented for our review is whether the plaintiff\'s promise to settle her lawsuit lost its value, and thus its ability to serve as consideration\nfor a settlement payment, once the defendant prevailed in its motion for summary\njudgment. The trial court answered this question affirmatively. We disagree and\nreverse the grant of summary judgment in favor of the defendant on the breach of\ncontract claim.\n[2]\nPlaintiff Fannie Kalis was injured by the explosion of a container of fuel\nand in December 1995 filed an action in the United States District Court which\nsought damages from the alleged manufacturer, defendant Colgate-Palmolive\nCompany (Colgate). On March 13, 1998, Colgate moved for summary judgment.\nOn April 27, 1999, while that motion was pending, Colgate, via letter from its\ncounsel to Kalis\'s counsel, offered $100,000 to settle the claim. The offer contained no conditions, did not refer to the pending summary judgment motion in\nany way, and did not purport to expire at any specific time.\n[3]\nOn May 10, 1999, the district court granted Colgate\'s motion, and on May\n14, Kalis\'s attorney sent defense counsel a letter accepting Colgate\'s offer. Colgate\'s May 18 response advised Kalis that "the moment the judge ruled summary\njudgment in our favor and against the plaintiff, the offer of $100,000 was no longer valid."\n51\n\n\x0c[4]\nKalis sought reconsideration of the summary judgment ruling, and when\nthat motion was denied, she appealed. The United States Court of Appeals for the\nSeventh Circuit heard arguments on the case in April 2000 and affirmed the\njudgment in Colgate\'s favor on November 3, 2000.\n[5]\nOn the same date she filed notice of her appeal of the summary judgment\non her products liability claim, Kalis also filed in the circuit court of Cook County\nthe action underlying the instant case: she alleged that Colgate\'s offer and her acceptance combined to create a binding agreement to settle her claim for $100,000.\n[6]\nKalis and Colgate both moved for summary judgment: Kalis alleging that\nthe formation of a contract and Colgate\'s subsequent breach were undisputed;\nColgate contending that she had no consideration to offer for a settlement agreement after the summary judgment ruling and that an implied condition of its offer\nwas that it be accepted before the motion was decided. The trial court agreed with\nColgate, ruled that there was no consideration for the settlement agreement, and\ngranted summary judgment in favor of the company. In our view, established\nprinciples of contract law dictate the opposite conclusion.\n[7]\nAny act or promise that benefits one party or disadvantages the other is\nsufficient consideration to support the formation of a contract. Steinberg v. Chicago Medical School, 69 Ill. 2d 320, 330 (1977). A promise to forego pursuit of a\nlegal claim will be determined to be adequate consideration to support formation\nof a contract even if the claim is invalid, provided that it is asserted in good faith.\nKeller v. State Farm Insurance Co., 180 Ill. App. 3d 539, 546 (1989).\n[8]\nSuch forbearance provides consideration sufficient to support the formation of a contract even if, at the time of the promise, a court has already found\nthe claim to be without merit. "The fact that a lower court has decided against the\nclaim, or that a court has held adversely to it in a suit to which the claimant was\nnot a party, does not prevent the forbearance to press a claim from being consideration." 2 J. Perillo & H. Bender, Corbin on Contracts, \xc2\xa77.17, at 436 (1995).\n[9]\nAccordingly, a promise to relinquish a right to appeal has also been recognized as providing consideration sufficient to support contract formation. "Forbearance to appeal or to litigate the question anew, as the claimant is privileged to\ndo, is consideration if the claim was such that forbearance to press it by suit\nwould originally have been consideration." 2 J. Perillo & H. Bender, Corbin on\nContracts, \xc2\xa77.17, at 436-37 (1995). In Kerns v. Engelke, * * * this court, though\nultimately declaring an agreement void on public policy grounds, found that sufficient consideration to form the agreement had been provided by a party\'s promise\nto abandon an appeal. * * * *\n[10] In F.H. Prince & Co. v. Towers Financial Corp., 275 Ill. App. 3d 792\n(1995), we held that the release of an arguably uncollectible debt provided con52\n\n\x0csideration to support a settlement agreement and highlighted an additional element of value provided by settlement of even a questionable claim: "Settlement of\nthe [plaintiff\'s] litigation also relieved [defendants] of the need to continue to defend against that claim and to incur additional defense costs related thereto." 275\nIll. App. 3d at 802.\n[11] In our view, the foregoing principles are readily applicable to the facts\npresented in the instant case. Though her claim failed to survive Colgate\'s summary judgment motion, Kalis retained the right to seek reconsideration of that ruling in the district court as well as the right to seek appellate review, and her promise to compromise these rights provided consideration for the offer of settlement\nas long as they were asserted in good faith. We believe that the good-faith basis\nfor continued pursuit of her claims at these stages was demonstrated by each\ncourt\'s need for extensive analysis of the merits of those claims. Given that fact,\nand the fact that the expense of months of additional active litigation of the reconsideration motion and appeal would have been avoided with a settlement, we have\nlittle difficulty concluding that Kalis\'s promise to abandon her claims offered a\ncompromise of her own legal rights, a benefit to Colgate, and thus, consideration.\nWe are therefore unable to share the trial court\'s view that the summary judgment\nmotion ruling left Kalis with nothing to offer as consideration for the settlement\npayment. * * * *\n[12] Finally, although Kalis invites us to direct the trial court to grant her summary judgment motion, she has not demonstrated the absence of issues of fact material to disposition of her claim, and indeed concedes the existence of at least one\ntriable issue of material fact on the record assembled to date. Accordingly, we decline the invitation to order entry of summary judgment in her favor, reverse the\nentry of summary judgment for Colgate, and remand the cause to the circuit court\nfor further proceedings consistent with this order.\nReversed and remanded.\nQuestions:\n1. How do you distinguish this case from Kim v. Son?\n2. When the court says \xe2\x80\x9cprovided that it is asserted in good faith,\xe2\x80\x9d does the court\nmean merely that the person asserting the claim must be asserting it honestly? Or\nmust the claim have some objective basis?\n3. When do we judge that \xe2\x80\x9cgood faith\xe2\x80\x9d\xe2\x80\x94at the time of the promise or later after\nall appeals are exhausted?\n4. In Atlantic Trust Co. v. Graver, No. 2-09-0589, 2011 WL 10109585 at *7 (Ill.\nApp. Jan. 31, 2011), the court said,\n53\n\n\x0cIn Kalis, the plaintiff retained the right to seek reconsideration of the\nsummary judgment ruling in the trial court as well as the right to seek appellate review, and her promise to compromise these rights constituted\nconsideration for the offer of settlement as long as they were asserted in\ngood faith. * * * * In other words, the plaintiff\xe2\x80\x99s promise to abandon her\nclaims offered a compromise of her legal rights, a benefit to the other party,\nand thus consideration.\nIf consideration exists in a compromise of rights case, will the compromise of\nrights be both benefit and detriment?\n5. Would the settlement agreement have been binding if Kalis had waited to accept it until Nov. 4, 2000?\n\nUniform Commercial Code \xc2\xa7 1-308. Performance of Acceptance Under Reservation of Rights, and cmt. 3.\n\nUniform Commercial Code \xc2\xa7 3-104. Negotiable Instrument.\n\nQuestion: This is a common bank check. Would it qualify as a negotiable instrument under \xc2\xa7 3-104(a)?\n\nUniform Commercial Code \xc2\xa7 3-311. Accord and Satisfaction by Use of Instrument.\n\n54\n\n\x0cSteven D. HAVARD and Judy A. Havard v. KEMPER NATIONAL INSURANCE\nCOMPANIES et al. (1995)\nS.D. Miss., 945 F. Supp. 953, aff\xe2\x80\x99d, 71 F.3d 876 (5th Cir. 1995)\nMEMORANDUM OPINION AND ORDER\nWINGATE, District Judge.\n[\xc2\xb61] Before the court is the defendants\xe2\x80\x99 motion for summary judgment pursuant\nto Rule 56(b), Federal Rules of Civil Procedure. Plaintiffs Steven D. Havard and\nJudy A. Havard filed a complaint in the instant lawsuit seeking actual and compensatory damages and punitive damages against the defendants, Kemper National Insurance Companies d/b/a American Manufacturers Mutual Insurance Company (\xe2\x80\x9cKemper\xe2\x80\x9d), Brown & Haynes Insurance, Inc., (\xe2\x80\x9cHaynes\xe2\x80\x9d), Hatch, Jones &\nAssociates, Inc., (\xe2\x80\x9cHatch\xe2\x80\x9d), and Midsouth Home Service, Inc., (\xe2\x80\x9cMidsouth\xe2\x80\x9d), for\nbad faith, fraud, gross negligence, negligent misrepresentation, deceit and other\nwrongful conduct. The genesis of this dispute began when plaintiffs\xe2\x80\x99 home, insured by Kemper, was damaged by an accidental fire. Plaintiffs are unhappy with\nKemper\xe2\x80\x99s response to their claim under their fire policy and unhappy with the alleged activities of Hatch and Midsouth whose employees acted as appraisers in\nthis matter. All defendants move for summary judgment on the ground that by\ncashing Kemper\xe2\x80\x99s check tendered to plaintiffs in full satisfaction of their policy\nclaim for fire damage to their home, plaintiffs now have fully discharged their\nclaims under the doctrine of accord and satisfaction codified by Miss. Code Ann.\n\xc2\xa7 75-3-311 (Supp.1994). Defendant Hatch moves for summary judgment on the\nadditional ground that at all times it was an agent acting for a known and disclosed principal, and that, as such, it is shielded from any liability in plaintiffs\xe2\x80\x99\nbad faith suit. Both Hatch and Midsouth move for summary judgment on the\nground that plaintiffs have no evidence to support any of the plaintiffs\xe2\x80\x99 claims\nmade against them. Plaintiffs oppose the motion. Nevertheless, this court is persuaded to grant the motions in all respects. * * * *\nFINDINGS OF FACT\n[\xc2\xb62] A fire damaged the home of the Havards, plaintiffs in this suit. The\nHavards had a homeowners\xe2\x80\x99 policy of insurance with Kemper, so following the\nfire, they submitted an insurance claim with Kemper. Kemper processed the\nHavards\xe2\x80\x99 claim and tendered a check for $5,374.45 for the claim on the damage to\nthe dwelling. An accompanying letter dated June 25, 1993, informed the Havards:\nPlease find enclosed a check in the amount of $5,374.45 for the repairs to your house. We stand by our letter dated April 30, 1993, which\nstated the loss settlement and appraisal provisions of your policy. We have\nreviewed the repair estimates you sent and feel the damage repairs can be\nproperly repaired in accordance with Mr. Meadows\xe2\x80\x99 appraisal of $5,874.45.\nLater, an attorney for Kemper, Larry Gunn, wrote a letter to plaintiffs\xe2\x80\x99 attorney,\nstating the following:\n55\n\n\x0cA check was previously tendered to Mr. and Mrs. Havard in the\nsum of $5,374.45. The check has not been cashed.\nThe Havards are not happy with this check. Thus Kemper has\nelected to rely upon the appraisal provision of the policy. I enclose a copy\nof the page from the policy showing the terms and provisions of the appraisal provision of the policy. I also enclose a copy of Hartford Fire Insurance Company v. Conner, 79 So.2d 236 (Miss. S. Ct.1955) holding the\nappraisal provision of homeowner\xe2\x80\x99s insurance policies to be valid and enforceable.\nPlease let me know if your clients would like to cash the check for\n$5,374.45 or if they would like to enter into an appraisal proceeding.\n[\xc2\xb63] After receiving the check, the June 25, 1993, letter from Kemper, and the\nfollowing letter from Larry Gunn, the Havards cashed the Kemper check. The\nHavards apparently attempted to reserve their rights to sue by marking on the\nback of the check \xe2\x80\x9cin partial payment and accepted with reservation.\xe2\x80\x9d\n[\xc2\xb64] Later, after the check had been cashed, plaintiffs sued all parties connected\nwith the insurance claim for bad faith, fraud, gross negligence, negligent misrepresentation, deceit and other wrongful conduct. In short, the plaintiffs claim that\nKemper did not properly evaluate their claim and that the other defendants acted\nwith Kemper to undervalue plaintiffs\xe2\x80\x99 loss.\nPROCEDURE FOR SUMMARY JUDGMENT\n[\xc2\xb65] In response to a motion for summary judgment, the non-moving party is\nrequired to respond with proof of a prima facie case, sufficient for a jury to enter a\nverdict in their favor. * * * *\n[\xc2\xb66] Rule 56(c) of the Federal Rules of Civil Procedure mandates summary\njudgment in any case where a party fails to establish the existence of an element\nessential to the case and on which that party has the burden of proof. * * * *\nRule 56(c) further requires that the court enter summary judgment if the evidence\nfavoring the non-moving party is not sufficient for the jury to enter a verdict in\nthe non-moving party\xe2\x80\x99s favor. * * * * When the moving party has carried the\nRule 56(c) burden, the opposing party must present more than a metaphysical\ndoubt about the material facts in order to preclude the grant of summary judgment.\n****\nCONCLUSIONS OF LAW\n[\xc2\xb67] The doctrine of accord and satisfaction recently has been codified in Mississippi, Miss. Code Ann. \xc2\xa7 75-3-311 (Supp.1994). The new statute effective after\nJanuary 1, 1993, provides:\n\n56\n\n\x0c(a) If a person against whom a claim is asserted proves that (i) that person\nin good faith tendered an instrument to the claimant as full satisfaction of\nthe claim, (ii) the amount of the claim was unliquidated or subject to a bona fide dispute, and (iii) the claimant obtained payment of the instrument,\nthe following subsections apply.\n(b) ... the claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument\nwas tendered as full satisfaction of the claim.\n[\xc2\xb68] The evidence received by this court convincingly establishes that plaintiffs\xe2\x80\x99 claim has been discharged under an accord and satisfaction. Here, there was\na bona fide dispute, a good faith tender of a check in full satisfaction of the plaintiffs\xe2\x80\x99 claim, and the plaintiffs accepted payment of the check. A letter, accompanying the check, contained a conspicuous* statement to the effect that the check was\ntendered in full satisfaction of the claim.\n[\xc2\xb69] Not only did the letter accompanying the check inform the Havards that\nKemper was paying no more money on the claim, a subsequent letter written by\nKemper\xe2\x80\x99s attorney, Larry Gunn, informed the Havards\xe2\x80\x99 attorney that the Havards\nshould either cash the check or enter into an appraisal proceeding in accordance\nwith the provisions of the insurance policy.\xe2\x80\xa0 Moreover, the check itself stated on\nits face that it was \xe2\x80\x9cPayment for Fire Damage\xe2\x80\x94Building.\xe2\x80\x9d\n[\xc2\xb610] Throughout this entire period, when plaintiffs received the Kemper check\nand accompanying correspondence, plaintiffs were actively represented by counsel. Hence, before cashing the Kemper check they had ready access to a legal\nopinion on the possible consequences.\n[\xc2\xb611] But, presence of counsel, while important, is not the key point here. The\npivotal fact here is that the correspondence accompanying the check and that sent\nsubsequently certainly told the plaintiffs that Kemper had determined their loss to\nbe no more than $5,394.45; that this was Kemper\xe2\x80\x99s final offer; and that if plaintiffs refused to accept this amount, Kemper was prepared to submit the matter to\n*\n\nMississippi Code Annotated \xc2\xa7 75-1-201(10) provides:\n(10) \xe2\x80\x9cConspicuous\xe2\x80\x9d: A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. A printed heading in\ncapitals (as: NONNEGOTIABLE BILL OF LADING) is conspicuous. Language in the\nbody of a form is \xe2\x80\x9cconspicuous\xe2\x80\x9d if it is in larger or other contrasting type or color. But in\na telegram any stated term is \xe2\x80\x9cconspicuous.\xe2\x80\x9d Whether a term or clause is \xe2\x80\x9cconspicuous\xe2\x80\x9d\nor not is for decision by the court.\n\xe2\x80\xa0\nSection I, Condition (6), of the insurance agreement between the parties provides:\n[i]f you and we fail to agree on the amount of loss, either party may demand an appraisal\nof the loss ... The two appraisers will choose an umpire. If they cannot agree on an umpire within 15 days, you or we may request that the choice by [sic] made by a judge of a\ncourt of record in the state where the resident premises is located ...\n\n57\n\n\x0can appraisal proceeding. When plaintiffs cashed the check under these circumstances, plaintiffs showed accord and satisfaction as a matter of law.\n[\xc2\xb612] Plaintiffs seemingly knew that by cashing the check they could be compromising their case. When the Havards cashed the check, they attempted to reserve their rights through notations on the back of the check. However, Miss.\nCode Ann. \xc2\xa7 75-1-207(2)7 (Supp.1994)* specifically states that accord and satisfaction is an exception to the general rule that a party may reserve its rights on an\ninstrument. So, while the plaintiffs failed to preserve the vitality of their dispute\nthrough this means, by these actions in attempting to do so, they showed an appreciation for the operation of the principle of accord and satisfaction. On this issue of accord and satisfaction, then, this court finds that there are no genuine issues of material fact, and all defendants are entitled to summary judgment on the\nground of accord and satisfaction. * * * *\nIT IS, THEREFORE, ORDERED AND ADJUDGED that all defendants are entitled to summary judgment, and all claims against all of the defendants are dismissed WITH PREJUDICE. A separate judgment shall be entered in accordance\nwith the local rules.\nQuestions:\n1. Did the Havards assent?\n2. What is consideration for the accord and satisfaction?\n3. Does one have to find consideration in a full payment check case to which\n\xc2\xa7 3-311 applies?\n4. What should the Havards have done with the check?\n\n3. Mutual Promises\n\nWEST v. STOWELL (1577)\nCommon Pleas\n2 Leonard 154, 74 ER 437, B&M 494\nIn an action upon the case, by Thomas West against Sir John Stowell, the plaintiff\ndeclared, that the defendant, in consideration that the plaintiff promised to the defendant, that if the defendant shall win a certain match at shooting, made between\n*\n\nMississippi Code Annotated \xc2\xa7 75-1-207(2) provides:\n(2) Subsection (1) does not apply to an accord and satisfaction.\n\n58\n\n\x0cthe Lord of Effingham and the defendant, then the plaintiff should pay to the defendant 10l. and promised to the plaintiff, that if the said L. Effingham shall win\nthe same match of the defendant, that then the defendant would pay to the plaintiff\n10l. and farther declared that the Lord Effingham won the match, for which the\naction is brought. It was moved, that here is not\nany sufficient consideration; for the promise of Roger Manwood (1525-92) was\nthe plaintiff to the defendant, [is not equally ac- appointed judge of the Comtionable], for there is not any consideration upon mon Pleas in 1572. He was\nwhich it is conceived, but it [is] only nudum knighted and appointed lord\npactum, upon which the defendant could not chief baron of the Exchequer in\nhave an action against the plaintiff. And then 1578. Manwood was famously\nhere is not any sufficient consideration for the corrupt. He offered to buy the\npromise of the defendant. Mounsen, Justice, position of Chief Justice of the\nQueen\xe2\x80\x99s Bench in 1592, just\nconceived that here the consideration is suffibefore he died, and rumor has it\ncient, for here this counter promise is a recipro- he offered to buy the position of\ncal promise, and so a good consideration, for all chief justice of the Common\nthe communication ought to be taken together. Pleas ten years earlier. See\nManwood [, J.:] Such a reciprocal promise be- http://cca.li/QD. Manwood was\ntwixt the parties themselves at the match is suf- also a philanthropist. He foundficient; for there is consideration good enough to ed a grammar school in Kent,\neach, as the preparing of the bows and arrows, Sir Roger Manwood\xe2\x80\x99s School,\nthe riding or coming to the place appointed to still in operation. The school\xe2\x80\x99s\nshoot, the labour in shooting, the travel in going web page can be found\nup and down between the marks: but for the bet- http://cca.li/QE.\ntors by, there is not any consideration, if the bettor doth not give aim. ....\nQuestions:\n1. Ok, West is a little confusing. Perhaps the most confusing part of it is that the\nreporter, Leonard, doesn\xe2\x80\x99t tell you who won. In fact, no one knows. I give you the\ncase so that you can see that the rule that a promise can be consideration for another promise is quite different than the consideration rules we have just studied.\nThe key to understanding the case is that Stowell\xe2\x80\x99s counsel is objecting that there\nis no consideration because there is no detriment to West. That\xe2\x80\x99s Manwood\xe2\x80\x99s objection, too. But Manwood doesn\xe2\x80\x99t think all wagers would be unenforceable.\nManwood thinks West could have sued if he had participated in the match. Why\nwould that have made a difference?\n2. In this case, if West wins, does he win because otherwise Stowell would get\naway with a benefit he hadn\xe2\x80\x99t paid for? Does he win because otherwise West will\nhave performed a labor Stowell hadn\xe2\x80\x99t paid for? What principle(s) of justice supports recovery here?\n3. Who do you think should win this case?\n\n59\n\n\x0cSTRANGBOROUGH v. WARNER (1589)\nQueen\xe2\x80\x99s Bench\n4 Leonard 3, 74 ER 686 (1589)\nNote, that a promise against a promise will maintain an action [in assumpsit], as\nin consideration that you do [promise to] give me \xc2\xa310 on such a day, I promise to\ngive you \xc2\xa310 the day after.\nQuestion: How are the facts named in the example different from those of Game v.\nHarvie?\n\nNICHOLAS v. RAYNBRED (1615)\nKing\xe2\x80\x99s Bench and Exchequer Chamber\nJenk. 296, 145 ER 215, Hob. 88, 80 ER 238\n[\xc2\xb61] A sells a cow to B for 5l. and assumes to deliver her to him at a certain day;\nat the same time B assumes to A to pay him 5l. for the said cow, at the said day. A\nbrings an assumpsit for the 5l. not paid, and does not aver delivery of the cow: it\nneed not be averred; but the writ ought to aver the mutual assumpsit; for they are\nreciprocal assumpsits: and such mutual assumpsits are a good consideration, and\neach of them has a remedy against the other; one for the cow, and other for the 5l.\n[\xc2\xb62]\n\nJudged in both courts [the King\xe2\x80\x99s Bench and the Exchequer].\n\n[\xc2\xb63] ... [B]ut such mutual assumpsits ought to be made at the same time; for\nthey make the consideration, and the consideration and the promise always ought\nto be together: otherwise it is nudum pactum.\nQuestions:\n1. Okay, this opinion always throws students, perhaps because it is so counterintuitive. We don\xe2\x80\x99t really think like this about binding promises, anymore. Does A\nhave to deliver the cow before he sues for the money? The answer the court gives\nto this question is \xe2\x80\x9cno,\xe2\x80\x9d but this is no longer good law. It was modified in the early 1700s in a case you will probably read when you get to the second semester of\nContracts. I want you to read Nicholas, though, so you can understand that, in its\nsimplest form, contract law is really only about the enforcement of one promise,\nnot about the enforcement of an agreement.\n2. If A does not have to deliver the cow before suing B for the money, how will B\nget the cow?\n\n60\n\n\x0c3. Is there a bargain here?\n4. Why must the promises be made at the same time, do you think? That rule is\nalso no longer good law, but we will pinpoint later in the semester the exact date\non which this rule was changed. The reason for the rule is still with us, though,\nbut that reason is enforced through another rule, one we have already studied.\n5. Can a promise to accept a gift be consideration for a promise to give a gift? It\nmay help you to know the additional rule of law, here stated somewhat roughly,\nthat the thing promised as consideration must itself be adequate consideration if\nexchanged for the promise at the time the promise was made. E.g., Restatement\n(Second) of Contracts \xc2\xa7 75 (1981).\n\nPROBLEM 6. Farmer promises to buy a tractor and seller promises to sell that\ntractor. Is there consideration here?\n\nESSENTIAL ACCOUNTING SYSTEMS, INC. v. DEWBERRY (2013)\nArk. Ct. App.\n428 S.W.3d 613, 617\n**** Mutual promises constitute consideration, each for the other. ****\nNote: This rule is the modern statement of the mutual promise rule, which holds\nthat a promise can be consideration for another promise. The rule has been more\nor less the same since West v. Stowell.\nThe following cases and problems (derived from actual opinions) are an interesting subset of the mutual promise cases. Often the issue in these cases is described\nas \xe2\x80\x9cillusory promise\xe2\x80\x9d or \xe2\x80\x9clack of mutuality.\xe2\x80\x9d These are only other names for lack\nof consideration in a case in which what might have been the consideration was a\nmutual promise. If there is no real mutual promise, but only an illusory one, then\nthere is no consideration (assuming, of course, that no performance was consideration). That is what these cases discuss, for the most part.\nThere is another aspect of these cases reflected in the phrase \xe2\x80\x9clack of mutuality.\xe2\x80\x9d\nRemember Nicholas v. Raynbred? How many times did that case say \xe2\x80\x9cmutual assumpsit\xe2\x80\x9d? Recall that, early on, if mutual promises were alleged as consideration,\none did not have to perform first before suing on the promise. That was fair only\nbecause the defendant could turn around and sue the plaintiff for breach of the\nplaintiff\xe2\x80\x99s mutual promise. (The requirement of two actions to reach a just result\nis probably why one can generally no longer collect for breach of promise without\nalleging performance of one\xe2\x80\x99s own obligation.) But if the defendant could never\nrecover on the plaintiff\xe2\x80\x99s promise, then it didn\xe2\x80\x99t seem right that the plaintiff could\n61\n\n\x0csue the defendant, so if the plaintiff\xe2\x80\x99s promise did not bind the plaintiff, courts\nsometimes held that the defendant\xe2\x80\x99s promise lacked mutuality and threw out the\nplaintiff\xe2\x80\x99s suit. That seemed fair, too, conversely.\n\nJOHNSON ENTERPRISES OF JACKSONVILLE, INC., a Florida corporation v.\nFPL GROUP, INC., a Florida corporation, FPL Group Capital, Inc.,\na Florida corporation, and Telesat Cablevision, Inc., a Florida corporation (1998)\nU.S. Court of Appeals, 11th Circuit\n162 F.3d 1290, 1311\n[\xc2\xb61] * * * * It is a fundamental principle of contract law that a promise is not\nenforceable unless it is supported by consideration. See Restatement (Second) of\nContracts \xc2\xa7 17 (1981) (\xe2\x80\x9c[T]he formation of a contract requires a bargain in which\nthere is a manifestation of mutual assent to the exchange and a consideration.\xe2\x80\x9d).\nIn a bilateral contract, the exchange of promises by both parties constitutes consideration. * * * *. * * * *\n[\xc2\xb62] If, however, \xe2\x80\x9cone of the promises appears on its face to be so insubstantial\nas to impose no obligation at all on the promisor\xe2\x80\x94who says, in effect, \xe2\x80\x98I will if I\nwant to\xe2\x80\x99\xe2\x80\x9d\xe2\x80\x94then that promise may be characterized as an \xe2\x80\x9cillusory\xe2\x80\x9d promise, i.e.,\n\xe2\x80\x9ca promise in form but not in substance.\xe2\x80\x9d Farnsworth, Contracts \xc2\xa7 2.13, at 75-76\n(1990). An illusory promise does not constitute consideration for the other promise, and thus the contract is unenforceable against either party. See id.; Williston\non Contracts \xc2\xa7 7:7, at 88-89 (\xe2\x80\x9cWhere an illusory promise is made, that is, a promise merely in form, but in actuality not promising anything, it cannot serve as consideration \xe2\x80\xa6. In such cases, where the promisor may perform or not, solely on the\ncondition of his whim, his promise will not serve as consideration.\xe2\x80\x9d (footnote\nomitted)).\n\nIn re ADIRONDACK RAILWAY CORPORATION, Debtor (1988)\nN.D. N.Y.\n95 B.R. 867, 874\n* * * * It is hornbook law that illusory promises or mere statements of intention,\nwhich by their terms make performance entirely optional with the \xe2\x80\x98promisor\xe2\x80\x99 whatever may happen, or whatever course of conduct in other respects\nhe may pursue, do not constitute a promise. Although such words are often\nreferred to as forming an illusory promise, they do not fall within the present definition of promise. They may not even manifest any intention on\nthe part of the promisor. Even if a present intention is manifested, the reservation of an option to change that intention means that there can be no\npromisee who is justified in an expectation of performance.\n\n62\n\n\x0cId. at [Restatement (Second) of Contracts] \xc2\xa7 2 comment e. Hence, the State\xe2\x80\x99s return promise imposes no obligation on itself since it amounts to an \xe2\x80\x9cI will if I\nwant to\xe2\x80\x9d, rendering the settlement, as a matter of law, anything but binding.\n* * * * It is a promise in form but not in substance.\nNote: These cases contain probably the best definitions of illusory promises I\nhave seen in case law, perhaps because they are direct quotes from Williston and\nthe Restatement (Second) of Contracts. Here is an illustration of their application:\n\nRIDGE RUNNER FORESTRY v. VENEMAN (2002)\nFed. Cir.\n287 F.3d 1058\n[\xc2\xb61] Ridge Runner Forestry appeals from the decision of the Department of\nAgriculture Board of Contract Appeals dismissing its cause of action for lack of\njurisdiction * * * *. * * * * Because no contract had been formed, we affirm the\nboard\xe2\x80\x99s decision.\n[\xc2\xb62] Ridge Runner Forestry is a fire protection company located in the Pacific\nNorthwest. In response to a request for quotations (\xe2\x80\x9cRFQ\xe2\x80\x9d) issued by the Forestry\nService, Ridge Runner submitted a proposal and ultimately signed a document\nentitled Pacific Northwest Interagency Engine Tender Agreement (\xe2\x80\x9cTender\nAgreement\xe2\x80\x9d). The Tender Agreement incorporated the RFQ in its entirety, including the following two provisions in bold faced lettering: (1) \xe2\x80\x9cAward of an Interagency Equipment Rental Agreement based on response to this Request for Quotations (RFQ) does not preclude the Government from using any agency or cooperator or local EERA resources\xe2\x80\x9d; and (2) \xe2\x80\x9cAward of an Interagency Equipment\nRental Agreement does not guarantee there will be a need for the equipment offered nor does it guarantee orders will be placed against the awarded agreements.\xe2\x80\x9d\nRequest for Quotation, No. R6-99-117 (March 29, 1999). Additionally, because\nthe government could not foresee its actual equipment needs, the RFQ contained\nlanguage that allowed the contractor to decline the government\xe2\x80\x99s request for\nequipment for any reason: \xe2\x80\x9cBecause the equipment needs of the government and\navailability of contractor\xe2\x80\x99s equipment during an emergency cannot be determined\nin advance, it is mutually agreed that, upon request of the government, the contractor shall furnish the equipment offered herein to the extent the contractor is\nwilling and able at the time of order.\xe2\x80\x9d Id. (emphasis added). The RFQ also included a clause informing bidders that they would not be reimbursed for any costs incurred in submitting a quotation. Ridge Runner signed Tender Agreements in\n1996, 1997, 1998, and 1999. In 1999, it presented a claim for $180,000 to the\ncontracting officer alleging that the Forestry Service had violated an \xe2\x80\x9cimplied duty of good faith and fair dealing\xe2\x80\x9d because Ridge Runner had been \xe2\x80\x9csystematically\nexcluded for the past several years from providing services to the Government.\xe2\x80\x9d\nIn response, the contracting officer told Ridge Runner that she lacked the proper\nauthority to decide the claim. Ridge Runner timely appealed the decision to the\n63\n\n\x0cDepartment of Agriculture Board of Contract Appeals. The board granted the\ngovernment\xe2\x80\x99s motion to dismiss concluding that because no contract had been entered into, it lacked jurisdiction under the Contract Disputes Act (\xe2\x80\x9cCDA\xe2\x80\x9d), 41\nU.S.C. \xc2\xa7\xc2\xa7 601-613.\n[\xc2\xb63] We have jurisdiction over an appeal from a decision of an agency board of\ncontract appeals by virtue of 28 U.S.C. \xc2\xa7 1295(a)(10). The board\xe2\x80\x99s jurisdiction\nunder the CDA requires, at a minimum, a contract between an agency and another\nparty. * * * * Therefore, the threshold matter is whether the Tender Agreements\nconstituted contracts between the parties, which is a question of law that we review de novo. * * * *\n[\xc2\xb64] Ridge Runner argues that the Tender Agreement was a binding contract\nthat placed specific obligations upon the government; namely, the government\nwas obligated to call upon Ridge Runner, and the other winning vendors, for its\nfire fighting needs, and in return, the vendors were to remain ready with acceptable equipment and trained staff to answer the government\xe2\x80\x99s call. This, Ridge Runner argues, places the alleged contract squarely within our holding in Ace-Federal,\n226 F.3d 1329.\n[\xc2\xb65] Ace-Federal involved a requirements contract whereby the government\nwas obligated to use, with limited exceptions, enumerated suppliers. Following a\nrequest for proposals, Ace Federal, as well as other vendors, contracted with the\ngovernment to provide court reporting and transcription services for various federal agencies. Included in each of the contracts was the standard requirements\nclause found in Federal Acquisition Regulation \xc2\xa7 52.216-21(c) which provides\n\xe2\x80\x9c[e]xcept as this contract otherwise provides, the Government shall order from the\nContractor all the supplies or services specified in the Schedule that are required\nto be purchased by the Government activity or activities specified in the Schedule.\xe2\x80\x9d 48 C.F.R. \xc2\xa7 52.216-21(c) (1988). Each contract also included a termination\nfor convenience clause that limited government liability should the General Services Administration (\xe2\x80\x9cGSA\xe2\x80\x9d) choose to cancel any contract. During the relevant\nterm, some of the covered agencies contracted for transcription services from noncontract sources without obtaining the necessary waiver. We held that \xe2\x80\x9ceach time\nan agency that did not obtain a GSA waiver arranged for services covered under\nthe contract from a non-contract source, the government did not act within the\nlimited exception and breached the contract.\xe2\x80\x9d Ace-Federal, 226 F.3d at 1332-33.\n[\xc2\xb66] The contract in Ace-Federal is quite distinct from the Tender Agreements\nat issue in this case. That contract obligated the government to fulfill all of its requirements for transcription services from enumerated vendors or obtain a waiver.\nThe Tender Agreements here are nothing but illusory promises. By the phrase illusory promise is meant words in promissory form that promise nothing; they do\nnot purport to put any limitation on the freedom of the alleged promisor, but leave\nhis future action subject to his own future will, just as it would have been had he\nsaid no words at all. Torncello v. United States, 231 Ct.Cl. 20, 681 F.2d 756, 769\n64\n\n\x0c(1982) (quoting 1 Corbin on Contracts \xc2\xa7 145 (1963)). The government had the\noption of attempting to obtain firefighting services from Ridge Runner or any other source, regardless of whether that source had signed a tender agreement. The\nAgreements contained no clause limiting the government\xe2\x80\x99s options for firefighting\nservices; the government merely \xe2\x80\x9cpromised\xe2\x80\x9d to consider using Ridge Runner for\nfirefighting services. Also, the Tender Agreement placed no obligation upon\nRidge Runner. If the government came calling, Ridge Runner \xe2\x80\x9cpromised\xe2\x80\x9d to provide the requested equipment only if it was \xe2\x80\x9cwilling and able.\xe2\x80\x9d It is axiomatic that\na valid contract cannot be based upon the illusory promise of one party, much less\nillusory promises of both parties. See Restatement (Second) of Contracts \xc2\xa7 71(1).\n[\xc2\xb67] Accordingly, the decision of the Department of Agriculture Board of Contract Appeals is affirmed.\nQuestion: Is this case about the government not promising anything, or about\nRidge Runner Forestry not providing any consideration?\n\nThe result in Ridge Runner Forestry seems acceptable, but consider the following\nproblems. See if you can predict the right result. The answers, taken from real\ncases, can be found in an Appendix at the end of this volume. A note of caution:\nSome of these cases are controversial. The rule they cite might be acceptable, but\nthe application may be erroneous, or at least problematic. Some courts myopically\nlook for only a promise when some performance might in fact be the sought-for\nexchange.\n\nPROBLEM 7. Miami Coca-Cola Bottling Co. (\xe2\x80\x9cBottler\xe2\x80\x9d) agreed with Orange\nCrush Co. (\xe2\x80\x9cCrush\xe2\x80\x9d) as follows: Crush would give Bottler a perpetual and exclusive license within a designated territory to make, bottle, and distribute Orange\nCrush under Crush\xe2\x80\x99s trademark. Crush would supply concentrate at stated prices\nand do certain advertising. Bottler agreed to buy a specified quantity of concentrate, maintain the bottling plant, solicit orders for Orange Crush, promote its sale,\nand \xe2\x80\x9cdevelop an increase in the volume of sales.\xe2\x80\x9d The license \xe2\x80\x9ccontained a proviso to the effect that [Bottler] might at any time cancel the contract.\xe2\x80\x9d\nBottler bought a quantity of concentrate and performed for about a year. Then,\nCrush gave written notice to Bottler that Crush would no longer be bound. In response to Bottler\xe2\x80\x99s suit, Crush claimed that Bottler\xe2\x80\x99s promise was illusory and that\nits own promise was therefore without consideration. What result?\n\nPROBLEM 8. Central Nebraska Public Power and Irrigation District (\xe2\x80\x9cCentral\xe2\x80\x9d)\nand Johnson Lakes Development, Incorporated (\xe2\x80\x9cLakes\xe2\x80\x9d) entered into a written\nlease for land owned by Central. The lease term was 31 years. There was no pro65\n\n\x0cvision for rent, but the lease stated that Central \xe2\x80\x9cshall have complete power and\nauthority to cancel or terminate this Agreement at any time it so desires by giving\n[Lakes] written notice of such intentions at least six (6) months in advance addressed to [Lakes] at its last known corporate address.\xe2\x80\x9d Sixteen years later, Central decided to begin extracting rent. Central\xe2\x80\x99s board directed its officers to modify\nthe lease by agreement with Lakes. If Lakes failed to agree to a modification,\nCentral was to begin the process of terminating the lease. Negotiations for rent\nfailed, and Lakes sued Central. One of Lakes\xe2\x80\x99s arguments was that Central\xe2\x80\x99s right\nto cancel rendered the lease illusory. Did it?\n\nPROBLEM 9. Scott offered to the Moragues Lumber Co. as follows: \xe2\x80\x9cI am\nthinking of buying an American shipping vessel of about 1,050 tons, due in Chile.\nIf I buy it, I will charter it to you for the transportation of a cargo of lumber from\nany port in the Gulf of Mexico to Montevideo or Buenos Aires, for the freight of\n$65 per thousand feet of lumber, freight to be prepaid, free of discount and of insurance, and the vessel to be furnished within a reasonable time after its purchase.\xe2\x80\x9d Moragues Lumber accepted this offer, meaning it promised to charter the\nboat as offered. Scott purchased the vessel. Moragues Lumber was ready, willing,\nand able to charter it, but Scott chartered it to someone else. In response to\nMoragues Lumber\xe2\x80\x99s suit against Scott, Scott argued that his own promise was illusory. Was it?\nAlong the same line as these facts, consider the common fact scenario of a real\nestate purchase contract with a financing condition\xe2\x80\x94the \xe2\x80\x9cpurchaser is not bound\nunless the purchaser obtains financing.\xe2\x80\x9d But the purchaser will never obtain financing unless the purchaser applies for financing and cooperates with the lender.* Does the financing condition render the promise to buy illusory?\n\nPROBLEM 10. This problem comes from a case written by Justice (then Judge)\nCardozo. Best let him tell it in his own words. The case is Wood v. Lucy, Lady\nDuff-Gordon, 118 N.E. 214 (N.Y. 1917):\nThe defendant styles herself \xe2\x80\x9ca creator of fashions.\xe2\x80\x9d Her favor helps a sale.\nManufacturers of dresses, millinery and like articles are glad to pay for a\ncertificate of her approval. The things which she designs, fabrics, parasols\nand what not, have a new value in the public mind when issued in her\nname. She employed the plaintiff to help her to turn this vogue into money.\n*\n\nNearly all real estate sales transactions occur as follows: The buyer and seller bind themselves to\na contract to sell, subject to certain conditions. They then go about seeing if the conditions are\nmet: that the seller owns the property, that the buyer obtains financing, and so on. After a period of\ntime during which the parties can assure that the conditions are met, the parties \xe2\x80\x9cclose\xe2\x80\x9d the transaction by actually trading the real property and the payment given in exchange for it. Often, they\nwill close through an agent who holds the document transferring title to the property (called a\n\xe2\x80\x9cdeed,\xe2\x80\x9d usually) and the money to be paid for the property. We call the holding of these things for\na pending transaction an \xe2\x80\x9cescrow\xe2\x80\x9d and the person holding them an \xe2\x80\x9cescrow agent.\xe2\x80\x9d\n\n66\n\n\x0cHe was to have the exclusive right, subject always to her approval, to\nplace her indorsements on the designs of others. He was also to have the\nexclusive right to place her own designs on sale, or to license others to\nmarket them. In return, she was to have one-half of \xe2\x80\x9call profits and revenues\xe2\x80\x9d derived from any contracts he might make. The exclusive right was\nto last at least one year from April 1, 1915, and thereafter from year to\nyear unless terminated by notice of ninety days. The plaintiff says that he\nkept the contract on his part, and that the defendant broke it. She placed\nher indorsement on fabrics, dresses and millinery without his knowledge,\nand withheld the profits. He sues her for the damages, and the case comes\nhere on demurrer.\nLady Lucy, in demurrer, claimed that Wood never promised to do anything and\nthat the contract was therefore lacking in consideration. True?\n\nPROBLEM 11. White Light Optical promised to sell and Lumenera promised to\nbuy at certain prices all the small lenses that Lumenera needed for the webcams\nthat Lumenera manufactured and sold. Three months later, White Light\xe2\x80\x99s glass\nsupplier went out of business, and it was unable to find another supplier at a cost\nthat made the Lumenera contract profitable. White Light wanted out of it. Is Lumenera\xe2\x80\x99s promise illusory?\nConsider the following sections from the Uniform Commercial Code:\nUniform Commercial Code \xc2\xa7 2-306. Output, Requirements and Exclusive\nDealings, and cmt. 2.\nUniform Commercial Code \xc2\xa7 1-304. Obligation of Good Faith.\nUniform Commercial Code \xc2\xa7 1-201(20). General Definitions.\n\nThe UCC does not apply to everything. Here is the provision describing the scope\nof Article 2:\nUniform Commercial Code \xc2\xa7 2-102. Scope * * *.\nQuestions:\nSection 2-306 owes an intellectual debt to Wood v. Lucy, Lady Duff-Gordon.\nWood was not selling goods, but one can apply the rationale of \xc2\xa7 2-306(2) to the\nfacts of that case.\n1. Under subsection (2), was Wood more like a seller or buyer?\n67\n\n\x0c2. Would subsection (2) apply to Lucy?\n3. Suppose I buy from Lucy all the dresses that she makes. Does subsection (1)\nimpose any duties on Lucy or me?\n\nPROBLEM 12. Mattei, a real estate developer, was planning to build a shopping\ncenter on a tract next to Hopper\xe2\x80\x99s land. Mattei wanted to include Hopper\xe2\x80\x99s land in\nthe development. For several months, a real estate agent tried to negotiate a sale\nof Hopper\xe2\x80\x99s land to Mattei. After Hopper rejected several proposals, the agent\nsuggested Hopper herself submit a proposal. She did, on a form supplied by the\nagent. Mattei accepted the offer on the day it was offered. Under the agreement,\nMattei was required to deposit $1,000 and pay another $56,500 at closing. The\nagreement said that the parties would close in 120 days. The agreement also contained the following condition: \xe2\x80\x9cSubject to Coldwell Banker & Company obtaining leases satisfactory to the purchaser.\xe2\x80\x9d Leases for what? For the shopping center.\nApparently, Mattei was not going to build it unless leases for space within it were\nalready in place. If he was not going to build, then he did not want to buy Hopper\xe2\x80\x99s land.\nMattei paid the $1,000 deposit. While Mattei was securing leases, and before the\n120 days had ended, Hopper\xe2\x80\x99s attorney gave notice that she would not sell. Later,\nMattei gave Hopper notice that satisfactory leases had been obtained. Mattei offered to pay the balance. Hopper refused to tender a deed. Her argument? That\nMattei\xe2\x80\x99s promise was illusory. Was it?\n__________________________\nHere is one last illusory promise case.\nFORRESTER\xe2\x80\x99S CASE (1661)\n1 Siderfin 41\nA minor by his guardian brought an action on the case in assumpsit and [the jury]\nfound for the minor. And it was moved in arrest of the judgment * * * * that the\nconsideration for this promise being it was by a minor to pay a sum of money is\nvoid, * * * * so that the promise on which the action is brought lacks consideration. But by the whole Court it was held that if the money was paid according to\nthe promise of the minor it is clear that this action well lies because the consideration is executed. And it was held and ruled by the whole Court that although the\nmoney was not paid (whereas it was not in this case) nevertheless the action well\nlies because it is solely in the election of the minor to make his promise void, and\nnot in the election of the [other] party * * * *. And it was said by Twisden, J., that\nwhere a minor made a lease for annual rent that it is not at all in the election of the\n\n68\n\n\x0clessee [to avoid] this lease for the infancy of the lessor, and upon the selfsame\nreason is our principal case, upon that judgment * * * *.\nQuestions:\n1. Is this case different than West v. Stowell? If you recall, in West the two parties,\na participant and a bystander, bet on an archery match. Only one of the two could\nwin the bet. That meant that only one party\xe2\x80\x99s promise could become enforceable.\nThe promise made to the loser of the bet would not be enforceable by definition.\nWhat was the result in West?\n2. According to Forrester\xe2\x80\x99s Case and Justice Mounsen\xe2\x80\x99s position in West, does a\npromise need to be enforceable in order to function as a valuable consideration?\n3. A similar problem arises in cases in which the statute of frauds has effect. The\nstatute of frauds, which we will study in Chapter 5, declares certain types of\npromises unenforceable if not in writing signed by the promisor. Could such an\nunenforceable promise serve as consideration? For the most part, courts have said\n\xe2\x80\x9cyes,\xe2\x80\x9d though a few states (such as the great state of Idaho, and also Michigan)\ndissent. Is it fair that an unenforceable promise serve as consideration? In CocaCola Bottling Corp. v. Kosydar, 331 N.E.2d 440, 444 (Ohio 1975), the court said,\n\xe2\x80\x9cThe uttering of promises does not supply the actual consideration for the bargain.\nIt is the content of the promise or the actual anticipated performance which supplies consideration for the bargain.\xe2\x80\x9d Accord Restatement (Second) of Contracts \xc2\xa7\xc2\xa7\n75, 78 (1981).\n4. Is this case different from Scott v. Moragues Lumber, the answer to Problem 9?\n\nNote on Assent\nJustinian\xe2\x80\x99s DIGEST, 2.14.1.3\n[S]o true it is that the word \xe2\x80\x9cagreement\xe2\x80\x9d [conventiones*] has a general significance that Pedius neatly says that there is no contract, no obligation\nwhich does not consist of agreement, whether it is achieved by the handing over of something or by the use of certain words.\nFor the last century and a half, courts have routinely held that one party to a contract must assent to another\xe2\x80\x99s promise before that promise is enforceable: \xe2\x80\x9cThe\nessential elements of a valid contract must be present: competent parties, legal\nsubject matter, valuable consideration, and mutual assent.\xe2\x80\x9d Blatt v. Blatt, Opinion,\n*\n\nConventiones is the same Latin word the English royal courts used when speaking of a covenant\nwhich they would then enforce if it was set forth in writing and sealed by the promisor. Justinian\n(or one of his scholars) was writing in Latin around 550 C.E.\n\n69\n\n\x0c1988 WL 619305, *2 (Va. Cir. Ct. August 4, 1988). We will study mutual assent in\nthe second half of the semester. But you should wonder, especially given Pedius\xe2\x80\x99s\nopinion about \xe2\x80\x9chanding over\xe2\x80\x9d things and \xe2\x80\x9ccertain words,\xe2\x80\x9d why both consideration\nand mutual assent are required. Is it possible for consideration to be present without mutual assent existing? Consider the next reading, from the argument of Laurence Tanfielde in Slade\xe2\x80\x99s Case, which was argued several times before all the justices of England between 1597 and 1602. The judges never resolved the case formally, but Tanfielde\xe2\x80\x99s argument must have seemed plausible to him at the time:\n[A]s I have learned, an assumption is nothing but a mutual agreement between the parties for a thing to be performed by the defendant in consideration of [some benefit to the promisor or detriment to the promisee].\nJ.H. Baker, The Legal Profession and the Common Law 397 (1986, trans. by\nBaker). Consider also the argument of Saunders for the defendant in Peters v.\nOpie, 2 Keble 837, 84 Eng. Rep. 529, 530 (1671): \xe2\x80\x9cA mutual promise is but the\nconstruction of law on a mutual agreement.\xe2\x80\x9d Saunders argued during the age of\nHobbes, Locke, and the social contract, and while Pufendorf was conceiving his\nown theory of contract. It is possible to have assent without consideration. Your\nnext reading is from Pufendorf, who grounds all of contract on consent. Pufendorf\nwas writing from continental Europe, not from England, and he didn\xe2\x80\x99t recognize a\nrequirement of consideration. Pothier\xe2\x80\x99s theory to some extent follows Pufendorf\xe2\x80\x99s.\nSamuel von Pufendorf, DE OFFICIO HOMINIS ET CIVIS JUXTA LEGEM\nNATURALEM LIBRI DUO 55-56, 59-60 (Frank G. Moore trans., 1682)\n[T]hat promises and compacts may bind us to give or do something not\nformerly required of us, or to omit what we previously had a right to do,\nour voluntary consent is most essential. For, since the fulfillment of any\npromise and agreement is associated with some burden, there is no better\nreason to prevent our justly complaining about it, than the fact that we\nvoluntarily consented to do what it was evidently in our own power to\navoid. * * * *\nFurthermore, consent should be mutual, not only in contracts, but also in\npromises, so that both promisor, and promisee, must consent. For when the\nconsent of the latter is lacking, or when he has refused to accept the offered promise, the thing promised remains in the hands of the promisor.\nFor he who offers something of his own to another, neither wishes to obtrude it upon him against his will, nor to consider it ownerless. Hence, if\nthe other does not accept it, the right of the promisor over the thing offered\nis undiminished.\n\n70\n\n\x0cRobert J. Pothier, TREATISE ON THE CONTRACT OF SALE \xc2\xa7 31\n(1752, transl. L.S. Cushing 1839)\nThe consent of the parties, which is of the essence of the contract of sale,\nconsists in a concurrence of the will of the seller, to sell a particular thing\nto the buyer, for a particular price, and of the buyer, to buy of him the\nsame thing for the same price.\nPothier, Pufendorf and a few others like them wrote treatises that theorized contract law persuasively around consent. These two and another commentator, Grotius, whose treatise was published in 1626, wielded great influence over English\nand American courts in the early part of the 19th century. America in particular\nwas eager for new ideas from abroad, and some American lawyers tried somewhat\nsuccessfully to extend French intellectual influence in American politics and law.\nDuring this time the common law of contracts adopted a requirement of mutual\nassent. We will study how that came about later in the semester. Now the following statement from courts is fairly common:\nTURNER-BASS ASSOCS. OF TYLER v. WILLIAMSON\n932 S.W.2d 219, 222 (Tx. Ct. App. 1996)\nMutual assent or agreement is the essence of a contract.\nBRADDOCK v. MADISON CTY.\n34 F. Supp.2d 1098, 1104 (S.D. Ind. 1998)\nAt its core and in general, however, the essence of contract law is the enforcement of promises where the parties have manifested their assent to a\nmutual exchange of consideration.\nActually both of these two recent statements from American courts are fairly\ncommon. Courts don\xe2\x80\x99t even seem to see the conflict between them. Perhaps that is\nbecause so few agreements lack consideration, given most folks\xe2\x80\x99 evident selfinterestedness, particularly if courts \xe2\x80\x9cintend\xe2\x80\x9d consideration as did the court in\nRiches v. Bridges (and they do that, as we will see later). Is consideration essential\nto contract, or is agreement really what it is all about? Believe it or not, this issue\nis not settled in the law, and we won\xe2\x80\x99t settle it in class, though we will revisit it\nagain more carefully in Chapter 5. If you look closely at many of the cases we\nwill study for the remainder of the semester, you will see just below the surface of\nthe doctrines and analyses the tension about whether contract is about assent alone,\nor something more.\n\n71\n\n\x0cNote on Remedies in Contract Actions\nThe following are rough definitions of contract law remedies intended only to\nguide your inquiry this semester, not to substitute for rigorous case analysis here\nor in any other contracts or other course, especially one in which you might study\nremedies specifically, as we will not in this book. Damages remedies originated in\nthe English royal law courts and are thus often called legal remedies. Injunctive\nand declaratory remedies originated, for our purposes, in chancery, meaning the\noffice of the chancellor of England, who was entrusted with that nation\xe2\x80\x99s public\nconscience. Often injunctive and declaratory remedies are called equitable remedies. Restitutionary remedies have a more difficult genealogy. They were granted\nby both the law courts and the chancery. Because the law courts\xe2\x80\x99 paid homage to\n\xe2\x80\x9cjustice and conscience\xe2\x80\x9d in restitution cases, however, restitution was (and is) often called an equitable remedy. Only tradition stops the courts from rewarding\ndamages outside of these categories, and occasionally courts become very creative in the relief they order. Most courts stick with the following remedies, however, choosing from among them the one(s) they feel would best do justice.\nExpectation Damages: a sum of money intended to place the non-breaching party in the position that party would have been in had the promise at issue been performed.\nReliance Damages: a sum of money intended to place the non-breaching party in\nthe position that party would have been in had the promise at issue not been made.\nGenerally two kinds of costs to the non-breaching party form a basis for reliance\ndamages: out-of-pocket costs\xe2\x80\x94direct net costs incurred by a promisee in reliance\non a promise prior to breach; and opportunity costs\xe2\x80\x94indirect net value that the\npromisee would have enjoyed if the promisee had taken an opportunity that the\npromise led the promisee to forego.\nRestitution: an order that the promisor account for a benefit that has been conferred by the injured party on the promisor. Usually the promisor accounts by returning the benefit received or paying a sum of money equal in value to the benefit. The purpose of the restitution remedy generally is to prevent the unjust enrichment of the party in breach, in other words, to put the party in breach back in\nthe position it would have been in had the contract not been made.\nInjunction: a court\xe2\x80\x99s order that a party do or not do something other than pay\nmoney damages. For example, in certain, special cases, a court may order specific\nperformance, that the promisor perform as promised. In other cases, a court may\norder that a party to a contract refrain from interfering with another party\xe2\x80\x99s performance. Courts often say that injunctive relief is inappropriate when legal remedies adequately compensate the plaintiff. The prototypical case in which damages are inadequate and specific performance is appropriate occurs when a promisor\nbreaches a promise to sell land, because each piece of land is unique and determining the appropriate amount of damages involves too much speculation.\n72\n\n\x0cDeclaratory Relief: a court\xe2\x80\x99s statement of a party\xe2\x80\x99s legal rights. For example, a\ncourt may state that a contract is void or voidable (rescindable) at the option of\none or either party.\nPROBLEM 13. A hires B to build a house for $100,000. B buys $20,000 worth\nof materials and does $15,000 worth of work that uses up all $20,000 in materials.\nThen A fires B for no good reason. The house would have cost B $90,000 to build.\nWhat are B\xe2\x80\x99s damages? The court will probably let B choose its legal remedy, if\none of them is adequate to compensate B, so which should B choose?\nIn Texas, an additional element of damages is available: \xe2\x80\x9cA person may recover\nreasonable attorney\xe2\x80\x99s fees from an individual or corporation, in addition to the\namount of a valid claim and costs, if the claim is for: (1) rendered services; (2)\nperformed labor; (3) furnished material; * * * * (8) an oral or written contract.\nTexas Civ. Prac. & Rem. \xc2\xa7 38.001 (1997). Is this a good idea?\n\n73\n\n\x0cChapter 2. Assent-Based\nNiches of Promise Enforcement: Modification\nand Waiver\nA. Modification\n1. Modification of Judgment Liabilities\nYou begin studying modifications with Foakes v. Beer because this case shows\nthe legal issue that arises when the parties to a contract modify one parties\xe2\x80\x99 (A\xe2\x80\x99s)\nduties but not the other\xe2\x80\x99s (B\xe2\x80\x99s). A doesn\xe2\x80\x99t bargain for what B already has a duty to\ndo\xe2\x80\x94remember Borelli? So promises made by A with respect to the modification\n(i.e., I\xe2\x80\x99ll pay you the same, or more (even though you are doing what the contract\nor some other duty already requires you to do)) are not binding. Yet in many of\nthese cases, such promises serve a commercial purpose, and policy or theoretical\nreasons for enforcing them exist. What to do?\nJohn Weston FOAKES v. Julia BEER (1884)\nHouse of Lords\n9 App. Cas. 605\n[\xc2\xb61] * * * * On the 11th of August 1875 [Beer] [obtained a] judgment against\n[Foakes] for \xc2\xa32077 17s. 2d. for [a] debt and \xc2\xa313 1s. 10d. for costs. On the 21st of\nDecember 1876 a memorandum of agreement was made and signed by [Foakes]\nand [Beer in which Foakes agreed to pay Beer \xc2\xa3500 immediately and the remainder of the judgment principal in installments. In consideration of Foakes\xe2\x80\x99s making\nthese payments, Beer agreed to forego interest on the judgment debt, to which she\nwas otherwise entitled. Foakes paid the principal in full according to the agreement, but then Beer tried to initiate collection efforts for the interest. The trial\njudge refused to allow her to proceed. The initial appellate court to hear the matter\naffirmed, but the Court of Appeal reversed and entered judgment for Beer. Foakes\nthen appealed to the House of Lords.]\n[Holl, counsel for Foakes:]\n74\n\n\x0c[\xc2\xb62] * * * * [T]here is no reason in sense or law why the agreement should not\nbe valid, and the creditor prevented from enforcing his judgment if the agreement\nbe performed. It may often be much more advantageous to the creditor to obtain\nimmediate payment of part of his debt than to wait to enforce payment, or perhaps\nby pressing his debtor to force him into bankruptcy with the result of only a small\ndividend. Moreover, if a composition is accepted friends, who would not otherwise do so, may be willing to come forward to assist the debtor. And if the creditor thinks that the acceptance of part is for his benefit who is to say it is not?\n* * * * Reynolds v. Pinhowe * * * * decided that the saving of trouble was a sufficient consideration; \xe2\x80\x9cfor it is a benefit unto him to have his debt without suit or\ncharge.\xe2\x80\x9d * * * * Pinnel\xe2\x80\x99s Case was decided on a point of pleading: the dictum that\npayment of a small sum was no satisfaction of a larger, was extra-judicial, and\noverlooked all considerations of mercantile convenience, such as mentioned in\nReynolds v. Pinhowe * * * *. It is every day practice for tradesmen to take less in\nsatisfaction of a larger sum, and give discount, where there is neither custom nor\nright to take credit. * * * * Mankind have never acted on the doctrine of [Pinnel\xe2\x80\x99s\nCase], but the contrary; nay few are aware of it. By overruling it the House will\nonly declare the universal practice to be good law as well as good sense.\n[\xc2\xb63] [Earl of Selborne, L.C.:-Whatever may be the ultimate decision of this appeal the House is much indebted to Mr. Holl for his exceedingly able argument.]\n****\n[\xc2\xb64] Bompas Q.C. (Gaskell with him) for [Beer]:[\xc2\xb65] * * * * There is a strong current of authority that what the law implies as a\nduty is no consideration. Therefore where a debt is due part payment is no reason\nfor giving up the residue. The doctrine is too well settled to be now overthrown:\nsee a long list of authorities [citations omitted]. * * * * It is contrary to public policy to make the performance of a legal duty a good consideration; see the cases on\nseamen\xe2\x80\x99s wages: [citations omitted]. Where law and practice are so well established this House will not now depart from them * * * *. * * * *\nEarl of Selborne, L.C.:- * * * *\n[\xc2\xb66] * * * * The doctrine [of Pinnel\xe2\x80\x99s Case] itself, as laid down by Sir Edward\nCoke, may have been criticised, as questionable in principle, by some persons\nwhose opinions are entitled to respect, but it has never been judicially overruled;\non the contrary I think it has always, since the sixteenth century, been accepted as\nlaw. If so, I cannot think that your Lordships would do right, if you were now to\nreverse, as erroneous, a judgment of the Court of Appeal, proceeding upon a doctrine which has been accepted as part of the law of England for 280 years.\n[\xc2\xb67] The doctrine, as stated in Pinnel\xe2\x80\x99s Case, is \xe2\x80\x9cthat payment of a lesser sum\non the day\xe2\x80\x9d (it would of course be the same after the day), \xe2\x80\x9cin satisfaction of a\ngreater, cannot be any satisfaction for the whole, because it appears to the Judges,\n75\n\n\x0cthat by no possibility a lesser sum can be satisfaction to the plaintiff for a greater\nsum.\xe2\x80\x9d * * * *\n[\xc2\xb68] If the question be (as, in the actual state of the law, I think it is), whether\nconsideration is, or is not, given in a case of this kind, by the debtor who pays\ndown part of the debt presently due from him, for a promise by the creditor to relinquish, after certain further payments on account, the residue of the debt, I cannot say that I think consideration is given, in the sense in which I have always understood that word as used in our law. It might be (and indeed I think it would be)\nan improvement in our law, if a release or acquittance of the whole debt, on payment of any sum which the creditor might be content to receive * * * * (though\nless than the whole), were held to be, generally, binding, though not under seal;\nnor should I be unwilling to see equal force given to a prospective agreement, like\nthe present, in writing though not under seal; but I think it impossible, without\nrefinements which practically alter the sense of the word, to treat such a release or\nacquittance as supported by any new consideration proceeding from the debtor.\n****\nLord Blackburn:- * * * *\n[\xc2\xb69] * * * * Lord Coke reports * * * * [in Pinnel\xe2\x80\x99s Case] \xe2\x80\x9cthat payment of a\nlesser sum on the day in satisfaction of a greater cannot be any satisfaction for the\nwhole, because it appears to the judges that by no possibility a lesser sum can be a\nsatisfaction to the plaintiff for a greater sum: but the gift of a horse, hawk, or robe,\n&c., in satisfaction is good, for it shall be intended that a horse, hawk, or robe,\n&c., might be more beneficial to the plaintiff than the money, in respect of some\ncircumstance, or otherwise the plaintiff would not have accepted of it in satisfaction. But when the whole sum is due, by no intendment the acceptance of parcel\ncan be a satisfaction to the plaintiff; but in the case at bar it was resolved that the\npayment and acceptance of parcel before the day in satisfaction of the whole\nwould be a good satisfaction in regard of circumstance of time; for peradventure\nparcel of it before the day would be more beneficial to him than the whole at the\nday, and the value of the satisfaction is not material; so if I am bound in \xc2\xa320 to\npay you \xc2\xa310 at Westminster, and you request me to pay you \xc2\xa35 at the day at York,\nand you will accept it in full satisfaction for the whole \xc2\xa310, it is a good satisfaction for the whole, for the expenses to pay it at York is sufficient satisfaction.\xe2\x80\x9d\n[\xc2\xb610] * * * * What principally weighs with me in thinking that Lord Coke made\na mistake of fact [as to what the Judges in Pinnel\xe2\x80\x99s Case decided] is my conviction that all men of business, whether merchants or tradesmen, do every day recognise and act on the ground that prompt payment of a part of their demand may\nbe more beneficial to them than it would be to insist on their rights and enforce\npayment of the whole. Even where the debtor is perfectly solvent, and sure to pay\nat last, this often is so. Where the credit of the debtor is doubtful it must be more\nso. I had persuaded myself that there was no such long-continued action on this\ndictum as to render it improper in this House to reconsider the question. I had\nwritten my reasons for so thinking; but as they were not satisfactory to the other\n76\n\n\x0cnoble and learned Lords who heard the case, I do not now repeat them nor persist\nin them.\n[\xc2\xb611] I assent to the judgment proposed, though it is not that which I had originally thought proper.\n[\xc2\xb612] [Lord Watson and Lord Fitzgerald also voted to affirm, in opinions here\nomitted.]\nQuestions:\n1. Review Reynolds v. Pinhowe, from Chapter 1. How would you distinguish\nFoakes from Reynolds factually?\n2. Suppose Foakes had complied with the agreement and also given Beer a horse.\nWould she be bound?\n3. Why would a hawk or robe, if given by Foakes, have bound Beer, when payment of part of the money owed would not?\n4. Why would payment prior to the due date have been sufficient consideration\nwhen payment of part on the due date would not?\n5. Why should Foakes be overruled? (You can collect several arguments from this\ncase. Please list and be prepared to discuss them.)\n6. Why should Foakes be retained as law? (Again, please look to the case first.)\n\nSUGARHOUSE FINANCE COMPANY v. Eugene L. ANDERSON and Colleen\nW. Anderson (1980)\nSupreme Court of Utah\n610 P.2d 1369\nHALL, Justice:\n[\xc2\xb61] Plaintiff Sugarhouse Finance Company appeals the lower court\xe2\x80\x99s grant of\na motion made by defendant Eugene L. Anderson for an order enforcing the terms\nof an agreement in settlement of a judgment held against him.\n[\xc2\xb62] On July 7, 1976, plaintiff filed a complaint against defendant for nonpayment of a promissory note. Judgment thereon was rendered in favor of plaintiff on\nDecember 17, 1976, in the amount of $2,423.86, plus interest, costs, and attorneys\xe2\x80\x99 fees. A copy of the judgment was docketed by plaintiff in Sevier County,\ndefendant\xe2\x80\x99s county of residence.\n77\n\n\x0c[\xc2\xb63] Some two years later, on January 29, 1979, plaintiff served defendant with\nan Order in Supplemental Proceedings, apparently due to the latter\xe2\x80\x99s failure during the interim to satisfy the judgment. Two days after receiving this notice, defendant met with plaintiff\xe2\x80\x99s president, Mr. Neuman Petty, for the purpose of discussing an alternative to full payment of the judgment. While reports conflict as to\nthe exact content of that conversation, it is clear the defendant informed plaintiff\nof the existence of numerous outstanding obligations against him, including medical expenses incurred pursuant to treatment for injuries sustained in an automobile accident in 1978. Defendant initially proposed that plaintiff accept $1,500 in\nfull settlement of the claim, which proposal was refused. Defendant then asserted\nthat he was contemplating bankruptcy, and that such a measure would result in\nplaintiff\xe2\x80\x99s judgment being discharged. The parties finally settled on a figure of\n$2,200 in full satisfaction of the claim. Defendant issued Petty a check for this\namount, asking him, however, not to negotiate it immediately, there being some\nuncertainty as to the sufficiency of funds in the account to cover it. At no time\nduring the conversation did defendant represent to Petty that defendant had any\nownership interest in real property, nor did Petty make inquiry in that regard.\n[\xc2\xb64] The day following these negotiations, plaintiff received a telephone call\nfrom a title company. Plaintiff learned from that call, allegedly for the first time,\nthat defendant owned part interest in a 12-acre tract in Sevier County, Utah, four\nacres of which were the subject of a pending sale. The property was owned jointly\nwith another party, and was otherwise encumbered, such that defendant hoped to\nreceive no more than $2,000 from the transaction. The title company had telephoned to request that plaintiff file a satisfaction of judgment in order to clear title\nto the property in question; plaintiff refused the request.\n[\xc2\xb65] The next day, the defendant called to inform plaintiff that there were then\nsufficient funds in the account to cover the previously issued check. Plaintiff responded by indicating that it did not intend on going through with the settlement\nbased on what it had learned from the title company. The check was subsequently\nreturned to defendant.\n[\xc2\xb66] Defendant thereafter filed a motion in the original action, asking that the\ncourt order plaintiff to comply with the terms of the agreement of settlement.\nHearing on the motion was convened on March 13, 1979, at the conclusion of\nwhich the motion was granted and the plaintiff was ordered upon receipt of the\n$2,200 payment, to file a satisfaction of judgment with the court. It is from this\norder that plaintiff appeals.\n[\xc2\xb67] Plaintiff first challenges the procedural propriety of defendant\xe2\x80\x99s petition\nfor judicial redress by means of a motion in the initial action. Under plaintiff\xe2\x80\x99s\nview, defendant should be constrained to raise the alleged accord and satisfaction\nonly as an affirmative defense to further attempts by the plaintiff to enforce the\nterms of the original promissory note. This contention is in error. * * * *\n78\n\n\x0c[\xc2\xb68] Plaintiff next challenges the validity of the accord allegedly reached between the parties on the basis of adequacy of consideration. Plaintiff points out\nthat, as defendant sought a substitute settlement of an undisputed and liquidated\nclaim, separate and additional consideration was required to support the accord. It\nis plaintiff\xe2\x80\x99s position that no such consideration existed in the present case.\n[\xc2\xb69] Accord and satisfaction arises where the parties to an agreement resolve\nthat a given performance by one party thereto, offered in substitution of the performance originally agreed upon, will discharge the obligation created under the\noriginal agreement. Essential to its validity are, (1) a proper subject matter; (2)\ncompetent parties; (3) an assent or meeting of the minds of the parties; and (4) a\nconsideration given for the accord. Where the underlying claim is disputed or uncertain (\xe2\x80\x9cunliquidated\xe2\x80\x9d), the obligor\xe2\x80\x99s assent to the definite statement of performance in the accord amounts to sufficient consideration, as it constitutes a surrender of the right to dispute the initial obligation. Where, however, the underlying\nclaim is liquidated and certain as to amount, separate consideration must be found\nto support the accord; otherwise, the obligor binds himself to do nothing he was\nnot already obligated to do, and the obligee\xe2\x80\x99s promise to accept a substitute performance is unenforceable. The original obligation in the present case being of a\ndefinite and undisputed amount, the question presented is whether or not separate\nconsideration was given to support the accord reached by the parties.\n[\xc2\xb610] No completely satisfactory and comprehensive definition of \xe2\x80\x9cconsideration\xe2\x80\x9d has ever been devised. It is generally agreed, however, that where a promise\nis supported by the incurrence, on the part of the promisee, of a legal detriment in\norder to confer a benefit on the promisor, such is sufficient to serve as consideration, thereby rendering the promise legally enforceable. This is particularly so\nwhen an accord and satisfaction is involved, the modern trend among the courts\nbeing to uphold such agreements wherever possible. In such cases, consideration\nis often found in the obligor\xe2\x80\x99s agreement to alter the means or method of payment\nof the obligation initially owed, or to surrender the assertion of a legally enforceable right.\n[\xc2\xb611] It is to be noted that, in the present case, plaintiff held a judgment which\nhad been outstanding for more than two years. Pursuant to the parties\xe2\x80\x99 conversation of January 31, 1979, defendant agreed that, for a release of the judgment upon payment of a lesser agreed amount, he would negotiate a loan with a third party to enable him to pay off the substitute obligation immediately. A check was\ngiven for the agreed amount at the conclusion of that conversation, and authorization to cash it followed two days later. In effect, defendant had agreed to transfer\nthe debt represented by plaintiff\xe2\x80\x99s judgment to a third party, thereby immediately\nsatisfying the obligation owed to plaintiff. This was something defendant had no\nlegal obligation to do; by law, plaintiff could only move by levy of execution\nagainst property already owned by the defendant\xe2\x80\x94plaintiff could not legally require defendant to incur additional obligations to satisfy the judgment. By so do79\n\n\x0cing, defendant deliberately incurred the detriment of surrendering his right to limit\nplaintiff\xe2\x80\x99s ability to obtain satisfaction of the underlying judgment, and bestowed\nupon plaintiff the benefit of immediate payment by means of the incurrence of\nadditional indebtedness. We hold such action to constitute sufficient consideration\nto support the accord negotiated by the parties.\n[\xc2\xb612] We note, in addition, that this jurisdiction recognizes the doctrine of promissory estoppel, whereby an individual who has made a promise which the individual should reasonably expect to induce action or forbearance on the part of the\npromisee or a third person and which does induce such action or forbearance is\nestopped to deny or repudiate the promise should the promisee or some third party\nsuffer detriment thereby. We note that, in the present case, defendant agreed to\nincur additional indebtedness pursuant to the terms of the accord, in reliance on\nplaintiff\xe2\x80\x99s promise to accept immediate payment of a lesser amount in full satisfaction of the underlying obligation. As such, plaintiff should now be estopped to\ndeny or reject the promise made.\n[\xc2\xb613] The trial court\xe2\x80\x99s decision is hereby affirmed. Costs to defendant.\nCROCKETT, C. J., and MAUGHAN, WILKINS and STEWART, JJ., concur.\nQuestions:\n1. What other acts in reliance by a debtor would have the same effect as Anderson\xe2\x80\x99s borrowing money?\n2. In an accord and satisfaction, what discharges the prior obligation\xe2\x80\x94the accord\nor the satisfaction?\n\n2. Modification of Contractual Liabilities\nALASKA PACKERS\xe2\x80\x99 ASS\xe2\x80\x99N v. DOMENICO (1902)\nCircuit Court of Appeals, Ninth Circuit\n117 F. 99\nROSS, Circuit Judge.\n[\xc2\xb61] The libel in this case was based upon a contract alleged to have been entered into between the libelants and the appellant corporation on the 22d day of\nMay, 1900, at Pyramid Harbor, Alaska, by which it is claimed the appellant promised to pay each of the libelants, among other things, the sum of $100 for services\nrendered and to be rendered. In its answer the respondent denied the execution, on\nits part, of the contract sued upon, averred that it was without consideration, and\nfor a third defense alleged that the work performed by the libelants for it was per80\n\n\x0cformed under other and different contracts than that sued on, and that, prior to the\nfiling of the libel, each of the libelants was paid by the respondent the full amount\ndue him thereunder, in consideration of which each of them executed a full release of all his claims and demands against the respondent.\n[\xc2\xb62] The evidence shows without conflict that on March 26, 1900, at the city\nand county of San Francisco, the libelants entered into a written contract with the\nappellants, whereby they agreed to go from San Francisco to Pyramid Harbor,\nAlaska, and return, on board such vessel as might be designated by the appellant,\nand to work for the appellant during the fishing season of 1900, at Pyramid Harbor, as sailors and fishermen, agreeing to do \xe2\x80\x9cregular ship\xe2\x80\x99s duty, both up and\ndown, discharging and loading; and to do any other work whatsoever when requested to do so by the captain or agent of the Alaska Packers\xe2\x80\x99 Association.\xe2\x80\x9d By\nthe terms of this agreement, the appellant was to pay each of the libelants $50 for\nthe season, and two cents for each red salmon in the catching of which he took\npart.\n[\xc2\xb63] On the 15th day of April, 1900, 21 of the libelants signed shipping articles\nby which they shipped as seamen on the Two Brothers, a vessel chartered by the\nappellant for the voyage between San Francisco and Pyramid Harbor, and also\nbound themselves to perform the same work for the appellant provided for by the\nprevious contract of March 26th; the appellant agreeing to pay them therefor the\nsum of $60 for the season, and two cents each for each red salmon in the catching\nof which they should respectively take part. Under these contracts, the libelants\nsailed on board the Two Brothers for Pyramid Harbor, where the appellants had\nabout $150,000 invested in a salmon cannery. The libelants arrived there early in\nApril of the year mentioned, and began to unload the vessel and fit up the cannery.\nA few days thereafter, to wit, May 19th, they stopped work in a body, and demanded of the company\xe2\x80\x99s superintendent there in charge $100 for services in operating the vessel to and from Pyramid Harbor, instead of the sums stipulated for\nin and by the contracts; stating that unless they were paid this additional wage\nthey would stop work entirely, and return to San Francisco. The evidence showed,\nand the court below found, that it was impossible for the appellant to get other\nmen to take the places of the libelants, the place being remote, the season short\nand just opening; so that, after endeavoring for several days without success to\ninduce the libelants to proceed with their work in accordance with their contracts,\nthe company\xe2\x80\x99s superintendent, on the 22d day of May, so far yielded to their demands as to instruct his clerk to copy the contracts executed in San Francisco, including the words \xe2\x80\x9cAlaska Packers\xe2\x80\x99 Association\xe2\x80\x9d at the end, substituting, for the\n$50 and $60 payments, respectively, of those contracts, the sum of $100, which\ndocument, so prepared, was signed by the libelants before a shipping commissioner whom they had requested to be brought from Northeast Point; the superintendent, however, testifying that he at the time told the libelants that he was without authority to enter into any such contract, or to in any way alter the contracts\nmade between them and the company in San Francisco. Upon the return of the\nlibelants to San Francisco at the close of the fishing season, they demanded pay in\n81\n\n\x0caccordance with the terms of the alleged contract of May 22d, when the company\ndenied its validity, and refused to pay other than as provided for by the contracts\nof March 26th and April 5th, respectively. Some of the libelants, at least, consulted counsel, and, after receiving his advice, those of them who had signed the\nshipping articles before the shipping commissioner at San Francisco went before\nthat officer, and received the amount due them thereunder, executing in consideration thereof a release in full, and the others paid at the office of the company, also\nreceipting in full for their demands.\n[\xc2\xb64] On the trial in the court below, the libelants undertook to show that the\nfishing nets provided by the respondent were defective, and that it was on that account that they demanded increased wages. On that point, the evidence was substantially conflicting, and the finding of the court was against the libelants * * * *.\n[\xc2\xb65] The evidence being sharply conflicting in respect to these facts, the conclusions of the court, who heard and saw the witnesses, will not be disturbed.\n****\n[\xc2\xb66] The real questions in the case as brought here are questions of law, and, in\nthe view that we take of the case, it will be necessary to consider but one of those.\nAssuming that the appellant\xe2\x80\x99s superintendent at Pyramid Harbor was authorized to\nmake the alleged contract of May 22d, and that he executed it on behalf of the appellant, was it supported by a sufficient consideration? From the foregoing statement of the case, it will have been seen that the libelants agreed in writing, for\ncertain stated compensation, to render their services to the appellant in remote waters where the season for conducting fishing operations is extremely short, and in\nwhich enterprise the appellant had a large amount of money invested; and, after\nhaving entered upon the discharge of their contract, and at a time when it was impossible for the appellant to secure other men in their places, the libelants, without\nany valid cause, absolutely refused to continue the services they were under contract to perform unless the appellant would consent to pay them more money.\nConsent to such a demand, under such circumstances, if given, was, in our opinion, without consideration, for the reason that it was based solely upon the libelants\xe2\x80\x99 agreement to render the exact services, and none other, that they were already under contract to render. The case shows that they willfully and arbitrarily\nbroke that obligation. * * * *\n[\xc2\xb67] The circumstances of the present case bring it, we think, directly within\nthe sound and just observations of the supreme court of Minnesota in the case of\nKing v. Railway Co., 61 Minn. 482, 63 N.W. 1105:\n\xe2\x80\x9cNo astute reasoning can change the plain fact that the party who refuses\nto perform, and thereby coerces a promise from the other party to the contract to pay him an increased compensation for doing that which he is legally bound to do, takes an unjustifiable advantage of the necessities of the\nother party. Surely it would be a travesty on justice to hold that the party\nso making the promise for extra pay was estopped from asserting that the\n82\n\n\x0cpromise was without consideration. A party cannot lay the foundation of\nan estoppel by his own wrong, where the promise is simply a repetition of\na subsisting legal promise. There can be no consideration for the promise\nof the other party, and there is no warrant for inferring that the parties have\nvoluntarily rescinded or modified their contract. The promise cannot be\nlegally enforced, although the other party has completed his contract in reliance upon it.\xe2\x80\x9d\n****\n[\xc2\xb68] * * * * [T]he supreme court of Vermont [said] in the * * * * case of Cobb\nv. Cowdery, 40 Vt. 25, 94 Am.Dec. 370 * * * * [,]\n\xe2\x80\x9cA promise by a party to do what he is bound in law to do is not an illegal\nconsideration, but is the same as no consideration at all, and is merely void;\nin other words, it is insufficient, but not illegal. Thus, if the master of a\nship promise his crew an addition to their fixed wages in consideration for\nand as an incitement to, their extraordinary exertions during a storm, or in\nany other emergency of the voyage, this promise is nudum pactum; the\nvoluntary performance of an act which it was before legally incumbent on\nthe party to perform being in law an insufficient consideration; and so it\nwould be in any other case where the only consideration for the promise of\none party was the promise of the other party to do, or his actual doing,\nsomething which he was previously bound in law to do. Chit. Cont. (10th\nAm.Ed.) 51; Smith, Cont. 87; 3 Kent, Com.. 185.\xe2\x80\x9d\n****\n[\xc2\xb69] It results from the views above expressed that the judgment must be reversed, and the cause remanded, with directions to the court below to enter judgment for the respondent, with costs. It is so ordered.\nQuestions:\n1. What is the policy behind the pre-existing duty rule as used in this case?\n2. Why did the superintendent wait so long to sign? (Please speculate. I don\xe2\x80\x99t\nthink the answer is in the case.)\n3. Generally, a mutual rescission of a contract in which each parties\xe2\x80\x99 duties are\nexecutory is binding. (Executory means, roughly, \xe2\x80\x9cnot yet performed.\xe2\x80\x9d) For instance, suppose I promise to sell you my cow and you promise to buy the cow for\n$500. After we have traded promises in assent, we are bound to a contract. But\nsuppose we mutually release each other from our obligations under the contract\nbefore either of us performs. In that case, we are more or less mutually promising\nnot to assert rights under the contract. This consensual trade of mutual promises\nought to be just as binding as the original agreement, shouldn\xe2\x80\x99t it, either as a contract or as a mutual exchange of gifts? Wasn\xe2\x80\x99t that what happened in Domenico?\n\n83\n\n\x0cSCHWARTZREICH v. BAUMAN-BASCH, INC. (1921)\nCourt of Appeals of New York\n131 N.E. 887\nCRANE, J.\n[\xc2\xb61] On the 31st day of August, 1917, the plaintiff entered into the following\nemployment agreement with the defendant:\n\xe2\x80\x9cBAUMAN-BASCH, INC.,\n\xe2\x80\x9cCoats & Wraps,\n\xe2\x80\x9c31-33 East 32nd Street,\n\xe2\x80\x9cNew York\n\xe2\x80\x9cAgreement entered into this 31st day of August, 1917, by and between\nBauman-Basch, Inc., a domestic corporation, party of the first part, and\nLouis Schwartzreich, of the Borough of Bronx, City of New York, party of\nthe second part, Witnesseth:\n\xe2\x80\x9cThe party of the first part does hereby employ the party of the second part,\nand the party of the second part agrees to enter the services of the party of\nthe first part as a designer of coats and wraps.\n\xe2\x80\x9cThe employment herein shall commence on the 22nd day of November,\n1917, and shall continue for twelve months thereafter. The party of the\nsecond part shall receive a salary of Ninety ($90.00) per week, payable\nweekly.\n\xe2\x80\x9cThe party of the second part shall devote his entire time and attention to\nthe business of the party of the first part, and shall use his best energies\nand endeavors in the furtherance of its business.\n\xe2\x80\x9cIn witness whereof, the party of the first part has caused its seal to be affixed hereto and these presents to be signed, and the party of the second\npart has here-unto set his hand and seal the day and year first above written.\n\xe2\x80\x9cBAUMAN-BASCH, INC.\nS. BAUMAN\n\xe2\x80\x9cLOUIS SCHWARTZREICH.\n\xe2\x80\x9cIn the presence of:\xe2\x80\x9d\n[\xc2\xb62] In October the plaintiff was offered more money by another concern. Mr.\nBauman, an officer of the Bauman-Basch, Inc., says that in that month he heard\nthat the plaintiff was going to leave and thereupon had with him the following\nconversation.\n\xe2\x80\x9cA. I called him in the office, and I asked him, \xe2\x80\x98Is that true that you want\nto leave us?\xe2\x80\x99 and he said \xe2\x80\x98Yes,\xe2\x80\x99 and I said, \xe2\x80\x98Mr. Schwartzreich, how can\nyou do that; you are under contract with us?\xe2\x80\x99 He said, \xe2\x80\x98Somebody offered\nme more money.\xe2\x80\x99 * * * * I said, \xe2\x80\x98How much do they offer you?\xe2\x80\x99 He said,\n\xe2\x80\x98They offered him $115 a week.\xe2\x80\x99 * * * * I said, \xe2\x80\x98I cannot get a designer\nnow, and, in view of the fact that I have to send my sample line out on the\n84\n\n\x0croad, I will give you a hundred dollars a week rather than to let you go.\xe2\x80\x99\nHe said, \xe2\x80\x98If you will give me $100, I will stay.\xe2\x80\x99\xe2\x80\x9c\nThereupon Mr. Bauman dictated to his stenographer a new contract, dated October 17, 1917, in the exact words of the first contract and running for the same period, the salary being $100 a week, which contract was duly executed by the parties and witnessed. Duplicate originals were kept by the plaintiff and defendant.\n[\xc2\xb63] Simultaneously with the signing of this new contract, the plaintiff\xe2\x80\x99s copy\nof the old contract was either given to or left with Mr. Bauman. He testifies that\nthe plaintiff gave him the paper but that he did not take it from him. The signatures to the old contract plaintiff tore off at the time according to Mr. Bauman.\nThe plaintiff\xe2\x80\x99s version as to the execution of the new contract is as follows:\n\xe2\x80\x9cA. I told Mr. Bauman that I have an offer from Scheer & Mayer of $110 a\nweek, and I said to him, \xe2\x80\x98Do you advise me as a friendly matter\xe2\x80\x94will you\nadvise me as a friendly matter what to do; you see I have a contract with\nyou, and I should not accept the offer of $110 a week, and I ask you, as a\nmatter of friendship, do you advise me to take it or not.\xe2\x80\x99 At the minute he\ndid not say anything, but the day afterwards he came to me in and he said,\n\xe2\x80\x98I will give you $100 a week, and I want you to stay with me.\xe2\x80\x99 I said, \xe2\x80\x98All\nright, I will accept it; it is very nice of you that you do that, and I appreciate it very much.\xe2\x80\x99\xe2\x80\x9c\nThe plaintiff says that on the 17th of October when the new contract was signed,\nhe gave his copy of the old contract back to Mr. Bauman, who said: \xe2\x80\x9cYou do not\nwant this contract any more because the new one takes its place.\xe2\x80\x9d\n[\xc2\xb64]\n\n[\xc2\xb65] The plaintiff remained in the defendant\xe2\x80\x99s employ until the following December when he was discharged. He brought this action under the contract of October 17th for his damages.\n[\xc2\xb66] The defense, insisted upon through all the courts, is that there was no consideration for the new contract as the plaintiff was already bound under his\nagreement of August 31, 1917, to do the same work for the same period at $90 a\nweek.\n[\xc2\xb67] The trial justice submitted to the jury the question whether there was a\ncancellation of the old contract and charged as follows:\n\xe2\x80\x9cIf you find that the $90 contract was prior to or at the time of the execution of the $100 contract cancelled and revoked by the parties by their mutual consent, then it is your duty to find that there was a consideration for\nthe making of the contract in suit, viz., the $100 contract and, in that event,\nthe plaintiff would be entitled to your verdict for such damages as you\nmay find resulted proximately, naturally and necessarily in consequence of\nthe plaintiff\xe2\x80\x99s discharge prior to the termination of the contract period of\nwhich I shall speak later on.\xe2\x80\x9d\n85\n\n\x0c[\xc2\xb68] Defendant\xe2\x80\x99s counsel thereupon excepted to that portion of the charge in\nwhich the court permitted the jury to find that the prior contract may have been\ncanceled simultaneously with the execution of the other agreement. Again the\ncourt said:\n\xe2\x80\x9cThe test question is whether by word or by act, either prior to or at the\ntime of the signing of the $100 contract, these parties mutually agreed that\nthe old contract from that instant should be null and void.\xe2\x80\x9d\n[\xc2\xb69] The jury having rendered a verdict for the plaintiff the trial justice set it\naside and dismissed the complaint on the ground that there was not sufficient evidence that the first contract was canceled to warrant the jury\xe2\x80\x99s findings.\n[\xc2\xb610] The above quotations from the record show that a question of fact was\npresented and that the evidence most favorable for the plaintiff would sustain a\nfinding that the first contract was destroyed, canceled or abrogated by the consent\nof both parties.\n[\xc2\xb611] The Appellate Term was right in reversing this ruling. Instead of granting a\nnew trial, however, it reinstated the verdict of the jury and the judgment for the\nplaintiff. The question remains, therefore, whether the charge of the court, as\nabove given, was a correct statement of the law or whether on all the evidence in\nthe plaintiff\xe2\x80\x99s favor a cause of action was made out.\n[\xc2\xb612] Can a contract of employment be set aside or terminated by the parties to\nit and a new one made or substituted in its place? If so, is it competent to end the\none and make the other at the same time?\n[\xc2\xb613] It has been repeatedly held that a promise made to induce a party to do\nthat which he is already bound by contract to perform is without consideration.\nBut the cases in this state, while enforcing this rule, also recognize that a contract\nmay be canceled by mutual consent and a new one made. Thus Vanderbilt v.\nSchreyer (91 N. Y. 392, 402) held that it was no consideration for a guaranty that a\nparty promise to do only that which he was before legally bound to perform. This\ncourt stated, however:\n\xe2\x80\x9cIt would doubtless be competent for parties to cancel an existing contract\nand make a new one to complete the same work at a different rate of compensation, but it seems that it would be essential to its validity that there\nshould be a valid cancellation of the original contract. Such was the case\nof Lattimore v. Harsen (14 Johns. 330).\xe2\x80\x9d\n[\xc2\xb614] In Cosgray v. New England Piano Co. (10 App. Div. 351, 353) it was decided that where the plaintiff had bound himself to work for a year at $30 a week,\nthere was no consideration for a promise thereafter made by the defendant that he\nshould notwithstanding receive $1,800 a year. Here it will be noticed there was no\n86\n\n\x0ctermination of the first agreement which gave occasion for BARTLETT, J., to say\nin the opinion:\n\xe2\x80\x9cThe case might be different if the parties had, by word of mouth, agreed\nwholly to abrogate and do away with a pre-existing written contract in regard to service and compensation, and had substituted for it another\nagreement.\xe2\x80\x9d\n[\xc2\xb615] Any change in an existing contract, such as a modification of the rate of\ncompensation, or a supplemental agreement, must have a new consideration to\nsupport it. In such a case the contract is continued, not ended. Where, however, an\nexisting contract is terminated by consent of both parties and a new one executed\nin its place and stead, we have a different situation and the mutual promises are\nagain a consideration. Very little difference may appear in a mere change of compensation in an existing and continuing contract and a termination of one contract\nand the making of a new one for the same time and work, but at an increased\ncompensation. There is, however, a marked difference in principle. Where the\nnew contract gives any new privilege or advantage to the promisee, a consideration has been recognized, though in the main it is the same contract. (Triangle\nWaist Co., Inc., v. Todd, 223 N. Y. 27.)\n[\xc2\xb616] If this which we are now holding were not the rule, parties having once\nmade a contract would be prevented from changing it no matter how willing and\ndesirous they might be to do so, unless the terms conferred an additional benefit\nto the promisee.\n[\xc2\xb617] All concede that an agreement may be rescinded by mutual consent and a\nnew agreement made thereafter on any terms to which the parties may assent. Prof.\nWilliston in his work on Contracts says (Vol. 1, \xc2\xa7 130a): \xe2\x80\x9cA rescission followed\nshortly afterwards by a new agreement in regard to the same subject-matter would\ncreate the legal obligations provided in the subsequent agreement.\xe2\x80\x9d\n[\xc2\xb618] The same effect follows in our judgment from a new contract entered into\nat the same time the old one is destroyed and rescinded by mutual consent. The\ndetermining factor is the rescission by consent. Provided this is the expressed and\nacted upon intention, the time of the rescission, whether a moment before or at the\nsame time as the making of the new contract, is unimportant. The decisions are\nnumerous and divergent where one of the parties to a contract refuses to perform\nunless paid an additional amount. Some states hold the new promise to pay the\ndemand binding though there be no rescission. It is said that the new promise is\ngiven to secure performance in place of an action for damages for not performing\n(Parrot v. Mexican Central Railway Co., 207 Mass. 184), or that the new contract\nis evidence of the rescission of the old one and it is the same as if no previous\ncontract had been made (Coyner v. Lynde, 10 Ind. 282; Connelly v. Devoe, 37\nConn. 570; Goebel v. Linn, 47 Mich. 489), or that unforeseen difficulties and\nhardships modify the rule (King v. Duluth, M. & N. Ry. Co., 61 Minn. 482), or\n87\n\n\x0cthat the new contract is an attempt to mitigate the damages which may flow from\nthe breach of the first. (Endriss v. Belle Isle Ice Co., 49 Mich. 279.) * * * *\n[\xc2\xb619] The contrary has been held in such cases as * * * * Alaska Packers\xe2\x80\x99 Association v. Domenico (117 Fed. Rep. 99); * * * *. In none of these cases, however,\nwas there a full and complete rescission of the old contract and it is this with\nwhich we are dealing in this case. Rescission is not presumed; it is expressed; the\nold contract is not continued with modifications; it is ended and a new one made.\n****\n[\xc2\xb620] As before stated, in this case we have an express rescission and a new contract.\n[\xc2\xb621] There is no reason that we can see why the parties to a contract may not\ncome together and agree to cancel and rescind an existing contract, making a new\none in its place. We are also of the opinion that reason and authority support the\nconclusion that both transactions can take place at the same time.\n[\xc2\xb622] For the reasons here stated, the charge of the trial court was correct, and\nthe judgments of the Appellate Division and the Appellate Term should be affirmed, with costs.\n[\xc2\xb623] HISCOCK, C. J., and HOGAN, CARDOZO, McLAUGHLIN, and ANDREWS, JJ., concur.\nCHASE, J., dissents.\nJudgments affirmed.\nQuestions:\n1. What difference factually is there between Domenico and Schwartzreich?\n2. New Hampshire purports not to need a case such as Schwartzreich. Consider\nthe following from Kramas v. Beattie, 221 A.2d 236 (N.H. 1966):\nA half century ago New Hampshire by judicial decision, quietly and unheralded, modernized a portion of the law of consideration by lopping off\none of the historical errors of the common law. It repudiated Pinnel\xe2\x80\x99s Case,\n5 Coke 177a (1602) and Foakes v. Beer, 9 App. Cas. 605 (1884) as being\nneither logical nor just. See, Ferson, The Rule in Foakes v. Beer, 31 Yale\nL.J. 15 (1921); Havighurst, Consideration, Ethics and Administration, 42\nColum. L. Rev. 127 (1942). \xe2\x80\x98The rule that the payment of a less sum can\nnever sustain an agreement to discharge a greater, because without consideration, however well supported by authorities * * * * is based upon misconception, is not founded in reason, and cannot be followed without\nabandoning the greater principle that reason is the life of the law.\xe2\x80\x99 Frye v.\n88\n\n\x0cHubbell, 74 N.H. 358, 377, 68 A. 325, 334, * * * *. Consequently, in Frye\nv. Hubbell, supra, it was held that payment of part of a debt accepted in\nfull payment discharged liability for the balance. * * * * Whether \xe2\x80\x98the\nclaim be liquidated or unliquidated, the matter resolves itself into a question as to whether the lesser sum was accepted as satisfaction in full.\xe2\x80\x99\nIn the present case there is no doubt that the defendant was dissatisfied\nwith the lease, was attempting to \xe2\x80\x98break the lease,\xe2\x80\x99 and wished to terminate\nthe lease with the payment of rent for the month of March by the check\nwhich bore the notation \xe2\x80\x98final and terminating payment under lease.\xe2\x80\x99\nThere is also no doubt that the plaintiffs were aware of these facts because\nof the defendant\xe2\x80\x99s complaints and the letters he had received from the defendant\xe2\x80\x99s attorney. If the Presiding Justice had believed the defendant\xe2\x80\x99s\ntestimony that she was terminating the lease by the check for the March\nrent and the [plaintiffs] accepted it as such, there would be an accord and\nsatisfaction.\nThis last sentence from Kramas is dicta; the trial court found that plaintiffs did not\naccept the last check as a termination of the lease. But can you see how the sentence refuses to follow Foakes? If Foakes were the rule, what else besides that\n\xe2\x80\x9cthe plaintiffs accepted it as such\xe2\x80\x9d would be required in order that an accord and\nsatisfaction occur?\nAn earlier case following Frye, Watkins & Son v. Carrig, 21 A.2d 591 (N.H.\n1941), involved an excavation contract. When the excavator actually began digging, it struck rock, something not anticipated, so the excavator made an \xe2\x80\x9cinsistent request\xe2\x80\x9d to the property owner for a renegotiation of the contract. The\nowner renegotiated but later refused to pay the increased price. The court reasoned as follows:\nIn common understanding there is, importantly, a wide divergence between a bare promise and a promise in adjustment of a contractual promise\nalready outstanding. * * * * * * * * [P]arties to a valid contract generally\nunderstand that it is subject to any mutual action they may take in its performance. Changes to meet changes in circumstances and conditions\nshould be valid if the law is to carry out its function and service by rules\nconformable with reasonable practices and understandings in matters of\nbusiness and commerce. * * * *\nThe foregoing views are considered to meet the reasonable needs of standard and ethical practices of men in their business dealings with each other.\nConceding that the plaintiff threatened to break its contract because it\nfound the contract to be improvident, yet the defendant yielded to the\nthreat without protest, excusing the plaintiff, and making a new arrangement. Not insisting on his rights but relinquishing them, fairly he should\nbe held to the new arrangement. The law is a means to an end. It is not the\n89\n\n\x0claw because it is the law, but because it is adapted and adaptable to establish and maintain reasonable order. * * * * It is not practical that the law\nshould adopt all precepts of moral conduct, but it is desirable that its rule\nand principles should not run counter to them in important conduct and\ntransactions of life.\nIs this a better approach?\n\nAlfred L. ANGEL v. John E. MURRAY, Jr.,\nDirector of Finance of the City of Newport, et al. (1974)\nSupreme Court of Rhode Island\n322 A.2d 630\nOPINION\nROBERTS, Chief Justice.\n[\xc2\xb61] This is a civil action brought by Alfred L. Angel and others against John E.\nMurray, Jr., Director of Finance of the City of Newport, the city of Newport, and\nJames L. Maher, alleging that Maher had illegally been paid the sum of $20,000\nby the Director of Finance and praying that the defendant Maher be ordered to\nrepay the city such sum. The case was heard by a justice of the Superior Court,\nsitting without a jury, who entered a judgment ordering Maher to repay the sum of\n$20,000 to the city of Newport. Maher is now before this court prosecuting an appeal.\n[\xc2\xb62] The record discloses that Maher has provided the city of Newport with a\nrefuse-collection service under a series of five-year contracts beginning in 1946.\nOn March 12, 1964, Maher and the city entered into another such contract for a\nperiod of five years commencing on July 1, 1964, and terminating on June 30,\n1969. The contract provided, among other things, that Maher would receive\n$137,000 per year in return for collecting and removing all combustible and noncombustible waste materials generated within the city.\n[\xc2\xb63] In June of 1967 Maher requested an additional $10,000 per year from the\ncity council because there had been a substantial increase in the cost of collection\ndue to an unexpected and unanticipated increase of 400 new dwelling units. Maher\xe2\x80\x99s testimony, which is uncontradicted, indicates the 1964 contract had been\npredicated on the fact that since 1946 there had been an average increase of 20 to\n25 new dwelling units per year. After a public meeting of the city council where\nMaher explained in detail the reasons for his request and was questioned by\nmembers of the city council, the city council agreed to pay him an additional\n$10,000 for the year ending on June 30, 1968. Maher made a similar request again\nin June of 1968 for the same reasons, and the city council again agreed to pay an\nadditional $10,000 for the year ending on June 30, 1969.\n90\n\n\x0c[\xc2\xb64] The trial justice found that each such $10,000 payment was made in violation of law. His decision, as we understand it, is premised on two independent\ngrounds. First, he found that the additional payments were unlawful because they\nhad not been recommended in writing to the city council by the city manager.\nSecond, he found that Maher was not entitled to extra compensation because the\noriginal contract already required him to collect all refuse generated within the\ncity and, therefore, included the 400 additional units. The trial justice further\nfound that these 400 additional units were within the contemplation of the parties\nwhen they entered into the contract. It appears that he based this portion of the\ndecision upon the rule that Maher had a preexisting duty to collect the refuse generated by the 400 additional units, and thus there was no consideration for the two\nadditional payments.\n[\xc2\xb65]\n\n[Analysis of the first ground for appeal is omitted.]\n\n[\xc2\xb66] Having found that the city council had the power to modify the 1964 contract without the written recommendation of the city manager, we are still confronted with the question of whether the additional payments were illegal because\nthey were not supported by consideration.\nA\n[\xc2\xb67] As previously stated, the city council made two $10,000 payments. The\nfirst was made in June of 1967 for the year beginning on July 1, 1967, and ending\non June 30, 1968. Thus, by the time this action was commenced in October of\n1968, the modification was completely executed. That is, the money had been\npaid by the city council, and Maher had collected all of the refuse. Since consideration is only a test of the enforceability of executory promises, the presence or\nabsence of consideration for the first payment is unimportant because the city\ncouncil\xe2\x80\x99s agreement to make the first payment was fully executed at the time of\nthe commencement of this action. * * * * However, since both payments were\nmade under similar circumstances, our decision regarding the second payment\n(Part B, infra) is fully applicable to the first payment.\nB\n[\xc2\xb68] It is generally held that a modification of a contract is itself a contract,\nwhich is unenforceable unless supported by consideration. See Simpson, supra, \xc2\xa7\n93. In Rose v. Daniels, 8 R.I. 381 (1866), this court held that an agreement by a\ndebtor with a creditor to discharge a debt for a sum of money less than the amount\ndue is unenforceable because it was not supported by consideration.\n[\xc2\xb69] Rose is a perfect example of the preexisting duty rule. Under this rule an\nagreement modifying a contract is not supported by consideration if one of the\n91\n\n\x0cparties to the agreement does or promises to do something that he is legally obligated to do or refrains or promises to refrain from doing something he is not legally privileged to do, See Calamari & Perillo, Contracts \xc2\xa7 60 (1970); 1A Corbin,\nContracts \xc2\xa7\xc2\xa7 171-72 (1963); 1 Williston, supra, \xc2\xa7 130; Annot., 12 A.L.R.2d 78\n(1950). In Rose there was no consideration for the new agreement because the\ndebtor was already legally obligated to repay the full amount of the debt. * * * *\n[\xc2\xb610] The primary purpose of the preexisting duty rule is to prevent what has\nbeen referred to as the \xe2\x80\x9chold-up game.\xe2\x80\x9d See 1A Corbin, supra, \xc2\xa7 171. A classic\nexample of the \xe2\x80\x9chold-up game\xe2\x80\x9d is found in Alaska Packers\xe2\x80\x99 Ass\xe2\x80\x99n v. Domenico,\n117 F. 99 (9th Cir. 1902). There 21 seamen entered into a written contract with\nDomenico to sail from San Francisco to Pyramid Harbor, Alaska. They were to\nwork as sailors and fishermen out of Pyramid Harbor during the fishing season of\n1900. The contract specified that each man would be paid $50 plus two cents for\neach red salmon he caught. Subsequent to their arrival at Pyramid Harbor, the\nmen stopped work and demanded an additional $50. They threatened to return to\nSan Francisco if Domenico did not agree to their demand. Since it was impossible\nfor Domenico to find other men, he agreed to pay the men an additional $50. After they returned to San Francisco, Domenico refused to pay the men an additional\n$50. The court found that the subsequent agreement to pay the men an additional\n$50 was not supported by consideration because the men had a preexisting duty to\nwork on the ship under the original contract, and thus the subsequent agreement\nwas unenforceable.\n[\xc2\xb611] Another example of the \xe2\x80\x9chold-up game\xe2\x80\x9d is found in the area of construction contracts. Frequently, a contractor will refuse to complete work under an unprofitable contract unless he is awarded additional compensation. The courts have\ngenerally held that a subsequent agreement to award additional compensation is\nunenforceable if the contractor is only performing work which would have been\nrequired of him under the original contract. See, e.g., Lingenfelder v. Wainwright\nBrewing Co., 103 Mo. 578, 15 S.W. 844 (1891), which is a leading case in this\narea. * * * *\n[\xc2\xb612] These examples clearly illustrate that the courts will not enforce an\nagreement that has been procured by coercion or duress and will hold the parties\nto their original contract regardless of whether it is profitable or unprofitable.\nHowever, the courts have been reluctant to apply the pre-existing duty rule when\na party to a contract encounters unanticipated difficulties and the other party, not\ninfluenced by coercion or duress, voluntarily agrees to pay additional compensation for work already required to be performed under the contract. For example,\nthe courts have found that the original contract was rescinded, Linz v. Schuck, 106\nMd. 220, 67 A. 286 (1907); abandoned, Connelly v. Devoe, 37 Conn. 570 (1871),\nor waived, Michaud v. MacGregor, 61 Minn. 198, 63 N.W. 479 (1895).\n[\xc2\xb613] Although the preexisting duty rule has served a useful purpose insofar as it\ndeters parties from using coercion and duress to obtain additional compensation, it\n92\n\n\x0chas been widely criticized as a general rule of law. With regard to the preexisting\nduty rule, one legal scholar has stated: \xe2\x80\x9cThere has been a growing doubt as to the\nsoundness of this doctrine as a matter of social policy. * * * * In certain classes of\ncases, this doubt has influenced courts to refuse to apply the rule, or to ignore it,\nin their actual decisions. Like other legal rules, this rule is in process of growth\nand change, the process being more active here than in most instances. The result\nof this is that a court should no longer accept this rule as fully established. It\nshould never use it as the major premise of a decision, at least without giving\ncareful thought to the circumstances of the particular case, to the moral deserts of\nthe parties, and to the social feelings and interests that are involved. It is certain\nthat the rule, stated in general and all-inclusive terms, is no longer so well-settled\nthat a court must apply it though the heavens fall.\xe2\x80\x9d 1A Corbin, supra, \xc2\xa7 171; see\nalso Calamari & Perillo, supra, \xc2\xa7 61.\n[\xc2\xb614] The modern trend appears to recognize the necessity that courts should\nenforce agreements modifying contracts when unexpected or unanticipated difficulties arise during the course of the performance of a contract, even though there\nis no consideration for the modification, as long as the parties agree voluntarily.\n[\xc2\xb615] Under the Uniform Commercial Code, \xc2\xa7 2-209(1), which has been adopted by 49 states, \xe2\x80\x9c[a]n agreement modifying a contract [for the sale of goods]\nneeds no consideration to be binding.\xe2\x80\x9d See G.L. 1956 (1969 Reenactment) \xc2\xa7 6A2-209(1). Although at first blush this section appears to validate modifications obtained by coercion and duress, the comments to this section indicate that a modification under this section must meet the test of good faith imposed by the Code,\nand a modification obtained by extortion without a legitimate commercial reason\nis unenforceable.\n[\xc2\xb616] The modern trend away from a rigid application of the preexisting duty\nrule is reflected by \xc2\xa7 89D(a) of the American Law Institute\xe2\x80\x99s Restatement Second\nof the Law of Contracts,* which provides: \xe2\x80\x9cA promise modifying a duty under a\ncontract not fully performed on either side is binding (a) if the modification is fair\nand equitable in view of circumstances not anticipated by the parties when the\ncontract was made * * *.\xe2\x80\x9d\n[\xc2\xb617] We believe that \xc2\xa7 89D(a) is the proper rule of law and find it applicable to\nthe facts of this case. It not only prohibits modifications obtained by coercion, duress, or extortion but also fulfills society\xe2\x80\x99s expectation that agreements entered\n\n*\n\nThe first nine chapters of the Restatement Second of the Law of Contracts were given tentative\napproval by the American Law Institute at successive meetings from 1964 to 1972. These chapters, which include \xc2\xa7\xc2\xa7 1-255, were published by the Institute in 1973 in a hard-cover edition. Herbert Wechsler, Director of the Institute, in a foreword to this edition indicates that although these\nsections are still tentative and await final approval, it is unlikely that any further changes will be\nmade.\n\n93\n\n\x0cinto voluntarily will be enforced by the courts.* See generally Horwitz, The Historical Foundations of Modern Contract Law, 87 Harv. L. Rev. 917 (1974). Section 89D(a), of course, does not compel a modification of an unprofitable or unfair contract; it only enforces a modification if the parties voluntarily agree and if\n(1) the promise modifying the original contract was made before the contract was\nfully performed on either side, (2) the underlying circumstances which prompted\nthe modification were unanticipated by the parties, and (3) the modification is fair\nand equitable.\n[\xc2\xb618] The evidence, which is uncontradicted, reveals that in June of 1968 Maher\nrequested the city council to pay him an additional $10,000 for the year beginning\non July 1, 1968, and ending on June 30, 1969. This request was made at a public\nmeeting of the city council, where Maher explained in detail his reasons for making the request. Thereafter, the city council voted to authorize the Mayor to sign\nan amendment to the 1954 contract which provided that Maher would receive an\nadditional $10,000 per year for the duration of the contract. Under such circumstances we have no doubt that the city voluntarily agreed to modify the 1964 contract.\n[\xc2\xb619] Having determined the voluntariness of this agreement, we turn our attention to the three criteria delineated above. First, the modification was made in\n*\n\nThe drafters of \xc2\xa7 89D(a) of the Restatement Second of the Law of Contracts use the following\nillustrations in comment (b) as examples of how this rule is applied to certain transactions:\n\xe2\x80\x9c1. By a written contract A agrees to excavate a cellar for B for a stated price. Solid rock\nis unexpectedly encountered and A so notifies B. A and B then orally agree that A will\nremove the rock at a unit price which is reasonable but nine times that used in computing\nthe original price, and A completes the job. B is bound to pay the increased amount.\n\xe2\x80\x9c2. A contracts with B to supply for $300 a laundry chute for a building B has contracted\nto build for the government for $150,000. Later A discovers that he made an error as to\nthe type of material to be used and should have bid $1,200. A offers to supply the chute\nfor $1,000, eliminating overhead and profit. After ascertaining that other suppliers would\ncharge more, B agrees. The new agreement is binding.\n\xe2\x80\x9c3. A is employed by B as a designer of coats at $90 a week for a year beginning November 1 under a written contract executed September 1. A is offered $115 a week by\nanother employer and so informs B. A and B then agree that A will be paid $100 a week\nand in October execute a new written contract to that effect, simultaneously tearing up\nthe prior contract. The new contract is binding.\n\xe2\x80\x9c4. A contracts to manufacture and sell to B 2,000 steel roofs for corn cribs at $60. Before A begins manufacture a threat of a nationwide steel strike raises the cost of steel\nabout $10 per roof, and A and B agree orally to increase the price to $70 per roof. A\nthereafter manufactures and delivers 1,700 of the roofs, and B pays for 1,500 of them at\nthe increased price without protest, increasing the selling price of the corn cribs by $10.\nThe new agreement is binding.\n\xe2\x80\x9c5. A contracts to manufacture and sell to B 100,000 castings for lawn mowers at 50\ncents each. After partial delivery and after B has contracted to sell a substantial number\nof lawn mowers at a fixed price, A notifies B that increased metal costs require that the\nprice be increased to 75 cents. Substitute castings are available at 55 cents, but only after\nseveral months delay. B protests but is forced to agree to the new price to keep its plant in\noperation. The modification is not binding.\xe2\x80\x9d\n\n94\n\n\x0cJune of 1968 at a time when the five-year contract which was made in 1964 had\nnot been fully performed by either party. Second, although the 1964 contract provided that Maher collect all refuse generated within the city, it appears this contract was premised on Maher\xe2\x80\x99s past experience that the number of refusegenerating units would increase at a rate of 20 to 25 per year. Furthermore, the\nevidence is uncontradicted that the 1967-1968 increase of 400 units \xe2\x80\x9cwent beyond\nany previous expectation.\xe2\x80\x9d Clearly, the circumstances which prompted the city\ncouncil to modify the 1964 contract were unanticipated. Third, although the evidence does not indicate what proportion of the total this increase comprised, the\nevidence does indicate that it was a \xe2\x80\x9csubstantial\xe2\x80\x9d increase. In light of this, we\ncannot say that the council\xe2\x80\x99s agreement to pay Maher the $10,000 increase was\nnot fair and equitable in the circumstances.\n[\xc2\xb620] The judgment appealed from is reversed, and the cause is remanded to the\nSuperior Court for entry of judgment for the defendants.\nQuestions:\n1. Who is Angel? (Just guess. It\xe2\x80\x99s not in the case.)\n2. If the court had found that lack of consideration meant that the modification\nwas not binding, would Maher have had to repay the first $10,000?\n3. If the city\xe2\x80\x99s promise to pay the second $10,000 was enforceable, was the promise to pay the first $10,000 likewise enforceable?\n4. Does the court adopt the Restatement Rule exactly?\n5. Would the rule the court adopts apply to Foakes v. Beer?\n6. Do you recognize the facts of illustration no. 3 in the second footnote? The\nfacts of illustration no. 1?\n\nUniform Commercial Code \xc2\xa7 2-209. Modification, Rescission and Waiver,\nand cmts. 1 and 2.\n\nUniform Commercial Code \xc2\xa7 2-104(1). Definitions: \xe2\x80\x9cMerchant\xe2\x80\x9d * * * .\n\n95\n\n\x0cGROSS VALENTINO PRINTING COMPANY v. Frederick S. CLARKE,\nd/b/a Cinefantastique (1983)\nAppellate Court of Illinois, First District, First Division\n458 N.E.2d 1027\nGOLDBERG, Justice:\n[\xc2\xb61] Gross Valentino Printing Company (plaintiff) brought this action against\nFrederick S. Clarke, doing business as Cinefantastique (defendant), based on an\nalleged breach of contract. Defendant asserted three affirmative defenses: lack of\nconsideration, fraudulent or innocent misrepresentation, and business compulsion.\n[\xc2\xb62] Plaintiff moved for summary judgment. Both plaintiff and defendant filed\ndepositions in support of their theories. The trial court granted plaintiff\xe2\x80\x99s motion\nwith regard to the first [defense] * * * *. * * * * Defendant appeals.\n[\xc2\xb63] Defendant publishes a magazine. After discussion, in July of 1979, plaintiff sent defendant a letter for printing the magazine including a price quotation of\n$6,695. Defendant accepted the terms. On August 8, 1979, the parties met to discuss the layout. The parties\xe2\x80\x99 depositions diverge as to the substance of that meeting. Because plaintiff was the movant for summary judgment, \xe2\x80\x9cthe court will construe the pleadings, depositions, admissions and affidavits strictly against the movant and liberally in favor of the opponent\xe2\x80\x9d to determine if the summary judgment\nwas proper. Kolakowski v. Voris (1980), 83 Ill.2d 388, 398, 415 N.E.2d 397.\n[\xc2\xb64] According to defendant\xe2\x80\x99s deposition, he brought materials for printing the\nmagazine to plaintiff\xe2\x80\x99s office on August 8, 1979. Defendant discussed problems\nconcerning the layout with an agent of plaintiff corporation. The agent told defendant the job could still be done \xe2\x80\x9cin house\xe2\x80\x9d despite the problems. He also told\ndefendant the price would remain the same over the next six issues of the magazine.\n[\xc2\xb65] Defendant also stated the parties had a telephone conversation on August\n14, 1979. Defendant was informed the job \xe2\x80\x9cwas going to cost more than we\nthought.\xe2\x80\x9d Plaintiff\xe2\x80\x99s agent told defendant the higher cost was incurred because\nplaintiff had to \xe2\x80\x9csend the stripping out.\xe2\x80\x9d Defendant did not inform plaintiff\xe2\x80\x99s agent\nhe wanted to get another printer because defendant did not believe he could meet\nhis deadline if he changed printers. Defendant was also afraid plaintiff would not\nreturn defendant\xe2\x80\x99s materials if defendant argued about the price. Those materials\nwere necessary for continued printing of defendant\xe2\x80\x99s magazine.\n[\xc2\xb66] Defendant also deposed that sometime thereafter plaintiff sent defendant a\nletter dated August 15, 1979. The letter specified the same work as represented in\nthe parties\xe2\x80\x99 earlier contract. However the price was increased to $9,300. Defendant made no objection to this increase until a later date.\n96\n\n\x0c[\xc2\xb67] On August 30, 1979, plaintiff delivered the first 5,000 magazines to defendant. Defendant signed the purchase order reflecting the new price and paid\nplaintiff $4,650 on account of the purchase. Defendant subsequently received the\ncomplete shipment of 15,000 magazines. However, on October 28, 1979, defendant informed plaintiff he would not accept the price increase.\nI\nLACK OF CONSIDERATION\n[\xc2\xb68] The parties agree that the sufficiency of defendant\xe2\x80\x99s first affirmative defense of lack of consideration depends on the determination of whether the transactions at issue are subject to the Uniform Commercial Code (UCC) (Ill. Rev. Stat.\n1981, ch. 26, par. 1-101 et seq.). Under the UCC a modification of an existing\ncontract \xe2\x80\x9cwithin this Article needs no consideration to be binding.\xe2\x80\x9d (Ill. Rev. Stat.\n1981, ch. 26, par. 2-209(1).) The parties also agree that the applicability of the\nUCC depends on the determination of whether they contracted for \xe2\x80\x9cgoods\xe2\x80\x9d or\n\xe2\x80\x9cservices.\xe2\x80\x9d\n[\xc2\xb69]\n\nThe UCC defines \xe2\x80\x9cgoods\xe2\x80\x9d as (Ill. Rev. Stat. 1981, ch. 26, par. 2-105(1)):\n\xe2\x80\x9c`Goods\xe2\x80\x99 means all things, including specially manufactured goods, which\nare movable at the time of identification to the contract for sale other than\nthe money in which the price is to be paid, investment securities (Article 8)\nand things in action. `Goods\xe2\x80\x99 also includes the unborn young of animals\nand growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (Section 2-107).\xe2\x80\x9d\n\n[\xc2\xb610] The parties have not cited, and our research has not disclosed, any case in\nIllinois in which the court specifically applied the above definition to printed\nmagazines. However, in Colony Press, Inc. v. Fleeman (1974), 17 Ill. App.3d 14,\n308 N.E.2d 78, we dealt with the printing and sale of advertising leaflets.:\n* * * * According to the language in Colony Press, the court implied that the\nprinted advertising leaflets were \xe2\x80\x9cgoods\xe2\x80\x9d and that the UCC applied to the contract.\n****\n[\xc2\xb611] Closer to the point is Lake Wales Publishing Co. v. Florida Visitor, Inc.\n(Fla. App. 1976), 335 So.2d 335. There, the court specifically addressed the issue\nof whether a contract to compile, edit, and publish printed material constituted a\nsale of goods. The court concluded that it did (335 So.2d 335, 336):\n\xe2\x80\x9cWe focus then on whether the printed materials which appellant allegedly\nfurnished to appellee were `goods\xe2\x80\x99 under the U.C.C., Fla. Stat. \xc2\xa7 672.2105(1), which defines `goods\xe2\x80\x99 as:\n`... all things (including specially manufactured goods) which are\nmovable at the time of identification to the contract for sale other\n97\n\n\x0cthan the money in which the price is to be paid, investment securities (chapter 678) and things in action.\xe2\x80\x99\nThe specific point has not been passed on by the Florida courts; however,\nthe Official Comment to U.C.C. \xc2\xa7 2-105 states that the definition of goods\nis based upon the concept of their movability. The items allegedly furnished by the appellant were specially produced or manufactured and were\nmovable. Moreover, any services rendered were of necessity directed to\nproduction of the items.\xe2\x80\x9d\nSee also Cardozo v. True (Fla. App. 1977), 342 So.2d 1053, 1055, where the court\nstated \xe2\x80\x9c[t]he definition of `goods\xe2\x80\x99 under the U.C.C. is sufficiently broad to include\nbooks.\xe2\x80\x9d\n[\xc2\xb612] The court in Lake Wales relied on Carpel v. Saget Studios, Inc. (E.D. Pa.\n1971), 326 F. Supp. 1331. There the court determined that a contract for a photographer to provide photographs, was a contract for goods. 326 F. Supp. 1331, 1333.\n[\xc2\xb613] In the case at bar, we conclude that the primary subject of the contract was\nthe tangible printed magazines and not \xe2\x80\x9cprinting services.\xe2\x80\x9d Defendant\xe2\x80\x99s deposition\nindicates he worked with plaintiff in arriving at the \xe2\x80\x9clayout\xe2\x80\x9d of the magazine. Furthermore, defendant\xe2\x80\x99s deposition indicates he \xe2\x80\x9cshopped\xe2\x80\x9d for printers based solely\non which printer submitted the lowest price estimate. Such an admission suggests\nthat to defendant the \xe2\x80\x9cprinting services\xe2\x80\x9d were largely fungible or interchangeable\nand were merely incidental to delivery of the final product. It is clear that defendant was simply interested in determining who could get him the magazines, the\nultimate product, at the lowest possible price.\n[\xc2\xb614] Defendant relies on three cases. We find them inapposite to the case at bar:\n[\xc2\xb615] In Mallin v. University of Miami (Fla. App. 1978), 354 So.2d 1227, the\ncourt held a contract between an author and a publisher was a contract for services.\nThe court stressed that \xe2\x80\x9c[t]his transaction did not involve a sale of goods by the\npublisher to the author\xe2\x80\x9d (354 So.2d 1227, 1229). In fact there was no sale of\nbooks except from the publisher to the eventual consumer.\n[\xc2\xb616] In For Children, Inc. v. Graphics International, Inc. (S.D.N.Y. 1972), 352\nF. Supp. 1280, the court held damages for breach of a contract for the publishing\nof \xe2\x80\x9cpop-up\xe2\x80\x9d children\xe2\x80\x99s books were not governed by the UCC. The court indicated\nthe manufacture of pop-up books was \xe2\x80\x9ca limited field.\xe2\x80\x9d (352 F. Supp. 1280, 1284.)\nTherefore, the publishing at issue in For Children was in the nature of a specialty.\nSuch specialized printing requires greater skill and expertise than the simple printing of a magazine as in the case at bar.\n[\xc2\xb617] In Curtis Publishing Co. v. Sheridan (S.D.N.Y. 1971), 53 F.R.D. 642, the\ncourt denied summary judgment in an action based on a contact for the publication of books. The court concluded there were disputed facts regarding whether\n98\n\n\x0cthe contract was for goods or services. (53 F.R.D. 642, 643.) However, the court\nnoted that the contract included various responsibilities of the publisher other than\nprinting, such as financing and marketing of the books.\n[\xc2\xb618] In all of these cases the responsibility of the publisher went beyond the\nsimple printing of the material. Each of the contracts in the cited cases required\nmore independent judgment, skill, and service than the contract in the case at bar.\nTherefore we hold that the agreement between these parties for printing the magazines was subject to the provisions of the UCC. It follows that proof of consideration was unnecessary. The trial court properly struck the first affirmative defense.\n****\nNote: As Gross Valentino Printing Company describes, the scope of Article Two\nis limited to transactions in \xe2\x80\x9cgoods\xe2\x80\x9d defined as per UCC \xc2\xa7 2-105(1):\nUniform Commercial Code \xc2\xa7 2-105. Definitions: * * * \xe2\x80\x9cGoods\xe2\x80\x9d * * * .\nUniform Commercial Code \xc2\xa7 1-201(20). General Definitions: * * * \xe2\x80\x9cGood faith\xe2\x80\x9d * *\n*.\nUniform Commercial Code \xc2\xa7 1-304. Obligation of Good Faith.\n\nQuestions: UCC \xc2\xa7 2-209 abandoned consideration in this narrow instance, but it\ndid not abdicate all regulation. What does the code require in place of consideration? See \xc2\xa7 2-209 cmt. 2. Did the printing company meet this requirement? Consider the following:\n\nLUMBER ENTERPRISES, INC. v. Duane F. HANSEN and Peggy Hansen,\nd/b/a Model Log Homes (1993)\nSupreme Court of Montana\n846 P.2d 1046\nTURNAGE, Chief Justice.\n[\xc2\xb61] This is an action for breach of contract. The District Court for the Eighteenth Judicial District, Gallatin County, granted judgment to Lumber Enterprises,\nInc., in the amount of $45,460.50 plus interest and costs. Duane F. Hansen and\nPeggy Hansen appeal. Lumber Enterprises, Inc., cross-appeals. We affirm. * * * *\n[\xc2\xb62] Lumber Enterprises, Inc., is a Montana corporation with its principal place\nof business at Gallatin Gateway, Montana. It sells specially prepared logs for log\nhomes through a network of dealers. Duane F. Hansen and his wife Peggy Hansen\ndo business as Heartbilt Homes (formerly Model Log Homes) in Stockton, Illinois,\nas a dealer of Lumber Enterprises\xe2\x80\x99 products.\n99\n\n\x0c[\xc2\xb63] The parties have had a working relationship since 1972. On October 29,\n1985, at the request of the Hansens, the parties agreed to a special pricing arrangement for approximately thirty loads of logs to be delivered in January, February and March of 1986. Lumber Enterprises agreed to the reduced price to keep\nits crews busy during the winter months.\n[\xc2\xb64] The thirty loads were delivered but, at the request of the Hansens, over a\nmuch longer period of time than originally agreed. The last load was shipped on\nOctober 31, 1988. The price of the last twelve of the thirty loads is the subject of\nthis lawsuit.\n[\xc2\xb65] On April 27, 1987, Lumber Enterprises issued a new price list to the Hansens and told them to \xe2\x80\x9ctake it or leave it.\xe2\x80\x9d The practical effect was to raise prices\nto the Hansens by about 50 percent. After the April 1987 price change, the Hansens ordered twelve loads of logs to complete the thirty-load agreement of October 1985. They paid for the first nine of those twelve loads at the new 1987 prices,\nbut under protest. Mr. Hansen testified he told the office manager for Lumber Enterprises that eventually there would have to be a reconciliation of the 1987 prices.\nThe Hansens did not make payment for the last three loads, contending that this\nwas the only way to force Lumber Enterprises to deal with their concerns.\n[\xc2\xb66] Lumber Enterprises brought suit claiming $45,460.50 was due from the\nHansens for logs, catalogs, trusses and insulation, using the 1987 prices. The Hansens contended the twelve disputed loads should have been billed at 1985 prices.\nThey further contended that Lumber Enterprises owed them $859 as part of a professional photography bill: a credit of $9,827.55 for half logs billed as full logs;\nand a $500 credit for help in photographing and assembling new company catalogues. By the Hansens\xe2\x80\x99 calculations, Lumber Enterprises owed them money.\n****\n[\xc2\xb67] The [trial] court * * * * ruled that the Hansens owe Lumber Enterprises\n$45,460.50, plus costs of suit. The court denied the credits sought by the Hansens\nfor photography and half logs, the damages sought by the Hansens for breach of\ngood faith and consequential damages, and the request of Lumber Enterprises for\nattorney fees.\n[\xc2\xb68]\n\nThe Hansens appeal and Lumber Enterprises cross-appeals.\n\nI\n[\xc2\xb69] * * * * The Hansens claim the April 27, 1987 price increase by Lumber\nEnterprises was a unilateral modification of a term of the contract, not a termination of the contract. They assert that the attempted modification of the contract\nwas not made in good faith and that the original contract should be enforced. They\n100\n\n\x0cclaim the remedy should have been the one for modification of contract in the absence of good faith.\n[\xc2\xb610] The test of good faith as to merchants includes observance of reasonable\ncommercial standards of fair dealing in the trade. This may in some situations require an objectively demonstrable reason for seeking a modification. But such\nmatters as a market shift which makes performance come to involve a loss may\nprovide such a reason even though there is no such unforeseen difficulty as would\nmake out a legal excuse from performance under Sections 30-2-615 and 30-2-616.\nOfficial Comment to 5 30-2-209, MCA.\n[\xc2\xb611] A Lumber Enterprises manager testified that the April 27, 1987 price increase was necessary \xe2\x80\x9c[b]ecause we were losing money at the 1985 price agreement.\xe2\x80\x9d He testified that when the original agreement was entered, Lumber Enterprises had never before sold truckloads of logs without the usual trim work done\non them, and they believed the price was proper. However, after a year of supplying the Hansens with such logs, they realized they were selling the logs at a price\nbelow the cost of production. We conclude that the test of good faith has been met.\n[\xc2\xb612] More importantly, the Hansens ignore that the contract had already been\nextended indefinitely, with the acquiescence of both parties, at the time of the\nApril 27, 1987 price increase. The indefinite extension placed the contract within\n\xc2\xa7 30-2-309(2), MCA, in that \xe2\x80\x9cthe contract provides for successive performances\nbut is indefinite in duration.\xe2\x80\x9d Under that statute, termination is allowed \xe2\x80\x9cat any\ntime by either party\xe2\x80\x9d in such a contract. * * * *\n[\xc2\xb613] In buying loads of logs more than thirty days after the unilateral price increase, the Hansens effectively entered into a new contract with Lumber Enterprises. Lumber Enterprises brought this suit to collect on the unpaid debt under\nthat contract.\n[\xc2\xb614] We hold that the District Court did not abuse its discretion * * * *. * * * *\nQuestion: Would application of the standard employed by this court have changed\nthe result in Angel v. Murray?\n\nNote on Modification of Consumer Transactions\nCourts have viewed the good faith requirement with some degree of flexibility.\nConsider the following from Palmer v. Safe Auto Sales, Inc., 452 N.Y.S.2d 995\n(Kings Cty. Small Claims Part 1982). This is the case of the \xe2\x80\x9cfrugal optometrist.\xe2\x80\x9d\nDr. Palmer, a doctor of optometry, bought a Toyota Tercel, deluxe model, from\nSafe Auto Sales. He paid a $100 deposit. Balance was due at the time of delivery.\nFive weeks later, Dr. Palmer was told his car was available but included a rear\n101\n\n\x0cwiper ($75) and a body molding ($45) not specified in the original agreement.\nSafe Auto told Palmer that he would have to pay for these additions in order to\ntake the car. He would also have to pay a price adjustment of $150, reflecting increased dealer cost between the time of ordering and delivery. With tax, this came\nto an additional $291. Dr. Palmer testified that he needed the car at the time but\ndid not want the additions. He took the car but sued for the $291. It is clear that\nSafe Auto would have lost money had they not charged Dr. Palmer for the extras.\nThe court stated, however,\nAlthough the comment does not specifically state, it would appear that a\nmodification of a sales price term arising out of a market shift will generally be held enforceable only in a context involving \xe2\x80\x9cmerchants\xe2\x80\x9d. The\ncourt, in United States for Use & Benefit of Crane Co. v Progressive Enterprises (418 F. Supp. 662, 664), observed in a case involving merchants\nthat:\n\xe2\x80\x9cIn the context of a lengthy, ongoing business relationship, seeking\nmodification of a sales price is not uncommon and, given increased\ncosts, is a fair method of doing business in order to preserve the\ndesirability of the relationship for both parties. In such a situation,\nthe parties must be able to rely on objective, unequivocal manifestations of assent.\xe2\x80\x9d\nHowever, while such a modification might be expected in a sales transaction between merchants, a different rule is appropriate where one of the\nparties is a consumer. A merchant \xe2\x80\x9cmeans a person who deals in goods of\nthe kind or otherwise by his occupation holds himself out as having\nknowledge or skill peculiar to the practices or goods involved in the transaction\xe2\x80\x9d (Uniform Commercial Code, \xc2\xa7 2-104, subd [1]). I hold that where,\nas here, a sophisticated merchant attempts to coerce a consumer into asserting and paying for a price increase for the vehicle that had previously\nbeen contracted for, such a modification does not meet the good-faith requirement of article 2 of the Uniform Commercial Code. The consumer\nwho purchases goods, such as an automobile, makes, it is presumed, a reasoned decision based among other things upon price factors and the necessity of receiving delivery of the vehicle within certain time parameters.\nThe purchase of an automobile entails a large expenditure for the average\nconsumer. It is not a transaction undertaken frequently. Therefore, having\nsigned a contract and furnished a deposit, the consumer reasonably believes that he has contracted for a vehicle at a price certain. The attempt by\nthe dealer to exact a further charge to reflect a price increase to it, is an unfair and manifestly unreasonable requirement. In short, it is a modification\nlacking in good faith. * * * * The duty of \xe2\x80\x9chonesty in fact\xe2\x80\x9d is the standard by which all commercial transactions are judged. Good faith is not\nmerely an ideal which is devoutly to be desired but is in fact an obligation\nwhich is as much a part of any agreement or contract as are the obligations\ncreated by agreement of the parties. In fact, the obligation of good faith\n102\n\n\x0ctakes priority over the obligations which the parties may have created.\n****\nWhile the modification to reflect the price increase might be deemed a\nmodification \xe2\x80\x9chonest in fact,\xe2\x80\x9d I hold that the modification does not conform to the additional standard relevant to this transaction, i.e., \xe2\x80\x9cthe observance of reasonable commercial standards of fair dealing in the trade\xe2\x80\x9d\n(Uniform Commercial Code, \xc2\xa7 2-103, subd [1], par [b]). The transaction\nmust be viewed in the totality of the circumstances: a price increase modification in the context of a single consumer transaction as opposed to one\nin \xe2\x80\x9ca lengthy, on-going business relationship\xe2\x80\x9d between merchants. (United\nStates for Use & Benefit of Crane Co. v Progressive Enterprises, supra, at\np 664.) If both parties were merchants, I would hold otherwise.\n\nNote on the Relationship Between Duress and Good Faith for a Modification\nWe have not yet studied duress, but obviously there is some connection between\nthe \xe2\x80\x9cgood faith\xe2\x80\x9d standard and the protections offered by the duress doctrine. In the\nunpublished opinion in Duffy Tool & Stamping, Inc. v. Bosch Auto. Motor Syst.\nCorp., Opinion, 2000 WL 122225 (Tenn. Ct. App., Feb. 1, 2000), the court stated\nwell the view typical of many courts:\nCommercial parties are undoubtedly free to modify their contracts consensually. See Tenn. Code Ann. \xc2\xa7 47-2-209 (1996). Modifications of contracts\ngoverned by the Uniform Commercial Code are subject to the general obligation of good faith, which the Code defines as \xe2\x80\x9chonesty in fact and the\nobservance of reasonable commercial standards of fair dealing in the\ntrade.\xe2\x80\x9d Tenn. Code Ann. \xc2\xa7 47 -2-103(1)(b) (1996). Thus, a modification of\na contract for the sale of goods procured under circumstances of economic\nduress is voidable by the victim. * * * *\nThe sort of economic duress that will render a contract voidable is the\n\xe2\x80\x9cimposition, oppression . . . or taking of undue advantage of the business\nor financial stress or extreme necessities . . . of another . . . [so] that the\nparty profiting thereby has received money, property or other advantage\n[that in equity the party] ought not be permitted to retain.\xe2\x80\x9d Johnson v. Ford,\n147 Tenn. 63, 92-93, 245 S.W. 531, 539 (1922). Tenn. Code Ann. \xc2\xa7 47-1103 (1996) preserves the applicability of economic duress as a defense in\ndealings between commercial actors. As a general matter, economic duress\nwill make an agreement voidable by the strapped party when that party\xe2\x80\x99s\nassent has been induced by an \xe2\x80\x9cimproper threat by the other party that [has\n\n103\n\n\x0cleft] the victim no reasonable alternative.\xe2\x80\x9d Restatement (Second) Contracts \xc2\xa7 175(1) (1981).*\nWe will study the doctrine of duress in Chapter 4.\n\nThe following case is an aside regarding the scope of Article 2 of the UCC. You\nknow that the UCC does not apply to all contracts, and Article 2 applies only to\n\xe2\x80\x9ctransactions in goods.\xe2\x80\x9d The following case addresses the meaning of that phrase.\nJane PITTSLEY v. Donald HOUSER, dba Hilton Contract Co.;\nHilton Contract Carpet Co., a corporation (1994)\nCourt of Appeals of Idaho\n875 P.2d 232\nSWANSTROM, Judge, pro tem. * * * *\n[\xc2\xb61] * * * * The single question upon which this appeal depends is whether the\nUCC is applicable to the subject transaction. If the underlying transaction involved the sale of \xe2\x80\x9cgoods,\xe2\x80\x9d then the UCC would apply. If the transaction did not\ninvolve goods, but rather was for services, then application of the UCC would be\nerroneous.\n[\xc2\xb62] Idaho Code \xc2\xa7 28-2-105(1) defines \xe2\x80\x9cgoods\xe2\x80\x9d as \xe2\x80\x9call things (including specially manufactured goods) which are movable at the time of identification to the\ncontract for sale. . . .\xe2\x80\x9d Although there is little dispute that carpets are \xe2\x80\x9cgoods,\xe2\x80\x9d the\ntransaction in this case also involved installation, a service. Such hybrid transactions, involving both goods and services, raise difficult questions about the applicability of the UCC. Two lines of authority have emerged to deal with such situations.\n[\xc2\xb63] The first line of authority, and the majority position, utilizes the \xe2\x80\x9cpredominant factor\xe2\x80\x9d test. The Ninth Circuit, applying the Idaho Uniform Commercial\nCode to the subject transaction, restated the predominant factor test as:\nThe test for inclusion or exclusion is not whether they are mixed, but,\ngranting that they are mixed, whether their predominant factor, their thrust,\ntheir purpose, reasonably stated, is the rendition of service, with goods in*\n\nOne of the examples used by the American Law Institute to illustrate the use of economic duress\nto induce an increase in the price of goods is strikingly similar to the facts of this case:\nA, who has contracted to sell goods to B, makes an improper threat to refuse to deliver\nthe goods to B unless B modifies the contract to increase the price. B attempts to buy\nsubstitute goods elsewhere but is unable to do so. Being in urgent need of the goods, he\nmakes the modification. B has no reasonable alternative. A\xe2\x80\x99s threat amounts to duress,\nand the modification is voidable by B.\nRestatement (Second) Contracts, \xc2\xa7 175, illustration 5.\n\n104\n\n\x0ccidentally involved (e.g., contract with artist for painting) or is a transaction of sale, with labor incidentally involved (e.g., installation of a water\nheater in a bathroom).\n* * * * This test essentially involves consideration of the contract in its entirety,\napplying the UCC to the entire contract or not at all.\n[\xc2\xb64] The second line of authority, which Hilton urges us to adopt, allows the\ncontract to be severed into different parts, applying the UCC to the goods involved in the contract, but not to the nongoods involved, including services as\nwell as other nongoods assets and property. Thus, an action focusing on defects or\nproblems with the goods themselves would be covered by the UCC, while a suit\nbased on the service provided or some other nongoods aspect would not be covered by the UCC. This position was advanced by the Tenth Circuit Court of Appeals in Foster v. Colorado Radio Corp., 381 F.2d 222 (10th Cir. 1967), which\ninvolved the sale of a radio station. The court in Foster held that, although there\nwas a single contract for the purchase of a radio station, the UCC applied only to\nthe actual goods that were covered under the contract. Thus, the court applied different analyses and remedies to two different aspects of the same contract.\n[\xc2\xb65] We believe the predominant factor test is the more prudent rule. Severing\ncontracts into various parts, attempting to label each as goods or nongoods and\napplying different law to each separate part clearly contravenes the UCC\xe2\x80\x99s declared purpose \xe2\x80\x9cto simplify, clarify and modernize the law governing commercial\ntransactions.\xe2\x80\x9d I.C. \xc2\xa7 28-1-102(2)(a). As the Supreme Court of Tennessee suggested in Hudson v. Town & Country True Value Hardware, Inc., 666 S.W.2d 51 (Tenn.\n1984), such a rule would, in many contexts, present \xe2\x80\x9cdifficult and in some instances insurmountable problems of proof in segregating assets and determining\ntheir respective values at the time of the original contract and at the time of resale,\nin order to apply two different measures of damages.\xe2\x80\x9d Id. at 54.\n[\xc2\xb66] Applying the predominant factor test to the case before us, we conclude\nthat the UCC was applicable to the subject transaction. The record indicates that\nthe contract between the parties called for \xe2\x80\x9c165 yds Masterpiece # 2122 \xe2\x80\x94 Installed\xe2\x80\x9d for a price of $4319.50. There was an additional charge for removing the\nexisting carpet. The record indicates that Hilton paid the installers $700 for the\nwork done in laying Pittsley\xe2\x80\x99s carpet. It appears that Pittsley entered into this contract for the purpose of obtaining carpet of a certain quality and color. It does not\nappear that the installation, either who would provide it or the nature of the work,\nwas a factor in inducing Pittsley to choose Hilton as the carpet supplier. On these\nfacts, we conclude that the sale of the carpet was the predominant factor in the\ncontract, with the installation being merely incidental to the purchase. Therefore,\nin failing to consider the UCC, the magistrate did not apply the correct legal principles to the facts as found. We must therefore vacate the judgment and remand\nfor further findings of fact and application of the UCC to the subject transaction.\nWALTERS, C.J., and CAREY, J. pro tem, concur.\n105\n\n\x0cQuestions:\n1. A contract for a perm\xe2\x80\x94would that be covered by Article 2?\n2. A contract for a house?\n3. A contract for money?\n4. Does Article 2 cover items sold at garage sales?\n5. Does Article 2 cover items picked up on the way out of the grocery store, before the checkout counter is reached?\nB. Waiver\nR. CONRAD MOORE & ASSOCS., INC. v. LERMA\n946 S.W.2d 90 (Tex. App.\xe2\x80\x94El Paso 1997, writ denied)\nOPINION\nLarsen, Justice.\n* * * * FACTS\n[\xc2\xb61] On January 30, 1990, the Lermas (Appellees) and R. Conrad Moore & Associates, Inc. (Appellant) entered into an earnest money contract for the purchase\nof two lots at 1900 Gus Moran in El Paso. The Lermas tendered a check to Moore\nfor $13,500 as part of the earnest money contract. The sale of the lots was contingent upon the Lermas using Moore as a builder. On April 16, 1990, the Lermas\nand Moore incorporated the previous contract into a new home residential earnest\nmoney contract. This contract provided for the construction of a custom home on\nthe lots for a total price, including the lots, of $180,000. The new contract called\nfor an additional payment of $6,500 earnest money, due upon the Lermas\xe2\x80\x99 approval of the house plan. Paragraph 4 of the contract required the following:\nFINANCING CONDITIONS: This contract is subject to approval for\nBuyer of a conventional (type of loan) loan (the Loan) to be evidenced by\na promissory note (the Note) in the amount of $180,000. Buyer shall apply\nfor the Loan within 15 days from the effective date of this contract and\nshall make every reasonable effort to obtain approval from Competitive\nMortgage Co., as lender, or any lender that will make the Loan. If the\nLoan cannot be approved within 60 days from the effective date of\nthis contract, this contract shall terminate and the Earnest Money\nshall be refunded to Buyer without delay. [Emphasis added.]\n[\xc2\xb62] In addition to the standard provision of the preprinted contract, special\nhandwritten provisions were included under Paragraph 11:\n\n106\n\n\x0c1) Seller give One Year (1) Builders Warranty and 10-Year H.O.W. warranty\n2) On Lot held more than 60 days, Earnest Money is non-refundable.\n3) Lot purchase contract dated January 30, 1990 is hereby transferred to\nthis Home construction contract.\n4) Balance of Down Payment to be made at time of sale of properties located at 1400 Bodega and 3509 Breckenridge. [Emphasis added.]\n[\xc2\xb63] Construction on the house began in December 1990, and was completed in\nthe summer of 1991. The Lermas were ultimately denied credit and were unable\nto close on the house. In September 1991, after demanding the return of their earnest money, they initiated this suit in November 1992. After trial to a jury, the\nLermas were awarded $20,000 in damages. The jury found that Moore breached\nthe contract by failing to return the Lermas\xe2\x80\x99 earnest money upon the Lermas\xe2\x80\x99 failure to get loan approval within the 60 days contemplated by Paragraph 4 of the\ncontract. Moore appeals.\nSTANDARD OF REVIEW: LEGAL AND FACTUAL SUFFICIENCY\n[\xc2\xb64] Moore asserts in its first six points of error that the evidence was legally or\nfactual insufficient to support the jury\xe2\x80\x99s findings.\n[\xc2\xb65] In reviewing a \xe2\x80\x9cno evidence\xe2\x80\x9d or legal sufficiency claim, we examine only\nthe evidence favorable to the verdict and disregard all evidence to the contrary.\n****\n[\xc2\xb66] In reviewing a \xe2\x80\x9cmatter of law\xe2\x80\x9d challenge, we first examine the record to\nsee if any evidence supports the finding, ignoring all evidence to the contrary. If\nno evidence supports the finding, we then determine whether the evidence conclusively establishes its converse. If so, we must reverse. * * * *\nLoan Approval\n[\xc2\xb67] In its first point of error, Moore asserts the evidence is legally and factually insufficient to support the jury finding that the Lermas failed to get loan approval for the purchase of the home. After a diligent search of the record, we have\nbeen unable to find any evidence that would support a finding that the Lermas did\nget financing for the purchase. Moore testified that \xe2\x80\x9csomeone\xe2\x80\x9d at Sun World Savings informed her that the Lermas were approved within the 60 day period. However, Ms. Nancy Montes of Mortgage Plus, who took the Lermas\xe2\x80\x99 loan application,\ntestified that they were never approved. She stated that a \xe2\x80\x9ctake out\xe2\x80\x9d letter sent out\nin October 1990 was not final loan approval but a prequalification report that indicates a conditional approval subject to verification and continuing good credit.\nMs. Montes further testified that she exhausted all her sources in attempting to get\nfinancing for the Lermas. Ultimately, the Lermas were denied credit and were un107\n\n\x0cable to close on the house. The record overwhelmingly supports the jury\xe2\x80\x99s finding\nthat the Lermas did not get loan approval for the purchase of the house. Therefore,\nMoore\xe2\x80\x99s first point of error is overruled.\nWaiver\n[\xc2\xb68] In its second point of error, Moore asserts that the evidence establishes as\na matter of law that the Lermas waived any right to have the earnest money refunded. We agree.\n[\xc2\xb69] Any contractual right can be waived. Purvis Oil Corp. v. Hillin, 890\nS.W.2d 931, 937 (Tex. App.-El Paso 1994, no writ). A waiver is an intentional release, relinquishment, or surrender of a known right. Id. The following elements\nmust be met to find waiver: (1) a right must exist at the time of the waiver; (2) the\nparty who is accused of waiver must have constructive or actual knowledge of the\nright in question; and (3) the party intended to relinquish its right. See Riley v.\nMeriwether, 780 S.W.2d 919, 922 (Tex. App.-El Paso 1989, writ denied). Intentional relinquishment of a known right can be inferred from intentional conduct\nwhich is inconsistent with claiming the contractual right. Id.\n[\xc2\xb610] It has been conclusively established that the Lermas did not obtain financing for the purchase of the house from Moore. Paragraph 4 of the contract clearly\nstates that if the purchasers are unable to obtain financing within 60 days of the\neffective date of the contract, they had a right to have their money returned. Thus,\non June 15, 1990, the Lermas had a right to the return of their earnest money. The\nLermas\xe2\x80\x99 intention to relinquish their right to the return of the earnest money, however, is clearly established by their conduct after June 15. Between the date the\ncontract was signed and the date construction began on the house, the Lermas participated in the design of the house, approved the blueprints in July 1990, and tendered an additional $6,500 in earnest money to Moore in October. The Lermas\nwere then conditionally approved for financing which allowed Moore to get a\nconstruction loan to begin building the house.\n[\xc2\xb611] Additionally, after construction of the house began in December 1990, the\nLermas monitored its progress on a daily basis. In March 1991, they requested\nand paid for an upgrade in tile for the house. In June, Isabel Lerma executed a\npromissory note in the principal amount of $6,000 to Moore to pay for the addition of another room to the house. During this same time period, the Lermas sold\ntheir home and another property, as agreed in the contract, to fund the down payment. Mr. Lerma testified that he fully intended to buy the house that Moore was\nbuilding, and at no time prior to August 1991 did he consider the contract terminated. Mrs. Lerma also testified that until August 1991, they wanted and intended\nto purchase the home.\n[\xc2\xb612] Although the Lermas claim that they were unaware that they could get\ntheir money back on that date, both Mr. and Mrs. Lerma signed the contract. Mrs.\n108\n\n\x0cLerma testified that she read the contract. Mr. Lerma was not sure if he read the\ncontract, but testified that no one prevented him from doing so. A person who\nsigns a contract is presumed to know and understand its contents; absent a finding\nof fraud, failure to apprehend the rights and obligations under the contract will not\nexcuse performance. See G-W-L, Inc. v. Robichaux, 643 S.W.2d 392 (Tex.1982);\nThigpen v. Locke, 363 S.W.2d 247 (Tex.1962). There is no evidence of fraud, actual or constructive, on the part of Moore. Thus, we conclude the Lermas had\nknowledge of their right to a refund of the earnest money on June 15.\n[\xc2\xb613] There is no evidence to support the jury\xe2\x80\x99s finding that the Lermas did not\nwaive the right to have the earnest money refunded. The Lermas\xe2\x80\x99 intentional conduct after the right to the return of the earnest money arose was inconsistent with\nclaiming that right. They intentionally relinquished a known right, and therefore,\nwe find as a matter of law, that the Lermas waived Paragraph 4 of the contract,\nand the contract continued in effect, including Paragraph 11 allowing Moore to\nretain the earnest money on the lots.\n[\xc2\xb614] The Lermas argue that Paragraph 4 operates as a condition precedent.\nWhen the Lermas failed to obtain financing within 60 days, the contract, including any forfeiture provisions, terminated. Thus, the Lermas assert Paragraphs 16\nand 11 never became effective. Many Texas cases have construed provisions similar to Paragraph 4 as conditions precedent. See e.g., * * * *. We agree with the\nLermas that Paragraph 16, a simple default clause included in the preprinted sections of the contract, may not have become effective in the event the Lermas\nfailed to obtain financing within 60 days. In this case, however, we have an additional handwritten provision that is somewhat out of the ordinary and distinguishable from the clauses considered in the cases finding conditions precedent. Under\nParagraph 11, the \xe2\x80\x9cspecial provisions\xe2\x80\x9d section of the contract, the parties added\nthe phrase \xe2\x80\x9con Lot held more than 60 days, Earnest Money is non-refundable.\xe2\x80\x9d\nThis brief passage is less than a model of clarity. At first blush, it appears in direct\ncontradiction to Paragraph 4, the termination clause.\n[\xc2\xb615] If a contract is worded so that it can be given a certain or definite legal\nmeaning or interpretation, then it is not ambiguous and the court will construe the\ncontract as a matter of law. City of Pinehurst v. Spooner Addition Water Co., 432\nS.W.2d 515, 518 (Tex.1968); First City Nat\xe2\x80\x99l Bank of Midland v. Concord Oil Co.,\n808 S.W.2d 133, 137 (Tex. App.-El Paso 1991, no writ). There is no allegation in\nthis case that the earnest money contract is ambiguous, and it does not appear to\nus to be so. Generally, the parties to a contract intend every clause to have some\neffect and the Court may not ignore any portion of the contract unless there is an\nirreconcilable conflict. Ogden v. Dickinson State Bank, 662 S.W.2d 330, 332\n(Tex.1983); Woods v. Sims, 154 Tex. 59, 273 S.W.2d 617 (1954). In the interpretation of contracts, the primary concern of courts is to ascertain and to give effect to\nthe intentions of the parties as expressed in the instrument. Coker v. Coker, 650\nS.W.2d 391, 393 (Tex.1983); Deacon, Inc. v. Price, 817 S.W.2d 147, 149 (Tex.\nApp.-El Paso 1991, writ denied). This requires the court to examine and consider\n109\n\n\x0cthe entire instrument and reach a decision so that none of the provisions will be\nrendered meaningless. Id.\n[\xc2\xb616] By its wording, Paragraph 11 is not merely a forfeiture clause subject to\nthe condition precedent stated in Paragraph 4. Paragraph 11 envisions the nonoccurrence of the condition (in this case financing obtained within 60 days), references the 60-day provision, and provides for continuation of the contract beyond 60 days. To give effect to both provisions and render neither meaningless,\nwe must construe the handwritten provision to allow the buyer, at its option, to\ncontinue the contract after 60 days in the absence of financing. A condition precedent like any other provision of a contract can be waived. Purvis Oil Corp., 890\nS.W.2d at 931. Thus, if financing were not obtained in 60 days, the Lermas could\ndo nothing, the contract would terminate, and the Lermas would be entitled to return of the earnest money. On the other hand, the Lermas could take action to\nhave the lot \xe2\x80\x9cheld more than 60 days\xe2\x80\x9d thereby waiving the right to the return of\nthe earnest money.\n[\xc2\xb617] The record establishes that the Lermas chose the latter option. They\nworked with Moore on the design of the house, tendered additional earnest money\nfour months after the contract would have expired under Paragraph 4, contracted\nwith Moore to increase the square footage of the house, paid for tile upgrades, and\nsold both the home they were living in and another property in anticipation of\nclosing on the house when it was completed. The record therefore conclusively\nestablishes that the Lermas waived termination of the contract and instead continued to operate pursuant to the contract under Paragraph 11.\n****\n[\xc2\xb618] We must reject the Lermas\xe2\x80\x99 arguments and affirm Moore\xe2\x80\x99s second point of\nerror.\n****\nCONCLUSION\n[\xc2\xb619] Having sustained Moore\xe2\x80\x99s second point of error, we reverse the judgment\nof the trial court and render judgment that the Lermas take nothing on their contract * * * * cause[] of action.\nQuestions:\n1. Is this a case of express or implied waiver?\n2. What facts show the Lermas\xe2\x80\x99 intent? Do you believe the Lermas intended to\nrelinquish their right?\n3. Did the Lermas promise to apply for a loan?\n\n110\n\n\x0c4. Is reliance on a waiver necessary for the waiver to have legal effect?\n5. What exactly was waived?\n6. Can anything be waived? In Clark v. West, 86 N.E. 1 (N.Y. 1908), Clark and\nWest contracted for Clark to write a book (and perhaps several books) that West\nwould publish. Clark was to be paid $2 per page \xe2\x80\x9cand if [Clark] abstains from the\nuse of intoxicating liquor and otherwise fulfills his agreements as hereinbefore set\nforth, he shall be paid an additional $4 per page in manner hereinbefore stated.\xe2\x80\x9d\nBut, after Clark began writing, he drank, and West knew it, but West told Clark\nthat he would pay $6 per page notwithstanding Clark\xe2\x80\x99s drinking, or at least that is\nwhat Clark later alleged. When West paid only $2 per page, Clark sued, and West\ndefended by claiming Clark drank. In response, Clark claimed West had waived\nthe requirement of Clark\xe2\x80\x99s abstinence. In return, West argued that Clark\xe2\x80\x99s abstinence was the consideration for the contract, and could not be waived. While the\ncourt agreed that the consideration for a contract cannot be waived, the court said\nthat Clark\xe2\x80\x99s writing books\xe2\x80\x94not Clark\xe2\x80\x99s abstinence\xe2\x80\x94was consideration, and\nClark\xe2\x80\x99s abstinence was a waivable point. The point of law, though, is not controversial: the consideration of a contract cannot be waived, though we say it differently now: \xe2\x80\x9cA material part of the agreed exchange cannot be waived.\xe2\x80\x9d Was what\nthe Lermas waived a material part of the agreed exchange?\n\nNote: Retraction of Waivers\nOnce a waiver occurs, is it binding in the future? In other words, can it be retracted?\nTo some extent, a waiver is like a contractual modification. It can be characterized\nas a promise, namely, a promise to accept something that was not acceptable before. West promised that Clark would not forfeit the $4 per page as a result of\nClark\xe2\x80\x99s drinking. If a waiver is viewed in this way, the question is whether the\npromise is enforceable. One might expect such a promise to be enforceable according to the same doctrines by which any other promise is enforceable.\nOn the other hand, it is also possible to think of contractual rights as a kind of\nproperty, at least after a contract forms. If one thinks this way, then a waiver is\nlike an abandonment of property. West abandoned the contractual right to pay only $2 per page if Clark drank. If a waiver is viewed in this way, the question is\nwhether the abandoned right may be reclaimed. The answer from property law is\ngenerally no. Once property is abandoned, the person abandoning it has no more\nrights in it. To some extent, the property view is more consistent with our manner\nof speaking about waivers. We do not usually talk of a breach of a waiver, as we\nwould if the waiver was a promise. We do, on the other hand, sometimes talk of\nwaivers as being retracted, although that makes them sound more like a grant of\nproperty rather than an abandonment of it.\n111\n\n\x0cEither way one thinks about waivers, one must ask if they can be taken back. For\ninstance, suppose after West grants Clark a waiver, Clark drinks to excess and begins turning in work of lesser quality. Let\xe2\x80\x99s suppose the work is satisfactory but\nnot as good as Clark\xe2\x80\x99s normal work. In that case, West may regret the waiver. If\nClark has not finished the book, may West retract the waiver with respect to the\nremaining pages?\nThe rule for this scenario is recited in Fitzgerald v. Hubert Herman, Inc., 179\nN.W.2d 252 (Mich. App. 1970): \xe2\x80\x9c[A]n executory waiver being in the nature of a\npromise or a contract must be supported by consideration to be enforceable. But a\nwaiver ... partaking of the principle of an election needs no consideration ... and\ncannot be retracted.\xe2\x80\x9d\nSome have had trouble understanding this rule on first reading it. The rule divides\nwaivers into two types: executory and \xe2\x80\x9cpartaking of the principle of an election.\xe2\x80\x9d\nExecutory waivers are treated like promises. Those partaking of the principle of\nan election are treated like abandonments of property. The trick here is to find\nwhich waivers are executory, then. What does executory mean? That a thing is\nincomplete and that some part of it is yet to be done. Contractual performance is\nexecutory before it has been fully completed. So does that help establish the\nmeaning of the rule? Of course, as performance continues, what was executory\nbecomes no longer so.\nHere are some hypotheticals against which to test your knowledge:\nPROBLEM 14. In the facts of Clark v. West, West tells Clark that Clark may\ndrink without forfeiting the $4 per page West would otherwise have a right to\nwithhold under the contract. When Clark turns in his next installment, pages 220230 (out of 3,470), West is not pleased with Clark\xe2\x80\x99s work. It is acceptable, but not\nas good as what Clark had been writing. West therefore sends a letter to Clark\nstating that West will from the date of the letter\xe2\x80\x99s receipt forward insist that Clark\nnot drink on pain of losing the $4 per page. Should Clark now drink?\n\nPROBLEM 15. Marco contracted with Andrea that Andrea would deliver to him\n22 tons of long grain rice on November 4, 2020. Andrea delivered the rice on November 7, 2020, at which time Marco accepted it. Two weeks later, Marco called\nAndrea and informed her that he was declining the rice and that she could pick it\nup or pay storage for it. He said he was not going to pay her because the rice was\nlate. Must Marco pay?\n\n112\n\n\x0cChapter 3. Alternate\nTheories of Recovery:\nPromissory Estoppel &\nUnjust Enrichment\nLawyers representing plaintiffs wish to raise every argument supporting their client\xe2\x80\x99s case. I have filed simple contract cases resting on five or six different theories of recovery, only one of which was grounded in a consensual contract showing consideration. The forms of action\xe2\x80\x94covenant, debt, and so on\xe2\x80\x94have been\nabolished, but because of developments over the centuries, it is still possible to\nrecover for breach of promise on several grounds. Now, however, unlike in the\nmedieval period, courts expect plaintiffs to raise every possible theory of recovery,\nnot pick one and stick with it. The same procedures\xe2\x80\x94just general civil procedures\xe2\x80\x94now apply to the litigation of each.\nThis chapter provides materials for your study of the two most prominent alternative theories. They are related to consensual contract in certain ways. For instance,\nconsensual contracts are founded on a bargain under the doctrine of consideration.\nPromissory estoppel is akin to detriment consideration. Unjust enrichment, like\nmoral obligation, is akin to benefit consideration. Each of these two alternate theories if proved is grounds for legal enforcement of a promise.\n\nA. Promissory Estoppel\nYou recall that we almost discussed the effect of non-bargained-for detriment in\nthe first chapter. Some cases hinted at it. Now we return to it.\nKIRKSEY v. KIRKSEY (1845)\nAlabama Supreme Court\n8 Ala. 131\n[\xc2\xb61] Assumpsit by the defendant, against the plaintiff in error. The question is\npresented in this Court, upon a case agreed, which shows the following facts:\n113\n\n\x0c[\xc2\xb62] The plaintiff was the wife of defendant\xe2\x80\x99s brother, but had for some time\nbeen a widow, and had several children. In 1840, the plaintiff resided on public\nland, under a contract of lease, she had held over, and was comfortably settled,\nand would have attempted to secure the land she lived on. The defendant resided\nin Talledega county, some sixty, or seventy miles off. On the 10th October, 1840,\nhe wrote to her the following letter:\nDear sister Antillico\xe2\x80\x94Much to my mortification, I heard, that brother\nHenry was dead, and one of his children. I know that your situation is one\nof grief, and difficulty. You had a bad chance before, but a great deal\nworse now. I should like to come and see you, but cannot with convenience at present. * * * * I do not know whether you have a preference on\nthe place you live on, or not. If you had, I would advise you to obtain your\npreference, and sell the land and quit the country, as I understand it is very\nunhealthy, and I know society is very bad. If you will come down and see\nme, I will let you have a place to raise your family, and I have more open\nland than I can tend; and on account of your situation, and that of your\nfamily, I feel like I want you and the children to do well.\nWithin a month or two after the receipt of this letter, the plaintiff abandoned her\npossession, without disposing of it, and removed with her family, to the residence\nof the defendant, who put her in comfortable houses, and gave her land to cultivate for two years, at the end of which he notified her to remove, and put her in a\nhouse, not comfortable, in the woods, which he afterwards required her to leave.\n[\xc2\xb63] A verdict being found for the plaintiff, for two hundred dollars, the above\nfacts were agreed, and if they will sustain the action, the judgment is to be affirmed, otherwise it is to be reversed.\n[\xc2\xb64] ORMOND, J. The inclination of my mind, is, that the loss and inconvenience, which the plaintiff sustained in breaking up, and moving to the defendant\xe2\x80\x99s,\na distance of sixty miles, is a sufficient consideration to support the promise, to\nfurnish her with a house, and land to cultivate, until she could raise her family.\nMy brothers, however think, that the promise on the part of the defendant, was a\nmere gratuity, and that an action will not lie, for its breach. The judgment of the\nCourt below must therefore be reversed, pursuant to the agreement of the parties.\nQuestions:\n1. Why did the majority think that the promise was not enforceable?\n2. How is this case different from Keyme v. Goulston?\n3. If Antillico\xe2\x80\x99s (actually Angelico\xe2\x80\x99s) traveling from Marshall County with her 8+\nchildren was not consideration, what was it? After all, Isaac requested it. A relatively recent case quoted Samuel Williston on this issue:\n\n114\n\n\x0cThe difference between a conditional gift and a contract has been famously explained by Samuel Williston as follows:\nIf a benevolent man says to a tramp, \xe2\x80\x9cIf you go around the corner\nto the clothing shop there, you may purchase an overcoat on my\ncredit,\xe2\x80\x9d no reasonable person would understand that the short walk\nwas requested as the consideration for the promise; rather, the understanding would be that in the event of the tramp going to the\nshop the promisor would make him a gift. Yet the walk to the shop\nis in its nature capable of being consideration. It is a legal detriment to the tramp to take the walk, and the only reason why the\nwalk is not consideration is because on a reasonable interpretation,\nit must be held that the walk was not requested as the price of the\npromise, but was merely a condition of a gratuitous promise.\nIt is often a difficult question to decide whether words of condition\nin a promise indicate a request for consideration or state a mere\ncondition in a gratuitous promise.\nAlthough no conclusive test exists for making the determination,\nan aid in determining which interpretation of the promise is more\nreasonable is an inquiry into whether the happening of the condition will benefit the promisor. If so, it is a fair inference that the\nhappening was requested as a consideration. On the other hand, if,\nas in the case of the tramp stated above, the happening of the condition will not benefit the promisor but is obviously for the purpose\nof enabling the promisee to receive a benefit (a gift), the happening\nof the event on which the promise is conditional, though brought\nabout by the promisee in reliance on the promise, will not be interpreted as consideration.\n3 Samuel Williston & Richard A. Lord, A Treatise on the Law of\nContracts \xc2\xa7 7:18, at 412-18 (4th ed. 2008).\nFritz v. Fritz, 767 N.W.2d 420 (Table) (2009), at\nhttp://statecasefiles.justia.com/documents/iowa/court-of-appeals/8-997-08-1088(2009-03-26).pdf?ts=1370462790 (last accessed April 20, 2016).\n4. What fact(s) would you add to the tramp hypothetical to give the tramp a right\nto recover in consensual contract? What fact(s) would you add to Kirksey to ensure that Angelico had a right to recover?\n\n115\n\n\x0cPROBLEM 16. If Bob says to Alice, \xe2\x80\x9cI will give you this new Jaguar if you will\naccept it,\xe2\x80\x9d is Bob\xe2\x80\x99s promise enforceable as a contract? Under the theory set out in\nR2K \xc2\xa7 90 (see the note after the next case)?\n\nRICKETTS v. SCOTHORN (1898)\nSupreme Court of Nebraska\n77 N.W. 365\nERROR from the district court of Lancaster county. Tried below before HOLMES,\nJ. Affirmed.\nSULLIVAN, J.\n[\xc2\xb61] In the district court of Lancaster county the plaintiff Katie Scothorn recovered judgment against the defendant Andrew D. Ricketts, as executor of the last\nwill and testament of John C. Ricketts, deceased. The action was based upon a\npromissory note, of which the following is a copy:\nMay the first, 1891. I promise to pay to Katie Scothorn on demand, $2,000,\nto be at 6 per cent per annum.\nJ. C. RICKETTS.\n[\xc2\xb62] In the petition the plaintiff alleges that the consideration for the execution\nof the note was that she should surrender her employment as bookkeeper for\nMayer Bros, and cease to work for a living. She also alleges that the note was given to induce her to abandon her occupation, and that, relying on it, and on the annual interest, as a means of support, she gave up the employment in which she\nwas then engaged. These allegations of the petition are denied by the executor.\nThe material facts are undisputed. They are as follows: John O. Ricketts, the maker of the note, was the grandfather of the plaintiff. Early in May,\xe2\x80\x94presumably on\nthe day the note bears date,\xe2\x80\x94he called on her at the store where she was working.\nWhat transpired between them is thus described by Mr. Flodene, one of the plaintiff\xe2\x80\x99s witnesses:\nA. Well the old gentleman came in there one morning about 9 o\xe2\x80\x99clock,\xe2\x80\x94\nprobably a little before or a little after, but early in the morning,\xe2\x80\x94and he\nunbuttoned his vest and took out a piece of paper in the shape of a note;\nthat is the way it looked to me; and he says to Miss Scothorn, \xe2\x80\x9cI have\nfixed out something that you have not got to work any more.\xe2\x80\x9d He says,\n\xe2\x80\x9cNone of my grandchildren work and you don\xe2\x80\x99t have to.\xe2\x80\x9d\nQ. Where was she?\n\n116\n\n\x0cA. She took the piece of paper and kissed him; and kissed the old gentleman and commenced to cry.\n[\xc2\xb63] It seems Miss Scothorn immediately notified her employer of her intention\nto quit work and that she did soon after abandon her occupation. The mother of\nthe plaintiff was a witness and testified that she had a conversation with her father,\nMr. Ricketts, shortly after the note was executed in which he informed her that he\nhad given the note to the plaintiff to enable her to quit work; that none of his\ngrandchildren worked and he did not think she ought to. For something more than\na year the plaintiff was without an occupation; but in September, 1892, with the\nconsent of her grandfather, and by his assistance, she secured a position as\nbookkeeper with Messrs. Funke & Ogden. On June 8, 1894, Mr. Ricketts died. He\nhad paid one year\xe2\x80\x99s interest on the note, and a short time before his death expressed regret that he had not been able to pay the balance. In the summer or fall\nof 1892 he stated to his daughter, Mrs. Scothorn, that if he could sell his farm in\nOhio he would pay the note out of the proceeds. He at no time repudiated the obligation. We quite agree with counsel for the defendant that upon this evidence\nthere was nothing to submit to the jury, and that a verdict should have been directed peremptorily for one of the parties. The testimony of Flodene and Mrs.\nScothorn, taken together, conclusively establishes the fact that the note was not\ngiven in consideration of the plaintiff pursuing, or agreeing to pursue, any particular line of conduct. There was no promise on the part of the plaintiff to do or refrain from doing anything. Her right to the money promised in the note was not\nmade to depend upon an abandonment of her employment with Mayer Bros, and\nfuture abstention from like service. Mr. Ricketts made no condition, requirement,\nor request. He exacted no quid pro quo. He gave the note as a gratuity and looked\nfor nothing in return. So far as the evidence discloses, it was his purpose to place\nthe plaintiff in a position of independence where she could work or remain idle as\nshe might choose. The abandonment by Miss Scothorn of her position as\nbookkeeper was altogether voluntary. It was not an act done in fulfillment of any\ncontract obligation assumed when she accepted the note. The instrument in suit\nbeing given without any valuable consideration, was nothing more than a promise\nto make a gift in the future of the sum of money therein named. Ordinarily, such\npromises are not enforceable even when put in the form of a promissory note.\n(Kirkpatrick v. Taylor, 43 Ill. 207; Phelps v. Phelps, 28 Barb. [N.Y.] 121; Johnston\nv. Griest, 85 Ind. 503; Fink v. Cox, 18 Johns. [N.Y.] 145.) But it has often been\nheld that an action on a note given to a church, college, or other like institution,\nupon the faith of which money has been expended or obligations incurred, could\nnot be successfully defended on the ground of a want of consideration. (Barnes v.\nPerine, 12 N.Y. 18; Philomath College v. Hartless, 6 Ore. 158; Thompson v. Mercer County, 40 Ill. 379; Irwin v. Lombard University, 56 O. St. 9.) In this class of\ncases the note in suit is nearly always spoken of as a gift or donation, but the decision is generally put on the ground that the expenditure of money or assumption\nof liability by the donee, on the faith of the promise, constitutes a valuable and\nsufficient consideration. It seems to us that the true reason is the preclusion of the\ndefendant, under the doctrine of estoppel, to deny the consideration. Such seems\n117\n\n\x0cto be the view of the matter taken by the supreme court of Iowa in the case of\nSimpson Centenary College v. Tuttle, 71 Ia. 596, where Rothrock, J., speaking for\nthe court, said:\nWhere a note, however, is based on a promise to give for the support of\nthe objects referred to, it may still be open to this defense [want of consideration], unless it shall appear that the donee has, prior to any revocation,\nentered into engagements or made expenditures based on such promise, so\nthat he must suffer loss or injury if the note is not paid. This is based on\nthe equitable principle that, after allowing the donee to incur obligations\non the faith that the note would be paid, the donor would be estopped from\npleading want of consideration.\n[\xc2\xb64] And in the case of Reimensnyder v. Gans, 110 Pa. St. 17, 2 Atl. Rep. 425,\nwhich was an action on a note given as a donation to a charitable object, the court\nsaid: \xe2\x80\x9cThe fact is that, as we may see from the case of Ryerss v. Trustees, 33 Pa. St.\n114, a contract of the kind here involved is enforceable rather by way of estoppel\nthan on the ground of consideration in the original undertaking.\xe2\x80\x9d It has been held\nthat a note given in expectation of the payee performing certain services, but\nwithout any contract binding him to serve, will not support an action. (Hulse v.\nHulse, 84 Eng. Com. Law 709.) But when the payee changes his position to his\ndisadvantage, in reliance on the promise, a right of action does arise. (McClure v.\nWilson, 43 Ill. 356; Trustees v. Garvey, 53 Ill. 401.)\n[\xc2\xb65] Under the circumstances of this case is there an equitable estoppel which\nought to preclude the defendant from alleging that the note in controversy is lacking in one of the essential elements of a valid contract? We think there is. An estoppel in pais is defined to be \xe2\x80\x9ca right arising from acts, admissions, or conduct\nwhich have induced a change of position in accordance with the real or apparent\nintention of the party against whom they are alleged.\xe2\x80\x9d Mr. Pomeroy has formulated the following definition:\nEquitable estoppel is the effect of the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting\nrights which might perhaps have otherwise existed, either of property, or\ncontract, or of remedy, as against another person who in good faith relied\nupon such conduct, and has been led thereby to change his position for the\nworse, and who on his part acquires some corresponding right either of\nproperty, of contract, or of remedy. (2 Pomeroy, Equity Jurisprudence 804.)\n[\xc2\xb66] According to the undisputed proof, as shown by the record before us, the\nplaintiff was a working girl, holding a position in which she earned a salary of\n$10 per week. Her grandfather, desiring to put her in a position of independence,\ngave her the note, accompanying it with the remark that his other grandchildren\ndid not work, and that she would not be obliged to work any longer. In effect, he\nsuggested that she might abandon her employment and rely in the future upon the\nbounty which he promised. He doubtless desired that she should give up her occupation, but, whether he did or not, it is entirely certain that he contemplated\n118\n\n\x0csuch action on her part as a reasonable and probable consequence of his gift. Having intentionally influenced the plaintiff to alter her position for the worse on the\nfaith of the note being paid when due, it would be grossly inequitable to permit\nthe maker, or his executor, to resist payment on the ground that the promise was\ngiven without consideration. The petition charges the elements of an equitable\nestoppel, and the evidence conclusively establishes them. If errors intervened at\nthe trial they could not have been prejudicial. A verdict for the defendant would\nbe unwarranted.\n[\xc2\xb67]\n\nThe judgment is right and is\n\nAFFIRMED.\nQuestions:\n1. Was there consideration for grandfather\xe2\x80\x99s promise?\n2. The purpose and function of the doctrine of equitable estoppel or estoppel in\npais is to establish statements of fact at trial. Traditionally, the doctrine applies\nwhen a person\n(1) makes a statement of fact to another,\n(2) the other (a) reasonably (b) relies on that statement of fact, and\n(3) the reliance results in some detriment.\nIf the person relying on the statement of fact can prove these three elements, then\nthe person who made the statement may not deny the truth of the statement at trial.\nA fine example is the case of Griswold v. Haven, 25 N.Y. 595 (1862), in which\nWright, who ran a storage warehouse, signed a storage receipt for grain purportedly received by Wright from Ford. Wright then introduced Ford to Griswold as a\nperson who wanted to borrow money and to put up grain in the warehouse as collateral. In reliance on Wright\xe2\x80\x99s statements, Griswold loaned Ford money and took\nas collateral an assignment of the grain in Wright\xe2\x80\x99s warehouse. When Ford failed\nto repay, Griswold came to Wright to collect the grain. Wright refused to give\nGriswold any grain, so Griswold sued Wright for conversion. One element of\nconversion is the exercise of dominion, if you recall. In defense to Griswold\xe2\x80\x99s suit,\nWright claimed that he had none of Ford\xe2\x80\x99s grain, but then the court imposed equitable estoppel because of Wright\xe2\x80\x99s statement in the warehouse receipt that he had\nreceived Ford\xe2\x80\x99s grain. Wright was thereafter unable to deny in court that he had\nthe grain, and Griswold was relieved of the requirement that he prove exercise of\ndominion, one element of his conversion case. Which facts support the Griswold\ncourt\xe2\x80\x99s finding that equitable estoppel applied?\n3. Equitable estoppel, as set forth traditionally in note 2, does not technically apply to the facts of Ricketts. Why not? Consider the following limerick:\n\n119\n\n\x0cKatie\xe2\x80\x99s grandfather promised some money,\nHe said, \xe2\x80\x9cYou shouldn\xe2\x80\x99t have to work, Honey\xe2\x80\x9d;\nWhere\xe2\x80\x99s the statement of fact\nThat he couldn\xe2\x80\x99t retract?\nHow the court found estoppel is funny.\n\xe2\x80\x94Stacey Severovich, STCL Class of 2013\n4. Even if equitable estoppel did apply, would it help Katie Scothorn recover?\n5. Is Ricketts different from Kirksey? Keyme v. Goulston?\n6. Ms. Scothorn\xe2\x80\x99s lost wages during the time she did not work were $520 less interest paid. Should she recover the $520 less interest or the face amount of the\nnote, $2,000? (I\xe2\x80\x99m asking you to speculate here on what the policy should be, but\nyou should look back to the note on contract remedies and pick the one you think\nis most just.)\n\nRestatement (Second) of Contracts \xc2\xa7 90\nNote: This section is the result of cases such as Ricketts v. Scothorn as well as\nKeyme v. Goulston. In fact, a long line of cases granting relief to plaintiffs who\nhad relied on non-bargained-for promises led to \xc2\xa7 90\xe2\x80\x99s drafting. Some of these\ncases involved gifts promised to charitable organizations, mostly churches and\nschools. A would promise church B a gift of $100, for instance, to go toward\nbuilding a meetinghouse. B would also obtain pledges from 49 other parishioners,\nand in reliance on the pledges, begin building. Once the church had begun building, courts often held that detriment consideration existed for the pledgor\xe2\x80\x99s promise, so that the promise was binding. But the promise was clearly given as a gift,\nnot in exchange. When contracts scholars and courts began to clarify contract doctrines in the second half of the nineteenth century, these consideration cases\nemerged as the anomaly that they are. Because no one disagreed with the results\nin the cases, some new formulation of doctrine was necessary to describe the cases so that they would no longer fall confusingly under the consideration doctrine.\nSection 90 was the result. Samuel Williston first coined the term promissory estoppel, in his 1920 treatise, to describe these cases. Initially, there was some\nthought that \xc2\xa7 90 would only be applied to family and charitable gift cases, but the\ncases following in our readings show clearly that courts have not limited \xc2\xa7 90\xe2\x80\x99s\nreach in this fashion.\n\n120\n\n\x0cQuestions:\n1. Does \xc2\xa7 90, as formulated, apply to give a right to recover to Keyme, \xe2\x80\x9cAntillico\xe2\x80\x9d\nKirksey, and Katie Scothorn?\n2. Under \xc2\xa7 90, should Katie Scothorn receive $520 for lost wages or $2,000, what\nshe was promised?\n\nJohn GROUSE v. GROUP HEALTH PLAN, INC. (1981)\nSupreme Court of Minnesota\n306 N.W.2d 114\nOTIS, Justice.\n[\xc2\xb61] Plaintiff John Grouse appeals from a judgment in favor of Group Health\nPlan, Inc., in this action for damages resulting from repudiation of an employment\noffer. The narrow issue raised is whether the trial court erred by concluding that\nGrouse\xe2\x80\x99s complaint fails to state a claim upon which relief can be granted. In our\nview, the doctrine of promissory estoppel entitles Grouse to recover and we,\ntherefore, reverse and remand for a new trial on the issue of damages.\n[\xc2\xb62] The facts relevant to this appeal are essentially undisputed. Grouse, a 1974\ngraduate of the University of Minnesota School of Pharmacy, was employed in\n1975 as a retail pharmacist at Richter Drug in Minneapolis. He worked approximately 41 hours per week earning $7 per hour. Grouse desired employment in a\nhospital or clinical setting, however, because of the work environment and the\nincreased compensation and benefits. In the summer of 1975 he was advised by\nthe Health Sciences Placement office at the University that Group Health was\nseeking a pharmacist.\n[\xc2\xb63] Grouse called Group Health and was told to come in and fill out an application. He did so in September and was, at that time, interviewed by Cyrus Elliott,\nGroup Health\xe2\x80\x99s Chief Pharmacist. Approximately 2 weeks later, Elliott contacted\nGrouse and asked him to come in for an interview with Donald Shoberg, Group\nHealth\xe2\x80\x99s General Manager. Shoberg explained company policies and procedures\nas well as salary and benefits. Following this meeting Grouse again spoke with\nElliott who told him to be patient, that it was necessary to interview recent graduates before making an offer.\n[\xc2\xb64] On December 4, 1975, Elliott telephoned Grouse at Richter Drug and offered him a position as a pharmacist at Group Health\xe2\x80\x99s St. Louis Park Clinic.\nGrouse accepted but informed Elliott that 2 week\xe2\x80\x99s notice to Richter Drug would\nbe necessary. That afternoon Grouse received an offer from a Veteran\xe2\x80\x99s Admin-\n\n121\n\n\x0cistration Hospital in Virginia which he declined because of Group Health\xe2\x80\x99s offer.\nElliott called back to confirm that Grouse had resigned.\n[\xc2\xb65] Sometime in the next few days Elliott mentioned to Shoberg that he had\nhired, or was thinking of hiring, Grouse. Shoberg told him that company hiring\nrequirements included a favorable written reference, a background check, and approval of the general manager. Elliott contacted two faculty members at the\nSchool of Pharmacy who declined to give references. He also contacted an internship employer and several pharmacies where Grouse had done relief work. Their\nresponses were that they had not had enough exposure to Grouse\xe2\x80\x99s work to form a\njudgment as to his capabilities. Elliott did not contact Richter because Grouse\xe2\x80\x99s\napplication requested that he not be contacted. Because Elliott was unable to supply a favorable reference for Grouse, Shoberg hired another person to fill the position.\n[\xc2\xb66] On December 15, 1975 Grouse called Group Health and reported that he\nwas free to begin work. Elliott informed Grouse that someone else had been hired.\nGrouse complained to the director of Group Health who apologized but took no\nother action. Grouse experienced difficulty regaining full time employment and\nsuffered wage loss as a result. He commenced this suit to recover damages; the\ntrial judge found that he had not stated an actionable claim.\n[\xc2\xb67] In our view the principle of contract law applicable here is promissory estoppel. Its effect is to imply a contract in law where none exists in fact. Del Hayes\n& Sons, Inc. v. Mitchell, 304 Minn. 275, 230 N.W.2d 588 (1975). On these facts\nno contract exists because due to the bilateral power of termination neither party\nis committed to performance and the promises are, therefore, illusory. The elements of promissory estoppel are stated in Restatement of Contracts \xc2\xa7 90 (1932):\nA promise which the promisor should reasonably expect to induce action\nor forbearance * * * * on the part of the promisee and which does induce\nsuch action or forbearance is binding if injustice can be avoided only by\nenforcement of the promise.\nGroup Health knew that to accept its offer Grouse would have to resign his employment at Richter Drug. Grouse promptly gave notice to Richter Drug and informed Group Health that he had done so when specifically asked by Elliott. Under these circumstances it would be unjust not to hold Group Health to its promise.\n[\xc2\xb68] The parties focus their arguments on whether an employment contract\nwhich is terminable at will can give rise to an action for damages if anticipatorily\nrepudiated. * * * *. Group Health contends that recognition of a cause of action\non these facts would result in the anomalous rule that an employee who is told not\nto report to work the day before he is scheduled to begin has a remedy while an\nemployee who is discharged after the first day does not. We cannot agree since\nunder appropriate circumstances we believe section 90 would apply even after\nemployment has begun.\n122\n\n\x0c[\xc2\xb69] When a promise is enforced pursuant to section 90 \xe2\x80\x9cthe remedy granted\nfor breach may be limited as justice requires.\xe2\x80\x9d Relief may be limited to damages\nmeasured by the promisee\xe2\x80\x99s reliance.\n[\xc2\xb610] The conclusion we reach does not imply that an employer will be liable\nwhenever he discharges an employee whose term of employment is at will. What\nwe do hold is that under the facts of this case the appellant had a right to assume\nhe would be given a good faith opportunity to perform his duties to the satisfaction of respondent once he was on the job. He was not only denied that opportunity but resigned the position he already held in reliance on the firm offer which respondent tendered him. Since, as respondent points out, the prospective employment might have been terminated at any time, the measure of damages is not so\nmuch what he would have earned from respondent as what he lost in quitting the\njob he held and in declining at least one other offer of employment elsewhere.\n[\xc2\xb611] Reversed and remanded for a new trial on the issue of damages.\nQuestions:\n1. What would have been Grouse\xe2\x80\x99s expectation damages?\n2. What would have been Grouse\xe2\x80\x99s reliance damages?\n\nThey offered a job at their shop,\nBut soon after the offer was dropped;\nGrouse yelled, \xe2\x80\x9cBut I\xe2\x80\x99ve quit,\nAnd you\xe2\x80\x99ve hurt me a bit\xe2\x80\x9d;\nThe employer was therefore estopped.\n\xe2\x80\x94Stacey Severovich, STCL Class of 2013\n\nFrank LEONARDI v. CITY OF HOLLYWOOD (1998)\nDistrict Court of Appeal of Florida, Fourth District\n715 So.2d 1007\nPOLEN, Judge.\n[\xc2\xb61] Frank Leonardi, who sued the City of Hollywood (\xe2\x80\x9cCity\xe2\x80\x9d) for terminating\nhis prospective employment with the City, appeals from that portion of an amended final judgment which held that the at-will employment doctrine barred his\nclaim for lost wages. The City cross-appeals from that portion of the judgment\n\n123\n\n\x0cwhich awarded Leonardi $10 in nominal damages. We affirm Leonardi\xe2\x80\x99s appeal\nand reverse on the city\xe2\x80\x99s cross-appeal.\n[\xc2\xb62] On October 26, 1995, City orally offered Leonardi a position as assistant\nto the city manager at an annual salary of $47,570 to begin on November 13, 1995.\nCity confirmed the offer via a letter, dated October 30, 1995. The offer did not\nstate the period of employment. As a result of the offer, Leonardi quit his thencurrent employment the morning of November 3, 1995 and, at a lunch meeting\nwith the city manager on that same date, gave written confirmation of his acceptance of the offer. At that meeting, however, the city manager informed\nLeonardi that he could not offer him the job any longer. Thereafter, Leonardi was\nunable to regain his prior employment.\n[\xc2\xb63] Subsequently, Leonardi sued City on the theory of promissory estoppel.\nArguing that City should have reasonably expected that its offer of at-will employment would induce him to quit his then existing at-will employment, * he\nsought lost wages.\n[\xc2\xb64] The trial court found that Leonardi relied on City\xe2\x80\x99s promise of employment to his detriment. It determined that the reasonable amount of his damages as\na result of City\xe2\x80\x99s actions was $90,400, representing his lost wages at his former\njob from November 13, 1995, the date his employment with City was supposed to\nbegin, through the date of trial. Nevertheless, it held that the employment at-will\ndoctrine barred an award of such damages. It, thus, denied awarding Leonardi his\nlost wages, but did award him $10 as nominal damages, and $1,466.45 as taxable\ncosts.\n[\xc2\xb65] The basic elements of promissory estoppel are set forth in the Restatement\n(Second) of Contracts, Section 90 (1979), which states\n(1) 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\ndoes induce such action or forbearance is binding if injustice can be\navoided only by enforcement of the promise.\nThe character of the reliance protected is explained as follows:\nThe promisor is affected only by reliance which he does or should foresee,\nand enforcement must be necessary to avoid injustice. Satisfaction of the\nlatter requirement may depend on the reasonableness of the promisee\xe2\x80\x99s reliance, on its definite and substantial character in relation to the remedy\nsought, on the formality with which the promise is made, on the extent to\nwhich the evidentiary, cautionary, deterrent and channeling functions of\nform are met by the commercial setting or otherwise, and on the extent to\nBoth parties concede that Leonardi\xe2\x80\x99s prior and prospective employment were at-will. The general\nrule of at-will employment is that an employee can be discharged at any time, as long as he is not\nterminated for a reason prohibited by law, such as retaliation or unlawful discrimination. Davidson\nv. Iona-McGregor Fire Protection and Rescue Dist., 674 So.2d 858, 861 (Fla. 2d DCA 1996).\n*\n\n124\n\n\x0cwhich such other policies as the enforcement of bargains and the prevention of unjust enrichment are relevant.\nId. (emphasis added) (cited in W.R. Grace and Co. v. Geodata Services, Inc., 547\nSo.2d 919, 924 (Fla.1989)).\n[\xc2\xb66] While the courts of this state have applied promissory estoppel in several\ndifferent contexts, we have not uncovered any Florida decision which either expressly accepted or rejected the doctrine in circumstances akin to the facts of this\ncase. Although Leonardi, citing Golden Complete Holdings, Inc., 818 F. Supp.\n1495 (M.D. Fla. 1993), argues that this court should recognize a cause of action\nfor promissory estoppel in the employment at-will context, Golden did not address nor concern whether a cause of action for promissory estoppel is actionable\neither generally in the employment context or specifically under facts similar to\nthose in this case. Thus, we do not believe that Golden is controlling.\n[\xc2\xb67] Accordingly, we focus our attention on cases from other jurisdictions, with\nfacts similar to this case. Many of these cases have held that an employee may\nbase a promissory estoppel claim on a promise of at-will employment. In Grouse v.\nGroup Health Plan, Inc., 306 N.W.2d 114 (Minn. 1981), for example, the plaintiff\nresigned from his employment in reliance on the defendant\xe2\x80\x99s at-will employment\noffer. As in the instant case, the defendant then revoked the offer after the plaintiff\nhad accepted it but before he began to work for the defendant. The plaintiff filed\nsuit and the trial court dismissed the action for failure to state a claim. On appeal,\nthe state supreme court reversed and found that promissory estoppel applied:\n[W]e ... hold ... that under the facts of this case the appellant [plaintiff] had\na right to assume he would be given a good faith opportunity to perform\nhis duties to the satisfaction of respondent [the defendant] once he was on\nthe job. He was not only denied that opportunity but resigned the position\nhe already held in reliance on the firm offer which respondent tendered\nhim.\nId.; accord Bower v. AT & T Technologies, Inc., 852 F.2d 361 (8th Cir. 1988);\nRavelo by Ravelo v. Hawaii County, 66 Haw. 194, 658 P.2d 883 (1983).\n[\xc2\xb68] Other courts, however, have reached a contrary result under similar circumstances. For example, in White v. Roche Biomedical Laboratories, Inc., 807 F.\nSupp. 1212 (D.S.C. 1992), aff\xe2\x80\x99d, 998 F.2d 1011 (4th Cir. 1993), the defendant had\nrevoked an offer of at-will employment after the plaintiff had relied on the offer\nby quitting his job. He subsequently sued for damages based on promissory estoppel, but the trial court granted summary judgment on his claim. On appeal, the\ndistrict court affirmed, holding that the doctrine of promissory estoppel did not\napply to his situation:\nThe Court bases this conclusion on the fact that a promise of employment\nfor an indefinite duration with no restrictions on the employer\xe2\x80\x99s right to\nterminate is illusory since an employer who promises at-will employment\nhas the right to renege on that promise at any time for any reason. \xe2\x80\x9cA determining factor in deciding whether to enforce a promise under the theory\n125\n\n\x0cof promissory estoppel is the reasonableness of the promisee\xe2\x80\x99s reliance.\xe2\x80\x9d\nThe Court finds that reliance on a promise consisting solely of at-will employment is unreasonable as a matter of law since such a promise creates\nno enforceable rights in favor of the employee other than the right to collect wages accrued for work performed. Therefore, because plaintiff cannot establish an essential element of his cause of action for promissory estoppel, the Court will grant summary judgment in favor of defendant on\nthis claim.\nId. at 1219-20 (internal citations omitted); accord Heinritz v. Lawrence University,\n194 Wis.2d 606, 535 N.W.2d 81 (1995).\n[\xc2\xb69] Despite this case law, we need not look any further than \xc2\xa7 90 of the Restatement (Second) of Contracts to conclude that Leonardi\xe2\x80\x99s reliance on City\xe2\x80\x99s\noffer was unreasonable. Had City allowed Leonardi to begin working, it could\nhave terminated his employment immediately thereafter, before he accrued any\nwages. Similarly, had he not quit his prior position, his employer also could have\nterminated him at will. In either scenario, we do not believe the doctrine of promissory estoppel would allow him to recover his lost wages.\n[\xc2\xb610] Accordingly, we affirm the trial court\xe2\x80\x99s finding that Leonardi should not\nbe allowed to recover the damages he sought. We reverse, however, the award of\nnominal damages and costs. Without any actionable claim, there was no basis for\nthe trial court to award any damages or costs to Leonardi. In making such an\naward, we conclude the trial court erred.\nAFFIRMED in part; REVERSED in part and REMANDED to the trial court to\nenter judgment in favor of City.\nDELL and GUNTHER, JJ., concur.\nQuestions:\n1. I have given you Leonardi only so that we can talk about the policy differences\nbetween this case and Grouse. What policies might lead you to choose the result\nreached in Leonardi?\n2. What policies might lead you to choose the result reached in Grouse?\n\n126\n\n\x0cB. Unjust Enrichment\nWHORWOOD v. GYBBONS (1587)\nQueen\xe2\x80\x99s Bench\nGouldsborough 48\n* * * * And the opinion of the whole Court * * * * was, that insomuch as the\n[promise] was made by [Gybbons,] by whom the debt is due, that it is a good consideration, and that it is a common course in action upon the case against him by\nwhom the debt is due, to [plead] without any words in consideration. * * * *\nNote: What? No consideration?! As you might suspect, then, the key to determining whether the Whorwood line of cases would apply is answering the question\nwhat transaction raised a debt.\n\nIRELAND v. HIGGINS (1589)\nQueen\xe2\x80\x99s Bench\nCro. El. 125\nAssumpsit. The plaintiff declareth, that whereas he was possessed of a greyhound,\nwhich came to the defendant\xe2\x80\x99s hands by [his finding it], and that [the defendant]\npromised to deliver it upon request, the defendant demurred upon the declaration.\n\xe2\x80\x94Lee [for the defendant] argued the action did not lie: for being out of the plaintiff\xe2\x80\x99s possession, he had no property in it, [it] being ferae naturae * * * *. \xe2\x80\x94\nTanfield contra. [Tanfield] agreed that if it were ferae naturae there was no consideration of the promise, but a dog is a thing that is tame by industry of man, and\nthe law regardeth it as any other beast, and [it] is of as good use: and there are\nfour kinds of dogs which the law regards, viz. a mastiff, a hound, which comprehends a greyhound, a spaniel and tumbler * * * *. * * * * And it was adjudged for\nthe plaintiff.\nQuestions:\n1. What does ferae naturae mean? (Unless you speak Latin, you will have to find\na Latin or a legal dictionary and look up the phrase ferae naturae to understand\nthis case. You should know what it means when you come to class.)\n2. What is the consideration in this case?\n\n127\n\n\x0cEDMUNDS v. BARRE (1573)\nQueen\xe2\x80\x99s Bench\nDalison 104\n[\xc2\xb61] William Edwards brought an action on the case [in assumpsit] against\nEdmund Burre [sic] & Margaret, his wife, administratrix of the goods and chattels\nof John Sidwell, her late husband, and declared that the testator [Sidwell], in consideration that the plaintiff [Edwards] lent to the testator 40s., the said testator undertook to pay to him [Edwards] 40s. * * * * [At trial,] the plaintiff gave in evidence that he lent the testator 40s. Wray, Justice [of the Queen\xe2\x80\x99s Bench], said to\nthe jury: if it be so [that] the plaintiff lent the said sum, then you ought to find for\nthe plaintiff, because the debt is an undertaking in law.\n[\xc2\xb62] But note that it was said that this is by reason of the custom of the Queen\xe2\x80\x99s\nBench, because in the Common Pleas he would have to prove the undertaking,\nand it is not sufficient to prove the debt alone, because for the debt he should have\nan action for debt and not an action on the case, because the common law will not\nsuffer a man to have an action on the case where he could have another remedy,\nand also, for * * * * the debtor if he [the creditor] was without [a sealed writing]\ncould [wage] his law, and by an action on the case would be prevented from doing\nso, which is [not right]. And therefore in the Common Pleas he must prove the\nundertaking.\nQuestions:\n1. What facts gave rise to Sidwell\xe2\x80\x99s indebtedness to Edwards?\n2. What does it mean to wage law? If you don\xe2\x80\x99t know, go back to Chapter 1 and\nread again the first essay about the history of consideration.\n\nNote on the Ancient History of Unjust Enrichment\nEdmunds is a well-known citation in the historical record of a marvelous feud between two English courts, the Common Pleas and the Queen\xe2\x80\x99s Bench. (The first\nsign of the feud is from a report by Justice Dyer in 1557, proof that the feud continued for at least 48 years, until 1605.) Put briefly, the Common Pleas had traditionally retained sole jurisdiction over debt actions and been managed by very\nconservative justices. Early in the 16th century the (then) King\xe2\x80\x99s Bench began to\ngrant relief in assumpsit on facts that would also have given rise to an action in\ndebt. Assumpsit had traditionally been a Queen\xe2\x80\x99s Bench action, though it could be\nbrought in the Common Pleas, too. Wager of law was not available to defendants\nin assumpsit, so plaintiffs began to shift some debt litigation from the Common\nPleas to the Queen\xe2\x80\x99s Bench, and from debt to assumpsit. The Common Pleas\njudges saw that if all litigation for debts could be brought in assumpsit, the debt\nlitigation would dry up and assumpsit litigation would take over. No one is sure\n128\n\n\x0cjust why the Common Pleas opposed this result, but conservatism and a feeling\nthat wager of law worked well in actual practice probably had something to do\nwith it. By having eleven oath-helpers swear with him, a reputable (or wealthy)\nperson could avoid suits brought by liars and thieves (or by anyone else, for that\nmatter). If wager of law was unavailable, alleged debtors would all have to appear\nbefore a jury, something aristocrats would, I suspect, rather not have done. The\nCommon Pleas supported those who did not want to have a jury examine their\ndebts. So when the plaintiffs brought what would otherwise be a debt case in assumpsit, the Common Pleas insisted that plaintiffs allege that, subsequent to the\ntransaction that created the debt, the debtor also promised to pay the debt. At least\nby pointing to this extra promise, the Common Pleas could justify taking away\nfrom the defendant the right to wager of law. The Queen\xe2\x80\x99s Bench, on the other\nhand, saw nothing wrong with replacing debt with assumpsit actions. Though the\nQueen\xe2\x80\x99s Bench required that an additional promise be pleaded, they held that\npleading the extra promise proved it conclusively, so that no defendant could\nchallenge the statement. This move ensured that all debt cases could be brought in\nassumpsit, whether or not any extra promise was in fact made. The allegation of\nan extra promise in the plaintiff\xe2\x80\x99s pleading could be a mere fiction, and no\nQueen\xe2\x80\x99s Bench justice would care.\nFor a long time, the Common Pleas could do nothing about the Queen\xe2\x80\x99s Bench\npractice. Defendants could appeal a Queen\xe2\x80\x99s Bench judgment only to Parliament,\nwhich was too expensive, and these cases were probably not worth Parliament\xe2\x80\x99s\ntime. Then in 1585 Queen Elizabeth signed a law allowing the Common Pleas and\nthe Exchequer to sit together as the Exchequer Chamber to review appeals from\nQueen\xe2\x80\x99s Bench judgments. There were more Common Pleas judges than Exchequer judges, so the Common Pleas views held sway in the new court. The Exchequer Chamber, in order to do away with the Queen\xe2\x80\x99s Bench practice, reversed the\nCommon Pleas\xe2\x80\x99 own prior practice of allowing assumpsit in debt cases when a\nsubsequent promise was alleged and also proved, and held instead that no debt\ncases at all could be brought in assumpsit. This position continued in the Exchequer Chamber until all the judges on the Common Pleas who held the conservative\nview either died, were replaced, or changed their minds (probably only one\nchanged his mind). By 1605 all the judges had come around to the (now) King\xe2\x80\x99s\nBench view. Because the King\xe2\x80\x99s Bench view triumphed, the class of cases in assumpsit that escaped consideration\xe2\x80\x99s reach and also escaped the requirement of an\nactual promise increased and expanded in their own way, until they became today\xe2\x80\x99s unjust enrichment cases, in which neither promise nor consideration is required to be alleged. In the sixteenth century, only a debt needed to be pleaded\nand proved. We do not call it debt today, but the thought is similar, as you\xe2\x80\x99ll learn\nfrom the next few cases in this section.\nSo you can see that we have a class of cases in which breach of contract is remedied but in which neither promise nor consideration need be pleaded or proved,\nand that this came about as a result of a jurisdictional squabble between courts\nand one court\xe2\x80\x99s preference for a jury trial over wager of law.\n129\n\n\x0cGIKAS v. NICHOLIS (1950)\nNew Hampshire Supreme Court\n96 N.H. 177, 71 A.2d 785\nKENISON, J.\n[\xc2\xb61] The main issue in this appeal is whether the donor of an engagement ring\nmay recover it from the donee who terminates the engagement. By the great\nweight of authority recovery is allowed. Anno. 92 A. L. R. 604; Beberman v.\nSegle, 69 A.2d 587 (N. J. 1949). The basis for recovery is quasi contractual, as it\nis considered that it is unjust for a donee to retain the fruit of a broken promise.\nRestatement, Restitution, s. 58, comment c.\n[\xc2\xb62] It is not necessary and in the natural course of events it would be unusual\nfor the donor to give the engagement ring upon the expressed condition that marriage was to ensue. Such a condition may be implied in fact or imposed by law in\norder to prevent unjust enrichment. 29 Cornell L. Q. 401. In this case the defendant did not testify but there is evidence from the plaintiff\xe2\x80\x99s testimony from which\nit can be found that the engagement ring was a token of the expected marriage and\nwas given only as such.\n[\xc2\xb63] R. L., c. 385, s. 11 reads as follows: \xe2\x80\x9cBREACH OF CONTRACT TO\nMARRY. Breach of contract to marry shall not constitute an injury or wrong recognized by law, and no action, suit or proceeding shall be maintained therefor.\xe2\x80\x9d\nThis statute although copied from the Massachusetts act was passed in 1941\n(Laws 1941, c. 150) before any interpretation of the Massachusetts statute had\nbeen made. Consequently the decision in Thibault v. Lelumiere, 318 Mass. 72 is\nnot necessarily binding here. The same is equally true of the broader New York\nstatute which was construed in Andie v. Kaplan, 263 App. Div. 884 affirmed without opinion Per Curiam, 288 N.Y. 68 5. It is the theory of these cases that the socalled heart-balm statutes not only bar actions for breach of marriage contracts but\nany other proceeding which directly or indirectly arises out of the breach. Under\nthat view gifts in contemplation of marriage may not be recovered even though\nunjust enrichment may result to the donee. The results of these cases have been\nalmost uniformly criticized as being unnecessary and undesirable. 1947 Annual\nSurvey of American Law 845; N. Y. Law Revision Commission, Report, Recommendations and Studies (1947) pp. 233-247.\n[\xc2\xb64] It was not the intention of the New Hampshire Legislature in outlawing\nbreach of promise suits to permit the unjust enrichment of persons to whom property had been transferred while the parties enjoyed a confidential relationship. To\nso construe the statute would be to permit the unjust enrichment which the statute\nis designed to prevent. Apparently for this reason New Jersey which has a similar\nstatute to ours has refused to follow the Massachusetts and New York decisions.\nMate v. Abraham, 62 A.2d 754 (N. J. 1948). We prefer the view advanced by the\nRestatement, Restitution, s. 58 which allows the recovery of an engagement ring\n130\n\n\x0cwhere the engagement is terminated by the donee. There is nothing in the legislative history of our statute which indicates that any other result was contemplated.\n****\n\nLOWE v. QUINN (1971)\nNew York Court of Appeals\n27 N.Y.2d 397\nChief Judge FULD.\n[\xc2\xb61] The plaintiff, a married man, sues for the return of a diamond \xe2\x80\x9cengagement\xe2\x80\x9d ring which he gave the defendant in October of 1968 upon her promise to\nwed him when and if he became free; he had been living apart from his wife for\nseveral years and they contemplated a divorce. About a month after receiving the\nring, the defendant told the plaintiff that she had \xe2\x80\x9csecond thoughts\xe2\x80\x9d about the matter and had decided against getting married. When he requested the return of the\nring, she suggested that he \xe2\x80\x9ctalk to [her] lawyer\xe2\x80\x9d. Convinced of the futility of further discussion, he brought this action to recover the ring or, in the alternative, the\nsum of $60,000, its asserted value.\n[\xc2\xb62] Following a motion by the defendant for summary judgment dismissing\nthe complaint and a cross motion by the plaintiff to amend his complaint \xe2\x80\x9cto include causes of action for fraud, unjust enrichment and monies had and received,\xe2\x80\x9d\nthe court at Special Term denied the defendant\xe2\x80\x99s application and granted the plaintiff\xe2\x80\x99s. The Appellate Division reversed and granted the defendant\xe2\x80\x99s motion, directing summary judgment against the plaintiff.\n[\xc2\xb63] An engagement ring \xe2\x80\x9cis in the nature of a pledge for the contract of marriage\xe2\x80\x9d * * * * and, under the common law, it was settled\xe2\x80\x94at least in a case where\nno impediment existed to a marriage\xe2\x80\x94that, if the recipient broke the \xe2\x80\x9cengagement,\xe2\x80\x9d she was required, upon demand, to return the ring on the theory that it constituted a conditional gift. * * * * However, a different result is compelled where,\nas here, one of the parties is married. An agreement to marry under such circumstances is void as against public policy * * * *, and it is not saved or rendered valid by the fact that the married individual contemplated divorce and that the\nagreement was conditioned on procurement of the divorce. * * * * Based on such\nreasoning, the few courts which have had occasion to consider the question have\nheld that a plaintiff may not recover the engagement ring or any other property he\nmay have given the woman. * * * * Thus, in Armitage v. Hogan (25 Wn.2d 672,\nsupra), which is quite similar to the present case, the high court of the State of\nWashington declared (pp. 683, 685):\n\xe2\x80\x9c* * * if it be admitted for the sake of argument that [defendant] respondent did agree to marry [plaintiff] appellant, and that the ring was purchased\n* * * in consideration of such promise, such agreement would be illegal\n131\n\n\x0cand void, as appellant was, at that time, and in fact has at all times since\nbeen, a married man. [p. 683]\n***\n\xe2\x80\x9cRegardless of the fact that appellant states this action is based on fraud\nand deceit, we are of the opinion that, under the facts in the case, appellant\xe2\x80\x99s claimed cause of action is based upon an illegal and an immoral\ntransaction, and that this court should not lend its aid in furthering such\ntransaction. [p. 685]\xe2\x80\x9d.\n[\xc2\xb64] There are cases, it is true, which refuse to apply the doctrine of \xe2\x80\x9cunclean\nhands\xe2\x80\x9d\xe2\x80\x94invoked by the courts in the cited decisions\xe2\x80\x94when the conduct relied\nupon is not \xe2\x80\x9cdirectly related to the subject matter in litigation\xe2\x80\x9d * * * * but it is difficult to see how the delivery of the ring or the action to procure its return may be\ndeemed unrelated to the contract to marry. There can be no possible doubt that the\ngift of the engagement ring was part and parcel of, directly related to, the agreement to wed.\n[\xc2\xb65] Nor does section 80-b of the Civil Rights Law create a cause of action.\nThat provision, enacted in 1965, recites in part that \xe2\x80\x9cNothing in this article contained shall be construed to bar a right of action for the recovery of a chattel\n* * * * when the sole consideration for the transfer of the chattel * * * * was a\ncontemplated marriage which has not occurred\xe2\x80\x9d. That section must, however, be\nread in connection with section 80-a which effected the abolition of actions for\nbreach of promise to marry. Section 80-b was added to overcome decisions such\nas Josephson v. Dry Dock Sav. Inst. (292 N.Y. 666), in order to make it clear that a\nman not under any impediment to marry was entitled to the return of articles\nwhich he gave the woman, even though breach of promise suits had been abolished as against public policy. (See, e.g., Goldstein v. Rosenthal, 56 Misc.2d 311,\n314, supra.) This statute, however, does not alter the settled principle denying a\nright of recovery where either of the parties to the proposed marriage is already\nmarried.\nThe order appealed from should be affirmed, with costs.\n[This was a 4-3 decision. The dissent is omitted.]\n\nHESS v. JOHNSTON (2007)\nUtah Court of Appeals\n163 P.3d 747, 2007 WL 1775186\n[\xc2\xb6 2] Hess and Johnston started dating in mid-April 2004 and within three\nmonths, they decided to marry. Johnston found an engagement ring she liked, and\nHess commissioned a jeweler to craft one like it. The couple planned to marry\n\n132\n\n\x0csometime in November 2004, but mutually decided that they would take their\ntime in planning the wedding to ensure their finances were in order.\n[\xc2\xb6 3] About this time, Johnston told Hess that, during their engagement, she\nwanted to go on some trips and wanted Hess to have a vasectomy. Hess complied\nwith these requests. Hess began by paying for the couple to take a seven-day\ncruise to Alaska at the end of July. * * * * And in September, after Johnston expressed an interest in traveling to France to introduce Hess to friends she had met\nwhile living there years earlier, Hess paid for the couple to travel to France for\nthree weeks. Before leaving on the trip, Hess paid the balance on the custom engagement ring so that he could present Johnston with it while in France. After returning from France, Hess and Johnston twice rescheduled the wedding, first,\nfrom November 2004 to May 5, 2005, and then to July 9, 2005. In October 2004,\nJohnston also asked Hess to help purchase a vehicle for her son. Hess contributed\n$2400 toward the automobile.\n[\xc2\xb6 4] In late April 2005, without any forewarning or explanation, Johnston returned the engagement ring to Hess and informed him that she would not be his\nwife. Hess attempted, numerous times, to obtain an explanation from Johnston,\nbut she refused to offer any excuse for breaking off the engagement.\nB.\n\nUnjust Enrichment\n\n[\xc2\xb6 20] Hess\xe2\x80\x99s complaint does not allege facts sufficient to sustain a claim for restitution under a theory of unjust enrichment. To state a claim for unjust enrichment,\na plaintiff must allege facts supporting three elements: \xe2\x80\x9c(1) a benefit conferred on\none person by another; (2) an appreciation or knowledge by the conferee of the\nbenefit; and (3) the acceptance or retention of the benefit under such circumstances as to make it inequitable for the conferee to retain the benefit without payment\nof its value.\xe2\x80\x9d Jeffs v. Stubbs, 970 P.2d 1234, 1248 (Utah 1998) (quotations omitted). Although Hess has pleaded facts that support the first two of these elements,\nhis complaint fails to allege facts that can support the conclusion that it would be\ninequitable for Johnston to retain the benefits of the gifts without payment.\n[\xc2\xb6 21] Unjust enrichment occurs when a person has and retains money or benefits\nthat in justice and equity belong to another; however, \xe2\x80\x9c[t]he fact that a person\nbenefits another is not itself sufficient to require the other to make restitution.\xe2\x80\x9d\nFowler v. Taylor, 554 P.2d 205, 209 (Utah 1976). Money or benefits that have\nbeen \xe2\x80\x9cofficiously or gratuitously furnished are not recoverable.\xe2\x80\x9d Jeffs, 970 P.2d\nat 1248 (quotation omitted). A person acts gratuitously when, at the time he conferred the benefit, \xe2\x80\x9cthere was no expectation of a return benefit, compensation, or\nconsideration.\xe2\x80\x9d Id. at 1246. As previously discussed, Hess\xe2\x80\x99s complaint fails to allege that, at the time the vacations * * * * and money for the vehicle were given,\nhe intended anything other than an unconditional gift. \xe2\x80\x9c[E]nrichment of the donee\nis the intended purpose of a gift, [therefore,] there is nothing \xe2\x80\x98unjust\xe2\x80\x99 about allowing [the donee] to retain the gifts she received, in the absence of fraud, overreach133\n\n\x0cing or some other circumstance.\xe2\x80\x9d 6 Cooper, 155 Ohio App.3d 218, 800 N.E.2d\n372, at \xc2\xb6 15. Thus, the benefits were gratuitously bestowed on Johnston, and the\ntrial court properly dismissed Hess\xe2\x80\x99s unjust enrichment claim.\n[Hess appealed to the Utah Supreme Court, which ruled in one word: \xe2\x80\x9cDenied.\xe2\x80\x9d]\nQuestions:\n1. Would Edmunds of Edmunds v. Barre recover from Barre under this theory?\n2. Would Katie Scothorn of Ricketts v. Scothorn recover from her grandfather\xe2\x80\x99s\nestate under this theory?\n3. Would Nicholas of Nicholas v. Raynbred recover under this theory?\n4. William Murray (commonly known as Lord Mansfield), Chief Justice of the\nKing\xe2\x80\x99s Bench from 1756-88, said this of the cause of action we are considering:\nThis kind of equitable action, to recover back money, which ought not in\njustice to be kept, is very beneficial, and therefore much encouraged. It\nlies only for money which ex aequo et bono, the defendant ought to refund . . . . [I]t lies for money paid by mistake, or upon a consideration\nwhich happens to fail, or for money got through . . . extortion, or oppression, or an undue advantage taken of the plaintiff\xe2\x80\x99s situation, contrary to\nlaws made for the protection of persons under those circumstances. In one\nword, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice to refund\nthe money.\nMoses v. Macferlan, 97 Eng. Rep. 676, 680-81 (K.B. 1760). It wasn\xe2\x80\x99t \xe2\x80\x9cone word\xe2\x80\x9d\n(it was twenty-one), but the rest of Mansfield\xe2\x80\x99s statement is accurate.\n\nPROBLEM 17. Suppose you own a home in another city (say, El Paso) and one\nday you receive a phone call. The caller says the following, then hangs up: \xe2\x80\x9cHi,\nI\xe2\x80\x99m Bob the painter. Your house in El Paso is an eyesore! I\xe2\x80\x99m going to paint it and\nsend you a bill. Just wanted to let you know! Bye!\xe2\x80\x9d A week later you get a bill\nfrom Bob. Must you pay it? (The rule in cases like this has been called the \xe2\x80\x9cofficious intermeddler\xe2\x80\x9d rule. What does officious mean?)\n\n134\n\n\x0cCOTNAM v. WISDOM ET AL. (1907)\nSupreme Court of Arkansas\n104 S.W. 164\n[\xc2\xb61]\n\nAppeal from Circuit Court, Pulaski County; R. J. Lea, Judge.\n\n[\xc2\xb62] Action by F. L. Wisdom and another against T. T. Cotnam, administrator\nof A. M. Harrison, deceased, for services rendered by plaintiffs as surgeons to defendant\xe2\x80\x99s intestate. Judgment for plaintiffs. Defendant appeals. Reversed and remanded.\n[\xc2\xb63] Instructions 1 and 2, given at the instance of plaintiffs, are as follows: (1)\nIf you find from the evidence that plaintiffs rendered professional services as physicians and surgeons to the deceased, A. M. Harrison, in a sudden emergency following the deceased\xe2\x80\x99s injury in a street car wreck, in an endeavor to save his life,\nthen you are instructed that plaintiffs are entitled to recover from the estate of the\nsaid A. M. Harrison such sum as you may find from the evidence is a reasonable\ncompensation for the services rendered. (2) The character and importance of the\noperation, the responsibility resting upon the surgeon performing the operation,\nhis experience and professional training, and the ability to pay of the person operated upon, are elements to be considered by you in determining what is a reasonable charge for the services performed by plaintiffs in the particular case.\n* * * * HILL, C. J. (after stating the facts). * * * *\n[\xc2\xb64] The first question is as to the correctness of this instruction. As indicated\ntherein the facts are that Mr. Harrison, appellant\xe2\x80\x99s intestate, was thrown from a\nstreet car, receiving serious injuries which rendered him unconscious, and while\nin that condition the appellees were notified of the accident and summoned to his\nassistance by some spectator, and performed a difficult operation in an effort to\nsave his life, but they were unsuccessful, and he died without regaining consciousness. The appellant says: \xe2\x80\x9cHarrison was never conscious after his head\nstruck the pavement. He did not and could not, expressly or impliedly, assent to\nthe action of the appellees. He was without knowledge or will power. However\nmerciful or benevolent may have been the intention of the appellees, a new rule of\nlaw, of contract by implication of law, will have to be established by this court in\norder to sustain the recovery.\xe2\x80\x9d Appellant is right in saying that the recovery must\nbe sustained by a contract by implication of law, but is not right in saying that it is\na new rule of law, for such contracts are almost as old as the English system of\njurisprudence. They are usually called \xe2\x80\x9cimplied contracts.\xe2\x80\x9d More properly they\nshould be called \xe2\x80\x9cquasi contracts\xe2\x80\x9d or \xe2\x80\x9cconstructive contracts.\xe2\x80\x9d See 1 Page on Contracts, \xc2\xa7 14; also 2 Page on Contracts, \xc2\xa7 771.\n[\xc2\xb65] The following excerpts from Sceva v. True, 53 N. H. 627, are peculiarly\napplicable here:\n135\n\n\x0cWe regard it as well settled by the cases referred to in the briefs of counsel,\nmany of which have been commented on at length by Mr. Shirley for the\ndefendant, that an insane person, an idiot, or a person utterly bereft of all\nsense and reason by the sudden stroke of an accident or disease may be\nheld liable, in assumpsit, for necessaries furnished to him in good faith\nwhile in that unfortunate and helpless condition. And the reasons upon\nwhich this rest are too broad, as well as too sensible and humane, to be\noverborne by any deductions which a refined logic may make from the\ncircumstances that in such cases there can be no contract or promise, in\nfact, no meeting of the minds of the parties. The cases put it on the ground\nof an implied contract; and by this is not meant, as the defendant\xe2\x80\x99s counsel\nseems to suppose, an actual contract\xe2\x80\x94that is, an actual meeting of the\nminds of the parties, an actual, mutual understanding, to be inferred from\nlanguage, acts, and circumstances by the jury\xe2\x80\x94but a contract and promise,\nsaid to be implied by the law, where, in point of fact, there was no contract,\nno mutual understanding, and so no promise. The defendant\xe2\x80\x99s counsel says\nit is usurpation for the court to hold, as a matter of law, that there is a contract and a promise, when all the evidence in the case shows that there was\nnot a contract, nor the semblance of one. It is doubtless a legal fiction, invented and used for the sake of the remedy. If it was originally usurpation,\ncertainly it has now become very inveterate, and firmly fixed in the body\nof the law. Illustrations might be multiplied, but enough has been said to\nshow that when a contract or promise implied by law is spoken of, a very\ndifferent thing is meant from a contract in fact, whether express or tacit.\nThe evidence of an actual contract is generally to be found either in some\nwriting made by the parties, or in verbal communications which passed\nbetween them, or in their acts and conduct considered in the light of the\ncircumstances of each particular case. A contract implied by law, on the\ncontrary, rests upon no evidence. It has no actual existence. It is simply a\nmythical creation of the law. The law says it shall be taken that there was a\npromise, when in point of fact, there was none. Of course this is not good\nlogic, for the obvious and sufficient reason that it is not true. It is a legal\nfiction, resting wholly for its support on a plain legal obligation, and a\nplain legal right. If it were true, it would not be a fiction. There is a class\nof legal rights, with their correlative legal duties, analogous to the obligations quasi ex contractu of the civil law, which seem to be in the region between contracts on the one hand, and torts on the other, and to call for the\napplication of a remedy not strictly furnished either by actions ex contractu or actions ex delicto. The common law supplies no action of duty, as it\ndoes of assumpsit and trespass; and hence the somewhat awkward contrivance of this fiction to apply the remedy of assumpsit where there is no true\ncontract and no promise to support it.\n[\xc2\xb66] This subject is fully discussed in Beach on the Modern Law of Contracts,\n639 et seq., and 2 Page on Contracts, 771 et seq. One phase in the law of implied\n136\n\n\x0ccontracts was considered in the case of Lewis v. Lewis, 75 Ark. 191, 87 S. W. 134.\nIn its practical application it sustains recovery for physicians and nurses who render services for infants, insane persons, and drunkards. 2 Page on Contracts, \xc2\xa7\xc2\xa7\n867, 897, 906. And services rendered by physicians to persons unconscious or\nhelpless by reason of injury or sickness are in the same situation as those rendered\nto persons incapable of contracting, such as the classes above described. Raoul v.\nNewman, 59 Ga. 408; Meyer v. K. of P., 70 N. E. 111, 178 N. Y. 63, 64 L. R. A.\n839. The court was therefore right in giving the instruction in question.\nJudgment is reversed [for reasons not discussed in the excerpt here], and cause\nremanded. [The concurring opinion of Battle and Wood JJ., is omitted]\nQuestions:\n1. What policy supports requiring folks such as Mr. Harrison to pay medical bills\nthey never consented to pay?\n2. Why should this case be limited to medically trained individuals who try to\nhelp (and the case is so limited)?\n3. Doesn\xe2\x80\x99t this case violate Mr. Harrison\xe2\x80\x99s right to autonomy?\n4. What should be the measure of damages?\n\nDeadly injury\nNo consent to operate\nBenefit to corpse.\n\xe2\x80\x94Amy Hebert, 2001\n\n137\n\n\x0cChapter 4. Limits on\nBargains: Defenses\nThe cases in this Chapter answer the following question: Does enforcement depend on the bargain being roughly equal in value on both sides, or is the equality\nof the bargain left to the parties? Is some sort of just price required? You might be\nsurprised at the answer, but to answer that question you must study all of the cases\nin this chapter. None of them is unusual. Each statement of law in them is mundane. But their doctrines leave in the law a striking contradiction.\n\nA. Introduction: Limits on Bargains?\nHAMER v. SIDWAY (1891)\nCourt of Appeals of New York, Second Division\n27 N.E. 256\n[\xc2\xb61] Appeal from an order of the general term of the supreme court the fourth\njudicial department, reversing a judgment entered on the decision of the court at\nspecial term in the county clerk\xe2\x80\x99s office of Chemung county on the 1st day of October, 1889. The plaintiff presented a claim to the executor of William E. Story, Sr.\nfor $5,000 and interest from the 6th day of February, 1875. She acquired it\nthrough several mesne assignments from William E. Story, 2d. The claim being\nrejected by the executor, this action was brought.\n[\xc2\xb62] It appears that William E. Story, Sr., was the uncle of William E. Story, 2d;\nthat at the celebration of the golden wedding of Samuel Story and wife, father and\nmother of William E. Story, Sr., on the 20th day of March, 1869, in the presence\nof the family and invited guests, he promised his nephew that if he would refrain\nfrom drinking, using tobacco, swearing, and playing cards or billiards for money\nuntil he became 21 years of age, he would pay him the sum of $5,000. The nephew assented thereto, and fully performed the conditions inducing the promise.\nWhen the nephew arrived at the age of 21 years, and on the 31st day of January,\n1875, he wrote to his uncle, informing him that he had performed his part of the\nagreement, and had thereby become entitled to the sum of $5,000. The uncle received the letter, and a few days later, and on the 6th day of February, he wrote\nand mailed to his nephew the following letter:\nBuffalo, Feb. 6, 1875.\n138\n\n\x0c\xe2\x80\x9cW.E. STORY, JR: `DEAR NEPHEW Your letter of the 31st ult. came to\nhand all right, saying that you had lived up to the promise made to me\nseveral years ago. I have no doubt but you have, for which you shall have\nfive thousand dollars as I promised you. I had the money in the bank the\nday you was 21 years old that I intend for you, and you shall have the\nmoney certain. Now, Willie, I do not intend to interfere with this money in\nany way till I think you are capable of taking care of it and the sooner that\ntime comes the better it will please me. I would hate very much to have\nyou start out in some adventure that you thought all right and lose this\nmoney in one year. The first five thousand dollars that I got together cost\nme a heap of hard work. . . . It did not come to me in any mysterious way,\nand the reason I speak of this is that money got in this way stops longer\nwith a fellow that gets it with hard knocks than it does when he finds it.\nWillie, you are 21 and you have many a thing to learn yet. This money you\nhave earned much easier than I did besides acquiring good habits at the\nsame time and you are quite welcome to the money; hope you will make\ngood use of it. I was ten long years getting this together after I was your\nage. Now, hoping this will be satisfactory, I stop....\nTruly Yours, \xe2\x80\x9cW.E. STORY.\n`P.S.-You can consider this money on interest.\xe2\x80\x9d\n[\xc2\xb63] The nephew received the letter and thereafter consented that the money\nshould remain with his uncle in accordance with the terms and conditions of the\nletters. The uncle died on the 29th day of January, 1887, without having paid over\nto his nephew any portion of the said $5,000 and interest.\xe2\x80\x9d\nPARKER, J. (after stating the facts above),\n[\xc2\xb64] The question which provoked the most discussion by counsel on this appeal, and which lies at the foundation of plaintiff\xe2\x80\x99s asserted right of recovery, is\nwhether by virtue of a contract defendant\xe2\x80\x99s testator William E. Story became indebted to his nephew William E. Story, 2d, on his twenty-first birthday in the sum\nof five thousand dollars. The trial court found as a fact that \xe2\x80\x98on the 20th day of\nMarch, 1869, * * * * William E. Story agreed to and with William E. Story, 2d,\nthat if he would refrain from drinking liquor, using tobacco, swearing, and playing\ncards or billiards for money until he should become 21 years of age then he, the\nsaid William E. Story, would at that time pay him, the said William E. Story, 2d,\nthe sum of $5,000 for such refraining, to which the said William E. Story, 2d,\nagreed,\xe2\x80\x99 and that he \xe2\x80\x98in all things fully performed his part of said agreement.\xe2\x80\x99\n[\xc2\xb65] The defendant contends that the contract was without consideration to\nsupport it, and, therefore, invalid. He asserts that the promisee by refraining from\nthe use of liquor and tobacco was not harmed but benefited; that that which he did\n139\n\n\x0cwas best for him to do independently of his uncle\xe2\x80\x99s promise, and insists that it follows that unless the promisor was benefited, the contract was without consideration. A contention, which if well founded, would seem to leave open for controversy in many cases whether that which the promisee did or omitted to do was, in\nfact, of such benefit to him as to leave no consideration to support the enforcement of the promisor\xe2\x80\x99s agreement. Such a rule could not be tolerated, and is without foundation in the law. The Exchequer Chamber, in 1875, defined consideration as follows: \xe2\x80\x98A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to the one party, or some\nforbearance, detriment, loss or responsibility given, suffered or undertaken by the\nother.\xe2\x80\x99 Courts \xe2\x80\x98will not ask whether the thing which forms the consideration does\nin fact benefit the promisee or a third party, or is of any substantial value to anyone. It is enough that something is promised, done, forborne or suffered by the\nparty to whom the promise is made as consideration for the promise made to him.\xe2\x80\x99\n(Anson\xe2\x80\x99s Prin. of Con. 63.)\n[\xc2\xb66] \xe2\x80\x98In general a waiver of any legal right at the request of another party is a\nsufficient consideration for a promise.\xe2\x80\x99 (Parsons on Contracts, 444.)\n[\xc2\xb67] \xe2\x80\x98Any damage, or suspension, or forbearance of a right will be sufficient to\nsustain a promise.\xe2\x80\x99 (Kent, vol. 2, 465, 12th ed.)\n[\xc2\xb68] Pollock, in his work on contracts, page 166, after citing the definition given by the Exchequer Chamber already quoted, says: \xe2\x80\x98The second branch of this\njudicial description is really the most important one. Consideration means not so\nmuch that one party is profiting as that the other abandons some legal right in the\npresent or limits his legal freedom of action in the future as an inducement for the\npromise of the first.\xe2\x80\x99\n[\xc2\xb69] Now, applying this rule to the facts before us, the promisee used tobacco,\noccasionally drank liquor, and he had a legal right to do so. That right he abandoned for a period of years upon the strength of the promise of the testator that for\nsuch forbearance he would give him $5,000. We need not speculate on the effort\nwhich may have been required to give up the use of those stimulants. It is sufficient that he restricted his lawful freedom of action within certain prescribed limits upon the faith of his uncle\xe2\x80\x99s agreement, and now having fully performed the\nconditions imposed, it is of no moment whether such performance actually proved\na benefit to the promisor, and the court will not inquire into it, but were it a proper\nsubject of inquiry, we see nothing in this record that would permit a determination\nthat the uncle was not benefited in a legal sense.\n* * * * The order appealed from should be reversed and the judgment of the Special Term affirmed, with costs payable out of the estate.\nAll concur.\n140\n\n\x0cOrder reversed and judgment of Special Term affirmed.\nQuestions:\n1. Does it matter to this court how much of a detriment existed, or how valuable\nthe benefit was to the promisor?\n2. What, actually, do you think induced Story Sr. to make his promise?\n3. Would application of the rule of Hamer v. Sidway change the result in Kirksey v.\nKirksey? In the Williston\xe2\x80\x99s tramp hypothetical?\n\nPROBLEM 18. Duane II\xe2\x80\x99s rich uncle Duane I, for whom Duane II was named,\npromises him in private at a family dinner at which Duane II\xe2\x80\x99s parents are the only other guests, that if Duane II will refrain from recreational use of harder\ndrugs\xe2\x80\x94heroin, LSD, cocaine, methamphetamine\xe2\x80\x94until the age of 21, Duane I\nwill pay him $10,000. Enforceable?\n\nBATSAKIS v. DEMOTSIS (1949)\nCourt of Civil Appeals of Texas, El Paso\n226 S.W.2d 673\nMcGILL, Justice.\n[\xc2\xb61] This is an appeal from a judgment of the 57th judicial District Court of\nBexar County. Appellant was plaintiff and appellee was defendant in the trial\ncourt. The parties will be so designated.\n[\xc2\xb62] Plaintiff sued defendant to recover $2,000 with interest at the rate of 8%\nper annum from April 2, 1942, alleged to be due on the following instrument, being a translation from the original, which is written in the Greek language:\nPeiraeus\nApril 2, 1942\nMr. George Batsakis\nKonstantinou Diadohou #7\nPeiraeus\nMr. Batsakis:\nI state by my present (letter) that I received today from you the amount of\ntwo thousand dollars ($2,000.00) of United States of America money,\n141\n\n\x0cwhich I borrowed from you for the support of my family during these difficult days and because it is impossible for me to transfer dollars of my\nown from America. The above amount I accept with the expressed promise that I will return to you again in American dollars either at the end of\nthe present war or even before in the event that you might be able to find a\nway to collect them (dollars) from my representative in America to whom\nI shall write and give him an order relative to this. You understand until\nthe final execution (payment) to the above amount an eight per cent interest will be added and paid together with the principal.\nI thank you and I remain yours with respects.\nThe recipient,\n(Signed) Eugenia The. Demotsis\n[\xc2\xb63] Trial to the court without the intervention of a jury resulted in a judgment\nin favor of plaintiff for $750.00 principal, and interest at the rate of 8% per annum\nfrom April 2, 1942 to the date of judgment, totaling $1,163.83, with interest\nthereon at the rate of 8% per annum until paid. Plaintiff has perfected his appeal.\n[\xc2\xb64] The court sustained certain special exceptions ... to defendant\xe2\x80\x99s first\namended original answer on which the case was tried, and struck therefrom paragraphs II, III and V.... The answer, stripped of such paragraphs, consisted of a\ngeneral denial ... and of paragraph IV, which is as follows:\n...[T]he consideration upon which said written instrument sued upon by\nplaintiff herein is founded, is wanting and has failed to the extent of\n$1975.00, and defendant ... now tenders, as defendant has heretofore tendered to plaintiff, $25.00 as the value of the loan of money received by defendant from plaintiff, together with interest thereon.\n... [D]efendant alleges that she at no time received from plaintiff himself\nor from anyone for plaintiff any money or thing of value other than ... [a]\nloan of 500,000 drachmae. That at the time of the loan ... the value of\n500,000 drachmae in the Kingdom of Greece in dollars of money of the\nUnited States of America, was $25.00, and also at said time the value of\n500,000 drachmae of Greek money in the United States of America in dollars was $25.00 of money of the United States of America....\nThe [defendant] alleg[ed] ... that the instrument sued on was signed and\ndelivered in the Kingdom of Greece on or about April 2, 1942, at which\ntime both plaintiff and defendant were ... residing in the Kingdom of\nGreece, and that on or about April 2, 1942 [defendant] owned money [in\nthe United] States of America, but was then and there in the Kingdom of\n142\n\n\x0cGreece in straitened financial circumstances due to the conditions produced by World War II and could not make use of her money and property\nand credit existing in the United States of America. That in the circumstances the plaintiff agreed to and did lend to defendant the sum of\n500,000 drachmae, which at that time, on or about April 2, 1942, had the\nvalue of $25.00 in money of the United States of America. That the said\nplaintiff, knowing defendant\xe2\x80\x99s financial distress and desire to return to the\nUnited States of America, exacted of her the written instrument plaintiff\nsues upon, which was a promise by her to pay to him the sum of $2,000.00\nof United States of America money. ....\n[\xc2\xb65] Defendant testified that she did receive 500,000 drachmas from plaintiff. It\nis not clear whether she received all the 500,000 drachmas or only a portion of\nthem before she signed the instrument in question. Her testimony clearly shows\nthat the understanding of the parties was that plaintiff would give her the 500,000\ndrachmas if she would sign the instrument. She testified:\nQ. [W]ho suggested the figure of $2,000.00?\nA. That was how he asked me from the beginning. He said he will give me\nfive hundred thousand drachmas provided I signed that I would pay him\n$2,000.00 American money.\nThe transaction amounted to a sale by plaintiff of the 500,000 drachmas in consideration of the execution of the instrument sued on, by defendant. It is not contended that the drachmas had no value. Indeed, the judgment indicates that the\ntrial court placed a value of $750.00 on them .... Therefore the plea of want of\nconsideration was unavailing. A plea of want of consideration amounts to a contention that the instrument never became a valid obligation in the first place. National Bank of Commerce v. Williams, 125 Tex. 619, 84 S.W.2d 691 (1935).\n[\xc2\xb66] Mere inadequacy of consideration will not void a contract. 10 TEX. JUR.,\nContracts \xc2\xa7 89, at 150; Chastain v. Texas Christian Missionary Society, 78 S.W.2d\n728, 731 (Tex. Civ. App. 1935).\n[\xc2\xb67] Nor was the plea of failure of consideration availing. Defendant got exactly what she contracted for according to her own testimony. The court should have\nrendered judgment in favor of plaintiff against defendant for the principal sum of\n$2,000.00 evidenced by the instrument sued on, with interest as therein provided.\nWe construe the provision relating to interest as providing for interest at the rate\nof 8% per annum. The judgment is reformed so as to award appellant a recovery\nagainst appellee of $2,000.00 with interest thereon at the rate of 8% per annum\nfrom April 2, 1942. Such judgment will bear interest at the rate of 8% per annum\nuntil paid on $2,000.00 thereof and on the balance interest at the rate of 6% per\nannum. As so reformed, the judgment is affirmed.\n[\xc2\xb68]\n\nReformed and affirmed.\n\n143\n\n\x0cQuestion: What facts could you add to Batsakis\xe2\x80\x99s situation to make the result of\nthis case appear more just?\n\nPROBLEM 19. In Embola v. Tuppela, 220 P. 789 (Wash. 1923), Tuppela obtained land during the Alaska gold rush. After a number of years, he was adjudicated insane and committed in Portland, Oregon. After four years, he was released,\nbut he found that his mining properties had been sold by his guardian. Tuppela\nsoon thereafter found Embola. They had been close friends for thirty years. Embola advanced money for Tuppela\xe2\x80\x99s support and brought him back to Seattle.\nTuppela tried to raise money so that he could return to Alaska and re-obtain his\nmine, but no one was willing to lend to him. After a few months, Tuppela proposed to Embola, \xe2\x80\x9cYou have already let me have $270. If you give me $50 more\nso I can go to Alaska and get my property back, I will pay you ten thousand dollars when I win my property.\xe2\x80\x9d Embola agreed and gave Tuppela $50. Three years\nlater, Tuppela recovered his property, which was worth about $500,000. Tuppela\nasked his trustee to pay $10,000 to Embola, but the trustee refused, so Embola\nsued Tuppela\xe2\x80\x99s trustee. From the analysis in Batsakis, what result?\n\nB. Duress\n\nRestatement (Second) of Contracts \xc2\xa7 175. When Duress by Threat Makes a\nContract Voidable\n\nRestatement (Second) of Contracts \xc2\xa7 176. When a Threat is Improper\n\nConsider carefully these two sections. They are widely employed by courts. See,\ne.g., Miller and Holler, the next two cases. The two Restatement sections work\ntogether. Section 175(1) defines duress as when a manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative. Given that definition, what are the elements of duress?\nPROBLEMS 20-26. Section 176 gives examples of what might be improper\nthreats. Please match the following examples with the subsections of section 176:\n20. Bob goes to look at a used car, a 1972 Nova, and finds that the seller is the\nbrother of Bob\xe2\x80\x99s sister Marsha\xe2\x80\x99s employer. As the seller and Bob finish negotiations for this car, which is not in very good shape, the seller says to Bob, \xe2\x80\x9cActually, I have a lot of pull with my brother Al and I really need to sell this car. If you\nbuy the car for $10,000, I\xe2\x80\x99ll tell Al what a fine family Marsha has. If you don\xe2\x80\x99t,\nwell, Marsha can kiss her job goodbye!\xe2\x80\x9d Employment is at-will in the state.\n\n144\n\n\x0c21. Bob embezzles money from Business. The Business sues Bob and threatens to\ntake steps to encourage a criminal prosecution against Bob if he does not sign a\npromissory note to repay with interest what he took.\n22. Bob is visiting his sister Marsha and sitting in the backyard drinking lemonade\nwhen Marsha\xe2\x80\x99s neighbor Andy walks up. Andy says to Bob, \xe2\x80\x9cI want to sell you\nmy Mercedes for $10,000 cash.\xe2\x80\x9d Bob agrees to look at the car. The car is only a\nfew years old, and appears to be in excellent condition. Still, Bob had hoped to be\ndriving something sportier, like a 1972 Nova, restored, with a big spoiler on the\nback. \xe2\x80\x9cI don\xe2\x80\x99t think so,\xe2\x80\x9d Bob finally says, \xe2\x80\x9cI\xe2\x80\x99m not in the market for this kind of\ncar right now.\xe2\x80\x9d \xe2\x80\x9cYes, you are, \xe2\x80\x9cAndy replies, pulling a pistol from his coat. \xe2\x80\x9cSign\nthis contract for my car right now or I\xe2\x80\x99ll bury you under the garage.\xe2\x80\x9d Bob gulps\nand signs. (Does the excellent price make a difference?)\n23. Joe threatens to commence a lawsuit and file a lien on a house Bob just built,\nunless Bob signs a contract to release Joe from a disputed claim that Bob has\nagainst Joe regarding an entirely separate matter. Joe knows that he has no\ngrounds to sue Bob or file a lien.\n24. Bob is 82 years old and lives alone in a small apartment in Houston. Bob had\nno air conditioning until last August, when he was sitting alone one day in his\napartment and heard a knock at the door. It was Andy, selling air conditioners.\nBob really wanted to buy an air conditioner. Andy said the price for a window box\nair conditioner was only $1,200. \xe2\x80\x9cTwelve hundred!\xe2\x80\x9d Bob started, \xe2\x80\x9cThat\xe2\x80\x99s outrageous!\xe2\x80\x9d \xe2\x80\x9cDon\xe2\x80\x99t complain about the price, or I\xe2\x80\x99ll take my business elsewhere,\xe2\x80\x9d\nAndy said, \xe2\x80\x9cand just see if anyone else will sell to you on credit!\xe2\x80\x9d Bob knew his\ncredit wasn\xe2\x80\x99t the best. \xe2\x80\x9cOk,\xe2\x80\x9d Bob said, \xe2\x80\x9cYou stay and I\xe2\x80\x99ll sign.\xe2\x80\x9d\n25. Marsha, a fur store employee at Al\xe2\x80\x99s Furs, buys furs herself. Both Al\xe2\x80\x99s and\nMarsha store their furs at the same independent warehouse. Marsha has not paid\nher warehouse bill. Warehouse says to Al\xe2\x80\x99s Furs owner, Al, \xe2\x80\x9cUnless you sign on to\npay for Marsha\xe2\x80\x99s fees, we will hold your furs indefinitely.\xe2\x80\x9d The next time Al went\nto the warehouse, the warehouse refused to release Al\xe2\x80\x99s furs without his signature\non a note to pay Marsha\xe2\x80\x99s debt. Al signs.\n26. Andy intentionally misleads Bob into thinking that Andy will supply goods at\nthe usual price and thereby causes Bob to delay any attempt to buy them elsewhere. Andy then later, when Bob really needs the goods, threatens not to sell\nthem unless Bob promises to pay an outrageous price. Bob, in great need, promises to pay. See R2K \xc2\xa7 176 illus. 13.\nQuestion: When was it relevant in applying \xc2\xa7 176 that the price was too high?\n\n145\n\n\x0cOther formulations of duress besides that found in the Restatement (Second) of\nContracts exist, of course. They often focus on subjective traits and are difficult to\nunderstand.* You will see an example in the Holler case, infra.\n\nALLIED BRUCE TERMINIX CO., INC. v. GUILLORY (1994)\nCourt of Appeal of Louisiana, Third Circuit\n649 So.2d 652\nLUCIEN C. BERTRAND, Jr., Judge Pro Tem.\n[\xc2\xb61] Plaintiff, Allied Bruce Terminix Company, Inc., filed suit for injunction\nand damages against defendant, John R. Guillory, for the alleged breach of a noncompete agreement. The trial court granted a preliminary injunction and Guillory\nappeals. We affirm.\n[\xc2\xb62] The trial court made the following findings of fact and conclusions of law:\n****\nThe facts show that defendant was employed by Terminix as a pest control\ntechnician, and on September 7, 1990, defendant signed an employment\nagreement setting forth certain limitations on his actions during the course\nof his employment with Terminix for a period of two (2) years after termination. The agreement specifically provides in pertinent part:\nFor a period of two years following termination of employment\nwith Employer, Employee will not, either directly or indirectly, solicit or accept termite and/or pest control work from, or perform\ntermite and/or pest control work for, any customer of employer for\nhimself or for any other person, firm or corporation, nor will Employee engage in, accept employment from, become affiliated or\nconnected with, directly or indirectly, or by any means become interested in, directly or indirectly, any termite and/or pest control\nbusiness, or any other line of business similar to or of a like nature\nto any work performed by Employer.\n\n*\n\nConsider the following from Magoon v. Reber, 45 N.W. 112 (Wisc. 1890):\nIf the plaintiff was induced to sign the notes and power of attorney through\ncompulsion or constraint of personal violence threatened or impending, or under\nthe influence of such fear of actual violence as overcame his mind and will, so\nthat he did not act freely and voluntarily in executing them, they are void in law,\nthough there might be some consideration to support them; for the principle is\nelementary that a contract made by a party under compulsion is void, because\nthe consent is of the essence of a contract, and where there is compulsion there\nis no consent, for that must be voluntary.\nMagoon is about as useful as any subjective definition of duress, but what qualifies as \xe2\x80\x9cpersonal\nviolence\xe2\x80\x9d? \xe2\x80\x9cOvercoming of mind and will\xe2\x80\x9d? Acting \xe2\x80\x9cfreely and voluntarily\xe2\x80\x9d?\n\n146\n\n\x0c[\xc2\xb63] The agreement further provides that said prohibition be limited to those\nparishes in which defendant has worked for Terminix during the term of the\nagreement. The Court finds these parishes to be Lafayette and Acadia.\n[\xc2\xb64] Defendant resigned from his employment effective July 6, 1993, and has\nopened up his own pest control service company, which is located in St. Landry\nParish. The majority of defendant\xe2\x80\x99s client base is in Lafayette Parish, and he\nfreely admits that some of these clients were former clients of Terminix.\n[\xc2\xb65] After considering the law, evidence and arguments of counsel, the Court\ngrants the injunction and denies the Exception of No Cause of Action. The provision at issue is valid and enforceable * * * *. * * * *\n[\xc2\xb66] Further, we find no merit to Guillory\xe2\x80\x99s argument that his consent to the\ncontract was vitiated by economic duress, i.e., the threat of his employment being\nterminated. * * * * [T]he threat of doing a lawful act does not constitute duress.\nTherefore, we reject the argument that Guillory signed the non-compete agreement under duress and did not consent to its terms. * * * *\n[\xc2\xb67] For the foregoing reasons, the judgment of the trial court is affirmed at\ndefendant\xe2\x80\x99s cost.\nAFFIRMED.\n\nPROBLEM 27. A debtor threatens a creditor, \xe2\x80\x9cEither settle with me for less or\nI\xe2\x80\x99ll file bankruptcy.\xe2\x80\x9d Is this threat improper?\n\nIn re the MARRIAGE OF John W. MILLER and Debra K. Miller,\nCourt of Appeals of Iowa\n2002 WL 31312840\nOct. 16, 2002\nMAHAN, J.\n[\xc2\xb61] Debra Miller appeals a district court ruling upholding the validity of a prenuptial agreement she signed prior to her marriage to John Miller. We affirm.\n[\xc2\xb62] Background Facts and Proceedings. John and Debra were married in\nAugust 1990. At the time of the parties\xe2\x80\x99 marriage, Debra had two registered horses,\na truck, and household items worth approximately $2000. John had a house located at 1007 College Drive in Decorah, Iowa, a couple of boats, outdoor equipment,\nand a 401(k) account.\n\n147\n\n\x0c[\xc2\xb63] Both parties were previously married. As part of the decree dissolving\nJohn\xe2\x80\x99s first marriage, he was awarded the house located in Decorah, Iowa. In order to maintain the house and other assets from his first marriage as his own property, John asked Debra to sign a prenuptial agreement prepared by his lawyer.\nThis was requested a day before the wedding, and Debra was not aware of the\nprenuptial agreement until that time. It was clear if she did not sign the prenuptial\nagreement John would not marry her. John\xe2\x80\x99s lawyer apparently advised Debra to\nhave the prenuptial agreement reviewed by independent counsel although she did\nnot do so. Paragraph three of the agreement provides:\nIn the event of a dissolution of marriage or death of either party to the\nmarriage, each party hereto waives, relinquishes, and renounces any right,\ntitle or interest in the property of another. This includes all rights of dower\nand courtesy in the estates of one another.\nParagraph four provides:\nAll property, both real and personal, which belonged to John W. Miller\nand Debra L. Fjelstul separately before marriage shall be and remain his or\nhers and neither party shall have claim to the other person\xe2\x80\x99s property. This\nincludes, but is not limited to John W. Miller\xe2\x80\x99s interest in a house in Decorah, Iowa, and various items of sports equipment owned by him at the time\nof this Agreement was executed.\n[\xc2\xb64] As part of the divorce decree issued in November 2001, the district court\nconcluded the prenuptial agreement was valid. The court awarded the Decorah\nhome to John, and he was ordered to pay any debt remaining against the house.\nThe court also awarded each party his/her entire 401(k) account. Debra appeals.\n* * * *\n[\xc2\xb65] Duress. We follow the Restatement\xe2\x80\x99s rule concerning the effect of duress\non the enforceability of a contract: \xe2\x80\x98\xe2\x80\x9cIf a party\xe2\x80\x99s manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim.\xe2\x80\x99\xe2\x80\x9d Id. at 318 (quoting Turner\nv. Low Rent Hous. Agency, 387 N.W.2d 596, 598 (Iowa 1986); Restatement (Second) of Contracts \xc2\xa7 175 (1), at 475 (1981)). There are two essential elements one\nmust prove in order to show duress. The first element is the victim had no reasonable alternative to entering into the contract. Turner, 387 N.W.2d at 598-99. In the\npresent case, Debra had a reasonable alternative: she could have canceled the\nwedding. In Spiegel, the supreme court noted \xe2\x80\x9csocial embarrassment from the\ncancellation of wedding plans, even on the eve of the wedding, [does not] render\nthat choice unreasonable.\xe2\x80\x9d Spiegel, 553 N.W.2d at 318.\n\n148\n\n\x0c[\xc2\xb66] The other element of duress is the threat must be wrongful or unlawful. In\nre C.K., 315 N.W.2d 37, 43-44 (Iowa 1982). Here, John\xe2\x80\x99s threat was he would not\nmarry Debra if she did not sign the prenuptial agreement. We find insistence on a\nprenuptial agreement as a condition of marriage is not a threat or unlawful. See\nSpiegel, 553 N.W.2d at 318; Liebelt v. Liebelt, 801 P.2d 52, 55 (Idaho Ct. App.\n1990) (\xe2\x80\x9cThe threat of a refusal to marry is not wrongful in the eyes of the law.\xe2\x80\x9d).\nConsequently, while we do not admire John\xe2\x80\x99s actions, Debra has failed to show\nshe acted under duress in signing the prenuptial agreement.\nAFFIRMED.\n\nNataliya HOLLER v. William HOLLER\nCourt of Appeals of South Carolina\n612 S.E.2d 469\nApril 18, 2005\nANDERSON, J.\n[\xc2\xb61] William Holler (Husband) appeals from the family court\xe2\x80\x99s determination\nthat a premarital agreement signed by Nataliya Holler (Wife) is not enforceable.\nWe affirm.\nFACTUAL/PROCEDURAL BACKGROUND\n[\xc2\xb62] Wife is originally from Ukraine. She was educated in Ukraine and taught\ncollege students in that country. English is not Wife\xe2\x80\x99s first language. After seeing\nHusband\xe2\x80\x99s picture in \xe2\x80\x9ca feminine magazine,\xe2\x80\x9d Wife wrote a letter to him in English\nand included her phone number. Thereafter, Husband and Wife talked on the\nphone for \xe2\x80\x9c[a]bout a year.\xe2\x80\x9d Their conversations were in English. During this time,\nHusband visited Wife in Ukraine.\n[\xc2\xb63] On September 5, 1997, Wife traveled to the United States to marry Husband. At the time of her arrival, Wife\xe2\x80\x99s English was \xe2\x80\x9creally poor.\xe2\x80\x9d Husband disputed Wife\xe2\x80\x99s inability to speak English, claiming she spoke \xe2\x80\x9c[v]ery well.\xe2\x80\x9d Upon\ncompleting an English course, Wife received a certificate from Central Piedmont\nCollege in May of 1998.\n[\xc2\xb64] In October or early November 1997, Wife became pregnant with Husband\xe2\x80\x99s child. Wife\xe2\x80\x99s visa was scheduled to expire on December 4, 1997, and she\nwould have to return to Ukraine unless she married Husband. Wife came to the\nUnited States without money and relied upon Husband to provide support.\n[\xc2\xb65] Wife admitted that, while she was still in Ukraine, Husband told her about\nthe premarital agreement. However, Wife believed she \xe2\x80\x9cneeded to sign some pa149\n\n\x0cpers under the law of South Carolina before we g[o]t married.\xe2\x80\x9d Wife claimed:\n\xe2\x80\x9c[Husband] faxed me some documents for American Embassy, and one page was\nhe told me that we need\xe2\x80\x94when you get to United States we have to sign that\nagreement before we get married because this is under [the] law of South Carolina.\xe2\x80\x9d Husband delivered the premarital agreement to Wife sometime before the\nmarriage. Husband first stated he faxed it to her five or six months before she arrived in the United States. Husband maintained he handed her a copy to sign within a week after she arrived. Yet, Wife declared Husband gave her a copy of the\npremarital agreement only two weeks before she signed it.\n[\xc2\xb66] Prior to signing the premarital agreement, Wife attempted to translate a\nportion of the agreement from English into Russian, but was unable to complete\nthe translation. \xe2\x80\x9cBecause it was too hard,\xe2\x80\x9d Wife became frustrated with the translation and quit. Wife had eleven pages of translation before she determined the\neffort was futile. Wife professed the agreement \xe2\x80\x9chad specific language which [she\ndid not] understand even in Russian.\xe2\x80\x9d Wife never retained counsel because she\nhad no money to pay someone to review the agreement.\n[\xc2\xb67] Wife signed the agreement on November 25, 1997. The parties were married on December 1, 1997, merely three days before Wife\xe2\x80\x99s visa was set to expire.\n[\xc2\xb68] Husband and Wife separated on February 13, 2000. Wife brought this action seeking a divorce, custody of the parties\xe2\x80\x99 child, child support, equitable distribution of marital property, and alimony. Husband answered and counterclaimed.\nSubsequently, he filed a motion to dismiss the claims for alimony and equitable\ndistribution asserting the premarital agreement controlled. After a hearing, the\nfamily court denied the motion to dismiss. The court ruled the premarital agreement was invalid and unenforceable because it was signed under duress * * * *.\n****\nII. PREMARITAL AGREEMENT\n[\xc2\xb69] Husband contends the trial court erred in finding the premarital agreement\nwas invalid and unenforceable as a result of being * * * * signed under duress.\n[\xc2\xb610] Premarital agreements, also called antenuptial or prenuptial agreements,\nare agreements between prospective spouses made in contemplation of marriage.\nBlack\xe2\x80\x99s Law Dictionary defines a prenuptial agreement as \xe2\x80\x9c[a]n agreement made\nbefore marriage usu[ally] to resolve issues of support and property division if the\nmarriage ends in divorce or by the death of a spouse.\xe2\x80\x9d Black\xe2\x80\x99s Law Dictionary\n1220 (8th ed. 2004). Antenuptial settlements are contracts or agreements entered\ninto between a man and woman before marriage, but in contemplation and generally in consideration of marriage, whereby the property rights and interests of either the prospective husband or wife, or of both of them, are determined, or where\nproperty is secured to either or to both of them, or to their children. 41 C.J.S.\nHusband and Wife \xc2\xa7 61 (1991).\n150\n\n\x0c[\xc2\xb611] The consideration for a premarital agreement is the marriage itself. Because such agreements are executory, they become effective only upon marriage.\n* * * * In South Carolina Loan & Trust Co. v. Lawton, the Supreme Court explained:\nThere is not complete execution of such instruments until actual marriage,\nand it does not matter how many changes may be made, and how many\ndifferent instruments may be signed, the settlement, in the last form it assumes before marriage, is the real contract supported by the consideration\nof marriage.\nId. at 349, 48 S.E. at 283.\n[\xc2\xb612] In Stork v. First National Bank, 281 S.C. 515, 316 S.E.2d 400 (1984), the\nSupreme Court inculcated:\nAntenuptial agreements * * * will be enforced if made voluntarily and in\ngood faith and if fair and equitable. Rieger v. Schaible, 81 Neb. 33, 115\nN.W. 560 (1908) (citing Pierce v. Pierce, 71 N.Y. 154, 27 Am. Rep. 22).\nSuch contracts are not opposed to public policy but are highly beneficial to\nserving the best interest of the marriage relationship.\nId. at 516, 316 S.E.2d at 401. An antenuptial contract is valid and will be upheld\nwhen, and only when, it is entered into freely, fairly, and in good faith by parties\nlegally competent to contract. 41 C.J.S. Husband and Wife \xc2\xa7 62 (1991). An antenuptial agreement must be free from duress, fraud, deceit, misrepresentation, or\noverreaching. Id. * * * *\nA. Duress\n[\xc2\xb613] Husband avers the family court improperly concluded Wife signed the\npremarital agreement while under duress. We disagree.\n[\xc2\xb614] Duress is a condition of mind produced by improper external pressure or\ninfluence that practically destroys the free agency of a party and causes him to do\nan act or form a contract not of his own volition. Cherry v. Shelby Mut. Plate\nGlass & Cas. Co., 191 S.C. 177, 4 S.E.2d 123 (1939); Cox & Floyd Grading, Inc.\nv. Kajima Constr. Servs., Inc., 356 S.C. 512, 589 S.E.2d 789 (Ct. App. 2003);\nWillms Trucking Co. v. JW Constr. Co., 314 S.C. 170, 442 S.E.2d 197 (Ct. App.\n1994).\n[\xc2\xb615] Corpus Juris Secundum defines duress:\n\xe2\x80\x9cDuress\xe2\x80\x9d may be defined as subjecting a person to a pressure which overcomes his or her will and coerces him or her to comply with demands to\nwhich he or she would not yield if acting as a free agent. Some definitions\nof \xe2\x80\x9cduress\xe2\x80\x9d contain not only the element of pressure overcoming the victim\xe2\x80\x99s will but also the element that the pressure or compulsion consists of\nimproper, wrongful, or unlawful conduct, acts, or threats.\n151\n\n\x0cFurther, \xe2\x80\x9cduress\xe2\x80\x9d has been defined as the condition of mind produced by\nthe wrongful conduct of another rendering a person incompetent to contract with the exercise of his or her free will power, or as the condition of\nmind produced by an improper external pressure destroying free agency so\nas to cause the victim to act or contract without use of his or her own volition, or as unlawful constraint whereby a person is forced to do some act\nagainst his or her will.\n17A C.J.S. Contracts \xc2\xa7 175 (1999) (footnotes omitted).\n[\xc2\xb616] The central question with respect to whether a contract was executed under duress is whether, considering all the surrounding circumstances, one party to\nthe transaction was prevented from exercising his free will by threats or the\nwrongful conduct of another. 17A Am. Jur. 2d Contracts \xc2\xa7 218 (2004). Freedom\nof will is essential to the validity of an agreement. Id. A party claiming \xe2\x80\x9cduress\xe2\x80\x9d\ncan prevail if he shows that he has been the victim of a wrongful or unlawful act\nor threat of a kind that deprives the victim of unfettered will, with the result that\nhe was compelled to make a disproportionate exchange of values. Id.\n[\xc2\xb617] In order to establish that a contract was procured through duress, three\nthings must be proved: (1) coercion; (2) putting a person in such fear that he is\nbereft of the quality of mind essential to the making of a contract; and (3) that the\ncontract was thereby obtained as a result of this state of mind. In re Nightingale\xe2\x80\x99s\nEstate, 182 S.C. 527, 189 S.E. 890 (1937). The fear which makes it impossible for\na person to exercise his own free will is not so much to be tested by the means\nemployed to accomplish the act, as by the state of mind produced by the means\ninvoked. Id.; Willms Trucking Co., 314 S.C. at 179, 442 S.E.2d at 202. If one of\nthe parties to an agreement is in a position to dictate its terms to such an extent as\nto substitute his will for the will of the other party thereto, it is not a mutual, voluntary agreement, but becomes an agreement emanating entirely from his own\nmind. In re Nightingale\xe2\x80\x99s Estate, 182 S.C. at 547, 189 S.E at 898; Willms Trucking\nCo., 314 S.C. at 179, 442 S.E.2d at 202. If a party\xe2\x80\x99s manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim. Willms Trucking Co., 314\nS.C. at 179, 442 S.E.2d at 202. Whether or not duress exists in a particular case is\na question of fact to be determined according to the circumstances of each case,\nsuch as the age, sex, and capacity of the party influenced. Id.; see also Santee\nPortland Cement Corp. v. Mid-State Redi-Mix Concrete Co., 273 S.C. 784, 260\nS.E.2d 178 (1979) (stating whether or not duress was present is a question ordinarily determined on a case by case basis).\n[\xc2\xb618] Duress is viewed with a subjective test which looks at the individual characteristics of the person allegedly influenced, and duress does not occur if the victim has a reasonable alternative to succumbing and fails to take advantage of it.\nBlejski v. Blejski, 325 S.C. 491, 480 S.E.2d 462 (Ct. App. 1997) (citing Restatement (Second) of Contracts \xc2\xa7 175 cmt. b & c (1981)). Duress is a defense to an\notherwise valid contract. 17A Am. Jur. 2d Contracts \xc2\xa7 218. Duress renders a con152\n\n\x0ctract voidable at the option of the oppressed party. Santee Portland Cement Corp.,\n273 S.C. at 784, 260 S.E.2d at 178.\n[\xc2\xb619] Assumptively concluding Wife was allowed the opportunity to view the\npremarital agreement three months in advance, the evidence in the record indicates: (1) Wife did not understand the contents of the agreement; (2) she did not\nfreely enter into the agreement; (3) she attempted to translate the agreement into\nRussian in order to better comprehend the document; (4) she became frustrated as\nshe was unable to complete a satisfactory translation; and (5) her notes indicate\nthere are several words for which she could not find a translation, including \xe2\x80\x9cundivided,\xe2\x80\x9d \xe2\x80\x9cequitable,\xe2\x80\x9d and \xe2\x80\x9cpro rata.\xe2\x80\x9d Consequently, Wife could not understand\nthe agreement.\n[\xc2\xb620] Additionally, Husband was aware of the deadline with respect to Wife\xe2\x80\x99s\nvisa. According to his own testimony, Husband made it perfectly clear to Wife\nthat she must sign the agreement if she wanted to be married prior to the expiration of her visa. Wife was in the United States with no means to support herself.\nShe relied solely and completely on Husband for support. Wife had no money of\nher own with which to retain and consult an attorney or a translator. Whether a\nparty obtained independent legal advice is a significant consideration in evaluating whether an antenuptial agreement was voluntarily and understandingly made.\nSee 41 C.J.S. Husband and Wife \xc2\xa7 62 (1991). The family court found if Wife was\nnot able to marry, then she would be forced to return to Ukraine. Because she was\npregnant with Husband\xe2\x80\x99s child, she sought to insure his continued support and to\nremain in the United States.\n[\xc2\xb621] Wife did not enter into the agreement freely and voluntarily. Ample evidence exists to support the family court\xe2\x80\x99s determination that Wife, given the circumstances she faced, signed the agreement under duress and without a clear understanding of what she was signing. The family court did not err in finding Wife\nsigned the agreement under duress.\nQuestion: Why do Miller and Holler reach different results?\nThere once was a bride in a bind,\nWho felt bad \xe2\x80\x98bout the prenup she signed;\nSo she argued duress\nDue to her marriage mess;\nAnd the court ruled on her state of mind.\n\xe2\x80\x94Stacey Severovich, STCL Class of 2013\n\n153\n\n\x0cBETHLEHEM STEEL CORPORATION, Plaintiff v. Sheldon H. SOLOW, etc., et\nal.,\nDefendants, Diesel Construction, etc., Defendant, Solow Development Corporation, Defendant-Respondent, The Chase Manhattan Bank, N.A., et al., Defendants\nSupreme Court, Appellate Division, First Department, New York\n63 A.D.2d 611, 405 N.Y.S.2d 80\nMay 16, 1978\nBefore BIRNS, J. P., and EVANS, FEIN, MARKEWICH and SULLIVAN, JJ.\nMEMORANDUM DECISION.\n****\n[\xc2\xb61] Defendants\xe2\x80\x99 contentions are that plaintiff submitted a bid to supply and\nerect structural steel at $420 per ton provided the bid was executed and returned\nwithin seven days; that defendants repeatedly attempted to meet with plaintiff until about six weeks after receipt of the initial bid and to their surprise and dismay\nlearned that plaintiff had raised the price of their steel to $474 per ton; that this\nprice was not based upon costs, materials or labor increases, but was an arbitrary\ninflated price interposed by plaintiff because it knew it was the only structural\nsteel supplier available at the time; that defendants were in immediate need of the\nsteel and had no alternative but to execute the contract under duress.\n[\xc2\xb62] It is not alleged that defendants accepted or responded to plaintiff\xe2\x80\x99s initial\nbid; nor is it alleged that plaintiff had any contractual relationship with defendants\nof any type prior to the time the parties entered into the contract which serves as\nthe predicate for the economic duress defense.\n[\xc2\xb63] \xe2\x80\x9cDuress, in order to render voidable what was done, must involve a\nwrongful act or threat precluding the exercise of a free will.\xe2\x80\x9d (17 NY Jur, Duress\nand Undue Influence, \xc2\xa7 3.)\n[\xc2\xb64] The law in New York is clear that in order to have a situation involving\n\xe2\x80\x9ceconomic duress\xe2\x80\x9d there must have been some sort of obligation on the part of the\nparty to perform. (Salzman v Holiday Inns, 48 A.D.2d 258, mod 40 N.Y.2d 919;\nMuller Constr. Co. v New York Tel. Co., 50 A.D.2d 580, affd 40 N.Y.2d 955.)\n[\xc2\xb65] In the instant situation, the original bid was never accepted by defendants\nin any way, shape or form. Consequently, there is no showing of a prior contractual relationship or a showing that plaintiff had any obligation or duty to deal with\ndefendants. Although it appears defendant was subject to financial pressures and\nmay have lacked equal bargaining power, there nonetheless was an insufficient\nshowing to constitute economic duress. (Grubel v Union Mut. Life Ins. Co., 54\nA.D.2d 686.) The law is well stated in Hugo V. Lowei, Inc. v Kips Bay Brewing\nCo. (63 N.Y.S.2d 289), where the defendant claimed that he had been induced to\n154\n\n\x0center into a contract by economic duress because of existing war emergency conditions, leaving him unable to purchase his product from any other source than the\nplaintiff. The court held (p 290):\n\xe2\x80\x9cAssuming the truth of this, it does not constitute duress in law. The plaintiff was under no duty or obligation to do business with defendant and\ncould have refused, arbitrarily, to do business with it, or if it decided to do\nbusiness with defendant could name its own terms. Defendant could have\ndeclined to accept them; it was under no obligation to accept, other than its\nneed to have the hops which it could not obtain elsewhere. Driving a hard\nbargain in the circumstances is not the type of duress which may be\navailed of as a ground for avoiding entering into a contract and liability\nthereunder. This defense is legally insufficient.\xe2\x80\x9d\n[\xc2\xb66] Austin Instrument v Loral Corp. (29 N.Y.2d 124) is not controlling. In the\nAustin case there was a binding contract which was subsequently renegotiated as\na result of the economic duress applied by Austin. Here there is no prior contractual relationship.\n[\xc2\xb67] One who would repudiate a contract procured by duress, must act promptly, or he will be deemed to have elected to affirm it. (Port Chester Elec. Constr.\nCorp. v Hastings Terraces, 284 App Div 966; Fowler v Fowler, 197 App Div 572.)\nHere the defendants waited six years from the commencement of this action before interposing the economic duress defense. In view of the inordinate length of\ntime which has passed between the alleged economic duress and the assertion of\nthat defense, it must be deemed waived. * * * *\nQuestions:\n1. What could be the alleged wrongful act or threat here?\n2. Why would a subjective duress defense make sense or not make sense when the\npromisor is a corporation?\n3. In Austin Instrument, Inc., a supplier of electronics components, Austin, contracted to supply a set of parts for radar equipment to Loral, a radar equipment\nmanufacturer. When Loral asked for bids for a second set of parts, Austin stopped\nperformance on the first set and threatened to provide nothing more under its current contracts unless Loral awarded Austin the second set and increased the price\non the first. After determining that no one on its approved list of suppliers could\nfill Austin\xe2\x80\x99s obligations, Loral agreed to Austin\xe2\x80\x99s demands. Immediately after receiving the last component under the second set of contracts, Loral refused to pay\nAustin the remainder of what the contracts required. When Austin sued, Loral argued duress. The court agreed with Loral. Can you see the difference between this\ncase and Bethlehem Steel? How would you analyze the Austin facts under the Restatement (Second) test?\n155\n\n\x0cC. Mutual Mistake\nCHANDELOR v. LOPUS (1603)\nExchequer-Chamber\nCroke Jac 4, 79 ER 3\n[\xc2\xb61] Action upon the case. Whereas the defendant being a goldsmith, and having skill in jewels and precious stones, had a stone which he affirmed to Lopus to\nbe a bezar-stone, and sold it to him for one hundred pounds; [but] it was not a\nbezar-stone: the defendant pleaded not guilty, and verdict was given and judgment\nentered for the plaintiff in the King\xe2\x80\x99s Bench.\n[\xc2\xb62] But error was thereof brought in the Exchequer-Chamber; because the\ndeclaration contains not matter sufficient to charge the defendant, viz. that he warranted it to be a bezar-stone, or that he knew that it was not a bezar-stone; for it\nmay be, he himself was ignorant whether it were a bezar-stone or not.\n[\xc2\xb63] And all the justices and Barons (except Anderson) held, that for this cause\nit was error: for the bare affirmation that it was a bezar-stone, without warranting\nit to be so, is no cause of action: and although he knew it to be no bezar-stone, it is\nnot material; for every one in selling his wares will affirm that his wares are good,\nor the horse which he sells is sound; yet if he does not warrant them to be so, it is\nno cause of action, and the warranty ought to be made at the same time of the sale;\nas F.N.B. 94. c.& 98. b.5 Hen. 7. pl. 41. 9 Hen. 6. pl.53. 12 Hen. 4. pl.1. 42 Ass. 8.\n7 Hen. 4. pl.15. Wherefore, forasmuch as no warrant is alledged, they held the\ndeclaration to be ill.\n[\xc2\xb64] Anderson to the contrary; for the deceit in selling it for a bezar, whereas it\nwas not so, is cause of action. - But, notwithstanding, it was adjudged to be no\ncause, and the judgment was reversed.\nQuestions:\n1. What is a bezar-stone?\n2. Did Chandelor misrepresent the nature of the stone?\n3. Did the parties\xe2\x80\x99 mistake about the nature of the stone have any legal effect here?\nNote: In equity (that is, in front of the English chancellor) some relief might have\nbeen obtainable here. Unfortunately, our published records of English equity are\nscant. The chancellor was granting relief for mistake at least by 1540, but just under what circumstances is uncertain. Real relief for mutual mistake would not\ncome until American jurists around the turn of the 19th century combined the assent-focused approach to contracts used by natural and civil lawyers (Pufendorf,\n156\n\n\x0cGrotius, Pothier) with the consideration-focused approach found in the common\nlaw.\nSHERWOOD v. WALKER and others\nSupreme Court of Michigan\nJuly 7, 1887\n33 N.W. 919\nMORSE, J.\n[\xc2\xb61] Replevin for a cow. Suit commenced in justice\xe2\x80\x99s court; judgment for plaintiff; appealed to circuit court of Wayne county, and verdict and judgment for\nplaintiff in that court. The defendants bring error, and set out 25 assignments of\nthe same.\n[\xc2\xb62] The main controversy depends upon the construction of a contract for the\nsale of the cow. The plaintiff claims that the title passed, and bases his action upon\nsuch claim. The defendants contend that the contract was executory, and by its\nterms no title to the animal was acquired by plaintiff.\n[\xc2\xb63] The defendants reside at Detroit, but are in business at Walkerville, Ontario, and have a farm at Greenfield, in Wayne county, upon which were some\nblooded cattle supposed to be barren as breeders. The Walkers are importers and\nbreeders of polled Angus cattle. The plaintiff is a banker living at Plymouth, in\nWayne county. He called upon the defendants at Walkerville for the purchase of\nsome of their stock, but found none there that suited him. Meeting one of the defendants afterwards, he was informed that they had a few head upon this Greenfield farm. He was asked to go out and look at them, with the statement at the\ntime that they were probably barren, and would not breed. May 5, 1886, plaintiff\nwent out to Greenfield and saw the cattle. A few days thereafter, he called upon\none of the defendants with the view of purchasing a cow, known as \xe2\x80\x9cRose 2d of\nAberlone.\xe2\x80\x9d After considerable talk, it was agreed that defendants would telephone\nSherwood at his home in Plymouth in reference to the price. The second morning\nafter this talk he was called up by telephone, and the terms of the sale were finally\nagreed upon. He was to pay five and one-half cents per pound, live weight, fifty\npounds shrinkage. He was asked how he intended to take the cow home, and replied that he might ship her from King\xe2\x80\x99s cattle-yard. He requested defendants to\nconfirm the sale in writing, which they did by sending him the following letter:\n\xe2\x80\x9cWALKERVILLE, May 15,1886.\n\xe2\x80\x9cT.C. SHERWOOD,\nPresident, etc.,\xe2\x80\x94\n\xe2\x80\x9cDear Sir: We confirm sale to you of the cow Rose 2d Aberlone, lot 56 of\nour catalogue, at five and a half cents per pound, less fifty pounds after\nshrink. We inclose herewith order on Mr. Graham for the cow. You might\nleave check with him, or mail to us here, as you prefer.\n157\n\n\x0c\xe2\x80\x9cYours truly,\n\xe2\x80\x9cHIRAM WALKER & SONS.\xe2\x80\x9d\nThe order upon Graham inclosed in the letter read as follows:\n\xe2\x80\x9cWALKERVILLE, May 15, 1886.\n\xe2\x80\x9cGeorge Graham: You will please deliver at Kings cattle-yard to Mr. T.C.\nSherwood, Plymouth, the cow Rose 2d of Aberlone, lot 56 of our catalogue. Send halter with cow, and have her weighed.\n\xe2\x80\x9cYours truly,\n\xe2\x80\x9cHIRAM WALKER & SONS.\xe2\x80\x9d\n[\xc2\xb63] On the twenty-first of the same month the plaintiff went to defendants\xe2\x80\x99\nfarm at Greenfield, and presented the order and letter to Graham, who informed\nhim that the defendants had instructed him not to deliver the cow. Soon after, the\nplaintiff tendered to Hiram Walker, one of the defendants, $80, and demanded the\ncow. Walker refused to take the money or deliver the cow. The plaintiff then instituted this suit. After he had secured possession of the cow under the writ of replevin, the plaintiff caused her to be weighed by the constable who served the writ,\nat a place other than King\xe2\x80\x99s cattle-yard. She weighed 1,420 pounds.\n[\xc2\xb64] When the plaintiff, upon the trial in the circuit court, had submitted his\nproofs showing the above transaction, defendants moved to strike out and exclude\nthe testimony from the case, for the reason that it was irrelevant, and did not tend\nto show that the title to the cow passed, and that it showed that the contract of sale\nwas merely executory. The court refused the motion, and an exception was taken.\nThe defendants then introduced evidence tending to show that at the time of the\nalleged sale it was believed by both the plaintiff and themselves that the cow was\nbarren and would not breed; that she cost $850, and if not barren would be worth\nfrom $750 to $1,000; that after the date of the letter, and the order to Graham, the\ndefendants were informed by said Graham that in his judgment the cow was with\ncalf, and therefore they instructed him not to deliver her to plaintiff, and on the\ntwentieth of May, 1886, telegraphed to the plaintiff what Graham thought about\nthe cow being with calf, and that consequently they could not sell her. The cow\nhad a calf in the month of October following. On the nineteenth of May, the plaintiff wrote Graham as follows:\n\xe2\x80\x9cPLYMOUTH, May 19, 1886.\xe2\x80\x9d\nMR. GEORGE GRAHAM,\n\xe2\x80\x9cGreenfield, \xe2\x80\x94\n\xe2\x80\x9cDear Sir: I have bought Rose or Lucy from Mr. Walker, and will be there\nfor her Friday morning, nine or ten o\xe2\x80\x99clock. Do not water her in the morning.\n\xe2\x80\x9cYours, etc.,\n\xe2\x80\x9cT. C. SHERWOOD.\xe2\x80\x9d\nPlaintiff explained the mention of the two cows in this letter by testifying that,\nwhen he wrote this letter, the order and letter of defendants were at his house, and,\nwriting in a hurry, and being uncertain as to the name of the cow, and not wishing\n158\n\n\x0chis cow watered, he thought it would do no harm to name them both, as his bill of\nsale would show which one he had purchased. Plaintiff also testified that he asked\ndefendants to give him a price on the balance of their herd at Greenfield, as a\nfriend thought of buying some, and received a letter dated May 17, 1886, in which\nthey named the price of five cattle, including Lucy at $90, and Rose 2d at $80.\nWhen he received the letter he called defendants up by telephone, and asked them\nwhy they put Rose 2d in the list, as he had already purchased her. They replied\nthat they knew he had, but thought it would make no difference if plaintiff and his\nfriend concluded to take the whole herd.\n[\xc2\xb65]\n\nThe foregoing is the substance of all the testimony in the case.\n\n[\xc2\xb66] The circuit judge instructed the jury that if they believed the defendants,\nwhen they sent the order and letter to plaintiff, meant to pass the title to the cow,\nand that the cow was intended to be delivered to plaintiff, it did not matter whether the cow was weighed at any particular place, or by any particular person; and if\nthe cow was weighed afterwards, as Sherwood testified, such weighing would be\na sufficient compliance with the order; if they believed that defendants intended to\npass the title by the writing, it did not matter whether the cow was weighed before\nor after suit brought, and the plaintiff would be entitled to recover. The defendants\nsubmitted a number of requests, which were refused. The substance of them was\nthat the cow was never delivered to plaintiff, and the title to her did not pass by\nthe letter and order; and that under the contract, as evidenced by these writings,\nthe title did not pass until the cow was weighed and her price thereby determined;\nand that, if the defendants only agreed to sell a cow that would not breed, then the\nbarrenness of the cow was a condition precedent to passing title, and plaintiff\ncannot recover. The court also charged the jury that it was immaterial whether the\ncow was with calf or not. It will therefore be seen that the defendants claim that,\nas a matter of law, the title to this cow did not pass, and that the circuit judge erred\nin submitting the case to the jury, to be determined by them, upon the intent of the\nparties as to whether or not the title passed with the sending of the letter and order\nby the defendants to the plaintiff. * * * *\n[\xc2\xb67] It appears from the record that both parties supposed this cow was barren\nand would not breed, and she was sold by the pound for an insignificant sum as\ncompared with her real value if a breeder. She was evidently sold and purchased\non the relation of her value for beef, unless the plaintiff had learned of her true\ncondition, and concealed such knowledge from the defendants. Before the plaintiff secured possession of the animal, the defendants learned that she was with calf,\nand therefore of great value, and undertook to rescind the sale by refusing to deliver her. The question arises whether they had a right to do so. The circuit judge\nruled that this fact did not avoid the sale, and it made no difference whether she\nwas barren or not. I am of the opinion that the court erred in this holding. I know\nthat this is a close question, and the dividing line between the adjudicated cases is\nnot easily discerned. But it must be considered as well settled that a party who has\ngiven an apparent consent to a contract of sale may refuse to execute it, or he may\n159\n\n\x0cavoid it after it has been completed, if the assent was founded, or the contract\nmade, upon the mistake of a material fact,\xe2\x80\x94such as the subject-matter of the sale,\nthe price, or some collateral fact materially inducing the agreement; and this can\nbe done when the mistake is mutual, 1 Benj. Sales, \xc2\xa7\xc2\xa7 605, 606; Leake, Cont. 339;\nStory, Sales (4th ed.), \xc2\xa7\xc2\xa7 148, 377. See, also, Cutts v. Guild, 57 H. Y. 229; Harvey\nv. Harris, 112 Mass. 32; Gardner v. Lane, 9 Allen, 492; S. C. 12 Allen, 44; Huthmacher v. Harris\xe2\x80\x99 Adm\xe2\x80\x99rs, 38 Penn. St. 491; Byers v. Chapin, 28 Ohio St. 300;\nGibson v. Pelkie, 37 Mich. 380, and cases cited; Allen v. Hammond, 11 Pet. 63, 71.\n[\xc2\xb68] If there is a difference or misapprehension as to the substance of the thing\nbargained for, if the thing actually delivered or received is different in substance\nfrom the thing bargained for and intended to be sold, then there is no contract; but\nif it be only a difference in some quality or accident, even though the mistake may\nhave been the actuating motive to the purchaser or seller, or both of them, yet the\ncontract remains binding. \xe2\x80\x9cThe difficulty in every case is to determine whether the\nmistake or misapprehension is as to the substance of the whole contract, going, as\nit were, to the root of the matter, or only to some point, even though a material\npoint, an error as to which does not affect the substance of the whole consideration.\xe2\x80\x9d Kennedy v. Panama, etc., Mail Co., L. E. 2 Q. B. 580, 588. It has been held,\nin accordance with the principles above stated, that where a horse is bought under\nthe belief that he is sound, and both vendor and vendee honestly believe him to be\nsound, the purchaser must stand by his bargain, and pay the full price, unless there\nwas a warranty.\n[\xc2\xb69] It seems to me, however, in the case made by this record, that the mistake\nor misapprehension of the parties went to the whole substance of the agreement. If\nthe cow was a breeder, she was worth at least $750; if barren, she was worth not\nover $80. The parties would not have made the contract of sale except upon the\nunderstanding and belief that she was incapable of breeding, and of no use as a\ncow. It is true she is now the identical animal that they thought her to be when the\ncontract was made; there is no mistake as to the identity of the creature. Yet the\nmistake was not of the mere quality of the animal, but went to the very nature of\nthe thing. A barren cow is substantially a different creature than a breeding one.\nThere is as much difference between them for all purposes of use as there is between an ox and a cow that is capable of breeding and giving milk. If the mutual\nmistake had simply related to the fact whether she was with calf or not for one\nseason, then it might have been a good sale; but the mistake affected the character\nof the animal for all time, and for her present and ultimate use. She was not in fact\nthe animal, or the kind of animal, the defendants intended to sell or the plaintiff to\nbuy. She was not a barren cow, and, if this fact had been known, there would have\nbeen no contract. The mistake affected the substance of the whole consideration,\nand it must be considered that there was no contract to sell or sale of the cow as\nshe actually was. The thing sold and bought had in fact no existence. She was sold\nas a beef creature would be sold; she is in fact a breeding cow, and a valuable one.\nThe court should have instructed the jury that if they found that the cow was sold,\nor contracted to be sold, upon the understanding of both parties that she was bar160\n\n\x0cren, and useless for the purpose of breeding, and that in fact she was not barren,\nbut capable of breeding, then the defendants had a right to rescind, and to refuse\nto deliver, and the verdict should be in their favor.\n[\xc2\xb610] The judgment of the court below must be reversed, and a new trial granted,\nwith costs of this Court to defendants.\nCAMPBELL, C.J., and CHAMPLIN, J., concurred.\nSHERWOOD, J. (dissenting).\n[\xc2\xb61] I do not concur in the opinion given by my brethren in this case. I think\nthe judgments before the justice and at the circuit were right. * * * *\n[\xc2\xb62] As has already been stated by my brethren, the record shows that the\nplaintiff is a banker, and farmer as well, carrying on a farm, and raising the best\nbreeds of stock, and lived in Plymouth, in the county of Wayne, 23 miles from\nDetroit; that the defendants lived in Detroit, and were also dealers in stock of the\nhigher grades; that they had a farm at Walkerville, in Canada, and also one in\nGreenfield, in said county of Wayne, and upon these farms the defendants kept\ntheir stock. The Greenfield farm was about 15 miles from the plaintiff\xe2\x80\x99s. In the\nspring of 1886 the plaintiff, learning that the defendants had some \xe2\x80\x9cpolled Angus\ncattle\xe2\x80\x9d for sale, was desirous of purchasing some of that breed, and, meeting the\ndefendants, or some of them, at Walkerville, inquired about them, and was informed that they had none at Walkerville, \xe2\x80\x9cbut had a few head left on their farm in\nGreenfield, and they asked the plaintiff to go and see them, stating that in all\nprobability they were sterile and would not breed.\xe2\x80\x9d In accordance with said request, the plaintiff, on the fifth day of May, went out and looked at the defendants\xe2\x80\x99\ncattle at Greenfield, and found one called \xe2\x80\x9cRose 2d,\xe2\x80\x9d which he wished to purchase,\nand the terms were finally agreed upon at five and one-half cents per pound, live\nweight, 50 pounds to be deducted for shrinkage. The sale was in writing, and the\ndefendants gave an order to the plaintiff directing the man in charge of the Greenfield farm to deliver the cow to plaintiff. This was done on the fifteenth of May.\nOn the twenty-first of May plaintiff went to get his cow, and the defendants refused to let him have her; claiming at the time that the man in charge at the farm\nthought the cow was with calf, and, if such was the case, they would not sell her\nfor the price agreed upon. The record further shows that the defendants, when\nthey sold the cow, believed the cow was not with calf, and barren; that from what\nthe plaintiff had been told by defendants (for it does not appear he had any other\nknowledge or facts from which he could form an opinion) he believed the cow\nwas farrow, but still thought she could be made to breed. The foregoing shows the\nentire interview and treaty between the parties as to the sterility and qualities of\nthe cow sold to the plaintiff. The cow had a calf in the month of October.\n[\xc2\xb63] There is no question but that the defendants sold the cow representing her\nof the breed and quality they believed the cow to be, and that the purchaser so un161\n\n\x0cderstood it. And the buyer purchased her believing her to be of the breed represented by the sellers, and possessing all the qualities stated, and even more. He\nbelieved she would breed. There is no pretense that the plaintiff bought the cow\nfor beef, and there is nothing in the record indicating that he would have bought\nher at all only that he thought she might be made to breed. Under the foregoing\nfacts,\xe2\x80\x94and these are all that are contained in the record material to the contract,\xe2\x80\x94it is held that because it turned out that the plaintiff was more correct in\nhis judgment as to one quality of the cow than the defendants, and a quality, too,\nwhich could not by any possibility be positively known at the time by either party\nto exist, the contract may be annulled by the defendants at their pleasure. I know\nof no law, and have not been referred to any, which will justify any such holding,\nand I think the circuit judge was right in his construction of the contract between\nthe parties.\n[\xc2\xb64] It is claimed that a mutual mistake of a material fact was made by the parties when the contract of sale was made. There was no warranty in the case of the\nquality of the animal. When a mistaken fact is relied upon as ground for rescinding, such fact must not only exist at the time the contract is made, but must have\nbeen known to one or both of the parties. Where there is no warranty, there can be\nno mistake of fact when no such fact exists, or, if in existence, neither party knew\nof it, or could know of it; and that is precisely this case. If the owner of a Hambletonian horse had speeded him, and was only able to make him go a mile in three\nminutes, and should sell him to another, believing that was his greatest speed, for\n$300, when the purchaser believed he could go much faster, and made the purchase for that sum, and a few days thereafter, under more favorable circumstances,\nthe horse was driven a mile in 2 min. 16 sec., and was found to be worth $20,000,\nI hardly think it would be held, either at law or in equity, by any one, that the seller in such case could rescind the contract. The same legal principles apply in each\ncase.\n[\xc2\xb65] In this case neither party knew the actual quality and condition of this cow\nat the time of the sale. The defendants say, or rather said, to the plaintiff, \xe2\x80\x9cthey\nhad a few head left on their farm in Greenfield, and asked plaintiff to go and see\nthem, stating to plaintiff that in all probability they were sterile and would not\nbreed.\xe2\x80\x9d Plaintiff did go as requested, and found there three cows, including the\none purchased, with a bull. The cow had been exposed, but neither knew she was\nwith calf or whether she would breed. The defendants thought she would not, but\nthe plaintiff says that he thought she could be made to breed, but believed she was\nnot with calf. The defendants sold the cow for what they believed her to be, and\nthe plaintiff bought her as he believed she was, after the statements made by the\ndefendants. No conditions whatever were attached to the terms of sale by either\nparty. * * * *\n\n162\n\n\x0cQuestions:\n1. In Allen v. Hammond, 36 U.S. (11 Pet.) 63 (1837), a case cited by both the majority and the dissent, the court asked:\nSuppose a life-estate in land be sold, and at the time of the sale, the\nestate has terminated by the death of the person in whom the right\nvested; would not a court of equity relieve the purchaser? If the\nvendor knew of the death, relief would be given on the ground of\nfraud; if he did not know it, on the ground of mistake. * * * * If a\nhorse be sold, which is dead, though believed to be living by both\nparties, can the purchaser be compelled to pay the consideration?\xe2\x80\x9d\nThe court thought not, under the doctrine of mutual mistake.\nThese cases fall into one category of mutual mistake\xe2\x80\x94we might call them\ncases of present impossibility. In fact, there is no life estate or horse to sell, so the\nseller\xe2\x80\x99s performance is impossible at the time the contract is formed. Some jurisdictions actually have a doctrine called \xe2\x80\x9cpresent impossibility\xe2\x80\x9d that will also render a contract voidable.\n2. In Allen v. Hammond itself, a ship was illegally captured by the Portuguese.\nNotice of the capture was given to Washington, D.C., but the ship and its cargo by\nthat time had already been sold. This occurred in 1830. News of the capture took\ntime to reach the ship\xe2\x80\x99s owner, Hammond. On January 27, 1832, Hammond hired\nAllen to petition for compensation with the federal government and the government of Portugal. Hammond agreed to pay Allen ten percent of the first $8,000\nHammond obtained and one-third of everything after that. At the time, Hammond\nand Allen didn\xe2\x80\x99t know that federal government agents had already complained to\nPortugal, which admitted a claim of $33,700 and paid one quarter of that. When\nHammond learned this, he sued for a declaration that his contract with Allen was\nvoid. The court granted the declaration. This is another category of mutual mistake. The seller\xe2\x80\x99s performance is possible, here, because Allen could petition Portugal regarding the ship. But there would be no point to doing so. Allen\xe2\x80\x99s performance would be valueless to Hammond. We might call this a case of frustration of\npurpose. Some jurisdictions also have a doctrine called \xe2\x80\x9cpresent frustration of\npurpose\xe2\x80\x9d that will also render a contract voidable.\n3. Does Sherwood v. Walker fit into these two categories?\n4. Do you think Sherwood is correctly decided? Who should bear the risk of the\nmistake in this case? Is non-assumption of risk an element of mutual mistake?\nMost cases say it is. The court in Robert v. Century Contractors, Inc., 592 S.E.2d\n215, 219 (N.C. App. 2004) stated,\nLikewise, a party who assumed the risk of a mistaken fact cannot\navoid a contract. Id.\nA party bears the risk of a mistake when\n(a) the risk is allocated to him by agreement of the parties,\nor\n163\n\n\x0c(b) he is aware, at the time the contract is made that he has\nonly limited knowledge with respect to the facts to which\nthe mistake relates but treats his limited knowledge as sufficient, or\n(c) the risk is allocated to him by the court on the ground\nthat it is reasonable in the circumstances to do so.\nRestatement (Second) Contracts, \xc2\xa7 154 (1979) * * * *.\nDid the purchaser of Rose 2d of Aberlone assume the risk of the mistake? Did the\nseller? Did any of the judges consider assumption of risk?\n5. Suppose a farmer sells his farm to another farmer who discovers oil under the\nproperty before closing. (By closing I mean the actual transfer of the deed for the\nfarm, on the one hand, and the money used to buy it, on the other.) Can the first\nfarmer sue to rescind the sale on the basis of mutual mistake, do you think?\n6. In Lenawee County Bd. of Health v. Messerly, 331 N.W.2d 203 (Mich. 1982),\nthe Michigan Supreme Court limited Sherwood \xe2\x80\x9cto its facts,\xe2\x80\x9d which more or less\ntakes away all of its precedential value but does not overrule the case.\n7. Is Sherwood tedious to read? Why?\n8. Would applying the test in Sherwood to the facts of Chandelor change the result?\n\nNote: Consideration, Fairness of Exchange, and How Contract Breach Litigation Works\nNow that we have studied duress and mutual mistake, you can begin to understand the courts\xe2\x80\x99 hands-off approach to consideration\xe2\x80\x94that a court does not judge\nconsideration\xe2\x80\x99s \xe2\x80\x9cadequacy\xe2\x80\x9d and why that is necessary even while the court later\nlooks at the exchange\xe2\x80\x99s fairness under other doctrines. The key lies in your recognition that consideration is an element of the plaintiff\xe2\x80\x99s prima facie case; it is\nsomething only the plaintiff proves.\n\xe2\x80\x9cA plaintiff asserting a breach-of-contract claim must prove (1) the existence of a\nvalid contract . . . .\xe2\x80\x9d USAA Texas Lloyds Co. v. Menchaca, 545 S.W.3d 479, 502\nn.21 (Tex. 2018). If the plaintiff\xe2\x80\x99s complaint does not allege that, or if no evidence\nsupports that existence of a contract against the defendant\xe2\x80\x99s motion for summary\njudgment, then the plaintiff\xe2\x80\x99s case is dismissed.\nHow does the plaintiff allege or prove \xe2\x80\x9cthe existence of a valid contract\xe2\x80\x9d? By alleging and offering evidence of each of the elements of a contract that we are\nstudying: \xe2\x80\x9ccompetent parties, legal subject-matter, valuable consideration, and\nmutual assent,\xe2\x80\x9d as well as definiteness or specificity. See Intro to this book, page\n164\n\n\x0cxvi. Alleging those things, any performance due from the plaintiff, and breach\ngets the plaintiff into court.\nThe court must therefore be able to make a judgment about consideration when it\nhas before it only the plaintiff\xe2\x80\x99s allegations. The court does this, for example,\nwhen the defendant moves to dismiss before answering the complaint. The court\nalso does this when deciding whether to grant relief to the plaintiff when the defendant never shows up in court; in such a case, the court with jurisdiction can\nissue a judgment against the defendant (called a \xe2\x80\x9cdefault judgment\xe2\x80\x9d) if the plaintiff\xe2\x80\x99s prima facie case is alleged and proved.\nBecause consideration is an element of the plaintiff\xe2\x80\x99s prima facie case, it must be\nprovable on evidence that only the plaintiff would have and would offer. A plausible exchange\xe2\x80\x94consideration\xe2\x80\x94is just that sort of thing. The plaintiff can show the\ncourt the exchange.\nBut no one should expect the plaintiff to show that the exchange was unfair. That\nis defendant\xe2\x80\x99s evidence. It is evidence only the defendant has an incentive to show,\nand much of the time only the defendant would have access to evidence showing\nunfairness. So when the defendant answers, the defendant alleges doctrines that\nshow that the bargain was unfair\xe2\x80\x94duress, mistake, misrepresentation, unconscionability. These are defenses that the defendant raises by name. After the court\nhas before it evidence from both the plaintiff and defendant regarding unfairness\n(the bargain and a defense), the court is free to consider unfairness, and the defenses are the tools to address that issue.\nGiven the way contract litigation works, then, the law is not conflicted when it\nsays it will not consider the adequacy of consideration but will consider whether a\nthreat is improper in part because \xe2\x80\x9cthe resulting exchange is not on fair terms.\xe2\x80\x9d\nR2K \xc2\xa7 176(2). Unconscionability, when you get to it, is even more intrusive, and\nmany courts under that doctrine will unwind a contract because the terms unreasonably favor one party. But that does not mean that contract law is contradictory;\nit merely means that the law is practical and requires judges to make important\ncalls only when the proper evidence is introduced at the appropriate stage of litigation.\n\n165\n\n\x0cD. Unilateral Mistake\nFIRST BAPTIST CHURCH OF MOULTRIE v. BARBER CONTRACTING\nCOMPANY et al.\nBARBER CONTRACTING COMPANY v. FIRST BAPTIST CHURCH OF\nMOULTRIE\n(Jan. 9, 1989)\nCourt of Appeals of Georgia\n377 S.E.2d 717\nMcMURRAY, Presiding Judge.\n[\xc2\xb61] The First Baptist Church of Moultrie, Georgia, invited bids for the construction of a music, education and recreation building. The bids were to be\nopened on May 15, 1986. They were to be accompanied by a bid bond in the\namount of 5 percent of the base bid. The bidding instructions provided, in pertinent part: \xe2\x80\x9cNegligence on the part of the bidder in preparing the bid confers no\nright for the withdrawal of the bid after it has been opened.\xe2\x80\x9d\n[\xc2\xb62] Barber Contracting Company (\xe2\x80\x9cBarber\xe2\x80\x9d) submitted a bid for the project in\nthe amount of $1,860,000. The bid provided, in pertinent part: \xe2\x80\x9cFor and in consideration of the sum of $1.00, the receipt of which is hereby acknowledged, the undersigned agrees that this proposal may not be revoked or withdrawn after the\ntime set for the opening of bids but shall remain open for acceptance for a period\nof thirty-five (35) days following such time.\xe2\x80\x9d The bid also provided that if it was\naccepted within 35 days of the opening of bids, Barber would execute a contract\nfor the construction of the project within 10 days of the acceptance of the bid.\n[\xc2\xb63] A bid bond in the amount of 5 percent of Barber\xe2\x80\x99s bid ($93,000) was issued by The American Insurance Company to cover Barber\xe2\x80\x99s bid. With regard to\nthe bid bond, the bid submitted by Barber provided: \xe2\x80\x9cIf this proposal is accepted\nwithin thirty-five (35) days after the date set for the opening of bids and the undersigned [Barber] fails to execute the contract within ten (10) days after written\nnotice of such acceptance ... the obligation of the bid bond will remain in full\nforce and effect and the money payable thereon shall be paid into the funds of the\nOwner as liquidated damages for such failure ...\xe2\x80\x9d\n[\xc2\xb64] The bids were opened by the church on May 15, 1986, as planned. Barber\nsubmitted the lowest bid. The second lowest bid, in the amount of $1,975,000 was\nsubmitted by H & H Construction and Supply Company, Inc. (\xe2\x80\x9cH & H\xe2\x80\x9d).\n[\xc2\xb65] Barber\xe2\x80\x99s president, Albert W. Barber was present when the bids were\nopened, and of course, he was informed that Barber was the low bidder. Members\nof the church building committee informally asked President Barber if changes\ncould be made in the contract to reduce the amount of the bid. He replied that he\nwas sure such changes could be made.\n166\n\n\x0c[\xc2\xb66] On May 16, 1986, Albert W. Barber informed the architect for the project,\nWilliam Frank McCall, Jr., that the amount of the bid was in error\xe2\x80\x94the bid should\nhave been $143,120 higher. In Mr. Barber\xe2\x80\x99s words: \xe2\x80\x9c[T]he mistake in Barber\xe2\x80\x99s bid\nwas caused by an error in totaling the material costs on page 3 of Barber\xe2\x80\x99s estimate work sheets. The subtotal of the material cost listed on that page is actually\n$137,990. The total listed on Barber\xe2\x80\x99s summary sheet for the material cost subtotal was $19,214. The net error in addition was $118,776. After adding in mark-ups\nfor sales tax (4 percent), overhead and profit (15 percent), and bond procurement\ncosts (.75 percent), the error was compounded to a total of $143,120 ...\xe2\x80\x9d The architect immediately telephoned Billy G. Fallin, co-chairman of the church building committee, and relayed the information which he received from President\nBarber.\n[\xc2\xb67] On May 20, 1986, Barber delivered letters to the architect and the church.\nIn the letter to the architect, Barber enclosed copies of its estimate sheets and requested that it be permitted to withdraw its bid. In the letter to the church, Barber\nstated that it was withdrawing its bid on account of \xe2\x80\x9can error in adding certain estimated material costs.\xe2\x80\x9d In addition, Barber sought the return of the bid bond from\nthe church.\n[\xc2\xb68] On May 29, 1986, the church forwarded a construction contract, based upon Barber\xe2\x80\x99s bid, to Barber. The contract had been prepared by the architect and\nexecuted by the church. The next day, Barber returned the contract to the church\nwithout executing it. In so doing, Barber pointed out that its bid had been withdrawn previously.\n[\xc2\xb69] On July 25, 1986, the church entered into a construction contract for the\nproject with H & H, the second lowest bidder. Through deletions and design\nchanges, the church was able to secure a contract with H & H for $1,919,272.\n[\xc2\xb610] In the meantime, the church demanded that Barber and The American Insurance Company pay it $93,000 pursuant to the bid bond. The demand was refused.\n[\xc2\xb611] On May 26, 1987, the church brought suit against Barber and The American Insurance Company seeking to recover the amount of the bid bond. Answering the complaint, defendants denied they were liable to plaintiff.\n[\xc2\xb612] Thereafter, defendants moved for summary judgment and so did the plaintiff. In support of their summary judgment motions, defendants submitted the affidavit of Albert W. Barber. He averred that in preparing its bid, Barber exercised\nthe level of care ordinarily exercised by contractors submitting sealed bids. In\nsupport of its summary judgment motion, the church submitted the affidavit of a\nbuilding contractor who averred that he would never submit a bid of any magnitude without obtaining assistance in verification and computation.\n167\n\n\x0c[\xc2\xb613] The trial court denied the summary judgment motions, certified its rulings\nfor immediate review and we granted these interlocutory appeals. Held:\n[\xc2\xb614] The question for decision is whether Barber was entitled to rescind its bid\nupon discovering that it was based upon a miscalculation or whether Barber\nshould forfeit its bond because it refused to execute the contract following the acceptance of its bid by the church. We hold that Barber was entitled to rescind its\nbid.\n[\xc2\xb615] That equity will rescind a contract upon a unilateral mistake is a generally\naccepted principle. See Corbin on Contracts, \xc2\xa7 609 (1960). As it is said: \xe2\x80\x9cWhere a\nmistake of one party at the time a contract was made as to a basic assumption on\nwhich he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not\nbear the risk of the mistake ... and (a) the effect of the mistake is such that enforcement of the contract would be unconscionable, or (b) the other party had reason to know of the mistake or his fault caused the mistake.\xe2\x80\x9d Restatement (2d) of\nContracts, \xc2\xa7 153 (1979).\n[\xc2\xb616] The following illustration demonstrates the rule: \xe2\x80\x9cIn response to B\xe2\x80\x99s invitation for bids on the construction of a building according to stated specifications,\nA submits an offer to do the work for $150,000. A believes that this is the total of\na column of figures, but he has made an error by inadvertently omitting a $50,000\nitem, and in fact the total is $200,000. B, having no reason to know of A\xe2\x80\x99s mistake,\naccepts A\xe2\x80\x99s bid. If A performs for $150,000, he will sustain a loss of $20,000 instead of making an expected profit of $30,000. If the court determines that enforcement of the contract would be unconscionable, it is voidable by A.\xe2\x80\x9d Restatement (2d) of Contracts, \xc2\xa7 153 (1979) (Illustration 1).\n[\xc2\xb617] Corbin explains: \xe2\x80\x9cSuppose ... a bidding contractor makes an offer to supply specified goods or to do specified work for a definitely named price, and that\nhe was caused to name this price by an antecedent error of computation. If, before\nacceptance, the offeree knows, or has reason to know, that a material error has\nbeen made, he is seldom mean enough to accept; and if he does accept, the courts\nhave no difficulty in throwing him out. He is not permitted `to snap up\xe2\x80\x99 such an\noffer and profit thereby. If, without knowledge of the mistake and before any revocation, he has accepted the offer, it is natural for him to feel a sense of disappointment at not getting a good bargain, when the offeror insists on withdrawal;\nbut a just and reasonable man will not insist upon profiting by the other\xe2\x80\x99s mistake.\nThere are now many decisions to the effect that if the error was a substantial one\nand notice is given before the other party has made such a change of position that\nhe cannot be put substantially in status quo, the bargain is voidable and rescission\nwill be decreed.\xe2\x80\x9d Corbin on Contracts, \xc2\xa7 609 (1960).\n\n168\n\n\x0c[\xc2\xb618] Georgia law is no different. It provides for rescission and cancellation\n\xe2\x80\x9cupon the ground of mistake of fact material to the contract of one party only.\xe2\x80\x9d\nOCGA \xc2\xa7 23-2-31. The mistake must be an \xe2\x80\x9cunintentional act, or mission, or error\narising from ignorance, surprise, imposition, or misplaced confidence.\xe2\x80\x9d OCGA \xc2\xa7\n23-2-21 (a). But relief will be granted even in cases of negligence if the opposing\nparty will not be prejudiced. OCGA \xc2\xa7 23-2-32.\n[\xc2\xb619] We can see these principles at work in M. J. McGough Co. v. Jane Lamb\nMemorial Hosp., 302 F. Supp. 482 (SD Iowa 1969). In that case, a bid of\n$1,957,000 was submitted for a hospital improvement by a contractor. A bond in\nthe amount of $100,000 was given to secure the contractor\xe2\x80\x99s bid. The contractor\nsubmitted the lowest bid. After the bids were opened, but before its bid was accepted, the contractor informed the hospital that it erroneously transcribed numbers in computing the bid and that, therefore, it underbid the project by $199,800.\nNevertheless, the hospital tried to hold the contractor to its bid. When the contractor refused to execute a contract, the hospital awarded the contract to the next\nlowest bidder. The contractor and surety sought rescission of the bid and the return of the bond. The hospital sued the contractor and surety for damages. The\ndistrict court allowed the contractor to rescind. Its decision is noteworthy and illuminating. We quote it at length:\n[\xc2\xb6a] \xe2\x80\x9cBy the overwhelming weight of authority a contractor may be relieved from a unilateral mistake in his bid by rescission under the proper\ncircumstances. See generally Annot., 52 ALR2d 792 (1957). The prerequisites for obtaining such relief are: (1) the mistake is of such consequence\nthat enforcement would be unconscionable; (2) the mistake must relate to\nthe substance of the consideration; (3) the mistake must have occurred regardless of the exercise of ordinary care; (4) it must be possible to place\nthe other party in status quo. [Cits.] It is also generally required that the\nbidder give prompt notification of the mistake and his intention to withdraw. [Cits.] ...\n[\xc2\xb6b] \xe2\x80\x9cApplying the criteria for rescission for a unilateral mistake to the\ncircumstances in this case, it is clear that [the contractor] and his surety ...\nare entitled to equitable relief. The notification of mistake was promptly\nmade, and [the contractor] made every possible effort to explain the circumstances of the mistake to the authorities of [the hospital]. Although\n[the hospital] argues to the contrary, the Court finds that notification of the\nmistake was received before acceptance of the bid. The mere opening of\nthe bids did not constitute the acceptance of the lowest bid ... Furthermore,\nit is generally held that acceptance prior to notification does not bar the\nright to equitable relief from a mistake in the bid. [Cits.]\n[\xc2\xb6c] \xe2\x80\x9cThe mistake in this case was an honest error made in good faith.\nWhile a mistake in and of itself indicates some degree of lack of care or\n\n169\n\n\x0cnegligence, under the circumstances here there was not such a lack of care\nas to bar relief....\n[\xc2\xb6d] \xe2\x80\x9cThe mistake here was a simple clerical error. To allow [the hospital] to take advantage of this mistake would be unconscionable. This is especially true in light of the fact that they had actual knowledge of the mistake before the acceptance of the bid. [Cits.] Nor can it be seriously contended that a $199,800 error, amounting to approximately 10 percent of\nthe bid, does not relate directly to the substance of the consideration. Furthermore, [the hospital] has suffered no actual damage by the withdrawal\nof the bid of [the contractor]. The Hospital has lost only what it sought to\ngain by taking advantage of [the contractor\xe2\x80\x99s] mistake. [Cits.] Equitable\nconsiderations will not allow the recovery of the loss of bargain in this situation.\xe2\x80\x9d M. J. McGough Co. v. Jane Lamb Memorial Hosp., 302 F. Supp.\n482, 485, 486, supra.\n[\xc2\xb620] In the case sub judice, Barber, the contractor, promptly notified the plaintiff that a mistake was made in calculating the amount of the bid. The plaintiff had\nactual knowledge of the mistake before it forwarded a contract to Barber. The\nmistake was a \xe2\x80\x9csimple clerical error.\xe2\x80\x9d M. J. McGough Co. v. Jane Lamb Memorial\nHosp., 302 F. Supp. 482, 485, supra. See OCGA \xc2\xa7 23-2-21 (a). It did not amount\nto negligence preventing equitable relief. See OCGA \xc2\xa7 23-2-32 (a). Furthermore,\nit was a mistake which was material to the contract (OCGA \xc2\xa7 23-2-31)\xe2\x80\x94it went\nto the substance of the consideration. (The mistake amounted to approximately\nseven percent of the bid.) To allow the plaintiff to take advantage of the mistake\nwould not be just. M. J. McGough Co. v. Jane Lamb Memorial Hosp., supra at\n486. See also Shelton & Co. v. Ellis, 70 Ga. 297 (1883).\n[\xc2\xb621] The contention is made that Barber\xe2\x80\x99s miscalculation constituted negligence sufficient to prevent relief in equity. See OCGA \xc2\xa7 23-2-32(a). Assuming,\narguendo, that the error stemmed from such a want of prudence as to violate a legal duty (OCGA \xc2\xa7 23-2-32 (a)), we must nevertheless conclude that Barber is entitled to rescission.\n[\xc2\xb622] Relief in equity \xe2\x80\x9cmay be granted even in cases of negligence by the complainant if it appears that the other party has not been prejudiced thereby.\xe2\x80\x9d OCGA\n\xc2\xa7 23-2-32 (b). It cannot be said that plaintiff was prejudiced by Barber\xe2\x80\x99s rescission. After all, plaintiff \xe2\x80\x9clost only what it sought to gain by taking advantage of\n[the contractor\xe2\x80\x99s] mistake.\xe2\x80\x9d M. J. McGough Co. v. Jane Lamb Memorial Hosp.,\nsupra at 486.\n[\xc2\xb623] The plaintiff takes the position that rescission is improper since, pursuant\nto the language set forth in the bid, Barber agreed not to withdraw the bid for a\nperiod of 35 days after the bids were opened. It also asserts that the language set\nforth in the bidding instructions prohibited Barber from withdrawing the bid on\nthe ground of \xe2\x80\x9cnegligence.\xe2\x80\x9d We disagree. \xe2\x80\x9c[P]rovisions such as these have been\n170\n\n\x0cconsidered many times in similar cases, and have never been held effective when\nequitable considerations dictate otherwise. [Cits.]\xe2\x80\x9d M. J. McGough Co. v. Jane\nLamb Memorial Hosp., 302 F. Supp. 482, 487, supra.\n[\xc2\xb624] The trial court properly denied the plaintiff\xe2\x80\x99s (the church\xe2\x80\x99s) motion for\nsummary judgment. It erred in denying defendants\xe2\x80\x99 (Barber\xe2\x80\x99s and The American\nInsurance Company\xe2\x80\x99s) motions for summary judgment.\n[\xc2\xb625] Judgment affirmed in Case No. 77340; judgment reversed in Case No.\n77341.\nPOPE and BENHAM, JJ., concur.\nQuestion: In what ways is unilateral mistake doctrine different from mutual mistake doctrine?\n\nE. Misrepresentation\nMisrepresentation Law\nMisrepresentation renders a contract voidable by the party relying on the misrepresentation.\nA misrepresentation exists if\n1) one party makes a false statement, or omission in breach of a duty to speak,\n2) of a material fact (or an immaterial fact if the false statement is made with the\nintent to mislead),\n3) on which the other party relies in entering the contract,\n4) reasonably.\nNo duty to speak exists when the parties deal at arm\xe2\x80\x99s length and the underlying\nfacts are reasonably within the knowledge of both parties. Under such circumstances, the other party is obliged to take reasonable steps to inform himself, and\nto protect his own interests. A duty to speak arises, however, when the omitting\nparty is or should be aware of circumstances that would make an omission misleading.\n\n171\n\n\x0cC. Willard HENDRICK and Hazel E. Hendrick v. Catherine A. LYNN (1958)\nCourt of Chancery of Delaware, New Castle County\n144 A. 2d 147\nMARVEL, Vice Chancellor.\n[\xc2\xb61] Plaintiffs as buyers seek rescission of a consummated purchase and sale of\nreal estate. Plaintiffs complain that sometime prior to July 30, 1956 defendant\xe2\x80\x99s\nhome at 211 W. 38th Street in Wilmington was put up for sale, that on or about\nJuly 16 Miss Grace Ellingsworth, a realtor, arranged to show the premises in\nquestion to Mr. Hendrick and that on July 30, plaintiffs entered into a contract to\nbuy the house. After completing the purchase plaintiffs entered into possession on\nSeptember 10, 1956 and thereupon discovered the house to be infested with termites. The complaint alleges:\n\xe2\x80\x9c3. Although the subject premises was, on July 16, 1956, infested with\ntermites and, although defendant knew that it was so infested since the\ntermites had eaten through the hardwood floor between the living room\nand the sun room and defendant had covered the spot with a rug she\nfraudulently concealed this fact from Miss Ellingsworth and plaintiff, C.\nWillard Hendrick, for the purpose of inducing the plaintiffs to purchase\nthe subject premises from her.\n\xe2\x80\x9c4. On or about Thursday, the 19th day of July, A.D. 1956, John Scott,\nrepresenting the plaintiffs and Grace Ellingsworth, realtor, visited 211\nWest 38th Street and again went over the house with the defendant. The\nsaid Grace Ellingsworth, in the presence of John Scott, asked the defendant if there were any termites in the house. The defendant informed Mr.\nScott and Miss Ellingsworth that there were none.\n****\n\xe2\x80\x9c7. In truth and in fact, 211 West 38th Street was infested with termites\nwhich the defendant well knew, for on or about May 8, A.D. 1955, Miss\nLynn telephoned a termite exterminator to come and inspect 211 West\n38th Street and, on May 11, 1955, said inspection was made of the subject\npremises; termites were found, and the exterminator quoted defendant a\nprice for exterminating same. Defendant ordered the work done, but on or\nabout May 12, 1955, before the work had been started, she called the exterminator and cancelled the request for termite exterminating in the premises.\n\xe2\x80\x9c8. Defendant fraudulently represented that 211 West 38th Street was free\nof termites, where as in truth and in fact said premises were infested with\ntermites.\n\xe2\x80\x9c9. The fraudulent representations made by defendant were made for the\npurpose of inducing the plaintiffs to purchase 211 West 38th Street from\nher and at the time said representations were known to be untrue, and the\nplaintiffs relied upon said representations as they were entitled to do to\ntheir injury and damage.\xe2\x80\x9d\n172\n\n\x0c[\xc2\xb62] Plaintiffs accordingly ask that their purchase of said house be rescinded\ntaking the position that defendant\xe2\x80\x99s alleged statements go beyond those of inducement permitted under the maxim caveat emptor, as applied in Wiest v. Garman, 3 Del.Ch. 422, affirmed by the Court of Errors and Appeals, 4 Houst 119,\n121.\n[\xc2\xb63] Having denied defendant\xe2\x80\x99s motion to dismiss and for summary judgment\nas well as plaintiffs\xe2\x80\x99 motion for summary judgment, this Court on October 11,\n1957 directed that certain factual issues be framed for trial before a jury. Questions having been framed and submitted, the jury failed to agree on whether or not\nthe premises in question were infested with termites in July 1956 or whether or\nnot defendant believed there was termite infestation in her home. In answer to another question: \xe2\x80\x9c3 Did Miss Grace Ellingsworth, in the presence of Julian Scott,\nmake any inquiry of Miss Lynn on July 19, 1956, concerning the existence of\ntermites in the premises at 211 West 38th Street, Wilmington, Delaware?\xe2\x80\x9d, the\njury reached a negative verdict.\n[\xc2\xb64] Defendant on the basis of such verdict then moved for judgment in this\nCourt. Plaintiff opposes such motion, contending that not only was the jury verdict merely advisory but that it was inconclusive as it left the issue of concealment\nundisposed of, citing DeJoseph v. Zambelli, Ct. of Common Pleas of Montgomery\nCounty, Pennsylvania, June Term, 1955.\n[\xc2\xb65] The jury having observed and weighed the testimony of witnesses who\ntestified on the issue of misrepresentation, I adopt the jury\xe2\x80\x99s findings on such issue. To retry in this Court the facts on which the claim of misrepresentation is\nbased would merely mean to test my own powers of evaluating the honesty of\nwitnesses in a simple factual situation against those of a petit jury. I decline to do\nthis.\n[\xc2\xb66] On the issue of concealment, on which the jury furnished no aid, and\nwhich must be tried if a cause of action has been stated, plaintiffs would have the\nCourt adopt a moral code for vendor and purchaser which to date has no substantial legal sanction. In the case of Swinton v. Whitinsville Savings Bank, 311 Mass.\n677, 42 N.E. 2d 808, 141 A.L.R. 965, the Supreme Judicial Court of Massachusetts held that allegations of non-disclosure by a vendor dealing at arms\xe2\x80\x99 length\nwith a purchaser of the fact that the house there to be sold was infested with termites failed to state a cause of action. The Court stated:\n\xe2\x80\x9cIf this defendant is liable on this declaration every seller is liable who\nfails to disclose any nonapparent defect known to him in the subject of the\nsale which materially reduces its value and which the buyer fails to discover. Similarly it would seem that every buyer would be liable who fails\nto disclose any nonapparent virtue known to him in the subject of the purchase which materially enhances its value and of which the seller is ignorant. See Goodwin v. Agassiz, 283 Mass. 358, 186 N.E. 659. The law has\nnot yet, we believe, reached the point of imposing upon the frailties of\n173\n\n\x0chuman nature a standard so idealistic as this. That the particular case here\nstated by the plaintiff possesses a certain appeal to the moral sense is\nscarcely to be denied. Probably the reason is to be found in the facts that\nthe infestation of buildings by termites has not been common in Massachusetts and constitutes a concealed risk against which buyers are off their\nguard. But the law cannot provide special rules for termites and can hardly\nattempt to determine liability according to the varying probabilities of the\nexistence and discovery of different possible defects in the subjects of\ntrade.\xe2\x80\x9d\nThe ruling was followed in Spencer v. Gabriel, 328 Mass. 1, 101 N.E. 2d 369, and\nconforms with the rule of the Restatement of the Law, Contracts, Vol. 2, \xc2\xa7 472,\ncomment (b), p. 897, to the effect that, \xe2\x80\x9cA party entering into a bargain is not\nbound to tell everything he knows to the other party, even if he is aware that the\nother is ignorant of the facts; and unilateral mistake of itself, does not make a\ntransaction voidable\xe2\x80\x9d.\n[\xc2\xb67] In my opinion this rule of law applies to the case at bar, a case in which\nplaintiffs had full opportunity to inspect the premises which they later purchased.\nInasmuch as plaintiffs have failed to prove misrepresentation and because their\nallegations as to concealment fail to state a cause of action, final judgment for defendant on plaintiffs\xe2\x80\x99 cause of action based on alleged misrepresentation and\njudgment of dismissal as to that portion of plaintiffs\xe2\x80\x99 claim based on concealment\nwill be entered. * * * *\nOrder on notice.\n\nJeffrey M. STAMBOVSKY v. Helen V. ACKLEY and Ellis Realty (1991)\nSupreme Court, Appellate Division, First Department, New York\n572 N.Y.S.2d 672\nRUBIN, Justice.\n[\xc2\xb61] Plaintiff, to his horror, discovered that the house he had recently contracted to purchase was widely reputed to be possessed by poltergeists, reportedly seen\nby defendant seller and members of her family on numerous occasions over the\nlast nine years. Plaintiff promptly commenced this action seeking rescission of the\ncontract of sale. Supreme Court reluctantly dismissed the complaint, holding that\nplaintiff has no remedy at law in this jurisdiction.\n[\xc2\xb62] The unusual facts of this case, as disclosed by the record, clearly warrant a\ngrant of equitable relief to the buyer who, as a resident of New York City, cannot\nbe expected to have any familiarity with the folklore of the Village of Nyack. Not\nbeing a \xe2\x80\x9clocal\xe2\x80\x9d, plaintiff could not readily learn that the home he had contracted to\npurchase is haunted. Whether the source of the spectral apparitions seen by de174\n\n\x0cfendant seller are parapsychic or psychogenic, having reported their presence in\nboth a national publication (Readers\xe2\x80\x99 Digest) and the local press (in 1977 and\n1982, respectively), defendant is estopped to deny their existence and, as a matter\nof law, the house is haunted. More to the point, however, no divination is required\nto conclude that it is defendant\xe2\x80\x99s promotional efforts in publicizing her close encounters with these spirits which fostered the home\xe2\x80\x99s reputation in the community.\nIn 1989, the house was included in a five-home walking tour of Nyack and described in a November 27th newspaper article as \xe2\x80\x9ca riverfront Victorian (with\nghost).\xe2\x80\x9d The impact of the reputation thus created goes to the very essence of the\nbargain between the parties, greatly impairing both the value of the property and\nits potential for resale. The extent of this impairment may be presumed for the\npurpose of reviewing the disposition of this motion to dismiss the cause of action\nfor rescission (Harris v City of New York, 147 AD2d 186, 188\xe2\x80\x93189) and represents merely an issue of fact for resolution at trial.\n[\xc2\xb63] While I agree with Supreme Court that the real estate broker, as agent for\nthe seller, is under no duty to disclose to a potential buyer the phantasmal reputation of the premises and that, in his pursuit of a legal remedy for fraudulent misrepresentation against the seller, plaintiff hasn\xe2\x80\x99t a ghost of a chance, I am nevertheless moved by the spirit of equity to allow the buyer to seek rescission of the\ncontract of sale and recovery of his down payment. New York law fails to recognize any remedy for damages incurred as a result of the seller\xe2\x80\x99s mere silence, applying instead the strict rule of caveat emptor. Therefore, the theoretical basis for\ngranting relief, even under the extraordinary facts of this case, is elusive if not\nephemeral.\n[\xc2\xb64] \xe2\x80\x9cPity me not but lend thy serious hearing to what I shall unfold\xe2\x80\x9d (William\nShakespeare, Hamlet, Act I, Scene V [Ghost]).\n[\xc2\xb65] From the perspective of a person in the position of plaintiff herein, a very\npractical problem arises with respect to the discovery of a paranormal phenomenon: \xe2\x80\x9cWho you gonna\xe2\x80\x99 call?\xe2\x80\x9d as a title song to the movie \xe2\x80\x9cGhostbusters\xe2\x80\x9d asks.\nApplying the strict rule of caveat emptor to a contract involving a house possessed by poltergeists conjures up visions of a psychic or medium routinely accompanying the structural engineer and Terminix man on an inspection of every\nhome subject to a contract of sale. It portends that the prudent attorney will establish an escrow account lest the subject of the transaction come back to haunt him\nand his client\xe2\x80\x94or pray that his malpractice insurance coverage extends to supernatural disasters. In the interest of avoiding such untenable consequences, the notion that a haunting is a condition which can and should be ascertained upon reasonable inspection of the premises is a hobgoblin which should be exorcised from\nthe body of legal precedent and laid quietly to rest.\n[\xc2\xb66] It has been suggested by a leading authority that the ancient rule which\nholds that mere nondisclosure does not constitute actionable misrepresentation\n\xe2\x80\x9cfinds proper application in cases where the fact undisclosed is patent, or the\n175\n\n\x0cplaintiff has equal opportunities for obtaining information which he may be expected to utilize, or the defendant has no reason to think that he is acting under\nany misapprehension\xe2\x80\x9d (Prosser, Torts \xc2\xa7 106, at 696 [4th ed 1971]). However, with\nrespect to transactions in real estate, New York adheres to the doctrine of caveat\nemptor and imposes no duty upon the vendor to disclose any information concerning the premises (London v Courduff, 141 AD2d 803) unless there is a confidential or fiduciary relationship between the parties (Moser v Spizzirro, 31 AD2d\n537, affd 25 NY2d 941; IBM Credit Fin. Corp. v Mazda Motor Mfg. [USA] Corp.,\n152 AD2d 451) or some conduct on the part of the seller which constitutes \xe2\x80\x9cactive\nconcealment\xe2\x80\x9d (see, 17 E. 80th Realty Corp. v 68th Assocs., AD2d [1st Dept,\nMay 9, 1991] [dummy ventilation system constructed by seller]; Haberman v\nGreenspan, 82 Misc 2d 263 [foundation cracks covered by seller]). Normally,\nsome affirmative misrepresentation (e.g., Tahini Invs. v Bobrowsky, 99 AD2d 489\n[industrial waste on land allegedly used only as farm]; Jansen v Kelly, 11 AD2d\n587 [land containing valuable minerals allegedly acquired for use as campsite])\nor partial disclosure (Junius Constr. Corp. v Cohen, 257 NY 393 [existence of\nthird unopened street concealed]; Noved Realty Corp. v A. A. P. Co., 250 App Div\n1 [escrow agreements securing lien concealed]) is required to impose upon the\nseller a duty to communicate undisclosed conditions affecting the premises (contra, Young v Keith, 112 AD2d 625 [defective water and sewer systems concealed]).\n[\xc2\xb67] Caveat emptor is not so all-encompassing a doctrine of common law as to\nrender every act of nondisclosure immune from redress, whether legal or equitable. \xe2\x80\x9cIn regard to the necessity of giving information which has not been asked,\nthe rule differs somewhat at law and in equity, and while the law courts would\npermit no recovery of damages against a vendor, because of mere concealment of\nfacts under certain circumstances, yet if the vendee refused to complete the contract because of the concealment of a material fact on the part of the other, equity\nwould refuse to compel him so to do, because equity only compels the specific\nperformance of a contract which is fair and open, and in regard to which all material matters known to each have been communicated to the other\xe2\x80\x9d (Rothmiller v\nStein, 143 NY 581, 591\xe2\x80\x93592 [emphasis added]). Even as a principle of law, long\nbefore exceptions were embodied in statute law (see, e.g., UCC 2-312, 2-313, 2314, 2-315; 3-417 [2] [e]), the doctrine was held inapplicable to contagion among\nanimals, adulteration of food, and insolvency of a maker of a promissory note and\nof a tenant substituted for another under a lease (see, Rothmiller v Stein, supra, at\n592\xe2\x80\x93593, and cases cited therein). Common law is not moribund. Ex facto jus oritur (law arises out of facts). Where fairness and common sense dictate that an exception should be created, the evolution of the law should not be stifled by rigid\napplication of a legal maxim.\n[\xc2\xb68] The doctrine of caveat emptor requires that a buyer act prudently to assess\nthe fitness and value of his purchase and operates to bar the purchaser who fails to\nexercise due care from seeking the equitable remedy of rescission (see,\ne.g., Rodas v Manitaras, 159 AD2d 341). For the purposes of the instant motion\nto dismiss the action pursuant to CPLR 3211(a)(7), plaintiff is entitled to every\n176\n\n\x0cfavorable inference which may reasonably be drawn from the pleadings (Arrington v New York Times Co., 55 NY2d 433, 442; Rovello v Orofino Realty Co., 40\nNY2d 633, 634), specifically, in this instance, that he met his obligation to conduct an inspection of the premises and a search of available public records with\nrespect to title. It should be apparent, however, that the most meticulous inspection and the search would not reveal the presence of poltergeists at the premises or\nunearth the property\xe2\x80\x99s ghoulish reputation in the community. Therefore, there is\nno sound policy reason to deny plaintiff relief for failing to discover a state of affairs which the most prudent purchaser would not be expected to even contemplate (see, Da Silva v Musso, 53 NY2d 543, 551).\n[\xc2\xb69] The case law in this jurisdiction dealing with the duty of a vendor of real\nproperty to disclose information to the buyer is distinguishable from the matter\nunder review. The most salient distinction is that existing cases invariably deal\nwith the physical condition of the premises (e.g., London v Courduff, supra [use\nas a landfill]; Perin v Mardine Realty Co., 5 AD2d 685, affd 6 NY2d 920 [sewer\nline crossing adjoining property without owner\xe2\x80\x99s consent]), defects in title\n(e.g., Sands v Kissane, 282 App Div 140 [remainderman]), liens against the property (e.g., Noved Realty Corp. v A. A. P. Co., supra), expenses or income\n(e.g., Rodas v Manitaras, supra [gross receipts]) and other factors affecting its\noperation. No case has been brought to this court\xe2\x80\x99s attention in which the property\nvalue was impaired as the result of the reputation created by information disseminated to the public by the seller (or, for that matter, as a result of possession by\npoltergeists).\n[\xc2\xb610] Where a condition which has been created by the seller materially impairs\nthe value of the contract and is peculiarly within the knowledge of the seller or\nunlikely to be discovered by a prudent purchaser exercising due care with respect\nto the subject transaction, nondisclosure constitutes a basis for rescission as a matter of equity. Any other outcome places upon the buyer not merely the obligation\nto exercise care in his purchase but rather to be omniscient with respect to any\nfact which may affect the bargain. No practical purpose is served by imposing\nsuch a burden upon a purchaser. To the contrary, it encourages predatory business\npractice and offends the principle that equity will suffer no wrong to be without a\nremedy.\n[\xc2\xb611] Defendant\'s contention that the contract of sale, particularly the merger or\n\xe2\x80\x9cas is\xe2\x80\x9d clause, bars recovery of the buyer\'s deposit is unavailing. Even an express\ndisclaimer will not be given effect where the facts are peculiarly within the\nknowledge of the party invoking it (Danann Realty Corp. v. Harris, 5 N.Y.2d 317,\n322, 184 N.Y.S.2d 599, 157 N.E.2d 597; Tahini Invs., Ltd. v. Bobrowsky, supra).\nMoreover, a fair reading of the merger clause reveals that it expressly disclaims\nonly representations made with respect to the physical condition of the premises\nand merely makes general reference to representations concerning \xe2\x80\x9cany other matter or things affecting or relating to the aforesaid premises\xe2\x80\x9d. As broad as this language may be, a reasonable interpretation is that its effect is limited to tangible or\n177\n\n\x0cphysical matters and does not extend to paranormal phenomena. Finally, if the\nlanguage of the contract is to be construed as broadly as defendant urges to encompass the presence of poltergeists in the house, it cannot be said that she has\ndelivered the premises \xe2\x80\x9cvacant\xe2\x80\x9d in accordance with her obligation under the provisions of the contract rider.\n[\xc2\xb612] To the extent New York law may be said to require something more than\n\xe2\x80\x9cmere concealment\xe2\x80\x9d to apply even the equitable remedy of rescission, the case\nof Junius Constr. Corp. v Cohen (257 NY 393, supra), while not precisely on\npoint, provides some guidance. In that case, the seller disclosed that an official\nmap indicated two as yet unopened streets which were planned for construction at\nthe edges of the parcel. What was not disclosed was that the same map indicated a\nthird street which, if opened, would divide the plot in half. The court held that,\nwhile the seller was under no duty to mention the planned streets at all, having\nundertaken to disclose two of them, he was obliged to reveal the third (see also, Rosenschein v McNally, 17 AD2d 834).\n[\xc2\xb613] In the case at bar, defendant seller deliberately fostered the public belief\nthat her home was possessed. Having undertaken to inform the public-at-large, to\nwhom she has no legal relationship, about the supernatural occurrences on her\nproperty, she may be said to owe no less a duty to her contract vendee. It has been\nremarked that the occasional modern cases which permit a seller to take unfair\nadvantage of a buyer\xe2\x80\x99s ignorance so long as he is not actively misled are \xe2\x80\x9csingularly unappetizing\xe2\x80\x9d (Prosser, Torts \xc2\xa7 106, at 696 [4th ed 1971]). Where, as here,\nthe seller not only takes unfair advantage of the buyer\xe2\x80\x99s ignorance but has created\nand perpetuated a condition about which he is unlikely to even inquire, enforcement of the contract (in whole or in part) is offensive to the court\xe2\x80\x99s sense of equity.\nApplication of the remedy of rescission, within the bounds of the narrow exception to the doctrine of caveat emptor set forth herein, is entirely appropriate to relieve the unwitting purchaser from the consequences of a most unnatural bargain.\n[\xc2\xb614] Accordingly, the judgment of the Supreme Court, New York County (Edward H. Lehner, J.), entered April 9, 1990, which dismissed the complaint pursuant to CPLR 3211 (a) (7), should be modified, on the law and the facts, and in the\nexercise of discretion, and the first cause of action seeking rescission of the contract reinstated, without costs. * * * *\n[\xc2\xb615] All concur except MILONAS, J.P. and SMITH, J., who dissent in an opinion by SMITH, J. [in which Smith argued for the application of caveat emptor].\nImages of the house are easy to find online, if you are interested.\nQuestion: The court in Dana v. Hershey Co., 180 F. Supp. 3d 652 (N.D. Cal.\n2016), held that Hershey did not have to disclose on its products that its supply\nchain includes chocolate produced in Ivory Coast using child and slave labor, a\nfact Hershey had acknowledged in a public statement. What\'s the difference be178\n\n\x0ctween that case and this? See also Hodsdon v. Mars, Inc., 162 F. Supp. 3d 1016\n(N.D. Cal. 2016).\n\nF. Unconscionability\nGloria JAMES v. NATIONAL FINANCIAL, LLC\nDel. Ch. 2016, 132 A.3d 799\n\xe2\x80\x94LASTER, Vice Chancellor.\n[\xc2\xb61] Defendant National Financial, LLC (\xe2\x80\x9cNational\xe2\x80\x9d) is a consumer finance\ncompany that operates under the trade name Loan Till Payday. In May 2013, National loaned $200 to plaintiff Gloria James (the \xe2\x80\x9cDisputed Loan\xe2\x80\x9d). National described the loan product as a \xe2\x80\x9cFlex Pay Loan.\xe2\x80\x9d * * * *\n[\xc2\xb62] The terms of the Disputed Loan called for James to make twenty-six, biweekly, interest-only payments of $60, followed by a twenty-seventh payment\ncomprising both interest of $60 and the original principal of $200. The total repayments added up to $1,820, representing a cost of credit of $1,620. According\nto the loan document that National provided to James, the annual percentage rate\n(\xe2\x80\x9cAPR\xe2\x80\x9d) for the Disputed Loan was 838.45%.\n[\xc2\xb63] James defaulted. After National rejected her request for a workout agreement, she filed this action seeking to rescind the Disputed Loan. She proved at\ntrial that the Disputed Loan was unconscionable, resulting in an order of rescission. * * * *\nI. FACTUAL BACKGROUND * * * *\nA. Hardworking But Poor\n[\xc2\xb64] James is a resident of Wilmington, Delaware. From 2007 through 2014,\nJames worked in the housekeeping department at the Hotel DuPont. In May 2013,\nwhen she obtained the Disputed Loan, James earned $11.83 per hour. As a parttime employee, her hours varied. On average, after taxes, James took home approximately $1,100 per month.\n[\xc2\xb65] James\' annualized earnings amounted to roughly 115% of the federal poverty line, placing her among what scholars call the working poor. Contrary to pernicious stereotypes of the poor as lazy, many work extremely hard. James exemplified this attribute. She got her first job at age thirteen and has been employed\nmore or less continuously ever since. Her jobs have included stints in restaurants,\nat a gas station, as a dental assistant, as a store clerk, and at a metal plating com-\n\n179\n\n\x0cpany. In 2007, she obtained her position with the Hotel DuPont. She was laid off\non December 31, 2014, when the hotel reduced its part-time staff.\nB. James\xe2\x80\x99 Use Of Credit\n[\xc2\xb66] James is undereducated and financially unsophisticated. She dropped out\nof school in the tenth grade because of problems at home. Approximately ten\nyears later, she obtained her GED.\n[\xc2\xb67] Around the same time she obtained her position with the Hotel DuPont,\nJames attempted to improve her skills by enrolling in a nine-month course on\nmedical billing and coding. For seven months, she worked from 8:00 a.m. to 4:00\np.m. at the hotel, then attended classes starting at 5:00 p.m. She was also taking\ncare of her school-age daughter. Two months before the end of the program, the\nschedule became too much and she dropped out. James thought she received a\ngrant to attend the program, but after dropping out she learned she actually had\ntaken out a student loan. She eventually repaid it.\n[\xc2\xb68] James does not have a savings account or a checking account. She has no\nsavings. She uses a Nexis card, which is a pre-paid VISA card.\n[\xc2\xb69] In May 2013, when she took out the Disputed Loan, James had been using\nhigh-interest, unsecured loans for four to five years. She obtained loans from several finance companies. She used the loans for essential needs, such as groceries\nor rent. On at least one occasion, she used a loan from one provider to pay off an\noutstanding loan from another provider.\n[\xc2\xb610] Before the Disputed Loan, James had obtained five prior loans from National. James believed that she repaid those loans in one or two payments. The\npayment history for the loans shows otherwise. [She normally repaid in four payments over two months.] * * * *\n[\xc2\xb611] For her fifth loan, James borrowed $200 on December 27, 2012, less than\none week after repaying her fourth loan. James failed to make the second payment,\nfailed to make the fourth payment, and finally repaid the loan two months later.\nHer [seven] repayments [over two months] totaled $393. * * * *\n[\xc2\xb612] Despite James\' difficulty in repaying her fifth loan, National sent her text\nmessages soliciting her interest in another loan. A text message on March 29,\n2013, stated, \xe2\x80\x9cLoan Til [sic] Payday welcomes you with open arms. If you ever\nneed a loan again we want to be your source!:)\xe2\x80\x9d A text message on April 5, 2013,\nstated, \xe2\x80\x9cLoan Til [sic] Payday misses you! Call NOW and receive $20 off your\nfirst payment.\xe2\x80\x9d\nC. The Disputed Loan\n180\n\n\x0c[\xc2\xb613] On May 7, 2013, James needed money for food and rent. She went to National\'s \xe2\x80\x9cLoan Till Payday\xe2\x80\x9d storefront operation at * * *. At the time, National operated fourteen stores in Delaware.\n[\xc2\xb614] James dealt with Ed Reilly, National\'s general manager. In that capacity,\nReilly oversaw National\'s business operations and supervised its loan approvals.\nHe also filled in at stores from time to time. He happened to be working in the\nstore * * * when James came in for a loan.\n[\xc2\xb615] James told Reilly that she wanted to borrow $200. Reilly looked up James\nin the computer program that National uses to track its customers and their loans,\nwhich is known as the \xe2\x80\x9cPayday Loan Manager.\xe2\x80\x9d It has a main page for each customer that provides identifying information[, loan status, current and past loans,\npayment history, and notes].\n[\xc2\xb616] James was a customer in good standing, meaning that she did not have to\nfill out a new loan application. She provided Reilly with her Nexis card, two recent paystubs, and her driver\'s license.\n[\xc2\xb617] Using the internet, Reilly pulled up James\' Nexis card account history for\nthe preceding sixty days and printed out a copy. It showed that James started the\nperiod with a positive balance on her card of $384.70. During the sixty days, she\nreceived direct deposit credits totaling $2,216.58 and incurred debits totaling\n$2,594.38, for negative cash flow of $377.80. Her ending balance was $6.90, and\nshe had a pending authorization for that amount. Her available cash was zero.\n[\xc2\xb618] During the sixty day period, James\' Nexis card was declined fourteen\ntimes. Reilly testified at trial that if someone\'s transaction history showed three or\nfour declines, then they probably should not receive a loan.\n[\xc2\xb619] After reviewing her transaction history, Reilly offered to loan James $400\nrather than $200. The $400 would have represented almost 40% of James\' aftertax monthly income. Reilly offered that amount because National has a policy of\nloaning borrowers up to 40% of their after-tax monthly income, regardless of their\nother expenditures. National only checks to \xe2\x80\x9cmake sure they\'re positive on payday.\xe2\x80\x9d * * * *\n[\xc2\xb620] James declined the offer of $400. She only wanted $200, and she did not\nbelieve she could repay $400.\n[\xc2\xb621] James thought she was getting a payday loan with a block rate of \xe2\x80\x9c$30 on\n$100.\xe2\x80\x9d As James understood it, this meant she would pay $60 to borrow the $200.\n\n181\n\n\x0c[\xc2\xb622] Lenders developed the block rate concept to describe the finance charge\nfor a traditional payday loan, which was a single-payment loan designed to be repaid on the borrower\'s next payday. National\'s trade name\xe2\x80\x94Loan Till Payday\xe2\x80\x94\nembodies this concept. Because the loan was technically intended to be outstanding only for a single block of time, payday loan companies described the finance\ncharge by identifying the dollar amount per $100 borrowed that the customer\nwould owe at the end of the period. A block rate of \xe2\x80\x9c$30 on $100\xe2\x80\x9d meant that a\ncustomer who borrowed $100 would repay $130 on her next payday.\n[\xc2\xb623] In May 2013, when James approached National for a $200 loan, National\nwas no longer making traditional payday loans. Effective January 1, 2013, the\nGeneral Assembly amended Delaware\'s statutory framework for closed-end consumer credit to impose limits on payday loans. * * * *\n[\xc2\xb624] In response to the Payday Loan Law, National recast its payday loans as\nnon-amortizing installment loans that were structured to remain outstanding for\nseven to twelve months. The Payday Loan Law only applied to loans designed to\nbe outstanding for sixty days or less, so by making this change, National sidestepped the law. Throughout this litigation, National insisted that it no longer\nmade payday loans.\n[\xc2\xb625] Despite shifting to longer-dated installment loans, National continued to\nframe its finance charges using a block rate. National adhered to this practice for a\nsimple reason: It made a high cost loan product sound cheaper than it was. On an\nannualized basis, a customer who repays $100 by making an interest-only payment of $30 every two weeks followed by $130 at the end of a year pays $810 in\ninterest for an annualized rate of 838%. By framing the interest as a block rate,\nNational\'s employees could tell customers that the interest rate was 30%. Although National\'s customers eventually saw an APR on the loan agreement, National\'s employees followed a practice of telling customers that the APR had\n\xe2\x80\x9cnothing to do with the loan.\xe2\x80\x9d Tr. 335 (Carter). As National pitched it, the APR\nwas \xe2\x80\x9cirrelevant\xe2\x80\x9d unless the customer kept the loan outstanding for an entire year;\nif the customer only planned to keep the loan outstanding for a few weeks, National\'s employees said that the APR \xe2\x80\x9cmeans nothing.\xe2\x80\x9d3\n[Footnote 3: It is true that the APR calculation changes depending on\nwhen the customer repays the loan, but the APR for a block rate of \xe2\x80\x9c$30\non $100\xe2\x80\x9d remains high. James originally planned to repay her loan in two\npayments of $130. Had she done so, the APR would have been 630.3272%.\nAs National learned the hard way, it is difficult to convert a block rate into\nan accurate APR. During 2013, the Delaware State Banking Commissioner questioned the accuracy of the APRs in National\'s loan agreements. After several audits, National changed how it calculates interest on its loan\nproducts. Effective January 1, 2014, National no longer uses a block rate.\nDuring each payment period, National instead charges simple interest at a\n182\n\n\x0crate of either 1% or 2% daily, depending on whether the payment period is\ntwo weeks or one month. At the end of each payment period, the amount\nof interest is totaled and either paid by the borrower or added to the loan\nbalance. Using the banking conventions of a 30-day month and a 360-day\nyear, the economic substance of 2% simple interest per day is the same as\nthe block rate: $30 per $100 borrowed. National employees now call its\nproducts \xe2\x80\x9c1 percent loans\xe2\x80\x9d and \xe2\x80\x9c2 percent loans.\xe2\x80\x9d]\n[\xc2\xb626] When James obtained the Disputed Loan, she focused on the block rate\nand the concept of $30 in interest per $100 borrowed, just as National intended.\nShe thought she would have to pay back $260. She told Reilly that she would repay the loan in two payments of $130 each. She planned to pay $130 on her next\npayday of May 17, 2013, and another $130 on May 31.\n[\xc2\xb627] James told Reilly that she wanted to make her payments in cash and that\nshe did not want to have her Nexis card debited. James viewed this as important\nbecause she knew from past experience that she could incur additional charges if a\nlender debited her account when there were insufficient funds to make a payment,\nparticularly if the lender attempted to debit her account multiple times. Reilly entered a note in the Payday Loan Manager reflecting that James did not want to\nhave electronic debits from her account. The note stated \xe2\x80\x9cNo ACH debits,\xe2\x80\x9d using\nthe abbreviation for the automated clearinghouse for electronic payments operated\nby the Federal Reserve and the National Automated Clearing House Association.\nHe entered another comment stating, \xe2\x80\x9cCustomer wants to walk in cash payments.\xe2\x80\x9d\n[\xc2\xb628] Reilly also entered a note in the Payday Loan Manager reflecting James\'\nplan to repay the loan in two payments. But Reilly\'s note contemplated different\npayments than what James understood she would be making. Reilly recorded that\nJames would make one payment of $150 on May 17 and a second payment of\n$143 on May 31. Reilly\'s note thus had James repaying $293. James thought she\nwas repaying $260.\n[\xc2\xb629] Reilly printed out a copy of National\'s standard form loan document and\nshowed James where to sign. The loan document was titled \xe2\x80\x9cDelaware Consumer\nInstallment Loan Agreement.\xe2\x80\x9d JX 19 at 1 (the \xe2\x80\x9cLoan Agreement\xe2\x80\x9d). In a box labeled \xe2\x80\x9cType of Contract,\xe2\x80\x9d it said \xe2\x80\x9cFlexPay.\xe2\x80\x9d The repayment schedule did not reflect either the two repayments that James wanted to make or the two repayments\nthat Reilly entered in the Payday Loan Manager. The Loan Agreement instead\ncontemplated twenty-six interest-only payments of $60 each, followed by a balloon payment comprising a twenty-seventh interest payment of $60 plus repayment of the original $200 in principal. The total amount of interest was $1,620.\nAccording to the Loan Agreement, the APR for the loan was 838.45%. Using\nReilly\'s planned repayment schedule, the APR was 1,095%.\n[\xc2\xb630] James signed the Loan Agreement, and Reilly gave her a check. From the\ntime James walked into the store, the whole process took about twenty minutes.\n183\n\n\x0cD. James Cannot Repay The Loan.\n[[\xc2\xb631] The next day, James broke her hand at work. She missed a week of work\nnormally paid per hour and then asked if she could return to work so that she\ncould be paid. Her supervisor agreed James could return for 2-3 days per week.\n[\xc2\xb632] On May 17, James went to Loan Till Payday and made the first interest\npayment of $60. She explained to Vasquez, the manager, that she had broken her\nhand and could not work. She asked for an accommodation. He told her she\nwould have to make the scheduled payments and suggested she pay more, $75.\nAt trial, Vasquez tried to suggest that paying more would help James pay down\nprincipal, but James had the right to pre-pay principal at any time and could barely pay $60.]\n[\xc2\xb633] Vazquez also testified [as an explanation] that he wanted James to make\npayments to \xe2\x80\x9ckeep[] her active, not past due, so she was still in good standing\nwith our company and able to get loans with us in the future.\xe2\x80\x9d Tr. 257 (Vazquez).\nYet Vazquez testified later that if a customer missed a payment, then National\nwould stop charging interest and only add a late fee of 5%. This meant that\nVazquez proposed an arrangement that kept interest accruing, whereas if James\nhad defaulted, then interest would have stopped and she only would have owed a\n$3 late fee.\n[\xc2\xb634] At bottom, Vazquez refused to lower James\' payments or give her any kind\nof accommodation. His proposals tried to get National more money and faster.\nE. James Defaults.\n[\xc2\xb635] On May 31, 2013, National attempted on four separate occasions to debit\nJames\' Nexis account for $60. Each time, the debit was declined. At trial, Vazquez\njustified the debits by distinguishing between an electronic debit from a Nexis\ncard and an ACH withdrawal from a bank account. Vazquez claimed that James\nonly told National not to make ACH withdrawals. * * * *\n[\xc2\xb636] On June 3, 2013, National tried twice more to debit James\' Nexis card,\neach time for $60. Both debits were declined. On June 7, National tried twice\nmore. At that point, the attempted debits were for $63, which included a $3 late\nfee. Both were declined.\n[\xc2\xb637] On June 8, 2013, an unidentified National employee called James at the\nHotel DuPont and left a message with her employer. National also sent her a\n\xe2\x80\x9cCollection Text\xe2\x80\x9d stating, \xe2\x80\x9cGloria, to avoid further occurrences on your account,\nyou must call Tracey, at Loan Till Payday.\xe2\x80\x9d\n\n184\n\n\x0c[\xc2\xb638] On June 13, 2013, an unidentified National employee again called James\nat the Hotel DuPont and left a message with her employer. That same day, National successfully made an ACH withdrawal of $63, comprising $60 in interest\nplus a $3 late fee. Recall that James had told National not to make electronic\nwithdrawals, and that Reilly had entered a note on the account stating \xe2\x80\x9cNo ACH\ndebits.\xe2\x80\x9d Recall also that National justified debiting her Nexis card on the theory\nthat a debit was different than an ACH withdrawal. At this point, however, National made an ACH withdrawal.\n[\xc2\xb639] On June 14, 2013, the notes in the Payday Loan Manager indicate that an\nunidentified National representative spoke with James. On June 27, National debited her Nexis account for $75. National also sent James an automated text: \xe2\x80\x9cRefer a friend and get $20 credit on your next payment! Call now! Loan Till Payday.\xe2\x80\x9d\nF. James Hires Counsel And Files Suit In Federal Court.\n[[\xc2\xb640] James then contacted counsel, who sent a letter to National opting out of\narbitration. James then filed suit in federal court.]\n[\xc2\xb641] Tim McFeeters is the sole owner of National. On July 8, 2013, after being\nserved with the federal action, he entered a note in the Payday Loan Manager:\n\xe2\x80\x9cDONT WORK DONT CALL DONT TAKE ANY $$$.\xe2\x80\x9d JX 29B at 662.\n[\xc2\xb642] As of July 8, 2013, James had repaid National $197. She has not made any\npayments on the Disputed Loan since then.\nG. This Litigation\n[\xc2\xb643] On September 20, 2013, after voluntarily dismissing her federal action,\nJames filed this lawsuit on behalf of herself and other similarly situated borrowers.\nCount I of the complaint sought a permanent injunction barring National from\ncollecting on the loans made to James and other class members. Count II sought a\ndeclaration that the terms of National\'s loan documents were unconscionable. * *\n**\n[[\xc2\xb644] National admitted in federal court that it had no right to arbitrate, but in\nstate court National moved for arbitration. James moved for Rule 11 sanctions,\nwhich the court granted. During discovery, National tried its best not to reveal its\npractices; it produced misleading information. National also did not comply with\na discovery order, resulting in a written decision imposing additional sanctions on\nNational. The trial court later denied class certification, so the case proceeded to\ntrial on James\xe2\x80\x99 claims alone.]\nII. LEGAL ANALYSIS\n185\n\n\x0c[\xc2\xb645] James proved at trial that the Loan Agreement was unconscionable, and\nthe Disputed Loan is rescinded on that basis. * * * *\nB. Unconscionability\n[\xc2\xb646] The doctrine of unconscionability stands as a limited exception to the\nlaw\'s broad support for freedom of contract. \xe2\x80\x9cDelaware courts seek to ensure\nfreedom of contract and promote clarity in the law in order to facilitate commerce.\xe2\x80\x9d ev3, Inc. v. Lesh, 114 A.3d 527, 530 n.3 (Del. 2014). * * * *\n[\xc2\xb647] But as with many areas of the law, there are countervailing principles that\nprevent an indisputably important and salutary doctrine from operating as a tyrannical absolute. One such ground is unconscionability, traditionally defined as a\ncontract \xe2\x80\x9csuch as no man in his senses and not under delusion would make on the\none hand, and no honest or fair man would accept, on the other.\xe2\x80\x9d Tulowitzki v. Atl.\nRichfield Co., 396 A.2d 956, 960 (Del. 1978) (quotation marks and citation omitted). It would be difficult to improve on Chancellor Allen\'s incisive summary of\nthe interplay between the core concept of contractual freedom and the residual\nprotection against unconscionability:\nThe right of competent persons to make contracts and thus privately to acquire rights and obligations is a basic part of our general liberty. * * * *\nBut not every writing purporting to contain a promise or every document\npurporting to make a transfer will be given legal effect. * * * *\n....\nIt is a general rule, recited by courts for well over a century, that the adequacy or fairness of the consideration that adduces a promise or a transfer\nis not alone grounds for a court to refuse to enforce a promise or to give\neffect to a transfer. This rule, present in 17th and 18th century cases,\nachieved its greatest dignity in the jurisprudence of 19th century classical\nliberalism. Thus, the classical liberal\'s premise concerning the subjectivity\n(and thus non-reviewability) of value has plainly been a dominant view in\nour contract law for a very long time. . . . But as standard as that generalization is, it has not precluded courts, on occasion, from striking down contracts or transfers in which inadequacy of price is coupled with some circumstance that amounts to inequitable or oppressive conduct. That is, the\n\xe2\x80\x9crule\xe2\x80\x9d that courts will not weigh consideration or assess the wisdom of\nbargains has not fully excluded the opposite proposition, that at some\npoint, courts will do so even in the absence of actual fraud, duress or incapacity.\nRyan v. Weiner, 610 A.2d 1377, 1380-81 (Del. Ch. 1992) (Allen, C.) (citations and\nfootnote omitted).\n[\xc2\xb648] In Ryan, Chancellor Allen delineated the history of the doctrine of unconscionability, describing it as \xe2\x80\x9cold when Justice Story summarized it in 1835\xe2\x80\x9d as\n186\n\n\x0cpart of his Commentaries on Equity Jurisprudence. Id. at 1381. After citing a\nrange of cases from the twentieth century, Chancellor Allen observed that\n[s]tatutory developments over the last thirty years reflect an explicit legislative endorsement of this ancient equitable doctrine. The most important\nexample of this mid-twentieth century codification is the unconscionability provision contained in Section 2-302 of the Uniform Commercial Code.\nThat provision has, of course, been adopted in almost all of the states and\napplies to the sale of all goods.\nId. at 1383. Delaware\'s version of Section 2-302 states:\n(1) If the court as a matter of law finds the contract or any clause of the\ncontract to have been unconscionable at the time it was made the court\nmay refuse to enforce the contract, or it may enforce the remainder of the\ncontract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.\n(2) When it is claimed or appears to the court that the contract or any\nclause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.\n6 Del. C. \xc2\xa7 2-302. Although technically limited in scope to sales of goods, Delaware decisions have applied Section 2-302 more broadly.\n[\xc2\xb649] This estimable pedigree does not mean that the doctrine of unconscionability will be invoked freely. \xe2\x80\x9cUnconscionability is a concept that is used sparingly.\xe2\x80\x9d Ketler v. PFPA, LLC, ___ A.3d ___, 2016 WL 192599, at *2 (Del. Jan. 15,\n2016). Chancellor Allen\'s words again capture the essential point:\nThe notion that a court can and will review contracts for fairness is apt for\ngood reason to strike us as dangerous, subjecting negotiated bargains to\nthe loosely constrained review of the judicial process. Perhaps for this reason, courts have evoked this doctrine with extreme reluctance and only\nwhen all of the facts suggest a level of unfairness that is unconscionable.\nRyan, 610 A.2d at 1381. A finding of unconscionability generally requires \xe2\x80\x9cthe\ntaking of an unfair advantage by one party over the other.\xe2\x80\x9d Tulowitzki, 396 A.2d at\n960 (quotation marks omitted). \xe2\x80\x9cA court must find that the party with superior\nbargaining power used it to take unfair advantage of his weaker counterpart.\xe2\x80\x9d\nGraham v. State Farm Mut. Auto. Inc. Co., 565 A.2d 908, 912 (Del. 1989). \xe2\x80\x9cFor a\ncontract clause to be unconscionable, its terms must be so one-sided as to be oppressive.\xe2\x80\x9d Id. (quotation marks and citation omitted).\n[\xc2\xb650] Whether a contract is unconscionable is determined at the time it was\nmade. * * * * The outcome turns on \xe2\x80\x9cthe totality of the circumstances.\xe2\x80\x9d Tulowitzki,\n396 A.2d at 962; see Restatement (Second) of Contracts \xc2\xa7 208, cmt. a (\xe2\x80\x9cThe determination that a contract or term is or is not unconscionable is made in light of\nits setting, purpose and effect.\xe2\x80\x9d).\n\n187\n\n\x0c[\xc2\xb651] This court has identified ten factors to guide the analysis of unconscionability. See Fritz v. Nationwide Mut. Ins. Co., 1990 WL 186448 (Del. Ch. Nov. 26,\n1990). In the language of the Fritz decision, they are:\n(1) The use of printed form or boilerplate contracts drawn skillfully by the\nparty in the strongest economic position, which establish industry wide\nstandards offered on a take it or leave it basis to the party in a weaker economic position[;]\n(2) a significant cost-price disparity or excessive price;\n(3) a denial of basic rights and remedies to a buyer of consumer goods[;]\n(4) the inclusion of penalty clauses;\n(5) the circumstances surrounding the execution of the contract, including\nits commercial setting, its purpose and actual effect[;]\n(6) the hiding of clauses which are disadvantageous to one party in a mass\nof fine print trivia or in places which are inconspicuous to the party signing the contract[;]\n(7) phrasing clauses in language that is incomprehensible to a layman or\nthat divert his attention from the problems raised by them or the rights\ngiven up through them;\n(8) an overall imbalance in the obligations and rights imposed by the bargain;\n(9) exploitation of the underprivileged, unsophisticated, uneducated and\nthe illiterate[;] and\n(10) inequality of bargaining or economic power.\nId. at *4-5 (citations omitted). Although this opinion uses the ten Fritz factors, it\nanalyzes them in a different order and under two broader headings: substantive\nunconscionability and procedural unconscionability.\n[\xc2\xb652] The concept of substantive unconscionability tests the substance of the\nexchange. An agreement is substantively unconscionable if the terms evidence a\ngross imbalance that \xe2\x80\x9cshocks the conscience.\xe2\x80\x9d Coles v. Trecothick, 32 Eng. Rep.\n592, 597 (Ch. 1804). In more modern terms, it means a bargain on terms \xe2\x80\x9cso extreme as to appear unconscionable according to the mores and business practices\nof the time and place.\xe2\x80\x9d Williams v. Walker-Thomas Furniture Co., 350 F.2d 445,\n450 (D.C. Cir. 1965) (quoting 1 Arthur L. Corbin, Corbin on Contracts \xc2\xa7 128\n(1963)).\n[\xc2\xb653] The concept of procedural unconscionability examines the procedures that\nled to the contract with the goal of evaluating whether seemingly lopsided terms\nmight have resulted from arms\'-length bargaining. Courts focus on the relative\nbargaining strength of the parties and whether the weaker party could make a\nmeaningful choice. The concept is \xe2\x80\x9cbroadly conceived to encompass not only the\nemployment of sharp bargaining practices and the use of fine print and convoluted\nlanguage, but a lack of understanding and an inequity of bargaining power.\xe2\x80\x9d 1 E.\nAllan Farnsworth, Farnsworth on Contracts \xc2\xa7 4.28, at 583-84 (3d ed. 2004) (footnotes omitted).\n188\n\n\x0c[\xc2\xb654] The two dimensions of unconscionability do not function as separate elements of a two prong test. The analysis is unitary, and \xe2\x80\x9cit is generally agreed that\nif more of one is present, then less of the other is required.\xe2\x80\x9d Id. \xc2\xa7 4.28, at 585.\n1. Factors Relating To Substantive Unconscionability\n[\xc2\xb655] Six of the Fritz factors relate to the concept of substantive unconscionability. They are:\n\xe2\x80\xa2 A significant cost-price disparity or excessive price.\n\xe2\x80\xa2 The denial of basic rights and remedies.\n\xe2\x80\xa2 Penalty clauses.\n\xe2\x80\xa2 The placement of disadvantageous clauses in inconspicuous locations or\namong fine print trivia.\n\xe2\x80\xa2 The phrasing of disadvantageous clauses in confusing language or in a\nmanner that obscures the problems they raise.\n\xe2\x80\xa2 An overall imbalance in the obligations and rights imposed by the bargain.\nWithin this lineup, the first factor tests for a threshold indication of fundamental\nunfairness. The second and third factors examine two types of contract terms\nwhere overreaching may occur. The fourth and fifth factors ask about other types\nof contract terms and whether they are adequately disclosed and comprehensible.\nThe sixth factor examines the agreement as a whole.\na. A Threshold Indication Of Unfairness\n[\xc2\xb656] The first Fritz factor considers whether there is a threshold indication of\nunfairness, such as \xe2\x80\x9ca significant cost-price disparity or excessive price.\xe2\x80\x9d Fritz,\n1990 WL 186448, at *4. \xe2\x80\x9c[G]ross disparity between price and value can be used\nto demonstrate unconscionability.\xe2\x80\x9d \xe2\x80\x9cInadequacy of consideration does not of itself\ninvalidate a bargain, but gross disparity in the values exchanged may be an important factor in a determination that a contract in unconscionable. . . .\xe2\x80\x9d Restatement (Second) of Contracts \xc2\xa7 208, cmt. c. \xe2\x80\x9cSuch a disparity may also corroborate\nindications of defects in the bargaining process. . . .\xe2\x80\x9d Id. * * * *\n[\xc2\xb657] In this case, there are obvious indications of unfairness. The Loan Agreement called for finance charges of $1,620 for a $200 loan, resulting in a disclosed\nAPR of 838.45%. That level of pricing shocks the conscience. Even defenders of\nfringe credit have recognized that \xe2\x80\x9c[a]t first glance, it would seem irrational for\nany consumer to borrow money at an interest rate exceeding 400% under any circumstance.\xe2\x80\x9d [National\xe2\x80\x99s expert Todd] Zywicki conceded that \xe2\x80\x9cto a layman in\nsome sense, it just looks kind of shocking to see a price this high.\xe2\x80\x9d More broadly,\nZywicki and his co-authors admit in their recent book that the finance charges for\nfringe products \xe2\x80\x9care indeed high when expressed in terms of [APR].\xe2\x80\x9d Consumer\n\n189\n\n\x0cCredit, supra, at 352. When making this observation, they cited APRs that \xe2\x80\x9coften\nexceed 100 percent.\xe2\x80\x9d Id. The rate for the Disputed Loan was eight times that level.\n[\xc2\xb658] Zywicki recognized that the interest rate on the Disputed Loan was high in\nother ways as well. He testified that the APRs for unsecured consumer installment\nloans generally cluster around 150%. Unlike the Disputed Loan, consumer installment loans \xe2\x80\x9care amortized with part of each payment repaying principal so\nthat the loan is paid in full by the last scheduled payment.\xe2\x80\x9d Consumer Credit, supra, at 355. The Disputed Loan was a twenty-six period interest-only loan culminating in a balloon payment at the year mark.\n[\xc2\xb659] The rate charged for the Disputed Loan exceeded even the rates charged\nfor traditional payday loans. Zywicki testified that the industry average for payday\nloans is a block rate of $15 per $100, half what National charged. Tr. 589-90, 594\n(Zywicki). Other sources cite similar figures. The rate for the Disputed Loan also\nfar exceeded what Zywicki and his co-authors report as typical rates for other\nfringe products.\n[\xc2\xb660] National\'s efforts to explain the cost of the Disputed Loan were unconvincing. McFeeters would not say what would be an excessive price for a loan. He\nonly would say, \xe2\x80\x9cI follow the state laws, and that\'s what I follow.\xe2\x80\x9d Tr. at 435\n(McFeeters). Delaware does not impose any cap on interest rates, so McFeeters\neffectively was saying that no price is too high.\n[\xc2\xb661] Zywicki advanced two types of arguments to explain the price of the Disputed Loan. First, he contended that an APR of 838% could, in theory, result from\na competitive market. Second, he argued that there could be situations where it\nwould be rational for a consumer to use a high-interest credit product.\ni. Arguments About Market Pricing\n[\xc2\xb662] To support his claim about market pricing, Zywicki cited academic studies\nwhich have observed that some features of the alternative financial product market are consistent with meaningful price competition, such as low barriers to entry\nand a large number of stores. Like many aspects of the industry, however, evidence on this issue is mixed, and other researchers have identified evidence consistent with a variety of strategic pricing practices. Importantly for this case,\nZywicki did not conduct any analysis of the Disputed Loan itself, nor did he assess the competitiveness of the Wilmington market. At the same time, he admitted\nthat prices in Wilmington were higher than the ranges he expected. He also recognized that consumers who use fringe products generally lack meaningful alternatives.\n[\xc2\xb663] In a variant of his market pricing argument, Zywicki contended that the\nprice of the Disputed Loan should not be viewed as excessive unless National was\n190\n\n\x0cable to generate supra-normal economic profits, which he equated with monopoly\nrents. Zywicki emphasized one study that has questioned whether payday loan\ncompanies generate supra-normal economic profits. The broader evidence is again\nmixed, with the authors of a study on payday-loan profitability noting that \xe2\x80\x9ca recent private analysis for potential investors . . . asserts that a store set up for\n$30,000 will generate more than $258,000 in operating cash flow over its first\nfive years of operation, which implies an extraordinary average annual pretax rate\nof return\xe2\x80\x94around 170 percent\xe2\x80\x94on the initial investment.\xe2\x80\x9d Flannery & Samolyk,\nsupra, at 4 (citation omitted). In their own study, the same authors found that\n\xe2\x80\x9cmature stores appear to earn quite healthy operating profits\xe2\x80\x94on average $18.73\nper loan made, or approximately $1.89 per average dollar of loans outstanding.\xe2\x80\x9d\nId. at 19. They declined to take a position on whether this level of returns could be\ndescribed in the abstract as \xe2\x80\x9chigh\xe2\x80\x9d or \xe2\x80\x9creasonable.\xe2\x80\x9d Id. Opponents of fringe products point to other indicators, such as marketing materials from payday loan franchisors that describe high profit levels and the rapid expansion of the industry,\nwhich suggests attractive returns. For purposes of this case, Zywicki again did not\nconduct any analysis specific to Wilmington or National, and he could not offer\nany opinion as to whether National enjoyed supra-normal profits.\n[\xc2\xb664] As a third basis for his market-pricing claim, Zywicki posited that highinterest loans are very costly to make, due in part to high default risk. He contended at trial that default rates \xe2\x80\x9care usually in the range of 15, 20, to 25 percent.\xe2\x80\x9d\nTr. 505 (Zywicki). A study by the Pew Charitable Trust found that loan loss rates\nfor payday loans are only 3%. See How Borrowers Repay, supra, at 6. Zywicki\nagain did not do any analysis specific to this case. He did not analyze default rates\nin the Wilmington area, nor did he examine National\'s default rates.\nZywicki\'s opinion that an APR of 838% could, in theory, result from a competitive market was just that\xe2\x80\x94a theoretical possibility. It was not a persuasive response to the facially shocking price of the Disputed Loan.\nii. Arguments About Hypothetically Rational Uses\n[\xc2\xb665] Zywicki\'s second explanation for the price of the Disputed Loan rested on\nthe sensible claim that the price of a consumer product should be assessed, among\nother things, \xe2\x80\x9cby reference to the utility of the loan to the consumer.\xe2\x80\x9d JX 46 at 43.\nThis approach posits that there can be situations where it is rational and wealthenhancing for consumers to use high-cost loans. Zywicki touched on these justifications at trial when he explained that consumers can use alternative credit products \xe2\x80\x9cto avoid what might kind of be bigger catastrophes like eviction and that\nsort of thing.\xe2\x80\x9d Tr. 541 (Zywicki).\n[\xc2\xb666] In their book on consumer credit, Zywicki and his co-authors offer an expanded version of this argument which asserts that high-interest, small-dollar\nloans \xe2\x80\x9ccan facilitate the accumulation of household assets even when they are not\nused directly to finance the household investment by enhancing overall liquidity,\n191\n\n\x0ceven at high cost.\xe2\x80\x9d Consumer Credit, supra, at 369; accord Lawrence & Elliehausen, supra, at 302. They provide two examples of situations where it could\nbe rational for a consumer to take out a $200 payday loan at a block rate of $15\nper $100 (half the rate of the Disputed Loan).\n[\xc2\xb667] The simplest scenario involves a looming bill, such as a utility payment,\nwhere non-payment will trigger a late fee exceeding the finance charge for the\nloan. Assuming the borrower can repay the loan on schedule, the borrower does\nbetter by paying the lower finance charge rather than the higher late fee. A slightly\nmore complex variant involves a late fee that may not exceed the finance charge,\nbut where failing to pay the bill will generate other hardships, such as the loss of\nelectricity for a period of time. Again assuming the borrower can repay the loan\non schedule, the borrower does better by paying the finance charge and avoiding\nthe combination of the late fee and the negative consequences. See Consumer\nCredit, supra, at 369.\n[\xc2\xb668] A second and more nuanced scenario posits a borrower who can use the\nloan proceeds to make a net-present-value-positive choice, such as repairing an\nautomobile immediately instead of delaying the repair while saving the money to\npay for it. To construct a viable example, Zywicki and his co-authors assume that\nuntil the repair is completed, the consumer will (i) pay fees for public transit and\n(ii) lose leisure time to commuting, which they value at the consumer\'s hourly\nwage. Depending on the assumptions, the model supports scenarios where it\nmakes sense for the consumer to use a payday loan with a nominally high APR of\n309% to repair the car sooner rather than later. See id. at 370-72.\n[\xc2\xb669] In each of these cases, the viability of using high-cost credit rationally depends on the consumer having a use for the funds which generates monetary and\nnon-monetary returns that exceed the price of the loan. To their credit, the authors\nrecognize that the ability of a consumer to overcome a high APR (309% in their\nmodel) depends largely on \xe2\x80\x9cthe very short term to maturity\xe2\x80\x9d for a single-period\npayday loan. Id. at 371. They observe that \xe2\x80\x9c[t]his would not be the case for a longterm loan,\xe2\x80\x9d and that \xe2\x80\x9c[e]xtended use of this sort of credit is where it becomes most\nhighly controversial.\xe2\x80\x9d Id. at 372.\n[\xc2\xb670] And there\'s the rub. The Disputed Loan was not structured as a short-term\nloan. It was a twelve-month, interest-only installment loan. The Disputed Loan\nalso charged an interest rate that was more than double what Zywicki and his coauthors modeled (838% vs. 309%). Zywicki did not identify any scenarios in\nwhich it could be rational for a consumer to borrow on the terms contemplated by\nthe Disputed Loan.\n[\xc2\xb671] Perhaps anticipating this disconnect, Zywicki attempted at trial to recharacterize the Disputed Loan as a short-term loan by pointing out that James\nhad the option to prepay. The decision to prepay parallels the decision to pay a\ntraditional payday loan on time. Consumer groups have modeled the likelihood\n192\n\n\x0cthat a typical user of high-cost credit will repay a traditional payday loan in a single period and avoid a cycle of long-term indebtedness. The Center for Responsible Lending provides the example of a borrower making $35,000 per year who\nobtains a payday loan for $200 plus a finance charge of $20. Assuming average\nlevels of consumer expenditures for food, housing, utilities, transportation,\nhealthcare, and other essentials, and excluding costs such as childcare and clothing, the borrower finishes the next pay period with a $96 deficit, forcing a loan\nrollover. See Born\xc3\xa9 et al., supra, at 8-9. The same report examines how a payday\nloan affects the account balance of a typical borrower on a fixed income, such as\nsocial security. It demonstrates that although the loan temporarily boosts the customer\'s bank balance, the combination of the balloon payment and fees makes the\nborrower worse off and necessitates another loan. A report by the Pew Charitable\nTrust concludes that\nthe lump-sum repayment model appears to make it difficult for borrowers\nto avoid renewal. Pew\'s analysis of state and industry data indicates that\nborrowers are indebted for an average of about five months of the year.\nAccording to one study, 76 percent of these loans, including renewals, are\nborrowed within two weeks following an existing payday loan\'s due date,\nmeaning the borrower could not pay back the loan and make it to the next\npayday without another loan. In addition, Pew\'s analysis of data from Oklahoma finds that more borrowers use at least 17 loans in a year than use\njust one.\nWho Borrows, supra, at 7 (footnotes omitted). A follow-up study found that\n\xe2\x80\x9c[o]nly 14 percent of borrowers can afford enough of their monthly budgets to\nrepay an average payday loan,\xe2\x80\x9d although most could afford to pay the interestonly fee to roll over the loan. How Borrowers Repay, supra, at 6. The study observed that \xe2\x80\x9c[a]verage borrowers end up indebted for five months, paying $520 in\nfinance charges for loans averaging $375.\xe2\x80\x9d\n[\xc2\xb672] It may be that a consumer with the wherewithal to repay a high-cost loan\nafter one period could rationally use some high-cost products in a wealthenhancing way, but that thought experiment does not persuasively justify the pricing and terms of the Disputed Loan. The loan James obtained was a twenty-six\nperiod, interest-only loan followed by a twenty-seventh period balloon payment at\nan APR of 838%. As noted, Zywicki and his co-authors recognize that it is difficult to imagine a situation where it would make sense for a consumer to use a\nmulti-period loan at the interest rates charged for payday loans. See Consumer\nCredit, supra, at 370-72. Zywicki\'s testimony about the hypothetically rational use\nof some high-cost credit products failed to legitimize the Disputed Loan\'s facially\ndisturbing price.\niii. Fundamental Unfairness\n[\xc2\xb673] The economic terms of the Disputed Loan are so extreme as to suggest\nfundamental unfairness. The price of the Disputed Loan is particularly egregious\ngiven its multi-period, non-amortizing structure. The finance charges incurred\n193\n\n\x0cover the course of the loan are so high that no rational borrower would agree to\npay them, unless under duress or operating under a misapprehension of fact. The\nfirst Fritz factor is satisfied.\nb. Contract Provisions Suggesting Unfairness\n[\xc2\xb674] The next four Fritz factors focus on contract provisions that can contribute\nto a finding of unfairness. They include provisions that deny or waive \xe2\x80\x9cbasic\nrights and remedies,\xe2\x80\x9d \xe2\x80\x9cpenalty clauses,\xe2\x80\x9d and \xe2\x80\x9cdisadvantageous\xe2\x80\x9d clauses that are\nhidden or difficult to identify and understand. 1990 WL 186448, at *4. The more\ngeneral question is whether the contract provisions evidence \xe2\x80\x9c[a]n overall imbalance in the obligations and rights imposed by the bargain.\xe2\x80\x9d Id. at *5. Specific provisions might not be unconscionable in isolation or under different circumstances,\nyet still may contribute to a finding of unconscionability in a given case.\n[\xc2\xb675] The Loan Agreement contains provisions that raise concerns, but they are\nnot sufficiently onerous to support a finding of unconscionability standing alone.\nThey contribute to the overall assessment of the Loan Agreement, but as a secondary factor. [The court here names in particular the arbitration clause and\nwaiver of a jury trial.]\n[\xc2\xb676] The Fritz decision also calls for consideration of \xe2\x80\x9cdisadvantageous\xe2\x80\x9d clauses that are \xe2\x80\x9cinconspicuous,\xe2\x80\x9d as well as \xe2\x80\x9clanguage that is incomprehensible to a\nlayman\xe2\x80\x9d or seems designed to \xe2\x80\x9cdivert his attention from the problems raised by\nthem or the rights given up through them.\xe2\x80\x9d 1990 WL 186448, at *4. Two aspects\nof the Loan Agreement warrant mention.\n[[\xc2\xb677] Fifteen single-spaced paragraphs and subparagraphs in eight-point font\ngive National the right to collect each periodic payment due from a checking or\nsavings account specified in the loan documents (the right to make ACH withdrawals). The agreement also contained a "Credit Card Authorization" giving National the right to charge a credit card. "Despite this language, National does not\naccept credit cards." Anyway, James did not have a credit card but a debit card,\nand she had no checking of savings account.]\n[\xc2\xb678] The inconsistent language in the Loan Agreement could easily confuse an\nunsophisticated customer like James. The difficulties with National\'s language\nhad particular salience for this case, because when James obtained the Disputed\nLoan, she told Reilly that she did not want electronic withdrawals made from her\naccount. Reilly made two notes in the Payday Loan Manager. One stated \xe2\x80\x9cNo\nACH debits,\xe2\x80\x9d and another stated, \xe2\x80\x9cCustomer wants to walk in cash payments.\xe2\x80\x9d JX\n29B at 659. Yet National debited James\' Nexis card and made at least one ACH\nwithdrawal from her Nexis account.\n\n194\n\n\x0c[\xc2\xb679] James\' instruction and National\'s acknowledgement catches National on\nthe horns of a dilemma. To the extent that National\'s witnesses took a narrow and\nlegalistic view at trial by arguing that James only opted out of ACH withdrawals\nand not debits from her Nexis card, then the same logic meant that James only\ngranted \xe2\x80\x9cCredit Card Authorization,\xe2\x80\x9d not debit card authorization. To the extent\nthat National\'s witnesses argued broadly at trial that the \xe2\x80\x9cCredit Card Authorization\xe2\x80\x9d encompassed all types of electronic withdrawals, then James\' insistence that\nshe did not want ACH withdrawals should have been sufficient to opt out. In neither case did National get the authorization it needed to debit James\' account.\n[[\xc2\xb680] Worse still, the actual terms of the agreement make opting out of the ACH\nwithdrawal provisions very difficult. The agreement claims that the borrower can\nopt out only by manually crossing out all ACH authorization language in the\nagreement. But the formal authorization actually appears only later in the \xe2\x80\x9cCredit\nCard Authorization,\xe2\x80\x9d which itself makes no reference to \xe2\x80\x9cACH.\xe2\x80\x9d\n[\xc2\xb681] If the customer authorized ACH transfers but later wanted to stop them,\nthe agreement provided that this could only be done by calling a specific number\nof by writing to a specific address and \xe2\x80\x9cspecifying which authorization\xe2\x80\x9d the borrower wanted to terminate. Even after a phone call, the authorization would remain in effect until written notification was received. McFeeters insisted on full\ncompliance with this clause.]\n[\xc2\xb682] The Loan Agreement skews the ACH withdrawal provisions in National\'s\nfavor in another way as well: National can withdraw whatever amount it wants\nfrom a customer\'s account, up to the full amount of the outstanding loan plus fees\nand charges, without prior notice to the customer that a higher amount will be\ndebited. * * * * National relied on this [language] to debit James\' account for\namounts greater than her scheduled payment, without prior notice to James. * * *\n*\n[\xc2\xb683] In my view, the provisions governing ACH withdrawals are \xe2\x80\x9cdisadvantageous,\xe2\x80\x9d drafted in \xe2\x80\x9clanguage that is incomprehensible to a layman,\xe2\x80\x9d and appear\ndesigned to \xe2\x80\x9cdivert [the customer\'s] attention from the problems raised by them or\nthe rights given up through them.\xe2\x80\x9d Fritz, 1990 WL 186448, at *4. As drafted and\nimplemented, the ACH provisions support a finding of unconscionability. * * * *\n[\xc2\xb684] The final factor relating to the contract terms is whether the agreement evidences \xe2\x80\x9c[a]n overall imbalance in the obligations and rights imposed by the bargain.\xe2\x80\x9d Fritz, 1990 WL 186448, at *5. Some insight into this factor can be gleaned\nfrom the degree to which the Loan Agreement devoted attention to particular subjects.\n[\xc2\xb685] The Loan Agreement covered six pages. Five contained substantive provisions. The sixth was a signature page. Of the five substantive pages, one full page\nof text (spanning most of page one and part of page two) created the most signifi195\n\n\x0ccant imbalance in the agreement: the financial terms. In return for a loan of $200,\nJames agreed to repay National $1,820, structured as twenty-six non-amortizing,\ninterest-only payments of $60 followed by a balloon payment of $260. Another\nfull page (spanning part of page two and most of page three) detailed National\'s\nability to make ACH withdrawals. A page and a half (spanning the bulk of page\nfour and the bulk of page five) addressed the arbitration provision.\n[\xc2\xb686] In total, the Loan Agreement devoted nearly two-thirds of its contents to\nthese three subjects, evidencing their importance to National. Through these provisions, National imposed onerous financial terms and gave itself the right to collect unilaterally from James any amount it wished, up to the full amount of the\nloan plus fees and charges. National ensured that in any challenge to the Disputed\nLoan, James would not be able to represent a class. She would have to challenge\nNational alone, based on a loan where the amount in question would make the\nrepresentation economically irrational for a lawyer unless he could recover his\nfees from National. Moreover, unless James opted out of the arbitration provision\nwithin sixty days\xe2\x80\x94something that no customer other than James has ever done\xe2\x80\x94\nthen James would have to challenge the Disputed Loan in arbitration, which was\nNational\'s chosen forum. Taken as a whole, for purposes of the Fritz factors, the\nLoan Agreement evidences \xe2\x80\x9c[a]n overall imbalance in the obligations and rights\nimposed by the bargain.\xe2\x80\x9d Id.\n2. Factors Relating To Procedural Unconscionability\n[\xc2\xb687] The next four Fritz factors shed light on the concept of procedural unconscionability. They are:\n\xe2\x80\xa2 Inequality of bargaining or economic power.\n\xe2\x80\xa2 Exploitation of the underprivileged, unsophisticated, uneducated, and illiterate.\n\xe2\x80\xa2 The use of printed form or boilerplate contracts drawn skillfully by the\nparty in the strongest economic position, which establish industry-wide\nstandards offered on a take it or leave it basis to the party in a weaker economic position.\n\xe2\x80\xa2 The circumstances surrounding the execution of the contract, including\nits commercial setting, its purpose, and actual effect.\nAs I see it, these factors help a court test the degree to which a seemingly disproportionate outcome could have resulted from legitimate, arms\'-length bargaining.\nThe first and second factors plumb this issue by considering the extent to which\nthe parties to the agreement were capable of bargaining at arms\'-length. A court\nrarely will intervene when the contracting parties are both commercial entities or\notherwise sophisticated. By contrast, a court may be more concerned where the\ncontracting process involved significant inequalities of bargaining power, economic power, or sophistication, particularly between a business and a consumer.\nAn aggravated version of this scenario arises when one of the parties is an individual who is underprivileged, uneducated, or illiterate.\n196\n\n\x0c[\xc2\xb688] The third and fourth factors similarly contribute by examining the degree\nto which actual bargaining took place. The third factor considers whether the\nagreement is a contract of adhesion. The fourth factor takes into account the contracting environment, including the commercial setting and the purpose and effect\nof the disputed agreement.\n[\xc2\xb689] Together, these factors weigh an initial showing of unfairness against the\nbargaining dynamic. If the contract resulted from legitimate negotiation, then a\ncourt should not intervene. \xe2\x80\x9cThere is a significant distinction between an unconscionable contract and a bad bargain.\xe2\x80\x9d Obaitan v. State Farm, 1997 WL 208959,\nat *3 (Del. Ch. Apr. 17, 1997). * * * * But if the contract appears fundamentally\nunfair and there are valid reasons to suspect that the outcome did not result from\nlegitimate negotiation, then a different picture emerges.\na. The Attributes Of The Parties\n[\xc2\xb690] The first two factors that fall under the heading of procedural unconscionability examine the relative attributes of the parties and whether they were capable\nof bargaining. The first of the two factors examines whether there is an \xe2\x80\x9cinequality of bargaining or economic power.\xe2\x80\x9d Fritz, 1990 WL 186448, at *5. The second\nconsiders whether the contract involved \xe2\x80\x9cexploitation of the underprivileged, unsophisticated, uneducated and the illiterate.\xe2\x80\x9d Id. To my mind, the second is an aggravated version of the first.\n[\xc2\xb691] These factors do not mean that the law censures every power imbalance.\nTo the contrary, \xe2\x80\x9c[a] bargain is not unconscionable merely because the parties to it\nare unequal in bargaining position, nor even because the inequality results in an\nallocation of risks to the weaker party.\xe2\x80\x9d Restatement (Second) of Contracts \xc2\xa7 208,\ncmt. d. After all, \xe2\x80\x9cbargaining power will rarely be equal.\xe2\x80\x9d * * * *\n[\xc2\xb692] \xe2\x80\x9cBut gross inequality of bargaining power, together with terms unreasonably favorable to the stronger party, . . . may show that the weaker party had no\nmeaningful choice, no real alternative, or did not in fact assent or appear to assent\nto the unfair terms.\xe2\x80\x9d Restatement (Second) of Contracts \xc2\xa7 208, cmt. d. The inequality must be sufficiently great such that one side is placed at a meaningful disadvantage, and the court must find as part of its overall analysis that the stronger\nparty used its position \xe2\x80\x9cto take unfair advantage of his weaker counterpart.\xe2\x80\x9d Graham, 565 A.2d at 912.\n[\xc2\xb693] * * * * [C]ourts are more willing to step in when a contract involves a\nbusiness and a consumer. Delaware decisions also exhibit sensitivity to situations\nin which a sophisticated actor has taken advantage of someone who is underprivileged, unsophisticated, uneducated, or illiterate. In the Ryan decision, for example,\nChancellor Allen recognized that a constellation of attributes such as poverty, financial distress, and lack of sophistication can make an individual vulnerable.\nRyan v. Weiner, 610 A.2d 1377, 1385 (Del. Ch. 1992) (Allen, C.). He noted that\n197\n\n\x0calthough these disadvantages do not prevent a person from making a valid contract, they are factors that a court can take into account. See id.\n[\xc2\xb694] The Disputed Loan was a contract between a business and a consumer. It\ntherefore falls within the category of contracts where courts are relatively more\nlikely to invoke the unconscionability doctrine.\n[\xc2\xb695] More importantly, the Loan Agreement was a contract between (i) a specialized business addressing a target market of underprivileged, cash-constrained,\nand credit-rationed consumers, and (ii) an unsophisticated member of the target\nmarket. The Disputed Loan thus raises concerns about predatory lending. Indeed,\nthe experts and the supporting literature on alternative financial services find rare\nagreement on two points. First, the consumers who use the products tend to be\ncash-constrained and credit-rationed, meaning that they have limited resources\nand few, if any, credit alternatives. Second, consumers typically use high-interest\nfinancial products for necessities, such as food, rent, utility bills, and mortgage\npayments, meaning that they face an urgent need for funds. Defenders and critics\nof high-interest products differ only in how they spin these facts. Defenders view\nfringe products as virtuous because they provide a form of credit, albeit at high\ncost, to consumers who otherwise would not have any. Critics charge that highinterest lenders take advantage of people in economic duress.\ni. National\n[\xc2\xb696] National specializes in providing high interest loans to underprivileged\nconsumers who are cash-constrained and lack alternative sources of credit. When\nMcFeeters acquired National, he applied to have National\'s banking licenses renewed. See JX 4 (the \xe2\x80\x9cLicensing Application\xe2\x80\x9d). National disclosed in its Licensing Application that many of its customers \xe2\x80\x9chave had credit problems in the past\nor have reached the maximum limit on their bank cards.\xe2\x80\x9d Id. at 510; see Tr. 37172 (McFeeters).\n[\xc2\xb697] National is a well-funded operation. The Licensing Application projected\nthat National\'s business model would generate free cash flow of $1.5 million to $2\nmillion per year. Its actual performance has been on the order of $1 million per\nyear.\n[\xc2\xb698] National\'s owner and its personnel are sophisticated and knowledgeable.\nMcFeeters acquired National after working in the payday loan industry for approximately ten years. In 2013, National had fourteen stores throughout Delaware,\nwhich it ran using a centralized model. At trial, National maintained that it had a\nmanual setting out its policies and procedures. Tracey Annand, a District Manager\nat National, trained all of National\'s personnel. National employed legal counsel\nto draft its loan agreements.\n\n198\n\n\x0c[\xc2\xb699] National\'s employees recognize that its customers have difficulty predicting how long their loans will be outstanding and virtually never estimate correctly\nwhen they will be able to repay their loans. Customers who believe they will have\na loan outstanding typically end up keeping the loan for \xe2\x80\x9ca couple months.\xe2\x80\x9d See\nTr. 341 (Carter).\nii. James\n[\xc2\xb6100] James is unsophisticated and undereducated. She dropped out of school in\nthe tenth grade, then obtained her GED approximately ten years later. She tried to\nimprove her skills through a nine-month course on medical billing and coding, but\nshe stopped two months short of graduation. Evidencing her lack of financial sophistication, she believed that the financial aid she received for the program was a\ngrant. It was actually a loan that she struggled to pay back.\n[\xc2\xb6101] Further evidence of James\' lack of financial sophistication comes from her\ntestimony about why she uses a pre-paid Nexis card. At trial, James explained that\nshe previously had a checking account with PNC Bank but switched to her Nexis\ncard because she did not like paying a monthly fee to maintain the checking account. Before making the Disputed Loan, National obtained a sixty-day transaction history for the Nexis account. It shows that during that period, James paid\nNexis a total of $127.07 in transaction fees. Each time the Hotel DuPont paid\nJames by direct deposit, Nexis charged her a load fee equal to 2% of the direct\ndeposit amount. The load fees totaled $44.07. Each time James used her card to\npay for a transaction and authorized it with her signature, Nexis charged her a signature transaction fee of $1. She signed for twelve transactions for total signature\nfees of $12. Each time James used her card to pay for a transaction and authorized\nit with her pin number, Nexis charged her a PIN transaction fee of $1.50. She\ncompleted thirteen PIN transactions for total PIN fees of $19.50. Each time,\nJames attempted a transaction and her card was declined, Nexis charged her a decline fee of $0.50. Her card was declined fourteen times for total decline fees of\n$7. Each time she withdrew cash, Nexis charged her an ATM usage fee of $2.50.\nShe withdrew cash on twenty-one occasions for total fees of $52.50. The amounts\nof the cash withdrawals suggest that the ATM provider also charged a withdrawal\nfee that was incorporated into the amount of the debit.\n[\xc2\xb6102] James does not appear to have comprehended the magnitude of the pertransaction fees that Nexis charged her, or the reality that those fees far exceeded\nthe flat monthly fee that a bank would charge for a no-minimum-balance checking\naccount, particularly where the client had direct deposit. She seems only to have\nconsidered the headline fee charged for the account each month.\n[\xc2\xb6103] James\' perception of the financial charge for the Disputed Loan reflected a\nsimilar short-term focus. National contended James understood the block rate she\nwould pay, which was $30 on $100. It is true that James could recite the block\nrate, but that does not mean she understood its implications. To the contrary, the\n199\n\n\x0cevidence convinced me that National used a block rate and de-emphasized the\nAPR to mislead its customers and make them think their cost of credit was an order of magnitude lower than it really was. James did not understand how interest\naccrued, and she did not understand what would happen upon default.\n[\xc2\xb6104] James underestimated her likelihood of repaying the Disputed Loan quickly. She thought she could pay it off in two payments, but she failed to do so. She\nsimilarly mis-remembered her success in repaying previous loans. She thought\nshe paid off each of her previous loans in one or two payments, but for the previous loans from National (the only loans in the record), James took longer. For the\nloan immediately preceding the Disputed Loan, there were seven attempted payments, four of which were declined.\n[\xc2\xb6105] James is also underprivileged. In 2013, she took home approximately\n$1,100 per month, and her annualized income of approximately $13,200 represented 115% of the federal poverty line for a single-person household. She lived\npaycheck to paycheck and had no savings to fall back on. She did not have access\nto alternative sources of credit. By 2013, when James took out the Disputed Loan,\nshe had been using high-interest, unsecured loans for four to five years, perhaps\nlonger. She did not use the loans in response to unforeseen emergencies. She used\nthem on a relatively regular basis for essential needs. She obtained the Disputed\nLoan because she needed money for groceries and rent. James\' frequent use of\nhigh-cost loans was a detriment and should have been a red flag to National.\n[\xc2\xb6106] At trial, National tried to turn James\' weakness into a strength, arguing that\nshe was an experienced consumer who was competent to use high-interest financial products. Zywicki stressed this point, contending that James\' prior use of similar loans \xe2\x80\x9csuggest[ed] that she was familiar with the material terms of the loan,\nunderstood the risks, and the like.\xe2\x80\x9d Tr. 509 (Zywicki); see id. at 523-24, 549-50.\nIn contrast to National\'s arguments at trial, both defenders and critics of payday\nloans generally agree that frequent use is problematic.\n[\xc2\xb6107] Given the relative attributes of National and James, the Disputed Loan involved both \xe2\x80\x9cinequality of bargaining or economic power\xe2\x80\x9d and the \xe2\x80\x9cexploitation\nof the underprivileged, unsophisticated, [and] uneducated.\xe2\x80\x9d Fritz, 1990 WL\n186448, at *5. These factors favor a finding of unconscionability.\nb. A Take-It-Or-Leave-It, One-Sided Form Agreement\n[\xc2\xb6108] The next Fritz factor asks directly whether there was actual bargaining involved. As framed in Fritz, the court should consider \xe2\x80\x9c[t]he use of printed form or\nboilerplate contracts drawn skillfully by the party in the strongest economic position, which establish industry wide standards offered on a take it or leave it basis\nto the party in a weaker economic position.\xe2\x80\x9d Id. at *4. The type of standardized\ncontract that this factor describes is also called a contract of adhesion. * * * *\n200\n\n\x0c[\xc2\xb6109] \xe2\x80\x9c[A] contract of adhesion is not unconscionable per se, and . . . all unconscionable contracts are not contracts of adhesion.\xe2\x80\x9d Restatement (Second) of Contracts \xc2\xa7 208, Reporter\'s Note, cmt a. Contracts of adhesion provide many benefits:\nStandardization of agreements serves many of the same functions as\nstandardization of goods and services; both are essential to a system of\nmass production and distribution. Scarce and costly time and skill can be\ndevoted to a class of transactions rather than to details of individual transactions. Legal rules which would apply in the absence of agreement can be\nshaped to fit the particular type of transaction, and extra copies of the form\ncan be used for purposes such as record-keeping, coordination and supervision. . . . Operations are simplified and costs reduced, to the advantage\nof all concerned.\nId. \xc2\xa7 211, cmt. a.\n[\xc2\xb6110] But standardized agreements also carry a heightened risk of unfair terms:\nStandardized agreements are commonly prepared by one party. The customer assents to a few terms, typically inserted in blanks on the printed\nform, and gives blanket assent to the type of transaction embodied in the\nstandard form. He is commonly not represented in the drafting, and the\ndraftsman may be tempted to overdraw in the interest of his employer.\nId., \xc2\xa7 211, cmt. c. This dynamic creates an \xe2\x80\x9cobvious danger of overreaching.\xe2\x80\x9d Id.\n\xe2\x80\x9cThe weaker party, in need of the good or services, is frequently not in a position\nto shop around for better terms, either because the author of the standard contract\nhas a monopoly (natural or artificial) or because all competitors use the same\nclauses.\xe2\x80\x9d 8 Williston on Contracts \xc2\xa7 18:13 (quoting Weaver v. Am. Oil Co., 276\nN.E.2d 144, 147 (Ind. 1971)).\n[\xc2\xb6111] All else equal, the fact that an agreement is a contract of adhesion makes it\nrelatively more likely that the agreement will be found unconscionable. Like the\nother Fritz factors, the fact that an agreement is a contract of adhesion is not sufficient, standing alone, to render an agreement unconscionable.\n[\xc2\xb6112] The Loan Agreement is a contract of adhesion. It was form agreement,\ndrafted by National, and provided to James on a take-it-or-leave-it basis. James\nhad no ability to negotiate the terms of the Loan Agreement. Other than to rely on\nthe truism that a standard form agreement is not inherently unconscionable, National does not dispute this factor. National\'s position is correct, but this factor\nnevertheless favors a finding of unconscionability.\nc. The Bargaining Environment\n[\xc2\xb6113] The final Fritz factor considers the \xe2\x80\x9c[t]he circumstances surrounding the\nexecution of the contract.\xe2\x80\x9d 1990 WL 186448, at *4. One pertinent attribute is the\ncommercial setting. Id. Another is whether a party confronts \xe2\x80\x9can absence of meaningful choice.\xe2\x80\x9d Ketler v. PFPA, LLC, ___ A.3d ___, 2016 WL 192599, at *2 (Del.\n201\n\n\x0cJan. 15, 2016) (quotation marks omitted). A third is the \xe2\x80\x9cpurpose and actual effect\xe2\x80\x9d of the agreement. Fritz, 1990 WL 186448, at *4; * * * . For the Disputed\nLoan, that necessarily takes into account its relationship to the Payday Loan Law.\ni. The Commercial Setting\n[\xc2\xb6114] James obtained the Disputed Loan from a small, store-front office. She\nwas given the documents and told where to sign. Reilly\'s main role was to try to\ninduce her to take out twice the loan amount she wanted ($400 instead of $200).\nThose were not ideal conditions, but they were not inherently oppressive. They\nare consistent with a standardized financial transaction accomplished through a\ncontract of adhesion.\n[\xc2\xb6115] A more problematic issue is that National\'s employees denigrate the importance of the APR while describing the interest rate in simplistic ways that are\ndesigned to mislead customers. For example, National takes the position that the\nAPR \xe2\x80\x9chas nothing to do with the loan.\xe2\x80\x9d Tr. 335 (Carter). National\'s employees\nsuggest to borrowers that that the APR is \xe2\x80\x9cirrelevant\xe2\x80\x9d unless the loan remains outstanding for an entire year. Tr. 337 (Carter). If a customer only plans to keep the\nloan outstanding for a few weeks, then National\'s employees discount the APR as\n\xe2\x80\x9cmeaning[less].\xe2\x80\x9d Tr. 337-38 (Carter).\n[\xc2\xb6116] Instead of focusing on the APR, National\'s employees describe the interest\nrate in terms that make the cost of the loan seem much lower. At trial, for example,\nJames\' counsel and Vazquez had the following exchange:\nQ: Typically, if someone comes in to borrow $100 at Loan Till Payday,\nwhat is the interest rate that they pay?\nA: 30 percent\nQ: Your understanding is they pay 30 percent? Is that right?\nA: It\'s a 30 percent block rate.\nTr. 246 (Vazquez). Vazquez did not know how a 30% block rate compared to an\nAPR. Tr. 254 (Vazquez).\n[\xc2\xb6117] These statements are highly problematic. By \xe2\x80\x9cdescrib[ing] the loan cost in\nterms of a misleading\xe2\x80\x9d bi-weekly rate, National understated the total cost of the\nDisputed Loan. Because National framed the price as \xe2\x80\x9c$30 on $100,\xe2\x80\x9d James\nthought she would pay $60 for the $200 when she actually agreed to pay $1,620\nin finance charges. James understood the simple block rate, but she did not understand the more complex financing arrangement captured by the Loan Agreement.\nii. Lack Of Meaningful Choice\n[\xc2\xb6118] A more significant aspect of the circumstances surrounding the Loan\nAgreement was James\' lack of a meaningful choice. When affirming a finding that\na contract of adhesion for membership in a fitness club was not unconscionable,\n202\n\n\x0cthe Delaware Supreme Court observed that \xe2\x80\x9c[t]here is no deprivation of meaningful choice if a party can walk away from the contract.\xe2\x80\x9d Ketler, ___ A.3d ___,\n2016 WL 192599, at *2.\n[\xc2\xb6119] Unlike the choice to spend discretionary income on a fitness contract,\nJames needed money for food and to pay her rent. She lived paycheck to\npaycheck, had no savings to fall back on, and did not have access to alternative\nsources of credit. She had reached a point where she was using high-interest, unsecured loans on a regular basis to make ends meet. As a practical matter, James\'\nprecarious financial situation meant she did not have meaningful options other\nthan a high-interest loan like the Disputed Loan.\niii. The Purpose And Effect Of The Loan Agreement\n[\xc2\xb6120] Perhaps the most critical aspect of the bargaining environment was the\npurpose and effect of the Loan Agreement, which was to evade the Payday Loan\nLaw. To reiterate, a traditional payday loan was a short-term loan designed to be\nrepaid in a single balloon payment on the borrower\'s next payday, usually within\ntwo weeks or, if the borrower was paid monthly, within one month. See Consumer\nCredit, supra, at 356 (\xe2\x80\x9cA payday loan is a small, short-term, single-payment consumer loan.\xe2\x80\x9d). Many borrowers, however, did not repay their loans when the balloon payments were due. When that happened, the payday loan company rolled\nthe outstanding balance into a new payday loan for the total amount of unpaid\nprincipal and interest, plus fees. The short-term loan effectively became a longer\nterm loan at the same high interest rate. Consumer advocates regarded the rollover\nas \xe2\x80\x9c[p]erhaps the most dangerous feature of the payday-loan product.\xe2\x80\x9d\n[\xc2\xb6121] To address the interest-only rollover problem in Delaware, the General\nAssembly adopted the Payday Loan Law. The synopsis of the bill stated:\nThis bill limits to five the number of short-term consumer loans (sometimes called payday loans) that any one borrower may obtain in a twelve\nmonth period. * * * *\nDel. H.B. 289 syn., 146th Gen. Assem. (2012). * * * *\n[\xc2\xb6122] Importantly, the Payday Loan Law only applied to short-term consumer\nloans, which the statute defined as \xe2\x80\x9ca loan of $1,000 or less made to an individual\nborrower that charges interest and/or fees for which the stated repayment period is\nless than 60 days and is not secured by title to a motor vehicle.\xe2\x80\x9d Id. \xc2\xa7 2227(7). * *\n**\n[\xc2\xb6123] The Payday Loan Law was enacted before McFeeters acquired National.\nUnder its prior owner, National responded to the Payday Loan Law by capping\nthe number of times a customer could rollover a payday loan. * * * *\n\n203\n\n\x0c[\xc2\xb6124] Once McFeeters acquired National, he caused National to stop making\npayday loans and switch to installment loans. The new structure built the rollover\nproblem into the design of the loan.\n[\xc2\xb6125] In its initial manifestation, National\'s installment loan product was a seven-month term loan called the Flex Pay Loan. Its economic substance mirrored a\none-month payday loan that was rolled over seven times (or a two-week payday\nloan that was rolled over fourteen times). * * * *\n[\xc2\xb6126] From an economic standpoint, however, the Flex Pay Loan product and\nthe Quick Payday Loan product were functionally equivalent. * * * *\n[\xc2\xb6127] National later developed the Flex Loan product that it sold to James. The\nmain difference was that the Flex Loan product contemplated twelve months of\nbi-weekly, interest-only payments before the final balloon payment.\n[\xc2\xb6128] Put simply, National designed its installment loan products to evade the\nFive Loan Limit. From National\'s standpoint, the shift was actually beneficial,\nbecause the new products built the concept of interest-only rollovers into the loans\nthemselves.\n[\xc2\xb6129] The Anti-Evasion Provision [of the Payday Loan Law] recognized the risk\nthat a lender might disguise \xe2\x80\x9ca short-term consumer loan as a revolving line of\ncredit.\xe2\x80\x9d 5 Del. C. \xc2\xa7 2235A(f)(2). National took the opposite approach. It disguised\na short-term consumer loan as an interest-only, non-amortizing installment loan.\nNational\'s shift to interest-only installment loans as a means of evading the Five\nLoan Limit followed a strategy employed by payday lenders in other jurisdictions.\n3. Balancing The Factors\n[\xc2\xb6130] All of the Fritz factors point in favor of a finding of unconscionability, albeit to varying degrees. The most telling factors include (i) the economic terms of\nthe Disputed Loan, which support a prima facie case of substantive unconscionability, (ii) the purpose and effect of the installment loan structure in circumventing\nthe Payday Loan Law and the Five Loan Limit, and (iii) the exploitation of an underprivileged, undereducated, and financially vulnerable person. Secondary factors include (a) the use of a contract of adhesion, (b) the overall imbalance of\nrights and obligations, and (c) National\'s practices when describing the block rate\nfinance charge versus the APR, which present a misleading picture of the cost of\ncredit.\n[\xc2\xb6131] On balance, the Loan Agreement is unconscionable. No one would borrow\nrationally on the terms it contemplated unless that person was delusional, mistaken about its terms or a material fact, or under economic duress.\n\n204\n\n\x0c4. The Remedy For The Unconscionable Agreement\n[\xc2\xb6132] Because the Loan Agreement is unconscionable, it is voidable. The proper\nremedy is to declare it invalid. See Restatement (Second) of Contracts \xc2\xa7 208, cmt.\ng.\n[\xc2\xb6133] Declaring the Loan Agreement invalid is likewise appropriate because National sought to use an interest-only, non-amortizing, installment loan to evade the\nPayday Loan Law. \xe2\x80\x9cEquity always attempts to . . . ascertain, uphold, and enforce\nrights and duties which spring from the real relations of parties.\xe2\x80\x9d 2 John Norton\nPomeroy, Equity Jurisprudence \xc2\xa7 378, at 41 (Spencer W. Symons ed., 5th ed.\n1941). \xe2\x80\x9c[E]quity regards substance rather than form.\xe2\x80\x9d Monroe Park v. Metro. Life\nIns. Co., 457 A.2d 734, 737 (Del. 1983). Equity also \xe2\x80\x9cregards that as done which\nin good conscience ought to be done.\xe2\x80\x9d Id. In substance, the Disputed Loan was a\npayday loan designed to roll over twenty-six times, which contravened the Five\nLoan Limit.\n[\xc2\xb6134] National loaned James $200. James has repaid National $197. As a consequence of rescinding the Loan Agreement, James owes National another $3.\nJames may satisfy this obligation by setting it off against amounts that this decision orders National to pay. * * * *\nIII. CONCLUSION\n[\xc2\xb6135] The Disputed Loan is invalid. Judgment is entered in favor of James in the\namount of $3,237. Pre- and post-judgment interest on this amount will accrue at\nthe legal rate, compounded quarterly, beginning on May 7, 2013. James is awarded her attorneys\' fees and costs. * * * *\nQuestions:\n1. Did the court require the plaintiff to show that the market for consumer loans in\nWilmington was monopolistic, or that National\'s profits were supra-normal?\nDoes the unconscionability test require that?\n2. Do you think that the interest rate on James\'s loan was set by market forces,\nmeaning by competition (i.e., that National offered the terms it did because it was\nafraid James would take her loan business elsewhere)?\n3. Are you persuaded by Zywicki\'s argument in \xc2\xb671 that the loan is economically\nequivalent to a payday loan because the borrower has the right to pre-pay?\n4. What if a party did not read a document? Does that make it unconscionable?\nYou should be able to answer that question from James, but consider the following:\n205\n\n\x0cPlaintiff argues repeatedly that he could not and did not read the\nforum selection clause, but this argument is a nonstarter: \xe2\x80\x9c[f]ailure to read\na contract, particularly in a commercial contract setting, is not an excuse\nthat relieves a person from the obligations of the contract.\xe2\x80\x9d Pietroske,\n2004 WI App 142, \xc2\xb6 11. \xe2\x80\x9c[I]n their dealings with each other, [parties] cannot close their eyes to the means of knowledge equally accessible to themselves and those with whom they deal, and then ask courts to relieve them\nfrom the consequences of their lack of vigilance.\xe2\x80\x9d Carney-Rutter Agency,\nInc. v. Central Office Buildings, Inc., 263 Wis. 244, 253, 57 N.W.2d 348,\n352 (1953); see also Paper Express, Ltd v. Pfankuch Maschinen GmbH,\n972 F.2d 753, 757 (7th Cir. 1992) (\xe2\x80\x9c[A] blind or illiterate party (or simply\none unfamiliar with the contract language) who signs the contract without\nlearning of its contents would be bound. Mere ignorance will not relieve a\nparty of her obligations and she will be bound by the terms of the agreement ... [sic] [A] party who agrees to terms in writing without understanding or investigating those terms does so at his own peril.\xe2\x80\x9d).\nEqually unpersuasive is plaintiff\xe2\x80\x99s argument that the forum selection clause was written in a foreign language. MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D\xe2\x80\x99Agostino, 144 F.3d 1384, 1387 n.9 (11th Cir.\n1998):\nCC makes much of the fact that the written order form is entirely\nin Italian and that Monzon, who signed the contract on MCC\xe2\x80\x99s behalf directly below this provision incorporating the terms on the\nreverse of the form, neither spoke nor read Italian. This fact is of\nno assistance to MCC\xe2\x80\x99s position. We find it nothing short of\nastounding that an individual, purportedly experienced in commercial matters, would sign a contract in a foreign language and expect\nnot to be bound simply because he could not comprehend its terms.\nWe find nothing in the CISG that might counsel this type of reckless behavior and nothing that signals any retreat from the proposition that parties who sign contracts will be bound by them regardless of whether they have read them or understood them.\n\xe2\x80\x9cRights under a contract are not forfeited by the other party\xe2\x80\x99s failure to\nread it.\xe2\x80\x9d United States v. Stump Home Specialties Manufacturing, Inc., 905\nF.2d 1117, 1120 (7th Cir. 1990).\nIsraeli v. Dott.Gallina S.R.L., 632 F. Supp.2d 866, 870-71 (W.D. Wis. 2009).\n5. Some courts (about half the states in the U.S.) have admitted they are willing to\ngrant relief in unconscionability for substantive unconscionability alone. See, e.g.,\nBrower v. Gateway 2000, Inc., 676 N.Y.S.2d 569, (Sup. Ct. App. 1998) (\xe2\x80\x9c[T]he\nsubstantive element alone may be sufficient to render the terms of the provision at\nissue unenforceable.\xe2\x80\x9d). Is this a good idea?\n6. Cases rescinding a contract for unconscionability as does James are a fairly recent phenomenon in common law history\xe2\x80\x94only about sixty years old. More\nsquarely in the unconscionability tradition is a case such as Wollums v. Horsley,\n206\n\n\x0c20 S.W. 781 (Ky. App. 1892), our Problem 28. The court in this case refused the\nrequested equitable remedy of specific performance, so the parties were already\nsquarely in equity\xe2\x80\x99s jurisdiction.\nPROBLEM 28. Wollums was 60 years old, a farmer, living on a mountain farm of\n\n200 acres in Kentucky, in a very rural area. Wollums was uneducated, afflicted\nwith a disabling disease, and owned no other land and little personal property. He\nknew little of what was going on in the world around him. Horsley was an experienced real estate speculator buying mineral rights. Through his agent, Horsley entered into a contract with Wollums to buy the mineral rights on Wollums\xe2\x80\x99s land\nfor $0.40 per acre. The agent assured Wollums that he would never be bothered by\nthe contract during his life, even though much mineral development was occurring locally and a railroad was being built through the area. Horsley paid the agent\n$80 for making this deal, the same amount Wollums would get in exchange for his\nmineral rights. Later, Horsley demanded a deed for the mineral rights, but Wollums refused to give one, so Horsley sued. At trial, Wollums proved that his land\nwas worth about $15 per acre, or $3,000. The value came almost entirely from the\nmineral rights. Should Wollums have to give a deed? Try to apply the complete\nprocedural and substantive unconscionability analyses from James. That is probably what a court would do now.\n7. James eventually was awarded attorneys\xe2\x80\x99 fees and costs of $331.024.50. Vice\nChancellor Laster said, \xe2\x80\x9cMany similarly qualified Chancery practitioners would\nhave charged at least double that amount. National should be commending James\xe2\x80\x99\ncounsel for their efficiency, particularly in light of National\'s bad-faith efforts to\nobstruct this litigation.\xe2\x80\x9d No. 8931-VCL, 2016 WL 3226434 at *4 (Del. Ch. June\n3, 2016). One ground for the fee and cost award was National\xe2\x80\x99s bad faith: \xe2\x80\x9cThis\npattern of behavior established that National and its counsel sought to deceive this\ncourt and opposing counsel and to strong-arm James by unnecessarily prolonging\nlitigation over what National regarded as a small-dollar loan. \xe2\x80\x9d Id. At one point,\nMcFeeters showed up at James\xe2\x80\x99s home and \xe2\x80\x9callegedly threatened her. National\ncontested the factual allegations but stipulated to a temporary restraining order\nthat required McFeeters to remain at least 2,000 feet from James and to refrain\nfrom contacting her except through counsel.\xe2\x80\x9d Id. at *2.\n8. Consider UCC \xc2\xa7 2-302.\nUniform Commercial Code \xc2\xa7 2-302. Unconscionable Contract or Clause, and\ncmts. 1, 2, and 3.\nPrior to the enactment of the UCC, unconscionability was considered to be largely\na doctrine of equity to which defendants could turn to argue that a plaintiff\xe2\x80\x99s remedy at law should be mitigated. Section 2-302 enlarged that scope. Consider the\nfirst sentence of comment 1. The UCC drafters were not kidding when they said\nthe section was intended to make unconscionability as we know it possible. This\nwas a bold move, but one that has caught on across the law of contracts as courts\n207\n\n\x0chave adopted the Article 2 position outside of the sale of goods context. Courts\nnow agree generally that unconscionability is available as a defense in any contract, regardless of subject matter. To some extent, UCC \xc2\xa7 2-302 was the genesis\nof this movement. How does the statute define unconscionability? How do the\ncomments? What does oppression mean? Unfair surprise? Disturbance of allocation of risks because of unequal bargaining power? Does James help you understand this language?\nDoes not \xc2\xa7 2-302 mandate that unconscionability be available on a showing of\nsubstantive unconscionability alone? What language suggests this? If the UCC\nmakes unconscionability doctrine potentially applicable to a supply contract between Exxon and Baker Hughes, should the doctrine also be part of the law of\ncontract that applies to contracts such as between James and National? In other\nwords, should the last sentence of \xc2\xb6 48 be true everywhere?\n9. When we say \xe2\x80\x9cfree market,\xe2\x80\x9d what do we mean the market is free of? What is\nthe relationship between law and a \xe2\x80\x9cfree market\xe2\x80\x9d?\n10. You might consider whether the James case is justified as a matter of autonomy, welfare, or morality. Which? More than one?\n\nFederal Trade Commission Regulation\xe2\x80\x94Door to Door Sales, especially \xc2\xa7\xc2\xa7\n429.1 and 429.2\nQuestion: This section mandates that the seller include in the written contract language granting a right to cancel. If the seller fails to include that language, does\nthe consumer have a right to cancel?\n\n208\n\n\x0cChapter 5. The Push\nToward Assent\nA. A Seal or Writing\nPILLANS v. VAN MIEROP (1765)\nKing\xe2\x80\x99s Bench\n3 Burr. 1663\n[\xc2\xb61] [In this case, White, a merchant in Ireland, wished to draw 800l. upon the\ncredit of Pillans, a Dutch merchant and financier, to pacify White\xe2\x80\x99s creditor,\nClifford. To induce Pillans to trust White\xe2\x80\x99s credit and make the advance, White\nproposed to obtain for Pillans the right to collect the money from a London financier should White default. White proposed Van Mierop as the London financier,\nwhereupon Pillans honored White\xe2\x80\x99s draft and paid 800l. to Clifford. Both Pillans\nand White then wrote to Van Mierop to learn \xe2\x80\x9cwhether [Van Mierop and his associates] would accept such bills as they, the plaintiffs, should in about a month\xe2\x80\x99s\ntime draw upon the said Van Mierop\xe2\x80\x99s * * * * house here in London, for 8001.\nupon the credit of White.\xe2\x80\x9d Van Mierop wrote a letter back agreeing to stand behind White, essentially as guarantor. Soon thereafter, White became insolvent, so\nwhen Pillans tried to draw upon his credit with Van Mierop, Van Mierop refused\nto pay. After a trial resulted in a verdict for Van Mierop, plaintiff\xe2\x80\x99s counsel moved\nfor a new trial. Van Mierop\xe2\x80\x99s counsel opposed a new trial on the ground that his\npromise was without consideration because Pillans granted credit to White before\nVan Mierop promised.]\n[\xc2\xb62] Lord Mansfield asked, if \xe2\x80\x9cany case could be found, where the undertaking\nholden to be a nudum pactum was in writing.\xe2\x80\x9d * * * *\n[\xc2\xb63] [Mansfield continued:] This is a matter of great consequence to trade and\ncommerce, in every light.\n[\xc2\xb64] If there was any kind of fraud in this transaction, the collusion and mala\nfides would have vacated the contract. But from these letters, it seems to me clear,\nthat there was none. The first proposal from White, was \xe2\x80\x9cI to reimburse the plaintiffs by a remittance, or by credit on the house of Van Mierop\xe2\x80\x9d: this was the alternative he proposed. The plaintiffs chose the latter. Both the plaintiffs and White\nwrote to Van Mierop and Company. They answered \xe2\x80\x9cthat they would honour the\nplaintiffs\xe2\x80\x99 draughts\xe2\x80\x9d so that the defendants assent to the proposal made by White,\n209\n\n\x0cand ratify it. And it does, not seem at all that the plaintiffs then doubted of White\xe2\x80\x99s\nsufficiency, or meant to conceal any thing from the defendants.\n[\xc2\xb65] If there be no fraud, it is a mere question of law. The law of merchants,\nand the law of the land, is the same * * * * . We must consider it as a point of law.\nA nudum pactum does not exist, in the usage and law of merchants.\n[\xc2\xb66] I take it, that the ancient notion about the want of consideration was for\nthe sake of evidence only: for when it is reduced into writing, as in covenants,\nspecialties, bonds, &c. there was no objection to the want of consideration. And\nthe Statute of Frauds proceeded upon the same principle.\n[\xc2\xb67] In commercial cases amongst merchants, the want of consideration is not\nan objection. * * * * I think the point of law is with the plaintiffs.\n[\xc2\xb68] Mr. Justice Wilmot- * * * * I can find none of those cases that go upon its\nbeing nudum pactum, that are in writing; they are all, upon parol.\n[\xc2\xb69]\n\nI have traced this matter of the nudum pactum; and it is very curious.\n\n[\xc2\xb610] He then explained the principle of an agreement being looked upon as a\nnudum pactum: and how the notion of a nudum pactum first came into our law.\nHe said, it was echoed from the civil law: -\xe2\x80\x9d Ex nudo pacto non oritur actio.\xe2\x80\x9d\n* * * * There was no radical defect in the contract, for want of consideration. But\nit was made requisite, in order to put people upon attention and reflection, and to\nprevent obscurity and uncertainty * * * *.\n[\xc2\xb611] Therefore it was intended as a guard against rash inconsiderate declarations: but if an undertaking was entered into upon deliberation and reflection, it\nhad activity; and such promises were binding. Both Grotius and Puffendorff, hold\nthem obligatory by the law of nations. Grot lib. 2, c. 11, De Promissis. Puffend lib.\n3, c. 5. They are morally good; and only require ascertainment. Therefore there is\nno reason to extend the principle, or carry it further.\n[\xc2\xb612] * * * * Our own lawyers have adopted exactly the same idea as the Roman\nlaw. Plowden, 308 b. in the case of [Sharington v. Strotton] * * * * mentions it:\nand no one contradicted it. He lays down the distinction between contracts or\nagreements in words (which are more base,) and contracts or agreements in writing, (which are more high,) and puts the distinction upon the want of deliberation\nin the former case, and the still exercise of it in the latter. His words are the marrow of what the Roman lawyers had said. \xe2\x80\x9cWords pass from men lightly:\xe2\x80\x9d but\nwhere the agreement is made by deed, there is more stay: &c. &c. For, first, there\nis &c. &c. And, thirdly, he delivers the writing as his deed. \xe2\x80\x9cThe delivery of the\ndeed is a ceremony in law, signifying fully his good will that the thing in the deed\nshould pass from him who made the deed, to the other. And therefore a deed,\n210\n\n\x0cwhich must necessarily be made upon great thought and deliberation, shall bind\nwithout regard to the consideration.\xe2\x80\x9d * * * *\n[\xc2\xb613] Therefore, if it stood only upon the naked promise, its being, in this case,\nreduced into writing, is a sufficient guard against surprize; and therefore the rule\nof nudum pactum does not apply in the present case.\n[\xc2\xb614] I cannot find, that a nudum pactum evidenced by writing has been ever\nholden bad: and I should think it good; though, where it is merely verbal, it is bad;\nyet I give no opinion for its being good, always, when in writing. * * * *\n___________________________________________\nThe holding of Pillans v. Van Mierop that a promise in writing needs no consideration was overruled by the House of Lords in Rann v. Hughes, 7 T.R. 350 n.a,,\n101 ER 1014 n.a. (House of Lords 1778), in which Chief Justice Skynner said,\n\xe2\x80\x9cAll contracts are, by the laws of England, distinguished into agreements by specialty [meaning a sealed writing], and agreements by parol; nor is there any such\nthird class as some of the counsel have endeavoured to maintain, as contracts in\nwriting. If they be merely written and not specialties, they are parol, and a consideration must be proved.\xe2\x80\x9d\nQuestions:\n1. Is there a bargain here?\n2. Lord Mansfield, Chief Justice of the King\xe2\x80\x99s Bench, was first trained in Scotland,\nwhere the civil law was employed, a derivation of Roman law and more akin to\nlaw used widely on the European continent. The linchpin of contract in civil law\nhas for many centuries been assent, in line with what we studied earlier about\nPufendorf and Pothier. How important does Mansfield think the consideration requirement is in this context? What does Mansfield say is the purpose for consideration?\n3. How important does Justice Wilmot think consideration is? What does he think\nis the purpose of the consideration requirement? Does he think consideration exists here?\n4. Is Pillans still the law?\nNote: Pillans is a guarantee case in which the guarantor promises to the creditor.\nIn our previous guaranty case, Edmonds Case, the guarantor promised to the\ndebtor, who reciprocally promised to pay the guarantor back. In a typical guarantee case, the debtor suggests a guarantor, but the guarantor promises to the creditor-guarantee that the guarantor will pay the debtor\xe2\x80\x99s debts if the debtor does not.\nWhat is consideration for the guarantor\xe2\x80\x99s promise? Typically, courts hold that the\n211\n\n\x0ccreditor\xe2\x80\x99s loan to the debtor, given in exchange for the guaranty, is consideration\nfor the guarantor\xe2\x80\x99s promise. Handing the loan funds over to the debtor is a bargained-for detriment to the promisee-creditor. But of course Pillans is different\nfrom that paradigmatic case.\n\nSeals and Statutes\nTex. Code Ann. \xc2\xa7 121.015. Private Seal or Scroll Not Required\nA private seal or scroll may not be required on a written instrument other\nthan an instrument made by a corporation.\nThe traditional effect of a seal has declined since medieval times. In America,\ncourts after the Revolution expanded greatly the kinds of marks on a paper that\nwould count as a seal, until the seal itself lost much of its significance. In response, legislatures passed statutes such as the one above, and the Iowa statute\nbelow, which is less ambiguous. The Texas statute was construed in the following\ntwo cases, which explain its meaning:\nWRIGHT v. ROBERT & ST. JOHN MOTOR CO. (1933)\nCommission of Appeals of Texas, Section A\n58 S.W.2d 67, 69\n* * * * [U]nder the common law, simple contracts in writing, under seal, implied\na consideration. Since the necessity for a seal has been done away with, as applied\nto simple written contracts, all such contracts now imply a consideration. * * * *\n\nJohn W. TAYLOR v. FRED CLARK FELT COMPANY (1978)\nCourt of Civil Appeals of Texas, Houston (14th Dist.)\n567 S.W.2d 863\nJ. CURTISS BROWN, Chief Justice.\n[\xc2\xb61] This is an appeal from a summary judgment granted the appellee in its suit\non a promissory note.\n[\xc2\xb62] John W. Taylor (appellant), individually and doing business as John Taylor\nCo., is the maker of a promissory note for $22,862.19 payable to the order of Fred\nClark Felt Company (appellee). The appellee filed suit on the note on June 17,\n1977. The appellant\xe2\x80\x99s first amended answer contained a general denial and allegations of payment and fraud in the inducement. The appellee subsequently filed a\nmotion for summary judgment, which was granted on September 27, 1977.\n****\n212\n\n\x0c[\xc2\xb63] There is a rebuttable statutory presumption that a written instrument imports consideration. Thigpen v. Thigpen, 563 S.W.2d 868 (Tex. Civ. App.-San Antonio 1978, no writ history); Maykus v. Texas Bank & Trust Co. of Dallas, 550\nS.W.2d 396 (Tex.Civ.App.-Dallas 1977, no writ); see Tex.Rev.Civ.Stat.Ann. art.\n27 (1969). The two opposing affidavits filed by the appellant contain statements\nthat John Taylor Co. had no record of ever receiving the goods for which the\npromissory note was issued and that it was the customary practice of that company to keep records of the receipt of such goods. That summary judgment evidence\ncounters the presumption of consideration and raises the inference that the goods\nwere never delivered. See Tex. Rev.Civ.Stat.Ann. art. 3737e, \xc2\xa7 3 (Supp. 1978).\nThe appellant having raised a fact issue concerning the affirmative defense of\nfailure of consideration, the trail court erred in granting summary judgment. Hudnall v. Tyler Bank and Trust Company, 458 S.W.2d 183 (Tex.Sup.1970).\n[\xc2\xb64] The judgment of the trial court is hereby reversed, and the case is remanded for a trial on the merits.\n[\xc2\xb65]\n\nReversed and remanded.\n\nThe Taylor v. Fred Clark Felt Co. case holds that the statute creates an \xe2\x80\x9cevidentiary presumption\xe2\x80\x9d in certain circumstances. An evidentiary presumption operates\nto show a fact or element of a law even though no evidence regarding that fact or\nelement is submitted to the court. Thus, relying on an evidentiary presumption, a\nlitigant can show a fact or element by either proving the fact itself or proving the\nfacts which cause the evidentiary presumption to exist. When a party relies on an\nevidentiary presumption, the opposing party may, if the presumption is rebuttable,\nrebut the presumption by submitting evidence which disproves the fact or element\nof law that was presumed. If the opposing party submits no evidence, then the unrebutted presumption becomes established as a matter of law. Taylor says that according to the statute certain facts establish a certain presumption. Which facts?\nWhat presumption? Is the presumption rebuttable?\nIowa Code \xc2\xa7 537A.1. Seals abolished\nThe use of private seals in written contracts, or other instruments in writing, by individuals, firms, or corporations that have not adopted a corporate seal, is hereby abolished; but the addition of a seal to any such instrument shall not affect its character or validity in any respect.\nIowa Code \xc2\xa7 537A.2. Consideration implied\nAll contracts in writing, signed by the party to be bound or by the party\xe2\x80\x99s\nauthorized agent or attorney, shall import a consideration.\n\n213\n\n\x0cIowa Code \xc2\xa7 537A.3. Failure of consideration\nThe want or failure, in whole or in part, of the consideration of a written\ncontract may be shown as a defense, total or partial * * * *.\nQuestion: How is the effect of the Iowa statute different from that of the Texas\nstatute?\n\nSKF USA, INC. v. WORKERS\xe2\x80\x99 COMPENSATION APPEAL BOARD\n(SMALLS) (1998)\nCommonwealth Court of Pennsylvania\n714 A.2d 496\nMIRARCHI, Jr., Senior Judge.\n[\xc2\xb61] [SKF employed Thomas Smalls. Smalls was injured in a work-related accident in which two of his fingers were amputated. Smalls received total and partial disability workers\xe2\x80\x99 compensation benefits for some time. Soon after his accident, Smalls sued Norton Industries, the manufacturer of the machine which\ncaused Smalls\xe2\x80\x99s injuries. Smalls and Norton later settled, Norton agreeing to pay\nSmalls a lump sum of $430,000 and Mrs. Smalls $20,000 and certain other later\nperiodic payments.\n[\xc2\xb62] When an employee is injured and recovers compensation from a person at\nfault other than his employer, the employer who has paid workers\xe2\x80\x99 compensation\nmoney in the meantime may then recover from the employee a portion of the\nmoney the employee receives from the third party, up to the amount of workers\xe2\x80\x99\ncompensation the employee received. This is called the employer\xe2\x80\x99s right of subrogation. Because SKF had paid Smalls workers\xe2\x80\x99 compensation benefits in compensation for injury caused by the fault of Norton, SKF had subrogation rights to\na portion of the money Smalls received from Norton.\n[\xc2\xb63] After Smalls and Norton settled, SKF\xe2\x80\x99s lawyer wrote a letter to Smalls\xe2\x80\x99s\nlawyer claiming subrogation rights. The two lawyers soon settled on a sum. SKF\xe2\x80\x99s\nlawyer suggested also that Smalls forego any further workers\xe2\x80\x99 compensation benefits. On January 31, 1986, SKF executed a general release, providing in relevant\npart:\n[T]he undersigned on behalf of SKF INDUSTRIES, INC. for and in consideration of $63,343.21, receipt of which is hereby acknowledged[,] do\nhereby remise, release, and forever discharge THOMAS SMALLS, ... of\nand from any and all manners of actions and causes of action, suits ...\nclaims and demands whatsoever in law or equity, especially any and all\npast, present or future claims which SKF INDUSTRIES, INC. may have\nagainst THOMAS SMALLS pursuant to Section 319 of the Pennsylvania\n214\n\n\x0cWorkers\xe2\x80\x99 Compensation Act for Workers\xe2\x80\x99 Compensation benefits paid or\nto be paid to THOMAS SMALLS due to Mr. SMALLS\xe2\x80\x99 accident of April\n22, 1980.\nAfter SKF signed the release, Smalls again experience periods of total and partial\ndisability and became entitled to workers\xe2\x80\x99 compensation as a result. On March 12,\n1987, SKF filed a petition seeking subrogation credit for benefits payable to\nSmalls subsequent to January 1, 1986. SKF alleged that the release was void because it lacked consideration. The Workers Compensation Board held that the release was supported by consideration.\n[\xc2\xb64] After deciding that the release was valid under workers\xe2\x80\x99 compensation\nlaws and that the release was actually supported by consideration, the Court stated:]\n[\xc2\xb65] * * * * [T]he Release contained the language, \xe2\x80\x9cwe have here unto set our\nhands and corporate seal,\xe2\x80\x9d and the word \xe2\x80\x9cseal\xe2\x80\x9d was preprinted next to the signature of Allen Belenson, Employer\xe2\x80\x99s Secretary and General Counsel. In Graybill v.\nJuniata County School District, 21 Pa. Cmwlth. 630, 347 A.2d 524, 526 (1975),\nthe contracts contained the similar language, \xe2\x80\x9cthe parties above named hereunto\nset their hands and seal,\xe2\x80\x9d along with the word \xe2\x80\x9cseal\xe2\x80\x9d or \xe2\x80\x9cL.S.\xe2\x80\x9d affixed next to or\nunder the signatures. Although no formal raised corporate seal was affixed, as in\nthis matter, this Court held that the presence of these markings provided ample\nevidence that the contracts were executed under seal.\n[\xc2\xb66] As to the common law effect of a seal in a written document, the Supreme\nCourt stated:\n[O]nce plaintiff has proved the signature, consideration \xe2\x80\xa6 may be presumed from the fact that the instrument is under seal \xe2\x80\xa6\xe2\x80\xa4 In other words,\na plaintiff who relies upon a sealed instrument is not obliged to prove consideration to take the case to the jury. The seal imports consideration.\nSelden v. Jackson, 425 Pa. 618, 619, 230 A.2d 197, 197-98 (1967). Thus, where,\nas here, a contract is executed under seal, a party may not raise, as a defense, want\nof consideration, distinguished from failure of consideration. Barnhart v. Barnhart, 376 Pa. 44, 101 A.2d 904 (1954). Hence, Employer in this matter may not\nraise lack or want of consideration to avoid the terms of the Release.\n[\xc2\xb67] Moreover, regardless of lack of consideration, the Release is also valid and\nenforceable under the Act of May, 13, 1927, P.L. 985, 33 P.S. \xc2\xa7 6, commonly\nknown as the Uniform Written Obligations Act, which provides:\nA written release or promise, hereafter made and signed by the person releasing or promising, shall not be invalid or unenforceable for lack of consideration, if the writing also contains an additional express statement, in\nany form of language, that the signer intends to be legally bound.\nIn the Release executed under seal, Employer unequivocally agreed to release and\ndischarge Claimant from \xe2\x80\x9cany and all past, present or future claims\xe2\x80\x9d arising under\n215\n\n\x0cSection 319 of the Act. The Release did not contain any condition or disclaimer\nwhich would refute Employer\xe2\x80\x99s intent to be legally bound by the terms therein.\n****\n[\xc2\xb68]\n\nIn conclusion, the Release is valid and enforceable. * * * *\n\nORDER\n[\xc2\xb69] AND NOW, this 23rd day of June, 1998, the order of the Workers\xe2\x80\x99 Compensation Appeal Board in the above-captioned matter is affirmed.\nQuestions:\n1. Does a seal raise a presumption of consideration in Pennsylvania? Is the presumption rebuttable?\n2. Would the release be enforceable without the seal?\n3. What language shows that SKF intended to be bound?\n\nB. Nominal and Recited Consideration Generally, and in Option Contracts\nSCHNELL v. NELL (1861)\nSupreme Court of Indiana\n17 Ind. 29\n[\xc2\xb61] PERKINS, J.\xe2\x80\x94Action by J. B. Nell against Zacharias Schnell, upon the\nfollowing instrument:\n\xe2\x80\x9cThis agreement, entered into this 13th day of February, 1856, between\nZach. Schnell, of Indianapolis, Marion county, State of Indiana, as party of\nthe first part, and J. B. Nell, of the same place, Wendelin Lorenz, of\nStilesville, Hendricks county, State of Indiana, and Donata Lorenz, of\nFrickinger, Grand Duchy of Baden, Germany, as parties of the second part,\nwitnesseth: The said Zacharias Schnell agrees as follows: whereas his wife,\nTheresa Schnell, now deceased, has made a last will and testament, in\nwhich, among other provisions, it was ordained that every one of the\nabove named second parties, should receive the sum of $200; and whereas\nthe said provisions of the will must remain a nullity, for the reason that no\nproperty, real or personal, was in the possession of the said Theresa\nSchnell, deceased, in her own name, at the time of her death, and all property held by Zacharias and Theresa Schnell jointly, therefore reverts to her\nhusband; and whereas the said Theresa Schnell has also been a dutiful and\nloving wife to the said Zach. Schnell, and has materially aided him in the\nacquisition of all property, real and personal, now possessed by him; for,\n216\n\n\x0cand in consideration of all this, and the love and respect he bears to his\nwife; and, furthermore, in consideration of one cent, received by him of\nthe second parties, he, the said Zach. Schnell, agrees to pay the above\nnamed sums of money to the parties of the second part, to wit: $200 to the\nsaid J. B. Nell; $200 to the said Wendelin Lorenz; and $200 to the said\nDonata Lorenz, in the following installments, viz., $200 in one year from\nthe date of these presents; $200 in two years, and $200 in three years; to\nbe divided between the parties in equal portions of $66\xe2\x85\x94 each year, or as\nthey may agree, till each one has received his full sum of $200.\n\xe2\x80\x9cAnd the said parties of the second part, for, and in consideration of this,\nagree to pay the above named sum of money [one cent], and to deliver up\nto said Schnell, and abstain from collecting any real or supposed claims\nupon him or his estate, arising from the said last will and testament of the\nsaid Theresa Schnell, deceased.\n\xe2\x80\x9cIn witness whereof, the said parties have, on this 13th day of February,\n1856, set hereunto their hands and seals.\n\xe2\x80\x9cZACHARIAS SCHNELL, [SEAL.]\n\xe2\x80\x9cJ. B. NELL, [SEAL.]\n\xe2\x80\x9cWEN. LORENZ.\xe2\x80\x9d [SEAL.]\n[\xc2\xb62] The complaint contained no averment of a consideration for the instrument,\noutside of those expressed in it; and did not aver that the one cent agreed to be\npaid, had been paid or tendered.\n[\xc2\xb63]\n\nA demurrer to the complaint was overruled.\n\n[\xc2\xb64] The defendant answered, that the instrument sued on was given for no\nconsideration whatever.\n[\xc2\xb65] He further answered, that it was given for no consideration, because his\nsaid wife, Theresa, at the time she made the will mentioned, and at the time of her\ndeath, owned, neither separately, nor jointly with her husband, or any one else\n(except so far as the law gave her an interest in her husband\xe2\x80\x99s property), any property, real or personal, &c. * * * *\n[\xc2\xb66] The Court sustained a demurrer to these answers, evidently on the ground\nthat they were regarded as contradicting the instrument sued on, which particularly set out the considerations upon which it was executed. But the instrument is\nlatently ambiguous on this point. See Ind. Dig., p. 110.\n\n217\n\n\x0c[\xc2\xb67] The case turned below, and must turn here, upon the question whether the\ninstrument sued on does express a consideration sufficient to give it legal obligation, as against Zacharias Schnell. It specifies three distinct considerations for his\npromise to pay $600:\n1. A promise, on the part of the plaintiffs, to pay him one cent.\n2. The love and affection he bore his deceased wife, and the fact that she\nhad done her part, as his wife, in the acquisition of property.\n3. The fact that she had expressed her desire, in the form of an inoperative\nwill, that the persons named therein should have the sums of money specified.\n[\xc2\xb68] The consideration of one cent will not support the promise of Schnell. It is\ntrue, that as a general proposition, inadequacy of consideration will not vitiate an\nagreement. Baker v. Roberts, 14 Ind. 552. But this doctrine does not apply to a\nmere exchange of sums of money, of coin, whose value is exactly fixed, but to the\nexchange of something of, in, itself, indeterminate value, for money, or, perhaps,\nfor some other thing of indeterminate value. In this case, had the one cent mentioned, been some particular one cent, a family piece, or ancient, remarkable coin,\npossessing an indeterminate value, extrinsic from its simple money value, a different view might be taken. As it is, the mere promise to pay six hundred dollars\nfor one cent, even had the portion of that cent due from the plaintiff been tendered,\nis an unconscionable contract, void, at first blush, upon its face, if it be regarded\nas an earnest one. Hardesty v. Smith, 3 Ind. 39. The consideration of one cent is,\nplainly, in this case, merely nominal, and intended to be so. As the will and testament of Schnell\xe2\x80\x99s wife imposed no legal obligation upon him to discharge her bequests out of his property, and as she had none of her own, his promise to discharge them was not legally binding upon him, on that ground. A moral consideration, only, will not support a promise. Ind. Dig., p. 13. And for the same reason,\na valid consideration for his promise can not be found in the fact of a compromise\nof a disputed claim; for where such claim is legally groundless, a promise upon a\ncompromise of it, or of a suit upon it, is not legally binding. Spahr v. Hollingshead, 8 Blackf. 415. There was no mistake of law or fact in this case, as the\nagreement admits the will inoperative and void. The promise was simply one to\nmake a gift. The past services of his wife, and the love and affection he had borne\nher, are objectionable as legal considerations for Schnell\xe2\x80\x99s promise, on two\ngrounds: 1. They are past considerations. Ind. Dig., p. 13. 2. The fact that Schnell\nloved his wife, and that she had been industrious, constituted no consideration for\nhis promise to pay J. B. Nell, and the Lorenzes, a sum of money. Whether, if his\nwife, in her lifetime, had made a bargain with Schnell, that, in consideration of his\npromising to pay, after her death, to the persons named, a sum of money, she\nwould be industrious, and worthy of his affection, such a promise would have\nbeen valid and consistent with public policy, we need not decide. Nor is the fact\nthat Schnell now venerates the memory of his deceased wife, a legal consideration\nfor a promise to pay any third person money.\n\n218\n\n\x0c[\xc2\xb69] The instrument sued on, interpreted in the light of the facts alleged in the\nsecond paragraph of the answer, will not support an action. The demurrer to the\nanswer should have been overruled. See Stevenson v. Druley, 4 Ind. 519.\n[\xc2\xb610] Per Curiam. \xe2\x80\x94 The judgment is reversed, with costs. Cause remanded &c.\nQuestions:\n1. What possible consideration can you argue here?\n2. What does nominal mean?\n3. Do you think that consideration exists here under the Kim v. Son case? Under\nDyer?\n\nLEWIS v. FLETCHER (1980)\nSupreme Court of Idaho\n617 P.2d 834\nBAKES, Justice.\n[\xc2\xb61] Plaintiffs Gerald and Patricia Lewis commenced this action for specific\nperformance of an option contract on forty acres of land owned by defendants\nClaude and Stella Fletcher. The matter was tried to the district court sitting without a jury. The Lewises appeal from a judgment in favor of the Fletchers.\n[\xc2\xb62] In March of 1971, the Fletchers listed their 440 acre farm for sale with a\nrealtor. The Lewises were interested in buying it. After some negotiations, the\nFletchers agreed to sell and the Lewises agreed to buy 360 acres of the farm. They\nexecuted a \xe2\x80\x9cReceipt and Agreement to Purchase\xe2\x80\x9d for the 360 acre tract. This tract\nincluded the entire farm with the exception of the home forty and another forty\nacres adjoining it. The parties also executed an option on this adjoining forty acre\nparcel. By its terms, the option could be exercised in May of 1976, or earlier if the\nparties agreed.\n[\xc2\xb63] The relationship between the contract for sale of the larger tract and the\noption on the smaller tract is disputed. The buyers, the Lewises, contend that the\nsale of the 360 acre tract and the option on the forty acre tract were inseparable.\nThey claim that both agreements were executed at the same time and on the same\nday, March 22, 1971. The Fletchers assert, and the trial court found, that the \xe2\x80\x9cReceipt and Agreement to Purchase\xe2\x80\x9d for the 360 acres was executed by the parties\non March 18, 1971, and the option contract on March 22, 1971. The Fletchers\ncontend, and again the trial court agreed, that the two contracts were separate. The\n\xe2\x80\x9cReceipt and Agreement to Purchase\xe2\x80\x9d is dated March 17, 1971, on the top of the\n219\n\n\x0cform, and March 18, 1971, next to the Fletchers\xe2\x80\x99 signatures. The option is dated\nMarch 22, 1971.\n[\xc2\xb64] The option contract recites a consideration of $20.00. The trial court found,\nand the evidence supports the finding, that the $20.00 payment had never been\nmade.\n[\xc2\xb65] In April of 1976, the Lewises gave notice of intention to exercise the option, the Fletchers resisted, and this controversy ensued. After a trial, the court\ndenied the Lewises\xe2\x80\x99 complaint for specific performance of the option contract,\nciting three alternative bases for its decision. The court found, among other things,\nthat the contract failed for want of consideration since the sum of $20.00 had not\nbeen paid to the Fletchers. Because we affirm the district court\xe2\x80\x99s finding that the\noption contract was unsupported by consideration, we need not address the alternative bases for the decision below.\n[\xc2\xb66] * * * * Since the option contract is separate [from the contract for the purchase of the 360 acres], it must stand on its own. The written option contract recites a consideration of $20.00 \xe2\x80\x9creceipt of which ... is acknowledged\xe2\x80\x9d by the\nFletchers. The trial court found that the $20.00 was never paid, and that finding is\nsupported by substantial and competent evidence. The legal issue presented is\nwhether a written and signed option contract, which contains a false recital of\npayment of consideration and acknowledgment of its receipt, is valid and enforceable. We conclude it is not.\n[\xc2\xb67] In Idaho, a written instrument is presumptive evidence of consideration,\nI.C. \xc2\xa7 29-103. That presumption is rebuttable and not conclusive. A party seeking\nto avoid or invalidate the contract may introduce evidence of a lack of consideration. I.C. \xc2\xa7 29-104; Rosenberry v. Clark, 85 Idaho 317, 379 P.2d 638 (1963); Merritt v. Sims, 78 Idaho 292, 301 P.2d 1108 (1956); G. Bell, Handbook of Evidence\nfor the Idaho Lawyer 199 (1972).\n[\xc2\xb68] The majority of jurisdictions hold that where the recited consideration has\nnot been paid and no other consideration has been given, the contract fails for\nwant of consideration. Bard v. Kent, 19 Cal.3d 449, 122 P.2d 8 (1942); Berryman\nv. Kmoch, 221 Kan. 304, 559 P.2d 790 (1977); American Handkerchief Corp. v.\nFrannat Realty Co., 17 N.J. 12, 109 A.2d 793 (1954); Echols v. Bloom, 485\nS.W.2d 798 (Tex.Civ.App. 1972, writ ref\xe2\x80\x99d n.r.e.); Kay v. Spencer, 29 Wyo. 382,\n213 P. 571 (1923). See J. Calamari & J. Perillo, Contracts \xc2\xa7 4-5 (2d ed. 1977); 1A\nCorbin on Contracts, \xc2\xa7 263 at 501 (1963); 1 Williston on Contracts \xc2\xa7\xc2\xa7 61 & 115B\n(3d ed. 1957); 17 Am.Jur.2d Contracts \xc2\xa7 91 (1964); Annot., 27 A.L.R. 1127\n(1923). A minority of jurisdictions have held otherwise, either on the theory that\nthe parties are estopped from contradicting their written recital and acknowledgement, Real Estate Co. of Pittsburgh v. Rudolph, 301 Pa. 502, 153 A. 438\n(1930), or on the theory that the recital of the consideration gives rise to an implied promise to pay it, Smith v. Wheeler, 210 S.E.2d 702 (Ga. 1974). The Re220\n\n\x0cstatement of Contracts takes the minority position that an option in writing and\nsigned by the offeror which recites consideration is binding notwithstanding the\nfact that no such consideration was given or expected. Restatement (Second) of\nContracts, \xc2\xa7 89B(1), comment c (Tent. Draft 1973). Cf. I.C. \xc2\xa7 28-2-205 (firm offer of merchant irrevocable notwithstanding lack of consideration). However, we\nchoose to adhere to the majority position. * * * *\n[\xc2\xb69] We therefore affirm the trial court\xe2\x80\x99s conclusion that the option on the forty\nacre tract is unsupported by consideration. An option contract not supported by\nconsideration is merely a revocable offer to sell. E.g., Berryman v. Kmoch, 221\nKan. 304, 559 P.2d 790 (1977). Both Fletcher and Lewis testified that Fletcher\nhad informed Lewis several years earlier that he did not intend to go through with\nthe option, which would constitute a revocation. Nowhere in the record or briefs\ndo the Lewises argue that they accepted the offer prior to the Fletchers\xe2\x80\x99 revocation.\nThere being no acceptance prior to revocation, plaintiffs do not have an enforceable contract to purchase the forty acres.\n[\xc2\xb610] The judgment of the district court is hereby affirmed.\n[\xc2\xb611] Costs to respondents. No attorney fees allowed.\nDONALDSON, C.J., SHEPARD, J., and KRAMER, J. Pro Tem., concur.\nMcFADDEN, J., dissents without opinion.\nQuestions:\n1. In an option contract, such as the one in this case, the optionor makes two\npromises. One is to sell the item on which the option is granted. What is the other\npromise?\n2. Would the court have enforced the contract if the $20 had been paid?\n3. Does the court adopt the position of the Restatement (Second) of Contracts?\n4. Why isn\xe2\x80\x99t $20 for an option on 40 acres nominal?\n\nREAL ESTATE CO. OF PITTSBURGH v. RUDOLPH (1930)\nSupreme Court of Pennsylvania\n153 A. 438\nSIMPSON, J.\n[\xc2\xb61] Defendant executed and delivered to the legal plaintiff an option as follows:\n\xe2\x80\x9cApril 18th, 1928.\n221\n\n\x0c\xe2\x80\x9cReal Estate Company of Pittsburgh,\n\xe2\x80\x9cWood and Fourth,\n\xe2\x80\x9cPittsburgh, Pennsylvania.\n\xe2\x80\x9cGentlemen:\n\xe2\x80\x9cIn consideration of One ($1.00) Dollar in hand paid, I hereby give you\nthe option to purchase my property situate 1628 Penn Ave., at the price of\n$15000.00. This option to expire at 12 o\xe2\x80\x99clock noon, April 21th, 1928.\n\xe2\x80\x9cIf this option is accepted by you and transaction closed, I agree to pay\nyou a commission of 3% on the sale price. It is understood that the property is free and clear of encumbrances excepting a mortgage in the amount\nof $6,000.00.\n\xe2\x80\x9cVery truly yours, J. A. Rudolph.\xe2\x80\x9d\nThe next day, and before he was formally notified of the acceptance of the option,\ndefendant informed plaintiffs that he would not sell the property because his wife\nwould not join in the conveyance. They were willing, however, to accept a title\nwithout the joinder of the wife, as, of course, they had the right to do (Corson v.\nMulvany, 49 Pa. 88, 88 Am. Dec. 485; Medoff v. Vandersaal, 271 Pa. 169, 116 A.\n525); but he persisted in his revocation, and refused even to discuss the matter\nwith them, whereupon they filed the present bill in equity for specific performance. The learned president judge of the court below, who sat as chancellor,\nfound all the disputed facts in favor of plaintiffs, and reported a decree nisi awarding specific performance, the deed to be executed by defendant alone, without the\njoinder of his wife. On exceptions filed, the court in banc decreed a dismissal of\nthe bill, solely because the one dollar, specified in the option as having been paid,\nhad not in fact been paid, and hence the optioner was well within his right in revoking it before acceptance. This raises the only point to be considered by us on\nplaintiffs\xe2\x80\x99 appeal from the decree. It must be admitted that the authorities elsewhere are not harmonious, but in our judgment the final decree is wrong.\n[\xc2\xb62] It is of course true that, if an option has no actual or legal consideration to\nsupport it, it may be revoked by the optioner at any time prior to acceptance. Defendant\xe2\x80\x99s answer does not aver a lack of consideration, however, and hence neither the fact nor effect of a want of it should have been considered by the court\nbelow. Moreover, this option has a legal consideration to support it. In Lawrence v.\nMcCalmont, 2 How. (43 U. S.) 426, 452, 11 L. Ed. 326, it is said in an opinion by\nMr. Justice Story:\n\xe2\x80\x9cThe second [defense] is, that the payment of the one dollar is merely\nnominal and not sufficient to sustain the guarantee, if it had been received;\nand it is urged that it was not received. As to this last point, we feel no difficulty. The guarantor acknowledged the receipt of the one dollar, and is\nnow estopped to deny it. If she has not received it, she would now be entitled to recover it. A valuable consideration, however small or nominal, if\ngiven or stipulated for in good faith, is, in the absence of fraud, sufficient\nto support an action on any parol contract; and this is equally true as to\ncontracts of guarantee as to other contracts. A stipulation in consideration\nof one dollar is just as effectual and valuable a consideration as a larger\n222\n\n\x0csum stipulated for or paid. * * * * But, independently of all authority, we\nshould arrive at the same conclusion. The receipt of the one dollar is\nacknowledged; no fraud is pretended or shown; and the consideration, if\nstanding alone in a bona fide transaction would sustain the present suit.\xe2\x80\x9d\n[\xc2\xb63] That case is apposite here, since the traditional statement in the option of\nthe \xe2\x80\x9c$1 in hand paid\xe2\x80\x9d can only mean that appellant acknowledges the receipt of\nthat sum.\n[\xc2\xb64] If this is so as concerns a guarantor, in whose favor the law leans, it must\nbe so in cases like the present, and so it, has been held in Watkins v. Robertson,\n105 Va. 269, 284, 285, 54 S. E. 33, 5 L. R, A. (N. S.) 1194, 115 Am. St. Rep. 880;\nHagen v. Lehmann, 317 Ill. 227, 230, 148 N. E. 57; Horbach v. Coyle (C. C. A.) 2\nF.(2d) 702; and in the cases cited in those authorities. * * * *\n[\xc2\xb65] We need not elaborate upon these authorities, however, since the point, is\nso ruled, in an opinion by the retiring Chief Justice, in Piper v. Queeney, 282 Pa.\n135, 142, 127 A. 474, 477. We there said:\n\xe2\x80\x9cWhen, in point of fact, a valuable consideration is relied on to support a\ndeed or contract, under seal or otherwise, it may be inquired into by parol,\nalthough the result of the admission of such evidence is to show that the\nconsideration set forth in the writing is not the real or exclusive one\n(Nichols v. Nichols, 133 Pa. 438, 454, 455, 19 A. 422), so long as nothing\nis permitted to be proved that is \xe2\x80\x98directly inconsistent\xe2\x80\x99 with the consideration named [in the instrument itself] (Buckley\xe2\x80\x99s Appeal, 48 Pa. 491, 496,\n88 Am. Dec. 468; Lewis v. Brewster, 57 Pa. 410, 414; McGary v. McDermott, 207 Pa. 620, 623, 57 A. 46), or which directly changes the character\nof the writing or its covenants (Henry v. Zurflieh, 203 Pa. 440, 450, 53 A.\n243).\xe2\x80\x9d\n[\xc2\xb66] * * * * It is elementary that the consideration imported from the use of a\nseal on such a paper may not be contradicted by proof. Storm v. United States, 94\nU. S. 76, 83, 84, 24 L. Ed. 42. In the light of this, it, would be neither logical nor\nconsistent to hold that the intentional insertion of an actual consideration may be\noverthrown whenever one of the parties desires to escape liability. * * * *\n[\xc2\xb67] Moreover, it is quite possible, when taken in conjunction with a finding of\nthe chancellor that defendant knew the agreement was sought because of a hopedfor resale to a third party, that its true interpretation is that defendant gave to the\nlegal plaintiff an option until \xe2\x80\x9c12 o\xe2\x80\x99clock noon April 24th, 1928,\xe2\x80\x9d to find a purchaser for the property at $15,000, and said to him, \xe2\x80\x9cif this option is accepted by\nyou and transaction closed, I agree to give you a commission of three per cent on\nthe sale price.\xe2\x80\x9d No other construction satisfactorily explains why the vendor\nagreed to pay the vendee for buying the property, instead of merely stating that\nthe sales price is to be $14,550. If that construction is correct, then the agreement\ncontemplated services to be rendered by plaintiff to defendant forthwith which the\n223\n\n\x0cformer impliedly agrees to render, and hence an additional valuable consideration\nappears.\n[\xc2\xb68] The decree of the court below is reversed, at the cost of appellee, and the\nrecord is remitted that the decree nisi may be entered as the decree of the court.\nQuestions:\n1. Is Rudolph consistent with Lewis v. Fletcher?\n2. Isn\xe2\x80\x99t $1 nominal, even if Rudolph is estopped to deny it?\n3. Did the plaintiff in Rudolph rely on the statement of consideration in the option?\nWas that reliance reasonable? What detriment resulted?\n4. Why allow a mere recital of consideration to make an option contract enforceable? Are option contracts different from other contracts in such a way that makes\nthis holding appropriate? (The answer is not in the case, but this is the relevant\npolicy question. If you think about what an option is worth, it\xe2\x80\x99s not difficult to\nfigure out why courts allow $20 paid for an option on 40 acres in Lewis and a $1\nrecital in Rudolph to be binding even though they are very small amounts.)\n\nC. Implied Inducement\nThe following is a typically Delphic Cardozo opinion. It won\xe2\x80\x99t be the last you see\nin law school. The key to this one is to see that there is no consideration here,\ntechnically. Why not? You may wish to review the pre-existing duty rule, which\nwe studied in Borelli v. Brusseau. Notwithstanding this, Cardozo enforces the\nagreement as if it had consideration. Why? What is here that counts as a bargain\neven though no bargain exists? Is there a reason to uphold this promise even if it\nis not part of a bargain?\nDE CICCO v. SCHWEIZER et al. (1917)\nCourt of Appeals of New York\n117 N.E. 807\nCARDOZO, J.\n[\xc2\xb61] On January 16, 1902, \xe2\x80\x98articles of agreement\xe2\x80\x99 were executed by the defendant Joseph Schweizer, his wife, Ernestine, and Count Oberto Gulinelli. The\nagreement is in Italian. We quote from a translation the part essential to the decision of this controversy:\n\n224\n\n\x0c\xe2\x80\x98Whereas, Miss Blanche Josephine Schweizer, daughter of said Mr. Joseph\nSchweizer and of said Mrs. Ernestine Teresa Schweizer, is now affianced\nto and is to be married to the above said Count Oberto Giacomo Giovanni\nFrancesco Maria Gulinelli: Now in consideration of all that is herein set\nforth the said Mr. Joseph Schweizer promises and expressly agrees by the\npresent contract to pay annually to his said daughter Blanche, during his\nown life and to send her, during her lifetime, the sum of two thousand five\nhundred dollars, or the equivalent of said sum in francs, the first payment\nof said amount to be made on the 20th day of January, 1902.\xe2\x80\x99\n[\xc2\xb62] Later articles provided that \xe2\x80\x98for the same reason heretofore set forth,\xe2\x80\x99 Mr.\nSchweizer will not change the provision made in his will for the benefit of his\ndaughter and her issue, if any. The yearly payments in the event of his death are to\nbe continued by his wife.\n[\xc2\xb63] On January 20, 1902, the marriage occurred. On the same day, the defendant made the first payment to his daughter. He continued the payments annually\ntill 1912. This action is brought to recover the installment of that year. The plaintiff holds an assignment executed by the daughter, in which her husband joined.\nThe question is whether there is any consideration for the promised annuity. That\nmarriage may be a sufficient consideration is not disputed. The argument for the\ndefendant is, however, that Count Gulinelli was already affianced to Miss\nSchweizer, and that the marriage was merely the fulfillment of an existing legal\nduty. For this reason, it is insisted, consideration was lacking. * * * *\n[\xc2\xb64] The defendant\xe2\x80\x99s contract, if it be one, is not bilateral. It is unilateral. Miller\nv. McKenzie, 95 N.Y. 575, 47 Am. Rep. 85. The consideration exacted is not a\npromise, but an act. The count did not promise anything. In effect the defendant\nsaid to him: If you and my daughter marry, I will pay her an annuity for life. Until\nmarriage occurred, the defendant was not bound. It would not have been enough\nthat the count remained willing to marry. The plain import of the contract is that\nhis bride also should be willing, and that marriage should follow. The promise\nwas intended to affect the conduct, not of one only, but of both. This becomes the\nmore evident when we recall that though the promise ran to the count, it was intended for the benefit of the daughter. [Citations omitted.] * * * * If the contract\nhad been bilateral, her position might have been different. Since, however, it was\nunilateral, the consideration being performance (Miller v. McKenzie, supra), action on the faith of it put her in the same position as if she had been in form the\npromisee. That she learned of the promise before the marriage is a legitimate inference from the relation of the parties and from other attendant circumstances.\nThe writing was signed by her parents; it was delivered to her intended husband;\nit was made four days before the marriage; it called for a payment on the day of\nthe marriage; and on that day payment was made, and made to her. From all these\ncircumstances, we may infer that at the time of the marriage the promise was\nknown to the bride as well as the husband, and that both acted upon the faith of it.\n\n225\n\n\x0c[\xc2\xb65] The situation, therefore, is the same in substance as if the promise had run\nto husband and wife alike, and had been intended to induce performance by both.\nThey were free by common consent to terminate their engagement or to postpone\nthe marriage. If they forebore from exercising that right and assumed the responsibilities of marriage in reliance on the defendant\xe2\x80\x99s promise, he may not now retract it. * * * *\n[\xc2\xb66] The defendant knew that a man and a woman were assuming the responsibilities of wedlock in the belief that adequate provision had been made for the\nwoman and for future offspring. He offered this inducement to both while they\nwere free to retract or to delay. That they neither retracted nor delayed is certain.\nIt is not to be expected that they should lay bare all the motives and promptings,\nsome avowed and conscious, others perhaps half-conscious and inarticulate,\nwhich swayed their conduct. It is enough that the natural consequence of the defendant\xe2\x80\x99s promise was to induce them to put the thought of rescission or delay\naside. From that moment, there was no longer a real alternative. There was no\nlonger what philosophers call a \xe2\x80\x98living\xe2\x80\x99 option. This in itself permits the inference\nof detriment. Smith v. Chadwick, 9 App. Cas. 187, 196; Smith v. Land & House\nCorp., 28 Ch.D. 7, 16; Voorhis v. Olmstead, 66 N.Y. 113, 118; Fottler v. Moseley,\n179 Mass. 295, 60 N.E. 788. \xe2\x80\x98If it is proved that the defendants with a view to induce the plaintiff to enter into a contract made a statement to the plaintiff of such\na nature as would be likely to induce a person to enter into the contract, it is a fair\ninference of fact that he was induced to do so by the statement.\xe2\x80\x99 Blackburn, L.J.,\nin Smith v. Chadwick, supra. The same inference follows, not so inevitably, but\nstill legitimately, where the statement is made to induce the preservation of a contract. It will not do to divert the minds of others from a given line of conduct, and\nthen to urge that because of the diversion the opportunity has gone by to say how\ntheir minds would otherwise have acted. If the tendency of the promise is to induce them to persevere, reliance and detriment may be inferred from the mere fact\nof performance. The springs of conduct are subtle and varied. One who meddles\nwith them must not insist upon too nice a measure of proof that the spring which\nhe released was effective to the exclusion of all others.\n[\xc2\xb67] One other line of argument must be considered. The suggestion is made\nthat the defendant\xe2\x80\x99s promise was not made animo contrahendi. It was not designed, we are told, to sway the conduct of any one; it was merely the offer of a\ngift which found its motive in the engagement of the daughter to the count. Undoubtedly, the prospective marriage is not to be deemed a consideration for the\npromise \xe2\x80\x98unless the parties have dealt with it on that footing.\xe2\x80\x99 Holmes, Common\nLaw, p. 292; Fire Ins. Ass\xe2\x80\x99n v. Wickham, 141 U.S. 564, 579, 12 Sup.Ct. 84 (35 L.\nEd. 860). \xe2\x80\x98Nothing is consideration that is not regarded as such by both parties.\xe2\x80\x99\nPhilpot v. Gruninger, 14 Wall. 570, 577 (20 L.Ed. 743); Fire Ins. Ass\xe2\x80\x99n v. Wickham, supra. But here the very formality of the agreement suggests a purpose to\neffect the legal relations of the signers. One does not commonly pledge one\xe2\x80\x99s self\nto generosity in the language of a covenant. That the parties believed there was a\nconsideration is certain. The document recites the engagement and the coming\n226\n\n\x0cmarriage. It states that these are the \xe2\x80\x98consideration\xe2\x80\x99 for the promise. The failure to\nmarry would have made the promise ineffective. In these circumstances we cannot say that the promise was not intended to control the conduct of those whom it\nwas designed to benefit. Certainly we cannot draw that inference as one of law.\nBoth sides moved for the direction of a verdict, and the trial judge became by\nconsent the trier of the facts. If conflicting inferences were possible, he chose\nthose favorable to the plaintiff.\n[\xc2\xb68] The conclusion to which we are thus led is reinforced by those considerations of public policy which cluster about contracts that touch the marriage relation. The law favors marriage settlements, and seeks to uphold them. It puts them\nfor many purposes in a class by themselves. Phalen v. U.S. Trust Co., 186\nN.Y.178, 181, 78 N.E.943, 7 L.R.A. (N.S.) 734, 9 Ann.Cas.595. It has enforced\nthem at times where consideration, if present at all, has been dependent upon\ndoubtful inference. McNutt v. McNutt, 116 Ind. 545, 19 N.E.115, 2 L.R.A 372;\nAppleby v. Appleby, 100 Minn.408, 111 N.W.305, 10 L.R.A. (N.S.) 590, 117\nAm.St.Rep.709, 10 Ann.Cas.563. It strains, if need be, to the uttermost the interpretation of equivocal words and conduct in the effort to hold men to the honorable fulfillment of engagements designed to influence in their deepest relations the\nlives of others.\n[\xc2\xb69]\n\nThe judgment should be affirmed with costs.\n\nCRANE, J. (concurring). [Crane\xe2\x80\x99s concurrence is omitted.]\nHISCOCK, C. J., and CUDDEBACK, POUND, and ANDREWS, JJ., concur with\nCARDOZO, J., and CRANE, J., concurs in opinion. COLLIN, J., not voting.\nJudgment affirmed.\nQuestions:\n1. DiCicco is a rather difficult case. What is the issue in this court?\n2. Does this case involve a unilateral or a bilateral contract?\n3. Why is it necessary to show that Blanche was a party to the contract? (In thinking about this question, consider that the Count and Blanche are engaged.)\n4. What facts indicate that Blanche was more or less a promisee?\n5. What facts does Cardozo cite showing that the Count and Blanche married in\norder to get the money Blanche\xe2\x80\x99s father promised them?\n6. Why is this promise not a gift promise? Or is it?\n\n227\n\n\x0c7. Is Cardozo\xe2\x80\x99s move with respect to consideration here similar to the judges\xe2\x80\x99\nmove in Riches v. Bridges?\n8. Could the De Cicco opinion have helped Mona in Problem 1?\nNote: Cardozo was a brilliant rhetorician, and in this case he is at his best (or\nworst).\n\nD. The Statute of Frauds\nOne immediate result of making parol promises based upon a consideration generally enforceable in assumpsit was that courts began enforcing promises on very\nlittle evidence. Particularly because of the mutual promise rule, no longer did a\nseal or a transaction of property evidence every actionable promise. As evidence\nof promises, consideration was not as good as a sealed writing. One reaction to\nthe ease of proof brought on by the growth of assumpsit was the passage of a statute by Parliament in 1677 which has become known as the Statute of Frauds. The\nStatute of Frauds has been enacted in more or less similar form by all fifty states.\nThe following version is from Texas, but it is very much the same as other statutes\nenacted in the other 49 states:\n(a) A promise or agreement described in Subsection (b) of this section is\nnot enforceable unless the promise or agreement, or a memorandum of it,\nis\n(1) in writing; and\n(2) signed by the person to be charged with the promise or agreement or by someone lawfully authorized to sign for him.\n(b) Subsection (a) of this section applies to:\n(1) a promise by an executor or administrator to answer out of his\nown estate for any debt or damage due from his testator or intestate;\n(2) a promise by one person to answer for the debt, default, or miscarriage of another person;\n(3) an agreement made on consideration of marriage * * * *;\n(4) a contract for the sale of real estate;\n(5) a lease of real estate for a term longer than one year;\n(6) an agreement which is not to be performed within one year\nfrom the date of making the agreement * * * *.\nQuestions:\n1. Is a promise of guaranty required to be in writing? If so, under what section?\n2. Does the statute require a promise to sell a house to be in writing?\n\n228\n\n\x0c3. Why do you suppose that Parliament in 1677 picked these categories of things\nto be in writing? Keep in mind that Parliament was composed of male landowners\nwho were mostly heads of families, had inherited their wealth, and were for the\nmost part trying to amass an estate they could pass on to heirs.\nThe Texas statute includes other categories of promises for which a memorandum\nis required but which were not found in the original Statute of Frauds and may or\nmay not be included in other states\xe2\x80\x99 statutes:\n... (3) ... or on consideration of nonmarital conjugal cohabitation; ...\n(7) a promise or agreement to pay a commission for the sale or purchase of:\n(A) an oil or gas mining lease;\n(B) an oil or gas royalty;\n(C) minerals; or\n(D) a mineral interest; and\n(8) an agreement, promise, contract, or warranty of cure relating to medical care or results thereof made by a physician or health care provider as\ndefined in Section 74.001, Civil Practice and Remedies Code. This section\nshall not apply to pharmacists.\nPlease do not consider these provisions to be included in \xe2\x80\x9cThe Statute of Frauds\xe2\x80\x9d\nas that term is generically used, but only when the Texas statute of frauds is itself\nspecifically discussed.\nTexas also has other \xe2\x80\x9cstatutes of frauds\xe2\x80\x9d on the books. These are typical. They are\nreferred to as \xe2\x80\x9cstatutes of frauds\xe2\x80\x9d but not as \xe2\x80\x9cThe Statute of Frauds,\xe2\x80\x9d which refers\nonly to the statute listed in the text above supplemented by the rest of subsection\n(3) and by subsections (7) and (8). One of these other statutes of frauds applies to\nloan agreements over a certain amount, see Tex. Bus. & Com. Code Ann. \xc2\xa7 26.02\n(2013), and one to premarital agreements, Tex. Fam. Code Ann. \xc2\xa7 4.002 (2013)\n(\xe2\x80\x9cA premarital agreement must be in writing and signed by both parties.\xe2\x80\x9d). Another is found in the Texas version of the Uniform Commercial Code. We will study\nthe UCC statute of frauds later in this section.\nIf a writing is now required for some kinds of agreements, does that mean a consideration is no longer required for those agreements? See the following case.\nRANN v. HUGHES (1778)\nHouse of Lords\n7 T.R. 350 n.a.\n* * * * All contracts are, by the laws of England, distinguished into agreements by\nspecialty, and agreements by parol; nor is there any such third class as some of the\ncounsel have endeavoured to maintain, as contracts in writing. If they be merely\nwritten and not specialties, they are parol, and a consideration must be proved.\nBut it is said that the Statute of Frauds has taken away the necessity of any con229\n\n\x0csideration in this case; the Statute of Frauds was made for the relief of personal\nrepresentatives and others, and did not intend to charge them further than by\ncommon law they were chargeable. His Lordship here read those sections of that\nstatute which relate to the present subject. He observed that the words were merely negative and that executors and administrators should not be liable out of their\nown estates, unless the agreement upon which the action was brought, or some\nmemorandum thereof was in writing and signed by the party. But this does not\nprove that the agreement was still not liable to be tried and judged of as all other\nagreements merely in writing are by the common law, and does not prove the\nconverse of the proposition, that when in writing the party must be at all events\nliable. He here observed upon the case of Pillans v. Van Mierov in Burr and the\ncase of Losh v Williamson, Mich. 16 G. 3- in B. R.: and so far as these cases went\non the doctrine of nudum pactum, he seemed to intimate that they were erroneous.\nHe said that all his brothers concurred with him that in this case there was not a\nsufficient consideration to support this demand as a personal demand against the\ndefendant, and that its being now supposed to have been in writing, makes no difference. * * * *\n\nBENJAMIN FULTON et al. v. MARY E. ROBINSON et al. (1881)\nSupreme Court of Texas\n55 Tex. 401\nAPPEAL from Tarrant. Tried below before the Hon. H. Barksdale.\n[\xc2\xb61] July 2, 1874, Mary E. Robinson and Sarah J. Choat (joined with their husbands), as heirs of Israel Earles, brought suit in \xe2\x80\x9ctrespass to try title\xe2\x80\x9d for three\nhundred and twenty acres of land against Benjamin Fulton and Charles Harold.\n[\xc2\xb62]\n\nJuly 13, 1874, defendants demurred and pleaded not guilty.\n\n[\xc2\xb63] July 13, 1875, amending, defendants alleged that on 23d of March, 1859,\none James Henderson bought of the said Israel Earles the land sued for $1,120, of\nwhich $300 was paid at the date of the purchase, and the balance, $820, February\n11, 1860, to Russell, administrator of Earles, which purchase was evidenced by a\nreceipt in writing, being a receipt which will be found set forth in the opinion.\n[\xc2\xb64] That on February 11, 1860, Russell, administrator of Israel Earles, under\nan order of the probate court, made at its January term, 1860, requiring him to do\nso, executed to Henderson a deed for the land; that the money by him paid to Russell ($820) was duly accounted for by Russell as administrator, and that the plaintiffs received full benefit of the same in the distribution of the estate; that Henderson, at the date of the purchase, took actual possession of the land, which possession was surrendered to him by Israel Earles, and that Henderson and those under\nhim had erected thereon valuable improvements. Defendant further pleaded limitation of three and five years.\n230\n\n\x0c[\xc2\xb65] The statement of facts shows, on the part of plaintiffs, a patent for the land\nsued for, and proof of heirship.\n[\xc2\xb66] Defendants proved the proceedings in the probate court, consisting of\nHenderson\xe2\x80\x99s petition to the probate court for title, upon the receipt, offering to\npay the remainder of the purchase money. The administrator, Russell, accepted\nservice of citation, and the court by decree ordered the administrator to execute a\nbond for title on payment, and at a subsequent term an order for title and administrator\xe2\x80\x99s deed was shown for the land to Henderson.\n[\xc2\xb67] Russell testified that Earles told witness, when in his last illness, and a\nshort time before his death, that he had sold the land to Henderson, and had turned\nover the tenant to him; had not made a deed; this seemed to trouble him; that\nHenderson had paid part of the money. Witness himself collected $820 as administrator of Earles, of Henderson; the money was paid in coin, and the coin was\npaid by witness over to the guardians of the children of Earles, including the\nplaintiffs.\nTerrell & Walker, for appellants.\nSmith & Jarvis, for appellees.\n[\xc2\xb68] I. The receipt relied upon by appellants to establish a contract of sale by\nEarles to Henderson is fatally defective, in this: it contains no formal promise to\nconvey, nor does it sufficiently state the terms of a contract to take it out of the\nstatute of frauds, or to imply a promise to convey. It does not fix the price of the\nland, nor does it refer to any other writing fixing the price. Henderson, after\nEarles\xe2\x80\x99 death, fixed the deferred payment, by oral testimony, at $820. This could\nnot be legally done. See Ellis v. Deadman, 4 Bibb, 466, a case exactly in point;\nParkhurst v. Van Cortland, 1 Johns. Ch., 278; 6 Blackf., 21; 1 McCord, 425; Peters v. Phillips, 19 Tex., 74. In the case cited by appellants from 10 Tex., 444,\npossession was taken under the contract, and all the purchase money had been\npaid in the life-time of Vaughn.\n[\xc2\xb69] II. There being no contract in writing for the sale of the land, and no\npromise in writing to convey, the probate court had no jurisdiction, and its proceeding, including Henderson\xe2\x80\x99s petition and the decree rendered thereon, was and\nis null and void. There being no jurisdiction, the court could not lawfully render\nany decree that would in any way affect the rights of appellees, or of their father\xe2\x80\x99s\nestate.\n[\xc2\xb610] III. The payment of the $820 to the guardians of appellees, if indeed such\npayments were ever made, could not stop the appellees without the further proof\nthat they, with knowledge of the facts, had received the money, or other thing of\n\n231\n\n\x0cvalue in lieu thereof, from their guardians after obtaining their majority. Rorer on\nJudicial Sales, secs. 452, 455.\nBONNER, ASSOCIATE JUSTICE\n[\xc2\xb611] If the receipt given by Israel Earles, deceased, to James Henderson, was\nsuch written agreement of the sale of the land therein mentioned as gave to the\ncounty court of Tarrant county jurisdiction to make the order directing S. B. Russell, as the administrator of Earles, to make the deed to Henderson, under the statute then in force (Pasch. Dig., 1313), then the deed made by the administrator,\nRussell, to Henderson constituted such legal title as would defeat the claim of\nplaintiffs as the heirs of Earles.\n[\xc2\xb612] This receipt is as follows:\n\xe2\x80\x9cReceived of James Henderson three hundred dollars, in part payment of a\ncertain tract of land, being my own head right, lying on Rush creek, in the\ncross timbers, this 23d March, 1859.\nISRAEL EARLES.\xe2\x80\x9d\n[\xc2\xb613] The mere fact that it was in the form of a receipt would not of itself defeat\nit as a memorandum of contract for the sale of land, if sufficient in other respects.\nDial v. Crain, 10 Tex., 553; authorities cited in Peters v. Phillips, 19 Tex., 74.\n[\xc2\xb614] Under the decision in the case of Peters v. Phillips, the memorandum\nwould be sufficient under the above statute, if it was such as required by the statute of frauds. Pasch. Dig., art. 3875.\n[\xc2\xb615] The general rule has often been announced in other courts as well as our\nown, that the memorandum under the statute of frauds should be so reasonably\ndefinite and certain within itself, or other writing referred to, as to parties, consideration and subject-matter, that specific performance can be enforced without a\nresort to parol testimony.\n[\xc2\xb616] The cases in our own reports must be construed with reference to the question then under consideration, and the settled construction given to the statute by\nthis court.\n[\xc2\xb617] Following the line of our decisions, it is said in Thomas v. Hammond, that,\nin this state, the rule is settled that it is not necessary that the consideration of a\ncontract for the sale of lands should be expressed in writing. 47 Tex., 55; Ellett v.\nBrittain, 10 Tex., 208; Atkins v. Watson, 12 Tex., 199.\n[\xc2\xb618] In the elaborate opinion by Chief Justice Hemphill, in the above case of\nEllett v. Brittain, the authorities upon a kindred question to the one now before the\n232\n\n\x0ccourt were reviewed, and the construction given to the statute in Packard v. Richardson, 17 Mass., 124, that the consideration need not be expressed in the writing,\nbut might be proved by parol, was adopted; and it was said that the weight of\nAmerican authority did not coincide with the rule to the contrary in Warn v. Walters, 5 East; and that latterly the force of this last named case had been much\nweakened in England.\n[\xc2\xb619] The receipt being sufficiently certain in other respects, as to the parties and\nsubject-matter, and as under the above authorities the consideration could be\nproven by parol, it constituted such memorandum as was sufficient, under the\nstatute, to give jurisdiction to the county court. In deciding otherwise there was\nerror in the judgment of the court below, for which it must be reversed and the\ncause remanded.\n[\xc2\xb620] REVERSED AND REMANDED.\nQuestions:\n1. How does one know that a memorandum is sufficient under the Statute of\nFrauds?\n2. Does the form of the memorandum matter? Can the memorandum be a mere\nreceipt? A telegram? A letter? A record book? A check? A suicide note?\n3. Need the memorandum be signed by both parties to be sufficient?\n4. The Uniform Electronic Transactions Act (UETA), passed in all but three states\n(WA, IL, NY\xe2\x80\x94these states have similar laws, though), helps electronic records\nand signatures count under the Statute of Frauds. The Act tries to equate writings\nin electronic form to writings on paper. A key section of the act provides,\n(a) A record or signature may not be denied legal effect or enforceability\nsolely because it is in electronic form.\n(b) A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.\n(c) If a law requires a record to be in writing, an electronic record satisfies\nthe law.\n(d) If a law requires a signature, an electronic signature satisfies the law.\nUETA \xc2\xa7 7. An \xe2\x80\x9celectronic signature\xe2\x80\x9d \xe2\x80\x9cmeans an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a\nperson with the intent to sign the record.\xe2\x80\x9d UETA \xc2\xa7 2(8). A \xe2\x80\x9crecord\xe2\x80\x9d includes \xe2\x80\x9cinformation . . . that is stored in an electronic or other medium and is retrievable in\nperceivable form.\xe2\x80\x9d UETA \xc2\xa7 2(13). The Act is limited in scope: it \xe2\x80\x9capplies only to\ntransactions between parties each of which has agreed to conduct transactions by\nelectronic means.\xe2\x80\x9d UETA \xc2\xa7 5(b). If James Henderson and Israel Earles\xe2\x80\x99 transaction had occurred last year, the two had bargained for the sale of this property by\n233\n\n\x0cemail, and Earles\xe2\x80\x99 receipt had been sent as an email, would a court bound by\nUETA reach the same result?\nA federal law attempts to reach a similar result by providing that, \xe2\x80\x9cwith respect to\nany transaction in or affecting interstate . . . commerce\xe2\x80\x94(1) a signature, contract,\nor other record relating to such transaction may not be denied legal effect, validity,\nor enforceability solely because it is in electronic form; and (2) a contract relating\nto such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation.\xe2\x80\x9d\nElectronic Signature in Global and National Commerce Act (\xe2\x80\x9cE-SIGN\xe2\x80\x9d) \xc2\xa7 101\n(2000). The NCCUSL proposed another uniform law that would have governed\nsoftware and other computer information transactions, called the Uniform Computer Information Transactions Act (UCITA). UCITA contains provisions that\nmight impact electronic signatures, but it is controversial for other reasons and is\nlaw only in Virginia and Maryland.\n\nMikio NAKAMURA v. Masaki FUJII (1998)\nN.Y. Supreme Court, Appellate Division, First Department\n677 N.Y.S.2d 113\nMEMORANDUM DECISION\n[\xc2\xb61] Order, Supreme Court, New York County (Carol Huff, J.), entered March\n17, 1997, which, to the extent appealed from, granted defendants\xe2\x80\x99 cross motion to\ndismiss the complaint as barred by the Statute of Frauds, and denied defendants\xe2\x80\x99\nrequest for sanctions, unanimously modified, on the law, defendants\xe2\x80\x99 motion to\ndismiss is denied except as to the fourth cause of action on an indemnity theory,\nthe balance of the complaint reinstated, and otherwise affirmed, without costs.\n[\xc2\xb62] Plaintiff alleges that in August 1992, defendants Masaki and Isako Fujii\ninformed him that they could not afford to pay the tuition of their daughter, Aki,\nwho was enrolled at the University of Southern California (USC). Defendants requested that plaintiff pay \xe2\x80\x9ccertain tuition invoices\xe2\x80\x9d for Aki. Plaintiff orally agreed\nto pay the tuition in exchange for defendants\xe2\x80\x99 express promise to repay the\namounts on demand. Thereafter, plaintiff had his corporation, Calinax, issue\nchecks to USC on five occasions between August 1992 and December 1993, totalling $40,339.33. In August 1993, defendants made a similar request for their\nyounger daughter, Sawako, and plaintiff orally agreed to make the tuition payments subject to the same repayment terms. Plaintiff had Calinax issue six checks\nto USC for Sawako\xe2\x80\x99s tuition between August 1993 and January 1996, totaling\n$60,964.20.\n[\xc2\xb63] According to plaintiff, defendants confirmed their repayment obligations\nin several meetings with plaintiff in New York. However, when plaintiff demand234\n\n\x0ced repayment, defendants refused. By summons and complaint dated June 20,\n1996, plaintiff commenced the instant action alleging, inter alia, a breach of the\noral agreement to repay the tuition advances, * * * and that defendants\xe2\x80\x99 promise to\nrepay the tuition advances constituted an indemnity. In their answer, defendants\ndenied that they asked plaintiff to make any payments to USC or that they promised to repay him, and further denied having knowledge or information as to\nwhether such payments were made by Calinax. Defendants also asserted six affirmative defenses, including * * * the Statute of Frauds. Defendants further asserted counterclaims for defamation, negligent and intentional infliction of emotional distress and tortious interference with contractual relations. The counterclaims were based on defendants\xe2\x80\x99 allegations that plaintiff sexually harassed\nSawako, an employee of plaintiff, made disparaging comments about defendants\nand their daughter and threatened to damage Masaki Fujii\xe2\x80\x99s reputation with his\nemployer.\n[\xc2\xb64] In October 1996, plaintiff moved to dismiss defendants\xe2\x80\x99 affirmative defenses and counterclaims as baseless and conclusory. Defendants cross-moved for\ndismissal of the complaint pursuant to CPLR 3211(a)(3), (5) and (7), and for sanctions pursuant to 22 NYCRR \xc2\xa7 130-1.1. In their dismissal motion, defendants argued * * * that plaintiff\xe2\x80\x99s claims were barred by the Statute of Frauds because the\npromises alleged were to answer for the debt of another, and could not be performed within one year from their making.\n[\xc2\xb65] The IAS court denied plaintiff\xe2\x80\x99s motion to dismiss the affirmative defenses and counterclaims, and severed the latter. Additionally, although rejecting defendants\xe2\x80\x99 argument concerning [another matter], it granted defendants\xe2\x80\x99 motion to\ndismiss the complaint on the ground that it was barred by the Statute of Frauds.\nThe court found that the oral agreement to repay the tuition advances during the\ndaughters\xe2\x80\x99 enrollment at USC was unenforceable since it was not, by its terms, to\nbe performed within one year (General Obligations Law [GOL] \xc2\xa7 5-701[a][1] ),\nand because it constituted a promise to answer for the debt of another (GOL \xc2\xa7 5701[a][2] ). The remainder of the motion and cross-motion was denied without\ndiscussion.\n[\xc2\xb66] In Cron v. Hargro Fabrics, 91 N.Y.2d 362, 366-367, 670 N.Y.S.2d 973,\n694 N.E.2d 56, the Court of Appeals recently reiterated the contours of GOL \xc2\xa7 5701(a)(1):\nNew York law provides that an agreement will not be recognized or enforceable if it is not in writing and \xe2\x80\x9csubscribed by the party to be charged\ntherewith\xe2\x80\x9d when the agreement \xe2\x80\x9cby its terms is not to be performed within\none year from the making thereof ...\xe2\x80\x9d [GOL \xc2\xa7 5-701(a) (1) ]. We have long\ninterpreted this provision of the Statute of Frauds to encompass only those\ncontracts which, by their terms, \xe2\x80\x9chave absolutely no possibility in fact and\nlaw of full performance within one year\xe2\x80\x9d (D & N Boening v. Kirsch Beverages, 63 N.Y.2d 449, 454, 483 N.Y.S.2d 164, 472 N.E.2d 992). As long\nas the agreement may be \xe2\x80\x9cfairly and reasonably interpreted\xe2\x80\x9d such that it\n235\n\n\x0cmay be performed within a year, the Statute of Frauds will not act as a bar\nhowever unexpected, unlikely, or even improbable that such performance\nwill occur during that time frame (Warren Chem. & Mfg. Co. v. Holbrook,\n118 N.Y. 586, 593, 23 N.E. 908 [citations omitted] ).\n[\xc2\xb67] Nothing in the oral agreement at issue sets the duration of plaintiff\xe2\x80\x99s obligation to pay the tuition. It certainly does not specifically require plaintiff to pay\nall four years of tuition for each daughter. By its terms, it merely requires plaintiff\nto pay \xe2\x80\x9ccertain tuition invoices,\xe2\x80\x9d without stating when those invoices must be paid,\nor even how many. Further, the agreement requires defendants to repay the sums\nnot at some future time, but \xe2\x80\x9con demand.\xe2\x80\x9d Given the absence of any terms mandating payments by plaintiff, or repayments by defendants, at specific times, it\ncannot be said that the agreement could not be performed within one year, notwithstanding its duration in fact (see, Mann v. Helmsley-Spear, 177 A.D.2d 147,\n149-150, 581 N.Y.S.2d 16).\n[\xc2\xb68] Additionally, there was no guarantee that defendants\xe2\x80\x99 daughters would remain at USC for the full four years, or even for one year (see, Zimmerman v.\nZimmerman, 86 A.D.2d 525, 526, 447 N.Y.S.2d 675, appeal dismissed 56 N.Y.2d\n806; but see, Sud v. Sud, 211 A.D.2d 423, 424, 621 N.Y.S.2d 37; In re Galvin\xe2\x80\x99s\nEstate, 148 Misc. 546, 547, 266 N.Y.S. 113). \xe2\x80\x9cThe statute of frauds is not applicable to an agreement the performance of which depends on a contingency which\nmay or may not happen within one year\xe2\x80\x9d (61 N.Y.Jur.2d Frauds, Statute of, \xc2\xa7 28,\np 65; see also, North Shore Bottling Co. v. C. Schmidt & Sons, 22 N.Y.2d 171, 176,\n292 N.Y.S.2d 86, 239 N.E.2d 189). In this case, defendants\xe2\x80\x99 daughters could have\nleft USC \xe2\x80\x9cfor any of the reasons that commonly lead many college students either\nto drop out of school or to change schools\xe2\x80\x9d (see, Zimmerman v. Zimmerman, supra, at 526, 447 N.Y.S.2d 675). Where a third party to an oral contract has the\nright to terminate the agreement within one year, the contract is not within the\nStatute of Frauds (see, 61 N.Y.Jur.2d Frauds, Statute of, \xc2\xa7 25, p 59; Sawyer v.\nSickinger, 47 A.D.2d 291, 295, 366 N.Y.S.2d 435; Metro-Goldwyn-Mayer v.\nScheider, 43 A.D.2d 922, 923, 352 N.Y.S.2d 205).\n[\xc2\xb69] Nor is GOL \xc2\xa7 5-701(a)(2) a bar to the enforcement of this agreement.\nContrary to defendants\xe2\x80\x99 argument, the complaint does not allege that defendants\nprovided a guaranty to repay the debt of their daughter. Rather, it alleges an independent promise by defendants to repay monies advanced by plaintiff, at their express request, to pay their children\xe2\x80\x99s tuition. Defendants\xe2\x80\x99 daughters owed no debt\nto plaintiff, and therefore GOL \xc2\xa7 5-701(a)(2) is inapplicable. * * * *\n[\xc2\xb610] We have examined the parties\xe2\x80\x99 remaining contentions for affirmative relief\nand find them to be without merit.\n\n236\n\n\x0cThe COLEMAN COMPANY, INC. v. CARGIL INTERNATIONAL CORP. (1998)\nDistrict Court of Appeal of Florida, Third District\n731 So.2d 2\nNESBITT, J.\n[\xc2\xb61] In the proceedings below, the jury found that camping supplies manufacturer Coleman breached an oral distributorship agreement with Cargil International, Coleman\xe2\x80\x99s distributor in Venezuela. Because the oral distributorship contract\nwas for a period of more than one year, its enforcement is barred by the statute of\nfrauds. Therefore, we reverse.\n[\xc2\xb62] The record reveals that the oral agreement at issue here was made in November 1993, and that the agreement anticipated performance for the entire calendar year 1994. Significantly, Cargil never disputed that the contract was made\nin November 1993. Nor could it: because the contract was to commence on January 1 of the calendar year 1994, and continue through December 31 of the same\nyear; the contact, discussions, negotiations and agreement were necessarily\nreached sometime earlier. Thus, the entire term of the contract was for over one\nyear. Such an oral contract is unenforceable pursuant to the statute of frauds. See\n\xc2\xa7\xc2\xa7 672.201(1), 725.01, Fla. Stat. (1995). See also Yates v. Ball, 132 Fla. 132, 181\nSo. 341, 344 (Fla.1937) (\xe2\x80\x9cto make a parol contract void, it must be apparent that it\nwas the understanding of the parties that it was not to be performed within one\nyear from the time it was made\xe2\x80\x9d); Khawly v. Reboul, 488 So.2d 856 (Fla. 3d DCA\n1986). * * * *\n[\xc2\xb63] In conclusion, the trial court should have entered a directed verdict for\nColeman on the underlying action and on the counterclaim for account stated.\n[\xc2\xb64] The judgment appealed from is reversed with directions to enter a judgment consistent with this opinion. * * * *\nQuestions: Does anyone doubt that Coleman made the promise at issue in The\nColeman Co., Inc. case? If you are Coleman\xe2\x80\x99s attorney and the Coleman sales rep\nsays he actually made this promise, should you raise the Statute of Frauds?\nCargil\xe2\x80\x99s new contract was real,\nBut oral, without sign or seal.\n\xe2\x80\x98Cause it lasted too long,\nThe form was all wrong,\nAnd the Statute of Frauds killed the deal.\n\xe2\x80\x94Jim Woodward, STCL Class of 2003\n\n237\n\n\x0cPROBLEMS 29-33. Consider the following hypotheticals. Are any of them unenforceable under the statute of frauds as agreements \xe2\x80\x9cnot to be performed within\none year\xe2\x80\x9d if not in writing?\n29. A promise by a five-person corporation to build an ocean liner.\n30. A promise made on February 9, 2020, to appear live on a TV show on February 10, 2021.\n31. A promise made on February 9, 2020, to cut down and deliver certain timber\non or before February 10, 2021.\n32. A promise to build a house within fifteen months.\n33. A promise by a railroad to maintain a switch so long as the other railroad\nneeds it.\n\nHOOKS v. BRIDGEWATER (1921)\nSupreme Court of Texas\n229 S.W. 1114\nPHILLIPS, C. J.\n[\xc2\xb61] The plaintiff, Bob Bridgewater, brought the suit against the administrator\nof the estate of John W. Davis, deceased, and the heirs at law of Davis, to recover\nDavis\xe2\x80\x99 estate. The suit was in fact one to enforce a verbal agreement claimed to\nhave been entered into by the plaintiff\xe2\x80\x99s father\xe2\x80\x94at that time his only surviving\nparent, when the plaintiff was a child of nine years of age\xe2\x80\x94and Davis, whereby\nthe father contracted to surrender plaintiff\xe2\x80\x99s custody and control to Davis, and\nDavis\xe2\x80\x94a single man who never married\xe2\x80\x94agreed upon that consideration to rear\nthe plaintiff, giving him the care and rights of a son, make him his heir and leave\nto him at his death all of his property.\n[\xc2\xb62] The trial court found that the evidence established the making of the parol\nagreement; that Davis took charge of the plaintiff under the agreement when he\nwas thus a child, and plaintiff\xe2\x80\x99s father never thereafter exercised any control over\nhim; that the plaintiff lived with Davis thereafter, giving him the affection and\nobedience of a son, and performing chores and services around his home as needed, for which he received no wages or money consideration. Davis failed to bequeath any of his property to plaintiff, dying intestate, leaving an estate of both\nreal and personal property. Before his death he had not placed the plaintiff in possession of any of it.\n[\xc2\xb63] Judgment for the defendants was rendered in the trial court. On the appeal,\nthis was reversed by the honorable Court of Civil Appeals for the First District\nand judgment rendered for the plaintiff.\n[\xc2\xb64] As it affected the land belonging to Davis, the contract was plainly condemned by the statute of frauds. It was merely a parol agreement whereby in con238\n\n\x0csideration of the father\xe2\x80\x99s surrender of the custody of the plaintiff and the latter\xe2\x80\x99s\nliving with Davis as a son, Davis\xe2\x80\x99 lands owned at his death should become the\nplaintiff\xe2\x80\x99s property. It was in effect but a parol sale of Davis\xe2\x80\x99 lands to be performed by him in the future, and has no higher dignity than such a sale. The question presented by this feature of the case is whether the performance of the contract by the plaintiff relieves it from the operation of the statute of frauds, or, as\nmore accurately stated, renders the contract enforceable in equity notwithstanding\nthe statute.\n[\xc2\xb65] The Court of Civil Appeals has held that it does, despite the fact that there\nwas never any possession of the lands by the plaintiff in Davis\xe2\x80\x99 lifetime.\n[\xc2\xb66] To sustain this holding, there must be created by judicial authority another\nexception to the operation of the statute of frauds, one unsanctioned by any previous decision of this court, and of larger consequence than any heretofore recognized by it. This is evident. For if it be the law that a contract of this kind may,\nunder the circumstances here present, be enforced against a decedent\xe2\x80\x99s estate, the\nentire inheritances of families are, for the benefit of strangers to the blood, put at\nthe mercy of parol evidence.\n[\xc2\xb67] From an early time it has been the rule of this court, steadily adhered to,\nthat to relieve a parol sale of land from the operation of the statute of frauds, three\nthings were necessary: 1. Payment of the consideration, whether it be in money or\nservices. 2. Possession by the vendee. And, 3. The making by the vendee of valuable and permanent improvements upon the land with the consent of the vendor;\nor, without such improvements, the presence of such facts as would make the\ntransaction a fraud upon the purchaser if it were not enforced. Payment of the\nconsideration, though it be a payment in full, is not sufficient. This has been the\nlaw since Garner v. Stubblefield, 5 Tex. 552. Nor is possession of the premises by\nthe vendee. Ann Berta Lodge v. Leverton, 42 Tex. 18. Each of these three elements\nis indispensable, and they must all exist.\n[\xc2\xb68] Regardless of the disposition of other courts to engraft other exceptions\nupon a plain and salutary statute which had its origin in the prolific frauds and\nperjuries with which parol contracts concerning lands abounded, this court has\nalways refused to further relax the statute. We think the wisdom of its course has\nbeen justified.\n[\xc2\xb69] Equity has no concern in such cases except to prevent the perpetration of a\nfraud. That is the only ground that can justify its interference. Otherwise, the exercise of its jurisdiction for the practical annulment of the statute would be but\nbare usurpation. It is not to remedy a possible loss to the purchaser that it may intervene. It is the operation of a plain and valid statute that is to be relieved against.\nFor this reason eminent judges have doubted whether under any circumstances\ncourts of equity had originally the power to enforce such parol agreements in\nopen disregard of the statute, and have questioned the wisdom of departing from\n239\n\n\x0cits certain rule however plausible the pretext. The statute is valid; it is imperative;\nit is emphatic. Its simple requirement that contracts for the transfer of lands be in\nwriting, imposes no hardship. The effect of its relaxation in what seemed to the\ncourts hard cases has produced abuses almost as great as would have its rigorous\nenforcement, in the substitution of a doubtful state of the law for a rule that was\nplain and certain and easily capable of observance. In a noted early English case\nthe chancellor made the following observation of this trend of judicial decisions:\n\xe2\x80\x9cThe statute was made for the purpose of preventing frauds and perjuries,\nand nothing can be more manifest to any person who has been in the habit\nof practicing in the courts of equity than that the relaxation of the statute\nhas been the ground of much perjury and much fraud. If the statute had\nbeen rigorously observed, the result would probably have been that few\ninstances of parol agreements would have occurred. Agreements would,\nfrom the necessity of the case, have been reduced to writing; whereas it is\nmanifest that the decisions on the subject have opened a new door to fraud,\nand that under the pretense of part execution, if possession is had in any\nway whatever, means are frequently found to put a court of equity in such\na situation that, without departing from its rule, it feels obliged to break\nthrough the statute.\xe2\x80\x9d\nWhatever may be the diversity of views upon the general subject, it is clear that to\nwarrant equity\xe2\x80\x99s \xe2\x80\x98breaking through the statute\xe2\x80\x99 to enforce such a parol contract,\nthe case must be such that the nonenforcement of the contract\xe2\x80\x94or the enforcement of the statute\xe2\x80\x94would, itself, plainly amount to a fraud. This is the basis, and\nthe only basis, for the jurisdiction which courts of equity have assumed in their\ncreation of exceptions to the statute. When it is considered that the exercise of that\njurisdiction results in any case in practically setting the statute aside, certainly\nthere should exist some positive rule which will insure its exercise for only the\nprevention of an actual fraud as distinguished from a mere wrong, and by which\nthe question of whether a failure to enforce the contract would result in such a\nfraud may be determined so surely as to leave the statute itself, through the exactness of the exception, with some definiteness of operation. The merit of the rule\nannounced by this court in every decision where it has dealt with the subject is\nthat it does this. By its requirement of payment of the consideration, adverse possession by the purchaser, and his making of valuable and permanent improvements in order for the contract to be exempt from the statute, it insures the application of the exemption only for the avoidance of actual fraud, and secures, as it\nshould, the full operation of the statute in all other cases. Its purpose is both to\nprevent the perpetration of fraud and to safeguard the titles of lands. It is a rule\nfounded in sound reason and common experience, and is fair and just.\n[\xc2\xb610] There is no fraud in refusing to enforce the contract where only the consideration is paid. The value of the consideration may in a law action be recovered.\nNor where only possession of the premises is given. In such case there is no performance by the purchaser of any obligation. Nor even where there is both payment of the consideration and possession; without valuable and permanent improvements made on the faith of contract, or their equivalent. Merely the transfer\n240\n\n\x0cof the possession by the vendor could create no estoppel against him. A transfer of\nthe possession of the soil affords no presumption of a sale of the fee. As said by\nJudge Moore in Ann Berta Lodge v. Leverton, 42 Tex. 18, to permit a person who\ncan show no other act done beyond the transfer of the possession of the soil from\nthe owner to himself, to enforce an oral agreement for the sale of the fee, would\npractically repeal the statute of frauds and let in all the mischiefs it was intended\nto guard against. But where there is payment of the consideration, the surrender of\npossession and the making of valuable and permanent improvements on the faith\nof the purchase with the owner\xe2\x80\x99s knowledge or consent, there is created an estoppel against him and it may fairly be said that a fraud upon the purchaser would\nresult if the owner were permitted to repudiate the contract.\n[\xc2\xb611] Not only can there be no fraud upon a purchaser in refusing to enforce a\nparol contract for the sale of land where there has been no performance beyond\nthe payment of the consideration, but a further strong reason for the requirement\nof possession is that without it the existence of the contract rests altogether in parol evidence, which common experience has shown to be too unstable and uncertain to be permitted to work a divestiture of title to real property. If, however, the\npurchaser be let into possession, there is furnished by an affirmative act of the\nowner himself at least a corroborative fact that the contract was actually made.\n[\xc2\xb612] At all events it is a positive requirement under the holding of this court. It\nis a part of the settled law, and is not now to be dispensed with. * * * *\n[\xc2\xb613] The parol contract here has no basis for its enforcement, other than the\nplaintiff\xe2\x80\x99s performance by his assuming with Davis the relation and rendering him\nthe service of a son. That was the consideration for Davis\xe2\x80\x99 agreement to make him\nthe owner of his estate. The case, therefore, is simply one where the consideration\nfor a parol agreement to transfer the title to land has been paid, with no possession\nof the land surrendered and no valuable and permanent improvements made by\nthe purchaser on the faith of the agreement. In no other character of case resting\nonly upon the payment of the consideration could such a contract be enforced in\nthis State. If the consideration for Davis\xe2\x80\x99 agreement had been an amount of money,\nhowever large, and had been fully paid, without possession of the land and valuable and permanent improvements the contract would be held incapable of enforcement. If the payment of the consideration is to be held insufficient in one\ncase, it should be so held in all cases. The test is not the character of the consideration or the value of the bargain. Why should the nature of the consideration or its\nexceptional value alone determine the question, instead of the rule itself which, in\naddition to the payment of the consideration, whatever its character and value,\nrequires possession of the land and valuable and permanent improvements? And\nwhy should there be allowed the enforcement of a parol contract for the sale of\nland, the consideration being of the nature paid in this case, and deny its enforcement where the consideration has been fully paid in money? No satisfactory answer can be given to these questions.\n\n241\n\n\x0c[\xc2\xb614] The holding of the Court of Civil Appeals is that a distinction should be\nmade in this case because the value of the plaintiff\xe2\x80\x99s services in his assumed relation as Davis\xe2\x80\x99 son could not be measured in money. The plaintiff\xe2\x80\x99s father in the\nmaking of the contract and as its basis, as well as Davis, measured them in property.\n[\xc2\xb615] The father calculated the money value of the plaintiff\xe2\x80\x99s filial relation to\nhimself, what it would be worth to surrender that relation to Davis and the value it\nwould be to Davis, placed it all at the value of Davis\xe2\x80\x99 estate, and closed the bargain accordingly. The suit assumes that Davis was able to estimate the value of\nthe relationship and services to himself, for it charges that he agreed to pay for\nthem by the transfer of his estate. The entire case is one where the custody, the\nrelationship and the services of the plaintiff were dealt with as property; where it\nwas agreed that they should be exchanged for property, showing that the parties\nestimated their value in property; and where, now, it is sought, as in any other pecuniary bargain, to compel payment of them in property. If the parties to the\nagreement were able to estimate their value in property, a court should be competent to value them in money. The value of a child\xe2\x80\x99s services to his parents, and of\na husband\xe2\x80\x99s or wife\xe2\x80\x99s relation and affection are every day the matter of assessment\nby courts. They are not held uncertain as a matter of judicial investigation. There\nwould equally be no difficulty, we apprehend, in a similar determination of the\nvalue of the plaintiff\xe2\x80\x99s services and relationship to Davis.\n[\xc2\xb616] Aside from the invalidity of the contract as to the land of the estate under\nthe statute of frauds and its being incapable of enforcement because there was no\npossession by the plaintiff of the land, it is a character of contract which should be\nheld void as a matter of public policy. A parent has no property interest in his\nchild and should not be permitted to deal with his child as property. The law\nshould not encourage the relinquishment by parents of their children and the renunciation of a sacred relation imposed by nature merely for the children\xe2\x80\x99s enrichment by placing the seal of validity upon a contract in which a parent in effect\nbarters his child away for a property return. It is more concerned in fostering and\nmaintaining that relation and guarding its valuable and wholesome influences than\nin promoting the child\xe2\x80\x99s financial prosperity. Let it be once held that a parent\xe2\x80\x99s\ncontract of this kind is valid and may be enforced, and every parent will be free to\ntransfer his children to anyone willing to pay them well for the bargain. We are\nunwilling to subscribe to such a doctrine. It tends to the destruction of one of the\nfinest relations of human life, to the subversion of the family tie, and to the reversal of an ordering of nature which is essential to human happiness and the security\nof society. It reduces parental duty and the child\xe2\x80\x99s welfare to the sordid level of\nfinancial profit, and would license the easy surrender of that duty for merely the\nchild\xe2\x80\x99s financial advantage. The custody of a child is not a subject matter of contract and therefore can constitute no consideration for a contract. The attempted\nagreement here was therefore not a contract. Legate v. Legate. Davis could not\nhave enforced it because based upon a void consideration. If Davis could not have\nenforced it against the plaintiff, it is not enforceable in the plaintiff\xe2\x80\x99s favor.\n242\n\n\x0c[\xc2\xb617] True, contracts between two persons upon a valuable consideration, that\none will leave his property to the other, are enforceable where no statute is contravened. Such is the recognized law and was the holding in Jordan v. Abney, 97\nTex. 296, 78 S. W. 486. There, in addition to the contract made between the plaintiff\xe2\x80\x99s father and Mr. and Mrs. Ogle, there was a contract between the plaintiff herself and Mrs. Ogle, made after Ogle\xe2\x80\x99s death, confirming the previous contract and\nby which Mrs. Ogle agreed to leave the plaintiff her property. Here, there was no\ncontract between the plaintiff and Davis for the former\xe2\x80\x99s service. The contract was\nbetween the plaintiff\xe2\x80\x99s father and Davis by which his custody and filial relation\nwere attempted to be bargained away as though properly the subject matter of\ncontract. They could not form the basis of a contract under the express holding in\nLegate v. Legate.\n[\xc2\xb618] The judgment of the honorable Court of Civil Appeals is reversed and the\njudgment of the District Court is affirmed.\nQuestions:\n1. Is the oral contract valid under the Statute of Frauds?\n2. On what section of the Statute does the court ground its ruling?\n3. Of what legal relevance is the fact that Bob Bridgewater performed?\n4. What is the policy of the Statute of Frauds?\n5. Do you think that Bob Bridgewater was fabricating Davis\xe2\x80\x99s promise? Does it\nbother you that he could be sold as a child and then disinherited because his socalled adoptive father never promised in writing?\n6. What is the alternate ground of this decision?\n\nW. L. TANENBAUM v. BISCAYNE OSTEOPATHIC HOSPITAL, INC. (1966)\nSupreme Court of Florida\n190 So.2d 777\nTHOMAS, Justice.\n[\xc2\xb61] The facts in this case are simple. W. L. Tanenbaum, the petitioner, is an\nosteopathic physician specializing in radiography. In September 1961 he removed\nfrom Allentown, Pennsylvania, to North Miami Beach where he became osteopathic radiologist at respondent\xe2\x80\x99s North Miami Beach hospital. The parties entered into an oral contract providing for his services for a period of five years ter243\n\n\x0cminable only after the expiration of that period and even then only upon 90 days\nwritten notice by either party. There was evidence that petitioner importuned respondent to execute a written agreement but this was never accomplished.\n[\xc2\xb62] In April 1962 the respondent notified the petitioner that his services would\nbe discontinued the first of the following July and in the next month petitioner\nfiled his complaint for damages resulting from the respondent\xe2\x80\x99s action. Principal\ndefense of the respondent, then defendant, was the Statute of Frauds, the relevant\npart of which provides, Sec. 725.01, that \xe2\x80\x98(n)o action shall be brought * * * upon\nany agreement that is not be performed within the space of one year from the\nmaking thereof, unless the agreement or promise upon which such action shall be\nbrought, or some note or memorandum thereof shall be in writing and signed by\nthe party to be charged therewith or by some other person by him thereunto lawfully authorized.\xe2\x80\x99\n[\xc2\xb63] So, as might have been expected, the respondent moved, at the end of\nplaintiff\xe2\x80\x99s case for a directed verdict in its favor. This was denied. The motion was\nrepeated at the close of all testimony and evidence, and ruling upon it was reserved by the court. Then the jury returned a verdict for the plaintiff in the amount\nof $40 thousand. Later the respondent presented a motion for a judgment in accordance with the motion for directed verdict and the court granted it.\n[\xc2\xb64] The trial judge found that the Statute of Frauds had been properly pleaded\nand that the contract was \xe2\x80\x98within\xe2\x80\x99 the statute. He observed that the plaintiff, petitioner, had opposed the motion on the ground that the respondent was estopped\nfrom resorting to the statute. The judge rejected this view and entered judgment\nfor the defendant, respondent, accordingly.\n[\xc2\xb65] The controversy then went to the District Court of Appeal, Third District,\nwhere the appellant presented the lone question whether or not the Circuit Court\nhad ruled properly that his claim was, as a matter of law, barred by the Statute of\nFrauds. That Court commented that the sole reason urged for the non-applicability\nof the Statute was the doctrine of \xe2\x80\x98promissory estoppel\xe2\x80\x99 which the Court said did\nnot appear in any of the Florida decisions. Such being the case the Court was of\nthe opinion that great caution should be exercised \xe2\x80\x98in the consideration of the advisability of ingrafting onto the law of this State a provision which may have the\neffect of nullifying the legislative will of the State as expressed by the inactment\n(sic) of the Statute of Frauds * * *.\xe2\x80\x99\n[\xc2\xb66] The District Court of Appeal referred to three decisions in which the doctrine of promissory estoppel had been recognized, Alaska Airlines, Inc. v. Stephenson, 15 Alaska 272, 217 F.2d 295; Fibreboard Products, Inc. v. Townsend, 9\nCir., 202 F.2d 180, and Seymour v. Oelrichs, 156 Cal. 782, 106 P. 88, and commented that no decision had been found indicating that the principle of promissory estoppel as related to the Statute of Frauds had been \xe2\x80\x98favorably considered by\nany Florida court in a law action * * *.\xe2\x80\x99 We are unable to elaborate on this state244\n\n\x0cment except to say that there have been brought to our attention two cases in\nwhich the doctrine had been mentioned, South Investment Corporation, et al. v.\nNorton, et al., Fla., 57 So.2d 1, and Southeastern Sales & Service Co. v. T. T. Watson, Inc., Fla.App., 172 So.2d 239. But in neither was the doctrine of promissory\nestoppel embraced.\n[\xc2\xb67]\n\nThe principle was also recognized in the Restatement of Contracts, s 90:\n\xe2\x80\x98A promise which the promisor should reasonably expect to induce action\nor forbearance of a definite and substantial character on the part of the\npromisee and which does induce such action or forbearance is binding if\ninjustice can be avoided only by enforcement of the promise.\xe2\x80\x99\nThe language of the Statute of Frauds we have already quoted is quite clear and\nits origin and purpose were plainly stated in Yates v. Ball, 132 Fla. 132, 181 So.\n341, as follows:\n\xe2\x80\x98The statute of frauds grew out of a purpose to intercept the frequency and\nsuccess of actions based on nothing more than loose verbal statements or\nmere innuendos. To accomplish this, the statute requires that all actions\nbased on agreements for longer than one year must depend on a written\nstatement or memorandum, signed by the party to be charged. The statute\nshould be strictly construed to prevent the fraud it was designed to correct,\nand so long as it can be made to effectuate this purpose, Courts should be\nreluctant to take cases from its protection.\xe2\x80\x99 (Italics supplied.)\nDoubtless because this is a matter of first impression and therefore involves the\nintroduction into the law of this State a relatively novel concept, the case was sent\nhere on a certificate under Sec. 4(2), Article V of the Constitution, F.S.A. The\nquestion that emerges for resolution by us is whether or not we will adopt by judicial action the doctrine of promissory estoppel as a sort of counteraction to the\nlegislatively created Statute of Frauds. This we decline to do.\n[\xc2\xb68] We agree with the conclusions of the Circuit Court and District Court of\nAppeal in rejecting the so-called doctrine of promissory estoppel and especially\nwith the observation of the latter with reference to embracing it in view of the legislative prerogative of dealing with matters of this nature.\n[\xc2\xb69] The petitioner had but to follow the provisions of the Statute of Frauds to\nsecure his rights under the arrangement with the respondent instead of taking the\nposition, rather tardily that they did not apply to him. Thirty-three years have\npassed since the Restatement we have quoted was adopted and there have been\nabout 15 intervening sessions of the legislature at which the contents of Sec. 90 of\nthe Restatement could have been incorporated into the act yet we know of no such\neffort or accomplishment.\n[\xc2\xb610] Having undertaken to answer the question certified, the writ of certiorari\nwhich brought it here is discharged.\nTHORNAL, C.J., and DREW and CALDWELL, JJ., concur.\n245\n\n\x0cERVIN, J., dissents with opinion.\nO\xe2\x80\x99CONNELL, J., dissents and concurs with ERVIN, J.\nQuestions:\n1. Does the one-year rule apply in this case?\n2. Why cannot a showing of promissory estoppel overcome the Statute of Frauds\nin Florida?\n3. Compare the reasoning of Tannenbaum with the following excerpt from Janke\nConstruction Co., Inc. v. Vulcan Materials Co., 386 F. Supp. 687 (D. Wis. 1974):\n[\xc2\xb61] One question remains. Can the statute of frauds, raised by defendant as a\ndefense in the context of plaintiffs contractual claim, be raised as a defense to a\nclaim for damages based on the theory of promissory estoppel? The issue has not\nbeen raised in the Wisconsin courts and there is a split of opinion in other jurisdictions where this question has been considered.\n[\xc2\xb62] Some states, such as New York, have held that promissory estoppel has no\napplication where the oral contract comes within the statute of frauds except in\ncases involving charitable subscriptions. Kahn v. Cecelia Co., 40 F. Supp. 878\n(S.D.N.Y.1941). Other jurisdictions have held that the defense of the statute is\nprecluded either when there has been (1) a misrepresentation that the statute\xe2\x80\x99s requirements have been complied with, (2) a promise to make a memorandum\nwhich was also relied on by the promisee, or (3) a subsidiary promise not to raise\nthe statute as a defense. Tiffany Incorporated v. W.M.K. Transit Mix, Inc., 16\nAriz.App. 415, 493 P.2d 1220 (1972); 21 Turtle Creek Sq., Ltd. v. New York St.\nTeach. Retire Sys., 432 F.2d 64 (5th Cir. 1970) (Construing Texas Law); Alaska\nAirlines v. Stephenson, 15 Alaska 272, 217 F.2d 295 (9th Cir. 1954); Easton v.\nWycoff, 4 Utah 2d 386, 295 P.2d 332 (1956); Wolfe v. Wallingford Bank & Trust\nCo., 124 Conn. 507, 1 A.2d 146 (1938).*\n[\xc2\xb63] Some jurisdictions, recognizing that the doctrine of promissory estoppel is\nbased essentially on the principles of equitable estoppel and fraud, are loath to\ndeny relief where the statute of frauds is raised as a defense and will enforce an\noral promise otherwise coming within the statute. McIntosh v. Murphy, 52 Haw.\n29, 469 P.2d 177 (1970); N. Litterio & Company v. Glassman Construction Com*\n\nMany of these cases cite Comment f to \xc2\xa7 178, Restatement of the Law of Contracts, as a\nbasis for their rulings. Comment f, which deals with the statute of frauds, states: \xe2\x80\x98Though there has\nbeen no satisfaction of the Statute, an estoppel may preclude objection on that ground in the same\nway that objection to the non-existence of other facts essential for the establishment of a right or a\ndefense may be precluded. A misrepresentation that there has been such satisfaction if substantial\naction is taken in reliance on the representation, precludes proof by the party who made the representation that it was false; and a promise to make a memorandum, if similarly relied on, may give\nrise to an effective promissory estoppel if the Statute would otherwise operate to defraud.\xe2\x80\x99\n\n246\n\n\x0cpany, supra; Miller v. Lawlor, 245 Iowa 1144, 66 N.W.2d 267 (1954); Sessions v.\nSouthern California Edison Co., 47 Cal.App.2d 611, 118 P.2d 935 (1941).\n[\xc2\xb64] In McIntosh the Supreme Court of Hawaii held that an oral contract of\nemployment was enforceable and that money damages would be granted notwithstanding that the contract allegedly violated the statute of frauds. It stated, 469\nP.2d at 180:\n\xe2\x80\x98It is appropriate for modern courts to cast aside the raiments of conceptualism which cloak the true policies underlying the reasoning behind the\nmany decisions enforcing contracts that violate the Statute of Frauds.\nThere is certainly no need to resort to legal rubrics or meticulous legal\nformulas when better explanations are available. The policy behind enforcing an oral agreement which violated the Statute of Frauds, as a policy\nof avoiding unconscionable injury, was well set out by the California Supreme Court. In Monarco v. Lo Greco, 35 Cal.2d 621, 623, 220 P.2d 737,\n739 (1950), a case which involved an action to enforce an oral contract for\nthe conveyance of land on the grounds of 20 years performance by the\npromisee, the court said:\n\xe2\x80\x98The doctrine of estoppel to assert the statute of frauds has been\nconsistently applied by the courts of this state to prevent fraud that\nwould result from refusal to enforce oral contracts in certain circumstances. Such fraud may inhere in the unconscionable injury\nthat would result from denying enforcement of the contract after\none party has been induced by the other seriously to change his position in reliance on the contract * * *.\xe2\x80\x9d\nIn Litterio the District of Columbia Circuit employed a different rationale\nfor precluding application of the statute of frauds in a construction bidding\ncase. It held that a subcontractor would be held liable on his bid, not on\nthe basis of a contractual obligation inasmuch as no contract existed, but\nunder the doctrine of promissory estoppel if all the elements of the doctrine were shown to be present. Thereupon the Court commented in a\nfootnote, 319 F.2d at 740:\n\xe2\x80\x98The issue as to the applicability of the Statute of Frauds is no\nlonger germane in light of our holding that no contract was created.\xe2\x80\x99\n[\xc2\xb65] I agree with the statement in Litterio as to the inapplicability of the statute.\nThe statute of frauds relates to the enforceability of contracts; promissory estoppel\nrelates to promises which have no contractual basis and are enforced only when\nnecessary to avoid injustice. The Wisconsin Supreme Court clearly stated in\nHoffman that a promise which could not meet the requirements of an offer that\nwould ripen into a contract if accepted by the promisee is nonetheless enforceable\nto avoid injustice if the other elements of promissory estoppel are present. * * * *\nAccordingly, I find the statute is not applicable in an action based on promissory\nestoppel.\n\n247\n\n\x0c4. Consider Restatement (Second) of Contracts \xc2\xa7 139:\nRestatement (Second) of Contracts \xc2\xa7 139. Enforcement by Virtue of Action in\nReliance.\nIs this section consistent with Tannenbaum?\n\nUniform Commercial Code \xc2\xa7 2-102. Scope; Certain Security and Other\nTransactions Excluded From This Article.\n\nUniform Commercial Code \xc2\xa7 2-201. Formal Requirements; Statute of Frauds,\nand cmt. 1.\n\nPROBLEMS 34-45. Please resolve each of the following hypothetical questions\nprior to class, using only UCC \xc2\xa7\xc2\xa7 2-102 & 2-201 and comments.\n34. John and Alice agree orally that Alice will sell to John Lot 102 of the River\nRidge subdivision. Is this an enforceable contract under UCC \xc2\xa7 2-201?\n35. Suppose Professor agrees orally to sell the class a ballpoint pen for $50. Does\nArticle 2 of the UCC apply to this transaction?\n36. John and Alice orally agree that John will sell Alice his 1972 Nova for $200.\nIs a writing required?\n37. John and Alice orally agree that John will sell Alice his 1972 Nova for $500.\nIs a writing required?\n38. John and Alice orally agree that John will allow Alice to use his $45,000 Lexus throughout the entire next calendar year. Is a writing required?\n39. John and Alice orally agree that John will install $10,000 worth of carpet in\nAlice\xe2\x80\x99s house. Alice plans to purchase the carpet from someone other than John\nand have it ready for John to install next Thursday. Is a writing required? Any difference if Alice is also buying the carpet from John?\n40. John and Alice orally agree that John will sell his 1972 Nova to Alice for $500.\nAlice writes on a slip of paper, \xe2\x80\x9c$500 for John\xe2\x80\x99s Nova,\xe2\x80\x9d and signs it. Can Alice\nenforce the contract? Can John enforce the contract?\n41. John and Alice orally agree that John will sell his 1972 Nova for $500. Alice\nwrites on a slip of paper, \xe2\x80\x9cI will pay $500 to John.\xe2\x80\x9d Alice signs the paper. Can\nJohn enforce the contract?\n42. John and Alice orally agree that John will sell his 1972 Nova for $500. Alice\nwrites on a slip of paper, \xe2\x80\x9cI will buy John\xe2\x80\x99s Nova.\xe2\x80\x9d Alice signs the paper. Can\nJohn enforce the contract?\n43. John and Alice, auto merchants, orally agree that John will sell his 1972 Nova\nfor $500. Alice writes on a slip of paper, \xe2\x80\x9cJohn and I agree I will pay $500 for\nJohn\xe2\x80\x99s Nova.\xe2\x80\x9d Alice signs and dates the paper. The next day, Alice sends a copy of\n248\n\n\x0cthe slip of paper to John. Alice has placed a line under her name and printed under\nthe line \xe2\x80\x9cJohn,\xe2\x80\x9d as if to signify that John\xe2\x80\x99s signature should be placed there. Can\nAlice enforce the contract?\n44. John is a used car wholesaler and Alice is a used car dealer, and they orally\nagree that John will sell Alice his Nova for $500. Alice writes on a slip of paper,\n\xe2\x80\x9cJohn and I agree John will sell me a 1972 Nova.\xe2\x80\x9d She signs and dates the paper\nand sends it to John via certified mail. John receives the writing two days later\nand his secretary opens it and date-stamps it the day it is received. John does not\nrespond within ten days. Can Alice enforce the contract against John?\n45. Alice and John agree orally for the sale of the $500 Nova. No writing is involved, but when Alice sues John he admits in his deposition that he and Alice\nmade a deal for the Nova. Is John\xe2\x80\x99s promise enforceable?\n\nE. The Final Push: When Does a Contract Form?\nEventually, the law adopted assent also as a paradigm. How it came to this result\nis fascinating. The three cases in this section were the mechanism for the adoption.\nOddly, two are a response to a surrogate for the bargain rule that we have already\nread, in Nicholas v. Raynbred. Go back and read the timing rule in that case, if\nyou will. Can you recall the purpose of that rule? Eventually, the timing rule became untenable.\nCOOKE v. OXLEY (1790)\nKing\xe2\x80\x99s Bench\n3 Term Rep. 653\n[\xc2\xb61] This was an action [in assumpsit]; and the ... count in the declaration ...\nstated that on [a certain date] a discourse was had ... concerning the buying of 266\nhogsheads of tobacco; and [in] that discourse [Oxley] proposed to [Cooke] that\n[Oxley] should sell and deliver to [Cooke] the said 266 hogsheads [at a certain\nprice]; whereupon [Cooke] desired [Oxley] to give [Cooke] time to agree to or\ndissent from the proposal till the hour of four in the afternoon of that day, to\nwhich [Oxley] agreed; ... ; [Cooke also] averred that he did agree to purchase the\nsame upon the terms aforesaid, and did give notice thereof to [Oxley] before the\nhour of four in the afternoon of that day; he also averred that he requested [Oxley]\nto deliver to him the said hogsheads, and offered to pay to [Oxley] the said price\nfor the same, yet that [Oxley] did not, &c.\n[\xc2\xb62] [The question then arose whether there was consideration for Oxley\xe2\x80\x99s\npromise.]\n[\xc2\xb63] Erskine and Wood [argued for Cooke that consideration existed]: This was\na bargain and sale on condition; and though the plaintiff might have rescinded the\ncontract before four o\xe2\x80\x99clock, yet not having done so, the condition was complied\nwith, and both parties were bound by the agreement. The declaration considered\n249\n\n\x0cthis as a complete bargain and sale; for the breach of the agreement is for not delivering the tobacco, and not for not selling it.\n[\xc2\xb64] Lord Kenyon, Ch.J. ...: Nothing can be clearer than that at the time of entering into this contract the engagement was all on one side; the other party was\nnot bound; it was therefore nudum pactum.\n[\xc2\xb65] Buller, J.-It is impossible to support this declaration in any point of view.\nIn order to sustain a promise, there must be either a damage to the plaintiff, or an\nadvantage to the defendant: but here was neither when the contract was first made.\nThen as to the subsequent time, the promise can only be supported on the ground\nof a new contract made at four o\xe2\x80\x99clock; but there is no pretence [sic] for that. It\nhas been argued that this must be taken to be a complete sale from the time when\nthe condition was complied with; but it was not complied with, for it is not stated\nthat the defendant did agree at four o\xe2\x80\x99clock to the terms of the sale; or even that\nthe goods were kept till that time.\n[\xc2\xb66] Grose, J.-The agreement was not binding on the plaintiff before four\no\xe2\x80\x99clock; and it is not stated that the parties came to any subsequent agreement;\nthere is therefore no consideration for the promise. ....\nQuestions:\n1. How is this case different from Nicholas v. Raynbred?\n2. What is the issue in Cooke? What was its resolution? What rule did the court\nfollow?\nNote: Cooke is one of the most misunderstood common law decisions of all time.\nCommentators and later courts argued over its meaning for fifty years after it was\ndecided. The difficulty was in squaring Cooke with Adams v. Lindsell, which you\nwill read shortly. Cooke has never been overruled, but, in fact, Cooke is no longer\nthe law in American jurisdictions. However, Cooke provided the impetus for the\nintroduction and development of the explicit assent requirement in AngloAmerican contract law. Only by understanding Cooke can one see how the consideration doctrine caused the courts to approach assent in the way that they have.\n\nPAYNE v. CAVE (1789)\nKing\xe2\x80\x99s Bench\n3 Term Reports 148\n[\xc2\xb61] This was an action tried at the sittings after last term at Guildhall before\nLord Kenyon, wherein the declaration stated, that the plaintiff, on 22d September\n1788 was possessed of a certain worm-tub, and a pewter worm in the same, which\n250\n\n\x0cwere then and there about to be sold by public auction by one S. M. the agent of\nthe plaintiff in that behalf; the conditions of which sale were to be the usual conditions of sale of goods sold by auction, &c. * * * *. And the plaintiff avers that the\nconditions of sale * * * are usual conditions of sale of goods sold by auction, to\nwit, that the highest bidder should be the purchaser, and should deposit five shillings in the pound, and that if the lot purchased were not paid for and taken away\nin two days time, it should be put up again and resold, &c. * * * *. It then stated,\nthat the defendant became the purchaser of the lot in question for 40l. and was\nrequested to pay the usual deposit, which he refused, &c. At the trial, the plaintiff\xe2\x80\x99s counsel opened the case thus: - The goods were put up in one lot at an auction; there were several bidders, of whom the defendant was the last, who bid 40l;\nthe auctioneer dwelt on the bidding, on which the defendant said, \xe2\x80\x9cWhy do you\ndwell? you will not get more.\xe2\x80\x9d The auctioneer said that he was informed the worm\nweighed at least 1300 cwt. and was worth more than 40l; the defendant then asked\nhim whether he would warrant it to weigh so much, and receiving an answer in\nthe negative, he then declared that he would not take it, and refused to pay for it.\nIt was resold on a subsequent day\xe2\x80\x99s sale for 30l. to the defendant, against whom\nthe action was brought for the difference. Lord Kenyon being of opinion, on this\nstatement of the case, that the defendant was at liberty to withdraw his bidding\nany time before the hammer was knocked down, nonsuited the plaintiff.\n[\xc2\xb62] Walton now moved to set aside the nonsuit, on the ground that the bidder\nwas bound * * * * to abide by his bidding, and could not retract. By the act of\nbidding, he acceded to those conditions, one of which was, that the highest bidder\nshould be the buyer. The hammer is suspended, not for the benefit of the bidder,\nor to give him an opportunity of repenting, but for the benefit of the seller: in the\nmeantime the person who bid last is a conditional purchaser, if nobody bids more.\nOtherwise it is in the power of any person to injure the vendor, because all the\nformer biddings are discharged by the last; and, as it happened in this very instance, the goods may thereby ultimately be sold for less than the person who was\nlast out-bid would have given for them. * * * *\n[\xc2\xb63] The Court thought the nonsuit very proper. The auctioneer is the agent of\nthe vendor, and the assent of both parties is necessary to make the contract binding; that is signified on the part of the seller by knocking down the hammer,\nwhich was not done here till the defendant had retracted. An auction is not unaptly\ncalled locus p\xc5\x93nitentiae. Every bidding is nothing more than an offer on one side,\nwhich is not binding on either side till it is assented to. But according to what is\nnow contended for, one party would be bound by the offer, and the other not,\nwhich can never be allowed.\nRule refused.\n\n251\n\n\x0cQuestions:\n1. Was Cave\xe2\x80\x99s bid revocable?\n2. What policy does the court cite in support of this decision? What authority have\nyou seen for that policy in the case law we have studied?\n3. What happens to prior bids when a bidder makes a higher bid?\n4. Now examine UCC \xc2\xa7 2-328:\nUniform Commercial Code \xc2\xa7 2-328. Sale by Auction.\nIs subsection (2) consistent with Payne v. Cave? Is the rule the same when, under\n(3), the auction is without reserve? When the sale is without reserve, who is the\nofferor and what problems does naming an offeror cause?\n\nADAMS v. LINDSELL (1818)\n1 Barnewall and Alderson 681\n[\xc2\xb61] Action for non-delivery of wool according to agreement. At the trial at the\nlast Lent Assizes for the county of Worcester, before Burrough J. it appeared that\nthe defendants, who were dealers in wool, at St. Ives, in the county of Huntingdon,\nhad, on Tuesday the 2d. of September 1817, written the following letter to the\nplaintiffs, who were woollen manufacturers residing in Bromsgrove, Worcestershire. \xe2\x80\x9cWe now offer you eight hundred tods of wether fleeces, of a good fair\nquality of our country wool, at 35s. 6d. per tod, to be delivered at Leicester, and to\nbe paid for by two months bill in two months, and to be weighed up by your agent\nwithin fourteen days, receiving your answer in course of post.\xe2\x80\x9d\n[\xc2\xb62] This letter was misdirected by the defendants, to Bromsgrove, Leicestershire, in consequence of which it was not received by the plaintiffs in Worcestershire till 7 p.m. on Friday, September 5th. On that evening the plaintiffs wrote an\nanswer, agreeing to accept the wool on the terms proposed. The course of the post\nbetween St. Ives and Bromsgrove is through London, and consequently this answer was not received by the defendants till Tuesday, September 9th. On the\nMonday September 8th, the defendants not having, as they expected, received an\nanswer on Sunday September 7th, (which in case their letter had not been misdirected, would have been in the usual course of the post,) sold the wool in question\nto another person. Under these circumstances, the learned Judge held, that the delay having been occasioned by the neglect of the defendants, the jury must take it,\nthat the answer did come back in due course of post; and that then the defendants\nwere liable for the loss that had been sustained: and the plaintiffs accordingly recovered a verdict.\n252\n\n\x0c[\xc2\xb63] Jervis having in Easter term obtained a rule nisi for a new trial, on the\nground that there was no binding contract between the parties,\n[\xc2\xb64] Dauncey, Puller, and Richardson, shewed cause. They contended, that at\nthe moment of the acceptance of the offer of the defendants by the plaintiffs, the\nformer became bound. And that was on the Friday evening, when there had been\nno change of circumstances. They were then stopped by the Court, who called upon\n[\xc2\xb65] Jervis and Campbell in support of the rule. They relied on Payne v Cave,\nand more particularly on Cooke v Oxley. In that case, Oxley, who had proposed to\nsell goods to Cooke, and given him a certain time at his request, to determine\nwhether he would buy them or not, was held not liable to the performance of the\ncontract, even though Cooke, within the specified time, had determined to buy\nthem, and given Oxley notice to that effect. So here the defendants who have proposed by letter to sell this wool, are not to be held liable, even though it be now\nadmitted that the answer did come back in due course of post. Till the plaintiffs\nanswer was actually received, there could be no binding contract between the parties; and before then, the defendants had retracted their offer, by selling the wool\nto other persons. But\n[\xc2\xb66] The Court said, that if that were so, no contract could ever be completed\nby the post. For if the defendants were not bound by their offer when accepted by\nthe plaintiffs till the answer was received, then the plaintiffs ought not to be bound\ntill after they had received the notification that the defendants had received their\nanswer and assented to it. And so it might go on ad infinitum. The defendants\nmust be considered in law as making, during every instant of the time their letter\nwas travelling, the same identical offer to the plaintiffs; and then the contract is\ncompleted by the acceptance of it by the latter. Then as to the delay in notifying\nthe acceptance, that arises entirely from the mistake of the defendants, and it\ntherefore must be taken as against them, that the plaintiffs answer was received in\ncourse of post.\nRule discharged.\nQuestions:\n1. Okay, here it is! The moment we\xe2\x80\x99ve all be waiting for: The BIRTH OF ASSENT! Congratulations for making it this far! Did a contract form in this case?\n2. Why didn\xe2\x80\x99t Cooke v. Oxley control?\n3. Do we have concerns that one promise may not have caused the other?\n\n253\n\n\x0cHistorical Note on Assent v. Consideration\nThe need to form contracts by post was not the only reason to shift to an assentfocused doctrinal structure. Civil law in continental Europe always focused on\nassent rather than consideration and remedy. From the early 1700s forward, common law judges (most enthusiastically Lord Mansfield, CJKB 1756-88) began\nadopting vocabulary from the civil law and importing civil law positions into the\ncommon law. Mansfield also began importing merchants\xe2\x80\x99 customs into the common law. Merchants to a great extent favored assent as a juridical concept. Mansfield was also Chief Justice while the Americans revolted in favor of government\nby consent and the French planned their revolution. Consent seemed to be the\nbuzzword for this time period. The popularity of French law also contributed to\nthis change. As noted, Pothier became the contract law treatise of choice for\ncommon lawyers around this time. American lawyers who acted as French popularizers, James Kent (Chief Judge, NY Supreme Court, and Chancellor) and Joseph Story (U.S. Supreme Court Justice and Harvard law professor), wrote treatises adopting Pothier\xe2\x80\x99s positions into various aspects of contract law. In England,\na commentator wrote that Pothier was \xe2\x80\x9claw at Westminster as well as Orleans.\xe2\x80\x9d\nSir W. Jones, ESSAY OF THE LAW OF BAILMENTS 29 (2d ed. 1804).\nWhat happened to consideration in all of this? It ceased to be a criterion for recovery of damages and became instead just one element of the test to see whether\na contract formed. The law didn\xe2\x80\x99t have to be put together that way. Consideration\nas a concept entirely subsumes assent. Courts alternately could have grounded\nrecovery in agreement and then limited damages based on the consideration existing, for example. But that\xe2\x80\x99s not what happened.\n\nNote and Questions on the Mailbox Rule\nThe rule of Adams v. Lindsell became known as the mailbox rule. The mailbox\nrule applies whenever acceptance is attempted by post in a case in which posting\nwould be an acceptable method of acceptance. The mailbox rule has been applied\nto the following circumstances:\n1. Attempted Withdrawal: Cases in which an offeror attempts to withdraw the offer but the withdrawal reaches the offeree only after the offeree has dropped the\nacceptance in the post office box. Under American law, a withdrawal of an offer is\neffective only upon receipt of the withdrawal by the offeree. The acceptance is\neffective when it is dropped in the mail. Should a contract form in this instance?\nWhy not use receipt of acceptance as the time for acceptance?\n2. Repudiation of an Acceptance: Cases in which the offeree drops an acceptance\nin the post and then repudiates the acceptance before it is received by the offeror.\nIn some cases, the offeree has phoned or wired the offeror to repudiate before the\nofferor receives the acceptance but after the offeree has dropped the acceptance in\n254\n\n\x0cthe post. In other cases, the offeree has retrieved the letter of acceptance before it\nhas arrived. If the mailbox rule applies, a contract forms when the acceptance is\ndropped in the post. Because a contract has formed, the repudiation has no effect.\nWhy should that be true? Can you think of a policy supporting that view? (Actually, the decisions in these cases are not uniform. The U.S. Court of Claims has held\nthat the repudiation of an acceptance is effective if the repudiation is received by\nthe offeror before the acceptance. See Rhode Island Tool Co. v. United States, 128\nF. Supp. 417, 130 Ct. Cl. 698 (1955); Dick v. United States, 82 F. Supp. 362, 113\nCt. Cl. 94 (1949). Only the Court of Claims so holds; so, unless you are suing the\nUnited States in the Court of Claims, the mailbox rule governs.)\n3. Loss of Acceptance: Cases in which the offeree drops the acceptance in the post\nbut the post office loses the acceptance and it never arrives. A contract forms\nwhen the acceptance is dropped in the post, even if the letter is later lost. If the\nofferor acted as if there was no contract, she must bear that loss. Thus, the rule\nplaces liability for the loss on the offeror in most cases. Who really should be liable?\n4. Time Required for Acceptance: Cases in which the offeror specified that the\noffer was to be \xe2\x80\x9caccepted\xe2\x80\x9d within X period of time. If the offeror said \xe2\x80\x9cwithin 10\ndays,\xe2\x80\x9d then dropping the acceptance in the post on the 10th day should suffice.\nWhat reason can you give for this rule?\nPlease note that if the offeror wishes to change the mailbox rule by specifying in\nthe offer that the acceptance must be received, the offeror is free so to specify and\nthe courts will respect that specification.\nShould the mailbox rule apply to option contracts? Courts have said yes and no.\nSee, e.g., Palo Alto Town and Country Village, Inc. v. BBTC Co., 11 Cal.3d 494\n(1974) (yes); Livesey v. COPPS Corp., 90 Wis.2d 577 (App. 1979) (no). Many\n(perhaps most) options contain language like the following: \xe2\x80\x9cPurchaser may exercise its right to purchase the Premises at any time during the Option Term by giving written notice thereof to Seller.\xe2\x80\x9d What about that language seems to require\nmore than mere mailing? Can it be construed to require something less than actual\nreceipt?\nThe United Nations Convention on Contracts for the International Sale of Goods\n(1980), or CISG, is a treaty comprising contract law governing transactions between persons in different countries where both countries are covered by the treaty, for instance, between a person in the US and one in Zambia. You can find it in\nyour statutory supplement.\nLook at the following articles 16, 18, and 22:\nCISG Article 16\n255\n\n\x0cCISG Article 18\nCISG Article 22\nHow does the CISG answer cases 1-3 above?\n\nF. What is Assent, Really, in Contract Law?\nW. O. LUCY and J. C. Lucy v. A. H. ZEHMER and Ida S. Zehmer (1954)\nSupreme Court of Appeals of Virginia\n84 S.E.2d 516\nBUCHANAN, J., delivered the opinion of the court.\n[\xc2\xb61] This suit was instituted by W. O. Lucy and J. C. Lucy, complainants,\nagainst A. H. Zehmer and Ida S. Zehmer, his wife, defendants, to have specific\nperformance of a contract by which it was alleged the Zehmers had sold to W. O.\nLucy a tract of land owned by A. H. Zehmer in Dinwiddie county containing\n471.6 acres, more or less, known as the Ferguson farm, for $50,000. J. C. Lucy,\nthe other complainant, is a brother of W. O. Lucy, to whom W. O. Lucy transferred a half interest in his alleged purchase.\n[\xc2\xb62] The instrument sought to be enforced was written by A. H. Zehmer on December 20, 1952, in these words: \xe2\x80\x98We hereby agree to sell to W. O. Lucy the Ferguson Farm complete for $50,000.00, title satisfactory to buyer,\xe2\x80\x99 and signed by\nthe defendants, A. H. Zehmer and Ida S. Zehmer.\n[\xc2\xb63] The answer of A. H. Zehmer admitted that at the time mentioned W. O.\nLucy offered him $50,000 cash for the farm, but that he, Zehmer, considered that\nthe offer was made in jest; that so thinking, and both he and Lucy having had several drinks, he wrote out \xe2\x80\x98the memorandum\xe2\x80\x99 quoted above and induced his wife to\nsign it; that he did not deliver the memorandum to Lucy, but that Lucy picked it\nup, read it, put it in his pocket, attempted to offer Zehmer $5 to bind the bargain,\nwhich Zehmer refused to accept, and realizing for the first time that Lucy was serious, Zehmer assured him that he had no intention of selling the farm and that the\nwhole matter was a joke. Lucy left the premises insisting that he had purchased\nthe farm.\n[\xc2\xb64] Depositions were taken and the decree appealed from was entered holding\nthat the complainants had failed to establish their right to specific performance,\nand dismissing their bill. The assignment of error is to this action of the court.\n\n256\n\n\x0c[\xc2\xb65] W. O. Lucy, a lumberman and farmer, thus testified in substance: He had\nknown Zehmer for fifteen or twenty years and had been familiar with the Ferguson farm for ten years. Seven or eight years ago he had offered Zehmer $20,000\nfor the farm which Zehmer had accepted, but the agreement was verbal and\nZehmer backed out. On the night of December 20, 1952, around eight o\xe2\x80\x99clock, he\ntook an employee to McKenney, where Zehmer lived and operated a restaurant,\nfilling station and motor court. While there he decided to see Zehmer and again\ntry to buy the Ferguson farm. He entered the restaurant and talked to Mrs. Zehmer\nuntil Zehmer came in. He asked Zehmer if he had sold the Ferguson farm. Zehmer\nreplied that he had not. Lucy said, \xe2\x80\x98I bet you wouldn\xe2\x80\x99t take $50,000.00 for that\nplace.\xe2\x80\x99 Zehmer replied, \xe2\x80\x98Yes, I would too; you wouldn\xe2\x80\x99t give fifty.\xe2\x80\x99 Lucy said he\nwould and told Zehmer to write up an agreement to that effect. Zehmer took a restaurant check and wrote on the back of it, \xe2\x80\x98I do hereby agree to sell to W. O. Lucy\nthe Ferguson Farm for $50,000 complete.\xe2\x80\x99 Lucy told him he had better change it\nto \xe2\x80\x98We\xe2\x80\x99 because Mrs. Zehmer would have to sign it too. Zehmer then tore up what\nhe had written, wrote the agreement quoted above and asked Mrs. Zehmer, who\nwas at the other end of the counter ten or twelve feet away, to sign it. Mrs.\nZehmer said she would for $50,000 and signed it. Zehmer brought it back and\ngave it to Lucy, who offered him $5 which Zehmer refused, saying, \xe2\x80\x98You don\xe2\x80\x99t\nneed to give me any money, you got the agreement there signed by both of us.\xe2\x80\x99\n[\xc2\xb66] The discussion leading to the signing of the agreement, said Lucy, lasted\nthirty or forty minutes, during which Zehmer seemed to doubt that Lucy could\nraise $50,000. Lucy suggested the provision for having the title examined and\nZehmer made the suggestion that he would sell it \xe2\x80\x98complete, everything there,\xe2\x80\x99\nand stated that all he had on the farm was three heifers.\n[\xc2\xb67] Lucy took a partly filled bottle of whiskey into the restaurant with him for\nthe purpose of giving Zehmer a drink if he wanted it. Zehmer did, and he and Lucy had one or two drinks together. Lucy said that while he felt the drinks he took\nhe was not intoxicated, and from the way Zehmer handled the transaction he did\nnot think he was either.\n[\xc2\xb68] December 20 was on Saturday. Next day Lucy telephoned to J. C. Lucy\nand arranged with the latter to take a half interest in the purchase and pay half of\nthe consideration. On Monday he engaged an attorney to examine the title. The\nattorney reported favorably on December 31 and on January 2 Lucy wrote\nZehmer stating that the title was satisfactory, that he was ready to pay the purchase price in cash and asking when Zehmer would be ready to close the deal.\nZehmer replied by letter, mailed on January 13, asserting that he had never agreed\nor intended to sell.\n[\xc2\xb69] Mr. and Mrs. Zehmer were called by the complainants as adverse witnesses. Zehmer testified in substance as follows:\n\n257\n\n\x0c[\xc2\xb610] He bought this farm more than ten years ago for $11,000. He had had\ntwenty-five offers, more or less, to buy it, including several from Lucy, who had\nnever offered any specific sum of money. He had given them all the same answer,\nthat he was not interested in selling it. On this Saturday night before Christmas it\nlooked like everybody and his brother came by there to have a drink. He took a\ngood many drinks during the afternoon and had a pint of his own. When he entered the restaurant around eight-thirty Lucy was there and he could see that he\nwas \xe2\x80\x98pretty high.\xe2\x80\x99 He said to Lucy, \xe2\x80\x98Boy, you got some good liquor, drinking, ain\xe2\x80\x99t\nyou?\xe2\x80\x99 Lucy then offered him a drink. \xe2\x80\x98I was already high as a Georgia pine, and\ndidn\xe2\x80\x99t have any more better sense than to pour another great big slug out and gulp\nit down, and he took one too.\xe2\x80\x99\n[\xc2\xb611] After they had talked a while Lucy asked whether he still had the Ferguson farm. He replied that he had not sold it and Lucy said, \xe2\x80\x98I bet you wouldn\xe2\x80\x99t\ntake $50,000.00 for it.\xe2\x80\x99 Zehmer asked him if he would give $50,000 and Lucy said\nyes. Zehmer replied, \xe2\x80\x98You haven\xe2\x80\x99t got $50,000 in cash.\xe2\x80\x99 Lucy said he did and\nZehmer replied that he did not believe it. They argued \xe2\x80\x98pro and con for a long\ntime,\xe2\x80\x99 mainly about \xe2\x80\x98whether he had $50,000 in cash that he could put up right\nthen and buy that farm.\xe2\x80\x99\n[\xc2\xb612] Finally, said Zehmer, Lucy told him if he didn\xe2\x80\x99t believe he had $50,000,\n\xe2\x80\x98you sign that piece of paper here and say you will take $50,000.00 for the farm.\xe2\x80\x99\nHe, Zehmer, \xe2\x80\x98just grabbed the back off of a guest check there\xe2\x80\x99 and wrote on the\nback of it. At that point in his testimony Zehmer asked to see what he had written\nto \xe2\x80\x98see if I recognize my own handwriting.\xe2\x80\x99 He examined the paper and exclaimed, \xe2\x80\x98Great balls of fire, I got \xe2\x80\x98Firgerson\xe2\x80\x99 for Ferguson. I have got satisfactory\nspelled wrong. I don\xe2\x80\x99t recognize that writing if I would see it, wouldn\xe2\x80\x99t know it\nwas mine.\xe2\x80\x99\n[\xc2\xb613] After Zehmer had, as he described it, \xe2\x80\x98scribbled this thing off,\xe2\x80\x99 Lucy said,\n\xe2\x80\x98Get your wife to sign it.\xe2\x80\x99 Zehmer walked over to where she was and she at first\nrefused to sign but did so after he told her that he \xe2\x80\x98was just needling him [Lucy],\nand didn\xe2\x80\x99t mean a thing in the world, that I was not selling the farm.\xe2\x80\x99 Zehmer then\n\xe2\x80\x98took it back over there * * * * and I was still looking at the dern thing. I had the\ndrink right there by my hand, and I reached over to get a drink, and he said, \xe2\x80\x98Let\nme see it.\xe2\x80\x99 He reached and picked it up, and when I looked back again he had it in\nhis pocket and he dropped a five dollar bill over there, and he said, \xe2\x80\x98Here is five\ndollars payment on it.\xe2\x80\x99 * * * * I said, \xe2\x80\x98Hell no, that is beer and liquor talking. I\nam not going to sell you the farm. I have told you that too many times before.\xe2\x80\x99\xe2\x80\x99\n[\xc2\xb614] Mrs. Zehmer testified that when Lucy came into the restaurant he looked\nas if he had had a drink. When Zehmer came in he took a drink out of a bottle that\nLucy handed him. She went back to help the waitress who was getting things\nready for next day. Lucy and Zehmer were talking but she did not pay too much\nattention to what they were saying. She heard Lucy ask Zehmer if he had sold the\nFerguson farm, and Zehmer replied that he had not and did not want to sell it. Lu258\n\n\x0ccy said, \xe2\x80\x98I bet you wouldn\xe2\x80\x99t take $50,000 cash for that farm,\xe2\x80\x99 and Zehmer replied,\n\xe2\x80\x98You haven\xe2\x80\x99t got $50,000 cash.\xe2\x80\x99 Lucy said, \xe2\x80\x98I can get it.\xe2\x80\x99 Zehmer said he might\nform a company and get it, \xe2\x80\x98but you haven\xe2\x80\x99t got $50,000.00 cash to pay me tonight.\xe2\x80\x99 Lucy asked him if he would put it in writing that he would sell him this\nfarm. Zehmer then wrote on the back of a pad, \xe2\x80\x98I agree to sell the Ferguson Place\nto W. O. Lucy for $50,000.00 cash.\xe2\x80\x99 Lucy said, \xe2\x80\x98All right, get your wife to sign it.\xe2\x80\x99\nZehmer came back to where she was standing and said, \xe2\x80\x98You want to put your\nname to this?\xe2\x80\x99 She said \xe2\x80\x98No,\xe2\x80\x99 but he said in an undertone, \xe2\x80\x98It is nothing but a joke,\xe2\x80\x99\nand she signed it.\n[\xc2\xb615] She said that only one paper was written and it said: \xe2\x80\x98I hereby agree to\nsell,\xe2\x80\x99 but the \xe2\x80\x98I\xe2\x80\x99 had been changed to \xe2\x80\x98We\xe2\x80\x99. However, she said she read what she\nsigned and was then asked, \xe2\x80\x98When you read \xe2\x80\x98We hereby agree to sell to W. O. Lucy,\xe2\x80\x99 what did you interpret that to mean, that particular phrase?\xe2\x80\x99 She said she\nthought that was a cash sale that night; but she also said that when she read that\npart about \xe2\x80\x98title satisfactory to buyer\xe2\x80\x99 she understood that if the title was good Lucy would pay $50,000 but if the title was bad he would have a right to reject it,\nand that that was her understanding at the time she signed her name.\n[\xc2\xb616] On examination by her own counsel she said that her husband laid this\npiece of paper down after it was signed; that Lucy said to let him see it, took it,\nfolded it and put it in his wallet, then said to Zehmer, \xe2\x80\x98Let me give you $5.00,\xe2\x80\x99 but\nZehmer said, \xe2\x80\x98No, this is liquor talking. I don\xe2\x80\x99t want to sell the farm, I have told\nyou that I want my son to have it. This is all a joke.\xe2\x80\x99 Lucy then said at least twice,\n\xe2\x80\x98Zehmer, you have sold your farm,\xe2\x80\x99 wheeled around and started for the door. He\npaused at the door and said, \xe2\x80\x98I will bring you $50,000.00 tomorrow. * * * * No,\ntomorrow is Sunday. I will bring it to you Monday.\xe2\x80\x99 She said you could tell definitely that he was drinking and she said to her husband, \xe2\x80\x98You should have taken\nhim home,\xe2\x80\x99 but he said, \xe2\x80\x98Well, I am just about as bad off as he is.\xe2\x80\x99\n[\xc2\xb617] The waitress referred to by Mrs. Zehmer testified that when Lucy first\ncame in \xe2\x80\x98he was mouthy.\xe2\x80\x99 When Zehmer came in they were laughing and joking\nand she thought they took a drink or two. She was sweeping and cleaning up for\nnext day. She said she heard Lucy tell Zehmer, \xe2\x80\x98I will give you so much for the\nfarm,\xe2\x80\x99 and Zehmer said, \xe2\x80\x98You haven\xe2\x80\x99t got that much.\xe2\x80\x99 Lucy answered, \xe2\x80\x98Oh, yes, I\nwill give you that much.\xe2\x80\x99 Then \xe2\x80\x98they jotted down something on paper * * * * and\nMr. Lucy reached over and took it, said let me see it.\xe2\x80\x99 He looked at it, put it in his\npocket and in about a minute he left. She was asked whether she saw Lucy offer\nZehmer any money and replied, \xe2\x80\x98He had five dollars laying up there, they didn\xe2\x80\x99t\ntake it.\xe2\x80\x99 She said Zehmer told Lucy he didn\xe2\x80\x99t want his money \xe2\x80\x98because he didn\xe2\x80\x99t\nhave enough money to pay for his property, and wasn\xe2\x80\x99t going to sell his farm.\xe2\x80\x99\nBoth of them appeared to be drinking right much, she said.\n[\xc2\xb618] She repeated on cross-examination that she was busy and paying no attention to what was going on. She was some distance away and did not see either of\nthem sign the paper. She was asked whether she saw Zehmer put the agreement\n259\n\n\x0cdown on the table in front of Lucy, and her answer was this: \xe2\x80\x98Time he got through\nwriting whatever it was on the paper, Mr. Lucy reached over and said, \xe2\x80\x98Let\xe2\x80\x99s see\nit.\xe2\x80\x99 He took it and put it in his pocket,\xe2\x80\x99 before showing it to Mrs. Zehmer. Her version was that Lucy kept raising his offer until it got to $50,000.\n[\xc2\xb619] The defendants insist that the evidence was ample to support their contention that the writing sought to be enforced was prepared as a bluff or dare to force\nLucy to admit that he did not have $50,000; that the whole matter was a joke; that\nthe writing was not delivered to Lucy and no binding contract was ever made between the parties.\n[\xc2\xb620] It is an unusual, if not bizarre, defense. When made to the writing admittedly prepared by one of the defendants and signed by both, clear evidence is required to sustain it.\n[\xc2\xb621] In his testimony Zehmer claimed that he \xe2\x80\x98was high as a Georgia pine,\n\xe2\x80\x98 and that the transaction \xe2\x80\x98was just a bunch of two doggoned drunks bluffing to\nsee who could talk the biggest and say the most.\xe2\x80\x99 That claim is inconsistent with\nhis attempt to testify in great detail as to what was said and what was done. It is\ncontradicted by other evidence as to the condition of both parties, and rendered of\nno weight by the testimony of his wife that when Lucy left the restaurant she suggested that Zehmer drive him home. The record is convincing that Zehmer was\nnot intoxicated to the extent of being unable to comprehend the nature and consequences of the instrument he executed, and hence that instrument is not to be invalidated on that ground. 17 C.J.S., Contracts, \xc2\xa7 133 b., p. 483; Taliaferro v. Emery, 124 Va. 674, 98 S.E. 627. It was in fact conceded by defendants\xe2\x80\x99 counsel in\noral argument that under the evidence Zehmer was not too drunk to make a valid\ncontract.\n[\xc2\xb622] The evidence is convincing also that Zehmer wrote two agreements, the\nfirst one beginning \xe2\x80\x98I hereby agree to sell.\xe2\x80\x99 Zehmer first said he could not remember about that, then that \xe2\x80\x98I don\xe2\x80\x99t think I wrote but one out.\xe2\x80\x99 Mrs. Zehmer said\nthat what he wrote was \xe2\x80\x98I hereby agree,\xe2\x80\x99 but that the \xe2\x80\x98I\xe2\x80\x99 was changed to \xe2\x80\x98We\xe2\x80\x99 after\nthat night. The agreement that was written and signed is in the record and indicates no such change. Neither are the mistakes in spelling that Zehmer sought to\npoint out readily apparent.\n[\xc2\xb623] The appearance of the contract, the fact that it was under discussion for\nforty minutes or more before it was signed; Lucy\xe2\x80\x99s objection to the first draft because it was written in the singular, and he wanted Mrs. Zehmer to sign it also; the\nrewriting to meet that objection and the signing by Mrs. Zehmer; the discussion of\nwhat was to be included in the sale, the provision for the examination of the title,\nthe completeness of the instrument that was executed, the taking possession of it\nby Lucy with no request or suggestion by either of the defendants that he give it\nback, are facts which furnish persuasive evidence that the execution of the con260\n\n\x0ctract was a serious business transaction rather than a casual, jesting matter as defendants now contend.\n[\xc2\xb624] On Sunday, the day after the instrument was signed on Saturday night,\nthere was a social gathering in a home in the town of McKenney at which there\nwere general comments that the sale had been made. Mrs. Zehmer testified that on\nthat occasion as she passed by a group of people, including Lucy, who were talking about the transaction, $50,000 was mentioned, whereupon she stepped up and\nsaid, \xe2\x80\x98Well, with the high-price whiskey you were drinking last night you should\nhave paid more. That was cheap.\xe2\x80\x99 Lucy testified that at that time Zehmer told him\nthat he did not want to \xe2\x80\x98stick\xe2\x80\x99 him or hold him to the agreement because he, Lucy,\nwas too tight and didn\xe2\x80\x99t know what he was doing, to which Lucy replied that he\nwas not too tight; that he had been stuck before and was going through with it.\nZehmer\xe2\x80\x99s version was that he said to Lucy: \xe2\x80\x98I am not trying to claim it wasn\xe2\x80\x99t a\ndeal on account of the fact the price was too low. If I had wanted to sell\n$50,000.00 would be a good price, in fact I think you would get stuck at\n$50,000.00.\xe2\x80\x99 A disinterested witness testified that what Zehmer said to Lucy was\nthat \xe2\x80\x98he was going to let him up off the deal, because he thought he was too tight,\ndidn\xe2\x80\x99t know what he was doing. Lucy said something to the effect that \xe2\x80\x98I have\nbeen stuck before and I will go through with it.\xe2\x80\x99\xe2\x80\x99\n[\xc2\xb625] If it be assumed, contrary to what we think the evidence shows, that\nZehmer was jesting about selling his farm to Lucy and that the transaction was\nintended by him to be a joke, nevertheless the evidence shows that Lucy did not\nso understand it but considered it to be a serious business transaction and the contract to be binding on the Zehmers as well as on himself. The very next day he\narranged with his brother to put up half the money and take a half interest in the\nland. The day after that he employed an attorney to examine the title. The next\nnight, Tuesday, he was back at Zehmer\xe2\x80\x99s place and there Zehmer told him for the\nfirst time, Lucy said, that he wasn\xe2\x80\x99t going to sell and he told Zehmer, \xe2\x80\x98You know\nyou sold that place fair and square.\xe2\x80\x99 After receiving the report from his attorney\nthat the title was good he wrote to Zehmer that he was ready to close the deal.\n[\xc2\xb626] Not only did Lucy actually believe, but the evidence shows he was warranted in believing, that the contract represented a serious business transaction\nand a good faith sale and purchase of the farm.\n[\xc2\xb627] In the field of contracts, as generally elsewhere, \xe2\x80\x98We must look to the outward expression of a person as manifesting his intention rather than to his secret\nand unexpressed intention. \xe2\x80\x98The law imputes to a person an intention corresponding to the reasonable meaning of his words and acts.\xe2\x80\x99\xe2\x80\x99 First Nat. Bank v. Roanoke\nOil Co., 169 Va. 99, 114, 192 S.E. 764, 770.\n[\xc2\xb628] At no time prior to the execution of the contract had Zehmer indicated to\nLucy by word or act that he was not in earnest about selling the farm. They had\nargued about it and discussed its terms, as Zehmer admitted, for a long time. Lucy\n261\n\n\x0ctestified that if there was any jesting it was about paying $50,000 that night. The\ncontract and the evidence show that he was not expected to pay the money that\nnight. Zehmer said that after the writing was signed he laid it down on the counter\nin front of Lucy. Lucy said Zehmer handed it to him. In any event there had been\nwhat appeared to be a good faith offer and a good faith acceptance, followed by\nthe execution and apparent delivery of a written contract. Both said that Lucy put\nthe writing in his pocket and then offered Zehmer $5 to seal the bargain. Not until\nthen, even under the defendants\xe2\x80\x99 evidence, was anything said or done to indicate\nthat the matter was a joke. Both of the Zehmers testified that when Zehmer asked\nhis wife to sign he whispered that it was a joke so Lucy wouldn\xe2\x80\x99t hear and that it\nwas not intended that he should hear.\n[\xc2\xb629] The mental assent of the parties is not requisite for the formation of a contract. If the words or other acts of one of the parties have but one reasonable\nmeaning, his undisclosed intention is immaterial except when an unreasonable\nmeaning which he attaches to his manifestations is known to the other party. Restatement of the Law of Contracts, Vol. I, \xc2\xa7 71, p. 74.\n[\xc2\xb630] \xe2\x80\x98* * * * The law, therefore, judges of an agreement between two persons\nexclusively from those expressions of their intentions which are communicated\nbetween them. * * * *.\xe2\x80\x99 Clark on Contracts, 4 ed., \xc2\xa7 3, p. 4.\n[\xc2\xb631] An agreement or mutual assent is of course essential to a valid contract but\nthe law imputes to a person an intention corresponding to the reasonable meaning\nof his words and acts. If his words and acts, judged by a reasonable standard,\nmanifest an intention to agree, it is immaterial what may be the real but unexpressed state of his mind. 17 C.J.S., Contracts, \xc2\xa7 32, p. 361; 12 Am. Jur., Contracts, \xc2\xa7 19, p. 515.\n[\xc2\xb632] So a person cannot set up that he was merely jesting when his conduct and\nwords would warrant a reasonable person in believing that he intended a real\nagreement, 17 C.J.S., Contracts, \xc2\xa7 47, p. 390; Clark on Contracts, 4 ed., \xc2\xa7 27, at p.\n54.\n[\xc2\xb633] Whether the writing signed by the defendants and now sought to be enforced by the complainants was the result of a serious offer by Lucy and a serious\nacceptance by the defendants, or was a serious offer by Lucy and an acceptance in\nsecret jest by the defendants, in either event it constituted a binding contract of\nsale between the parties.\n[\xc2\xb634] Defendants contend further, however, that even though a contract was\nmade, equity should decline to enforce it under the circumstances. These circumstances have been set forth in detail above. They disclose some drinking by the\ntwo parties but not to an extent that they were unable to understand fully what\nthey were doing. There was no fraud, no misrepresentation, no sharp practice and\nno dealing between unequal parties. The farm had been bought for $11,000 and\n262\n\n\x0cwas assessed for taxation at $6,300. The purchase price was $50,000. Zehmer\nadmitted that it was a good price. There is in fact present in this case none of the\ngrounds usually urged against specific performance.\n[\xc2\xb635] Specific performance, it is true, is not a matter of absolute or arbitrary\nright, but is addressed to the reasonable and sound discretion of the court. First\nNat. Bank v. Roanoke Oil Co., supra, 169 Va. at p. 116, 192 S.E. at p. 771. But it\nis likewise true that the discretion which may be exercised is not an arbitrary or\ncapricious one, but one which is controlled by the established doctrines and settled principles of equity; and, generally, where a contract is in its nature and circumstances unobjectionable, it is as much a matter of course for courts of equity\nto decree a specific performance of it as it is for a court of law to give damages\nfor a breach of it. Bond v. Crawford, 193 Va. 437, 444, 69 S.E.2d 470, 475.\n[\xc2\xb636] The complainants are entitled to have specific performance of the contracts sued on. The decree appealed from is therefore reversed and the cause is\nremanded for the entry of a proper decree requiring the defendants to perform the\ncontract in accordance with the prayer of the bill.\nReversed and remanded.\nQuestions:\n1. What reasonable person is at issue\xe2\x80\x94a person in the position of offeree or a\nthird person who might have been watching?\n2. Does this decision respect Zehmer\xe2\x80\x99s autonomy? What countervailing policy is\nat issue? (The answer to this question is not in the case. Please speculate what policy might support it.)\n3. When does drunkenness amount to lack of capacity? Apparently being drunk\ndoes not stop one from forming a contract. But what if one was really intoxicated?\nDewitt v. Bowers, 1138 S.W. 1147, 1149 (Tex. Civ. App. 1911), gave the following\nrecitation of the rule:\nIt is the rule of law that a person cannot escape liability on a contract on\nthe mere ground that he was intoxicated at the time of its execution, unless\nit is proved that he was so intoxicated that he was unable to understand the\nnature of the contract and the consequences of its execution. He may be\nintoxicated to such a degree as to be excited, or so as to prevent him from\nacting with that degree of care that he would use were he sober, still he\nwould not be released from his contractual liability. His contract cannot be\navoided, in other words, unless his drunkenness was of such a character\nthat he did not know its true intent or meaning, which is an amelioration of\nthe early common-law rule that asserted that a contract entered into by an\nintoxicated person was binding upon him. As said by this court, through\nJustice Neill, in Wells v. Houston, 23 Tex.Civ.App. 629, 57 S.W. 584: \xe2\x80\x9cTo\navoid a contract on this ground, the obligor must have been so drunk as to\n263\n\n\x0chave dethroned reason, memory, and judgment, and impaired his mental\nfaculties to an extent that would render him non compos mentis for the\ntime being, especially where there is no pretense that any person connected with the transaction aided in or procured the drunkenness.\xe2\x80\x9d It has been\nheld that a less degree of intoxication than that required to absolutely invalidate a contract may serve as a basis for avoiding the same if the drunkenness was caused by the other party, or if he takes unfair advantage of it.\nThis would involve questions of fraud and undue influence, however, and\nnot those of capacity to execute the contract.\n\nJacob F. KELLER v. Jacob HOLDERMAN (1863)\nSupreme Court of Michigan\n11 Mich. 248\nError to Berrien Circuit.\n[\xc2\xb61] Action by Holderman against Keller upon a check for $300, drawn by\nKeller upon a banker at Niles, and not honored. The case was tried without a jury,\nand the circuit judge found as facts, that the check was given for an old silver\nwatch, worth about $15, which Keller took and kept until the day of trial, when he\noffered to return it to the plaintiff, who refused to receive it. The whole transaction was a frolic and a banter\xe2\x80\x94the plaintiff not expecting to sell, nor the defendant intending to buy the watch at the sum for which the check was drawn. The\ndefendant, when he drew the check had no money in the banker\xe2\x80\x99s hands, and he\nhad intended to insert a condition in the check that would prevent his being liable\non it; but as he failed to do so, and had retained the watch, the judge held him liable, and judgement was rendered against him for the amount of the check. * * * *\nMartin, Ch. J.: Per Curiam\n[\xc2\xb62] When the court below found that as a fact that \xe2\x80\x9cthe whole transaction between the parties was a frolic and a banter, the plaintiff not expecting to sell, nor\nthe defendant intending to buy the watch for the sum for which the check was\ndrawn,\xe2\x80\x9d the conclusion should have been that no contract was ever made by the\nparties, and the finding should have been that no cause of action existed upon the\ncheck to the plaintiff.\n[\xc2\xb63]\nlow.\n\nThe judgment below is reversed, with cost of this court and the court be-\n\nQuestion: Suppose Lucy had told his brother the next day, \xe2\x80\x9cI think Zehmer was\ntrying to bluff me last night, as a joke, but he signed the document, and now I\nhave got him.\xe2\x80\x9d Would that change the result in Lucy v. Zehmer?\n\n264\n\n\x0cRAFFLES v. WICHELHAUS (1864)\nCourt of the Exchequer\n2 Hurl. & C. 906\n[\xc2\xb61] Declaration. For that it was agreed between the plaintiff and the defendants, to wit, at Liverpool, that the plaintiff should sell to the defendants, and the\ndefendants buy of the plaintiff, certain goods, to wit, 125 bales of Surat cotton,\nguaranteed middling fair merchant\xe2\x80\x99s Dhollorah, to arrive ex \xe2\x80\x9cPeerless\xe2\x80\x9d from\nBombay; and that the cotton should be taken from the quay, and that the defendants would pay the plaintiff for the same at a certain rate, to wit, at the rate of\n17\xc2\xbdd. per pound, within a certain time then agreed upon after the arrival of the\nsaid goods in England. Averments: that the said goods did arrive by the said ship\nfrom Bombay in England, to wit, at Liverpool, and the plaintiff was then and\nthere ready, and willing and offered to deliver the said goods to the defendants,\n&c. Breach: that the defendants refused to accept the said goods or pay the plaintiff for them.\n[\xc2\xb62] Plea. That the said ship mentioned in the said agreement was meant and\nintended by the defendants to be the ship called the \xe2\x80\x9cPeerless,\xe2\x80\x9d which sailed from\nBombay, to wit, in October; and that the plaintiff was not ready and willing and\ndid not offer to deliver to the defendants any bales of cotton which arrived by the\nlast mentioned ship, but instead thereof was only ready and willing and offered to\ndeliver to the defendants 125 bales of Surat cotton which arrived by another and\ndifferent ship, which was also called the \xe2\x80\x9cPeerless,\xe2\x80\x9d and which sailed from Bombay, to wit, in December.\n[\xc2\xb63]\n\nDemurrer, and joinder therein.\n\n[\xc2\xb64] Milward, in support of the demurrer. The contract was for the sale of a\nnumber of bales of cotton of a particular description, which the plaintiff was ready\nto deliver. It is immaterial by what ship the cotton was to arrive, so that it was a\nship called the Peerless. The words \xe2\x80\x9cto arrive ex \xe2\x80\x98Peerless,\xe2\x80\x99\xe2\x80\x9d only mean that if the\nvessel is lost on the voyage, the contract is to be at an end. [Pollock C.B. It would\nbe a question for the jury whether both parties meant the same ship called the\nPeerless.] That would be so if the contract was for the sale of a ship called the\nPeerless; but it is for the sale of cotton on board a ship of that name. [Pollock C.B.\nThe defendant only bought that cotton which was to arrive by a particular ship. It\nmay as well be said, that if there is a contract for the purchase of certain goods in\nwarehouse A., that is satisfied by the delivery of goods of the same description in\nwarehouse B.] In that case there would be goods in both warehouses; here it does\nnot appear that the plaintiff had any goods on board the other \xe2\x80\x9cPeerless.\xe2\x80\x9d [Martin,\nB. It is imposing on the defendant a contract different from that which he entered\ninto. Pollock C.B. It is like a contract for the purchase of wine coming from a particular estate in France or Spain, where there are two estates of that name.] The\ndefendant has no right to contradict by parol evidence a written contract good up265\n\n\x0con the face of it. He does not impute misrepresentation or fraud, but only says that\nhe fancied the ship was a different one. Intention is of no avail, unless stated at the\ntime of the contract. [Pollock C.B. One vessel sailed in October and the other in\nDecember.] The time of sailing is no part of the contract.\n[\xc2\xb65] Mellish (Cohen with him), in support of the plea. There is nothing on the\nface of the contract to shew that any particular ship called the \xe2\x80\x9cPeerless\xe2\x80\x9d was\nmeant; but the moment it appears that two ships called the \xe2\x80\x9cPeerless\xe2\x80\x9d were about\nto sail from Bombay there is a latent ambiguity, and parol evidence may be given\nfor the purpose of shewing that the defendant meant one \xe2\x80\x9cPeerless,\xe2\x80\x9d and the plaintiff another. That being so, there was no consensus ad idem, and therefore no\nbinding contract. He was then stopped by the Court.\n[\xc2\xb66]\n\nPer Curiam. Judgment for the defendants.\n\nQuestions:\n1. Raffles is another notoriously difficult case. Milward, Mellish, and Cohen are\nall lawyers for the parties. Pollock and Martin are judges-barons of the Exchequer.\nDo the judges say in this report why they give judgment for the defendants?\n2. Why does it matter which ship it was?\n3. Would you ground this decision on lack of subjective intent?\n4. Oliver Wendell Holmes said that the two parties never agreed because their objective manifestations of intent were different: \xe2\x80\x9c[T]here is no contract because the\nparties used different words.\xe2\x80\x9d What could Holmes have meant by that?\n5. Did the parties exchange promise for consideration? Is there any evidence the\njudges were thinking of it that way?\n6. Please look at Restatement (Second) of Contracts \xc2\xa7 20:\nRestatement (Second) of Contracts \xc2\xa7 20. Effect of Misunderstanding\nSection 20 is the Restatement\xe2\x80\x99s answer to the cases in this part of the casebook.\nHow would Lucy, Keller, and Raffles come out under \xc2\xa7 20?\n\n266\n\n\x0cChapter 6. Offers\nA. What Is an Offer?\nJohn D.R. LEONARD v. PEPSICO, INC. (August 5, 1999)\nUnited States District Court, S.D. New York\n1999 WL 587918 (S.D.N.Y.)\nOPINION & ORDER\nWOOD, J.\n[\xc2\xb61] Plaintiff brought this action seeking, among other things, specific performance of an alleged offer of a Harrier Jet, featured in a television advertisement\nfor defendant\xe2\x80\x99s \xe2\x80\x9cPepsi Stuff\xe2\x80\x9d promotion. Defendant has moved for summary\njudgment pursuant to Federal Rule of Civil Procedure 56. For the reasons stated\nbelow, defendant\xe2\x80\x99s motion is granted.\nI. Background\n[\xc2\xb62] This case arises out of a promotional campaign conducted by defendant,\nthe producer and distributor of the soft drinks Pepsi and Diet Pepsi. (See PepsiCo\nInc.\xe2\x80\x99s Rule 56.1 Statement [of Uncontested Facts] (\xe2\x80\x9cDef. Stat .\xe2\x80\x9d) \xc2\xb6 2.) The promotion, entitled \xe2\x80\x9cPepsi Stuff,\xe2\x80\x9d encouraged consumers to collect \xe2\x80\x9cPepsi Points\xe2\x80\x9d from\nspecially marked packages of Pepsi or Diet Pepsi and redeem these points for\nmerchandise featuring the Pepsi logo. (See id. \xc2\xb6\xc2\xb6 4, 8.) Before introducing the\npromotion nationally, defendant conducted a test of the promotion in the Pacific\nNorthwest from October 1995 to March 1996. (See id. \xc2\xb6\xc2\xb6 5-6.) A Pepsi Stuff catalog was distributed to consumers in the test market, including Washington State.\n(See id. \xc2\xb6 7.) Plaintiff is a resident of Seattle, Washington. (See id. \xc2\xb6 3.) While living in Seattle, plaintiff saw the Pepsi Stuff commercial (see id. \xc2\xb6 22) that he contends constituted an offer of a Harrier Jet.\nA. The Alleged Offer\n[\xc2\xb63] Because whether the television commercial constituted an offer is the central question in this case, the Court will describe the commercial in detail. The\ncommercial opens upon an idyllic, suburban morning, where the chirping of birds\nin sun-dappled trees welcomes a paperboy on his morning route. As the newspaper hits the stoop of a conventional two-story house, the tattoo of a military drum\nintroduces the subtitle, \xe2\x80\x9cMONDAY 7:58 AM.\xe2\x80\x9d The stirring strains of a martial air\n267\n\n\x0cmark the appearance of a well-coiffed teenager preparing to leave for school,\ndressed in a shirt emblazoned with the Pepsi logo, a red-white-and-blue ball.\nWhile the teenager confidently preens, the military drumroll again sounds as the\nsubtitle \xe2\x80\x9cT-SHIRT 75 PEPSI POINTS\xe2\x80\x9d scrolls across the screen. Bursting from\nhis room, the teenager strides down the hallway wearing a leather jacket. The\ndrumroll sounds again, as the subtitle \xe2\x80\x9cLEATHER JACKET 1450 PEPSI\nPOINTS\xe2\x80\x9d appears. The teenager opens the door of his house and, unfazed by the\nglare of the early morning sunshine, puts on a pair of sunglasses. The drumroll\nthen accompanies the subtitle \xe2\x80\x9cSHADES 175 PEPSI POINTS.\xe2\x80\x9d A voiceover then\nintones, \xe2\x80\x9cIntroducing the new Pepsi Stuff catalog,\xe2\x80\x9d as the camera focuses on the\ncover of the catalog. (See Defendant\xe2\x80\x99s Local Rule 56.1 Stat., Exh. A (the \xe2\x80\x9cCatalog\xe2\x80\x9d).)*\n[\xc2\xb64] The scene then shifts to three young boys sitting in front of a high school\nbuilding. The boy in the middle is intent on his Pepsi Stuff Catalog, while the\nboys on either side are each drinking Pepsi. The three boys gaze in awe at an object rushing overhead, as the military march builds to a crescendo. The Harrier Jet\nis not yet visible, but the observer senses the presence of a mighty plane as the\nextreme winds generated by its flight create a paper maelstrom in a classroom devoted to an otherwise dull physics lesson. Finally, the Harrier Jet swings into view\nand lands by the side of the school building, next to a bicycle rack. Several students run for cover, and the velocity of the wind strips one hapless faculty member down to his underwear. While the faculty member is being deprived of his\ndignity, the voiceover announces: \xe2\x80\x9cNow the more Pepsi you drink, the more great\nstuff you\xe2\x80\x99re gonna get.\xe2\x80\x9d\n[\xc2\xb65] The teenager opens the cockpit of the fighter and can be seen, helmetless,\nholding a Pepsi. \xe2\x80\x9c[L]ooking very pleased with himself,\xe2\x80\x9d (Pl. Mem. at 3,) the teenager exclaims, \xe2\x80\x9cSure beats the bus,\xe2\x80\x9d and chortles. The military drumroll sounds a\nfinal time, as the following words appear: \xe2\x80\x9cHARRIER FIGHTER 7,000,000\nPEPSI POINTS .\xe2\x80\x9d A few seconds later, the following appears in more stylized\nscript: \xe2\x80\x9cDrink Pepsi\xe2\x80\x94Get Stuff.\xe2\x80\x9d With that message, the music and the commercial end with a triumphant flourish.\n[\xc2\xb66] Inspired by this commercial, plaintiff set out to obtain a Harrier Jet. Plaintiff explains that he is \xe2\x80\x9ctypical of the \xe2\x80\x98Pepsi Generation\xe2\x80\x99 ... he is young, has an adventurous spirit, and the notion of obtaining a Harrier Jet appealed to him enormously.\xe2\x80\x9d (Pl. Mem. at 3.) Plaintiff consulted the Pepsi Stuff Catalog. The Catalog\nfeatures youths dressed in Pepsi Stuff regalia or enjoying Pepsi Stuff accessories,\nsuch as \xe2\x80\x9cBlue Shades\xe2\x80\x9d (\xe2\x80\x9cAs if you need another reason to look forward to sunny\ndays.\xe2\x80\x9d), \xe2\x80\x9cPepsi Tees\xe2\x80\x9d (\xe2\x80\x9cLive in \xe2\x80\x98em. Laugh in \xe2\x80\x98em. Get in \xe2\x80\x98em.\xe2\x80\x9d), \xe2\x80\x9cBag of Balls\xe2\x80\x9d\n(\xe2\x80\x9cThree balls. One bag. No rules.\xe2\x80\x9d), and \xe2\x80\x9cPepsi Phone Card\xe2\x80\x9d (\xe2\x80\x9cCall your mom!\xe2\x80\x9d).\nThe Catalog specifies the number of Pepsi Points required to obtain promotional\nAt this point, the following message appears at the bottom of the screen: \xe2\x80\x9cOffer not available in\nall areas. See details on specially marked packages.\xe2\x80\x9d\n*\n\n268\n\n\x0cmerchandise. (See Catalog, at rear foldout pages.) The Catalog includes an Order\nForm which lists, on one side, fifty-three items of Pepsi Stuff merchandise redeemable for Pepsi Points (see id. (the \xe2\x80\x9cOrder Form\xe2\x80\x9d)). Conspicuously absent\nfrom the Order Form is any entry or description of a Harrier Jet. (See id.) The\namount of Pepsi Points required to obtain the listed merchandise ranges from 15\n(for a \xe2\x80\x9cJacket Tattoo\xe2\x80\x9d (\xe2\x80\x9cSew \xe2\x80\x98em on your jacket, not your arm.\xe2\x80\x9d)) to 3300 (for a\n\xe2\x80\x9cFila Mountain Bike\xe2\x80\x9d (\xe2\x80\x9cRugged. All-terrain. Exclusively for Pepsi.\xe2\x80\x9d)). It should\nbe noted that plaintiff objects to the implication that because an item was not\nshown in the Catalog, it was unavailable. (See Pl. Stat. \xc2\xb6\xc2\xb6 23-26, 29.)\n[\xc2\xb67] The rear foldout pages of the Catalog contain directions for redeeming\nPepsi Points for merchandise. (See Catalog, at rear foldout pages.) These directions note that merchandise may be ordered \xe2\x80\x9conly\xe2\x80\x9d with the original Order Form.\n(See id.) The Catalog notes that in the event that a consumer lacks enough Pepsi\nPoints to obtain a desired item, additional Pepsi Points may be purchased for ten\ncents each; however, at least fifteen original Pepsi Points must accompany each\norder. (See id.)\n[\xc2\xb68] Although plaintiff initially set out to collect 7,000,000 Pepsi Points by\nconsuming Pepsi products, it soon became clear to him that he \xe2\x80\x9cwould not be able\nto buy (let alone drink) enough Pepsi to collect the necessary Pepsi Points fast\nenough.\xe2\x80\x9d (Affidavit of John D.R. Leonard, Mar. 30, 1999 (\xe2\x80\x9cLeonard Aff.\xe2\x80\x9d), \xc2\xb6 5.)\nReevaluating his strategy, plaintiff \xe2\x80\x9cfocused for the first time on the packaging\nmaterials in the Pepsi Stuff promotion,\xe2\x80\x9d (id.,) and realized that buying Pepsi\nPoints would be a more promising option. (See id.) Through acquaintances, plaintiff ultimately raised about $700,000. (See id. \xc2\xb6 6.)\nB. Plaintiff\xe2\x80\x99s Efforts to Redeem the Alleged Offer\n[\xc2\xb69] On or about March 27, 1996, plaintiff submitted an Order Form, fifteen\noriginal Pepsi Points, and a check for $700,008.50. (See Def. Stat. \xc2\xb6 36.) Plaintiff\nappears to have been represented by counsel at the time he mailed his check; the\ncheck is drawn on an account of plaintiff\xe2\x80\x99s first set of attorneys. (See Defendant\xe2\x80\x99s\nNotice of Motion, Exh. B (first).) At the bottom of the Order Form, plaintiff wrote\nin \xe2\x80\x9c1 Harrier Jet\xe2\x80\x9d in the \xe2\x80\x9cItem\xe2\x80\x9d column and \xe2\x80\x9c7,000,000\xe2\x80\x9d in the \xe2\x80\x9cTotal Points\xe2\x80\x9d column. (See id.) In a letter accompanying his submission, plaintiff stated that the\ncheck was to purchase additional Pepsi Points \xe2\x80\x9cexpressly for obtaining a new Harrier jet as advertised in your Pepsi Stuff commercial.\xe2\x80\x9d (See Declaration of David\nWynn, Mar. 18, 1999 (\xe2\x80\x9cWynn Dec.\xe2\x80\x9d), Exh. A.)\n[\xc2\xb610] On or about May 7, 1996, defendant\xe2\x80\x99s fulfillment house rejected plaintiff\xe2\x80\x99s\nsubmission and returned the check, explaining that:\nThe item that you have requested is not part of the Pepsi Stuff collection.\nIt is not included in the catalogue or on the order form, and only catalogue\nmerchandise can be redeemed under this program. The Harrier jet in the\nPepsi commercial is fanciful and is simply included to create a humorous\n269\n\n\x0cand entertaining ad. We apologize for any misunderstanding or confusion\nthat you may have experienced and are enclosing some free product coupons for your use.\n(Wynn Aff. Exh. B (second).) Plaintiff\xe2\x80\x99s previous counsel responded on or about\nMay 14, 1996, as follows:\nYour letter of May 7, 1996 is totally unacceptable. We have reviewed the\nvideo tape of the Pepsi Stuff commercial ... and it clearly offers the new\nHarrier jet for 7,000,000 Pepsi Points. Our client followed your rules explicitly.... This is a formal demand that you honor your commitment and\nmake immediate arrangements to transfer the new Harrier jet to our client.\nIf we do not receive transfer instructions within ten (10) business days of\nthe date of this letter you will leave us no choice but to file an appropriate\naction against Pepsi....\n(Wynn Aff., Exh. C.) This letter was apparently sent onward to the advertising\ncompany responsible for the actual commercial, BBDO New York (\xe2\x80\x9cBBDO\xe2\x80\x9d). In\na letter dated May 30, 1996, BBDO Vice President Raymond E. McGovern, Jr.,\nexplained to plaintiff that:\nI find it hard to believe that you are of the opinion that the Pepsi Stuff\ncommercial (\xe2\x80\x9cCommercial\xe2\x80\x9d) really offers a new Harrier Jet. The use of the\nJet was clearly a joke that was meant to make the Commercial more humorous and entertaining. In my opinion, no reasonable person would agree\nwith your analysis of the Commercial.\n(Wynn Aff. Exh. A.) On or about June 17, 1996, plaintiff mailed a similar demand\nletter to defendant. (See Wynn Aff., Exh. D.)\n[\xc2\xb611] Litigation of this case initially involved two lawsuits, the first a declaratory judgment action brought by PepsiCo in this district (the \xe2\x80\x9cdeclaratory judgment\naction\xe2\x80\x9d), and the second an action brought by Leonard in Florida state court (the\n\xe2\x80\x9cFlorida action\xe2\x80\x9d). PepsiCo brought suit in this Court on July 18, 1996, seeking a\ndeclaratory judgment stating that it had no obligation to furnish plaintiff with a\nHarrier Jet. That case was filed under docket number 96 Civ. 5320. In response to\nPepsiCo\xe2\x80\x99s suit in New York, Leonard brought suit in Florida state court on August\n6, 1996, although this case had nothing to do with Florida. That suit was removed\nto the Southern District of Florida in September 1996. In an Order dated November 6, 1996, United States District Judge James Lawrence King found that, \xe2\x80\x9cObviously this case has been filed in a forum that has no meaningful relationship to\nthe controversy and warrants a transfer pursuant to 28 U.S.C. \xc2\xa7 1404(a).\xe2\x80\x9d Leonard\nv. PepsiCo, 96-2555 Civ.-King, at 1 (S.D.Fla. Nov. 6, 1996). The Florida suit was\ntransferred to this Court on December 2, 1996, and assigned the docket number\n96 Civ. 9069.\n[\xc2\xb612] Once the Florida action had been transferred, Leonard moved to dismiss\nthe declaratory judgment action for lack of personal jurisdiction. In an Order dated November 24, 1997, the Court granted the motion to dismiss for lack of personal jurisdiction in case 96 Civ. 5320, from which PepsiCo appealed. Leonard\nalso moved to voluntarily dismiss the Florida action. While the Court indicated\n270\n\n\x0cthat the motion was proper, it noted that PepsiCo was entitled to some compensation for the costs of litigating this case in Florida, a forum that had no meaningful\nrelationship to the case. (See Transcript of Proceedings Before Hon. Kimba M.\nWood, Dec. 9, 1997, at 3.) In an Order dated December 15, 1997, the Court granted Leonard\xe2\x80\x99s motion to voluntarily dismiss this case without prejudice, but did so\non condition that Leonard pay certain attorneys\xe2\x80\x99 fees.\n[\xc2\xb613] In an Order dated October 1, 1998, the Court ordered Leonard to pay\n$88,162 in attorneys\xe2\x80\x99 fees within thirty days. Leonard failed to do so, yet sought\nnonetheless to appeal from his voluntary dismissal and the imposition of fees. In\nan Order dated January 5, 1999, the Court noted that Leonard\xe2\x80\x99s strategy was\n\xe2\x80\x9c \xe2\x80\x98clearly an end-run around the final judgment rule.\xe2\x80\x9d \xe2\x80\x98 (Order at 2 (quoting Palmieri v. DeFaria, 88 F.3d 136 (2d Cir. 1996)).) Accordingly, the Court ordered\nLeonard either to pay the amount due or withdraw his voluntary dismissal, as well\nas his appeals therefrom, and continue litigation before this Court. (See Order at\n3.) Rather than pay the attorneys\xe2\x80\x99 fees, Leonard elected to proceed with litigation,\nand shortly thereafter retained present counsel.\n[\xc2\xb614] On February 22, 1999, the Second Circuit endorsed the parties\xe2\x80\x99 stipulations to the dismissal of any appeals taken thus far in this case. Those stipulations\nnoted that Leonard had consented to the jurisdiction of this Court and that PepsiCo agreed not to seek enforcement of the attorneys\xe2\x80\x99 fees award. With these issues\nhaving been waived, PepsiCo moved for summary judgment pursuant to Federal\nRule of Civil Procedure 56. The present motion thus follows three years of jurisdictional and procedural wrangling.\nII. Discussion\nA. The Legal Framework\n1. Standard for Summary Judgment\n[\xc2\xb615] On a motion for summary judgment, a court \xe2\x80\x9ccannot try issues of fact; it\ncan only determine whether there are issues to be tried.\xe2\x80\x9d Donahue v. Windsor\nLocks Bd. of Fire Comm\xe2\x80\x99rs, 834 F.2d 54, 58 (2d Cir. 1987) (citations and internal\nquotation marks omitted). * * * *\n2. Choice of Law\n[\xc2\xb616] * * * * The Court agrees with both parties that resolution of this issue requires consideration of principles of contract law that are not limited to the law of\nany one state. Most of the cases cited by the parties are not from New York courts.\nAs plaintiff suggests, the questions presented by this case implicate questions of\ncontract law \xe2\x80\x9cdeeply ingrained in the common law of England and the States of\nthe Union.\xe2\x80\x9d (Pl. Mem. at 8.)\n271\n\n\x0cB. Defendant\xe2\x80\x99s Advertisement Was Not An Offer\n1. Advertisements as Offers\n[\xc2\xb617] The general rule is that an advertisement does not constitute an offer. The\nRestatement (Second) of Contracts explains that:\nAdvertisements of goods by display, sign, handbill, newspaper, radio or\ntelevision are not ordinarily intended or understood as offers to sell. The\nsame is true of catalogues, price lists and circulars, even though the terms\nof suggested bargains may be stated in some detail. It is of course possible\nto make an offer by an advertisement directed to the general public (see \xc2\xa7\n29), but there must ordinarily be some language of commitment or some\ninvitation to take action without further communication.\nRestatement (Second) of Contracts \xc2\xa7 26 cmt. b (1979). Similarly, a leading treatise notes that:\nIt is quite possible to make a definite and operative offer to buy or sell\ngoods by advertisement, in a newspaper, by a handbill, a catalog or circular or on a placard in a store window. It is not customary to do this, however; and the presumption is the other way. ... Such advertisements are understood to be mere requests to consider and examine and negotiate; and\nno one can reasonably regard them as otherwise unless the circumstances\nare exceptional and the words used are very plain and clear.\n1 Arthur Linton Corbin & Joseph M. Perillo, Corbin on Contracts \xc2\xa7 2.4, at 116- 17\n(rev. ed.1993) (emphasis added); see also 1 E. Allan Farnsworth, Farnsworth on\nContracts \xc2\xa7 3.10, at 239 (2d ed.1998); 1 Samuel Williston & Richard A. Lord, A\nTreatise on the Law of Contracts \xc2\xa7 4:7, at 286-87 (4th ed.1990). New York courts\nadhere to this general principle. See Lovett v. Frederick Loeser & Co., 124 Misc.\n81, 207 N.Y.S. 753, 755 (Mun. Ct. N.Y. City 1924) (noting that an \xe2\x80\x9cadvertisement\nis nothing but an invitation to enter into negotiations, and is not an offer which\nmay be turned into a contract by a person who signifies his intention to purchase\nsome of the articles mentioned in the advertisement\xe2\x80\x9d); see also Geismar v. Abraham & Strauss, 109 Misc.2d 495, 439 N.Y.S.2d 1005, 1006 (Dist. Ct. Suffolk Cty.\n1981) (reiterating Lovett rule); People v. Gimbel Bros. Inc., 202 Misc. 229, 115\nN.Y.S.2d 857, 858 (Ct. Spec. Sess. 1952) (because an \xe2\x80\x9c[a]dvertisement does not\nconstitute an offer of sale but is solely an invitation to customers to make an offer\nto purchase,\xe2\x80\x9d defendant not guilty of selling property on Sunday).\n[\xc2\xb618] An advertisement is not transformed into an enforceable offer merely by a\npotential offeree\xe2\x80\x99s expression of willingness to accept the offer through, among\nother means, completion of an order form. In Mesaros v. United States, 845 F.2d\n1576 (Fed. Cir. 1988), for example, the plaintiffs sued the United States Mint for\nfailure to deliver a number of Statue of Liberty commemorative coins that they\nhad ordered. When demand for the coins proved unexpectedly robust, a number of\nindividuals who had sent in their orders in a timely fashion were left emptyhanded. See id. at 1578-80. The court began by noting the \xe2\x80\x9cwell-established\xe2\x80\x9d rule\n272\n\n\x0cthat advertisements and order forms are \xe2\x80\x9cmere notices and solicitations for offers\nwhich create no power of acceptance in the recipient.\xe2\x80\x9d Id. at 1580; see also Foremost Pro Color, Inc. v. Eastman Kodak Co., 703 F.2d 534, 538-39 (9th Cir. 1983)\n(\xe2\x80\x9cThe weight of authority is that purchase orders such as those at issue here are\nnot enforceable contracts until they are accepted by the seller.\xe2\x80\x9d); Restatement\n(Second) of Contracts \xc2\xa7 26 (\xe2\x80\x9cA manifestation of willingness to enter a bargain is\nnot an offer if the person to whom it is addressed knows or has reason to know\nthat the person making it does not intend to conclude a bargain until he has made\na further manifestation of assent.\xe2\x80\x9d). The spurned coin collectors could not maintain a breach of contract action because no contract would be formed until the advertiser accepted the order form and processed payment. See id. at 1581; see also\nAlligood v. Procter & Gamble, 594 N.E.2d 668 (Ohio Ct. App. 1991) (finding that\nno offer was made in promotional campaign for baby diapers, in which consumers\nwere to redeem teddy bear proof-of-purchase symbols for catalog merchandise);\nChang v. First Colonial Savings Bank, 410 S.E.2d 928 (Va. 1991) (newspaper advertisement for bank settled the terms of the offer once bank accepted plaintiffs\xe2\x80\x99\ndeposit, notwithstanding bank\xe2\x80\x99s subsequent effort to amend the terms of the offer).\nUnder these principles, plaintiff\xe2\x80\x99s letter of March 27, 1996, with the Order Form\nand the appropriate number of Pepsi Points, constituted the offer. There would be\nno enforceable contract until defendant accepted the Order Form and cashed the\ncheck.\n[\xc2\xb619] The exception to the rule that advertisements do not create any power of\nacceptance in potential offerees is where the advertisement is \xe2\x80\x9cclear, definite, and\nexplicit, and leaves nothing open for negotiation,\xe2\x80\x9d in that circumstance, \xe2\x80\x9cit constitutes an offer, acceptance of which will complete the contract.\xe2\x80\x9d Lefkowitz v. Great\nMinneapolis Surplus Store, 86 N.W.2d 689, 691 (Minn. 1957). In Lefkowitz, defendant had published a newspaper announcement stating: \xe2\x80\x9cSaturday 9 AM Sharp,\n3 Brand New Fur Coats, Worth to $100 .00, First Come First Served $1 Each.\xe2\x80\x9d Id.\nat 690. Mr. Morris Lefkowitz arrived at the store, dollar in hand, but was informed\nthat under defendant\xe2\x80\x99s \xe2\x80\x9chouse rules,\xe2\x80\x9d the offer was open to ladies, but not gentlemen. See id. The court ruled that because plaintiff had fulfilled all of the terms of\nthe advertisement and the advertisement was specific and left nothing open for\nnegotiation, a contract had been formed. See id.; see also Johnson v. Capital City\nFord Co., 85 So.2d 75, 79 (La. Ct. App. 1955) (finding that newspaper advertisement was sufficiently certain and definite to constitute an offer).\n[\xc2\xb620] The present case is distinguishable from Lefkowitz. First, the commercial\ncannot be regarded in itself as sufficiently definite, because it specifically reserved the details of the offer to a separate writing, the Catalog. * The commercial\nitself made no mention of the steps a potential offeree would be required to take to\naccept the alleged offer of a Harrier Jet. The advertisement in Lefkowitz, in contrast, \xe2\x80\x9cidentified the person who could accept.\xe2\x80\x9d Corbin, supra, \xc2\xa7 2.4, at 119. See\nIt also communicated additional words of reservation: \xe2\x80\x9cOffer not available in all areas. See details on specially marked packages.\xe2\x80\x9d\n*\n\n273\n\n\x0cgenerally United States v. Braunstein, 75 F. Supp. 137, 139 (S.D.N.Y. 1947)\n(\xe2\x80\x9cGreater precision of expression may be required, and less help from the court\ngiven, when the parties are merely at the threshold of a contract.\xe2\x80\x9d); Farnsworth,\nsupra, at 239 (\xe2\x80\x9cThe fact that a proposal is very detailed suggests that it is an offer,\nwhile omission of many terms suggests that it is not.\xe2\x80\x9d).* Second, even if the Catalog had included a Harrier Jet among the items that could be obtained by redemption of Pepsi Points, the advertisement of a Harrier Jet by both television commercial and catalog would still not constitute an offer. As the Mesaros court explained, the absence of any words of limitation such as \xe2\x80\x9cfirst come, first served,\xe2\x80\x9d\nrenders the alleged offer sufficiently indefinite that no contract could be formed.\nSee Mesaros, 845 F.2d at 1581. \xe2\x80\x9cA customer would not usually have reason to believe that the shopkeeper intended exposure to the risk of a multitude of acceptances resulting in a number of contracts exceeding the shopkeeper\xe2\x80\x99s inventory.\xe2\x80\x9d Farnsworth, supra, at 242. There was no such danger in Lefkowitz, owing to\nthe limitation \xe2\x80\x9cfirst come, first served.\xe2\x80\x9d\n[\xc2\xb621] The Court finds, in sum, that the Harrier Jet commercial was merely an\nadvertisement. The Court now turns to the line of cases upon which plaintiff rests\nmuch of his argument.\n2. Rewards as Offers\n[\xc2\xb622] In opposing the present motion, plaintiff largely relies on a different species of unilateral offer, involving public offers of a reward for performance of a\nspecified act. Because these cases generally involve public declarations regarding\nthe efficacy or trustworthiness of specific products, one court has aptly characterized these authorities as \xe2\x80\x9cprove me wrong\xe2\x80\x9d cases. See Rosenthal v. Al Packer Ford,\n374 A.2d 377, 380 (Md. Ct. Spec. App. 1977). The most venerable of these precedents is the case of Carlill v. Carbolic Smoke Ball Co., 1 Q.B. 256 (Court of Appeal, 1892), a quote from which heads plaintiff\xe2\x80\x99s memorandum of law: \xe2\x80\x9c[I]f a person chooses to make extravagant promises ... he probably does so because it pays\nhim to make them, and, if he has made them, the extravagance of the promises is\nno reason in law why he should not be bound by them.\xe2\x80\x9d Carbolic Smoke Ball, 1\nQ.B. at 268 (Bowen, L.J.).\n[\xc2\xb623] Long a staple of law school curricula, Carbolic Smoke Ball owes its fame\nnot merely to \xe2\x80\x9cthe comic and slightly mysterious object involved,\xe2\x80\x9d A.W. Brian\nSimpson, Quackery and Contract Law: Carlill v. Carbolic Smoke Ball Company\n(1893), in Leading Cases in the Common Law 259, 281 (1995), but also to its role\n*\n\nThe reservation of the details of the offer in this case distinguishes it from Payne v. Lautz Bros.\n& Co., 166 N.Y.S. 844 (City Ct. Buffalo 1916). In Payne, a stamp and coupon broker purchased\nmassive quantities of coupons produced by defendant, a soap company, and tried to redeem them\nfor 4,000 round-trip tickets to a local beach. The court ruled for plaintiff, noting that the advertisements were \xe2\x80\x9cabsolutely unrestricted. It contained no reference whatever to any of its previous\nadvertising of any form.\xe2\x80\x9d Id. at 848. In the present case, by contrast, the commercial explicitly\nreserved the details of the offer to the Catalog.\n\n274\n\n\x0cin developing the law of unilateral offers. The case arose during the London influenza epidemic of the 1890s. Among other advertisements of the time, for Clarke\xe2\x80\x99s\nWorld Famous Blood Mixture, Towle\xe2\x80\x99s Pennyroyal and Steel Pills for Females,\nSequah\xe2\x80\x99s Prairie Flower, and Epp\xe2\x80\x99s Glycerine Jube-Jubes, see Simpson, supra, at\n267, appeared solicitations for the Carbolic Smoke Ball. The specific advertisement that Mrs. Carlill saw, and relied upon, read as follows:\n100\xc2\xa3 reward will be paid by the Carbolic Smoke Ball Company to\nany person who contracts the increasing epidemic influenza, colds, or any\ndiseases caused by taking cold, after having used the ball three times daily\nfor two weeks according to the printed directions supplied with each ball.\n1000\xc2\xa3 is deposited with the Alliance Bank, Regent Street, shewing our\nsincerity in the matter.\nDuring the last epidemic of influenza many thousand carbolic\nsmoke balls were sold as preventives against this disease, and in no ascertained case was the disease contracted by those using the carbolic smoke\nball.\nCarbolic Smoke Ball, 1 Q.B. at 256-57. \xe2\x80\x9cOn the faith of this advertisement,\xe2\x80\x9d id. at\n257, Mrs. Carlill purchased the smoke ball and used it as directed, but contracted\ninfluenza nevertheless.* The lower court held that she was entitled to recover the\npromised reward.\n[\xc2\xb624] Affirming the lower court\xe2\x80\x99s decision, Lord Justice Lindley began by noting that the advertisement was an express promise to pay \xc2\xa3100 in the event that a\nconsumer of the Carbolic Smoke Ball was stricken with influenza. See id. at 261.\nThe advertisement was construed as offering a reward because it sought to induce\nperformance, unlike an invitation to negotiate, which seeks a reciprocal promise.\nAs Lord Justice Lindley explained, \xe2\x80\x9cadvertisements offering rewards ... are offers\nto anybody who performs the conditions named in the advertisement, and anybody who does perform the condition accepts the offer.\xe2\x80\x9d Id. at 262; see also id. at\n268 (Bowen, L.J.).\xe2\x80\xa0 Because Mrs. Carlill had complied with the terms of the offer,\nyet contracted influenza, she was entitled to \xc2\xa3100.\n[\xc2\xb625] Like Carbolic Smoke Ball, the decisions relied upon by plaintiff involve\noffers of reward. In Barnes v. Treece, 549 P.2d 1152 (Wash.Ct.App.1976), for example, the vice-president of a punchboard distributor, in the course of hearings\nAlthough the Court of Appeals\xe2\x80\x99s opinion is silent as to exactly what a carbolic smoke ball was,\nthe historical record reveals it to have been a compressible hollow ball, about the size of an apple\nor orange, with a small opening covered by some porous material such as silk or gauze. The ball\nwas partially filled with carbolic acid in powder form. When the ball was squeezed, the powder\nwould be forced through the opening as a small cloud of smoke. See Simpson, supra, at 262-63.\nAt the time, carbolic acid was considered fatal if consumed in more than small amounts. See id. at\n264.\n\xe2\x80\xa0\nCarbolic Smoke Ball includes a classic formulation of this principle: \xe2\x80\x9cIf I advertise to the world\nthat my dog is lost, and that anybody who brings the dog to a particular place will be paid some\nmoney, are all the police or other persons whose business it is to find lost dogs to be expected to\nsit down and write a note saying that they have accepted my proposal?\xe2\x80\x9d Carbolic Smoke Ball, 1\nQ.B. at 270 (Bowen, L.J.).\n*\n\n275\n\n\x0cbefore the Washington State Gambling Commission, asserted that, \xe2\x80\x9c \xe2\x80\x98I\xe2\x80\x99ll put a\nhundred thousand dollars to anyone to find a crooked board. If they find it, I\xe2\x80\x99ll\npay it.\xe2\x80\x9d \xe2\x80\x98 Id. at 1154. Plaintiff, a former bartender, heard of the offer and located\ntwo crooked punchboards. Defendant, after reiterating that the offer was serious,\nproviding plaintiff with a receipt for the punchboard on company stationery, and\nassuring plaintiff that the reward was being held in escrow, nevertheless repudiated the offer. See id. at 1154. The court ruled that the offer was valid and that\nplaintiff was entitled to his reward. See id. at 1155. The plaintiff in this case also\ncites cases involving prizes for skill (or luck) in the game of golf. See Las Vegas\nHacienda v. Gibson, 359 P.2d 85 (Nev.1961) (awarding $5,000 to plaintiff, who\nsuccessfully shot a hole-in-one); see also Grove v. Charbonneau Buick- Pontiac,\nInc., 240 N.W.2d 853 (N.D.1976) (awarding automobile to plaintiff, who successfully shot a hole-in-one).\n[\xc2\xb626] Other \xe2\x80\x9creward\xe2\x80\x9d cases underscore the distinction between typical advertisements, in which the alleged offer is merely an invitation to negotiate for purchase of commercial goods, and promises of reward, in which the alleged offer is\nintended to induce a potential offeree to perform a specific action, often for noncommercial reasons. In Newman v. Schiff, 778 F.2d 460 (5th Cir. 1985), for example, the Fifth Circuit held that a tax protestor\xe2\x80\x99s assertion that, \xe2\x80\x9cIf anybody calls\nthis show ... and cites any section of the code that says an individual is required to\nfile a tax return, I\xe2\x80\x99ll pay them $100,000,\xe2\x80\x9d would have been an enforceable offer\nhad the plaintiff called the television show to claim the reward while the tax protestor was appearing. See id. at 466-67. The court noted that, like Carbolic Smoke\nBall, the case \xe2\x80\x9cconcerns a special type of offer: an offer for a reward.\xe2\x80\x9d Id. at 465.\nJames v. Turilli, 473 S.W.2d 757 (Mo. Ct. App. 1971), arose from a boast by defendant that the \xe2\x80\x9cnotorious Missouri desperado\xe2\x80\x9d Jesse James had not been killed\nin 1882, as portrayed in song and legend, but had lived under the alias \xe2\x80\x9cJ. Frank\nDalton\xe2\x80\x9d at the \xe2\x80\x9cJesse James Museum\xe2\x80\x9d operated by none other than defendant. Defendant offered $10,000 \xe2\x80\x9cto anyone who could prove me wrong.\xe2\x80\x9d See id. at 75859. The widow of the outlaw\xe2\x80\x99s son demonstrated, at trial, that the outlaw had in\nfact been killed in 1882. On appeal, the court held that defendant should be liable\nto pay the amount offered. See id. at 762; see also Mears v. Nationwide Mutual\nIns. Co., 91 F.3d 1118, 1122-23 (8th Cir. 1996) (plaintiff entitled to cost of two\nMercedes as reward for coining slogan for insurance company).\n[\xc2\xb627] In the present case, the Harrier Jet commercial did not direct that anyone\nwho appeared at Pepsi headquarters with 7,000,000 Pepsi Points on the Fourth of\nJuly would receive a Harrier Jet. Instead, the commercial urged consumers to accumulate Pepsi Points and to refer to the Catalog to determine how they could redeem their Pepsi Points. The commercial sought a reciprocal promise, expressed\nthrough acceptance of, and compliance with, the terms of the Order Form. As noted previously, the Catalog contains no mention of the Harrier Jet. Plaintiff states\nthat he \xe2\x80\x9cnoted that the Harrier Jet was not among the items described in the cata-\n\n276\n\n\x0clog, but this did not affect [his] understanding of the offer.\xe2\x80\x9d (Pl. Mem. at 4.) It\nshould have.*\n[\xc2\xb628] Carbolic Smoke Ball itself draws a distinction between the offer of reward\nin that case, and typical advertisements, which are merely offers to negotiate. As\nLord Justice Bowen explains:\nIt is an offer to become liable to any one who, before it is retracted, performs the condition.... It is not like cases in which you offer to negotiate,\nor you issue advertisements that you have got a stock of books to sell, or\nhouses to let, in which case there is no offer to be bound by any contract.\nSuch advertisements are offers to negotiate\xe2\x80\x94offers to receive offers\xe2\x80\x94\noffers to chaffer, as, I think, some learned judge in one of the cases has\nsaid.\nCarbolic Smoke Ball, 1 Q.B. at 268; see also Lovett, 207 N.Y.S. at 756 (distinguishing advertisements, as invitation to offer, from offers of reward made in advertisements, such as Carbolic Smoke Ball). Because the alleged offer in this case\nwas, at most, an advertisement to receive offers rather than an offer of reward,\nplaintiff cannot show that there was an offer made in the circumstances of this\ncase.\nC. An Objective, Reasonable Person Would Not Have Considered the Commercial an Offer\n[\xc2\xb629] Plaintiff\xe2\x80\x99s understanding of the commercial as an offer must also be rejected because the Court finds that no objective person could reasonably have\nconcluded that the commercial actually offered consumers a Harrier Jet.\n1. Objective Reasonable Person Standard\n[\xc2\xb630] In evaluating the commercial, the Court must not consider defendant\xe2\x80\x99s\nsubjective intent in making the commercial, or plaintiff\xe2\x80\x99s subjective view of what\nthe commercial offered, but what an objective, reasonable person would have understood the commercial to convey. See Kay-R Elec. Corp. v. Stone & Weber Constr. Co., 23 F.3d 55, 57 (2d Cir. 1994) (\xe2\x80\x9c[W]e are not concerned with what was\ngoing through the heads of the parties at the time [of the alleged contract]. Rather,\nwe are talking about the objective principles of contract law.\xe2\x80\x9d); Mesaros, 845 F.2d\nat 1581 (\xe2\x80\x9cA basic rule of contracts holds that whether an offer has been made depends on the objective reasonableness of the alleged offeree\xe2\x80\x99s belief that the advertisement or solicitation was intended as an offer.\xe2\x80\x9d); Farnsworth, supra, \xc2\xa7 3.10,\nat 237; Williston, supra, \xc2\xa7 4:7 at 296- 97.\n\n*\n\nIn his affidavit, plaintiff places great emphasis on a press release written by defendant, which\ncharacterizes the Harrier Jet as \xe2\x80\x9cthe ultimate Pepsi Stuff award.\xe2\x80\x9d (See Leonard Aff. \xc2\xb6 13.) Plaintiff\nsimply ignores the remainder of the release, which makes no mention of the Harrier Jet even as it\nsets forth in detail the number of points needed to redeem other merchandise.\n\n277\n\n\x0c[\xc2\xb631] If it is clear that an offer was not serious, then no offer has been made:\nWhat kind of act creates a power of acceptance and is therefore an offer?\nIt must be an expression of will or intention. It must be an act that leads\nthe offeree reasonably to conclude that a power to create a contract is conferred. This applies to the content of the power as well as to the fact of its\nexistence. It is on this ground that we must exclude invitations to deal or\nacts of mere preliminary negotiation, and acts evidently done in jest or\nwithout intent to create legal relations.\nCorbin on Contracts, \xc2\xa7 1.11 at 30 (emphasis added). An obvious joke, of course,\nwould not give rise to a contract. See, e.g., Graves v. Northern N.Y. Pub. Co., 260\nA.D. 900, 22 N.Y.S.2d 537 (App. Div. 4th Dept. 1940) (dismissing claim to offer\nof $1000, which appeared in the \xe2\x80\x9cjoke column\xe2\x80\x9d of the newspaper, to any person\nwho could provide a commonly available phone number). On the other hand, if\nthere is no indication that the offer is \xe2\x80\x9cevidently in jest,\xe2\x80\x9d and that an objective,\nreasonable person would find that the offer was serious, then there may be a valid\noffer. See Barnes, 549 P.2d at 1155 (\xe2\x80\x9c[I]f the jest is not apparent and a reasonable\nhearer would believe that an offer was being made, then the speaker risks the formation of a contract which was not intended .\xe2\x80\x9d); see also Lucy v. Zehmer, 84\nS.E.2d 516, 518, 520 (Va. 1954) (ordering specific performance of a contract to\npurchase a farm despite defendant\xe2\x80\x99s protestation that the transaction was done in\njest as \xe2\x80\x9c \xe2\x80\x98just a bunch of two doggoned drunks bluffing\xe2\x80\x9d \xe2\x80\x98).\n2. Necessity of a Jury Determination\n[\xc2\xb632] Plaintiff also contends that summary judgment is improper because the\nquestion of whether the commercial conveyed a sincere offer can be answered\nonly by a jury. Relying on dictum from Gallagher v. Delaney, 139 F.3d 338 (2d\nCir. 1998), plaintiff argues that a federal judge comes from a \xe2\x80\x9cnarrow segment of\nthe enormously broad American socio-economic spectrum,\xe2\x80\x9d id. at 342, and, thus,\nthat the question whether the commercial constituted a serious offer must be decided by a jury composed of, inter alia, members of the \xe2\x80\x9cPepsi Generation,\xe2\x80\x9d who\nare, as plaintiff puts it, \xe2\x80\x9cyoung, open to adventure, willing to do the unconventional.\xe2\x80\x9d (See Leonard Aff. \xc2\xb6 2.) Plaintiff essentially argues that a federal judge\nwould view his claim differently than fellow members of the \xe2\x80\x9cPepsi Generation.\xe2\x80\x9d\n[\xc2\xb633] Plaintiff\xe2\x80\x99s argument that his claim must be put to a jury is without merit.\nGallagher involved a claim of sexual harassment in which the defendant allegedly\ninvited plaintiff to sit on his lap, gave her inappropriate Valentine\xe2\x80\x99s Day gifts, told\nher that \xe2\x80\x9cshe brought out feelings that he had not had since he was sixteen,\xe2\x80\x9d and\n\xe2\x80\x9cinvited her to help him feed the ducks in the pond, since he was \xe2\x80\x98a bachelor for\nthe evening.\xe2\x80\x9d \xe2\x80\x98 Gallagher, 139 F.3d at 344. The court concluded that a jury determination was particularly appropriate because a federal judge lacked \xe2\x80\x9cthe current real-life experience required in interpreting subtle sexual dynamics of the\nworkplace based on nuances, subtle perceptions, and implicit communications.\xe2\x80\x9d\nId. at 342. This case, in contrast, presents a question of whether there was an offer\nto enter into a contract, requiring the Court to determine how a reasonable, objec278\n\n\x0ctive person would have understood defendant\xe2\x80\x99s commercial. Such an inquiry is\ncommonly performed by courts on a motion for summary judgment. See Krumme,\n143 F.3d at 83; Bourque, 42 F.3d at 708; Wards Co., 761 F.2d at 120.\n3. Whether the Commercial Was \xe2\x80\x9cEvidently Done In Jest\xe2\x80\x9d\n[\xc2\xb634] Plaintiff\xe2\x80\x99s insistence that the commercial appears to be a serious offer requires the Court to explain why the commercial is funny. Explaining why a joke is\nfunny is a daunting task; as the essayist E.B. White has remarked, \xe2\x80\x9cHumor can be\ndissected, as a frog can, but the thing dies in the process....\xe2\x80\x9d* The commercial is\nthe embodiment of what defendant appropriately characterizes as \xe2\x80\x9czany humor.\xe2\x80\x9d\n(Def. Mem. at 18.)\n[\xc2\xb635] First, the commercial suggests, as commercials often do, that use of the\nadvertised product will transform what, for most youth, can be a fairly routine and\nordinary experience. The military tattoo and stirring martial music, as well as the\nuse of subtitles in a Courier font that scroll terse messages across the screen, such\nas \xe2\x80\x9cMONDAY 7:58 AM,\xe2\x80\x9d evoke military and espionage thrillers. The implication\nof the commercial is that Pepsi Stuff merchandise will inject drama and moment\ninto hitherto unexceptional lives. The commercial in this case thus makes the exaggerated claims similar to those of many television advertisements: that by consuming the featured clothing, car, beer, or potato chips, one will become attractive,\nstylish, desirable, and admired by all. A reasonable viewer would understand such\nadvertisements as mere puffery, not as statements of fact, see, e.g., Hubbard v.\nGeneral Motors Corp., 95 Civ. 4362(AGS), 1996 WL 274018, at *6 (S.D.N.Y.\nMay 22, 1996) (advertisement describing automobile as \xe2\x80\x9cLike a Rock,\xe2\x80\x9d was mere\npuffery, not a warranty of quality); Lovett, 207 N.Y.S. at 756; and refrain from\ninterpreting the promises of the commercial as being literally true.\n[\xc2\xb636] Second, the callow youth featured in the commercial is a highly improbable pilot, one who could barely be trusted with the keys to his parents\xe2\x80\x99 car, much\nless the prize aircraft of the United States Marine Corps. Rather than checking the\nfuel gauges on his aircraft, the teenager spends his precious preflight minutes\npreening. The youth\xe2\x80\x99s concern for his coiffure appears to extend to his flying\nwithout a helmet. Finally, the teenager\xe2\x80\x99s comment that flying a Harrier Jet to\nschool \xe2\x80\x9csure beats the bus\xe2\x80\x9d evinces an improbably insouciant attitude toward the\nrelative difficulty and danger of piloting a fighter plane in a residential area, as\nopposed to taking public transportation.\xe2\x80\xa0\n\n*\n\nQuoted in Gerald R. Ford, Humor and the Presidency 23 (1987).\nIn this respect, the teenager of the advertisement contrasts with the distinguished figures who\ntestified to the effectiveness of the Carbolic Smoke Ball, including the Duchess of Sutherland; the\nEarls of Wharncliffe, Westmoreland, Cadogan, and Leitrim; the Countesses Dudley, Pembroke,\nand Aberdeen; the Marchionesses of Bath and Conyngham; Sir Henry Acland, the physician to the\nPrince of Wales; and Sir James Paget, sergeant surgeon to Queen Victoria. See Simpson, supra, at\n265.\n\xe2\x80\xa0\n\n279\n\n\x0c[\xc2\xb637] Third, the notion of traveling to school in a Harrier Jet is an exaggerated\nadolescent fantasy. In this commercial, the fantasy is underscored by how the\nteenager\xe2\x80\x99s schoolmates gape in admiration, ignoring their physics lesson. The\nforce of the wind generated by the Harrier Jet blows off one teacher\xe2\x80\x99s clothes, literally defrocking an authority figure. As if to emphasize the fantastic quality of\nhaving a Harrier Jet arrive at school, the Jet lands next to a plebeian bike rack.\nThis fantasy is, of course, extremely unrealistic. No school would provide landing\nspace for a student\xe2\x80\x99s fighter jet, or condone the disruption the jet\xe2\x80\x99s use would\ncause.\n[\xc2\xb638] Fourth, the primary mission of a Harrier Jet, according to the United States\nMarine Corps, is to \xe2\x80\x9cattack and destroy surface targets under day and night visual\nconditions.\xe2\x80\x9d United States Marine Corps, Factfile: AV-8B Harrier II (last modified\nDec. 5, 1995) <http://www.hqmc.usmc.mil/factfile.nsf>. Manufactured by\nMcDonnell Douglas, the Harrier Jet played a significant role in the air offensive\nof Operation Desert Storm in 1991. See id. The jet is designed to carry a considerable armament load, including Sidewinder and Maverick missiles. See id. As one\nnews report has noted, \xe2\x80\x9cFully loaded, the Harrier can float like a butterfly and\nsting like a bee\xe2\x80\x94albeit a roaring 14-ton butterfly and a bee with 9,200 pounds of\nbombs and missiles.\xe2\x80\x9d Jerry Allegood, Marines Rely on Harrier Jet, Despite Critics,\nNews & Observer (Raleigh), Nov. 4, 1990, at C1. In light of the Harrier Jet\xe2\x80\x99s welldocumented function in attacking and destroying surface and air targets, armed\nreconnaissance and air interdiction, and offensive and defensive anti-aircraft warfare, depiction of such a jet as a way to get to school in the morning is clearly not\nserious even if, as plaintiff contends, the jet is capable of being acquired \xe2\x80\x9cin a\nform that eliminates [its] potential for military use.\xe2\x80\x9d (See Leonard Aff. \xc2\xb6 20.)\n[\xc2\xb639] Fifth, the number of Pepsi Points the commercial mentions as required to\n\xe2\x80\x9cpurchase\xe2\x80\x9d the jet is 7,000,000. To amass that number of points, one would have\nto drink 7,000,000 Pepsis (or roughly 190 Pepsis a day for the next hundred\nyears\xe2\x80\x94an unlikely possibility), or one would have to purchase approximately\n$700,000 worth of Pepsi Points. The cost of a Harrier Jet is roughly $23 million\ndollars, a fact of which plaintiff was aware when he set out to gather the amount\nhe believed necessary to accept the alleged offer. (See Affidavit of Michael E.\nMcCabe, 96 Civ. 5320, Aug. 14, 1997, Exh. 6 (Leonard Business Plan).) Even if\nan objective, reasonable person were not aware of this fact, he would conclude\nthat purchasing a fighter plane for $700,000 is a deal too good to be true.*\n\n*\n\nIn contrast, the advertisers of the Carbolic Smoke Ball emphasized their earnestness, stating in\nthe advertisement that \xe2\x80\x9c \xc2\xa31,000 is deposited with the Alliance Bank, shewing our sincerity in the\nmatter.\xe2\x80\x9d Carbolic Smoke Ball, 1 Q.B. at 257. Similarly, in Barnes, the defendant\xe2\x80\x99s \xe2\x80\x9csubsequent\nstatements, conduct, and the circumstances show an intent to lead any hearer to believe the statements were made seriously.\xe2\x80\x9d Barnes, 549 P.2d at 1155. The offer in Barnes, moreover, was made\nin the serious forum of hearings before a state commission; not, as defendant states, at a \xe2\x80\x9cgambling convention.\xe2\x80\x9d Compare Barnes, 549 P.2d at 1154, with Def. Reply Mem. at 6.\n\n280\n\n\x0c[\xc2\xb640] Plaintiff argues that a reasonable, objective person would have understood\nthe commercial to make a serious offer of a Harrier Jet because there was \xe2\x80\x9cabsolutely no distinction in the manner\xe2\x80\x9d (Pl. Mem. at 13,) in which the items in the\ncommercial were presented. Plaintiff also relies upon a press release highlighting\nthe promotional campaign, issued by defendant, in which \xe2\x80\x9c[n]o mention is made\nby [defendant] of humor, or anything of the sort.\xe2\x80\x9d (Id. at 5.) These arguments suggest merely that the humor of the promotional campaign was tongue in cheek.\nHumor is not limited to what Justice Cardozo called \xe2\x80\x9c[t]he rough and boisterous\njoke ... [that] evokes its own guffaws.\xe2\x80\x9d Murphy v. Steeplechase Amusement Co.,\n250 N.Y. 479, 483, 166 N.E. 173, 174 (1929). In light of the obvious absurdity of\nthe commercial, the Court rejects plaintiff\xe2\x80\x99s argument that the commercial was\nnot clearly in jest. * * * *\nD. The Alleged Contract Does Not Satisfy the Statute of Frauds\n[\xc2\xb641] The absence of any writing setting forth the alleged contract in this case\nprovides an entirely separate reason for granting summary judgment. Under the\nNew York Statute of Frauds,\na contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties\nand signed by the party against whom enforcement is sought or by his authorized agent or broker.\nN.Y.U.C.C. \xc2\xa7 2-201(1); see also, e.g., AFP Imaging Corp. v. Philips Medizin System, 92 Civ. 6211(LMM), 1994 WL 652510, at *4 (S.D.N.Y. Nov. 17, 1994)).\nWithout such a writing, plaintiff\xe2\x80\x99s claim must fail as a matter of law. See Hilord\nChem. Corp. v. Ricoh Elecs., Inc., 875 F.2d 32, 36-37 (2d Cir. 1989) (\xe2\x80\x9cThe adequacy of a writing for Statute of Frauds purposes \xe2\x80\x98must be determined from the\ndocuments themselves, as a matter of law.\xe2\x80\x9d\xe2\x80\x98) (quoting Bazak Int\xe2\x80\x99l. Corp. v. Mast\nIndus., Inc., 73 N.Y.2d 113, 118, 538 N.Y.S.2d 503 (1989)).\n[\xc2\xb642] There is simply no writing between the parties that evidences any transaction. Plaintiff argues that the commercial, plaintiff\xe2\x80\x99s completed Order Form, and\nperhaps other agreements signed by defendant which plaintiff has not yet seen,\nshould suffice for Statute of Frauds purposes, either singly or taken together. (See\nPl. Mem. at 18-19.) For the latter claim, plaintiff relies on Crabtree v. Elizabeth\nArden Sales Corp., 305 N.Y. 48, 110 N.E .2d 551 (N.Y. 1953). Crabtree held that\na combination of signed and unsigned writings would satisfy the Statute of Frauds,\n\xe2\x80\x9cprovided that they clearly refer to the same subject matter or transaction.\xe2\x80\x9d Id. at\n55. Yet the Second Circuit emphasized in Horn & Hardart Co. v. Pillsbury Co.,\n888 F.2d 8 (2d Cir. 1989), that this rule \xe2\x80\x9ccontains two strict threshold requirements.\xe2\x80\x9d Id. at 11. First, the signed writing relied upon must by itself establish \xe2\x80\x9c \xe2\x80\x98a\ncontractual relationship between the parties.\xe2\x80\x9d \xe2\x80\x98 Id. (quoting Crabtree, 305 N.Y. at\n56); see also O\xe2\x80\x99Keeffe v. Bry, 456 F. Supp. 822, 829 (S.D.N.Y. 1978) (\xe2\x80\x9cTo the extent that Crabtree permits the use of a \xe2\x80\x98confluence of memoranda,\xe2\x80\x99 the minimum\ncondition for such use is the existence of one [signed] document establishing the\n281\n\n\x0cbasic, underlying contractual commitment.\xe2\x80\x9d). The second threshold requirement is\nthat the unsigned writing must \xe2\x80\x9c\xe2\x80\x98on its face refer to the same transaction as that\nset forth in the one that was signed.\xe2\x80\x99\xe2\x80\x99 Horn & Hardart, 888 F.2d at 11 (quoting\nCrabtree, 305 N.Y. at 56); see also Bruce Realty Co. of Florida v. Berger, 327 F.\nSupp. 507, 510 (S.D.N.Y. 1971).\n[\xc2\xb643] None of the material relied upon by plaintiff meets either threshold requirement. The commercial is not a writing; plaintiff\xe2\x80\x99s completed order form does\nnot bear the signature of defendant, or an agent thereof; and to the extent that\nplaintiff seeks discovery of any contracts between defendant and its advertisers,\nsuch discovery would be unavailing: plaintiff is not a party to, or a beneficiary of,\nany such contracts. Because the alleged contract does not meet the requirements\nof the Statute of Frauds, plaintiff has no claim for breach of contract or specific\nperformance. * * * *\nIII. Conclusion\n[\xc2\xb644] In sum, there are three reasons why plaintiff\xe2\x80\x99s demand cannot prevail as a\nmatter of law. First, the commercial was merely an advertisement, not a unilateral\noffer. Second, the tongue-in-cheek attitude of the commercial would not cause a\nreasonable person to conclude that a soft drink company would be giving away\nfighter planes as part of a promotion. Third, there is no writing between the parties sufficient to satisfy the Statute of Frauds.\n[\xc2\xb645] For the reasons stated above, the Court grants defendant\xe2\x80\x99s motion for\nsummary judgment. The Clerk of Court is instructed to close these cases. Any\npending motions are moot.\nQuestions:\n1. Was the advertisement an offer?\n2. Why is this case not like the rewards cases, such as the Carbolic Smoke Ball\ncase, or Barnes v. Treece?\n3. Who is the objective, reasonable person? Do you agree?\n4. The plaintiff here is from Seattle. Who wants to litigate in Florida? Why? Who\nwants to litigate in New York? Name at least two reasons to litigate in New York?\n5. What facts if added to those of Leonard would make Leonard\'s belief reasonable?\n6. In Lefkowitz v. Great Minneapolis Surplus Store, Inc., 86 N.W.2d 689 (Minn.\n1957), the Store placed the following ad in a Minneapolis newspaper:\n282\n\n\x0c\'Saturday 9 A.M. Sharp 3 Brand New Fur Coats Worth to $100.00\nFirst Come First Served $1 Each\'\nOne week later, the Store published the following ad:\n\'Saturday 9 A.M. 2 Brand New Pastel Mink 3-Skin Scarfs\nSelling for $89.50\nOut they go Saturday. Each ... $1.00\n1 Black Lapin Stole Beautiful, worth $139.50 ... $1.00\nFirst Come First Served\'\nOn each of the Saturdays named in the ads, Lefkowitz was the first to present\nhimself at the store and demand the items offered. Each time he indicated his willingness to pay $1. The Store refused to sell to him. The first time, the Store said it\nhad a "house rule" that the offer was intended only for women. On the second visit, the Store told Lefkowitz that he knew the house rules. Has the Store made an\noffer? Should the house rule affect the analysis? In the course of its analysis, the\nStore argued, citing numerous precedents, that\nwhere an advertiser publishes in a newspaper that he has a certain quantity\nor quality of goods which he wants to dispose of at certain prices and on\ncertain terms, such advertisements are not offers which become contracts\nas soon as any person to whose notice they may come signifies his acceptance by notifying the other that he will take a certain quantity of them.\nSuch advertisements have been construed as an invitation for an offer of\nsale on the terms stated, which offer, when received, may be accepted or\nrejected and which therefore does not become a contract of sale until accepted by the seller; and until a contract has been so made, the seller may\nmodify or revoke such prices or terms.\nWhy might you hold that a Walmart ad was not an offer but was an "invitation for\nan offer"?\n7. In Owen v. Tunison, 158 A. 926 (Me. 1932), Owen wrote to Tunison:\n"Dear Mr. Tunison:\nWill you sell me your store property which is located on Main St.\nin Bucksport, Me. running from Montgomery\'s Drug Store on one corner\nto a Grocery Store on the other, for the sum of $6,000.00?"\nAbout six weeks later, Owen received the following reply, written four weeks earlier and mailed from France:\nIn reply to your letter of Oct. 23rd which has been forwarded to me\nin which you inquire about the Bradley Block, Bucksport Me.\nBecause of improvements which have been added and an expenditure of several thousand dollars it would not be possible for me to sell it\nunless I was to receive $16,000.00 cash.\nThe upper floors have been converted into apartments with baths\nand the b\'l\'dg put into first class condition.\nVery truly yours,\n[Signed] R. G. Tunison."\nOwen then wrote back:\n283\n\n\x0cAccept your offer for Bradley block Bucksport Terms sixteen thousand cash send deed to Eastern Trust and Banking Co Bangor Maine\nPlease acknowledge.\nFour days later Tunison notified Owen that he did not wish to sell, so Owen sued.\nWhat should the court hold?\n8. Norreasha Gill was listening to \xe2\x80\x9cDJ Slick\xe2\x80\x9d on WLTO-FM (Hot 102) on May 25,\n2005. Slick announced that he would, as part of an on-air contest give a \xe2\x80\x9chundred\ngrand\xe2\x80\x9d to the 10th caller. Ms. Gill heard the description of the context and listened\nto the radio for two hours the next morning, hoping to win. She believed she\nwould receive $100,000 if she were the 10th caller and, indeed, she was the 10th\ncaller! Ms. Gill was told by DJ Slick on the air that she had won a \xe2\x80\x9chundred\ngrand\xe2\x80\x9d and was given instructions as to how to receive her prize. He said she\nwould be a \xe2\x80\x9chundred grand richer.\xe2\x80\x9d That night, she told her children that they\nwould buy a minivan and a home with a backyard. Pursuant to DJ Slick\xe2\x80\x99s instructions, she arrived at the Central Bank building the next day, where she was informed that she would not be receiving the money and that the contest was a joke.\nAssuming DJ Slick was its agent, did WLTO make an offer? [I (Ricks) spoke with\nLee Van Horn, counsel for Ms. Gill, on July 20, 2007. He said the station removed\nthe case to federal court in the Eastern District of Kentucky, but then it was mediated and settled. The amount of the settlement is to be kept confidential, according\nto its terms. Mr. Van Horn did say that his client was happy with the result but not\nas happy later when she did her taxes.]\nIn November 2000, Ben Stromberg (known as \xe2\x80\x9cBen Stone\xe2\x80\x9d on the radio)\ntold his listeners on KORB in Davenport, Iowa, that \xe2\x80\x9canyone who would have the\nstation\xe2\x80\x99s logo permanently tattooed across his or her forehead\xe2\x80\x9d would be paid\n$30,000 per year for five years. Two listeners called the station to make sure the\noffer was legitimate and were assured that it was. The two then went to a tattoo\nparlor with a person who claimed to be a radio station employee. The person paid\nfor the tattoos and snapped a photo of the two with the logo. But the station did\nnot pay. Branded, ABA Journal, September 2002, 20. Should it have to?\n9. Courts in a number of cases have held that\nA merchant who utilizes the self service shopping method thereby makes\nan open invitation to the public to enter his store and to inspect and take\npossession of any item so displayed. The merchant\'s act of stocking these\nself-service displays with goods thereby makes an offer to the shopper to\nenter a contract for their sale.\nBarker v. Allied Supermarket, 596 P.2d 870, 871-72 (Okla. 1979) (case in which a\nbottle of soda exploded in the shopper\'s cart on her way to the checkout counter).\nLikewise, the shopper\'s "act of taking physical possession of the goods with the\nintent to purchase them manifested an intent to accept the offer and a promise to\ntake them to the check-out counter and to there pay for them." Fender v. Colonial\nStores, Inc., 225 S.E.2d 691, 693-94 (Ga. Ct. App. 1976) (another exploding bottle case). Courts stick with this position even though stores universally allow the\ncustomer to put items back before paying for them. See Barker, 596 P.2d at 872;\n284\n\n\x0cFender, 225 S.E. at 694. Doesn\'t that mean that while the items are in the cart the\nstore is bound but the customer is not? Does that square with Payne v. Cave? Why\nwould a court do this?\n10. See if you can find on the internet a military jet for sale. Look, for instance\nhere\xe2\x80\x94\nhttp://gizmodo.com/5755832/7-year-old-kid-buys-harrier-jet-fighter\n\xe2\x80\x94and here\xe2\x80\x94\nhttp://www.wired.com/2014/07/harrier-silverstone-auction/.\n\nYou may find the Pepsi commercials (Pepsi made three different commercials,\nlisted in order) at the following links:\n#1: https://www.youtube.com/watch?v=ZdackF2H7Qc\n#2: https://www.youtube.com/watch?v=Ln0VSA9UJ-w\n#3: https://www.youtube.com/watch?v=Z4TQmazYyCU\n\nLeonard thought up a wondrous plan\nTo buy wings with points from a can\nBut "The jet\'s not offered,"\nThe district court proffered,\n"You are no reasonable man."\n\xe2\x80\x94Amy Hebert Craft, STCL Class of 2004\nFool sees commercial\nPepsi points for an airplane\nAre you kidding me?\n\xe2\x80\x94Amy Hebert Craft, STCL Class of 2004\n\nUniform Commercial Code \xc2\xa7 2-204. Formation in General.\nQuestion: Is the standard named in \xc2\xa7 2-204 different from the one in Leonard v.\nPepsico?\n\n285\n\n\x0cWe are about to study other rules that apply to offers, but in a real dispute, no offer ever stands alone. There is a response. What does the court\xe2\x80\x99s rule for responses,\ngiven in the next case, teach us about the nature of offers?\nFOSTER v. OHIO STATE UNIVERSITY (1987)\nCourt of Appeals of Ohio, Tenth District, Franklin County\n534 N.E.2d 1220\nSTRAUSBAUGH, Presiding Judge.\n[\xc2\xb61] This is an appeal by plaintiff from a summary judgment in the Court of\nClaims in favor of defendant and against plaintiff.\n[\xc2\xb62] The record indicates that defendant, the Ohio State University, through\nAndrew Broekema, Dean of the Ohio State College of Arts, by letter dated May 3,\n1983, offered plaintiff, Philip E. Foster, an eleven-month appointment as Chairperson and Associate Professor of the Department of History of Art at the Ohio\nState University beginning July 1, 1983. The letter concluded: \xe2\x80\x9cIf the terms and\nconditions of this letter are acceptable to you, please sign the enclosed copy and\nreturn it to my office.\xe2\x80\x9d Subsequently, Dean Broekema notified plaintiff by express\nmail dated May 25, 1983: \xe2\x80\x9cUnless an answer to letter of offer, dated May 3, 1983,\nis received in my office by Thursday, June 2, 1983, offer for position of Chairperson and Associate Professor, Department of History of Art at The Ohio State University, is withdrawn.\xe2\x80\x9d The record further indicates that, on June 2, 1983, plaintiff\ntelephoned Dean Broekema collect and left a message with his secretary that\nplaintiff accepted the position effective July 15, 1983. On June 7, 1983, defendant\nnotified plaintiff that, since he had failed to accept in writing by June 2, the offer\nwas revoked. On June 11, plaintiff signed the May 3 letter notifying defendant of\nhis acceptance.\n[\xc2\xb63] The Court of Claims thereafter granted defendant\xe2\x80\x99s motion for summary\njudgment finding that plaintiff\xe2\x80\x99s failure to accept in writing the terms of defendant\xe2\x80\x99s offer by June 2 barred his later acceptance on June 11. It is from this finding\nand judgment that plaintiff appeals setting forth the following single assignment\nof error:\n\xe2\x80\x9cThe lower court erred in failing to find that appellant\xe2\x80\x99s telephone acceptance of appellee\xe2\x80\x99s letter/offer of May 3, 1983, followed by a confirmatory writing delivered in a reasonable time, met all elements of appellee\xe2\x80\x99s\noffer and created an employment contract between the parties.\xe2\x80\x9d\nIn support of his assignment of error, plaintiff argues first that there is no evidence\nto support a finding that plaintiff had to answer by June 2 or that the answer had\nto be in writing and, therefore, plaintiff had a reasonable time in which to respond.\nSecond, even if the May 25 letter required a definite answer by June 2, there is no\nindication that the acceptance had to be in writing alone. Third, the question of\nwhether the acceptance had sufficiently met an offer is a question of fact and as\n286\n\n\x0csuch the evidence shows that plaintiff accepted the offer as tendered. Fourth, to\nthe extent that the Court of Claims relied upon time being the essence of the contract, there is no indication that defendant ever believed a timely answer was critical to the appointment of the position.\n[\xc2\xb64] The terms of defendant\xe2\x80\x99s offer to plaintiff were set forth in the May 3,\n1983 letter and established the precise manner and place of acceptance\xe2\x80\x94that a\ncopy of the letter be signed and the copy be returned to Dean Broekema\xe2\x80\x99s office.\nSubsequently, Dean Broekema imposed an additional requirement as to time, prescribing that plaintiff\xe2\x80\x99s acceptance be received by June 2, 1983. The time requirement did not modify or alter any previous specifications but merely put a\ntime limit on the duration of the offer. An offer which is unsupported by consideration is subject to revocation at any time. 1 Williston on Contracts (3 Ed.1957)\n176-179, Section 55; Franck v. Seavey Mfg. Co. (1926), 21 Ohio App. 369, 4\nOhio Law Abs. 299, 153 N.E. 209. The offeror can wholly terminate or limit the\npower and mode of acceptance. 1 Corbin on Contracts (1963) 157- 166, Sections\n38 and 39. When an acceptance to a contract for employment does not meet and\ncorrespond with the offer in every respect, no contract is usually formed. 1 Restatement of the Law 2d, Contracts (1981) 144, Section 58; Schiff v. Schiff\n(App.1942), 36 Ohio Law Abs. 626, 632, 45 N.E.2d 132, 136; see, also, Karas v.\nBrogan (1978), 55 Ohio St.2d 128, 129, 9 O.O.3d 107, 107-108, 378 N.E.2d 470,\n471.\n[\xc2\xb65] Defendant\xe2\x80\x99s offer to plaintiff dated May 3, 1983 states that the position\nwas to begin July 1, 1983. When plaintiff left his purported message of acceptance on June 2, 1983, he indicated July 15, 1983 as the desired date of commencement. A reply to an offer which purports to accept but is conditional on the\nofferor\xe2\x80\x99s assent to terms additional to or different from those offered is not an acceptance but is a counteroffer. 1 Restatement of the Law 2d, Contracts (1981) 145,\nSection 59. Plaintiff\xe2\x80\x99s telephonic purported acceptance of June 2, 1983 was therefore a counteroffer and not an unconditional acceptance which was rejected by\nDean Broekema in his letter of June 7, 1983 and, therefore, no contract was created. The undisputed facts indicate that plaintiff simply failed to accept the terms of\nthe offer and therefore no contract exists. Plaintiff\xe2\x80\x99s single assignment of error is\noverruled, and the judgment of the Court of Claims is affirmed.\n[\xc2\xb66] JUDGMENT AFFIRMED.\nWHITESIDE and BOWMAN, JJ., concur.\nWHITESIDE, Justice, concurring.\nAlthough I concur in the judgment, I do solely for the reason that the June 2, 1983\ntelephone \xe2\x80\x9cacceptance\xe2\x80\x9d by plaintiff constituted a counteroffer which was rejected\nby the June 7, 1983 response letter, the effect of which was to rescind the original\noffer making the subsequent attempted \xe2\x80\x9cacceptance\xe2\x80\x9d by plaintiff\xe2\x80\x99s signing the\n287\n\n\x0coriginal letter offer on June 11, 1983, ineffectual since there was no outstanding\noffer to accept at that time.\nQuestions:\n1. Did a contract form here?\n2. The Foster court states, "A reply to an offer which purports to accept but is\nconditional on the offeror\'s assent to terms additional to or different from those\noffered is not an acceptance but is a counteroffer." This is generally called the\n"mirror image" rule. Unless the acceptance is a mirror image of the offer (so the\nrhetoric behind the name goes), the acceptance is merely a counteroffer, and no\ncontract forms.\n\nPROBLEM 46. Suppose large company 1 sends a purchase order to large company 2. Company 1\'s purchase order contains terms A-K. In response, 2 ships the\ngoods and includes an invoice for the goods. Company 2\'s invoice specifically\nnegates terms C and D on Company 1\'s form and contains terms L-Q. Is 2\'s invoice an acceptance? If not, what is it?\n1\nA\nB\nC\nD\n..\nK\n\n2\n\n-C\n-D\n\nL-Q\n\nB. Termination of the Power of Acceptance\nThis section of your casebook (Chapter 6.B) is fairly simple, really. Recall from\nAdams v. Lindsell that the court held that an offer fictionally continued, as if in the\nether, until it was accepted. The Adams fiction raised the specter of offers continuing indefinitely, in which case the sheer number of outstanding offers would soon,\nspeaking tongue-in-cheek, fill the ether itself and crowd the metaphysical world\nwith offers, bouncing this way and that, to the consternation of other metaphysical\nentities who must also share the space (if it is proper to speak of it as space). On a\nmore practical note, offers that continued forever could be accepted forever, and\nthat would disrupt the certainty in future planning that contract law is supposed to\nallow. So, metaphysically and practically, there must be a way to get rid of outstanding offers\xe2\x80\x94ways for the viability of offers to end. The cases in this section\noutline those ways. See how many you can find and define.\n288\n\n\x0cDICKINSON v. DODDS (1876)\nCourt of Appeal, Chancery Division\n2 Ch. Div. 463\n[\xc2\xb61] On Wednesday, the 10th of June, 1874, the Defendant John Dodds signed\nand delivered to the Plaintiff, George Dickinson, a memorandum, of which the\nmaterial part was as follows:\xe2\x80\x94\nI hereby agree to sell to Mr. George Dickinson the whole of the dwellinghouses, garden ground, stabling, and outbuildings thereto belonging, situate at Croft, belonging to me, for the sum of \xc2\xa3800. As witness my hand\nthis tenth day of June, 1874.\n\xc2\xa3800.\n(Signed) John Dodds.\nP.S.\xe2\x80\x94This offer to be left over until Friday, 9 o\'clock, a.m. J.D. (the\ntwelfth), 12th June, 1874.\n(Signed) J. Dodds.\n[\xc2\xb62] The bill alleged that Dodds understood and intended that the Plaintiff\nshould have until Friday 9 A.M. within which to determine whether he would or\nwould not purchase, and that he should absolutely have until that time the refusal\nof the property at the price of \xc2\xa3800, and that the Plaintiff in fact determined to accept the offer on the morning of Thursday, the 11th of June, but did not at once\nsignify his acceptance to Dodds, believing that he had the power to accept it until\n9 A.M. on the Friday.\n[\xc2\xb63] In the afternoon of the Thursday the Plaintiff was informed by a Mr. Berry\nthat Dodds had been offering or agreeing to sell the property to Thomas Allan, the\nother Defendant. Thereupon the Plaintiff, at about half-past seven in the evening,\nwent to the house of Mrs. Burgess, the mother-in-law of Dodds, where he was\nthen staying, and left with her a formal acceptance in writing of the offer to sell\nthe property. According to the evidence of Mrs. Burgess this document never in\nfact reached Dodds, she having forgotten to give it to him.\n[\xc2\xb64] On the following (Friday) morning, at about seven o\'clock, Berry, who\nwas acting as agent for Dickinson, found Dodds at the Darlington railway station,\nand handed to him a duplicate of the acceptance by Dickinson, and explained to\nDodds its purport. He replied that it was too late, as he had sold the property. A\nfew minutes later Dickinson himself found Dodds entering a railway carriage, and\nhanded him another duplicate of the notice of acceptance, but Dodds declined to\nreceive it, saying, "You are too late. I have sold the property."\n[\xc2\xb65] It appeared that on the day before, Thursday, the 11th of June, Dodds had\nsigned a formal contract for the sale of the property to the Defendant Allan for\n\xc2\xa3800, and had received from him a deposit of \xc2\xa340.\n289\n\n\x0c[\xc2\xb66] The bill in this suit prayed that the Defendant Dodds might be decreed\nspecifically to perform the contract of the 10th of June, 1874; that he might be\nrestrained from conveying the property to Allan; that Allan might be restrained\nfrom taking any such conveyance; that, if any such conveyance had been or\nshould be made, Allan might be declared a trustee of the property for, and might\nbe directed to convey the property to, the Plaintiff; and for damages. * * * *\nJames, L.J., after referring to the document of the 10th of June, 1874, continued:[\xc2\xb67] The document, though beginning, "I hereby agree to sell," was nothing but\nan offer, and was only intended to be an offer, for the Plaintiff himself tells us that\nhe required time to consider whether he would enter into an agreement or not. Unless both parties had then agreed there was no concluded agreement then made; it\nwas in effect and substance only an offer to sell. * * * * There was no consideration given for the undertaking or promise, to whatever extent it may be considered\nbinding, to keep the property unsold until 9 o\'clock on Friday morning; but apparently Dickinson was of opinion, and probably Dodds was of the same opinion,\nthat he (Dodds) was bound by that promise, and could not in any way withdraw\nfrom it, or retract it, until 9 o\'clock on Friday morning, and this probably explains\na good deal of what afterwards took place. But it is clear settled law, on one of the\nclearest principles of law, that this promise, being a mere nudum pactum, was not\nbinding, and that at any moment before a complete acceptance by Dickinson of\nthe offer, Dodds was as free as Dickinson himself. Well, that being the state of\nthings, it is said that the only mode in which Dodds could assert that freedom was\nby actually and distinctly saying to Dickinson, "Now I withdraw my offer." It appears to me that there is neither principle nor authority for the proposition that\nthere must be an express and actual withdrawal of the offer, or what is called a\nretractation. It must, to constitute a contract, appear that the two minds were at\none, at the same moment of time, that is, that there was an offer continuing up to\nthe time of the acceptance. If there was not such a continuing offer, then the acceptance comes to nothing. Of course it may well be that the one man is bound in\nsome way or other to let the other man know that his mind with regard to the offer\nhas been changed; but in this case, beyond all question, the Plaintiff knew that\nDodds was no longer minded to sell the property to him as plainly and clearly as\nif Dodds had told him in so many words, "I withdraw the offer." This is evidence\nfrom the Plaintiff\'s own statements in the bill.\n[\xc2\xb68] The Plaintiff says in effect that, having heard and knowing that Dodds was\nno longer minded to sell to him, and that he was selling or had sold to some one\nelse, thinking that he could not in point of law withdraw his offer, meaning to fix\nhim to it, and endeavoring to bind him, "I went to the house where he was lodging,\nand saw his mother-in-law, and left with her an acceptance of the offer, knowing\nall the while that he had entirely changed his mind. I got an agent to watch for\nhim at 7 o\'clock the next morning, and I went to the train just before 9 o\'clock, in\norder that I might catch him and give him my notice of acceptance just before 9\n290\n\n\x0co\'clock, and when that occurred he told my agent, and he told me, you are too late,\nand he then threw back the paper." It is to my mind quite clear that before there\nwas any attempt at acceptance by the Plaintiff, he was perfectly well aware that\nDodds had changed his mind, and that he had in fact agreed to sell the property to\nAllan. It is impossible, therefore, to say that there was ever that existence of the\nsame mind between the two parties which is essential in point of law to the making of an agreement. I am of opinion, therefore, that the Plaintiff has failed to\nprove that there was any binding contract between Dodds and himself.\n[\xc2\xb69]\n\nMellish, L.J.:-I am of the same opinion. * * * *\n\n[\xc2\xb610] Baggallay, J.A.-I entirely concur in the judgments which have been pronounced.\n[\xc2\xb611] James, L.J.:-The bill will be dismissed * * * *. * * * *\nQuestions:\n1. Was Dodds\' promise to hold his offer open until Friday morning binding?\n2. Suppose Berry did not tell Dickinson about the revoking facts and otherwise\nthe facts of the case are the same. What result? (The answer to this question is not\nin the case, but you should be able to figure it out from the materials we have\nstudied.)\n3. Why does the court go out on a limb to let Dodds off after he was so sneaky?\n(The answer to this question is not in the case but if you think about policies underlying enforcement of promises, some answers should occur to you.)\nNote: Restatement (Second) of Contracts \xc2\xa7 43 is an acceptable recapitulation of\nDickinson v. Dodds.\nRestatement (Second) of Contracts \xc2\xa7 43. Indirect Communication of Revocation.\n\nCharles William AKERS v. J. B. SEDBERRY, Inc., et al.\nWilliam Gambill WHITSITT v. J. B. SEDBERRY, Inc., et al. (1956)\nCourt of Appeals of Tennessee, Middle Section, at Nashville\n286 S.W.2d 617\nFELTS, Judge.\n[\xc2\xb61] These two consolidated causes are before us upon a writ of error sued out\nby J. B. Sedberry, Inc., and Mrs. M. B. Sedberry, defendants below, to review a\n291\n\n\x0cdecree of the Chancery Court, awarding a recovery against them in favor of each\nof the complainants, Charles William Akers and William Gambill Whitsitt, for\ndamages for breach of a contract of employment.\n[\xc2\xb62] The principal question presented is whether complainants resigned their\nemployment, or were wrongfully discharged by defendants; and if there was a\nbreach of contract for which complainants are entitled to recover, there are some\nfurther questions as to the measure or extent of the recovery.\n[\xc2\xb63] J. B. Sedberry, Inc., was a Tennessee corporation with its principal place\nof business at Franklin, Tennessee. Mrs. M. B. Sedberry owned practically all of\nits stock and was its president and in active charge of its affairs. It was engaged in\nthe business of distributing \xe2\x80\x98Jay Bee\xe2\x80\x99 hammer mills, which were manufactured for\nit under contract by Jay Bee Manufacturing Company, a Texas corporation, whose\nplant was in Tyler, Texas, and whose capital stock was owned principally by L. M.\nGlasgow and B. G. Byars.\n[\xc2\xb64] On July 1, 1947, J. B. Sedberry, Inc., by written contract, employed complainant Akers as Chief Engineer for a term of five years at a salary of $12,000\nper year, payable $1,000 per month, plus 1% of its net profits for the first year,\n2% the second, 3% the third, 4% the fourth, and 5% the fifth year. His duties were\nto carry on research for his employer, and to see that the Jay Bee Manufacturing\nCompany, Tyler, Texas, manufactured the mills and parts according to proper\nspecifications. Mrs. M. B. Sedberry guaranteed the employer\xe2\x80\x99s performance of\nthis contract.\n[\xc2\xb65] On August 1, 1947, J. B. Sedberry, Inc., by written contract, employed\ncomplainant Whitsitt as Assistant Chief Engineer for a term of five years at a salary of $7,200 per year, payable $600 per month, plus 1% of the corporation\xe2\x80\x99s net\nprofits for the first year, 2% for the second, 3% for the third, 4% for the fourth,\nand 5% for the fifth year. His duties were to assist in the work done by the Chief\nEngineer. Mrs. M. B. Sedberry guaranteed the employer\xe2\x80\x99s performance of this\ncontract.\n[\xc2\xb66] Under Mrs. Sedberry\xe2\x80\x99s instructions, Akers and Whitsitt moved to Tyler,\nTexas, began performing their contract duties in the plant of the Jay Bee Manufacturing Company, continued working there, and were paid under the contracts until\nOctober 1, 1950, when they ceased work, under circumstances hereafter stated.\n[\xc2\xb67] In 1947, when these employment contracts were made, Mrs. Sedberry\nowned no stock in the Jay Bee Manufacturing Company. In 1948 she purchased\nthe shares of stock in this company which were owned by the Glasgow interests,\nand in 1949 she purchased the 750 shares owned by her brother, B. G. Byars, and\ngave him her note therefor in the sum of $157,333.93, pledging the 750 shares\nwith him as collateral to her note.\n292\n\n\x0c[\xc2\xb68] Glasgow had been general manager of the Jay Bee Manufacturing Company, but when he sold his stock, he was succeeded by A. M. Sorenson as manager. There soon developed considerable friction between Sorenson and complainants Akers and Whitsitt. The Jay Bee Manufacturing Company owed large sums\nto the Tyler State Bank & Trust Co.; and the bank\xe2\x80\x99s officers, fearing the company\nmight fail under Sorenson\xe2\x80\x99s management, began talking to Akers and Whitsitt\nabout the company\xe2\x80\x99s financial difficulties.\n[\xc2\xb69] One of the bank\xe2\x80\x99s vice-presidents, J. Harold Stringer, made a trip to Franklin to see Mrs. Sedberry about the company\xe2\x80\x99s indebtedness to the bank. He told\nher that they could not get along with Sorenson and did not agree with the way he\nwas managing the company\xe2\x80\x99s affairs. Mrs. Sedberry asked Stringer as soon as he\ngot back to Tyler to see Akers and Whitsitt and discuss with them plans for the\nrefinancing and the operation of the company; and thereafter the bank\xe2\x80\x99s officers\nhad a number of conferences with Akers and Whitsitt about these matters.\n[\xc2\xb610] While these matters were pending, Akers and Whitsitt flew to Nashville\nand went to Franklin to talk with Mrs. Sedberry about them. They had a conference with her at her office on Friday, September 29, 1950, lasting from 9:30 a. m.\nuntil 4:30 p. m. As they had come unannounced, and unknown to Sorenson, they\nfelt Mrs. Sedberry might mistrust them; and at the outset, to show their good faith,\nthey offered to resign, but she did not accept their offer. Instead, she proceeded\nwith them in discussing the operation and refinancing of the business.\n[\xc2\xb611] Testifying about this conference, Akers said that, at the very beginning, to\nshow their good faith, he told Mrs. Sedberry that they would offer their resignations on a ninety-day notice, provided they were paid according to the contract for\nthat period; that she pushed the offers aside\xe2\x80\x94\xe2\x80\x99would not accept them\xe2\x80\x99, but went\ninto a full discussion of the business; that nothing was thereafter said about the\noffers to resign; and that they spent the whole day discussing the business, Akers\nmaking notes of things she instructed him to do when he got back to Texas.\n[\xc2\xb612] Whitsitt testified that at the beginning of the meeting Akers stated the position for both of them, and told Mrs. Sedberry, as evidence of their good faith,\n\xe2\x80\x98we would resign with ninety-days notice if she paid us the monies that she owed\nus to that date, and on the other hand, if she did not accept that resignation, we\nwould carry forth the rest of our business.\xe2\x80\x99 He said that she did not accept the offer, but proceeded with the business, and nothing further was said about resigning.\n[\xc2\xb613] Mrs. Sedberry testified that Akers and Whitsitt came in and \xe2\x80\x98offered their\nresignations\xe2\x80\x99; that they said they could not work with Sorenson and did not believe the bank would go along with him; and that \xe2\x80\x98they said if it would be of any\nhelp to the organization they would be glad to tender their resignation and pay\nthem what was due them.\xe2\x80\x99 She further said that she \xe2\x80\x98did not accept the resignation\xe2\x80\x99, that she \xe2\x80\x98felt it necessary to contact Mr. Sorenson and give consideration to\n293\n\n\x0cthe resignation offer.\xe2\x80\x99 But she said nothing to complainants about taking the offer\nunder consideration.\n[\xc2\xb614] On cross-examination she said that in the offer to resign \xe2\x80\x98no mention was\nmade of any ninety-day notice\xe2\x80\x99. Asked what response she made to the offer she\nsaid, \xe2\x80\x98I treated it rather casually because I had to give it some thought and had to\ncontact Mr. Sorenson.\xe2\x80\x99 She further said she excused herself from the conference\nwith complainants, went to another room, tried to telephone Sorenson in Tyler,\nTexas, but was unable to locate him.\n[\xc2\xb615] She then resumed the conference, nothing further was said about the offers\nto resign, nothing was said by her to indicate that she thought the offers were left\nopen or held under consideration by her. But the discussion proceeded as if the\noffers had not been made. She discussed with complainants future plans for refinancing and operating the business, giving them instructions, and Akers making\nnotes of them.\n[\xc2\xb616] Following the conference, complainants, upon Mrs. Sedberry\xe2\x80\x99s request,\nflew back to Texas to proceed to carry out her instructions. On the way back, and\nwhile in Nashville, Friday evening, Akers telephoned her in Franklin to tell her\nthat he had just learned that the bank had sued both the companies and process\nhad been served that day. On the next morning, September 30, Akers had a conference with the bank officials about the refinancing of the company, the results of\nwhich he reported to Mrs. Sedberry by long-distance telephone conversation that\nday.\n[\xc2\xb617] On Monday, October 2, 1950, Mrs. Sedberry sent to complainants similar\ntelegrams, signed by \xe2\x80\x98J. B. Sedberry, Inc., by M. B. Sedberry, President\xe2\x80\x99, stating\nthat their resignations were accepted, effective immediately. We quote the telegram to Akers, omitting the formal parts:\n\xe2\x80\x98Account present unsettled conditions which you so fully are aware we accept your kind offer of resignation effective immediately. Please discontinue as of today with everyone employed in Sedberry, Inc., Engineering\nDepartment, discontinuing all expenses in this department writing.\xe2\x80\x99\nWhile this said she was \xe2\x80\x98writing\xe2\x80\x99, she did not write. Akers wrote her, but held up\nsending his letter, at the request of her brother, Mr. Byars, who was one of the officers of the bank in Tyler, Texas. Akers later rewrote practically the same letter\nand mailed it to her on October 16, 1950. Whitsitt also sent her a similar letter on\nthe same day.\n[\xc2\xb618] In his letter, Akers said that he was amazed to get her telegram, and called\nher attention to the fact that no offer to resign by him was open or outstanding\nwhen she sent the telegram; that while he had made a conditional offer to resign at\ntheir conference on September 29, she had immediately rejected the offer, and had\ndiscussed plans for the business and had instructed him and Whitsitt as to things\nshe wanted them to do in the business on their return to Tyler.\n294\n\n\x0c[\xc2\xb619] This letter further stated that Akers was expecting to be paid according to\nthe terms of his contract until he could find other employment that would pay him\nas much income as that provided in his contract, and that if he had to accept a position with less income, he would expect to be paid the difference, or whatever\nlosses he suffered by her breach of the contract. Whitsitt\xe2\x80\x99s letter contained a similar statement of his position.\n[\xc2\xb620] On November 10, 1950, Mrs. Sedberry wrote a letter addressed to both\nAkers and Whitsitt in which she said that \xe2\x80\x98no one deplored the action taken more\nthan the writer\xe2\x80\x99, but she did not recede from her position as expressed in the telegram. She stated her contention that the offers to resign had been without condition; and though she also said she would like to make an amicable settlement, no\nsettlement was made.\n[\xc2\xb621] As it takes two to make a contract, it takes two to unmake it. It cannot be\nchanged or ended by one alone, but only by mutual assent of both parties. A contract of employment for a fixed period may be terminated by the employee\xe2\x80\x99s offer\nto resign, provided such offer is duly accepted by the employer. Gentry Co. v.\nMargolius, 110 Tenn. 669, 674, 75 S.W. 959; Balderacchi v. Ruth, 36 Tenn. App.\n421, 424, 256 S.W.2d 390, 391.\n[\xc2\xb622] An employee\xe2\x80\x99s tender of his resignation, being a mere offer is, of course,\nnot binding until it has been accepted by the employer. Such offer must be accepted according to its terms and within the time fixed. The matter is governed by the\nsame rules as govern the formation of contracts. Nesbit v. Giblin, 96 Neb. 369,\n148 N.W. 138, L.R.A.1915D, 477, Ann.Cas.1916A, 1008; 1 Labatt\xe2\x80\x99s Master &\nServant (2d ed.) section 181; Note, Ann.Cas.1916A, 1011, 1012.\n[\xc2\xb623] An offer may be terminated in a number of ways, as, for example, where it\nis rejected by the offeree, or where it is not accepted by him within the time fixed,\nor, if no time is fixed, within a reasonable time. An offer terminated in either of\nthese ways ceases to exist and cannot thereafter be accepted. 1 Williston on Contracts (1936), secs. 50A, 51, 53, 54; 1 Corbin on Contracts (1950), secs. 35, 36; 1\nRest., Contracts, secs. 35, 40.\n[\xc2\xb624] The question what is a reasonable time, where no time is fixed, is a question of fact, depending on the nature of the contract proposed, the usages of business and other circumstances of the case. Ordinarily, an offer made by one to another in a face to face conversation is deemed to continue only to the close of their\nconversation, and cannot be accepted thereafter.\n[\xc2\xb625] The rule is illustrated by Restatement of Contracts, section 40, Illustration\n2, as follows:\n\n295\n\n\x0c\xe2\x80\x982. While A and B are engaged in conversation, A makes B an offer to\nwhich B then makes no reply, but a few hours later meeting A again, B\nstates that he accepts the offer. There is no contract unless the offer or the\nsurrounding circumstances indicate that the offer is intended to continue\nbeyond the immediate conversation.\xe2\x80\x99\n[\xc2\xb626] In Mactier\xe2\x80\x99s Adm\xe2\x80\x99rs v. Frith, 1830, 6 Wend.N.Y., 103, 114, 21 Am.Dec.\n262, 268, the rule was stated as follows:\n\xe2\x80\x98Although the will of the party making the offer may precede that of the\nparty accepting, yet it must continue down to the time of the acceptance.\nWhere parties are together chaffering about an article of merchandise and\none expresses a present willingness to accept of certain terms, that willingness is supposed to continue, unless it is revoked, to the close of their\ninterview and negotiation on the same subject, and if during this time the\nother party says he will take the article on the terms proposed, the bargain\nis thereby closed. Pothier Traite du Contract de Vente, p. 1, sec. 2, art. 3,\nno. 31.\xe2\x80\x99 * * * *\nProfessor Corbin says:\n\xe2\x80\x98When two negotiating parties are in each other\xe2\x80\x99s presence, and one makes\nan offer to the other without indicating any time for acceptance, the inference that will ordinarily be drawn by the other party is that an answer is\nexpected at once. * * * * If, when the first reply is not an acceptance, the\nofferor turns away in silence, the proper inference is that the offer is no\nlonger open to acceptance.\xe2\x80\x99 1 Corbin on Contracts (1950), section 36, p.\n111.\n[\xc2\xb627] The only offer by Akers and Whitsitt to resign was the offer made by them\nin their conversation with Mrs. Sedberry. They made that offer at the outset, and\non the evidence it seems clear that they expected an answer at once. Certainly,\nthere is nothing in the evidence to show that they intended the offer to continue\nbeyond that conversation; and on the above authorities, we think the offer did not\ncontinue beyond that meeting.\n[\xc2\xb628] Indeed, it did not last that long, in our opinion, but was terminated by Mrs.\nSedberry\xe2\x80\x99s rejection of it very early in that meeting. While she did not expressly\nreject it, and while she may have intended, as she says, to take the offer under\nconsideration, she did not disclose such an intent to complainants; but, by her\nconduct, led them to believe she rejected the offer, brushed it aside, and proceeded\nwith the discussion as if it had not been made.\n[\xc2\xb629] \xe2\x80\x98An offer is rejected when the offeror is justified in inferring from the\nwords or conduct of the offeree that the offeree intends not to accept the offer or\nto take it under further advisement (Rest. Contracts sec. 36).\xe2\x80\x99 1 Williston on Contracts, section 51.\n\n296\n\n\x0c[\xc2\xb630] So, we agree with the Trial Judge that when defendants sent the telegrams,\nundertaking to accept offers of complainants to resign, there was no such offer in\nexistence; and that this attempt of defendants to terminate their contract was unlawful and constituted a breach for which they are liable to complainants.\n****\n[\xc2\xb631] Finally, defendants contend that if complainants are entitled to any recovery at all, such recovery should have been limited to the ninety-day period from\nand after October 2, 1950, because complainants themselves admitted that they\nhad offered to resign upon ninety days notice with pay for that period.\n[\xc2\xb632] The answer to this contention is that their offer to resign on ninety days\nnotice was not accepted, but had terminated, and there was no offer in existence\nwhen Mrs. Sedberry undertook to accept their offers of resignation. Such attempt\nby defendants to terminate their contract was unlawful and was a breach for\nwhich they become liable for the measure of recovery as above stated. * * * *\n[\xc2\xb633] All of the assignments of error are overruled and the decree of the Chancellor is affirmed. Decrees will be entered here for complainants for the amount of\nthe decrees below with interest. * * * * The causes are remanded to the Chancery\nCourt for further proceedings not inconsistent with this opinion.\nHICKERSON and SHRIVER, JJ., concur.\nQuestions:\n1. What two ways for a power of acceptance to terminate are outlined in this case?\n2. What did Mrs. Sedberry do to reject the offers?\n3. How is this case the same as Foster v. Ohio State University?\n\nIn Re the Estate of Helen SEVERTSON, Deceased.\nKathy Thorson, et al., v. Inez BREITER, personal representative (1998)\nCourt of Appeals of Minnesota\n1998 WL 88253 (Minn. App.)\nWILLIS, Judge\n\n[\xc2\xb61] Appellant contends the district court erred in concluding that the document\nsigned by decedent and respondents relating to decedent\xe2\x80\x99s real estate is an offer to\nsell that survived her death. We reverse.\n297\n\n\x0cFACTS\n[\xc2\xb62] Respondents Kathy and Mark Thorson and the decedent, Helen Severtson,\nwere neighbors for approximately 14 years, during which time they became good\nfriends. After Severtson\xe2\x80\x99s husband died in 1993, the Thorsons spent substantial\ntime with Severtson. Kathy Thorson visited with her almost daily when she took\nSevertson her mail. Mark Thorson did odd jobs for Severtson when needed.\n[\xc2\xb63] The Thorsons had told both Severtson and her husband on several occasions that they would be interested in purchasing the Severtsons\xe2\x80\x99 property if they\never wanted to sell it. On February 16, 1996, Severtson and the Thorsons signed a\ntyped document that provides:\nI, Helen Severtson, give Mark and Kathy Thorson first option to purchase\nmy farmsite, all buildings, including the quonset home, rock quarry, including any leased quarry rights, and adjoining farm land. * * * *\nPurchase price agreed upon is $100,000, to be paid to Helen Severtson if\nliving or to the Estate of Helen Severtson if she is deceased or incapacitated to deal with sale of above listed property. Any persons occupying the\nquonset home will vacate and leave property in good repair before or upon\nclosure date on above property.\nThere is a hand-written addendum, initialed by the parties, that provides:\nIn the event that Helen Severtson should die suddenly, persons in the\nquonset home will be given three months to vacate all premises and to\nleave them in good repair, otherwise under any other conditions the above\nwill apply.\n[\xc2\xb64] Myron Danielson, another of Severtson\xe2\x80\x99s neighbors, testified that he drafted the typewritten portion of the document but was not actually present when the\nThorsons or Severtson signed it. Danielson also testified that he drafted the document for Severtson so \xe2\x80\x9c[t]hat there would be some legal document that her wishes would be carried out\xe2\x80\x9d and so there would not be litigation over the matter.\n[\xc2\xb65] Severtson died on August 4, 1996. The Thorsons recorded the document\nwith the Dodge County Recorder in September 1996 as an option contract. On\nOctober 17, 1996, the Thorsons notified Inez Breiter, the personal representative\nof Helen Severtson\xe2\x80\x99s estate, of their intent to purchase Severtson\xe2\x80\x99s property. When\nthe estate\xe2\x80\x99s representative disallowed their claim, the Thorsons petitioned the district court for relief.\n[\xc2\xb66] After a hearing, the district court rejected the Thorsons\xe2\x80\x99 argument that the\ndocument signed by Severtson and the Thorsons is an option to purchase property,\nconcluding that there was no consideration separate and distinct from a promise to\npay the purchase price. But the court found that a bilateral contract for the purchase of land was created because (1) Severtson offered to sell her property; (2)\nthe offer to sell survived her death; and (3) the Thorsons accepted the offer by no298\n\n\x0ctifying the estate\xe2\x80\x99s representative of their intent to purchase. The Thorsons and the\nestate\xe2\x80\x99s representative both moved the court for amended findings, and the court\nissued its amended findings of fact, conclusions of law, order, and judgment on\nJune 30, 1997. The court concluded that \xe2\x80\x9cthe Thorsons were entitled to possession\n[of the property] within 90 days of [Severtson\xe2\x80\x99s] death or their acceptance of the\noffer.\xe2\x80\x9d Because both of those dates had already passed, the court ordered that\nThorsons were entitled to possession of the property within 90 days after the date\nof its order. This appeal followed.\nDECISION\n[\xc2\xb67] \xe2\x80\x9cThe construction and effect of a contract are questions of law for the\ncourt * * * *.\xe2\x80\x9d Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn.\n1979). \xe2\x80\x9cThe court\xe2\x80\x99s role in interpreting a contract is to ascertain and give effect to\nthe intention of the parties.\xe2\x80\x9d Metropolitan Sports Facilities Comm\xe2\x80\x99n v. General\nMills, Inc., 470 N.W.2d 118, 122-23 (Minn.1991). But the court may only give\neffect to the parties\xe2\x80\x99 intent if that can be done consistently with established legal\nprinciples. Republic Nat\xe2\x80\x99l Life Ins. Co. v. Lorraine Realty Corp., 279 N.W.2d 349,\n354 (Minn. 1979).\n[\xc2\xb68] The estate\xe2\x80\x99s representative argues that the district court erred in concluding that Severtson offered to sell her property to the Thorsons, based on the fact\nthat the document they signed gives the Thorsons a \xe2\x80\x9cfirst option to purchase\xe2\x80\x9d the\nSevertson property. An offer is conduct that empowers an offeree to create a contract by his or her acceptance. League General Ins. Co. v. Tvedt, 317 N.W.2d 40,\n43 (Minn. 1982). Where we can ascertain the parties\xe2\x80\x99 intent from the written contract, we do not \xe2\x80\x9cremake the contract\xe2\x80\x9d by construing it differently. Art Goebel, Inc.\nv. North Suburban Agencies, Inc., 567 N.W.2d 511, 516 (Minn. 1997). The document signed by Severtson and the Thorsons recites no conditions precedent to the\nexercise of the Thorsons\xe2\x80\x99 \xe2\x80\x9cfirst option to purchase\xe2\x80\x9d; it unambiguously manifests\nSevertson\xe2\x80\x99s intent to sell her property to the Thorsons. The district court, therefore,\ndid not err in concluding that Severtson offered to sell her property to the Thorsons.\n[\xc2\xb69] The estate\xe2\x80\x99s representative argues that if Severtson did offer to sell her\nproperty, the district court erred in finding that the offer did not terminate on\nSevertson\xe2\x80\x99s death. The district court relied on the Restatement (Second) of Contracts \xc2\xa7 36 (1981), which provides that\n(1) An offeree\xe2\x80\x99s power of acceptance may be terminated by\n***\n(d) death or incapacity of the offeror or offeree.\nSee also Cooke v. Belzer, 413 N.W.2d 623, 627 (Minn. App. 1987) (citing section\n36 of the restatement). Noting that section 36 states that an offeror\xe2\x80\x99s death may\nterminate an offeree\xe2\x80\x99s power to accept, the district court concluded that an offeror\xe2\x80\x99s death does not automatically terminate an offer. The court found that the offer did not terminate here because Severtson intended her offer to remain open\n299\n\n\x0ceven if she died before it was accepted. But section 36 of the restatement simply\nlists alternative methods by which an offeree\xe2\x80\x99s power to accept is terminated,\nwhile sections 36-49 discuss the specific circumstances under which each method\napplies. Restatement (Second) of Contracts \xc2\xa7 36 cmt. a. Section 48 provides that\n[a]n offeree\xe2\x80\x99s power of acceptance is terminated when the offeree or offeror dies or is deprived of legal capacity to enter into the proposed contract.\nRestatement (Second) of Contracts \xc2\xa7 48 (1981); see also Heideman v. Northwestern Nat\xe2\x80\x99l Life Ins. Co., 546 N.W.2d 760, 764 (Minn. App. 1996) (adopting section\n48 of the restatement), review denied (Minn. June 7, 1996).\n[\xc2\xb610] The basis for the rule is described by Professor Williston in his treatise on\ncontracts:\nAssuming that the formation of a contract require[s] mutual mental assent\nof the parties, and offer and acceptance [are] merely evidence of such assent, it would be obviously impossible that a contract should be formed\nwhere either party to the transaction died before this assent was obtained.\nThat such assent was formerly thought necessary seems probable, and as\nto death, this theory is still maintained. Accordingly, it is generally held\nthat the death of the offeror terminates the offer.\n1 Samuel Williston, A Treatise on the Law of Contracts \xc2\xa7 62 (3d ed. 1957). Although Severtson may have intended for her offer to survive her death, we cannot\nharmonize that intent with the established legal principle that an offer terminates\non the death of the offeror.\n[\xc2\xb611] The Thorsons cite, as did the district court, Frederick v. Peoples State\nBank of Madison Lake, 385 N.W.2d 11 (Minn. App. 1986), review denied (Minn.\nMay 29, 1986). The court in Frederick, in turn, cites the New Jersey Superior\nCourt for the proposition that\nwhere the owner of real property enters into a contract of sale and then\ndies before executing a deed * * *, the other party may enforce the contract against the owner\xe2\x80\x99s estate, the theory being that equitable title to the\nproperty vests in the vendee as soon as the contract was executed, subject,\nhowever, to a lien in favor of the vendor for the unpaid purchase price.\n* * * * Such contracts, therefore, are enforceable, even though one of the\nparties thereto may die before performance is had.\nId. at 15 (quoting In re Beier, 48 N.J. Super. 450, 137 A.2d 617, 618 (N.J. Super.\n1958)) (second ellipsis in original). But because the Thorsons did not accept\nSevertson\xe2\x80\x99s offer before she died, there was no contract for sale at the time of\nSevertson\xe2\x80\x99s death. The issue is not whether a contract for sale survives\nSevertson\xe2\x80\x99s death, but whether her offer to enter into a contract for sale survives\nher death. Because the document signed by Severtson and the Thorsons is properly characterized as an offer to sell, the Thorsons\xe2\x80\x99 power to accept the offer terminated when Severtson died.\n[\xc2\xb612] The Thorsons argue that the document should be treated as an option to\npurchase. But the district court found that it is not an option, and because the\n300\n\n\x0cThorsons did not raise this issue in a notice of review, it is not properly before this\ncourt. See Minn. R. Civ. App. P. 106 (explaining respondent\xe2\x80\x99s right to obtain review); see also Arndt v. American Family Ins. Co., 394 N.W.2d 791, 793 (Minn.\n1986). Nevertheless, we note that the record supports the district court\xe2\x80\x99s determination that there was no legal consideration here separate and distinct from the\npromise to pay the purchase price. And the district court correctly concluded that\nwithout such consideration, the document is not an option to purchase. See Country Club Oil Co. v. Lee, 239 Minn. 148, 152, 58 N.W.2d 247, 250 (1953). * * * *\n[\xc2\xb613] Because the document at issue was an offer to sell that terminated on\nSevertson\xe2\x80\x99s death, the district court erred in finding that a bilateral contract for the\npurchase of real estate was created when the Thorsons gave the personal representative of Severtson\xe2\x80\x99s estate notice of their intent to purchase the Severtson\nproperty.\n[\xc2\xb614] Reversed.\nQuestions:\n1. Was the so-called option a binding option contract?\n2. Was the option an offer?\n3. Did the offer survive Severtson\'s death? Under the rule the court adopts, is it\nnecessary for the offeree to know of the offeror\xe2\x80\x99s death?\n4. What effect did Severtson\'s intent that her offer survive her death have?\n5. Can you think of a good reason to have this rule in this case (in which the offeror clearly intended her offer to survive her)?\n6. Suppose Severtson had not intended that her offer survive her death but had\nmerely left an outstanding offer which the Thorsons tried to accept. Can you think\nof a good reason to have the rule of In re Severtson apply to this case?\n\nQuestions from Foster v. Ohio State University and Payne v. Cave:\n1. What is the effect of a counteroffer on the original offer?\n2. What is the effect of a subsequent bid on a prior bid at an auction?\n\n301\n\n\x0cRestatement (Second) of Contracts \xc2\xa7 45. Option Contract Created by Part\nPerformance or Tender & cmt. e.\nQuestions:\n1. In a unilateral contract, a promise is made in exchange for a performance.\nThough either party might be the offeror, generally the promisor makes an offer:\n"If you mow my lawn, I\'ll pay you $30." A few law professors once argued that in\nsuch a case a contract would not form until the performance was complete because only then was consideration given as requested. But that meant that the\npromisor/offeror was not bound during the promisee\'s performance and could\nwithdraw the offer until the last blade of grass was cut. The most famous example,\nsuggested by a Professor Wormser, involves an offer by A to pay $100 to B if B\nwill walk across the Brooklyn Bridge. Wormser argued that if A overtook B when\nB was halfway across and withdrew his offer, B would have no rights against A\neven though B had partially performed. Wormser, The True Conception of Unilateral Contracts, 26 Yale L.J. 136 (1916). That result seems harsh because the\npromisee has justifiably relied on the promise. How would section 45 handle the\nBrooklyn Bridge case?\n2. Suppose Wormser had been correct and section 45 never written. When A stops\nB from performing further, doesn\'t B have a claim against A? The lawn mowing\ndeal is a better example, perhaps: When the lawn service mows half my lawn because I have told them if they mow the whole lawn I will pay them, don\'t they\nhave a claim against me even after I stop them from completing the job?\n3. An option contract involves two promises by the optionor: one (offering) to\nperform and one to hold the offer open during a period of time. In an option contract created under section 45, who is the optionor\xe2\x80\x94the promisor or the promisee?\nHow long has the optionor promised to keep the offer open? (You might draw\nsome argument from Akins v. J.B. Sedberry, Inc. in answer to this question.)\n4. In a unilateral contract, one party makes no promise, so that party is not bound\nto perform. B could legally stop walking halfway across and A would have no valid claim against him. But doesn\'t that mean that while B is walking, A is bound\nbut B is not? Is that a problem? (You might look at the comments to section 45\nwith respect to this question.)\n5. Why would a promisor offer a unilateral rather than a bilateral contract?\n\n302\n\n\x0cLouis W. and Sylvia V. RAGOSTA v. Allen S. WILDER, Jr. (1991)\nSupreme Court of Vermont\n592 A.2d 367\nPECK, Justice.\n[\xc2\xb61] Defendant appeals from a judgment ordering him to convey to plaintiffs a\npiece of real property known as \xe2\x80\x9cThe Fork Shop.\xe2\x80\x9d Defendant argues that the court\nimproperly found that a binding contract existed and that it misapplied the doctrine of equitable estoppel. He also contends that the ruling cannot be upheld under promissory estoppel principles since the court failed to examine the extent to\nwhich enforcement of defendant\xe2\x80\x99s promise to sell was required to prevent injustice. Because the trial court\xe2\x80\x99s ruling cannot stand on contract or equitable estoppel\ngrounds and because the court\xe2\x80\x99s analysis of promissory estoppel is inextricably\nbound in its contractual analysis, we reverse and remand the cause for further proceedings consistent with the principles expressed herein.\n[\xc2\xb62] In 1985, plaintiffs became interested in purchasing \xe2\x80\x9cThe Fork Shop\xe2\x80\x9d from\ndefendant, but preliminary negotiations between the parties were fruitless. In 1987,\nplaintiffs learned that defendant was again considering selling the \xe2\x80\x9cThe Fork\nShop,\xe2\x80\x9d mailed him a letter offering to purchase the property along with a check\nfor $2,000 and began arrangements to obtain the necessary financing. By letter\ndated September 28, 1987, defendant returned the $2,000 check explaining that he\nhad two properties \xe2\x80\x9cup for sale\xe2\x80\x9d and that he would not sign an acceptance to\nplaintiffs\xe2\x80\x99 offer because \xe2\x80\x9cthat would tie up both these properties until [there was] a\nclosing.\xe2\x80\x9d In the letter, he also made the following counter-offer:\nI will sell you The Fork Shop and its property as listed in book 35, at page\n135 of the Brookfield Land Records on 17 April 1972, for $88,000.00(Eighty- eight thousand dollars), at anytime up until the 1st of November\n1987 that you appear with me at the Randolph National Bank with said\nsum. At which time they will give you a certified deed to this property or\nto your agent as directed, providing said property has not been sold.\n[\xc2\xb63] On October 1st, the date plaintiffs received the letter, they called defendant. The court found that during the conversation plaintiffs told defendant that\n\xe2\x80\x9cthe terms and conditions of his offer were acceptable and that they would in fact\nprepare to accept the offer.\xe2\x80\x9d Defendant assured plaintiffs that there was no one\nelse currently interested in purchasing \xe2\x80\x9cThe Fork Shop.\xe2\x80\x9d\n[\xc2\xb64] On October 6th, plaintiffs informed defendant that they would not close\nthe sale on October 8th as discussed previously but that they would come to Vermont on October 10th. On October 8th, defendant called plaintiffs and informed\nthem that he was no longer willing to sell \xe2\x80\x9cThe Fork Shop.\xe2\x80\x9d The trial court found\nthat, at that time, defendant was aware plaintiffs \xe2\x80\x9chad processed their loan application and were prepared to close.\xe2\x80\x9d Plaintiffs informed defendant that they would\nbe at the Randolph National Bank at 10:00 a.m. on October 15th with the $88,000\n303\n\n\x0cpurchase price and in fact appeared. Defendant did not. Plaintiffs claim they incurred $7,499.23 in loan closing costs.\n[\xc2\xb65] Plaintiffs sued for specific performance arguing that defendant had contracted to sell the property to them. They alleged moreover that defendant knew\nthey would have to incur costs to obtain financing for the purchase but assured\nthem that the sale would go through and that they relied on his assurances.\n[\xc2\xb66] The trial court concluded that defendant \xe2\x80\x9cmade an offer in writing which\ncould only be accepted by performance prior to the deadline.\xe2\x80\x9d It concluded further\nthat defendant could not revoke his offer on October 8th because plaintiffs, relying on the offer, had already begun performance and that defendant should be estopped from revoking the offer on a theory of equitable estoppel. It ordered defendant to convey to plaintiffs \xe2\x80\x9cThe Fork Shop\xe2\x80\x9d for $88,000. This appeal followed.\nI.\n[\xc2\xb67] Plaintiffs claim that defendant\xe2\x80\x99s letter of September 28, 1987 created a\ncontract to sell \xe2\x80\x9cThe Fork Shop\xe2\x80\x9d to them unless the property was sold to another\nbuyer. Rather, defendant\xe2\x80\x99s letter contains an offer to sell the property for $88,000,\nwhich the trial court found could only be accepted \xe2\x80\x9cby performance prior to the\ndeadline,\xe2\x80\x9d and a promise to keep the offer open unless the property were sold to\nanother buyer. Defendant received no consideration for either promise. In fact,\ndefendant returned plaintiffs\xe2\x80\x99 check for $2,000 which would have constituted consideration for the promise to keep the offer open, presumably because he did not\nwish to make a firm offer. Thus, the promise to keep the offer to sell open was not\nenforceable and, absent the operation of equitable estoppel, defendant could revoke the offer to sell the property at any time before plaintiffs accepted it. See\nBuchannon v. Billings, 127 Vt. 69, 75, 238 A.2d 638, 642 (1968) (\xe2\x80\x9cAn option is a\ncontinuing offer, and if supported by a consideration, it cannot be withdrawn before the time limit.\xe2\x80\x9d) (emphasis added).\n[\xc2\xb68] Plaintiffs argue that the actions they undertook to obtain financing, which\nwere detrimental to them, could constitute consideration for the promise to keep\nthe offer to sell open. Their argument is unconvincing. Although plaintiffs are correct in stating that a detriment may constitute consideration, they ignore the rule\nthat \xe2\x80\x9c[t]o constitute consideration, a performance or a return promise must be bargained for.\xe2\x80\x9d Restatement (Second) of Contracts \xc2\xa7 71(1) (1981). \xe2\x80\x9cA performance\nor return promise is bargained for if it is sought by the promisor in exchange for\nhis promise and is given by the promisee in exchange for that promise.\xe2\x80\x9d Id. at \xc2\xa7\n71(2). Plaintiffs began to seek financing even before defendant made a definite\noffer to sell the property. Whatever detriment they suffered was not in exchange\nfor defendant\xe2\x80\x99s promise to keep the offer to sell open.\n\n304\n\n\x0c[\xc2\xb69] The trial court ruled that the offer to sell \xe2\x80\x9cThe Fork Shop\xe2\x80\x9d could only be\naccepted by performance but concluded that in obtaining financing plaintiffs began performance and that therefore defendant could not revoke the offer to sell\nonce plaintiffs incurred the cost of obtaining financing. Section 45 of the Restatement (Second) of Contracts provides that \xe2\x80\x9c[w]here an offer invites an offeree\nto accept by rendering a performance and does not invite a promissory acceptance,\nan option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it.\xe2\x80\x9d However, \xe2\x80\x9c[w]hat is begun or tendered\nmust be part of the actual performance invited in order to preclude revocation under this Section.\xe2\x80\x9d Id. at comment f.\n[\xc2\xb610] Here, plaintiffs were merely engaged in preparation for performance. The\ncourt itself found only that \xe2\x80\x9cplaintiffs had changed their position in order to tender\nperformance.\xe2\x80\x9d At most, they obtained financing and assured defendant that they\nwould pay; plaintiffs never tendered to defendant or even began to tender the\n$88,000 purchase price. Thus, they never accepted defendant\xe2\x80\x99s offer and no contract was ever created. See Multicare Medical Center v. State Social & Health\nServices, 114 Wash.2d 572, 584, 790 P.2d 124, 131 (1990) (\xe2\x80\x9cunder a unilateral\ncontract, an offer cannot be accepted by promising to perform; rather, the offeree\nmust accept, if at all, by performance, and the contract then becomes executed\xe2\x80\x9d). *\n****\n[\xc2\xb611] On remand the court shall consider the case under promissory estoppel\nonly and determine what remedy, if any, is necessary to prevent injustice. In making this determination the court should consider the fact that plaintiffs incurred the\nexpense of obtaining financing although they could not be certain that the property would be sold to them. * * * *\n[\xc2\xb612] Reversed and the cause remanded for further proceedings consistent with\nthe principles expressed herein.\nQuestions:\n1. Could Wilder\'s offer be revoked without breaching a contract?\n2. Was Wilder\'s promise made with consideration at the time it was made? Why?\n3. Did Ragosta\'s promise to perform render Wilder\'s promise binding? Why?\n\nBecause defendant specified that the manner of acceptance would be performance, plaintiffs\xe2\x80\x99\nargument that they accepted defendant\xe2\x80\x99s offer over the telephone must fail. In fact, plaintiffs admitted in their depositions that they were very worried that the property would be sold to someone\nelse prior to closing. Thus, they should have understood that they had no enforceable contract until\nclosing.\n*\n\n305\n\n\x0c4. Did Ragosta\'s beginning to obtain financing bind Wilder? Why?\n5. At what point in time would Wilder have been bound, had he not retracted?\n6. Should promissory estoppel principles apply to Wilder\'s promise?\n\nWilliam A. DRENNAN v. STAR PAVING COMPANY (a Corporation) (1958)\nSupreme Court of California, In Bank\n333 P.2d 757\nTRAYNOR, Justice.\n[\xc2\xb61] Defendant appeals from a judgment for plaintiff in an action to recover\ndamages caused by defendant\xe2\x80\x99s refusal to perform certain paving work according\nto a bid it submitted to plaintiff.\n[\xc2\xb62] On July 28, 1955, plaintiff, a licensed general contractor, was preparing a\nbid on the \xe2\x80\x98Monte Vista School Job\xe2\x80\x99 in the Lancaster school district. Bids had to\nbe submitted before 8:00 p. m. Plaintiff testified that it was customary in that area\nfor general contractors to receive the bids of subcontractors by telephone on the\nday set for bidding and to rely on them in computing their own bids. Thus on that\nday plaintiff\xe2\x80\x99s secretary, Mrs. Johnson, received by telephone between fifty and\nseventy-five subcontractors\xe2\x80\x99 bids for various parts of the school job. As each bid\ncame in, she wrote it on a special form, which she brought into plaintiff\xe2\x80\x99s office.\nHe then posted it on a master cost sheet setting forth the names and bids of all\nsubcontractors. His own bid had to include the names of subcontractors who were\nto perform one-half of one per cent or more of the construction work, and he had\nalso to provide a bidder\xe2\x80\x99s bond of ten per cent of his total bid of $317,385 as a\nguarantee that he would enter the contract if awarded the work.\n[\xc2\xb63] Late in the afternoon, Mrs. Johnson had a telephone conversation with\nKenneth R. Hoon, an estimator for defendant. He gave his name and telephone\nnumber and stated that he was bidding for defendant for the paving work at the\nMonte Vista School according to plans and specifications and that his bid was\n$7,131.60. At Mrs. Johnson\xe2\x80\x99s request he repeated his bid. Plaintiff listened to the\nbid over an extension telephone in his office and posted it on the master sheet after receiving the bid form from Mrs. Johnson. Defendant\xe2\x80\x99s was the lowest bid for\nthe paving. Plaintiff computed his own bid accordingly and submitted it with the\nname of defendant as the subcontractor for the paving. When the bids were\nopened on July 28th, plaintiff\xe2\x80\x99s proved to be the lowest, and he was awarded the\ncontract.\n[\xc2\xb64] On his way to Los Angeles the next morning plaintiff stopped at defendant\xe2\x80\x99s office. The first person he met was defendant\xe2\x80\x99s construction engineer, Mr.\n306\n\n\x0cOppenheimer. Plaintiff testified: \xe2\x80\x98I introduced myself and he immediately told me\nthat they had made a mistake in their bid to me the night before, they couldn\xe2\x80\x99t do\nit for the price they had bid, and I told him I would expect him to carry through\nwith their original bid because I had used it in compiling my bid and the job was\nbeing awarded them. And I would have to go and do the job according to my bid\nand I would expect them to do the same.\xe2\x80\x99\n[\xc2\xb65] Defendant refused to do the paving work for less than $15,000. Plaintiff\ntestified that he \xe2\x80\x98got figures from other people\xe2\x80\x99 and after trying for several months\nto get as low a bid as possible engaged L & H Paving Company, a firm in Lancaster, to do the work for $10,948.60.\n[\xc2\xb66] The trial court found on substantial evidence that defendant made a definite offer to do the paving on the Monte Vista job according to the plans and specifications for $7,131.60, and that plaintiff relied on defendant\xe2\x80\x99s bid in computing\nhis own bid for the school job and naming defendant therein as the subcontractor\nfor the paving work. Accordingly, it entered judgment for plaintiff in the amount\nof $3,817.00 (the difference between defendant\xe2\x80\x99s bid and the cost of the paving to\nplaintiff) plus costs.\n[\xc2\xb67] Defendant contends that there was no enforceable contract between the\nparties on the ground that it made a revocable offer and revoked it before plaintiff\ncommunicated his acceptance to defendant.\n[\xc2\xb68] There is no evidence that defendant offered to make its bid irrevocable in\nexchange for plaintiff\xe2\x80\x99s use of its figures in computing his bid. Nor is there evidence that would warrant interpreting plaintiff\xe2\x80\x99s use of defendant\xe2\x80\x99s bid as the acceptance thereof, binding plaintiff, on condition he received the main contract, to\naward the subcontract to defendant. In sum, there was neither an option supported\nby consideration nor a bilateral contract binding on both parties.\n[\xc2\xb69] Plaintiff contends, however, that he relied to his detriment on defendant\xe2\x80\x99s\noffer and that defendant must therefore answer in damages for its refusal to perform. Thus the question is squarely presented: Did plaintiff\xe2\x80\x99s reliance make defendant\xe2\x80\x99s offer irrevocable?\n[\xc2\xb610] Section 90 of the Restatement of Contracts states: \xe2\x80\x98A promise which the\npromisor should reasonably expect to induce action or forbearance of a definite\nand substantial character on the part of the promisee and which does induce such\naction or forbearance is binding if injustice can be avoided only by enforcement\nof the promise.\xe2\x80\x99 This rule applies in this state. * * * *\n[\xc2\xb611] Defendant\xe2\x80\x99s offer constituted a promise to perform on such conditions as\nwere stated expressly or by implication therein or annexed thereto by operation of\nlaw. (See 1 Williston, Contracts (3rd. ed.), s 24A, p. 56, s 61, p. 196.) Defendant\n307\n\n\x0chad reason to expect that if its bid proved the lowest it would be used by plaintiff.\nIt induced \xe2\x80\x98action * * * * of a definite and substantial character on the part of the\npromisee.\xe2\x80\x99\n[\xc2\xb612] Had defendant\xe2\x80\x99s bid expressly stated or clearly implied that it was revocable at any time before acceptance we would treat it accordingly. It was silent on\nrevocation, however, and we must therefore determine whether there are conditions to the right of revocation imposed by law or reasonably inferable in fact. In\nthe analogous problem of an offer for a unilateral contract, the theory is now obsolete that the offer is revocable at any time before complete performance. Thus\nsection 45 of the Restatement of Contracts provides: \xe2\x80\x98If an offer for a unilateral\ncontract is made, and part of the consideration requested in the offer is given or\ntendered by the offeree in response thereto, the offeror is bound by a contract, the\nduty of immediate performance of which is conditional on the full consideration\nbeing given or tendered within the time stated in the offer, or, if no time is stated\ntherein, within a reasonable time.\xe2\x80\x99 In explanation, comment b states that the \xe2\x80\x98main\noffer includes as a subsidiary promise, necessarily implied, that if part of the requested performance is given, the offeror will not revoke his offer, and that if tender is made it will be accepted. Part performance or tender may thus furnish consideration for the subsidiary promise. Moreover, merely acting in justifiable reliance on an offer may in some cases serve as sufficient reason for making a promise binding (see s 90).\xe2\x80\x99\n[\xc2\xb613] Whether implied in fact or law, the subsidiary promise serves to preclude\nthe injustice that would result if the offer could be revoked after the offeree had\nacted in detrimental reliance thereon. Reasonable reliance resulting in a foreseeable prejudicial change in position affords a compelling basis also for implying a\nsubsidiary promise not to revoke an offer for a bilateral contract.\n[\xc2\xb614] The absence of consideration is not fatal to the enforcement of such a\npromise. It is true that in the case of unilateral contracts the Restatement finds\nconsideration for the implied subsidiary promise in the part performance of the\nbargained-for exchange, but its reference to section 90 makes clear that consideration for such a promise is not always necessary. The very purpose of section 90 is\nto make a promise binding even though there was no consideration \xe2\x80\x98in the sense\nof something that is bargained for and given in exchange.\xe2\x80\x99 (See 1 Corbin, Contracts 634 et seq.) Reasonable reliance serves to hold the offeror in lieu of the\nconsideration ordinarily required to make the offer binding. In a case involving\nsimilar facts the Supreme Court of South Dakota stated that \xe2\x80\x98we believe that reason and justice demand that the doctrine (of section 90) be applied to the present\nfacts. We cannot believe that by accepting this doctrine as controlling in the state\nof facts before us we will abolish the requirement of a consideration in contract\ncases, in any different sense than an ordinary estoppel abolishes some legal requirement in its application. We are of the opinion, therefore, that the defendants\nin executing the agreement (which was not supported by consideration) made a\npromise which they should have reasonably expected would induce the plaintiff to\n308\n\n\x0csubmit a bid based thereon to the Government, that such promise did induce this\naction, and that injustice can be avoided only by enforcement of the promise.\xe2\x80\x99\nNorthwestern Engineering Co. v. Ellerman, 69 S.D. 397, 408, 10 N.W.2d 879, 884;\nsee also, Robert Gordon, Inc., v. Ingersoll-Rand Co., 7 Cir., 117 F.2d 654, 661; cf.\nJames Baird Co. v. Gimbel Bros., 2 Cir., 64 F.2d 344.\n[\xc2\xb615] When plaintiff used defendant\xe2\x80\x99s offer in computing his own bid, he bound\nhimself to perform in reliance on defendant\xe2\x80\x99s terms. Though defendant did not\nbargain for this use of its bid neither did defendant make it idly, indifferent to\nwhether it would be used or not. On the contrary it is reasonable to suppose that\ndefendant submitted its bid to obtain the subcontract. It was bound to realize the\nsubstantial possibility that its bid would be the lowest, and that it would be included by plaintiff in his bid. It was to its own interest that the contractor be\nawarded the general contract; the lower the subcontract bid, the lower the general\ncontractor\xe2\x80\x99s bid was likely to be and the greater its chance of acceptance and\nhence the greater defendant\xe2\x80\x99s chance of getting the paving subcontract. Defendant\nhad reason not only to expect plaintiff to rely on its bid but to want him to. Clearly defendant had a stake in plaintiff\xe2\x80\x99s reliance on its bid. Given this interest and\nthe fact that plaintiff is bound by his own bid, it is only fair that plaintiff should\nhave at least an opportunity to accept defendant\xe2\x80\x99s bid after the general contract\nhas been awarded to him.\n[\xc2\xb616] It bears noting that a general contractor is not free to delay acceptance after he has been awarded the general contract in the hope of getting a better price.\nNor can he reopen bargaining with the subcontractor and at the same time claim a\ncontinuing right to accept the original offer. See, R. J. Daum Const. Co. v. Child,\nUtah, 247 P.2d 817, 823. In the present case plaintiff promptly informed defendant that plaintiff was being awarded the job and that the subcontract was being\nawarded to defendant.\n[\xc2\xb617] Defendant contends, however, that its bid was the result of mistake and\nthat it was therefore entitled to revoke it. It relies on the rescission cases of M. F.\nKemper Const. Co. v. City of Los Angeles, 37 Cal.2d 696, 235 P.2d 7, and Brunzell\nConst. Co. v. G. J. Weisbrod, Inc., 134 Cal.App.2d 278, 285 P.2d 989. See also,\nLemoge Electric v. San Mateo County, 46 Cal.2d 659, 662, 297 P.2d 638. In those\ncases, however, the bidder\xe2\x80\x99s mistake was known or should have been known to\nthe offeree, and the offeree could be placed in status quo. Of course, if plaintiff\nhad reason to believe that defendant\xe2\x80\x99s bid was in error, he could not justifiably\nrely on it, and section 90 would afford no basis for enforcing it. Robert Gordon,\nInc., v. Ingersoll-Rand, Inc., 7 Cir., 117 F.2d 654, 660. Plaintiff, however, had no\nreason to know that defendant had made a mistake in submitting its bid, since\nthere was usually a variance of 160 per cent between the highest and lowest bids\nfor paving in the desert around Lancaster. He committed himself to performing\nthe main contract in reliance on defendant\xe2\x80\x99s figures. Under these circumstances\ndefendant\xe2\x80\x99s mistake, far from relieving it of its obligation constitutes an additional\nreason for enforcing it, for it misled plaintiff as to the cost of doing the paving.\n309\n\n\x0cEven had it been clearly understood that defendant\xe2\x80\x99s offer was revocable until accepted, it would not necessarily follow that defendant had no duty to exercise reasonable care in preparing its bid. It presented its bid with knowledge of the substantial possibility that it would be used by plaintiff; it could foresee the harm that\nwould ensue from an erroneous underestimate of the cost. Moreover, it was motivated by its own business interest. Whether or not these considerations alone\nwould justify recovery for negligence had the case been tried on that theory (see\nBiakanja v. Irving, 49 Cal.2d 647, 650, 320 P.2d 16), they are persuasive that defendant\xe2\x80\x99s mistake should not defeat recovery under the rule of section 90 of the\nRestatement of Contracts. As between the subcontractor who made the bid and the\ngeneral contractor who reasonably relied on it, the loss resulting from the mistake\nshould fall on the party who caused it. * * * *\n[\xc2\xb618] There is no merit in defendant\xe2\x80\x99s contention that plaintiff failed to state a\ncause of action, on the ground that the complaint failed to allege that plaintiff attempted to mitigate the damages or that they could not have been mitigated. Plaintiff alleged that after defendant\xe2\x80\x99s default, \xe2\x80\x98plaintiff had to procure the services of\nthe L & H Co. to perform said asphaltic paving for the sum of $10,948.60.\xe2\x80\x99 Plaintiff\xe2\x80\x99s uncontradicted evidence showed that he spent several months trying to get\nbids from other subcontractors and that he took the lowest bid. Clearly he acted\nreasonably to mitigate damages. In any event any uncertainty in plaintiff\xe2\x80\x99s allegation as to damages could have been raised by special demurrer. Code Civ.Proc. s\n430, subd. 9. It was not so raised and was therefore waived. Code Civ.Proc. s 434.\n[\xc2\xb619] The judgment is affirmed.\nGIBSON C. J., and SHENK, SCHAUER, SPENCE and McCOMB, JJ., concur.\nQuestions:\n1. Is Star Paving\'s bid enforceable? Why?\n2. Was Star Paving\'s bid supported by consideration?\n3. Did Drennan accept Star Paving\'s bid?\n4. Was there a consensual contract in this case?\n5. Should the general contractor be bound if the subcontractor might be? Consider\nthe following from Holman Erection Co. v. Orville E. Madsen & Sons, Inc., 330\nN.W.2d 693 (Minn. 1983) and prepare to report what reasons support your answer\nto that question:\n[\xc2\xb61] While commentators have urged that a general contractor be bound\nto a listed subcontractor upon the mere listing or use of the subcontractor\xe2\x80\x99s\nbid in the general bid on several theories, we do not adopt the reasoning.\n310\n\n\x0cSee, e.g., Note, Another Look at Construction Bidding and Contracts at\nFormation, 53 Va. L. Rev. 1720 (1967); Note, Once Around the Flag Pole:\nConstruction Bidding and Contracts at Formation, 39 N.Y.U.L.Rev. 816\n(1964); see also Closen & Weiland, supra at 605 (urging legislative action\nto regulate the public bidding process). * * * *\n[\xc2\xb62] The broad policy justifications advanced for binding the general to\nthe subcontractor upon utilization or listing of the subcontractor in the\ngeneral bid include:\n1) limiting bargaining to the pre-award stage to put the general and\nthe sub on equal footing as to any subsequent negotiation or modification of the initial agreement;\n2) providing certainty in the industry;\n3) avoiding bid-shopping;\n4) providing formality and allowing the commercial context to\nsupply the necessary fact basis; and\n5) allowing for necessary negotiation on open terms, the only binding terms being the price and the nature of the work bid on.\n[\xc2\xb63] Underlying all of the above justifications is a superficial equity notion. In Minnesota, as well as most other jurisdictions, the subcontractor\nmay be obligated to perform by application of promissory estoppel. The\ngeneral, however, remains free to avoid the listed subcontractor and negotiate with other subcontractors. This one-sided arrangement seems, on its\nface, unfair. Why should one party be bound and other not? A close examination of the construction business and the nature of the bidding process,\nhowever, reveals several justifications for the unequal treatment of generals and subcontractors.\n[\xc2\xb64] First, the reason a subcontractor is bound by its bid is the existence\nof justifiable reliance by the general on the subcontractor\xe2\x80\x99s price for specified work. The general makes his bid after gathering and evaluating a\nnumber of subcontract bids. Once the general wins the prime contract\nfrom the awarding authority, he is bound to his own bid. For the subcontractor to be able to refuse to perform would subject the general to a financial detriment. See Constructors Supply Co. v. Bostrom Sheet Metal Works,\nInc., 291 Minn. 113, 120, 190 N.W.2d 71, 75-76 (1971).\n[\xc2\xb65] In contrast, the subcontractor does not rely on the general and suffers no detriment. A subcontractor submits bids to all or most of the general contractors that it knows are bidding on a project. The subcontractor\nreceives invitations to bid from some generals and submits bids to others\nwithout invitation. The time and expense involved in preparing the bid is\nnot segregated to any particular general. The total cost is part of the overhead of doing business. The same bid is submitted to each general. Thus,\nwhether or not any particular general wins the contract is of little or no\n311\n\n\x0cconcern to the subcontractor. The subcontractor engages in the same work\nand expense in preparing its bid regardless of who wins the general contract and whether the subcontractor wins the contract on which it bid. No\nfurther expense is incurred until a formal agreement is reached with the\ngeneral and actual work commences. Clearly, the promissory estoppel\nconcept is not applicable in this situation. Bostrom bound the subcontractor to his bid not on the basis of a contract, but on the basis of estoppel.\nWith no detrimental reliance, there can be no estoppel claim. Ample justification exists for binding the subcontractor and not binding the general.\nThe two situations are very different.\n[\xc2\xb66] Second, the nature of the bidding process compels allowing the\ngeneral sufficient leeway to maintain its flexibility in executing subcontracts and selecting the subcontractors it will hire for a project. Typically,\nsubcontractors submit their bids only a few hours before the general bid\nmust be submitted to the awarding authority. The general\xe2\x80\x99s representatives\ntake the bids over the telephone and hurriedly compile their own bid. This\nperiod of time is hectic and complex. The bids received consist of the contract price and a listing of work included. Specifics are left for future negotiation and clarification.\n[\xc2\xb67] The last-minute procedure is designed to prevent bid-shopping.\nThis court has recognized the undesirable nature of bid-shopping, Bostrom,\n291 Minn. at 121, 190 N.W.2d at 76, and the last-minute bidding process\nseems well entrenched in the construction industry. See Hoel-Steffen Construction Co. v. United States, 684 F.2d 843, 849 (Ct. Cl. 1982).\n[\xc2\xb68] The bidding process puts the subcontractor and the general in very\ndifferent positions as to the content of the subcontract. The subcontractors\nhave the luxury of preparing their bids on their own timetable, subject only to the deadline for submitting their bids to the general contractors. The\nsame bid goes to all the general contractors and covers the same work. The\ngenerals, on the other hand, are dealing with all the various construction\naspects of the project and with numerous potential subcontractors. They\ncompile their bids, as the various subcontractor bids are received, within a\nfew hours of the deadline for submission of the prime bid. Specifics are\nnecessarily given less than thorough consideration and are left for future\nnegotiations. Finally, the lowest dollar amount bidder is not always the\none chosen to do the work or the one listed as the potential subcontractor.\nReliability, quality of work, and capability to handle the job are all considerations weighed by the general in choosing subcontractors. MBE regulations requiring an effort to use a percentage of minority contractors are\nanother potential consideration.\n[\xc2\xb69] Binding general contractors to subcontractors because a particular\nbid was listed in the general bid or was utilized in making the bid would\n312\n\n\x0cremove a considerable degree of needed flexibility. The present case illustrates the consequences quite well. Because the project involved was a\npublic project, MBE regulations required that an effort be made to use minority contractors. When Madsen began to put the specifics of the project\ntogether, it was forced to juggle the subcontracts in order to comply with\nthe MBE regulations. Van Knight, the subcontractor chosen instead of\nHolman, qualified as a minority business and offered to supply materials\nand supplies not included in Holman\xe2\x80\x99s bid. Despite a slightly higher cost,\nMadsen selected Van Knight as the steel erection subcontractor.\n[\xc2\xb610] If Madsen was bound to the bids listed in its prime bid, there is a\npossibility that the contract would have been lost due to failure to comply\nwith MBE regulations. The next highest qualifying bidder would then\nhave been selected, to the awarding authority\xe2\x80\x99s greater expense and to\nMadsen\xe2\x80\x99s detriment. Such a result imposes a greater cost on the project\nand a loss to the general contractor. The result under the prevailing law in\nmost jurisdictions, and which we adopt here, would not impose any additional expenses on the rejected subcontractor.\n[\xc2\xb611] A decision in favor of the subcontractor on this issue would place\nMinnesota in a minority position as perhaps the sole state to hold that a\ncontract is formed by the mere listing of a subcontractor in a general contractor\xe2\x80\x99s bid to the awarding authority. Although supplying some certainty\nand symmetry to the construction industry, such a decision would also impose a rigidity on the process and result in greater cost to awarding authorities and potential detriment to general contractors. If such a change is to\ntake place, it is one properly brought before the legislature.\nMore Questions:\n6. Did a contract form when Madsen listed Holman on the bid and Madsen won\nthe bid?\n7. What is bid-shopping? Should the general be able to bind the sub if the general\nshops the sub\'s bid?\n\nUniform Commercial Code \xc2\xa7 2-205. Firm Offers, and cmts. 1 and 2.\nQuestions:\n1. Can the holder of a garage sale give a firm offer?\n\n313\n\n\x0c2. Can a law college give a firm offer to provide a legal education at a stated tuition rate?\n3. Can a used car salesman give a firm offer that will remain open for six months\nto sell a certain car?\n4. Can the used car salesman give an oral firm offer?\n\nNote on Terms of Art\nI suggest you write out a list of elements for a firm offer. Typically, students think\nthe phrase firm offer means an offer which states unambiguous terms or is final in\nsome way. That is how business-people sometimes use the phrase. But we are\nlawyers, and so for us some words are "terms of art," which have technical meanings not necessarily related to the common meanings of the words. Firm offer is\none such legal term of art. So is offer. If we look at firm offer as a term of art, the\nbusiness-person\'s usage is nonsense. All offers contain ambiguous terms, and the\nlevel of definiteness in an offer is but one element in what makes an offer an offer\nat all. Moreover, all offers are final, because they invite acceptance. Otherwise,\nthey would not be offers. So the phrase firm offer as business-people use the term\nis merely redundant. Of course, in this law class and generally in law school and\nin practice (except when you speak to your business clients), the term of art is the\nprimarily relevant usage. Therefore, when you see the phrase firm offer from now\non in contract law, you should consider whether it means an offer that complies\nwith UCC \xc2\xa7 2-205.\n\n314\n\n\x0cChapter 7. Acceptances\nA. Acceptances: What Are They?\nPlease review Foster v. Ohio State University (1987), the last case in Chapter 6.A.\nWhat Is an Offer?\n\nB. Choice of Promise or Performance\nCharles L. GLEESON v. Chris F. FRAHM and Olga K. Frahm (1982)\nSupreme Court of Nebraska\n320 N.W.2d 95\nEMPSON, District Judge.\n[\xc2\xb61] This is an action for specific performance. On July 31, 1978, the defendants, Chris F. Frahm and Olga K. Frahm, executed for consideration an option,\nwhich is in pertinent part as follows:\n\xe2\x80\x9cKNOW ALL MEN BY THESE PRESENTS: That ... [Frahms] hereinafter referred to as First Party ... in consideration of the sum of One Dollar\nand other good and valuable consideration ... paid ... by ... second party ...\nhereby agree to hold, until the 1st day of January, 1980, 12:00 o\xe2\x80\x99clock\nA.M., ... subject exclusively to the order of the said second party or his,\nher or their assigns, the following described property to wit: [property described] or to transfer and convey the said property by warranty deed ... at\nany time within the time above prescribed, to the said second party or to\nsuch person or persons as he ... may direct, at and for the price of One\nThousand Two Hundred and Fifty (1,250) Dollars per acre payable on the\nfollowing terms: 25% down payment, balance payable in ten (10) annual\ninstallments bearing interest at the rate of 8% per annum ....\n....\n\xe2\x80\x9c... if there should be any delay on the part of the first party in perfecting\nthe title to the above property for more than thirty (30) days, after notice\nshall have been given of the election of the holder of this option to purchase the aforesaid property, then, and in that event, the holder of this option shall have the right to cancel this option, and upon the exercise of\nsuch right of cancellation, shall receive back the consideration paid for this\noption ....\xe2\x80\x9d\nThe option was assigned to the plaintiff, Charles L. Gleeson.\n\n315\n\n\x0c[\xc2\xb62]\n\nOn December 28, 1979, Gleeson mailed to the Frahms a document entitled\n\xe2\x80\x9cAcceptance of Option to Purchase,\xe2\x80\x9d which is in pertinent part as follows:\n\xe2\x80\x9cI, Charles L. Gleeson, as Assignee ... do under a certain option agreement\nmade by you on the 31st day of July, 1978, for the purchase of the property described as follows: [property described] hereby elect to exercise such\noption to purchase, upon the terms as contained in said option agreement\nand do direct that you transfer and convey said property by Warranty\nDeed ... to myself, Charles L. Gleeson and Richard J. Gleeson, as tenants\nin common.\n\xe2\x80\x9cPlease deliver abstract of title to the real estate certified to date, to my attorney ....\xe2\x80\x9d\n\n[\xc2\xb63] The document, received by the Frahms on December 29, 1979, neither\ncontained nor was accompanied by any payment or specific offer of payment of\nany kind. Gleeson has never offered the Frahms any payment and the Frahms\nhave never taken any steps to convey the property.\n[\xc2\xb64] No further action was taken by either party until about the middle of January 1980, when Gleeson stopped by the Frahms\xe2\x80\x99 home to ask about fencing the\nproperty. Chris Frahm told him to go see their attorney, who told Gleeson the sale\nwould not be made. This lawsuit resulted.\n[\xc2\xb65] The Frahms\xe2\x80\x99 answer to Gleeson\xe2\x80\x99s petition alleged that the option was not\nexercised by Gleeson because the \xe2\x80\x9cdownpayment\xe2\x80\x9d required was not tendered or\npaid before the option expired. They have defended throughout on that basis, and\nthe trial court, upon that same theory, sustained the Frahms\xe2\x80\x99 motion to dismiss at\nthe close of Gleeson\xe2\x80\x99s case.\n[\xc2\xb66] The nature of an option has been stated by this court as follows: \xe2\x80\x9c \xe2\x80\x98 \xe2\x80\x9cAn\noption to purchase real estate is a unilateral contract by which the owner of the\nproperty agrees with the holder of the option that he has the right to buy the property according to the terms and conditions of the contract. By such agreement the\nowner does not sell the land, nor does he at the time contract to sell. He does,\nhowever, agree that the person to whom the option is given shall have the right at\nhis election or option to demand the conveyance in the manner specified.\xe2\x80\x9d\n\xe2\x80\x98 \xe2\x80\x9c Commuter Developments & Investments, Inc. v. Gramlich, 203 Neb. 569, 573,\n279 N.W.2d 394, 396 (1979); Phillips Petroleum Co. v. City of Omaha, 171 Neb.\n457, 106 N.W.2d 727 (1960). This definition gives rise to and is implicit in such\ncases as Master Laboratories, Inc. v. Chestnut, 154 Neb. 749, 49 N.W.2d 693\n(1951), and State Securities Co. v. Daringer, 206 Neb. 427, 293 N.W.2d 102\n(1980), which hold that the exercise of an option to buy or sell real estate must be\nunconditional and in accordance with the offer made. Those holdings, in turn,\nspring from long-standing principles of contract law that the acceptance of any\noffer, to result in a contract, must be absolute, unconditional, and unqualified. See\nRoberts v. Cox, 91 Neb. 553, 136 N.W. 831 (1912).\n316\n\n\x0c[\xc2\xb67] The parties may contract to the effect that full or partial performance by\nthe holder of the option is required to exercise the option. If they do so, the contract remains a unilateral one after the option is exercised, that is, the holder having performed, only the owner remains bound to perform. If they do not so contract, the holder may exercise by promising to perform, in which case the contract\nbecomes bilateral\xe2\x80\x94both parties are bound by their promises to perform the contract. Where the contract specifies the required manner of acceptance, the holder\nmust conform. Where the manner of acceptance is not specified, the holder may\nexercise by promising to perform what the option requires of him. Restatement\n(Second) of Contracts \xc2\xa7 32 (1981). The option contract in this case does not specify any particular manner of exercise or acceptance.\n[\xc2\xb68] It is significant that the contract gives the Frahms 30 days to perfect title\nafter notice of election of Gleeson to purchase. It is more significant that upon the\nFrahms\xe2\x80\x99 failure to perfect title, Gleeson shall \xe2\x80\x9creceive back\xe2\x80\x9d not the downpayment\nbut the \xe2\x80\x9cconsideration paid for this option,\xe2\x80\x9d i.e., \xe2\x80\x9cOne Dollar and other good and\nvaluable consideration.\xe2\x80\x9d The Frahms\xe2\x80\x99 contention that proper exercise of the option\nrequired a downpayment before the Frahms had displayed good title is untenable.\nGleeson\xe2\x80\x99s letter of acceptance, couched in the words of the option contract itself,\nis a clear exercise of the option, by which Gleeson became bound to pay the price\nupon the Frahms\xe2\x80\x99 showing of good title and their offer of a warranty deed.\n[\xc2\xb69] The judgment is reversed and the cause is remanded to the District Court\nfor further proceedings.\n[\xc2\xb610] REVERSED AND REMANDED FOR FURTHER PROCEEDINGS.\nWHITE, Justice, dissenting.\n[\xc2\xb61] I dissent. The terms of the option require a downpayment of 25 percent at\nthe time the option is exercised. Since no downpayment was received by January\n1, 1980, the option expired. I would have sustained the District Court\xe2\x80\x99s order dismissing the plaintiff\xe2\x80\x99s petition.\n[\xc2\xb62]\n\nI am authorized to state that BROWER, D. J., joins in this dissent.\n\nQuestion: Does it matter in this case whether consideration was paid for the option?\n\n317\n\n\x0cC. Issues of Intent\nSIMMONS v. UNITED STATES (1962)\nUnited States Court of Appeals Fourth Circuit\n308 F.2d 160\nSOBELOFF, Chief Judge.\n[\xc2\xb61] Diamond Jim III, a rock fish, was one of millions of his species swimming\nin the Chesapeake Bay, but he was a very special fish, and he occasions some nice\nlegal questions. Wearing a valuable identification tag, he was placed on June 19,\n1958, in the waters of the Bay by employees of the American Brewery, Inc., with\nthe cooperation of Maryland state game officials. According to the wellpublicized rules governing the brewery-sponsored Third Annual American Beer\nFishing Derby, anybody who caught Diamond Jim III and presented him to the\ncompany, together with the identification tag and an affidavit that he had been\ncaught on hook and line, would be entitled to a cash prize of $25,000.00. The\ncompany also placed other tagged fish in the Chesapeake, carrying lesser prizes.\n[\xc2\xb62] Fishing on the morning of August 6, 1958, William Simmons caught Diamond Jim III. At first, he took little notice of the tag, but upon re-examining it a\nhalf hour later, he realized that he had caught the $25,000.00 prize fish. After\nSimmons and his fishing companions appropriately marked the happy event, he\nhastened to comply with the conditions of the contest. Soon thereafter, in the\ncourse of a television appearance arranged by the brewery, he received the cash\nprize. The record shows that Simmons knew about the contest, but, as an experienced fisherman, he also knew that his chances of landing that fish were minuscule, and he did not have Diamond Jim III in mind when he set out that morning.\n[\xc2\xb63] Thereupon, an alert District Director of the Internal Revenue Service came\nforward with the assertion that the cash prize was includable in Simmons\xe2\x80\x99 gross\nincome under section 61(a) and section 74(a) of the Internal Revenue Code, 26\nU.S.C.A. \xc2\xa7\xc2\xa7 61(a), 74(a) and assessed a tax deficiency of $5,230.00. Promptly\nSimmons paid and filed a claim for refund. A small sum was refunded on the basis\nof very generous deductions allowed by the Internal Revenue Service. Not satisfied, however, Simmons brought an action in the District Court on the theory that\nno part of the cash prize can be included in gross income under sections 61(a) and\n74(a) of the Internal Revenue Code * * *. * * * * On motion for summary judgment, the District Court held for the Government, and Simmons prosecutes this\nappeal. * * * *\n\n318\n\n\x0cII.\n[\xc2\xb64] The taxpayer\xe2\x80\x99s next point is that he was at least entitled to have a jury decide whether the $25,000.00 payment to him was a gift, excluded from gross income by section 102. The Supreme Court\xe2\x80\x99s exposition of this branch of the law in\nCommissioner of Internal Revenue v. Duberstein, 363 U.S. 278, 80 S. Ct. 1190\n(1960), is of course controlling, and this court expressed its understanding of that\ndecision in Poyner v. Commissioner, 301 F.2d 287 (4th Cir. 1962). Here it suffices\nto repeat that it is the function of the trier of fact to determine the basic facts and\nfrom these to infer the motivations of the donor. This does not mean, however,\nthat in an appropriate case a district judge may not make a decision on summary\njudgment. Where, from the facts stipulated and submitted on affidavit, when\nviewed in the light most favorable to the taxpayer, it plainly appears that a jury\ncould not reasonably infer that the payments were motivated \xe2\x80\x98out of affection, respect, admiration, charity or like impulses,\xe2\x80\x99 or from a \xe2\x80\x98detached or disinterested\ngenerosity,\xe2\x80\x99 or from similar sentiments, summary judgment for the Government is\nthe correct disposition. Such is the present case.\n[\xc2\xb65] The established fact is that there was no personal relationship between\nSimmons and the brewery to prompt it to render him financial assistance. Nor was\nit impelled by charitable impulses toward the community at large, for the prize\nwas to be paid to whoever caught Diamond Jim III, regardless of need or affluence. Rather, the taxpayer has apparently rendered the company a valuable service,\nfor, by catching the fish and receiving the award amid fanfare, he brought to the\ncompany the publicity the Fishing Derby was designed to generate.\n[\xc2\xb66] Moreover, under accepted principles of contract law on which we may rely in the absence of pertinent Maryland cases, the company was legally obligated\nto award the prize once Simmons had caught the fish and complied with the remaining conditions precedent. The offer of a prize or reward for doing a specified\nact, like catching a criminal, is an offer for a unilateral contract. For the offer to be\naccepted and the contract to become binding, the desired act must be performed\nwith knowledge of the offer. The evidence is clear that Simmons knew about the\nFishing Derby the morning he caught Diamond Jim III. It is not fatal to his claim\nfor refund that he did not go fishing for the express purpose of catching one of the\nprize fish. So long as the outstanding offer was known to him, a person may accept an offer for a unilateral contract by rendering performance, even if he does so\nprimarily for reasons unrelated to the offer. Consequently, since Simmons could\nrequire the company to pay him the prize, the case is governed by Robertson v.\nUnited States, 343 U.S. 711, 713-714, 72 S. Ct. 994, 96 L.Ed. 1237 (1952). There,\nthe Supreme Court held that, since the sponsor of a contest for the best symphonies submitted was legally obligated to award prizes in accordance with his offer,\nthe payment made was not a gift to the recipient. * ** *\n[\xc2\xb67]\n\nAffirmed.\n319\n\n\x0cQuestions:\n1. Would Simmons have won the prize if he had not known about the offer when\nhe caught the fish?\n2. Blanche and Albert are happily engaged to be married. Blanche\'s father Joe,\nwho is rich, wants to make sure Albert, who is kind of a loser, provides for his\ndaughter, but he doesn\'t want Blanche to know that he thinks Albert is a loser.\nTwo days before the marriage, he pulls Albert aside and gives him a note, which\nsays,\nIf you marry my daughter, I will pay you $10,000 per year for each year\nyou are married, while I am alive, beginning on the night of the wedding.\nSigned, Joe\nTwo days later, Blanche and Albert marry. Two years later, Albert is heavily in\ndebt and needs quick cash. He finds someone, Luigi, willing to give him cash for\nthe amount of all the payments required by Joe\'s note, taking into account Joe\'s\nlife expectancy and discounting to present value. So Albert sells the note to Luigi\nin exchange for this wad of cash. Albert pays off most of his debts with the cash,\nand Luigi gives notice of the assignment to Joe, who refuses to pay Luigi anything. In the suit Luigi v. Joe, does the court hold that Albert accepted Joe\'s offer?\n3. What is consideration for the brewery\'s promise to pay $25,000 to the person\nwho catches Diamond Jim III? Does a bargain exist in this case?\n\nOne day Mr. Simmons went fishin\'\nTo catch Jim III wasn\'t his mission:\n"This is no prize I took,\nJust a gift on a hook."\nBut the feds said that he was just wishin\'.\n\xe2\x80\x94Anon., 2001 (altered slightly)\n\nD. Notice\nCARLILL v. CARBOLIC SMOKE BALL CO. (1893)\nCourt of Appeal\n1 Q.B. 256\n[\xc2\xb61]\n\nAppeal from a decision of Hawkins, J.\n\n[\xc2\xb62] The defendants, who were the proprietors and vendors of a medical preparation called "The Carbolic Smoke Ball," inserted in the Pall Mall Gazette of November 13, 1891, and in other newspapers, the following advertisement:\n320\n\n\x0c"100l. reward will be paid by the Carbolic Smoke Ball Company to any\nperson who contracts the increasing epidemic influenza, colds, or any disease caused by taking cold, after having used the ball three times daily for\ntwo weeks according to the printed directions supplied with each ball.\n1000l. is deposited with the Alliance Bank, Regent Street, shewing our\nsincerity in the matter.\n"During the last epidemic of influenza many thousand carbolic smoke\nballs were sold as preventatives against this disease, and in no ascertained\ncase was the disease contracted by those using the carbolic smoke ball.\n"One carbolic smoke ball will last a family several months, making it the\ncheapest remedy in the world at the price, 10s., post free. The ball can be\nrefilled at a cost of 5s. Address, Carbolic Smoke Ball Company, 27 Princes Street, Hanover Square, London."\n[\xc2\xb63] The plaintiff, a lady, on the faith of this advertisement, bought one of the\nballs at a chemist\'s, and used it as directed, three times a day, from November 20,\n1891, to January 17, 1892, when she was attacked by influenza. Hawkins, J., held\nthat she was entitled to recover the 100l. The defendants appealed.\nLINDLEY, L.J. [The Lord Justice stated the facts, and proceeded:-] * * * *\n****\n[\xc2\xb64] But then it is said, "Supposing that the performance of the conditions is an\nacceptance of the offer, that acceptance ought to have been notified." Unquestionably, as a general proposition, when an offer is made, it is necessary in order to\nmake a binding contract, not only that it should be accepted, but that the acceptance should be notified. But is that so in cases of this kind? I apprehend that\nthey are an exception to that rule, or, if not an exception, they are open to the observation that the notification of the acceptance need not precede the performance.\nThis offer is a continuing offer. It was never revoked, and if notice of acceptance\nis required * * *, the person who makes the offer gets the notice of acceptance\ncontemporaneously with his notice of the performance of the condition. If he gets\nnotice of the acceptance before his offer is revoked, that in principle is all you\nwant. I, however, think that the true view, in a case of this kind, is that the person\nwho makes the offer shows by his language and from the nature of the transaction\nthat he does not expect and does not require notice of the acceptance apart from\nnotice of the performance.\n****\n[The concurring opinions of Bowen and Smith, L.J., are omitted.]\nQuestions:\n1. If I promise my young neighbor, "I\'ll pay you $20 if you promise to mow my\nlawn," then, if my neighbor accepts, how will I receive notice of that acceptance?\n\n321\n\n\x0c2. If I promise my young neighbor, "I\'ll pay you $20 if you mow my lawn," must\nmy neighbor give notice of acceptance at the time of my promise or before mowing in order to collect later?\n3. A Carbolic Smoke Ball is a rubber ball with a short, pipe-like, hollow extension.\nThe extension is covered with a cloth. The ball is filled with carbolic acid in powder form. The user holds the extension under her nose and taps on the ball, which\nmakes the powder arise through the cloth. When the user breaths in the carbolic\nacid, it induces sneezing. Considering what the smoke ball is and how it was used,\nyou will appreciate the humor in a part of Justice Lindley\'s opinion I have cut.\nThe first issue Lindley addressed in the actual opinion was: Is this advertisement\nan offer? He phrased it differently, however. He said, "We must first consider\nwhether this was intended to be a promise at all, or whether it was a mere puff\nwhich meant nothing. Was it a mere puff?\xe2\x80\x9d A "mere puff"! What a lark! Was the\nadvertisement an offer?\n4. What is consideration for the smoke ball company\'s promise?\n\nELECTRIC STORAGE BATTERY CO. v. BLACK (1965)\nSupreme Court of Wisconsin\n27 Wis. 2d 366 (1965)\nGORDON, J.\n* * * * Notice of Acceptance.\n[\xc2\xb61] All courts agree that if the contract of guaranty affirmatively calls for notice, it is a condition which must be met in order to bind the guarantor on his\npromise. Mr. Milo Black\xe2\x80\x99s letter of guaranty, dated July 30, 1960, does not expressly cover the question whether he expected to be notified by the creditor that\nthe latter accepted the guaranty and intended to make deliveries of merchandise in\nreliance thereon. Courts have not been uniform in their decisions on the issue\nwhether notice of intention to accept such a guaranty is necessary in order to hold\nthe guarantor liable.\n[\xc2\xb62] Some courts have held that if there is any fair reason for the guarantor to\nbe uncertain that the creditor will accept the proposed guaranty, a notice of the\nintention to accept is a constructive condition to the liability of the guarantor.\n****\n[\xc2\xb63]\ntion:\n\nIn Restatement, 1 Contracts, p. 64, sec. 56, appears the following illustra\xe2\x80\x9c1. A writes to B: \xe2\x80\x98Let C have $100 and I guarantee its repayment.\xe2\x80\x99 Immediately on receiving this communication, B lets C have $100 but fails to\n322\n\n\x0cnotify A of the fact, although he knows that A is not otherwise likely to\nlearn of it. B cannot enforce the guaranty if C fails to pay the debt.\xe2\x80\x9d\n[\xc2\xb64] The decisions of the state of Wisconsin demonstrate that notice of acceptance to the guarantor is ordinarily required. In A. B. Kuhlman Co. v. Cave\n(1908), 135 Wis. 279, 115 N. W. 793, the guarantor wrote a letter to the creditor\nwhich contained the following:\n\xe2\x80\x9cI request that should Mr. Leon H. Cave . . . order goods from you at any\ntime after date of this letter of credit until further notice, that you ship\nsame to order of said agent, and I hereby guarantee payment for the same\nwithin twenty days after the arrival of the goods at destination.\xe2\x80\x9d\nThe trial court rendered judgment in favor of the creditor against the guarantor,\nand the supreme court reversed, with the following holding, at page 280:\n\xe2\x80\x9cIt is plain that this judgment was erroneous. The writing sued on was\nsimply a letter of credit and constituted an offer merely on the part of the\ndefendant, which would not become a contract until accepted and notice of\nacceptance given to the guarantor. This has been so recently held by this\ncourt that no extended discussion of the principle is either desirable or\nnecessary. Miami Co. Nat. Bank v. Goldberg, 133 Wis. 175, 113 N. W. 391.\nSee, also, New Home S. M. Co. v. Simon, 104 Wis. 120, 80 N. W. 71. No\nacceptance or notice of acceptance was found by the court; hence no completed contract of guaranty was made and no liability incurred.\xe2\x80\x9d\n[\xc2\xb65] * * * * At page 180 of the Miami County Nat. Bank Case, the court cited\nAcme Mfg. Co. v. Reed (1900), 197 Pa. St. 359, 47 Atl. 205, for the policy behind\nthis rule:\n\xe2\x80\x9cA guarantor of future credit or advancing is entitled to notice from the\nparty giving the credit of his acceptance of the guaranty, inasmuch as such\nnotice enables the guarantor to know the nature and extent of his liability,\nto exercise due diligence in guarding himself against losses which might\notherwise be unknown to him, and to avail himself of the appropriate\nmeans in law and equity to compel the other parties to discharge him from\nfuture responsibility. . . . The corporation accepted and filled the order, but\ngave no notice of the acceptance to the guarantor. Held, that the guarantor\nwas not liable.\xe2\x80\x9d * * * *\n[\xc2\xb66] This rule followed in Wisconsin and in a number of other states has been\nquestioned and circumscribed. When the guaranty contract is executed contemporaneously with the signing of the primary contract, it would be unsound to require\nformal notice. In addition, the guarantor may, by his conduct, waive the necessity\nof notice of acceptance.\n[\xc2\xb67] The plaintiff has referred the court to several cases which hold that notice\nof acceptance is not necessary when the guaranties are continuing in nature, as\nthey are considered to be offers which become effective as soon as they are relied\non by the creditor. Klatte v. Franklin State Bank (1933), 211 Wis. 613, 248 N. W.\n323\n\n\x0c158, 249 N. W. 72; Chicago Lock Co. v. Kirchner (1929), 199 Wis. 30, 225 N. W.\n185; International Textbook Co. v. Mabbott (1915), 159 Wis. 423, 150 N. W. 429.\nHowever, in each of the foregoing cases (unlike the case at bar) the giving of the\nguaranty was contemporaneous with the execution of the primary contract; under\nsuch circumstances, notice of acceptance would indeed be a formality.\n[\xc2\xb68] Also, these cases can be distinguished on other grounds. In the International Textbook Co. Case, supra, the court points out, at page 427, that the guarantor expressly waived any notice of acceptance of the guaranty. In the Chicago\nLock Co. Case, supra, the guarantor claimed he never received a formal notice of\nacceptance, but the court observed that the guarantor had actual knowledge of it\nfrom another source. In the Klatte Case, supra, the issue now being considered\nwas not before the court. The main issue there involved the legal effect of a notice\nby a surety that he intended to terminate his future liability on the contract. * * * *\n[\xc2\xb69]\n\nRestatement, Security (1941), p. 248, sec. 86, asserts the following rule:\n\xe2\x80\x9cWhere the surety offers to guarantee an extension of credit to the principal and the credit is extended as the sole consideration for the surety\xe2\x80\x99s\npromise, the contract is complete upon the extension of credit, but if the\nsurety does not know of the extension of credit and has no adequate means\nof ascertaining with reasonable promptness and certainty that the credit\nhas been extended and the creditor should know this, the contract of the\nsurety is discharged unless within a reasonable time after the extension of\ncredit the creditor exercises reasonable diligence to notify the surety\nthereof.\xe2\x80\x9d\n\n[\xc2\xb610] The effect of the Restatement rule is to obviate the need of notice to the\nsurety except in those cases wherein he is either unaware of the extension of credit or does not have adequate means to learn of it; under the Kuhlman Case and\nother decisions of this state, the emphasis is somewhat different: The guarantor is\nentitled to notice of acceptance unless there exists some special circumstance excusing it. There may even be contracts of guaranty which, by their special terms\nor particular circumstances, will require not only an original notice of acceptance\nbut additional notices of acceptance as to subsequent sales or shipments.\n[\xc2\xb611] The instant case was submitted upon stipulated facts. There is nothing in\nsuch facts or in the documentary exhibits that were received in evidence which\nwould relieve the creditor of its responsibility to give notice of acceptance of Mr.\nMilo Black\xe2\x80\x99s offer to guarantee payment for material purchased by his son. The\nplaintiff urges that when Mr. Milo Black responded (in Exhibit 5) to the creditor\xe2\x80\x99s\nletter of May 7, 1962, he acknowledged, in effect, that he had never expected to\nreceive notice of acceptance at the time he wrote the original letter. We are unable\nto derive such meaning from Exhibit 5. Therein Mr. Milo Black wrote:\n\xe2\x80\x9cI guaranteed his first shipment but that was nearly two years ago.\n\xe2\x80\x9cI would suggest your reducing your account to your cost and giving him\na long term settlement. His intentions are good if given a chance.\xe2\x80\x9d\n324\n\n\x0cIn our opinion, the foregoing language neither demands nor waives acceptance in\nany degree greater than the original letter of July 30, 1960. Under the authority of\nA. B. Kuhlman Co. v. Cave, supra, we conclude that Mr. Milo Black was entitled\nto notice of acceptance, and, in the absence of such notice, he cannot be held liable on the contract. * * * *\nWe conclude that Mr. Milo Black was entitled to receive from the plaintiff notice\nof acceptance of his guaranty contract and, since such notice was not given, the\nguarantor cannot be held liable.\nBy the Court. Judgment affirmed.\nQuestions:\n1. What did Black offer?\n2. What was consideration for Black\xe2\x80\x99s offer?\n3. Did the battery company accept Black\xe2\x80\x99s offer?\n4. Would you have known that you were to give Black notice of acceptance, given\nsuch cases as Carlill?\n5. When must such notice be given?\n______________________________\nOkay, you now know quite a bit about consideration and assent. This rather recent\nopinion employs those terms but in some odd ways. Which statements by the\ncourt contradict what we have read in prior cases? Which statements that the court\nmakes are factually or legally impossible or so unlikely as to make them unbelievable?\nCraig ASMUS et al. v. PACIFIC BELL et al. (2000)\nSupreme Court of California\n96 Cal.Rptr.2d 179\nCHIN, J.\n[\xc2\xb61] We granted the request of the Ninth Circuit Court of Appeals for an answer to the following certified question of law under rule 29.5 of the California\nRules of * * *Court: \xe2\x80\x9cOnce an employer\xe2\x80\x99s unilaterally adopted policy\xe2\x80\x94which\nrequires employees to be retained so long as a specified condition does not occur\xe2\x80\x94has become a part of the employment contract, may the employer thereafter\n325\n\n\x0cunilaterally [terminate] the policy, even though the specified condition has not\noccurred?\xe2\x80\x9d We conclude the answer to the certified question is yes. An employer\nmay unilaterally terminate a policy that contains a specified condition, if the condition is one of indefinite duration, and the employer effects the change after a\nreasonable time, on reasonable notice, and without interfering with the employees\xe2\x80\x99 vested benefits.\nI. BACKGROUND\n****\nB. Facts\n[\xc2\xb62] In 1986, Pacific Bell issued the following \xe2\x80\x9cManagement Employment Security Policy\xe2\x80\x9d (MESP): \xe2\x80\x9cIt will be Pacific Bell\xe2\x80\x99s policy to offer all management\nemployees who continue to meet our changing business expectations employment\nsecurity through reassignment to and retraining for other management positions,\neven if their present jobs are eliminated. * * * * This policy will be maintained so\nlong as there is no change that will materially affect Pacific Bell\xe2\x80\x99s business plan\nachievement.\xe2\x80\x9d\n[\xc2\xb63] In January 1990, Pacific Bell notified its managers that industry conditions\ncould force it to discontinue its MESP. In a letter to managers, the company\xe2\x80\x99s\nchief executive officer wrote: \xe2\x80\x9c[W]e intend to do everything possible to preserve\nour Management Employment Security policy. However, given the reality of the\nmarketplace, changing demographics of the workforce and the continued need for\ncost reduction, the prospects for continuing this policy are diminishing\xe2\x80\x94perhaps,\neven unlikely. We will monitor the situation continuously; if we determine that\nbusiness conditions no longer allow us to keep this commitment, we will inform\nyou immediately.\xe2\x80\x9d\n[\xc2\xb64] Nearly two years later, in October 1991, Pacific Bell announced it would\nterminate its MESP on April 1, 1992, so that it could achieve more flexibility in\nconducting its business and compete more successfully in the marketplace. That\nsame day, Pacific Bell announced it was adopting a new layoff policy (the Management Force Adjustment Program) that replaced the MESP but provided a generous severance program designed to decrease management through job reassignments and voluntary and involuntary terminations. Employees who chose to\ncontinue working for Pacific Bell would receive enhanced pension benefits. Those\nemployees who opted to retire in December 1991 would receive additional enhanced pension benefits, including increases in monthly pension and annuity options. Employees who chose to resign in November 1991 would receive these additional enhanced pension benefits as well as outplacement services, medical and\nlife insurance for one year, and severance pay equaling the employee\xe2\x80\x99s salary and\nbonus multiplied by a percentage of the employee\xe2\x80\x99s years of service.\n[\xc2\xb65] Plaintiffs are 60 former Pacific Bell management employees who were\naffected by the MESP cancellation. They chose to remain with the company for\n326\n\n\x0cseveral years after the policy termination and received increased pension benefits\nfor their continued employment while working under the new Management Force\nAdjustment Program. All but eight of them signed releases waiving their right to\nassert claims arising from their employment under the MESP or its termination.\n[\xc2\xb66] Plaintiffs filed an action in federal district court against Pacific Bell and its\nparent company, Pacific Telesis Group, seeking declaratory and injunctive relief,\nas well as damages for breach of contract, breach of fiduciary duty, fraud, and\nviolations of the Employee Retirement Income Security Act (ERISA) (29 U.S.C.\n\xc2\xa7 1000 et seq.). The parties filed countermotions for partial summary judgment\nbefore conducting discovery. The district court granted summary judgment in Pacific Bell\xe2\x80\x99s favor against the 52 plaintiffs who signed releases. In an unpublished\nopinion, the Ninth Circuit affirmed the district court\xe2\x80\x99s judgment in this respect.\n[\xc2\xb67] The district court granted summary judgment on the breach of contract\nclaim in favor of the eight plaintiffs who did not sign releases. It held that even if\nan employer had the right unilaterally to terminate a personnel policy creating a\ncontractual obligation, that right would not apply in cases where the original employment policy incorporated a term for duration or conditions for rescission, absent stronger evidence of the employees\xe2\x80\x99 assent to the policy modification than\ntheir continued employment. The court concluded that Pacific Bell could not terminate its MESP unless it first demonstrated (paraphrasing the words of the\nMESP) \xe2\x80\x9ca change that will materially alter Pacific Bell\xe2\x80\x99s business plan achievement.\xe2\x80\x9d\n[\xc2\xb68] Thereafter, the parties entered into a stipulation providing in part that Pacific Bell \xe2\x80\x9celected not to present any further evidence in this action with respect to\nthe question of whether there has been \xe2\x80\x98a change that will materially alter Pacific\nBell\xe2\x80\x99s business plan achievement\xe2\x80\x99 ... and agreed that summary judgment may be\nentered in favor of the eight remaining Plaintiffs on the issue of liability for their\nclaims of breach of contract by breach of the MES policy....\xe2\x80\x9d On May 5, 1997, the\ndistrict court entered an order approving the stipulation and entered judgment in\nplaintiffs\xe2\x80\x99 favor on the issue.\n[\xc2\xb69] Pursuant to the parties\xe2\x80\x99 agreement, the court certified for interlocutory appeal the issue whether Pacific Bell breached the MESP, and the Ninth Circuit accepted the interlocutory appeal. In a published opinion, the Ninth Circuit stated its\ncertification request and noted that our answer to the certified question would determine the remaining portion of the case pending before it. (Asmus v. Pacific Bell\n(9th Cir. 1998) 159 F.3d 422, 423-425.) The court agreed to abide by our answer.\n(Id. at p. 425.)\nII. DISCUSSION\nA.\nCalifornia Employment Law\n\n327\n\n\x0c[\xc2\xb610] We held in Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 254 Cal.\nRptr. 211, 765 P.2d 373 (Foley), that an implied-in-fact contract term not to terminate an employee without good cause will rebut the statutory presumption of Labor Code section 2922 that employment for an indefinite period is terminable at\nwill. (Id. at p. 677, 254 Cal.Rptr. 211, 765 P.2d 373.) The Foley court observed\nthat the trier of fact can infer an agreement to limit grounds for an employee\xe2\x80\x99s\ntermination based on the employee\xe2\x80\x99s reasonable reliance on company policy manuals. (Id. at pp. 681- 682, 254 Cal.Rptr. 211, 765 P.2d 373.) In Scott, we stated\nthat, in light of Foley, we could find \xe2\x80\x9cno rational reason why an employer\xe2\x80\x99s policy\nthat its employees will not be demoted except for good cause, like a policy restricting termination or providing for severance pay, cannot become an implied\nterm of an employment contract. In each of these instances, an employer promises\nto confer a significant benefit on the employee, and it is a question of fact whether\nthat promise was reasonably understood by the employee to create a contractual\nobligation.\xe2\x80\x9d (Scott, supra, 11 Cal.4th at p. 464, 46 Cal.Rptr.2d 427, 904 P.2d 834.)\nBoth Scott and Foley emphasized that employment policies, manuals, and offers\nwere not exempt from the rules governing contract interpretation. (Scott, supra,\n11 Cal.4th at p. 469, 46 Cal.Rptr.2d 427, 904 P.2d 834; Foley, supra, 47 Cal.3d at\np. 681, 254 Cal.Rptr. 211, 765 P.2d 373.)\n[\xc2\xb611] In some cases, an employer adopts a no-layoff policy or provides employees with an employment security policy in order to earn the employees\xe2\x80\x99 loyalty in\nexchange for granting them job security. This exchange is fair and it may, depending on the facts, provide the basis for an enforceable unilateral contract, i.e., one\nin which the promisor does not receive a promise in return as consideration. (1\nWitkin, Summary of Cal. Law (9th ed. 1987) Contracts, \xc2\xa7 213, pp. 221-222; see\nBefort, Employee Handbooks and the Legal Effect of Disclaimers (1991/1992) 13\nIndus. Rel. L.J. 326, 342.)\n[\xc2\xb612] In a unilateral contract, there is only one promisor, who is under an enforceable legal duty. (1 Corbin on Contracts (1993) \xc2\xa7 1.23, p. 87.) The promise is\ngiven in consideration of the promisee\xe2\x80\x99s act or forbearance. As to the promisee, in\ngeneral, any act or forbearance, including continuing to work in response to the\nunilateral promise, may constitute consideration for the promise. (1 Witkin,\nSummary of Cal. Law, supra, Contracts, \xc2\xa7 213, p. 221; 2 Corbin on Contracts\n(1995) \xc2\xa7 5.9, pp. 40-46; Rest.2d Contracts, \xc2\xa7\xc2\xa7 71, 72; Civ.Code, \xc2\xa7 1584.)*\n*\n\nAn employment contract in which the employer promises to pay an employee a wage in return\nfor the employee\xe2\x80\x99s work is typically described as a unilateral contract. Scholars observe, however,\nthat it is not always easy to determine whether an offer creates a unilateral or bilateral contract. (1\nCorbin on Contracts, supra, \xc2\xa7 1.23, pp. 93- 94.) Indeed, the distinction between the contract types\noften exaggerates the importance of the particular bargain compelling performance without commitment. \xe2\x80\x9cIn response to these concerns, the Restatement (Second) of Contracts has abandoned the\nterms \xe2\x80\x98unilateral\xe2\x80\x99 and \xe2\x80\x98bilateral,\xe2\x80\x99 without, however, abandoning the concepts behind them.\xe2\x80\x9d (Id. at\n\xc2\xa7 1.23, p. 94.) In the Restatement Second of Contracts, the unilateral contract is preserved in the\nphrase, \xe2\x80\x9cWhere an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance....\xe2\x80\x9d (Rest.2d Contracts, \xc2\xa7 45(1).) Most legal scholars, however, prefer\nto rely on the traditional terminology to distinguish between the two types of offers and promises\n\n328\n\n\x0c[\xc2\xb613] As a Court of Appeal observed, \xe2\x80\x9cOf late years the attitude of the courts (as\nwell as of employers in general) is to consider [employment security agreements]\nwhich offer additional advantages to employees as being in effect offers of a unilateral contract which offer is accepted if the employee continues in the employment, and not as being mere offers of gifts. They make the employees more content and happier in their jobs, cause the employees to forego their rights to seek\nother employment, assist in avoiding labor turnover, and are considered of advantage to both the employer and the employees.\xe2\x80\x9d (Chinn v. China Nat. Aviation\nCorp. (1955) 138 Cal.App.2d 98, 99-100, 291 P.2d 91 (Chinn (Cite as: 23 Cal.4th\n1, 11, 999 P.2d 71, 76, 96 Cal.Rptr.2d 179, 184) ) [employer\xe2\x80\x99s agreement to pay\nseverance benefits becomes enforceable unilateral contract if employee accepts\nbenefit offer by continuing employment]; see also Lang v. Burlington Northern R.\nCo. (D. Minn. 1993) 835 F. Supp. 1104, 1106 [continued employment constitutes\nacceptance of arbitration policy added to employment manual after employment\ncommenced]; Hunter v. Sparling (1948) 87 Cal.App.2d 711, 723, 197 P.2d 807\n[continuing services of employee is adequate consideration for employer\xe2\x80\x99s promise to pay future pension].)\n[\xc2\xb614] The parties agree that California law permits employers to implement policies that may become unilateral implied-in-fact contracts when employees accept\nthem by continuing their employment. We do not further explore the issue in the\ncontext here, although we noted that whether employment policies create unilateral contracts will be a factual question in each case. (Chinn, supra, 138\nCal.App.2d at pp. 99-100, 291 P.2d 91.) The parties here disagree on how employers may terminate or modify a unilateral contract that has been accepted by\nthe employees\xe2\x80\x99 performance. Plaintiffs assert that Pacific Bell was not entitled to\nterminate its MESP until it could demonstrate a change materially affecting its\nbusiness plan, i.e., until the time referred to in a clause in the contract. Pacific Bell\nasserts that because it formed the contract unilaterally, it could terminate or modify that contract as long as it did so after a reasonable time, gave affected employees reasonable notice, and did not interfere with the employees\xe2\x80\x99 vested benefits\n(e.g., pension and other retirement benefits). Even if we were to require additional\nconsideration, Pacific Bell contends it gave that consideration by offering enhanced pension benefits to those employees who chose to remain with the company after the modification took effect. Both parties rely on cases from other jurisdictions to support their respective positions.\n\nbecause the use of unilateral contract analysis has been growing in recent years, particularly in\nemployment cases. (1 Corbin on Contracts, supra, \xc2\xa7 1.23, p. 95.) As one scholar observed, \xe2\x80\x9cSometimes innovation does not take the form of a new substantive rule but rather of a new perspective\non the problem, reflected in the substitution of a new terminology or analysis for a traditional one.\nFor example, the Restatement (Second) abandons the terms \xe2\x80\x98unilateral\xe2\x80\x99 and \xe2\x80\x98bilateral\xe2\x80\x99 as descriptions of contracts.... There is no way to assess the extent to which such innovations in terminology\nand analysis portend innovations of substance.\xe2\x80\x9d (Farnsworth, Ingredients in the Redaction of the\nRestatement (Second) of Contracts (1981) 81 Colum. L. Rev. 1, 5-6, fns. omitted.) In this case, we\nretain the distinction between unilateral and bilateral contracts.\n\n329\n\n\x0cB.\n\nOther Jurisdictions\n\n[\xc2\xb615] Because there is no case in point on the present question in this state, the\nparties each rely on the rule as stated in other jurisdictions to support their particular views.\n[\xc2\xb616] Pacific Bell points to the rule in the majority of jurisdictions that have addressed the question whether and how an employer may terminate or modify an\nemployment security policy that has become an implied-in-fact unilateral contract.\nRegardless of the legal theory employed, the majority of other jurisdictions that\nhave addressed the question conclude that an employer may terminate or modify a\ncontract with no fixed duration period after a reasonable time period, if it provides\nemployees with reasonable notice, and the modification does not interfere with\nvested employee benefits. (See, e.g., Elliott v. Board of Trustees (1995) 104\nMd.App. 93, 655 A.2d 46, 51 (Elliott); In re Certified Question (1989) 432 Mich.\n438, 443 N.W.2d 112, 120, 121, fn. 17 (Bankey); Sadler v. Basin Elec. Power Coop. (N.D. 1988) 431 N.W.2d 296, 300; Fleming v. Borden, Inc. (1994) 316 S.C.\n452, 450 S.E.2d 589, 595 (Fleming); Ryan v. Dan\xe2\x80\x99s Food Stores, Inc. (Utah 1998)\n972 P.2d 395, 401; Progress Printing Co., Inc. v. Nichols (1992) 244 Va. 337, 421\nS.E.2d 428, 431 (Progress Printing); Gaglidari v. Denny\xe2\x80\x99s Restaurants, Inc. (1991)\n117 Wash.2d 426, 815 P.2d 1362, 1367 (Gaglidari); Leathem v. Research Found.\nof City Univ. (S.D.N.Y. 1987) 658 F. Supp. 651, 655.)\n[\xc2\xb617] Most of these courts refer to general contract law in deciding whether an\nemployer may terminate or modify an employment contract. They reason that because the employer created the policy\xe2\x80\x99s terms unilaterally, the employer may terminate or modify them unilaterally with reasonable notice. (See, e.g., Elliott, supra, 655 A.2d at p. 51; Fleming, supra, 450 S.E.2d at p. 595; Progress Printing,\nsupra, 421 S.E.2d at p. 431; Gaglidari, supra, 815 P.2d at p. 1367; but see Bankey,\nsupra, 443 N.W.2d at pp. 119-120 [relying on public policy grounds, not contract\ntheory, to allow employer to terminate discharge-for-cause policy with reasonable\nnotice].)\n[\xc2\xb618] Fleming indicated that of the three possible approaches to the termination\nquestion, it favored the majority approach as the one most consistent with unilateral contract principles. (Fleming, supra, 450 S.E.2d at pp. 594-595.) The first\napproach\xe2\x80\x94to allow termination without notice at any time before completion of\nthe contract\xe2\x80\x94struck the Fleming court as too harsh. (Ibid.) That approach is now\nconsidered obsolete in California. (Drennan v. Star Paving Co. (1958) 51 Cal.2d\n409, 414, 333 P.2d 757.) Fleming also rejected an alternative minority model that\nwould impose bilateral concepts on a unilateral contract to require mutual assent\nand additional consideration to support the termination. (Fleming, supra, 450\nS.E.2d at p. 595.) The court settled on the majority approach after recognizing that\nthe employer-employee relationship is not static. Fleming stated that \xe2\x80\x9c[e]mployers\nmust have a mechanism which allows them to alter the employee handbook to\nmeet the changing needs of both business and employees.\xe2\x80\x9d (Ibid.)\n330\n\n\x0c[\xc2\xb619] As plaintiffs observe, a minority of jurisdictions today hold that an employer cannot terminate or modify a unilateral employment contract without the\nemployees\xe2\x80\x99 express knowledge and consent. (See Torosyan v. Boehringer Ingelheim Pharm. (1995) 234 Conn. 1, 662 A.2d 89, 99; Brodie v. General Chemical\nCorp. (Wyo. 1997) 934 P.2d 1263, 1268; Robinson v. Ada S. McKinley Community Services (7th Cir. 1994) 19 F.3d 359, 364.) Like the dissent, they reason that\nany termination or modification of a unilateral employment contract requires additional consideration and acceptance by the affected employees, because their\nonly choices in light of a pending termination would be to resign or to continue\nworking. (See, e.g., Demasse v. ITT Corp. (1999) 194 Ariz. 500, 984 P.2d 1138,\n1145 (Demasse).)\n[\xc2\xb620] Most recently, in Demasse, the Ninth Circuit certified a question to the Arizona Supreme Court whether a layoff seniority provision (stating that the company will lay off junior employees ahead of senior employees) may be unilaterally\nmodified to permit the employer to lay off employees without regard to seniority\nstatus. (Demasse, supra, 984 P.2d at p. 1140.) The employee handbook reserved\nthe employer\xe2\x80\x99s right to amend, modify, or cancel it. When the employees received\nthe handbook, they signed an acknowledgement that they understood and would\ncomply with its provisions. (Id. at p. 1141.) Four years later, the employer modified the layoff policy to base it not on seniority status, but on employee \xe2\x80\x9c \xe2\x80\x98abilities\nand documentation of performance.\xe2\x80\x99 \xe2\x80\x9c (Ibid.) The plaintiffs were employees\nwhom the company laid off 10 days after the new policy took effect. They sued in\nfederal district court, alleging they were laid off in breach of an implied-in-fact\ncontract. (Ibid.)\n[\xc2\xb621] After the district court found the employer unilaterally could alter its\nhandbook, the Ninth Circuit certified the question to the Arizona Supreme Court.\nThat court concluded that, although most handbook terms are merely descriptions\nof the employer\xe2\x80\x99s present policies, some could create implied-in- fact contracts,\ndepending on the parties\xe2\x80\x99 intent. (Demasse, supra, 984 P.2d at p. 1143.) The court\nadopted the minority rule, holding that once a handbook policy becomes an implied-in-fact contract, the employer cannot unilaterally modify it. (Id. at p. 1144.)\nAny change requires mutual assent, with continued employment inadequate consideration for the change. (Id. at p. 1145.) The court was concerned the employer\ncould alter the contract terms and, on the same day, fire the employee, rendering\nthe original contract illusory. (Id. at p. 1147.) It rejected Arizona precedent holding that the employer provided consideration for the change by continuing to provide jobs, and the employees manifested their assent by continuing to work. (Ibid.)\n[\xc2\xb622] Vice Chief Justice Jones\xe2\x80\x99s dissent aptly rejected the notion that in order to\nfree itself of future obligations, the company would be required to provide employees with a wage increase or other bonus amounting to new consideration. To\ndo so, the dissent reasoned, would incorrectly impose a bilateral principle on the\nunilateral relationship, leaving the employer unable to manage its business, im331\n\n\x0cpairing essential managerial flexibility, and causing undue deterioration of traditional employment principles. (Demasse, supra, 984 P.2d at p. 1156 (dis. opn. of\nJones, V.C.J.); see also Fleming, supra, 450 S.E.2d at p. 595.)\n[\xc2\xb623] In preferring the more reasonable majority rule, the dissent also found unsatisfactory the Demasse majority\xe2\x80\x99s reasoning that employers not wanting to be\nbound by a handbook\xe2\x80\x99s terms are simply free never to issue one in the first place.\nAs the dissent observed, \xe2\x80\x9cemployers may be unilaterally forced by economic circumstance to curtail or shut down an operation, something employers have the\nabsolute right to do. When the employer chooses in good faith, in pursuit of legitimate business objectives, to eliminate an employee policy as an alternative to\ncurtailment or total shutdown, there has been forbearance by the employer. Such\nforbearance constitutes a benefit to the employee in the form of an offer of continuing employment. The employer who provides continuing employment, albeit\nunder newly modified contract terms, also provides consideration to support the\namended policy manual.\xe2\x80\x9d (Demasse, supra, 984 P.2d at p. 1155 (dis. opn. Of\nJones, V.C.J.).) We agree with the Demasse dissent\xe2\x80\x99s thoughtful analysis and find\nits application of contract principles to the question before it reflected in our own\nstate\xe2\x80\x99s developing case law and scholarly treatises. (See, e.g., Scott, supra, 11\nCal.4th at p. 472, 46 Cal.Rptr.2d 427, 904 P.2d 834; 1 Witkin, Summary of Cal.\nLaw, supra, Contracts, \xc2\xa7 233, p. 241.)\n[\xc2\xb624] We turn now to plaintiffs\xe2\x80\x99 several arguments that would restrict Pacific\nBell\xe2\x80\x99s right to terminate or modify its MESP.\nC. Application of Legal Principles\n1. Consideration\n[\xc2\xb625] Plaintiffs contend that Pacific Bell gave no valid consideration to bind the\nproposed MESP termination and subsequent modification. According to plaintiffs,\nwhen Pacific Bell unilaterally terminated the contract to create a new contract\nwith different terms, it left its employees with no opportunity to bargain for additional benefits or other consideration. The parties\xe2\x80\x99 obligations were unequal, and\nhence, there was no mutuality of obligation for the change.\n[\xc2\xb626] We disagree. The general rule governing the proper termination of unilateral contracts is that once the promisor determines after a reasonable time that it\nwill terminate or modify the contract, and provides employees with reasonable\nnotice of the change, additional consideration is not required. (1 Witkin, Summary\nof Cal. Law, supra, Contracts, \xc2\xa7 228, p. 236.) The mutuality of obligation principle requiring new consideration for contract termination applies to bilateral contracts only. (Ibid.) In the unilateral contract context, there is no mutuality of obligation. (Ibid.) For an effective modification, there is consideration in the form of\ncontinued employee services. (Ibid.) The majority rule correctly recognizes and\napplies this principle. (See ante, 96 Cal.Rptr.2d at pp. 185-187, 999 P.2d at pp. 76332\n\n\x0c78.) Here, Pacific Bell replaced its MESP with a subsequent layoff policy. Plaintiffs\xe2\x80\x99 continued employment constituted acceptance of the offer of the modified\nunilateral contract. As we have observed, a rule requiring separate consideration\nin addition to continued employment as a limitation on the ability to terminate or\nmodify an employee security agreement would contradict the general principle\nthat the law will not concern itself with the adequacy of consideration. (Foley,\nsupra, 47 Cal.3d at p. 679, 254 Cal.Rptr. 211, 765 P.2d 373.)\n[\xc2\xb627] The corollary is also true. Just as employers must accept the employees\xe2\x80\x99\ncontinued employment as consideration for the original contract terms, employees\nmust be bound by amendments to those terms, with the availability of continuing\nemployment serving as adequate consideration from the employer. When Pacific\nBell terminated its original MESP and then offered continuing employment to\nemployees who received notice and signed an acknowledgement to that effect, the\nemployees accepted the new terms, and the subsequent modified contract, by continuing to work. Continuing to work after the policy termination and subsequent\nmodification constituted acceptance of the new employment terms. (See Pine River State Bank v. Mettille (Minn. 1983) 333 N.W.2d 622, 626-627 [continued employment is sufficient consideration for employment contract modification].)\n2. Illusoriness\n[\xc2\xb628] Plaintiffs alternatively claim that Pacific Bell\xe2\x80\x99s MESP would be an illusory\ncontract if Pacific Bell could unilaterally modify it. Plaintiffs rely on the rule that\nwhen a party to a contract retains the unfettered right to terminate or modify the\nagreement, the contract is deemed to be illusory. (See 1 Witkin, Summary of Cal.\nLaw, supra, Contracts, \xc2\xa7 234, p. 241.)\n[\xc2\xb629] Plaintiffs are only partly correct. Scholars define illusory contracts by\nwhat they are not. As Corbin observes, \xe2\x80\x9cif a promise is expressly made conditional on something that the parties know cannot occur, no real promise has been\nmade. Similarly, one who states \xe2\x80\x98I promise to render a future performance, if I\nwant to when the time arrives,\xe2\x80\x99 has made no promise at all. It has been thought,\nalso, that promissory words are illusory if they are conditional on some fact or\nevent that is wholly under the promisor\xe2\x80\x99s control and bringing it about is left\nwholly to the promisor\xe2\x80\x99s own will and discretion. This is not true, however, if the\nwords used do not leave an unlimited option to the one using them. It is true only\nif the words used do not in fact purport to limit future action in any way.\xe2\x80\x9d (2\nCorbin on Contracts, supra, \xc2\xa7 5.32, pp. 175-176, fns. omitted.) Thus, an unqualified right to modify or terminate the contract is not enforceable. But the fact that\none party reserves the implied power to terminate or modify a unilateral contract\nis not fatal to its enforcement, if the exercise of the power is subject to limitations,\nsuch as fairness and reasonable notice. (See id. at p. 177; 1 Witkin, Summary of\nCal. Law, supra, Contracts, \xc2\xa7 233, p. 241.)\n\n333\n\n\x0c[\xc2\xb630] As Pacific Bell observes, the MESP was not illusory because plaintiffs obtained the benefits of the policy while it was operable. In other words, Pacific Bell\nwas obligated to follow it as long as the MESP remained in effect. Although a\npermanent nolayoff policy would be highly prized in the modern workforce, it\ndoes not follow that anything less is without significant value to the employee or\nis an illusory promise. (See Bankey, supra, 443 N.W.2d at pp. 119-120.) As long\nas the MESP remained in force, Pacific Bell could not treat the contract as illusory\nby refusing to adhere to its terms; the promise was not optional with the employer\nand was fully enforceable until terminated or modified. (2 Corbin on Contracts,\nsupra, \xc2\xa7 5.32, p. 177.)\n3. Vested Benefits\n[\xc2\xb631] Plaintiffs next allege that the MESP conferred a vested benefit on employees, like an accrued bonus or a pension. But as Pacific Bell observes, no court has\ntreated an employment security policy as a vested interest for private sector employees. (See Bankey, supra, 443 N.W.2d at p. 121, fn. 17 [vested rights concept\ncannot be stretched to include obligations created by employer\xe2\x80\x99s written policy\nstatements applicable to general workforce].) In addition, plaintiffs do not allege\nthat Pacific Bell terminated its MESP in bad faith. Although we agree with plaintiffs that an employer may not generally interfere with an employee\xe2\x80\x99s vested benefits, we do not find that the MESP gave rise to, or created any, vested benefits in\nplaintiffs\xe2\x80\x99 favor.\n4. Condition as Definite Duration Clause\n[\xc2\xb632] Plaintiffs alternatively contend that a contract specifying termination on\nthe occurrence (or nonoccurrence) of a future happening, in lieu of a specific date,\nis one of definite duration that cannot be terminated or modified until the event\noccurs. (See Wittmann v. Whittingham (1927) 85 Cal.App. 140, 145, 259 P. 63\n[contract to deliver shares of stock when stock dividends or profits had paid note\nis contract of definite duration]; La Jolla Casa deManana v. Hopkins (1950) 98\nCal.App.2d 339, 348, 219 P.2d 871 [contracts specified to last until \xe2\x80\x9c \xe2\x80\x98termination\nof the present war\xe2\x80\x99 \xe2\x80\x9c and until plaintiff \xe2\x80\x9c \xe2\x80\x98can reasonably build a home for herself\xe2\x80\x99\n\xe2\x80\x9c are contracts for definite duration].) Because Pacific Bell declared that it would\nmaintain its MESP \xe2\x80\x9cso long as\xe2\x80\x9d its business conditions did not substantially\nchange, plaintiffs, like the dissent, assert that the specified condition is automatically one for a definite duration that Pacific Bell is obliged to honor until the condition occurs.\n[\xc2\xb633] Contrary to plaintiffs and the dissent, a \xe2\x80\x9cspecified condition\xe2\x80\x9d may be one\nfor either definite or indefinite duration. Indeed, both plaintiffs and the dissent fail\nto recognize that courts have interpreted a contract that conditions termination on\nthe happening of a future event as one for a definite duration or time period only\nwhen \xe2\x80\x9cthere is an ascertainable event which necessarily implies termination.\xe2\x80\x9d\n(Lura v. Multaplex, Inc. (1982) 129 Cal.App.3d 410, 414-415, 179 Cal.Rptr. 847;\n334\n\n\x0csee also Bradner v. Vasquez (1951) 102 Cal.App.2d 338, 344, 227 P.2d 559.) As\nPacific Bell observes, even though its MESP contained language specifying that\nthe company would continue the policy \xe2\x80\x9cso long as\xe2\x80\x9d it did not undergo changes\nmaterially affecting its business plan achievement, the condition did not state an\nascertainable event that could be measured in any reasonable manner. As Pacific\nBell explains, when it created its MESP, the document referred to changes that\nwould have a significant negative effect on the company\xe2\x80\x99s rate of return, earnings\nand, \xe2\x80\x9cultimately the viability of [its] business.\xe2\x80\x9d The company noted that if the\nchange were to occur, it would result from forces beyond Pacific Bell\xe2\x80\x99s control,\nand would include \xe2\x80\x9cmajor changes in the economy or the public policy arena.\xe2\x80\x9d\nThese changes would have nothing to do with a fixed or ascertainable event that\nwould govern plaintiffs\xe2\x80\x99 or Pacific Bell\xe2\x80\x99s obligations to each other under the policy. Therefore, the condition in the MESP did not restrict Pacific Bell\xe2\x80\x99s ability to\nterminate or modify it, as long as the company made the change after a reasonable\ntime, on reasonable notice, and in a manner that did not interfere with employees\xe2\x80\x99\nvested benefits. (See, e.g., Consolidated Theatres, Inc. v. Theatrical Stage Employees Union (1968) 69 Cal.2d 713, 731, 73 Cal.Rptr. 213, 447 P.2d 325 [contract for indefinite duration terminable after a reasonable time on reasonable notice].)\n[\xc2\xb634] The facts show that those conditions were met here. Pacific Bell implemented the MESP in 1986, and it remained in effect until 1992, when the company determined that maintaining the policy was incompatible with its need for flexibility in the marketplace. The company then implemented a new Management\nForce Adjustment Program in which employees whose positions were eliminated\nwould be given 60 days to either find another job within the company, leave the\ncompany with severance benefits after signing a release of any claims, or leave\nthe company without severance benefits. The employees were provided with a\nbooklet entitled Voluntary Force Management Programs detailing the new benefits the company provided following the MESP cancellation.\n[\xc2\xb635] Thus, the MESP was in place for a reasonable time and was effectively\nterminated after Pacific Bell determined that it was no longer a sound policy for\nthe company. Contrary to the dissent, Pacific Bell did not engage in behavior that\none could characterize as \xe2\x80\x9cmanipulative or oppressive.\xe2\x80\x9d (Dis. opn., post, 96\nCal.Rptr.2d at p. 191, 999 P.2d at p. 82.) Employees were provided ample advance\nnotice of the termination, and the present plaintiffs even enjoyed at least two more\nyears of employment and corresponding benefits under a modified policy before\nthey were eventually laid off. In sum, Pacific Bell maintained the MESP for a reasonable time, it provided more than reasonable notice to the affected employees\nthat it was terminating the policy, and it did not interfere with employees\xe2\x80\x99 vested\nbenefits. The law requires nothing more.\n\n335\n\n\x0cIII. CONCLUSION\n[\xc2\xb636] As discussed, our employment cases support application of contract principles in the decision whether an employer may unilaterally terminate an employment security policy that has become an implied- in-fact unilateral contract.\n(See, e.g., Foley, supra, 47 Cal.3d at pp. 678- 679, 254 Cal.Rptr. 211, 765 P.2d\n373.) Under contract theory, an employer may terminate a unilateral contract of\nindefinite duration, as long as its action occurs after a reasonable time, and is subject to prescribed or implied limitations, including reasonable notice and preservation of vested benefits. (1 Witkin, Summary of Cal. Law, supra, Contracts, \xc2\xa7\xc2\xa7\n233-234, pp. 240-241.) The facts clearly show that employees enjoyed the benefits of the MESP for a reasonable time period, and that Pacific Bell gave its employees reasonable and ample notice of its intent to terminate the MESP. The\ncompany also did not at any time interfere with employees\xe2\x80\x99 vested benefits in effecting the MESP termination. In addition, the employees accepted the company\xe2\x80\x99s\nmodified policy by continuing to work in light of the modification. Therefore, in\nresponse to the Ninth Circuit\xe2\x80\x99s certification request, we conclude that we should\nanswer as follows: An employer may terminate a written employment security\npolicy that contains a specified condition, if the condition is one of indefinite duration and the employer makes the change after a reasonable time, on reasonable\nnotice, and without interfering with the employees\xe2\x80\x99 vested benefits.\nBAXTER, J., BROWN, J., and HALLER, J., concur.\nQuestions:\n1. This opinion is full of doctrinal and analytical errors, almost as if the court\nneeds to retake first-semester Contracts. How many errors can you find?\n2. Did the court hold that there was a "change that will materially affect Pacific\nBell\'s business plan achievement" or that Pacific Bell had the right to modify the\nMESP?\n3. What would you do as an employee when Pacific Bell announced the MESP\nand you wanted to continue working at Pacific Bell but reject the MESP? How\ncan you be sure when the employee is going back to work that she means to accept the MESP? Is this circumstance different from Simmons v. United States?\nDiCicco v. Schweizer?\n4. What would you do as an employee when Pacific Bell announced the discontinuance of the MESP if you wanted to continue to work at Pacific Bell but wanted to reject the discontinuance and continue instead to accept the MESP? How\ncan you be sure when the employee is going back to work that she means to accept the discontinuance of the MESP?\n5. Is consideration required for the discontinuance?\n336\n\n\x0c6. How many positions have courts taken with respect to the enforceability of a\nmodification of an employee policy that arguably takes away rights from employees?\n7. Asmus is an analytical disaster. Much better reasoned is the opinion from Michigan dealing with the same issue, In re Certified Question (Bankey v. Storer\nBroadcasting Co.), 443 N.W.2d 112 (Mich. 1989), which follows. How is it different from Asmus?\n[\xc2\xb61] Without rejecting the applicability of unilateral contract theory in\nother situations, we find it inadequate as a basis for our answer to the\nquestion as worded and certified by the United States Court of Appeals.\nWe look, instead, to the analysis employed in Toussaint which focused upon the benefit that accrues to an employer when it establishes desirable\npersonnel policies. Under Toussaint, written personnel policies are not enforceable because they have been \xe2\x80\x9coffered and accepted\xe2\x80\x9d as a unilateral\ncontract; rather, their enforceability arises from the benefit the employer\nderives by establishing such policies.\nWhile an employer need not establish personnel policies or\npractices, where an employer chooses to establish such policies\nand practices and makes them known to its employees, the employment relationship is presumably enhanced. The employer secures an orderly, cooperative and loyal work force, and the employee the peace of mind associated with job security and the conviction that he will be treated fairly. No pre-employment negotiations need take place and the parties\xe2\x80\x99 minds need not meet on the\nsubject; nor does it matter that the employee knows nothing of the\nparticulars of the employer\xe2\x80\x99s policies and practices or that the employer may change them unilaterally. It is enough that the employer chooses, presumably in its own interest, to create an environment in which the employee believes that, whatever the personnel\npolicies and practices, they are established and official at any given\ntime, purport to be fair, and are applied consistently and uniformly\nto each employee. The employer has then created a situation \xe2\x80\x9cinstinct with an obligation.\xe2\x80\x9d Toussaint, supra, 408 Mich. P. 613 * * *\n(emphasis added).\n[\xc2\xb62] Under the Toussaint analysis, an employer who chooses to establish desirable personnel policies, such as a discharge-for-cause employment policy, is not seeking to induce each individual employee to show up\nfor work day after day, but rather is seeking to promote an environment\nconducive to collective productivity. The benefit to the employer of promoting such an environment, rather than the traditional contract-forming\nmechanisms of mutual assent or individual detrimental reliance, gives rise\n337\n\n\x0cto a situation \xe2\x80\x9cinstinct with an obligation.\xe2\x80\x9d When, as in the question before\nus, the employer changes its discharge-for-cause policy to one of employment at will, the employer\xe2\x80\x99s benefit is correspondingly extinguished, as is\nthe rationale for Court\xe2\x80\x99s enforcement of the discharge-for-cause policy.\n[\xc2\xb63] Even though a discharge-for-cause policy may be modified or revoked, while such a policy remains in effect \xe2\x80\x9cthe employer may not treat\nits promise as illusory\xe2\x80\x9d by refusing to adhere to the policy\xe2\x80\x99s terms. Toussaint, p. 619. It has been suggested that if such a policy is revocable, it is\nof no value and thus is the equivalent of an illusory promise. Of course, a\npermanent job commitment would be highly prized in the modern work\nforce. However, it does not follow that anything less than a permanent job\ncommitment is without meaning or value. Indeed, the prevalence of job\nsecurity provisions in collective bargaining agreements that typically expire after only a few years attests to the fact that such commitments need\nnot be permanent to have value.\n[\xc2\xb64] Furthermore, it is important to recognize that even though an employment policy is revocable, the Toussaint approach to employer obligation promotes stability in employment relations in two significant ways:\nby holding employers accountable for personnel policies that \xe2\x80\x9care established and official at any given time,\xe2\x80\x9d and by requiring that such policies\nbe \xe2\x80\x9capplied consistently and uniformly to each employee.\xe2\x80\x9d Toussaint holds\nthat an employee may \xe2\x80\x9clegitimately expect\xe2\x80\x9d that his employer will uniformly apply personnel policies \xe2\x80\x9cin force at any given time.\xe2\x80\x9d Id.\n[\xc2\xb65] It is one thing to expect that a discharge-for-cause policy will be\nuniformly applied while it is in effect; it is quite a different proposition to\nexpect that such a personnel policy, having no fixed duration, will be immutable unless the right to revoke the policy was expressly reserved. The\nvery definition of \xe2\x80\x9cpolicy\xe2\x80\x9d negates a legitimate expectation of permanence.\n\xe2\x80\x9cPolicy\xe2\x80\x9d is defined as \xe2\x80\x9ca definite course or method of action selected (as\nby a government, institution, group, or individual) from among alternatives and in the light of given conditions to guide and usu[ally] determine\npresent and future decisions; . . . a projected program consisting of desired\nobjectives and the means to achieve them . . . .\xe2\x80\x9d Webster\xe2\x80\x99s Third New International Dictionary Unabridged Edition (1964). In other words, a \xe2\x80\x9cpolicy\xe2\x80\x9d is commonly understood to be a flexible framework for operational\nguidance, not a perpetually binding contractual obligation. In the modern\neconomic climate, the operating policies of a business enterprise must be\nadaptable and responsive to change.\n[\xc2\xb66] Were we to answer the certified question by holding that once an\nemployer adopted a policy of discharge-for-cause, such a policy could\nnever be changed short of successful renegotiation with each employee\nwho worked while the policy was in effect, the uniformity stressed in\n338\n\n\x0cToussaint, supra pp. 613, 619, 624, would be sacrificed. If an employer\nhad amended its handbook from time to time, as often is the case, the employer could find itself obligated in a variety of different ways to any\nnumber of different employees, depending on the modifications which had\nbeen adopted and the extent of the work force turnover. Furthermore, were\nwe to answer the certified question as plaintiff Bankey requests, many\nemployers would be tied to anachronistic policies in perpetuity merely because they did not have the foresight to anticipate Court\xe2\x80\x99s Toussaint decision by expressly reserving at the outset the right to make policy changes.\n\nE. Silence\nGary F. KASKISTO v. NORTH AM. EQUITABLE LIFE ASSURANCE CO.\n(1981)\nDistrict Court of Appeal of Florida, Third District\n405 So.2d 248\nBASKIN, Judge.\n[\xc2\xb61] Because we find no evidence of appellant\xe2\x80\x99s acceptance of the changed\ncontract terms submitted by appellee, we reverse the final judgment entered by\nthe trial court. The court\xe2\x80\x99s announcement that its decision resulted from appellant\xe2\x80\x99s failure to object to the altered mortgage interest rate conflicts with the principle of law that silence does not constitute an acceptance of an offer unless a duty\nto speak has arisen from a past relationship of the parties, their previous dealings,\nor other circumstances. 17 C.J.S., Contracts, s 41(e) (1963). Appellant neither initialed the changes in the contract nor performed any act which might operate as an\nestoppel. See Mayer v. First National Co. of Sarasota, 99 Fla. 173, 125 So.2d 909\n(Fla. 1930). The requirement that acceptance of an offer to sell realty must be absolute and unconditional, Koplin v. Bennett, 155 So.2d 568 (Fla. 1st DCA 1963),\nwas not met.\n[\xc2\xb62]\nion.\n\nReversed and remanded for further proceedings consistent with this opin-\n\nQuestion: Under unjust enrichment doctrine, a person who embarks on a contract\nperformance before the other party has assented or given the performing party\nsome reasonable expectation of compensation is called a what?\nNote: Kaskisto states the general rule clearly. The question for the succeeding cases in this section is "when does a duty to speak arise?"\n\n339\n\n\x0cJames R. LEE v. SHELLER GLOBE CORP.\nv. STAUFFER CHEMICAL COMPANY and Brent Chemical Corporation (1986)\nUnited States District Court, S.D. Mississippi,\nHattiesburg Division\n661 F. Supp. 6\nMEMORANDUM OPINION\nGEX, District Judge.\n[\xc2\xb61] This matter is before the Court on the cross motions for summary judgment filed by Third Party Plaintiff Sheller Globe Corporation (\xe2\x80\x9cSheller\xe2\x80\x9d) and\nThird Party Defendant Stauffer Chemical Company (\xe2\x80\x9cStauffer\xe2\x80\x9d). * * * *\n[\xc2\xb62] Plaintiff James Lee, while employed as a sales representative for Stauffer,\nwas injured July 7, 1979, on the premises of Sheller\xe2\x80\x99s automotive plant then located in Kosciusko, Mississippi. Plaintiff was present in the plant in connection\nwith the sale of certain chemicals from Stauffer to Sheller as evidenced by Sheller\xe2\x80\x99s purchase order numbered K 06099 issued June 20, 1979. Lee filed this action\nagainst Sheller to recover damages for personal injuries allegedly sustained in the\naccident upon which his complaint is based. Sheller filed a third party complaint\nseeking contractual indemnity from Stauffer based upon the pertinent terms of the\npurchase order. The reverse side of the purchase order contained the following\nprovision:\nINDEMNIFICATION In the event that Seller is required to enter the\npremises owned, leased, occupied by, or under the control of Buyer during\nthe performance of services hereunder or during delivery of articles herein\ncontemplated, Seller agrees to indemnify and save harmless Buyer, officers, employees and agents from all costs, loss, expense, damages, claims,\nsuits or liability resulting from injury, including death, to person or property damage arising from or in any manner growing out of the act or omission of Seller, its subcontractors, agents, or their respective employees,\nand Seller agrees to indemnify Buyer with respect to any claim or demand\nfor damage for personal injury or death of, or property damage sustained\nby, Seller, its subcontractors, agents or their respective employees, which\narise from any cause, including negligence of Buyer, its agents, subcontractors or, their respective employees.\nSheller\xe2\x80\x99s urging of its motion is premised upon a finding that the subject chemical\nsale constituted a contract for the sale of goods pursuant to the provisions of the\nMississippi Uniform Commercial Code. * * * *\n[\xc2\xb63] The Court has considered the briefs and authorities submitted by the parties and is of the opinion that Sheller\xe2\x80\x99s premise is well founded. A contract was\nestablished by virtue of Sheller\xe2\x80\x99s purchase order (the offer) and Stauffer\xe2\x80\x99s shipment of the ordered goods (the acceptance). Miss.Code Ann. Sections 75-2-204,\n\n340\n\n\x0c75-2-206 (1972). Accordingly, the terms of the purchase order created the parties\xe2\x80\x99\nrespective obligations.\nQuestions:\n1. Is this decision consistent with UCC \xc2\xa7 2-204?\n2. How would you define the circumstances under which this duty arose?\n\nJOSEPHINE AND ANTHONY CORP. et al. v. Norman P. HORWITZ (1977)\nSupreme Court, Appellate Division, Second Department\n396 N.Y.S.2d 53\nMEMORANDUM BY THE COURT\n[\xc2\xb61] In an action inter alia to declare (1) that a certain stipulation is of no force\nand effect and (2) the amount due plaintiffs from defendant, plaintiffs appeal from\na judgment of the Supreme Court, Kings County, dated March 16, 1976, which\nafter a trial, is in favor of plaintiff Josephine Presti and against defendant, upon\nthe court\xe2\x80\x99s declaration that the stipulation was in full force and effect and fixation\nof the amount due from defendant.\n[\xc2\xb62]\n\nJudgment affirmed, with costs.\n\n[\xc2\xb63] During the period from October, 1964 to March, 1965 the defendant borrowed from the plaintiff corporation. Part payment was made, resulting, as of\nMay 18, 1971, in a balance due of $8,950. On that date the defendant offered\nplaintiffs a \xe2\x80\x9cstipulation\xe2\x80\x9d, with terms, although no action was pending. The plaintiffs did not sign the stipulation as tendered, but instead modified it. By his attorney\xe2\x80\x99s letter, the defendant rejected the agreement as modified and renewed the\noriginal offer. A check for $75, the first payment, was enclosed with that letter.\nThe plaintiffs never replied, but did cash that check and the subsequent 18 checks\ntendered pursuant to the renewed offer.\n[\xc2\xb64] Defendant ceased paying on May 3, 1973. Plaintiffs commenced this action, contending that no agreement had ever been entered into and seeking the remaining principal due, with interest from October, 1964. It is our opinion that the\nparties entered into a binding agreement, and, therefore, that interest should be\ncomputed from the date of default on that agreement.\n[\xc2\xb65] Plaintiffs\xe2\x80\x99 return of the modified agreement constituted a counteroffer. The\ndefendant\xe2\x80\x99s attorney\xe2\x80\x99s letter rejected the counteroffer. However, that same letter\nalso contained a renewal of the original offer. While silence, of itself, is not an\nacceptance absent a duty to speak, \xe2\x80\x9c(a) duty to speak is imperative as a matter of\n341\n\n\x0claw where conduct, accompanied by silence, would be deceptive and beguiling\xe2\x80\x9d\n(Brennan v. National Equit. Inv. Co., 247 N.Y. 486, 490, 160 N.E. 924, 925).\nWhen the plaintiffs cashed the checks, an acceptance of the renewed offer was\nindicated by their conduct.\nQuestions: How would you define this circumstance in which a duty to speak\narose? Is this case different from Lee v. Sheller Globe Corp.?\n\nDEN NORSKE STATS OLJESELSKAP, A.S. v. HYDROCARBON PROCESSING, INC. (1998)\nUnited States District Court, S.D. Texas, Houston Division\n992 F. Supp. 913\nOpinion on Summary Judgment\nHUGHES, District Judge.\n1.\n\nIntroduction.\n\n[\xc2\xb61] Two companies entered into contracts for the sale of propane. A broker\narranged the contracts and confirmed them by telephone calls and facsimile\ntransmissions to both companies. When the price of propane dropped, one of the\ncompanies repudiated the contracts. The other sued seeking damages. Because\ncontracts were formed, confirmed, and breached, the damaged company will recover its loss.\n2.\n\nFacts.\n\n[\xc2\xb62] On September 24, 1996, Hydrocarbon Processing, Inc. (Hydro) agreed to\nsell Den norske stats oljeselskap, a.s. (Statoil), 10,000 barrels of propane at\n$0.4200 per gallon for delivery in February 1997. Gasteam USA, Inc., brokered\nthe agreement, called both parties to confirm that the sale had closed, and confirmed the agreement by sending facsimiles to both parties.\n[\xc2\xb63] On December 20, 1996, Statoil and Hydro agreed to trade February propane deliveries. Statoil agreed to sell Hydro 25,000 barrels of propane at $0.5725\nper gallon; Hydro agreed to sell Statoil 25,000 barrels at a price to be calculated\nbased on the average current month quotation in an independent report. Again,\nGasteam brokered the transaction, called both parties to confirm that the sale had\nclosed, and sent confirming faxes to them.\n[\xc2\xb64] The faxes specified the seller, buyer, product, quality, quantity, delivery,\nprice, payment, title, risk, distribution, confidentiality, and commission. They began by saying, \xe2\x80\x9cFurther to recent conversations, we are pleased to confirm the following transaction ....\xe2\x80\x9d They did not require a response from the parties. Hydro\n342\n\n\x0cnever requested additional documents nor objected to the faxes. In none of seventy-two transactions brokered by Gasteam for Hydro and not involving Statoil in\n1995-1996 did Hydro tell Gasteam that it required additional documents to close a\ndeal.\n[\xc2\xb65] In mid-February\xe2\x80\x94sixty days after the second deal and, coincidentally, at\nthe time for performance of both deals\xe2\x80\x94Hydro sent letters to Statoil repudiating\nboth contracts, contending that the faxes were mere offers. Propane had by then\ndropped to $0.38793 per gallon. Statoil covered the first contract. It made a profit\nof $6,300.00 on the first deal but lost $193,798.50 on the second. Statoil seeks its\nnet loss of $187,498.50, Gasteam\xe2\x80\x99s brokerage fee of $1,050.00, attorneys\xe2\x80\x99 fees of\n$14,473.33, and pre- and post-judgment interest.\n3.\n\nContract Formation\n\n[\xc2\xb66] Texas law allows a contract to \xe2\x80\x9cbe made in any manner sufficient to show\nagreement.\xe2\x80\x9d Tex. Bus. & Com. Code \xc2\xa7 2.204(a) (1994). The confirming memoranda from the middle party reliably evinces agreement.\n[\xc2\xb67] The only reasonable interpretation of the facts is that contracts were\nformed. Gasteam conveyed Statoil\xe2\x80\x99s offers to Hydro and Hydro\xe2\x80\x99s acceptance to\nStatoil. It then confirmed the transactions by telephone and fax. That is simple\ncontract formation\xe2\x80\x94offer and acceptance\xe2\x80\x94occurring through a broker and documented in faxes.\n[\xc2\xb68] In a similar situation, a contract between two grain dealers was formed\nthrough a broker who sent confirmation by wire and mail to the parties. The purchasing grain dealer made no complaints on receipt of the confirmation. Producers Grain Corp. v. Rust, 291 S.W.2d 477, 480 (Tex.Civ.App.\xe2\x80\x94Amarillo 1956, no\nwrit). See also Louisiana Land & Exploration Co. v. Pilot Petroleum Corp., 900\nF.2d 816, 817 n.4 (5th Cir. 1990) (noting, without comment, that parties had \xe2\x80\x9ccontracted\xe2\x80\x9d for sale of jet fuel by buyer\xe2\x80\x99s contacting broker who transmitted confirmation telexes to seller). Under Texas law, therefore, Hydro and Statoil formed\ncontracts. Hydro\xe2\x80\x99s argument that there is a genuine issue of material fact on propane industry standards for contract formation does not matter: a contract was\nformed under Texas law.\n[\xc2\xb69] At a minimum, Hydro acquiesced to the contracts. Even if, as Hydro contends, the faxes were mere offers, Hydro\xe2\x80\x99s silence in the face of \xe2\x80\x9cconfirming telefaxes\xe2\x80\x9d is acceptance.\nIt is true that, generally speaking, an offeree has a right to make no reply\nto offers, and hence that his silence is not to be construed as an acceptance.\nBut, where the relation between the parties is such that the offeror is justified in expecting a reply, or the offeree is under a duty to reply, the latter\xe2\x80\x99s\nsilence will be regarded as acceptance. Under such circumstances, \xe2\x80\x9cone\nwho keeps silent, knowing that his silence will be misinterpreted, should\n343\n\n\x0cnot be allowed to deny the natural interpretation of his conduct,\xe2\x80\x9d etc. Williston on Contracts, \xc2\xa7\xc2\xa7 91, 91a.\nLaredo Nat\xe2\x80\x99l Bank v. Gordon, 61 F.2d 906, 907 (5th Cir. 1932). Hydro had to object openly and promptly if it did not intend to perform. Because it remained silent, Hydro at least acquiesced to the contract.\n4.\n\nAffirmative Defenses.\n\n[\xc2\xb610] Hydro has asserted the affirmative defenses of failure of consideration,\nestoppel, fraud, and contributory negligence. Two of these defenses are legally\nimpossible: one cannot negligently commit fraud. None of the defenses is convincing: no fact shows lack of consideration, estoppel, fraud, or contributory negligence.\n[\xc2\xb611] In its response to Statoil\xe2\x80\x99s motion for summary judgment, Hydro raises the\nstatute of frauds as an affirmative defense, which it had not asserted in its original\nanswer and which it did not seek leave to add until seven months after filing its\noriginal answer. The claim is, therefore, procedurally deficient. It is also substantively defective. Gasteam\xe2\x80\x99s confirming faxes satisfy the statute:\n[A] contract for the sale of goods for the price of $500 or more is not enforceable ... unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party\nagainst whom enforcement is sought or by his authorized agent or broker.\nTex. Bus. & Com. Code \xc2\xa7 2.201(a) (1994). Gasteam was the broker for both parties and acted with the authority of both parties. Statoil asked Gasteam to arrange\nthe transactions. Gasteam arranged them with Hydro. Hydro conveyed its acceptance to Gasteam. Gasteam prepared, signed, and delivered the faxes to both\nparties. Each fax constitutes \xe2\x80\x9ca writing ... signed by ... [an] authorized agent or\nbroker.\xe2\x80\x9d Although Gasteam\xe2\x80\x99s president stated in his affidavit that Gasteam acted\nindependently rather than as the agent for either of the parties, Gasteam was, nevertheless, authorized by both parties to broker the transactions. At the very least,\nGasteam had the authority to convey information between the parties. Gasteam\nsent signed, confirming faxes to the parties. The statute of frauds requires nothing\nmore.\n[\xc2\xb612] Even if the statute of frauds was not already satisfied, the faxes would fall\nwithin its \xe2\x80\x9cmerchant\xe2\x80\x99s exception\xe2\x80\x9d:\nBetween merchants if within a reasonable time a writing in confirmation\nof the contract and sufficient against the sender is received and the party\nreceiving it has reason to know its contents, it satisfies the requirements of\n[this law] against such party unless written notice of objection to its contents is given within ten days after it is received.\nTex. Bus. & Com. Code \xc2\xa7 2.201(b) (1994). Hydro and Statoil are merchants. The\nfaxes are good against Statoil since Gasteam functioned as Statoil\xe2\x80\x99s broker. Tex.\nBus. & Com. Code \xc2\xa7 2.201(a) (1994). They were plainly letters of confirmation\n(\xe2\x80\x9c[W]e are pleased to confirm the following transaction ....\xe2\x80\x9d); because they did not\n344\n\n\x0crequire further action by either party to form the contracts, they were not mere\noffers. See Adams v. Petrade Int\xe2\x80\x99l, Inc., 754 S.W.2d 696, 706 (Tex. App.\xe2\x80\x94\nHouston [1st Dist.] 1988, writ denied) (holding that a writing was a mere offer\nrather than a confirmation of an oral contract because recipient was required to\nsign and return copy of letter). Hydro received the faxes and knew their contents.\nIt did not object. The faxes satisfy the statute of frauds under its requirements for\nmerchants. * * * *\n6.\n\nConclusion\n\n[\xc2\xb613] The parties formed a contract; Hydro breached it. Statoil will recover its\nloss.\nQuestion: Is this case different from the last two: Lee v. Sheller Globe Corp. and\nJosephine and Anthony Corp. v. Horwitz?\n\nLOUISVILLE TIN & STOVE CO. v. LAY (1933)\nCourt of Appeals of Kentucky\n65 S.W.2d 1002\n[\xc2\xb61]\n\nAppeal from Circuit Court, Knox County.\n\n[\xc2\xb62] Action by the Louisville Tin & Stove Company against Mrs. May Lay.\nJudgment in favor of the defendant, and the plaintiff filed a motion for an appeal.\n[\xc2\xb63] Motion sustained, appeal granted, and judgment reversed in accordance\nwith opinion.\nRICHARDSON, Justice.\n[\xc2\xb64] The Louisville Tin & Stove Company, a corporation, with its chief office\nat Louisville, Ky., without the knowledge or consent of Mrs. May Lay, who was\nengaged in business at Corbin, Ky., under the firm name and style of Lay\xe2\x80\x99s Variety Store, shipped to her, in her firm name, a lot of heaters, gas ranges, and circulators of the value of $701.06, via the Louisville & Nashville Railroad Company. At\nthat time D. W. Lay, the husband of May Lay, was engaged at Corbin, Ky., in an\nindependent business under the firm name of Lay\xe2\x80\x99s Electric Shop. He was insolvent and without credit. Mrs. Lay was solvent with good credit which induced\njobbers and wholesalers to ship goods to her when ordered in her firm name. The\nmerchandise was shipped in good faith and billed to Lay\xe2\x80\x99s Variety Store, Corbin,\nKy., by the Louisville Tin & Stove Company, and received by the railroad company at Corbin, Ky., on September 16, 1930. B. Wax was a drayman at Corbin, and\nduring the month of September nine shipments of merchandise arrived at Corbin\nconsigned to Lay\xe2\x80\x99s Variety Store and each of them was delivered by the railroad\n345\n\n\x0ccompany to Wax, the drayman for Mrs. Lay. Wax claims that he was authorized\nby her to receive shipments of merchandise consigned to Lay\xe2\x80\x99s Variety Store,\nwhenever they arrived at the freight depot at Corbin, and that on the morning of\nSeptember 18th he noticed in the freight station a number of gas stoves, ranges,\netc., consigned to Lay\xe2\x80\x99s Variety Store. Knowing that Mrs. Lay was not selling that\nkind of merchandise, he did not take the same out of the depot until he talked with\nher. On the forenoon of September 18th he imparted to her the information of the\nnumber of ranges, stoves, etc., at the depot, billed to her, and asked her what she\nwanted done with them. She became angry and announced, \xe2\x80\x9cthat was some of Mr.\nLay\xe2\x80\x99s doings, and that she knew nothing about the shipments at all and had nothing to do with them, but that she would find out about them.\xe2\x80\x9d He claims he went\nback that afternoon to her place of business, again asked her about the shipment,\nwhen she told him to deliver the ranges, stoves, etc., to Lay\xe2\x80\x99s Electric Shop, and\nthat he did so. D. W. Lay \xe2\x80\x9cgave him a check for the freight and drayage.\xe2\x80\x9d Mrs.\nLay\xe2\x80\x99s version of the transaction is that she knew nothing about the shipment; that\nshe did not order the merchandise or authorize the ordering of same, directly or\nindirectly; that when Wax told her about the shipment being at the freight depot\nshe became very angry and objected to it and refused to accept same; that Wax\nfirst told her about the shipment one morning; that she talked to her husband, D.\nW. Lay, owner of the Lay\xe2\x80\x99s Electric Shop, and that later, some time that afternoon,\nthe drayman, Wax, mentioned the matter to her again, and that she told him to see\nMr. Lay and Mr. Bohmer about the matter; that \xe2\x80\x9cif she told Wax to deliver the\nmerchandise to Lay\xe2\x80\x99s Electric Shop, she did not remember it; that she and W. D.\nLay were man and wife, having two children and reside in the same house.\xe2\x80\x9d\n[\xc2\xb65] Of the entire shipment of merchandise, $349.39 worth were returned to the\nLouisville Tin & Stove Company, the balance retained by Lay\xe2\x80\x99s Electric Shop of\nthe value of $359.67. This action was brought to recover this balance. The case\nwas tried before a jury, resulting in a verdict in favor of Mrs. Lay.\n[\xc2\xb66] The testimony not only of Wax, the drayman, but that of Mrs. Lay, shows\nthat although the merchandise was billed and shipped to Lay\xe2\x80\x99s Variety Store without the knowledge or consent of Mrs. Lay, she, after its arrival, assumed control\nof its disposition, knowing full well that it had been so billed and shipped by the\nLouisville Tin & Stove Company. It was entirely optional with her to reject it unqualifiedly, or to accept it or direct it to be delivered to her husband. Without considering the testimony of the drayman, bearing on this topic, her own testimony\nshows that she directed the drayman to see her husband, thus conferring upon him\nthe authority and right to determine the disposition of the shipment. After so doing,\non his failure to pay the balance due thereon, she cannot escape her liability therefor to the consignor, the Louisville Tin & Stove Company. It was at her direction\nand by her authority that the merchandise reached the possession of her husband\nat his place of business.\n[\xc2\xb67] It is a reasonable and a sound principle that where merchandise is consigned to one in his name, in the absence of an express contract or order or when\n346\n\n\x0cone person sends or delivers goods to another, under circumstances which indicate that a sale is intended and the one to whom the goods are sent or delivered\nwith knowledge of the facts does not object or offer to return them within a reasonable time, but retains and uses them as his own or directs another to do so, a\ncontract of sale and purchase will be implied. Caldwell & Drake v. Cunningham,\n162 Ky. 272, 172 S. W. 498, 500; Caskey v. Williams Bros., 227 Ky. 73, 11 S.W.2d\n991.\n[\xc2\xb68] In Caldwell & Drake v. Cunningham, we quoted with approval from Estey\nOrgan Co. v. Lehman, 132 Wis. 144, 111 N. W. 1097, 11 L. R. A. (N. S.) 254, 122\nAm. St. Rep. 951, the prevailing rule in such cases: \xe2\x80\x9cThe defendants having received and retained the property with knowledge of the price plaintiff expected to\nreceive, and without any agreement, express or implied, for a different price, they\ncannot escape payment of the price stated in the invoice. * * * The minds of the\nparties not having met upon the price prior to the time the property was received\nby defendants at Houghton, Mich., it was their duty, when they received it with\nknowledge of the price, to refuse to accept it, unless they were willing to pay the\nprice stated in the invoice. Having taken the property and converted it to their\nown use, they became liable to pay such price, which the evidence establishes was\nthe regular selling price and a reasonable price.\xe2\x80\x9d * * * *\n[\xc2\xb69] Mrs. Lay, however, failed to exercise her right to repudiate the shipment,\nbut exercised the authority of authorizing the drayman to see her husband for directions over it. Her acts constitute an acceptance of the shipment and bring the\ncase squarely within the principle we have reiterated.\n[\xc2\xb610] The trial court erred in refusing to direct a verdict for the Louisville Tin &\nStove Company. The motion for an appeal is sustained, the appeal granted, and\njudgment reversed for proceedings consistent herewith.\nQuestions:\n1. How would you define the circumstances creating the duty to speak in this case?\n2. Was Mrs. Lay unjustly enriched?\n\nAUSTIN v. BURGE (1911)\nKansas City Court of Appeals, Missouri\n137 S.W. 618\nELLISON, J.\n[\xc2\xb61] This action was brought on an account for the subscription price of a\nnewspaper. The judgment in the trial court was for the defendant. It appears that\n347\n\n\x0cplaintiff was publisher of a newspaper in Butler, Mo., and that defendant\xe2\x80\x99s fatherin-law subscribed for the paper, to be sent to defendant for two years, and that the\nfather-in-law paid for it for that time. It was then continued to be sent to defendant,\nthrough the mail, for several years more. On two occasions defendant paid a bill\npresented for the subscription price, but each time directed it to be stopped. Plaintiff denies the order to stop, but for the purpose of the case we shall assume that\ndefendant is correct. He testified that, notwithstanding the order to stop it, it was\ncontinued to be sent to him, and he continued to receive and read it, until finally\nhe removed to another state.\n[\xc2\xb62] We have not been cited to a case in this state involving the liability of a\nperson who, though not having subscribed for a newspaper, continues to accept it\nby receiving it through the mail. There are, however, certain well-understood\nprinciples in the law of contracts that ought to solve the question. It is certain that\none cannot be forced into contractual relations with another and that therefore he\ncannot, against his will, be made the debtor of a newspaper publisher. But it is\nequally certain that he may cause contractual relations to arise by necessary implication from his conduct. The law in respect to contractual indebtedness for a\nnewspaper is not different from that relating to other things which have not been\nmade the subject of an express agreement. Thus one may not have ordered supplies for his table, or other household necessities, yet if he continue to receive and\nuse them, under circumstances where he had no right to suppose they were a gratuity, he will be held to have agreed, by implication, to pay their value. In this\ncase defendant admits that, notwithstanding he ordered the paper discontinued at\nthe time when he paid a bill for it, yet plaintiff continued to send it, and he continued to take it from the post office to his home. This was an acceptance and use\nof the property, and, there being no pretense that a gratuity was intended, an obligation arose to pay for it.\n[\xc2\xb63] A case quite applicable to the facts here involved arose in Fogg v. Atheneum, 44 N. H. 115, 82 Am. Dec. 191. There the Independent Democrat newspaper\nwas forwarded weekly by mail to the defendant from May 1, 1847, to May 1,\n1849, when a bill was presented, which defendant objected to paying on the\nground of not having subscribed. Payment was, however, finally made, and directions given to discontinue. The paper changed ownership, and the order to stop it\nwas not known to the new proprietors for a year; but, after being notified of the\norder, they nevertheless continued to send it to defendant until 1860, a period of\n11 years, and defendant continued to receive it through the post office. Payment\nwas several times demanded during this time, but refused on the ground that there\nwas no subscription. The court said that: \xe2\x80\x9cDuring this period of time the defendants were occasionally requested, by the plaintiff\xe2\x80\x99s agent, to pay their bill. The\nanswer was, by the defendants, \xe2\x80\x98We are not subscribers to your newspaper.\xe2\x80\x99 But\nthe evidence is the defendants used or kept the plaintiff\xe2\x80\x99s * * * newspapers, and\nnever offered to return a number, as they reasonably might have done, if they\nwould have avoided the liability to pay for them. Nor did they ever decline to take\nthe newspapers from the post office.\xe2\x80\x9d The defendant was held to have accepted\n348\n\n\x0cthe papers, and to have become liable for the subscription price by implication of\nlaw.\n[\xc2\xb64] In Ward v. Powell, 3 Har. (Del.) 379, it was decided that an implied\nagreement to pay for a newspaper or periodical arose by the continued taking and\naccepting the paper from the post office, and that \xe2\x80\x9cif a party, without subscribing\nto a paper, declines taking it out of the post office, he cannot become liable to pay\nfor it; and a subscriber may cease to be such at the end of the year, by refusing to\ntake the papers from the post office, and returning them to the editor as notice of\nsuch determination.\xe2\x80\x9d In Goodland v. Le Clair, 78 Wis. 176, 47 N.W. 268, it was\nheld that if a person receives a paper from the post office for a year, without refusing or returning it, he was liable for the year\xe2\x80\x99s subscription. And a like obligation\nwas held to arise in the case of Weatherby v. Bonham, 5 C. & P. 228.\n[\xc2\xb65] The preparation and publication of a newspaper involves much mental and\nphysical labor, as well as an outlay of money. One who accepts the paper, by continuously taking it from the post office, receives a benefit and pleasure arising\nfrom such labor and expenditure as fully as if he had appropriated any other product of another\xe2\x80\x99s labor, and by such act he must be held liable for the subscription\nprice. On the defendant\xe2\x80\x99s own evidence, plaintiff should have recovered.\n[\xc2\xb66]\n\nThe judgment will therefore be reversed, and the cause remanded.\nAll concur.\n\nQuestions:\n1. Is this case different from Louisville Tin & Stone Co. v. Lay?\n2. Is Burge unjustly enriched?\n\n39 U.S.C. \xc2\xa7 3009\nQuestions: Would this section, if applied to the facts of Austin v. Burge, reverse it?\nHow about Louisville Tin & Stove Co. v. Lay?\n\nNegative Option Plans\nSection 425.1 of 16 C.F.R. defines a negative option plan as "a contractual plan or\narrangement under which a seller periodically sends to subscribers an announcement which identifies merchandise (other than annual supplements to previously\nacquired merchandise) it proposes to send to subscribers to such plan, and the\nsubscribers thereafter receive and are billed for the merchandise identified in each\nsuch announcement, unless by a date or within a time specified by the seller with\n349\n\n\x0crespect to each such announcement the subscribers, in conformity with the provisions of such plan, instruct the seller not to send the identified merchandise.\xe2\x80\x9d\nDoes the negative option plan sound familiar? The regulation does not prohibit\nnegative option plans but requires that sellers clearly disclose plan terms and that\ncertain standards of fairness be met:\n(b) In connection with the sale or distribution of goods and merchandise in\nor affecting commerce, as "commerce" is defined in the Federal Trade\nCommission Act, it shall constitute an unfair or deceptive act or practice\nfor a seller in connection with the use of any negative option plan to:\n(1) Refuse to credit, for the full invoiced amount thereof, the return\nof any selection sent to a subscriber, and to guarantee to the Postal\nService or the subscriber postage adequate to return such selection\nto the seller, when:\n(i) The selection is sent to a subscriber whose form indicating that he does not want to receive the selection was received by the seller by the return date or was mailed by the\nsubscriber by the mailing date;\n(ii) Such form is received by the seller after the return date,\nbut has been mailed by the subscriber and postmarked at\nleast 3 days prior to the return date;\n(iii) Prior to the date of shipment of such selection, the seller has received from a contract-complete subscriber, a written notice of cancellation of membership adequately identifying the subscriber; however, this provision is applicable\nonly to the first selection sent to a canceling contractcomplete subscriber after the seller has received written notice of cancellation. After the first selection shipment, all\nselection shipments thereafter are deemed to be unordered\nmerchandise pursuant to Section 3009 of the Postal Reorganization Act of 1970, as adopted by the Federal Trade\nCommission in its public notice, dated September 11, 1970;\nor\n(iv) The announcement and form are not received by the\nsubscriber in time to afford him at least ten (10) days in\nwhich to mail his form.\nQuestion: A company called BMG used to sell compact discs with music on them\nusing a negative option plan, but it no longer does so. Consider instead another\nbusiness: Boxy Charm Inc. The website www.boxycharm.com\'s subscription program works as follows, according to https://www.boxycharm.com/how-it-works\n(6/27/19):\n1. Join Now. In each box, you will receive 4 to 5 full-size beauty items.\nRanging from makeup and skincare, to beauty tools and color cosmetics,\neach box has a minimum value of $100.\n350\n\n\x0c2. Explore Your Beauty. Find new and creative ways to use the products in\nyour BOXYCHARM by watching tutorials and looks shared by our\nCharmer community on social media.\n3. Be Charmed. Enjoy exclusive, members-only offers from the best\nbrands in beauty. Win free products through BOXY-Giveaways and receive reward points redeemable in our exclusive Charm Shop!\nAt the bottom of the page is a button labeled "SUBSCRIBE."\nSubscriptions start at $21 per month (an amazing deal for products with a minimum value of $100, don\'t you think?). Here\xe2\x80\x99s how the subscription works, according to the legal terms:\nBy subscribing to the monthly Box Service, you are considered a Subscriber of the Service, and you agree to the recurring monthly payment of\na Twenty-One Dollars USD ($21.00) monthly subscription fee, whether\nmonthly or in pre-paid intervals offered by the Website. Once you subscribe (or once a User is off the Waitlist), the Company will process your\nTwenty One Dollars USD ($21.00) monthly subscription fee for the first\nmonth, or your pre-payment for a Three (3), Six (6) or Twelve (12) month\nterm, as described below, and every month, or term thereafter, until your\nsubscription is cancelled, without further notice to you or authorization\nfrom you. * * * *\nActive Subscriber subscriptions will be automatically extended for successive renewal periods of the same duration as the initial subscription term\nunless the Active Subscriber expressly cancels the subscription at any time\nby logging in to the Account Page and selecting \'Subscriptions\' under \'Account preferences\', or by emailing BOXYCHARM at info@boxycharm.com with the subject line \xe2\x80\x9cUNSUBSCRIBE\xe2\x80\x9d from the\nemail you used to create your User account on the Website. If a Subscriber\non the waitlist wishes to cancel their Subscription, that Subscriber must\ncontact BOXYCHARM by emailing info@boxycharm.com, with the\nemail subject line "UNSUBSCRIBE".\nIf you want to cancel, you can, by going to your Account on the website. The cancellation instructions include the following: "Please Note: You must cancel your\naccount before the 1st of the month to prevent being billed for that month\'s box."\nIf you get a box you do not want, can you send it back? Nope: "Once you have\nbeen billed for a new subscription activation or a subscription renewed we are not\nable to offer a refund, return, or exchange."\nIs the Boxycharm subscription a negative option plan? When does the sale of the\nitems in the box occur?\n351\n\n\x0cIncidentally, the Boxycharm website terms also include this:\nBy accessing the Website and agreeing to these Terms and Conditions, you\nexpressly waive the right to request a chargeback from your credit card\ncompany, and acknowledge that your sole recourse for any disputes is\nthrough the dispute resolution procedures noted herein.\nF. The Battle of the Forms\nUniform Commercial Code \xc2\xa7 2-207. Add\xe2\x80\x99l Terms in Acceptance or Confirmation, and all cmts.\nUCC \xc2\xa7 2-207 is one of those disasters of law that happen occasionally when a\nstatute is drafted to handle a complex legal problem for the first time. Commentators Duesenberg & King said it "is one of the most important, subtle, and difficult\nin the entire Code, and well it may be said that the product as it finally reads is not\naltogether satisfactory.\xe2\x80\x9d 3 Richard W. Duesenberg & Lawrence P. King, Sales &\nBulk Transfers Under The Uniform Commercial Code \xc2\xa7 3.02 (1992). They understate the difficulties considerably. The statute was drafted to address the problem\nof forms sent between companies ordering and shipping goods. The forms might\nor might (probably will) not reflect what the buyer and seller consciously agreed.\nTypically, an ordering company will send a purchase order and the shipping company will respond by shipping the goods and sending an invoice. In virtually all\nsuch situations, the terms listed on the purchase order (usually on the back) do not\nagree with the terms listed on the invoice (again, usually on the back of the invoice).\nHere are two problems to walk you through the statute:\nPROBLEM 47. Tom Manufacturing Company sends a purchase order for tools to\nJerry Tools Company. Tom\'s purchase order contains terms A-J and a clause stating that "shipment of goods ordered herein shall constitute acceptance of the\nterms and conditions of this purchase order.\xe2\x80\x9d Jerry promptly ships the tools in response to Tom\'s purchase order and with the tools sends an invoice which contains terms -B, -D, -J (meaning the terms provide exactly the opposite of the corresponding terms in Tom\'s purchase order, i.e., if B requires arbitration, -B requires a court trial and explicitly says no arbitration will take place). Jerry\xe2\x80\x99s invoice also contains terms K-Q. Jerry\'s form has a clause stating that "acceptance\nof the goods shipped herein constitutes acceptance of the terms of this invoice,\nwhich shall supersede the terms of any purchase order received prior to shipment.\xe2\x80\x9d But both the purchase order and invoice on their front sides describe the\nsame ordered tools. Tom accepts the tools and promptly pays for them. The reverse sides of the forms Tom and Jerry sent look something like this:\n\n352\n\n\x0cTom\nA\nB\nC\nD\nE\n\nF\nG\nH\nI\nJ\n\nJerry\n-B\nM\n-D\nN\n-J\nO\nK\nP\nL\nQ\n\nQuestions:\nA. Common Law\n1. Under the common law rule set forth in Foster v. Ohio State University, did Jerry accept Tom\'s order?\n2. Under the common law rule set forth in Lee v. Sheller Globe Corp., did Jerry\naccept Tom\'s order?\n3. Under common law rules, did Tom accept Jerry\'s invoice?\nB. UCC \xc2\xa7 2-207(1)\n1. Was Jerry\'s invoice a definite and seasonable expression of acceptance?\n2. Was Jerry\'s response to the purchase order expressly made conditional on Tom\'s\nassent to its terms?\n3. Did a contract form when Jerry sent the invoice? (You might consider comments 1 & 2 in regard to this question. The answer to this question is "Yes," but I\nwant you to be able to read the statute and tell me why.)\nC. UCC \xc2\xa7 2-207(2) (comments 3-6 to section 2-207 are helpful here)\n1. Term K negates standard warranties of merchantability and fitness for a particular purpose. Does it become part of the contract?\n2. Clause L requires Tom as purchaser to pay 15% interest on overdue invoices,\nbut Jerry\'s invoice does not restrict Tom\'s credit or vary from ordinary trade practices in the industry. Is L part of the contract?\n3. What does section (2) say about whether -J is part of the contract? (Careful!\nThe drafters of section 2-207 made this a trick question! Section (1) talks about\nadditional and different terms. What does (2) say about different terms?)\n\n353\n\n\x0c4. What does comment 3 say about whether -J becomes part of the contract?\n5. What does comment 6 say about whether -J becomes part of the contract?\n\nPROBLEM 48. Bugs Production Co. sends a purchase order for supplies to\nElmer Supply Co. Bugs\'s purchase order orders from Elmer 2000 model XJ4aZ\nkeyboards. Bugs\'s purchase order also contains terms A-J and a clause stating that\n"shipment of goods ordered herein shall constitute acceptance of the terms and\nconditions of this purchase order." Elmer promptly ships the keyboards in response to Bugs\'s purchase order. Elmer sends an invoice with the keyboards\nwhich contains terms -B, -D, -J (purporting to negate corresponding terms in\nBugs\'s purchase order) and also terms K-Q. Elmer\'s form also describes the products shipped differently, however. It says that Bugs ordered 3000 model XJ7bX\nkeyboards, which are another model entirely and much more expensive. In fact,\nElmer shipped with the invoice 2000 model XJ4aZ keyboards, so Elmer\'s product\nand invoice do not match. Elmer\'s form also contains a clause stating that "this\ninvoice as an acceptance of any purchase order is expressly made conditional on\nthe purchaser\'s assent to any additional or different terms contained herein." Bugs\naccepted the keyboards, which are defective. Bugs wants Elmer to take them back,\nbut Elmer claims that term -D on its invoice disclaimed all warranties (as opposed\nto term D in the purchase order, which provided for warranties), so Elmer refuses\nto take the keyboards back.\nA. UCC \xc2\xa7 2-207(1)\n1. Was Elmer\'s invoice a definite and seasonable expression of acceptance? The\nanswer to this question is "No," but the answer is not in the statute. Consider the\nfollowing from Alliance Wall Corp. v. Ampat Midwest Corp., 477 N.E.2d 1206\n(Ohio Ct. App. 1984):\n[\xc2\xb61] At issue, of course, was not the date of delivery, but the date of\nshipment. The goods were to be shipped F.O.B. seller\xe2\x80\x99s plant. This was a\nshipment contract. R.C. 1302.32(A). * The seller was required only to\nplace the goods in the possession of a carrier, make a reasonable contract\nfor shipment, tender documents of title, and notify the buyer of the shipment. R.C. 1302.48.\xe2\x80\xa0\n\n\xe2\x80\x9cUnless otherwise agreed the term F.O.B. (which means \xe2\x80\x98free on board\xe2\x80\x99) at a named place, even\nthough used only in connection with the stated price, is a delivery term under which: \xe2\x80\x9c(1) when\nthe term is F.O.B. the place of shipment, the seller must at that place ship the goods in the manner\nprovided in section 1302.48 of the Revised Code and bear the expense and risk of putting them\ninto the possession of the carrier * * *.\xe2\x80\x9d R.C. 1302.32(A)(1).\n\xe2\x80\xa0\n\xe2\x80\x9cWhere the seller is required or authorized to send the goods to the buyer and the contract does not require him to deliver them at a particular destination, then unless otherwise agreed he must:\n*\n\n354\n\n\x0c[\xc2\xb62] The parties did not agree in their correspondence to a shipment\ndate, nor is there persuasive evidence that the parties orally agreed upon a\ndefinite shipment date. Seller\xe2\x80\x99s vice-president at trial admitted that seller\nwas aware of buyer\xe2\x80\x99s urgent need for prompt shipment. This fact, in conjunction with buyer\xe2\x80\x99s statement in its letter of September 1, 1981, that\nshipment should \xe2\x80\x9ccertainly\xe2\x80\x9d occur within seven weeks, is persuasive evidence that the parties had agreed that \xe2\x80\x9ctime was of the essence.\xe2\x80\x9d It was a\ncrucial term of the contract. Nevertheless, the seller did not expressly\nagree to the shipment date of seven weeks, but instead proposed a \xe2\x80\x9ctentative shipping date\xe2\x80\x9d of November 6, 1981.\n[\xc2\xb63] Seller\xe2\x80\x99s agent explained that in contracts of this type, it could not\nguarantee a shipping date because it depended for raw materials upon a\nMinnesota supplier. It could not fabricate the aluminum panels without\nthose materials.\n[\xc2\xb64] In the case at bar there was testimony that toward the end of September, the seller learned that its supplier would deliver the aluminum two\nweeks behind schedule. The seller promptly notified the buyer that this\nwould delay shipment from November 6 to November 20, 1981. There\nwas also testimony that after the exchange of letters on October 14 and\nOctober 22, 1981, the buyer orally agreed to the new delivery date, and\npromised not to hold seller liable for damages resulting from this delay.\nThe buyer offered no evidence to rebut this testimony.\n[\xc2\xb65] The parties did not agree, in their confirmatory memoranda, to a\nshipment date. The shipment date was a \xe2\x80\x9cmaterial term\xe2\x80\x9d; in fact, it appears\nto have been more important to the buyer than was the exact price, because of its need to promptly complete the work. The seller appeared to be\njust as adamant not to be bound to any particular date.\n[\xc2\xb66] The parties\xe2\x80\x99 failure to reach an agreement on the matter of the\nshipment date and price prevented the formation of a binding contract. The\nbuyer had proposed a date of seven weeks from September 1, 1981; to-wit,\nOctober 19, 1981. The seller had \xe2\x80\x9ctentatively\xe2\x80\x9d offered to ship on Novem\xe2\x80\x9c(A) put the goods in the possession of such a carrier and make such a contract for their\ntransportation as may be reasonable having regard to the nature of the goods and other\ncircumstances of the case; and\n\xe2\x80\x9c(B) obtain and promptly deliver or tender in due form any document necessary to enable\nthe buyer to obtain possession of the goods or otherwise required by the agreement or by\nusage of trade; and\n\xe2\x80\x9c(C) promptly notify the buyer of the shipment.\n\xe2\x80\x9cFailure to notify the buyer under division (C) of this section or to make a proper contract\nunder division (A) of this section is a ground for rejection only if material delay or loss\nensures.\xe2\x80\x9d R.C. 1302.48.\n\n355\n\n\x0cber 6, 1981. In short, the seller did not agree to be bound by any particular\ndate of shipment.\n[\xc2\xb67] In the usual case, the seller\xe2\x80\x99s written confirmation \xe2\x80\x9coperates as an\nacceptance even though it states terms additional or different from those\noffered * * *.\xe2\x80\x9d R.C. 1302.10(A). .... This rule, however, does not apply\nwhere the parties disagree as to \xe2\x80\x9cdickered for\xe2\x80\x9d terms. In such a case, contract formation does not occur until both sides have at least partially performed ....\n2. Was Elmer\'s response to the purchase order expressly made conditional on\nBugs\'s assent to its terms?\nB. UCC \xc2\xa7 2-207(3)\n1. Did a contract form under (3)?\n2. Are the keyboards subject to warranties? (See UCC \xc2\xa7\xc2\xa7 2-314 & 2-315, infra in\nChapter 10.)\n3. In Alliance Wall Corp., what should the shipment date be if the parties performed but failed to agree? (See UCC \xc2\xa7\xc2\xa7 2-309.)\nDo you see the relationship between \xc2\xa7 2-207(1) and (3)? Consider the following\nfrom Gardner Zemke Co. v. Dunham Bush, Inc., 850 P.2d 319 (N.M. 1993):\nThe one proposition on which most courts and commentators agree at this\npoint in the construction of the statute is that Section 2-207(3) applies only\nif a contract is not found under Section 2-207(1). Dorton, 453 F.2d at 1166;\nDuesenberg & King, \xc2\xa7 3.03[1] at 3-40; 2 Hawkland, \xc2\xa7 2-207:04 at 178-79;\nWhite & Summers, \xc2\xa7 1-3 at 35. However, there are courts that disagree\neven with this proposition. See Westinghouse Elec. Corp. v. Nielsons, Inc.,\n647 F. Supp. 896 (D.Colo. 1986) (dealing with different terms, finding a\ncontract under 2-207(1) and proceeding to apply 2-207(2) and 2-207(3)).\n\nIf you have worked through these problems to find the answers, you are ready to\nread the cases which follow in the last part of this chapter.\n\n356\n\n\x0cThe GARDNER ZEMKE COMPANY v. DUNHAM BUSH, INC. (1993)\nSupreme Court of New Mexico\n850 P.2d 319\nOPINION\nFRANCHINI, Justice.\n[\xc2\xb61] This case involves a contract for the sale of goods and accordingly the\ngoverning law is the Uniform Commercial Code\xe2\x80\x94Sales, as adopted in New Mexico. NMSA 1978, \xc2\xa7\xc2\xa7 55-2-101 to -2-725 (Orig.Pamp. & Cum.Supp.1992) (Article\n2). In the course of our discussion, we will also refer to pertinent general definitions and principles of construction found in NMSA 1978, Sections 55-1-101 to 1-209 (Orig.Pamp. & Cum.Supp.1992). Section 55-2-103(4). The case presents us\nwith our first opportunity to consider a classic \xe2\x80\x9cbattle of the forms\xe2\x80\x9d scenario arising under Section 55- 2-207. Appellant Gardner Zemke challenges the trial court\xe2\x80\x99s\njudgment that a Customer\xe2\x80\x99s Acknowledgment (Acknowledgment) sent by appellee manufacturer Dunham Bush, in response to a Gardner Zemke Purchase Order\n(Order), operated as a counteroffer, thereby providing controlling warranty terms\nunder the contract formed by the parties. We find merit in appellants\xe2\x80\x99 argument\nand remand for the trial court\xe2\x80\x99s reconsideration.\nI.\n[\xc2\xb62] Acting as the general contractor on a Department of Energy (DOE) project,\nGardner Zemke issued its Order to Dunham Bush for air-conditioning equipment,\nknown as chillers, to be used in connection with the project. The Order contained\na one-year manufacturer\xe2\x80\x99s warranty provision and the requirement that the chillers\ncomply with specifications attached to the Order. Dunham Bush responded with\nits preprinted Acknowledgment containing extensive warranty disclaimers, a\nstatement that the terms of the Acknowledgment controlled the parties\xe2\x80\x99 agreement,\nand a provision deeming silence to be acquiescence to the terms of the Acknowledgment.\n[\xc2\xb63] The parties did not address the discrepancies in the forms exchanged and\nproceeded with the transaction. Dunham Bush delivered the chillers, and Gardner\nZemke paid for them. Gardner Zemke alleges that the chillers provided did not\ncomply with their specifications and that they incurred additional costs to install\nthe nonconforming goods. Approximately five or six months after start up of the\nchillers, a DOE representative notified Gardner Zemke of problems with two of\nthe chillers. In a series of letters, Gardner Zemke requested on-site warranty repairs. Through its manufacturer\xe2\x80\x99s representative, Dunham Bush offered to send its\nmechanic to the job site to inspect the chillers and absorb the cost of the service\ncall only if problems discovered were within any component parts it provided.\nFurther, Dunham Bush required that prior to the service call a purchase order be\nissued from the DOE, to be executed by Dunham Bush for payment for their services in the event their mechanic discovered problems not caused by manufactur357\n\n\x0cing defects. Gardner Zemke rejected the proposal on the basis that the DOE had a\nwarranty still in effect for the goods and would not issue a separate purchase order\nfor warranty repairs.\n[\xc2\xb64] Ultimately, the DOE hired an independent contractor to repair the two\nchillers. The DOE paid $24,245.00 for the repairs and withheld $20,000.00 from\nits contract with Gardner Zemke.* This breach of contract action then ensued,\nwith Gardner Zemke alleging failure by Dunham Bush to provide equipment in\naccordance with the project plans and specifications and failure to provide warranty service.\nII.\n[\xc2\xb65] On cross-motions for summary judgment, the trial court granted partial\nsummary judgment in favor of Dunham Bush, ruling that its Acknowledgment\nwas a counteroffer to the Gardner Zemke Order and that the Acknowledgment\xe2\x80\x99s\nwarranty limitations and disclaimers were controlling. Gardner Zemke filed an\napplication for interlocutory appeal from the partial summary judgment in this\nCourt, which was denied. A bench trial was held in December 1991, and the trial\ncourt again ruled the Acknowledgment was a counteroffer which Gardner Zemke\naccepted by silence and that under the warranty provisions of the Acknowledgment, Gardner Zemke was not entitled to damages.\n[\xc2\xb66] On appeal, Gardner Zemke raises two issues: (1) the trial court erred as a\nmatter of law in ruling that the Acknowledgment was a counteroffer; and (2)\nGardner Zemke proved breach of contract and contract warranty, breach of code\nwarranties, and damages.\nIII.\n[\xc2\xb67] Karl N. Llewellyn, the principal draftsman of Article 2, described it as\n\xe2\x80\x9c[t]he heart of the Code.\xe2\x80\x9d Karl N. Llewellyn, Why We Need the Uniform Commercial Code, 10 U.Fla.L.Rev. 367, 378 (1957). Section 2-207 is characterized by\ncommentators as a \xe2\x80\x9ccrucial section of Article 2\xe2\x80\x9d and an \xe2\x80\x9ciconoclastic Code section.\xe2\x80\x9d Bender\xe2\x80\x99s Uniform Commercial Code Service (Vol. 3, Richard W. Duesenberg & Lawrence P. King, Sales & Bulk Transfers Under The Uniform Commercial Code) \xc2\xa7 3.01 at 3-2 (1992). Recognizing its innovative purpose and complex\nstructure Duesenberg and King further observe Section 2- 207 \xe2\x80\x9cis one of the most\nimportant, subtle, and difficult in the entire Code, and well it may be said that the\nproduct as it finally reads is not altogether satisfactory.\xe2\x80\x9d Id. \xc2\xa7 3.02 at 3-13.\n[\xc2\xb68]\n\nSection 55-2-207 provides:\n\n*\n\nThe government has the right to set off the remaining $4,245.00 from any other Gardner Zemke\ngovernment contract. See Project Map, Inc. v. United States, 203 Ct.Cl. 52, 486 F.2d 1375\n\n(1973) (per curiam).\n358\n\n\x0c(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance\neven though it states terms additional to or different from those offered or\nagreed upon, unless acceptance is expressly made conditional on assent to\nthe additional or different terms.\n(2) The additional terms are to be construed as proposals for addition to\nthe contract. Between merchants such terms become part of the contract\nunless:\n(a) the offer expressly limits acceptance to the terms of the offer;\n(b) they materially alter it; or\n(c) notification of objection to them has already been given or is\ngiven within a reasonable time after notice of them is received.\n(3) Conduct by both parties which recognizes the existence of a contract is\nsufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties\nagree, together with any supplementary terms incorporated under any other provisions of this act [this chapter].\nRelying on Section 2-207(1), Gardner Zemke argues that the trial court erred in\nconcluding that the Dunham Bush Acknowledgment was a counteroffer rather\nthan an acceptance. Gardner Zemke asserts that even though the Acknowledgment\ncontained terms different from or in addition to the terms of their Order, it did not\nmake acceptance expressly conditional on assent to the different or additional\nterms and therefore should operate as an acceptance rather than a counteroffer.\n[\xc2\xb69] At common law, the \xe2\x80\x9cmirror image\xe2\x80\x9d rule applied to the formation of contracts, and the terms of the acceptance had to exactly imitate or \xe2\x80\x9cmirror\xe2\x80\x9d the terms\nof the offer. Idaho Power Co. v. Westinghouse Elec. Corp., 596 F.2d 924, 926 (9th\nCir. 1979). If the accepting terms were different from or additional to those in the\noffer, the result was a counteroffer, not an acceptance. Id.; see also Silva v. Noble,\n85 N.M. 677, 678-79, 515 P.2d 1281, 1282-83 (1973). Thus, from a common law\nperspective, the trial court\xe2\x80\x99s conclusion that the Dunham Bush Acknowledgment\nwas a counteroffer was correct.\n[\xc2\xb610] However, the drafters of the Code \xe2\x80\x9cintended to change the common law in\nan attempt to conform contract law to modern day business transactions.\xe2\x80\x9d Leonard Pevar Co. v. Evans Prods. Co., 524 F. Supp. 546, 551 (D. Del.1981). As Professors White and Summers explain:\nThe rigidity of the common law rule ignored the modern realities of commerce. Where preprinted forms are used to structure deals, they rarely mirror each other, yet the parties usually assume they have a binding contract\nand act accordingly. Section 2-207 rejects the common law mirror image\nrule and converts many common law counteroffers into acceptances under\n2-207(1).\nJames J. White & Robert S. Summers, Handbook of the Law Under the Uniform\nCommercial Code \xc2\xa7 1-3 at 29-30 (3d ed. 1988) (footnotes omitted).\n359\n\n\x0c[\xc2\xb611] On its face, Section 2-207(1) provides that a document responding to an\noffer and purporting to be an acceptance will be an acceptance, despite the presence of additional and different terms. Where merchants exchange preprinted\nforms and the essential contract terms agree, a contract is formed under Section 2207(1). Duesenberg & King, \xc2\xa7 3.04 at 3-47 to -49. A responding document will\nfall outside of the provisions of Section 2-207(1) and convey a counteroffer, only\nwhen its terms differ radically from the offer, or when \xe2\x80\x9cacceptance is expressly\nmade conditional on assent to the additional or different terms\xe2\x80\x9d\xe2\x80\x94whether a contract is formed under Section 2-207(1) here turns on the meaning given this\nphrase.\n[\xc2\xb612] Dunham Bush argues that the language in its Acknowledgment makes acceptance expressly conditional on assent to the additional or different terms set\nforth in the Acknowledgment. The face of the Acknowledgment states:\nIT IS UNDERSTOOD THAT OUR ACCEPTANCE OF THIS ORDER IS\nSUBJECT TO THE TERMS AND CONDITIONS ENUMERATED ON\nTHE REVERSE SIDE HEREOF, IT BEING STRICTLY UNDERSTOOD\nTHAT THESE TERMS AND CONDITIONS BECOME A PART OF\nTHIS ORDER AND THE ACKNOWLEDGMENT THEREOF.\nThe following was among the terms and conditions on the reverse side of the Acknowledgment.\nFailure of the Buyer to object in writing within five (5) days of receipt\nthereof to Terms of Sale contained in the Seller\xe2\x80\x99s acceptance and/or acknowledgment, or other communications, shall be deemed an acceptance\nof such Terms of Sale by Buyer.\nIn support of its contention that the above language falls within the \xe2\x80\x9cexpressly\nconditional\xe2\x80\x9d provision of Section 2-207, Dunham Bush urges that we adopt the\nview taken by the First Circuit in Roto-Lith, Ltd. v. F.P. Bartlett & Co., 297 F.2d\n497 (1st Cir. 1962). There, Roto-Lith sent an order for goods to Bartlett, which\nresponded with an acknowledgment containing warranty disclaimers, a statement\nthat the acknowledgment reflected the terms of the sale, and a provision that if the\nterms were unacceptable Roto-Lith should notify Bartlett at once. Id. at 498-99.\nRoto-Lith did not protest the terms of the acknowledgment and accepted and paid\nfor the goods. The court held the Bartlett acknowledgment was a counteroffer that\nbecame binding on Roto-Lith with its acceptance of the goods, reasoning that \xe2\x80\x9ca\nresponse which states a condition materially altering the obligation solely to the\ndisadvantage of the offeror\xe2\x80\x9d falls within the \xe2\x80\x9cexpressly conditional\xe2\x80\x9d language of\n2-207(1). Id. at 500.\n[\xc2\xb613] Dunham Bush suggests that this Court has demonstrated alliance with the\nprinciples of Roto-Lith in Fratello v. Socorro Electric Cooperative, Inc., 107 N.M.\n378, 758 P.2d 792 (1988). Fratello involved the terms of a settlement agreement\nin which one party sent the other party a proposed stipulated order containing an\nadditional term. In the context of the common law, we cited Roto-Lith in support\n360\n\n\x0cof the proposition that the additional term made the proposed stipulation a counteroffer. Fratello, 107 N.M. at 381, 758 P.2d at 795.\n[\xc2\xb614] We have never adopted Roto-Lith in the context of the Code and decline to\ndo so now. While ostensibly interpreting Section 2-207(1), the First Circuit\xe2\x80\x99s\nanalysis imposes the common law doctrine of offer and acceptance on language\ndesigned to avoid the common law result. Roto-Lith has been almost uniformly\ncriticized by the courts and commentators as an aberration in Article 2 jurisprudence. Leonard Pevar Co., 524 F. Supp. at 551 (and cases cited therein); Duesenberg & King, \xc2\xa7 3.05[1] at 3-61 to -62; White & Summers, \xc2\xa7 1-3 at 36-37.\n[\xc2\xb615] Mindful of the purpose of Section 2-207 and the spirit of Article 2, we find\nthe better approach suggested in Dorton v. Collins & Aikman Corp., 453 F.2d\n1161 (6th Cir. 1972). In Dorton, the Sixth Circuit considered terms in acknowledgment forms sent by Collins & Aikman similar to the terms in the Dunham\nBush Acknowledgment. The Collins & Aikman acknowledgments provided that\nacceptance of orders was subject to the terms and conditions of their form, together with at least seven methods in which a buyer might acquiesce to their terms,\nincluding receipt and retention of their form for ten days without objection. Id. at\n1167-68.\n[\xc2\xb616] Concentrating its analysis on the concept of the offeror\xe2\x80\x99s \xe2\x80\x9cassent,\xe2\x80\x9d the\nCourt reasoned that it was not enough to make acceptance expressly conditional\non additional or different terms; instead, the expressly conditional nature of the\nacceptance must be predicated on the offeror\xe2\x80\x99s \xe2\x80\x9cassent\xe2\x80\x9d to those terms. Id. at 1168.\nThe Court concluded that the \xe2\x80\x9cexpressly conditional\xe2\x80\x9d provision of Section 2207(1) \xe2\x80\x9cwas intended to apply only to an acceptance which clearly reveals that the\nofferee is unwilling to proceed with the transaction unless he is assured of the offeror\xe2\x80\x99s assent to the additional or different terms therein.\xe2\x80\x9d Id. This approach has\nbeen widely accepted. Diatom, Inc. v. Pennwalt Corp., 741 F.2d 1569, 1576-77\n(10th Cir. 1984); Reaction Molding Technologies, Inc. v. General Elec. Co., 588 F.\nSupp. 1280, 1288 (E.D. Pa. 1984); Idaho Power Co., 596 F.2d at 926-27.\n[\xc2\xb617] We agree with the court in Dorton that the inquiry focuses on whether the\nofferee clearly and unequivocally communicated to the offeror that its willingness\nto enter into a bargain was conditioned on the offeror\xe2\x80\x99s \xe2\x80\x9cassent\xe2\x80\x9d to additional or\ndifferent terms. An exchange of forms containing identical dickered terms, such as\nthe identity, price, and quantity of goods, and conflicting undickered boilerplate\nprovisions, such as warranty terms and a provision making the bargain subject to\nthe terms and conditions of the offeree\xe2\x80\x99s document, however worded, will not\npropel the transaction into the \xe2\x80\x9cexpressly conditional\xe2\x80\x9d language of Section 2207(1) and confer the status of counteroffer on the responsive document.\n[\xc2\xb618] While Dorton articulates a laudable rule, it fails to provide a means for the\ndetermination of when a responsive document becomes a counteroffer. We adopt\nthe rule in Dorton and add that whether an acceptance is made expressly condi361\n\n\x0ctional on assent to different or additional terms is dependent on the commercial\ncontext of the transaction. Official Comment 2 to Section 55-2-207 suggests that\n\xe2\x80\x9c[u]nder this article a proposed deal which in commercial understanding has in\nfact been closed is recognized as a contract.\xe2\x80\x9d* While the comment applies broadly and envisions recognition of contracts formed under a variety of circumstances,\nit guides us to application of the concept of \xe2\x80\x9ccommercial understanding\xe2\x80\x9d to the\nquestion of formation. See 2 William D. Hawkland, Uniform Commercial Code\nSeries \xc2\xa7 2- 207:02 at 160 (1992) (\xe2\x80\x9cThe basic question is whether, in commercial\nunderstanding, the proposed deal has been closed.\xe2\x80\x9d).\n[\xc2\xb619] Discerning whether \xe2\x80\x9ccommercial understanding\xe2\x80\x9d dictates the existence of\na contract requires consideration of the objective manifestations of the parties\xe2\x80\x99\nunderstanding of the bargain. It requires consideration of the parties\xe2\x80\x99 activities and\ninteraction during the making of the bargain; and when available, relevant evidence of course of performance, Section 55-2-208; and course of dealing and usage of the trade, Section 55-1-205. The question guiding the inquiry should be\nwhether the offeror could reasonably believe that in the context of the commercial\nsetting in which the parties were acting, a contract had been formed. This determination requires a very fact specific inquiry. See John E. Murray, Jr., Section 2207 Of The Uniform Commercial Code: Another Word About Incipient Unconscionability, 39 U.Pitt.L.Rev. 597, 632-34 (1978) (discussing Dorton and identifying the commercial understanding of the reasonable buyer as the \xe2\x80\x9ccritical inquiry\xe2\x80\x9d).\n[\xc2\xb620] Our analysis does not yield an iron clad rule conducive to perfunctory application. However, it does remain true to the spirit of Article 2, as it calls the trial\ncourt to consider the commercial setting of each transaction and the reasonable\nexpectations and beliefs of the parties acting in that setting. Id. at 600; \xc2\xa7 55-1102(2)(b) (stating one purpose of the act is \xe2\x80\x9cto permit the continued expansion of\ncommercial practices through custom, usage and agreement of the parties\xe2\x80\x9d).\n[\xc2\xb621] The trial court\xe2\x80\x99s treatment of this issue did not encompass the scope of the\ninquiry we envision. We will not attempt to make the factual determination necessary to characterize this transaction on the record before us. Not satisfied that the\ntrial court adequately considered all of the relevant factors in determining that the\n\n*\n\nWhile we recognize that the Official Comments do not carry the force of law, they are a part of\nthe official text of the Code adopted by our legislature and we do look to them for guidance. Reardon v. Alsup (In Re Anthony), 114 N.M. 95, 98 n.1, 835 P.2d 811, 814 n.1 (1992). As Professor\nLlewellyn explained, the Comments were:\nprepared, as was the Code itself, under the joint auspices of the Conference of Commissioners on Uniform State Laws and the American Law Institute. These comments are\nvery useful in presenting something of the background and purposes of the sections, and\nof the way in which the details and policies build into a whole. In these aspects they\ngreatly aid understanding and construction.\nKarl N. Llewellyn, Why We Need the Uniform Commercial Code, 10 U.Fla.L.Rev. 367, 375\n(1957).\n\n362\n\n\x0cDunham Bush Acknowledgment functioned as a counteroffer, we remand for reconsideration of the question.\n[\xc2\xb622] In the event the trial court concludes that the Dunham Bush Acknowledgment constituted an acceptance, it will face the question of which terms will control in the exchange of forms. In the interest of judicial economy, and because this\ndetermination is a question of law, we proceed with our analysis.\nIV.\n[\xc2\xb623] The Gardner Zemke Order provides that the \xe2\x80\x9c[m]anufacturer shall replace\nor repair all parts found to be defective during initial year of use at no additional\ncost.\xe2\x80\x9d Because the Order does not include any warranty terms, Article 2 express\nand implied warranties arise by operation of law. Section 55-2-313 (express warranties), \xc2\xa7 55-2-314 (implied warranty of merchantability), \xc2\xa7 55-2-315 (implied\nwarranty of fitness for a particular purpose). The Dunham Bush Acknowledgment\ncontains the following warranty terms.\nWARRANTY: We agree that the apparatus manufactured by the Seller will\nbe free from defects in material and workmanship for a period of one year\nunder normal use and service and when properly installed: and our obligation under this agreement is limited solely to repair or replacement at our\noption, at our factories, of any part or parts thereof which shall within one\nyear from date of original installation or 18 months from date of shipment\nfrom factory to the original purchaser, whichever date may first occur be\nreturned to us with transportation charges prepaid which our examination\nshall disclose to our satisfaction to have been defective. THIS AGREEMENT TO REPAIR OR REPLACE DEFECTIVE PARTS IS EXPRESSLY IN LIEU OF AND IS HEREBY DISCLAIMER OF ALL OTHER EXPRESS WARRANTIES, AND IS IN LIEU OF AND IN DISCLAIMER\nAND EXCLUSION OF ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AS\nWELL AS ALL OTHER IMPLIED WARRANTIES, IN LAW OR EQUITY, AND OF ALL OTHER OBLIGATIONS OR LIABILITIES ON OUR\nPART. THERE ARE NO WARRANTIES WHICH EXTEND BEYOND\nTHE DESCRIPTION HEREOF.... Our obligation to repair or replace shall\nnot apply to any apparatus which shall have been repaired or altered outside our factory in any way....\n[\xc2\xb624] The one proposition on which most courts and commentators agree at this\npoint in the construction of the statute is that Section 2-207(3) applies only if a\ncontract is not found under Section 2-207(1). Dorton, 453 F.2d at 1166; Duesenberg & King, \xc2\xa7 3.03[1] at 3-40; 2 Hawkland, \xc2\xa7 2-207:04 at 178-79; White &\nSummers, \xc2\xa7 1-3 at 35. However, there are courts that disagree even with this\nproposition. See Westinghouse Elec. Corp. v. Nielsons, Inc., 647 F. Supp. 896\n(D.Colo. 1986) (dealing with different terms, finding a contract under 2-207(1)\nand proceeding to apply 2-207(2) and 2-207(3)).\n363\n\n\x0c[\xc2\xb625] The language of the statute makes it clear that \xe2\x80\x9cadditional\xe2\x80\x9d terms are subject to the provisions of Section 2-207(2). However, a continuing controversy rages among courts and commentators concerning the treatment of \xe2\x80\x9cdifferent\xe2\x80\x9d terms\nin a Section 2-207 analysis. While Section 2-207(1) refers to both \xe2\x80\x9cadditional or\ndifferent\xe2\x80\x9d terms, Section 2- 207(2) refers only to \xe2\x80\x9cadditional\xe2\x80\x9d terms. The omission\nof the word \xe2\x80\x9cdifferent\xe2\x80\x9d from Section 55-2-207(2) gives rise to the questions of\nwhether \xe2\x80\x9cdifferent\xe2\x80\x9d terms are to be dealt with under the provisions of Section 2207(2), and if not, how they are to be treated. That the terms in the Acknowledgment are \xe2\x80\x9cdifferent\xe2\x80\x9d rather than \xe2\x80\x9cadditional\xe2\x80\x9d guides the remainder of our inquiry\nand requires that we join the fray. Initially, we briefly survey the critical and judicial approaches to the problem posed by \xe2\x80\x9cdifferent\xe2\x80\x9d terms.\n[\xc2\xb626] One view is that, in spite of the omission, \xe2\x80\x9cdifferent\xe2\x80\x9d terms are to be analyzed under Section 2-207(2). 2 Hawkland, \xc2\xa7 2-207:03 at 168. The foundation for\nthis position is found in Comment 3, which provides \xe2\x80\x9c[w]hether or not additional\nor different terms will become part of the agreement depends upon the provisions\nof Subsection (2).\xe2\x80\x9d Armed with this statement in Comment 3, proponents point to\nthe ambiguity in the distinction between \xe2\x80\x9cdifferent\xe2\x80\x9d and \xe2\x80\x9cadditional\xe2\x80\x9d terms and\nargue that the distinction serves no clear purpose. Steiner v. Mobile Oil Corp., 20\nCal.3d 90, 141 Cal.Rptr. 157, 165- 66 n.5, 569 P.2d 751, 759-60 n.5 (1977); Boese-Hilburn Co. v. Dean Machinery Co., 616 S.W.2d 520, 527 (Mo. Ct. App.\n1981). Following this rationale in this case, and relying on the observation in\nComment 4 that a clause negating implied warranties would \xe2\x80\x9cmaterially alter\xe2\x80\x9d the\ncontract, the Dunham Bush warranty terms would not become a part of the contract, and the Gardner Zemke warranty provision, together with the Article 2 warranties would control. \xc2\xa7 55-2-207(2)(b).\n[\xc2\xb627] Another approach is suggested by Duesenberg and King who comment\nthat the ambiguity found in the treatment of \xe2\x80\x9cdifferent\xe2\x80\x9d and \xe2\x80\x9cadditional\xe2\x80\x9d terms is\nmore judicially created than statutorily supported. While conceding that Comment\n3 \xe2\x80\x9ccontributes to the confusion,\xe2\x80\x9d they also admonish that \xe2\x80\x9cthe Official Comments\ndo not happen to be the statute.\xe2\x80\x9d Duesenberg & King, \xc2\xa7 3.05 at 3-52. Observing\nthat \xe2\x80\x9cthe drafters knew what they were doing, and that they did not sloppily fail to\ninclude the term \xe2\x80\x98different\xe2\x80\x99 when drafting subsection (2),\xe2\x80\x9d Duesenberg and King\npostulate that a \xe2\x80\x9cdifferent\xe2\x80\x9d term in a responsive document operating as an acceptance can never become a part of the parties\xe2\x80\x99 contract under the plain language\nof the statute. Id. \xc2\xa7 3.03[1] at 3-38.\n[\xc2\xb628] The reasoning supporting this position is that once an offeror addresses a\nsubject it implicitly objects to variance of that subject by the offeree, thereby preventing the \xe2\x80\x9cdifferent\xe2\x80\x9d term from becoming a part of the contract by prior objection and obviating the need to refer to \xe2\x80\x9cdifferent\xe2\x80\x9d terms in Section 55-2-207(2). Id.\n\xc2\xa7 3.05[1] at 3-77; Air Prods. & Chems. Inc. v. Fairbanks Morse, Inc., 58 Wis.2d\n193, 206 N.W.2d 414, 423- 25 (1973). Professor Summers lends support to this\nposition. White & Summers, \xc2\xa7 1-3 at 34. Although indulging a different analysis,\n364\n\n\x0cfollowing this view in the case before us creates a result identical to that flowing\nfrom application of the provisions of Section 2- 207(2) as discussed above\xe2\x80\x94the\nDunham Bush warranty provisions fall out, and the stated Gardner Zemke and\nArticle 2 warranty provisions apply.\n[\xc2\xb629] Yet a third analysis arises from Comment 6, which in pertinent part states:\nWhere clauses on confirming forms sent by both parties conflict each party must be assumed to object to a clause of the other conflicting with one\non the confirmation sent by himself. As a result the requirement that there\nbe notice of objection which is found in Subsection (2) is satisfied and the\nconflicting terms do not become a part of the contract. The contract then\nconsists of the terms originally expressly agreed to, terms on which the\nconfirmations agree, and terms supplied by this act, including Subsection\n(2).\nThe import of Comment 6 is that \xe2\x80\x9cdifferent\xe2\x80\x9d terms cancel each other out and that\nexisting applicable code provisions stand in their place. The obvious flaws in\nComment 6 are the use of the words \xe2\x80\x9cconfirming forms,\xe2\x80\x9d suggesting the Comment applies only to variant confirmation forms and not variant offer and acceptance forms, and the reference to Subsection 55-2-207(2)\xe2\x80\x94arguably dealing\nonly with \xe2\x80\x9cadditional\xe2\x80\x9d terms\xe2\x80\x94in the context of \xe2\x80\x9cdifferent\xe2\x80\x9d terms. Of course,\nDuesenberg and King remind us that Comment 6 \xe2\x80\x9cis only a comment, and a poorly drawn one at that.\xe2\x80\x9d Duesenberg & King, \xc2\xa7 3.05[1] at 3-79.\n[\xc2\xb630] The analysis arising from Comment 6, however, has found acceptance in\nnumerous jurisdictions including the Tenth Circuit. Daitom, Inc. v. Pennwalt\nCorp., 741 F.2d 1569, 1578-79 (10th Cir. 1984). Following a discussion similar to\nthe one we have just indulged, the court found this the preferable approach. Id. at\n1579; accord Southern Idaho Pipe & Steel Co. v. Cal-Cut Pipe & Supply, Inc., 98\nIdaho 495, 503-04, 567 P.2d 1246, 1254-55 (1977), appeal dismissed and cert.\ndenied, 434 U.S. 1056, 98 S. Ct. 1225, 55 L.Ed.2d 757 (1978). Professor White\nalso finds merit in this analysis. White & Summers, \xc2\xa7 1-3 at 33-35. Application of\nthis approach here cancels out the parties\xe2\x80\x99 conflicting warranty terms and allows\nthe warranty provisions of Article 2 to control.\n[\xc2\xb631] We are unable to find comfort or refuge in concluding that any one of the\nthree paths drawn through the contours of Section 2-207 is more consistent with\nor true to the language of the statute. We do find that the analysis relying on\nComment 6 is the most consistent with the purpose and spirit of the Code in general and Article 2 in particular. We are mindful that the overriding goal of Article\n2 is to discern the bargain struck by the contracting parties. However, there are\ntimes where the conduct of the parties makes realizing that goal impossible. In\nsuch cases, we find guidance in the Code\xe2\x80\x99s commitment to fairness, Section 55-1102(3); good faith, Sections 55-1-203 & -2-103(1)(b); and conscionable conduct,\nSection 55-2-302.\n\n365\n\n\x0c[\xc2\xb632] While Section 2-207 was designed to avoid the common law result that\ngave the advantage to the party sending the last form, we cannot conclude that the\nstatute was intended to shift that advantage to the party sending the first form.\nSuch a result will generally follow from the first two analyses discussed. We\nadopt the third analysis as the most even-handed resolution of a difficult problem.\nWe are also aware that under this analysis even though the conflicting terms cancel out, the Code may provide a term similar to one rejected. We agree with Professor White that \xe2\x80\x9c[a]t least a term so supplied has the merit of being a term that\nthe draftsmen considered fair.\xe2\x80\x9d White & Summers, \xc2\xa7 1- 3 at 35.\n[\xc2\xb633] Due to our disposition of this case, we do not address the second issue\nraised by Gardner Zemke. On remand, should the trial court conclude a contract\nwas formed under Section 2-207(1), the conflicting warranty provisions in the\nparties\xe2\x80\x99 forms will cancel out, and the warranty provisions of Article 2 will control.\n[\xc2\xb634] IT IS SO ORDERED.\nBACA, J., and PATRICIO M. SERNA, District Judge (sitting by designation).\n\nNote: More Battles About Battle of the Forms\n\nBack in the early 1990s, Rich and Enza Hill called Gateway 2000, Inc.\xe2\x80\x99s phone\norder line, ordered a computer, and gave a credit card number. Gateway shipped a\ncomputer to them. In the box with the computer was a small booklet of terms that\nincluded an arbitration clause. A notice with the booklet stated that the terms\nwould govern the relationship between Gateway and its customer unless the customer returned the computer within 30 days. The Hills kept the computer, but the\ncomputer had issues. The Hills later filed suit for a class of Gateway customers,\nclaiming breach of contract and other things.\nIn Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir. 1997), the court per Judge\nFrank Easterbrook decided that the Hills were bound by the terms in the box, including the arbitration clause. Is that what you\xe2\x80\x99d expect from our studies of UCC\n\xc2\xa7 2-207?\nHill claimed to be following the ProCD decision. In ProCD, Zeidenberg bought a\nbox of software from a retail store. The box was closed, but on the outside of it\n\xe2\x80\x9cin small print at the bottom of the package\xe2\x80\x9d was a disclosure \xe2\x80\x9cstating that [the\nbuyer was] subject to the terms and conditions of the enclosed license\nagreement.\xe2\x80\x9d ProCD, Inc. v. Zeidenberg, 908 F. Supp. 640, 654 (W.D. Wisc. 1996).\nEven without the disclosure on the box, though, it\xe2\x80\x99s hard to imagine that\nZeidenberg, a Ph.D student in computer science, was not aware that the seller of\nthe software considered it subject to a license. Of course, Zeidenberg could not\nknow the exact terms of the license until he bought the software, opened the box,\nand opened the software, but the court of appeals held him bound to the license\nterms nonetheless. Is Zeidenberg\xe2\x80\x99s case similar to the Hills\xe2\x80\x99?\n366\n\n\x0cHere are some excerpts from the Hill opinion. Most people hesitate to defend\nthese statements as applicable to the Hills. What do you suppose is the basis for\ncriticizing each of these? The first is a rhetorical question.\n1. Are these terms [in the booklet] effective as the parties\xe2\x80\x99 contract, or is\nthe contract term-free because the order-taker did not read any terms over\nthe phone and elicit the customer\xe2\x80\x99s assent?\n2. ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996), holds that\nterms inside a box of software bind consumers who use the software after\nan opportunity to read the terms and to reject them by returning the product. Likewise, Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 111 S.\nCt. 1522, 113 L.Ed.2d 622 (1991), enforces a forum selection clause that\nwas included among three pages of terms attached to a cruise ship ticket.\nProCD and Carnival Cruise Lines exemplify the many commercial transactions in which people pay for products with terms to follow; ProCD discusses others. 86 F.3d at 1451-52. The district court concluded in ProCD\nthat the contract is formed when the consumer pays for the software; as a\nresult, the court held, only terms known to the consumer at that moment\nare part of the contract, and provisos inside the box do not count. Although\nthis is one way a contract could be formed, it is not the only way: \xe2\x80\x9cA vendor, as master of the offer, may invite acceptance by conduct, and may\npropose limitations on the kind of conduct that constitutes acceptance. A\nbuyer may accept by performing the acts the vendor proposes to treat as\nacceptance.\xe2\x80\x9d Id. at 1452. Gateway shipped computers with the same sort\nof accept-or-return offer ProCD made to users of its software.\n3. Payment preceding the revelation of full terms is common for air transportation, insurance, and many other endeavors. Practical considerations\nsupport allowing vendors to enclose the full legal terms with their products. Cashiers cannot be expected to read legal documents to customers\nbefore ringing up sales. If the staff at the other end of the phone for directsales operations such as Gateway\xe2\x80\x99s had to read the four-page statement of\nterms before taking the buyer\xe2\x80\x99s credit card number, the droning voice\nwould anesthetize rather than enlighten many potential buyers. Others\nwould hang up in a rage over the waste of their time. And oral recitation\nwould not avoid customers\xe2\x80\x99 assertions (whether true or feigned) that the\nclerk did not read term X to them, or that they did not remember or understand it. Writing provides benefits for both sides of commercial transactions. Customers as a group are better off when vendors skip costly and\nineffectual steps such as telephonic recitation, and use instead a simple\napprove-or-return device. Competent adults are bound by such documents,\nread or unread.\n\n367\n\n\x0c4. Section 2-207(2) of the UCC, the infamous battle-of-the-forms section,\nstates that \xe2\x80\x9cadditional terms [following acceptance of an offer] are to be\nconstrued as proposals for addition to a contract. Between merchants such\nterms become part of the contract unless ...\xe2\x80\x9d. Plaintiffs tell us that ProCD\ncame out as it did only because Zeidenberg was a \xe2\x80\x9cmerchant\xe2\x80\x9d and the\nterms inside ProCD\xe2\x80\x99s box were not excluded by the \xe2\x80\x9cunless\xe2\x80\x9d clause. This\nargument pays scant attention to the opinion in ProCD, which concluded\nthat, when there is only one form, \xe2\x80\x9csec. 2-207 is irrelevant.\xe2\x80\x9d 86 F.3d at\n1452.\n5. [T]he Hills knew before they ordered the computer that the carton\nwould include some important terms, and they did not seek to discover\nthese in advance. Gateway\xe2\x80\x99s ads state that their products come with limited warranties and lifetime support. How limited was the warranty\xe2\x80\x9430\ndays, with service contingent on shipping the computer back, or five years,\nwith free onsite service? What sort of support was offered? Shoppers have\nthree principal ways to discover these things. First, they can ask the vendor to send a copy before deciding whether to buy. Concealment would be\nbad for business, scaring some customers away and leading to excess returns from others. Second, shoppers can consult public sources (computer\nmagazines, the Web sites of vendors) that may contain this information.\nThird, they may inspect the documents after the product\xe2\x80\x99s delivery. Like\nZeidenberg, the Hills took the third option. By keeping the computer beyond 30 days, the Hills accepted Gateway\xe2\x80\x99s offer, including the arbitration\nclause.\nThough Hill was widely followed for a time, it was also strongly criticized. Also,\nsome courts directly rejected Hill. The following case, Klocek v. Gateway, Inc.,\n104 F. Supp. 2d 1332 (D. Kan. 2000), applied \xc2\xa7 2-207 to \xe2\x80\x9cthe Gateway facts,\xe2\x80\x9d a\npattern that came up in several cases in the late 1990s.\nBrower v. Gateway 2000, Inc., 676 N.Y.S.2d 569 (Sup. Ct. App. 1998), is a\ngood example. In this fact pattern, plaintiffs bought computers and software from\nGateway 2000, Inc. They ordered the products by mail or telephone, and the\nproducts were shipped to them. Gateway promised \xe2\x80\x9cservice when you need it,\xe2\x80\x9d\nincluding 24/7 technical support. As of July 3, 1995, Gateway included with the\nproducts shipped to consumers a \xe2\x80\x9cStandard Terms and Conditions Agreement.\xe2\x80\x9d\nThe document provided, \xe2\x80\x9cThis document contains Gateway 2000\xe2\x80\x99s Standard\nTerms and Conditions. By keeping your Gateway 2000 computer system beyond\nthirty (30) days after the date of delivery, you accept these Terms and Conditions.\xe2\x80\x9d Paragraph 10, titled \xe2\x80\x9cDISPUTE RESOLUTION,\xe2\x80\x9d said,\nAny dispute or controversy arising out of or relating to this Agreement or\nits interpretation shall be settled exclusively and finally by arbitration. The\narbitration shall be conducted in accordance with the Rules of Conciliation\nand Arbitration of the International Chamber of Commerce. The arbitration shall be conducted in Chicago, Illinois, U.S.A. before a sole arbitrator.\nAny award rendered in any such arbitration proceeding shall be final and\n368\n\n\x0cbinding on each of the parties, and judgment may be entered thereon in a\ncourt of competent jurisdiction.\nPlaintiffs sued as a class, alleging that Gateway did not provide any real technical\nsupport. Gateway moved for arbitration. Plaintiffs responded that the International\nChamber of Commerce (ICC) was headquartered in France and was particularly\ndifficult to contact. Further, under ICC arbitration rules, a claim of less than\n$50,000 required a $4,000 fee, including a non-refundable $2,000 registration fee.\nBecause the ICC followed England\xe2\x80\x99s \xe2\x80\x9closer pays\xe2\x80\x9d rule, a consumer would pay\nGateway\xe2\x80\x99s legal fees if Gateway won the arbitration. Consumers would also incur\ntravel fees to Chicago. But all correspondence had to be sent to France. Of course,\neven some really smart, capable, wealthy people bought Gateway computers.\nPlaintiffs contended the arbitration clause was unconscionable. The court in\nBrower held the arbitration term unconscionable. Can you see why?\nThe same arbitration term was at issue in Klocek, but the court did not\nreach the question of unconscionability. Instead, the court asked whether, under \xc2\xa7\n2-207, the clause ever became part of an enforceable contract:\n[\xc2\xb61] Gateway urges the Court to follow the Seventh Circuit decision in\nHill. That case involved the shipment of a Gateway computer with terms\nsimilar to the Standard Terms in this case, except that Gateway gave the\ncustomer 30 days\xe2\x80\x94instead of 5 days\xe2\x80\x94to return the computer. In enforcing the arbitration clause, the Seventh Circuit relied on its decision in\nProCD, where it enforced a software license which was contained inside a\nproduct box. See Hill, 105 F.3d at 1148-50. In ProCD, the Seventh Circuit\nnoted that the exchange of money frequently precedes the communication\nof detailed terms in a commercial transaction. See ProCD, 86 F.3d at 1451.\nCiting UCC \xc2\xa7 2-204, the court reasoned that by including the license with\nthe software, the vendor proposed a contract that the buyer could accept\nby using the software after having an opportunity to read the license. *\nProCD, 86 F.3d at 1452. Specifically, the court stated:\nA vendor, as master of the offer, may invite acceptance by conduct,\nand may propose limitations on the kind of conduct that constitutes\nacceptance. A buyer may accept by performing the acts the vendor\nproposes to treat as acceptance.\nProCD, 86 F.3d at 1452. The Hill court followed the ProCD analysis, noting that \xe2\x80\x9c[p]ractical considerations support allowing vendors to enclose\nthe full legal terms with their products.\xe2\x80\x9d Hill, 105 F.3d at 1149.\xe2\x80\xa0\nSection 2-204 provides: \xe2\x80\x9cA contract for sale of goods may be made in any manner sufficient to\nshow agreement, including conduct by both parties which recognizes the existence of such contract.\xe2\x80\x9d K.S.A. \xc2\xa7 84- 2-204; V.A.M.S. \xc2\xa7 400.2-204.\n\xe2\x80\xa0\nLegal commentators have criticized the reasoning of the Seventh Circuit in this regard. See, e.g.,\nJean R. Sternlight, Gateway Widens Doorway to Imposing Unfair Binding Arbitration on Consumers, Fla. Bar J., Nov. 1997, at 8, 10-12 (outcome in Gateway is questionable on federal statutory, common law and constitutional grounds and as a matter of contract law and is unwise as a matter of policy because it unreasonably shifts to consumers search cost of ascertaining existence of\narbitration clause and return cost to avoid such clause); Thomas J. McCarthy et al., Survey: Uniform Commercial Code, 53 Bus. Law. 1461, 1465-66 (Seventh Circuit finding that UCC \xc2\xa7 2-207\n*\n\n369\n\n\x0c[\xc2\xb62] The Court is not persuaded that Kansas or Missouri courts would\nfollow the Seventh Circuit reasoning in Hill and ProCD. In each case the\nSeventh Circuit concluded without support that UCC \xc2\xa7 2-207 was irrelevant because the cases involved only one written form. See ProCD, 86\nF.3d at 1452 (citing no authority); Hill, 105 F.3d at 1150 (citing ProCD).\nThis conclusion is not supported by the statute or by Kansas or Missouri\nlaw. Disputes under \xc2\xa7 2-207 often arise in the context of a \xe2\x80\x9cbattle of\nforms,\xe2\x80\x9d see, e.g., Diatom, Inc. v. Pennwalt Corp., 741 F.2d 1569, 1574\n(10th Cir. 1984), but nothing in its language precludes application in a\ncase which involves only one form. The statute provides:\nAdditional terms in acceptance or confirmation.\n(1) A definite and seasonable expression of acceptance or a written\nconfirmation which is sent within a reasonable time operates as an\nacceptance even though it states terms additional to or different\nfrom those offered or agreed upon, unless acceptance is expressly\nmade conditional on assent to the additional or different terms.\n(2) The additional terms are to be construed as proposals for addition to the contract [if the contract is not between merchants]....\nK.S.A. \xc2\xa7 84-2-207; V.A.M.S. \xc2\xa7 400.2-207. By its terms, \xc2\xa7 2-207 applies to\nan acceptance or written confirmation. It states nothing which requires another form before the provision becomes effective. In fact, the official\ncomment to the section specifically provides that \xc2\xa7\xc2\xa7 2-207(1) and (2) apply \xe2\x80\x9cwhere an agreement has been reached orally ... and is followed by\none or both of the parties sending formal memoranda embodying the terms\nso far agreed and adding terms not discussed.\xe2\x80\x9d Official Comment 1 of\nUCC \xc2\xa7 2- 207. Kansas and Missouri courts have followed this analysis.\n* * * * Thus, the Court concludes that Kansas and Missouri courts would\napply \xc2\xa7 2-207 to the facts in this case. * * * *\n[\xc2\xb63] In addition, the Seventh Circuit provided no explanation for its\nconclusion that \xe2\x80\x9cthe vendor is the master of the offer.\xe2\x80\x9d See ProCD, 86 F.3d\nat 1452 (citing nothing in support of proposition); Hill, 105 F.3d at 1149\ndid not apply is inconsistent with official comment); Batya Goodman, Honey, I Shrink-Wrapped\nthe Consumer: the Shrinkwrap Agreement as an Adhesion Contract, 21 Cardozo L. Rev. 319, 344352 (Seventh Circuit failed to consider principles of adhesion contracts); Jeremy Senderowicz,\nConsumer Arbitration and Freedom of Contract: A Proposal to Facilitate Consumers\xe2\x80\x99 Informed\nConsent to Arbitration Clauses in Form Contracts, 32 Colum. J.L. & Soc. Probs. 275, 296-299\n(judiciary (in multiple decisions, including Hill) has ignored issue of consumer consent to an arbitration clause). Nonetheless, several courts have followed the Seventh Circuit decisions in Hill and\nProCD. See, e.g., M.A. Mortenson Co., Inc. v. Timberline Software Corp., 140 Wash.2d 568, 998\nP.2d 305 (license agreement supplied with software); Rinaldi v. Iomega Corp., 1999 WL 1442014,\nCase No. 98C-09- 064-RRC (Del. Super. Sept. 3, 1999) (warranty disclaimer included inside\ncomputer Zip drive packaging ); Westendorf v. Gateway 2000, Inc., 2000 WL 307369, Case No.\n16913 (Del. Ch. March 16, 2000) (arbitration provision shipped with computer); Brower v. Gateway 2000, Inc. , 246 A.D.2d 246, 676 N.Y.S.2d 569 (N.Y.App.Div.1998) (same); Levy v. Gateway\n2000, Inc., 1997 WL 823611, 33 UCC Rep. Serv.2d 1060 (N.Y.Sup. Oct. 31, 1997) (same).\n\n370\n\n\x0c(citing ProCD). In typical consumer transactions, the purchaser is the offeror, and the vendor is the offeree. * * * * While it is possible for the vendor to be the offeror, see Brown Machine, 770 S.W.2d at 419 (price quote\ncan amount to offer if it reasonably appears from quote that assent to quote\nis all that is needed to ripen offer into contract), Gateway provides no factual evidence which would support such a finding in this case. The Court\ntherefore assumes for purposes of the motion to dismiss that plaintiff offered to purchase the computer (either in person or through catalog order)\nand that Gateway accepted plaintiff\xe2\x80\x99s offer (either by completing the sales\ntransaction in person or by agreeing to ship and/or shipping the computer\nto plaintiff).* Accord Arizona Retail, 831 F. Supp. at 765 (vendor entered\ninto contract by agreeing to ship goods, or at latest, by shipping goods).\n[\xc2\xb64] Under \xc2\xa7 2-207, the Standard Terms constitute either an expression\nof acceptance or written confirmation. As an expression of acceptance, the\nStandard Terms would constitute a counter-offer only if Gateway expressly made its acceptance conditional on plaintiff\xe2\x80\x99s assent to the additional or\ndifferent terms. K.S.A. \xc2\xa7 84-2-207(1); V.A.M.S. \xc2\xa7 400.2- 207(1). \xe2\x80\x9c[T]he\nconditional nature of the acceptance must be clearly expressed in a manner\nsufficient to notify the offeror that the offeree is unwilling to proceed with\nthe transaction unless the additional or different terms are included in the\ncontract.\xe2\x80\x9d Brown Machine, 770 S.W.2d at 420. Gateway provides no evidence that at the time of the sales transaction, it informed plaintiff that the\ntransaction was conditioned on plaintiff\xe2\x80\x99s acceptance of the Standard\nTerms. Moreover, the mere fact that Gateway shipped the goods with the\nterms attached did not communicate to plaintiff any unwillingness to proceed without plaintiff\xe2\x80\x99s agreement to the Standard Terms. * * * *\n[\xc2\xb65] Because plaintiff is not a merchant, additional or different terms\ncontained in the Standard Terms did not become part of the parties\xe2\x80\x99\nagreement unless plaintiff expressly agreed to them. See K.S.A. \xc2\xa7 84-2207, Kansas Comment 2 (if either party is not a merchant, additional terms\nare proposals for addition to the contract that do not become part of the\ncontract unless the original offeror expressly agrees). \xe2\x80\xa0 Gateway argues\nthat plaintiff demonstrated acceptance of the arbitration provision by keeping the computer more than five days after the date of delivery. Although\nthe Standard Terms purport to work that result, Gateway has not presented\nevidence that plaintiff expressly agreed to those Standard Terms. Gateway\nUCC \xc2\xa7 2-206(b) provides that \xe2\x80\x9can order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt\nor current shipment ...\xe2\x80\x9d The official comment states that \xe2\x80\x9c[e]ither shipment or a prompt promise to\nship is made a proper means of acceptance of an offer looking to current shipment.\xe2\x80\x9d UCC \xc2\xa7 2-206,\nOfficial Comment 2.\n\xe2\x80\xa0\nThe Court\xe2\x80\x99s decision would be the same if it considered the Standard Terms as a proposed modification under UCC \xc2\xa7 2-209. See, e.g., Orris, 5 F. Supp.2d at 1206 (express assent analysis is same\nunder \xc2\xa7\xc2\xa7 2- 207 and 2-209).\n*\n\n371\n\n\x0cstates only that it enclosed the Standard Terms inside the computer box for\nplaintiff to read afterwards. It provides no evidence that it informed plaintiff of the five-day review-and-return period as a condition of the sales\ntransaction, or that the parties contemplated additional terms to the agreement.* See Step-Saver, 939 F.2d at 99 (during negotiations leading to purchase, vendor never mentioned box-top license or obtained buyer\xe2\x80\x99s express assent thereto). The Court finds that the act of keeping the computer\npast five days was not sufficient to demonstrate that plaintiff expressly\nagreed to the Standard Terms. Accord Brown Machine, 770 S.W.2d at 421\n(express assent cannot be presumed by silence or mere failure to object).\nThus, because Gateway has not provided evidence sufficient to support a\nfinding under Kansas or Missouri law that plaintiff agreed to the arbitration provision contained in Gateway\xe2\x80\x99s Standard Terms, the Court overrules\nGateway\xe2\x80\x99s motion to dismiss. * * * *\nQuestion: Which decision has the better analysis, Hill or Klocek?\n\nG. Web Contracts\nCONTRACTING ONLINE: THE UBER CASES\n\xe2\x80\x9cUber provides a ride-sharing service . . . for a fee. Uber licenses the Uber mobile\napplication (the \xe2\x80\x9cUber App\xe2\x80\x9d) to the public so that users may request transportation\nservices from independent third party providers in the users\xe2\x80\x99 local area.\xe2\x80\x9d To use\nthe app, Uber \xe2\x80\x9cusers must first register with Uber by creating an account\xe2\x80\x9d through\nthe app itself or through Uber\xe2\x80\x99s website.\nUber\xe2\x80\x99s online registration process as a contract-formation event was at issue in\nthree recent, important cases. In two cases, the users downloaded the app and created an account through the app. In the latest case, the user registered on the website.\nThe users all had different disputes with Uber. In Meyer v. Uber Technologies,\nInc., 868 F.3d 66 (2d Cir. 2017), the plaintiff on behalf of a class of users sued\nUber\xe2\x80\x99s CEO Travis Kalanick for price-fixing. The trial court granted Kalanick\xe2\x80\x99s\nmotion to bring Uber into the litigation as a necessary party.\nIn Cullinane v. Uber Technologies, Inc., 893 F.3d 53 (1st Cir. 2018), the plaintiffs\non behalf of a class of users sued Uber for charging unnecessary fees. The facts in\nthe first paragraph above were quoted and paraphrased from Cullinane.\n*\n\nThe Court is mindful of the practical considerations which are involved in commercial transactions, but it is not unreasonable for a vendor to clearly communicate to a buyer\xe2\x80\x94at the time of\nsale\xe2\x80\x94either the complete terms of the sale or the fact that the vendor will propose additional terms\nas a condition of sale, if that be the case.\n\n372\n\n\x0cIn Theodore v. Uber Technologies, Inc., 442 F. Supp.3d 433 (D. Mass. 2020), the\nwheel-chair-bound plaintiff sued for injunctive relief because Uber failed \xe2\x80\x9cto provide wheelchair accessible vehicles in the suburb where Mr. Theodore resides.\xe2\x80\x9d\nIn each case, Uber moved to compel arbitration, and the court had to decide\nwhether the plaintiffs were bound by the arbitration clause in Uber\xe2\x80\x99s terms of service.\nUber\xe2\x80\x99s sign-up process was quite similar for all of these plaintiffs.\n1. Meyer\nHere is the way the Meyer court described it:\n[1]\nThe first screen, at which the user arrives after downloading the\napplication and clicking a button marked \xe2\x80\x9cRegister,\xe2\x80\x9d is labeled \xe2\x80\x9cRegister\xe2\x80\x9d\nand includes fields for the user to enter his or her name, email address,\nphone number, and a password (the \xe2\x80\x9cRegistration Screen\xe2\x80\x9d). The Registration Screen also offers the user the option to register via a Google+ or Facebook account. According to Uber\xca\xb9s records, Meyer did not sign up using\neither Google+ or Facebook and would have had to enter manually his\npersonal information. [Meyer\xe2\x80\x99s phone screen was 5.1 inches, measured diagonally, and no images here are rendered at actual size.]\n\n373\n\n\x0c[\xc2\xb62] After completing the information on the Registration Screen and\nclicking \xe2\x80\x9cNext,\xe2\x80\x9d the user advances to a second screen labeled \xe2\x80\x9cPayment\xe2\x80\x9d\n(the \xe2\x80\x9cPayment Screen\xe2\x80\x9d), on which the user can enter credit card details or\nelect to make payments using PayPal or Google Wallet, third\xe2\x80\x90party payment services. According to Uber\xe2\x80\x99s records, Meyer entered his credit card\ninformation to pay for rides. To complete the process, the prospective user\nmust click the button marked \xe2\x80\x9cREGISTER\xe2\x80\x9d in the middle of the Payment\nScreen.\n[\xc2\xb63] Below the input fields and buttons on the Payment Screen is black\ntext advising users that \xe2\x80\x9c[b]y creating an Uber account, you agree to the\nTERMS OF SERVICE & PRIVACY POLICY.\xe2\x80\x9d * * * * The capitalized\nphrase, which is bright blue and underlined, was a hyperlink that, when\nclicked, took the user to a third screen containing a button that, in turn,\nwhen clicked, would then display the current version of both Uber\xe2\x80\x99s Terms\nof Service and Privacy Policy. Meyer recalls entering his contact information and credit card details before registering, but does not recall seeing\nor following the hyperlink to the Terms and Conditions. He declares that\nhe did not read the Terms and Conditions, including the arbitration provision.\n[\xc2\xb64] When Meyer registered for an account, the Terms of Service contained the following mandatory arbitration clause [and Cullinane and Theodore appear to have had equivalents]:\nDispute Resolution\nYou and Company agree that any dispute, claim or controversy\narising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof or the use of\nthe Service or Application (collectively, \xe2\x80\x9cDisputes\xe2\x80\x9d) will be settled by binding arbitration, except that each party retains the right\nto bring an individual action in small claims court and the right to\nseek injunctive or other equitable relief in a court of competent jurisdiction to prevent the actual or threatened infringement, misappropriation or violation of a party\xe2\x80\x99s copyrights, trademarks, trade\nsecrets, patents or other intellectual property rights. You\nacknowledge and agree that you and Company are each waiving the right to a trial by jury or to participate as a plaintiff or\nclass User in any purported class action or representative proceeding.\nFurther, unless both you and Company otherwise agree in writing,\nthe arbitrator may not consolidate more than one person\xe2\x80\x99s claims,\nand may not otherwise preside over any form of any class or representative proceeding. If this specific paragraph is held unenforcea374\n\n\x0cble, then the entirety of this \xe2\x80\x9cDispute Resolution\xe2\x80\x9d section will be\ndeemed void. Except as provided in the preceding sentence, this\n\xe2\x80\x9cDispute Resolution\xe2\x80\x9d section will survive any termination of this\nAgreement.\nAppellants\xe2\x80\x99 App. at 111\xe2\x80\x9012. The Terms of Service further provided that the\nAmerican Arbitration Association (\xe2\x80\x9cAAA\xe2\x80\x9d) would hear any dispute, and\nthat the AAA Commercial Arbitration Rules would govern any arbitration\nproceeding.\n2. Cullinane\nThe Cullinane process was slightly different. The first screen was entitled \xe2\x80\x9cCreate\nan Account\xe2\x80\x9d and required an email address, mobile phone number, and password.\nA second screen entitled \xe2\x80\x9cCreate a Profile\xe2\x80\x9d required first and last name and a picture. The third screen said either \xe2\x80\x9cLink Card\xe2\x80\x9d or \xe2\x80\x9cLink Payment\xe2\x80\x9d and, like the\nsecond screen in Meyer, asked the user to enter payment information.\nThe third screen looked like one of the following. Earlier users only saw something like the right screen, but after Uber added a PayPal option, users were taken\nto the left screen first; if they chose credit card, then they saw something like the\nright screen. Uber claimed that the rectangular box around its Terms of Service &\nPrivacy Policy was a clickable link. After payment information was entered, a\n\xe2\x80\x9cDone\xe2\x80\x9d button in the upper right corner became visible and operable.\n\n375\n\n\x0c3. Theodore\nMr. Theodore\xe2\x80\x99s case is a little different because he never registered through the\napp. In 2016, he \xe2\x80\x9ccreated an account on Uber\xe2\x80\x99s website.\xe2\x80\x9d The website\xe2\x80\x99s screen\n(below) looked similar to that from Meyer and Cullinane with regard to the terms\nand conditions; other information on those pages in the app was, on the website,\nentered on prior screens, however.\n\nAfter registering, Mr. Theodore could not find wheelchair accessible vehicles\nthrough the app and never used Uber\xe2\x80\x99s service.\n4. The Dispute\nIn none of these cases was the user required to click on the Terms of Service link\nin order to complete the registration process. Each could (and did) register without clicking on the link. The question the court addressed was whether the plaintiffs\xe2\x80\x94users\xe2\x80\x94had agreed to the arbitration agreements.\nThis issue is probably (technically) about Uber\xe2\x80\x99s offer. It\xe2\x80\x99s safe to say that no human on Uber\xe2\x80\x99s side exercised any thought about whether to accept a user\xe2\x80\x99s registration after the user was finished registering. Thus, if a contract formed, the offer\nwas probably Uber\xe2\x80\x99s. Surely what Uber proposed was an exchange to which it\nhad already assented, on condition of a valid payment method. But we place the\nissue here at the end of the chapter on acceptance because the cases addressed\nboth offer and acceptance, as you will see.\n\n376\n\n\x0c5. The Law\nAll three courts used substantially the same law, and all cite ultimately to Specht v.\nNetscape Communications Corp. 306 F.3d 17 (2d Cir. 2002), an opinion by thenJudge Sotomayor that has become the foundational precedent in the area. Cullinane and Theodore cite also to Meyer, and Theodore cites also to Cullinane. The\ncases follow in line.\nHere is the recitation of law from Cullinane with most citations and other extraneous verbiage removed:\n[A] It is well settled that "arbitration is a matter of contract." "When deciding whether the parties agreed to arbitrate a certain matter (including arbitrability), courts generally . . . should apply ordinary state-law principles\nthat govern the formation of contracts."\n[B] [I]n Ajemian v. Yahoo!, Inc., 83 Mass.App.Ct. 565, 987 N.E.2d 604,\n611-15 (2013), the Massachusetts Appeals Court addressed the enforceability of forum selection and limitation clauses within an online contract\nand that court\'s decision is "trustworthy data for ascertaining state law."\nWhile the clauses at issue in Ajemian did not include an arbitration clause,\n"the essential question presented was the same: what level of notice and\nassent is required in order for a court to enforce an online adhesion contract?" Consequently, we apply the principles stated in Ajemian.\n[C] In Ajemian, the Appeals Court determined that there was "no reason to\napply different legal principles [of contract enforcement] simply because a\nforum selection clause . . . is contained in an online contract." Therefore,\n"such clauses will be enforced provided they have been reasonably communicated and accepted." The Appeals Court explained that "[r]easonably\nconspicuous notice of the existence of contract terms and unambiguous\nmanifestation of assent to those terms by consumers are essential if electronic bargaining is to have integrity and credibility." Id. at 612 ([ultimately] quoting Specht v. Netscape Commc\'ns Corp., 306 F.3d 17, 35 (2d Cir.\n2002)). With this in mind, the Appeals Court set forth a two-step inquiry\nfor the enforceability of forum selection clauses in online agreements. The\nfirst inquiry is whether the contract terms were "reasonably communicated\nto the plaintiffs." The second is whether the record shows that those terms\nwere "accepted and, if so, the manner of acceptance." The court further\nclarified that the burden to show that the terms were reasonably communicated and accepted lies on the party seeking to enforce the forum selection\nclause.\nCompare those statements with Meyer\xe2\x80\x99s:\n\n377\n\n\x0c[A] Where there is no evidence that the offeree had actual notice of the\nterms of the agreement, the offeree will still be bound by the agreement if\na reasonably prudent user would be on inquiry notice of the terms.\n[B] Whether a reasonably prudent user would be on inquiry notice turns\non the \xe2\x80\x9c[c]larity and conspicuousness of arbitration terms,\xe2\x80\x9d Specht, 306\nF.3d at 30; in the context of web-based contracts, as discussed further below, clarity and conspicuousness are a function of the design and content\nof the relevant interface.\n[C] Thus, only if the undisputed facts establish that there is \xe2\x80\x9c[r]easonably\nconspicuous notice of the existence of contract terms and unambiguous\nmanifestation of assent to those terms\xe2\x80\x9d will we find that a contract has\nbeen formed. See Specht, 306 F.3d at 35. * * * *\n[D] \xe2\x80\x9cCourts around the country have recognized that [an] electronic \xe2\x80\x98click\xe2\x80\x99\ncan suffice to signify the acceptance of a contract,\xe2\x80\x9d and that \xe2\x80\x9c[t]here is\nnothing automatically offensive about such agreements, as long as the layout and language of the site give the user reasonable notice that a click\nwill manifest assent to an agreement.\xe2\x80\x9d\n[E] With these principles in mind, one way in which we have previously\ndistinguished web-based contracts is the manner in which the user manifests assent\xe2\x80\x94namely, \xe2\x80\x9cclickwrap\xe2\x80\x9d (or \xe2\x80\x9cclick-through\xe2\x80\x9d) agreements, which\nrequire users to click an \xe2\x80\x9cI agree\xe2\x80\x9d box after being presented with a list of\nterms and conditions of use, or \xe2\x80\x9cbrowsewrap\xe2\x80\x9d agreements, which generally post terms and conditions on a website via a hyperlink at the bottom of\nthe screen. Courts routinely uphold clickwrap agreements for the principal\nreason that the user has affirmatively assented to the terms of agreement\nby clicking \xe2\x80\x9cI agree.\xe2\x80\x9d Browsewrap agreements, on the other hand, do not\nrequire the user to expressly assent. \xe2\x80\x9cBecause no affirmative action is required by the website user to agree to the terms of a contract other than his\nor her use of the website, the determination of the validity of the browsewrap contract depends on whether the user has actual or constructive\nknowledge of a website\'s terms and conditions.\xe2\x80\x9d\n[F] Of course, there are infinite ways to design a website or smartphone\napplication, and not all interfaces fit neatly into the clickwrap or browsewrap categories. Some online agreements require the user to scroll through\nthe terms before the user can indicate his or her assent by clicking \xe2\x80\x9cI\nagree.\xe2\x80\x9d [Scrollthrough or scrollwrap?] Other agreements notify the user of\nthe existence of the website\'s terms of use and, instead of providing an \xe2\x80\x9cI\nagree\xe2\x80\x9d button, advise the user that he or she is agreeing to the terms of\nservice when registering or signing up. * * * *\n\n378\n\n\x0c[G] Classification of web\xe2\x80\x90based contracts alone, however, does not resolve\nthe notice inquiry. Insofar as it turns on the reasonableness of notice, the\nenforceability of a web-based agreement is clearly a fact-intensive inquiry.\nNonetheless, on a motion to compel arbitration, we may determine that an\nagreement to arbitrate exists where the notice of the arbitration provision\nwas reasonably conspicuous and manifestation of assent unambiguous as a\nmatter of law. See Specht, 306 F.3d at 28.\nThese rules from Meyer might have a slightly different focus, but is it hard to predict what difference will occur in actual application merely by reading the rules\nfrom the two cases?\n6. The Application\nNevertheless, the courts differed in application of the test. The Meyer court held\nthat the plaintiff \xe2\x80\x9cwas on inquiry notice of the arbitration provision by virtue of\nthe hyperlink . . . and, thus, manifested his assent to the agreement by clicking\n\xe2\x80\x98Register.\xe2\x80\x99\xe2\x80\x9d It reasoned that (i) normal people know how to use a smartphone and\ncan recognize a link, (ii) this hyperlink was in blue like any normal hyperlink\nwould be, and (iii) the sign-up page was uncluttered and clear enough. The notice\nwas \xe2\x80\x9cspatially and temporally coupled\xe2\x80\x9d with the button designated for assent.\nThe court also stressed the \xe2\x80\x9ctransactional context\xe2\x80\x9d: \xe2\x80\x9cMeyer located and downloaded the Uber App, signed up for an account, and entered his credit card information with the intention of entering into a forward-looking relationship with Uber[,] . . . one that would require some terms and conditions.\xe2\x80\x9d\nCullinane, on the other hand, found \xe2\x80\x9cthat the Plaintiffs were not reasonably notified of the terms of the Agreement.\xe2\x80\x9d The highlights include these:\n[D] We note at the outset that Uber chose not to use a common method of\nconspicuously informing users of the existence and location of terms and\nconditions: requiring users to click a box stating that they agree to a set of\nterms, often provided by hyperlink, before continuing to the next screen.\nInstead, Uber chose to rely on simply displaying a notice of deemed acquiescence and a link to the terms.\n[E] Uber\'s \xe2\x80\x9cTerms of Service & Privacy Policy\xe2\x80\x9d hyperlink did not have the\ncommon appearance of a hyperlink. While not all hyperlinks need to have\nthe same characteristics, they are \xe2\x80\x9ccommonly blue and underlined.\xe2\x80\x9d [The\ncourt cited Meyer after this sentence.]\n[F] Along with the \xe2\x80\x9cTerms of Service & Privacy Policy\xe2\x80\x9d hyperlink, the\n\xe2\x80\x9cLink Card\xe2\x80\x9d and \xe2\x80\x9cLink Payment\xe2\x80\x9d screens contained other terms displayed\nwith similar features. For example, the terms \xe2\x80\x9cscan your card\xe2\x80\x9d and \xe2\x80\x9center\npromo code\xe2\x80\x9d were also written in bold and with a similarly sized font as\n379\n\n\x0cthe hyperlink. Both versions of the third screen also included the words\n\xe2\x80\x9cCANCEL\xe2\x80\x9d and \xe2\x80\x9cDONE,\xe2\x80\x9d\xe2\x80\x94the latter being barely visible until the user\nhad entered the required payment information\xe2\x80\x94in all capital letters and\ndark colored font. Meanwhile, the top of the screens featured the terms\n\xe2\x80\x9cLink Card\xe2\x80\x9d or \xe2\x80\x9cLink Payment\xe2\x80\x9d in large capital letters and dark colored\nfont. These had the largest-sized font in both versions of the third screen.\n[G] Uber\'s \xe2\x80\x9cTerms of Service & Privacy Policy\xe2\x80\x9d hyperlink was even less\nconspicuous on the \xe2\x80\x9cLink Payment\xe2\x80\x9d screen. The inclusion of the additional payment option and the placement of a large blue PayPal button in the\nmiddle of the screen were more attention-grabbing and displaced the hyperlink to the bottom of the screen.\nThis is just a small portion of the analyses from Cullinane and Meyer, but you can\nget what the courts are doing: parsing through the website design to argue whether the terms and conditions link was conspicuous\xe2\x80\x94reasonably communicated.\nAh, but Theodore included the terms and conditions link in blue on a white background, just as we saw in Meyer! The Theodore court noted the similarity to Meyer but also reasoned that\nsome of the other terms on the page were still in the same color as the hyperlink, including \xe2\x80\x9center promo code,\xe2\x80\x9d and the links to the \xe2\x80\x9cTerms and\nConditions\xe2\x80\x9d and \xe2\x80\x9cPrivacy Policy\xe2\x80\x9d were still not the largest text on the\nscreen. The hyperlinks also continued to appear without any underlining.\nFinally, as before, the Terms and Conditions were linked at the bottom of\nthe screen and did not require an affirmative acknowledgment from the\nprospective user that he or she was agreeing to be bound by the Terms and\nConditions or the Privacy Policy by creating an Uber account.\nThe court also noted that it was bound by Cullinane (D. Mass is within the 1st\nCir.). One could also almost hear the court whisper \xe2\x80\x9cand not bound by Meyer.\xe2\x80\x9d At\nany rate, the Theodore court refused to order arbitration, on grounds that no\nagreement to arbitrate existed.\nHere is your ASSIGNMENT FOR CLASS:\n1) Taking the facts of Meyer, choose what result you think a court should reach\xe2\x80\x94\nagreement or not, then construct your legal argument (a) using the best standards\nused by these courts, to the extent you can discern them, and (b) naming at least\nfive facts, from most persuasive to least persuasive, in favor of your result. I may\nask you for your legal argument, and I intend to poll the class to see what facts\neach of you chose.\n2) Given the state of the law, how would you recommend that clients design their\nwebsites? Please name the key design feature/s and give reasons.\n380\n\n\x0cQuestions:\n1. The Meyer court held that Meyer also had to arbitrate against Kalanick:\nAlthough Kalanick is not a party to the Terms and Conditions between\nUber and Meyer, he is nonetheless protected by them. \xe2\x80\x9cCourts in this and\nother circuits consistently have held that employees or disclosed agents of\nan entity that is a party to an arbitration agreement are protected by that\nagreement.\xe2\x80\x9d\nOp. at 39 n.11. The law reasons that these claims, too, are within the language of\nthe arbitration clause. What do you think? The courts have also cited in support\nthe federal policy in favor of arbitration. Whether Kalanick himself, a non-party,\ncan claim the right to arbitrate is the question, though. Roby v. Corp. of Lloyd\xe2\x80\x99s,\n996 F.2d 1353 (2d Cir. 1993), reasoned that employees and agents are intended\nbeneficiaries of the arbitration clauses. (The doctrine of third-party beneficiaries\nis a topic addressed in Volume II of this casebook.) How hard would it be to escape arbitration with an entity if you could force into court all the people who acted on the entity\xe2\x80\x99s behalf?\n2. Binding Meyer to the arbitration agreement in this case is most like which other\ncase we have studied? ProCD? Hill? Austin v. Burge? Den Norske Stats Oljeselscap? Lee v. Sheller Globe? Lucy v. Zehmer?\n\n381\n\n\x0cChapter 8. Definiteness\nA. The General Principle\nACADEMY CHICAGO PUBLISHERS v. Mary W. CHEEVER (1991)\nSupreme Court of Illinois\n578 N.E.2d 981\nJustice HEIPLE delivered the opinion of the court:\n[\xc2\xb61] This is a suit for declaratory judgment. It arose out of an agreement between the widow of the widely published author, John Cheever, and Academy\nChicago Publishers. Contact between the parties began in 1987 when the publisher approached Mrs. Cheever about the possibility of publishing a collection of Mr.\nCheever\xe2\x80\x99s short stories which, though previously published, had never been collected into a single anthology. In August of that year, a publishing agreement was\nsigned which provided, in pertinent part:\n\xe2\x80\x9cAgreement made this 15th day of August 1987, between Academy Chicago Publishers or any affiliated entity or imprint (hereinafter referred to\nas the Publisher) and Mary W. Cheever and Franklin H. Dennis of the\nUSA (hereinafter referred to as Author).\nWhereas the parties are desirous of publishing and having published a certain work or works, tentatively titled The Uncollected Stories of John\nCheever (hereinafter referred to as the Work):\n****\n2. The Author will deliver to the Publisher on a mutually agreeable date\none copy of the manuscript of the Work as finally arranged by the editor\nand satisfactory to the Publisher in form and content.\n****\n5. Within a reasonable time and a mutually agreeable date after delivery of\nthe final revised manuscript, the Publisher will publish the Work at its own\nexpense, in such style and manner and at such price as it deems best, and\nwill keep the Work in print as long as it deems it expedient; but it will not\nbe responsible for delays caused by circumstances beyond its control.\xe2\x80\x9d\n[\xc2\xb62] Academy and its editor, Franklin Dennis, assumed the task of locating and\nprocuring the uncollected stories and delivering them to Mrs. Cheever. Mrs.\nCheever and Mr. Dennis received partial advances for manuscript preparation. By\nthe end of 1987, Academy had located and delivered more than 60 uncollected\nstories to Mrs. Cheever. Shortly thereafter, Mrs. Cheever informed Academy in\n\n382\n\n\x0cwriting that she objected to the publication of the book and attempted to return her\nadvance.\n[\xc2\xb63] Academy filed suit in the circuit court of Cook County in February 1988,\nseeking a declaratory judgment: (1) granting Academy the exclusive right to publish the tentatively titled, \xe2\x80\x9cThe Uncollected Stories of John Cheever\xe2\x80\x9d; (2) designating Franklin Dennis as the book\xe2\x80\x99s editor; and (3) obligating Mrs. Cheever to\ndeliver the manuscript from which the work was to be published. The trial court\nentered an order declaring, inter alia: (1) that the publishing agreement executed\nby the parties was valid and enforceable; (2) that Mrs. Cheever was entitled to\nselect the short stories to be included in the manuscript for publication; (3) that\nMrs. Cheever would comply with her obligations of good faith and fair dealing if\nshe delivered a manuscript including at least 10 to 15 stories totaling at least 140\npages; (4) Academy controlled the design and format of the work to be published,\nbut control must be exercised in cooperation with Mrs. Cheever.\n[\xc2\xb64] Academy appealed the trial court\xe2\x80\x99s order, challenging particularly the declaration regarding the minimum story and page numbers for Mrs. Cheever\xe2\x80\x99s compliance with the publishing agreement, and the declaration that Academy must\nconsult with defendant on all matters of publication of the manuscript.\n[\xc2\xb65] The appellate court affirmed the decision of the trial court with respect to\nthe validity and enforceability of the publishing agreement and the minimum story and page number requirements for Mrs. Cheever\xe2\x80\x99s compliance with same. The\nappellate court reversed the trial court\xe2\x80\x99s declaration regarding control of publication, stating that the trial court erred in considering extrinsic evidence to interpret\nthe agreement regarding control of the publication, given the explicit language of\nthe agreement granting exclusive control to Academy. (200 Ill.App.3d 677, 146 Ill.\nDec. 386, 558 N.E.2d 349.) Appeal is taken in this court pursuant to Supreme\nCourt Rule 315(a) (134 Ill.2d R. 315(a)).\n[\xc2\xb66] The parties raise several issues on appeal; this matter, however, is one of\ncontract and we confine our discussion to the issue of the validity and enforceability of the publishing agreement.\n[\xc2\xb67] While the trial court and the appellate court agreed that the publishing\nagreement constitutes a valid and enforceable contract, we cannot concur. The\nprinciples of contract state that in order for a valid contract to be formed, an \xe2\x80\x9coffer\nmust be so definite as to its material terms or require such definite terms in the\nacceptance that the promises and performances to be rendered by each party are\nreasonably certain.\xe2\x80\x9d (1 Williston, Contracts \xc2\xa7\xc2\xa7 38 through 48 (3d ed. 1957); 1\nCorbin, Contracts \xc2\xa7\xc2\xa7 95 through 100 (1963).) Although the parties may have had\nand manifested the intent to make a contract, if the content of their agreement is\nunduly uncertain and indefinite no contract is formed. 1 Williston \xc2\xa7 37; 1 Corbin\n\xc2\xa7 95.\n383\n\n\x0c[\xc2\xb68] The pertinent language of this agreement lacks the definite and certain essential terms required for the formation of an enforceable contract. (Midland Hotel Corp. v. Reuben H. Donnelley Corp. (1987), 118 Ill.2d 306, 113 Ill. Dec. 252,\n515 N.E.2d 61.) A contract \xe2\x80\x9cis sufficiently definite and certain to be enforceable if\nthe court is enabled from the terms and provisions thereof, under proper rules of\nconstruction and applicable principles of equity, to ascertain what the parties have\nagreed to do.\xe2\x80\x9d (Morey v. Hoffman (1957), 12 Ill.2d 125, 145 N.E.2d 644.) The\nprovisions of the subject publishing agreement do not provide the court with a\nmeans of determining the intent of the parties.\n[\xc2\xb69] Trial testimony reveals that a major source of controversy between the\nparties is the length and content of the proposed book. The agreement sheds no\nlight on the minimum or maximum number of stories or pages necessary for publication of the collection, nor is there any implicit language from which we can\nglean the intentions of the parties with respect to this essential contract term. The\npublishing agreement is similarly silent with respect to who will decide which stories will be included in the collection. Other omissions, ambiguities, unresolved\nessential terms and illusory terms are: No date certain for delivery of the manuscript. No definition of the criteria which would render the manuscript satisfactory\nto the publisher either as to form or content. No date certain as to when publication will occur. No certainty as to style or manner in which the book will be published nor is there any indication as to the price at which such book will be sold,\nor the length of time publication shall continue, all of which terms are left to the\nsole discretion of the publisher.\n[\xc2\xb610] A contract may be enforced even though some contract terms may be\nmissing or left to be agreed upon, but if the essential terms are so uncertain that\nthere is no basis for deciding whether the agreement has been kept or broken,\nthere is no contract. (Champaign National Bank v. Landers Seed Co. (1988), 165\nIll.App.3d 1090, 116 Ill. Dec. 742, 519 N.E.2d 957, Restatement (Second) of\nContracts \xc2\xa7 33 (1981).) Without setting forth adequate terms for compliance, the\npublishing agreement provides no basis for determining when breach has occurred,\nand, therefore, is not a valid and enforceable contract.\n[\xc2\xb611] An enforceable contract must include a meeting of the minds or mutual\nassent as to the terms of the contract. (Midland Hotel, 118 Ill.2d at 313, 113 Ill.\nDec. 252, 515 N.E.2d 61.) It is not compelling that the parties share a subjective\nunderstanding as to the terms of the contract; the parties\xe2\x80\x99 conduct may indicate an\nagreement to the terms of same. (Steinberg v. Chicago Medical School (1977), 69\nIll.2d 320, 13 Ill. Dec. 699, 371 N.E.2d 634.) In the instant case, however, no mutual assent has been illustrated. The parties did not and do not share a common\nunderstanding of the essential terms of the publishing agreement.\n[\xc2\xb612] In rendering its judgment, the trial court supplied minimum terms for Mrs.\nCheever\xe2\x80\x99s compliance, including story and page numbers. It is not uncommon for\na court to supply a missing material term, as the reasonable conclusion often is\n384\n\n\x0cthat the parties intended that the term be supplied by implication. However, where\nthe subject matter of the contract has not been decided upon and there is no standard available for reasonable implication, courts ordinarily refuse to supply the\nmissing term. (1 Williston \xc2\xa7 42; 1 Corbin \xc2\xa7 100.) No suitable standard was available for the trial court to apply. It is our opinion that the trial court incorrectly supplied minimum compliance terms to the publishing agreement, as the agreement\ndid not constitute a valid and enforceable contract to begin with. As noted above,\nthe publishing agreement contains major unresolved uncertainties. It is not the\nrole of the court to rewrite the contract and spell out essential elements not included therein.\n[\xc2\xb613] In light of our decision that there was no valid and enforceable contract\nbetween the parties, we need not address other issues raised on appeal. For the\nforegoing reasons, the decisions of the trial and appellate courts in this declaratory\njudgment action are reversed.\nReversed.\nJustices CLARK and FREEMAN took no part in the consideration or decision of\nthis opinion.\nQuestions:\n1. Did a contract form here?\n2. Why doesn\'t the court simply imply a reasonable term?\n3. Why don\'t parties fill out terms? (The answer to this is not in the case, but\nplease speculate as to what reasons might be.)\nNote: The Amazon review of the book, Anita Miller, UNCOLLECTING CHEEVER:\nTHE FAMILY OF JOHN CHEEVER VS. ACADEMY CHICAGO PUBLISHERS (2001), details the history of this litigation. Miller was part owner of the publishing house\nand wrote the book in order to grind her ax (she has an ax to grind). In the end,\nAcademy did publish a small collection of 13 stories in 1994, which left 55 still\nuncollected. Why did the Cheevers (more than Mrs. Cheever were involved) back\nout? One Cheever child said, "I\'m a greedy pig. All my life I\'ve wanted to be rich.\nHaven\'t you?\xe2\x80\x9d Of course, that\'s not what they argued in court.\n\n385\n\n\x0cJOSEPH MARTIN, JR., DELICATESSEN, INC. v. Henry D. SCHUMACHER\n(1981)\nCourt of Appeals of New York\n436 N.Y.S.2d 247\nFUCHSBERG, Judge.\n[\xc2\xb61] This case raises an issue fundamental to the law of contracts. It calls upon\nus to review a decision of the Appellate Division, 70 A.D.2d 1, 419 N.Y.S.2d 558\nwhich held that a realty lease\xe2\x80\x99s provision that the rent for a renewal period was \xe2\x80\x9cto\nbe agreed upon\xe2\x80\x9d may be enforceable.\n[\xc2\xb62] The pertinent factual and procedural contexts in which the case reaches\nthis court are uncomplicated. In 1973, the appellant, as landlord, leased a retail\nstore to the respondent for a five-year term at a rent graduated upwards from $500\nper month for the first year to $650 for the fifth. The renewal clause stated that\n\xe2\x80\x9c(t)he Tenant may renew this lease for an additional period of five years at annual\nrentals to be agreed upon; Tenant shall give Landlord thirty (30) days written notice, to be mailed certified mail, return receipt requested, of the intention to exercise such right.\xe2\x80\x9d It is not disputed that the tenant gave timely notice of its desire to\nrenew or that, once the landlord made it clear that he would do so only at a rental\nstarting at $900 a month, the tenant engaged an appraiser who opined that a fair\nmarket rental value would be $545.41.\n[\xc2\xb63] The tenant thereupon commenced an action for specific performance in\nSupreme Court, Suffolk County, to compel the landlord to extend the lease for the\nadditional term at the appraiser\xe2\x80\x99s figure or such other sum as the court would decide was reasonable. For his part, the landlord in due course brought a holdover\nproceeding in the local District Court to evict the tenant. On the landlord\xe2\x80\x99s motion\nfor summary judgment, the Supreme Court, holding that a bald agreement to\nagree on a future rental was unenforceable for uncertainty as a matter of law, dismissed the tenant\xe2\x80\x99s complaint. Concordantly, it denied as moot the tenant\xe2\x80\x99s motion to remove the District Court case to the Supreme Court and to consolidate the\ntwo suits.\n[\xc2\xb64] It was on appeal by the tenant from these orders that the Appellate Division, expressly overruling an established line of cases in the process, reinstated\nthe tenant\xe2\x80\x99s complaint and granted consolidation. In so doing, it reasoned that \xe2\x80\x9ca\nrenewal clause in a lease providing for future agreement on the rent to be paid\nduring the renewal term is enforceable if it is established that the parties\xe2\x80\x99 intent\nwas not to terminate in the event of a failure to agree\xe2\x80\x9d. It went on to provide that,\nif the tenant met that burden, the trial court could proceed to set a \xe2\x80\x9creasonable\nrent\xe2\x80\x9d. One of the Justices, concurring, would have eliminated the first step and\nrequired the trial court to proceed directly to the fixation of the rent. Each party\nnow appeals by leave of the Appellate Division pursuant to CPLR 5602 (subd. (b),\npar. 1). The tenant seeks only a modification adopting the concurrer\xe2\x80\x99s position.\n386\n\n\x0cThe question formally certified to us by the Appellate Division is simply whether\nits order was properly made. Since we conclude that the disposition at the Supreme Court was the correct one, our answer must be in the negative.\n[\xc2\xb65] We begin our analysis with the basic observation that, unless otherwise\nmandated by law (e. g., residential emergency rent control statutes), a contract is a\nprivate \xe2\x80\x9cordering\xe2\x80\x9d in which a party binds himself to do, or not to do, a particular\nthing (Fletcher v. Peck, 6 Cranch (10 U.S.) 87, 136; 3 L.Ed. 162. Hart and Sachs,\nLegal Process, 147- 148 (1958)). This liberty is no right at all if it is not accompanied by freedom not to contract. The corollary is that, before one may secure redress in our courts because another has failed to honor a promise, it must appear\nthat the promisee assented to the obligation in question.\n[\xc2\xb66] It also follows that, before the power of law can be invoked to enforce a\npromise, it must be sufficiently certain and specific so that what was promised can\nbe ascertained. Otherwise, a court, in intervening, would be imposing its own\nconception of what the parties should or might have undertaken, rather than confining itself to the implementation of a bargain to which they have mutually\ncommitted themselves. Thus, definiteness as to material matters is of the very essence in contract law. Impenetrable vagueness and uncertainty will not do (1\nCorbin, Contracts, s 95, p. 394; 6 Encyclopedia of New York Law, Contracts, s\n301; Restatement, Contracts 2d, s 32, Comment a).\n[\xc2\xb67] Dictated by these principles, it is rightfully well settled in the common law\nof contracts in this State that a mere agreement to agree, in which a material term\nis left for future negotiations, is unenforceable (Willmott v. Giarraputo, 5 N.Y.2d\n250, 253, 184 N.Y.S.2d 97, 157 N.E.2d 282; Sourwine v. Truscott, 17 Hun. 432,\n434). [Editor Notes: Citations to other state court decisions in accord are omitted.]\nThis is especially true of the amount to be paid for the sale or lease of real property (see Forma v. Moran, 273 App.Div. 818, 76 N.Y.S.2d 232; Huber v. Ruby, 187\nMisc. 967, 969, 65 N.Y.S.2d 462, app. dsmd 271 App.Div. 927, 67 N.Y.S.2d 710,\nsee, generally, 58 A.L.R. 3d 500, Validity and Enforceability of Provision for Renewal of Lease at Rental to be Fixed by Subsequent Agreement of the Parties).\nThe rule applies all the more, and not the less, when, as here, the extraordinary\nremedy of specific performance is sought (11 Williston, Contracts (Jaeger 3d ed.),\ns 1424; Pomeroy, Equity Jurisprudence, s 1405).\n[\xc2\xb68] This is not to say that the requirement for definiteness in the case before us\nnow could only have been met by explicit expression of the rent to be paid. The\nconcern is with substance, not form. It certainly would have sufficed, for instance,\nif a methodology for determining the rent was to be found within the four corners\nof the lease, for a rent so arrived at would have been the end product of agreement\nbetween the parties themselves. Nor would the agreement have failed for indefiniteness because it invited recourse to an objective extrinsic event, condition or\nstandard on which the amount was made to depend. All of these, inter alia, would\nhave come within the embrace of the maxim that what can be made certain is cer387\n\n\x0ctain (9 Coke, 47a). (Cf. Backer Mgt. Corp. v. Acme Quilting Co., 46 N.Y.2d 211,\n219, 413 N.Y.S.2d 135, 385 N.E.2d 1062 (escalation of rent keyed to building\nemployees\xe2\x80\x99 future wage increases); City of Hope v. Fisk Bldg. Assoc., 63 A.D.2d\n946, 406 N.Y.S.2d 472 (rental increase to be adjusted for upward movement in\nUS Consumer Price Index); see, generally, 87 A.L.R. 3d 986; Lease Provisions\nProviding for Rent Adjustment Based on Event or Formula Outside Control of\nParties.)\n[\xc2\xb69] But the renewal clause here in fact contains no such ingredients. Its unrevealing, unamplified language speaks to no more than \xe2\x80\x9cannual rentals to be\nagreed upon\xe2\x80\x9d. Its simple words leave no room for legal construction or resolution\nof ambiguity. Neither tenant nor landlord is bound to any formula. There is not so\nmuch as a hint at a commitment to be bound by the \xe2\x80\x9cfair market rental value\xe2\x80\x9d\nwhich the tenant\xe2\x80\x99s expert reported or the \xe2\x80\x9creasonable rent\xe2\x80\x9d the Appellate Division\nwould impose, much less any definition of either. Nowhere is there an inkling that\neither of the parties directly or indirectly assented, upon accepting the clause, to\nsubordinate the figure on which it ultimately would insist, to one fixed judicially,\nas the Appellate Division decreed be done, or, for that matter, by an arbitrator or\nother third party. * * * *\n[\xc2\xb610] For all these reasons, the order of the Appellate Division should be reversed, with costs, and the orders of the Supreme Court, Suffolk County, reinstated. The certified question, therefore, should be answered in the negative. As to the\nplaintiff\xe2\x80\x99s appeal, since that party was not aggrieved by the order of the Appellate\nDivision, the appeal should be dismissed (CPLR 5511), without costs. * * * *\nJASEN, Judge (dissenting in part).\nWhile I recognize that the traditional rule is that a provision for renewal of a lease\nmust be \xe2\x80\x9ccertain\xe2\x80\x9d in order to render it binding and enforceable, in my view the\nbetter rule would be that if the tenant can establish its entitlement to renewal under the lease, the mere presence of a provision calling for renewal at \xe2\x80\x9crentals to be\nagreed upon\xe2\x80\x9d should not prevent judicial intervention to fix rent at a reasonable\nrate in order to avoid a forfeiture. Therefore, I would affirm the order of the Appellate Division for the reasons stated in the opinion of Justice LEON D. LAZER\nat the Appellate Division.\nCOOKE, C. J., and GABRIELLI, JONES and WACHTLER, JJ., concur with\nFUCHSBERG, J.\nMEYER, J., concurs in a memorandum.\nJASEN, J., dissents in part and on defendant\xe2\x80\x99s appeal votes to affirm in a memorandum.\nOn defendant\xe2\x80\x99s appeal: Order reversed, with costs, the orders of Supreme Court,\nSuffolk County, reinstated and the question certified answered in the negative.\nOn plaintiff\xe2\x80\x99s appeal: Appeal dismissed, without costs.\n388\n\n\x0cQuestions:\n1. Why wasn\'t the landlord held to have violated a duty to negotiate in good faith?\n2. Why doesn\'t the court impose a reasonable rental rate under UCC \xc2\xa7 2-305?\n3. Suppose the parties had specified that rent on renewal will be current rent plus\na percentage of current rent equal to the percentage by which the consumer price\nindex has increased from time of lease formation to the time of renewal. Would\nthis be enforceable?\n4. Suppose the parties had specified that an arbitrator would set a rate. Would this\nbe enforceable?\n\nJohn CASSINARI v. Charles W. MAPES and Gloria Mapes Walker (1975)\nSupreme Court of Nevada\n542 P.2d 1069\nOPINION\nTHOMPSON, Justice:\n[\xc2\xb61] This action was commenced by John Cassinari as lessee in response to notices to quit served upon him by Charles W. Mapes and Gloria Mapes Walker, lessors. He sought a court declaration regarding the status of his lease, an injunction\nagainst the lessors\xe2\x80\x99 interference therewith, and damages for breach of the covenant of quiet enjoyment. The lessors counterclaimed for restitution of the premises.\n[\xc2\xb62] The written lease, effective September 1, 1966, through August 31, 1971,\nat a monthly rent of $450, granted lessee \xe2\x80\x98the exclusive right to secure a new lease\nupon the property covered hereby for an additional period of Five (5) years from\nand after the expiration of the term hereof upon the same terms and conditions as\nherein set forth, at a monthly rental to be determined at that time.\xe2\x80\x99\n[\xc2\xb63] Since the rent was not specified, nor a method provided for determining\nrent in case of disagreement, the district court ruled that the option to extend the\nterm of the lease was too vague to be enforced. The court also declined to apply\nthe doctrine of part performance to the circumstances before it. Consequently, injunctive relief was denied the lessee, and restitution of the premises to the lessors\nwas ordered. By reason of its holding, the court was not obliged to decide other\nissues in the case. The lessee has appealed.\n\n389\n\n\x0c[\xc2\xb64] As already noted, the original five-year term was to expire August 31,\n1971. In March, and again in April, 1971 the lessee notified the lessors in writing\nof his intention to extend the lease for an additional five years, and in the latter\nnotification, requested that a time and place be scheduled to determine the rent to\nbe charged. Attorneys for lessee and lessors discussed the matter before August 31,\n1971, but did not resolve it. The lessee and lessors did not themselves communicate with each other regarding the rent to be charged for the extended term.\n[\xc2\xb65] On August 17, 1971, before expiration of the original term, the President\nof the United States issued executive order No. 11615 which prohibited the raising of rents after its issue. This order was effective for six months.\n[\xc2\xb66] From September 1, 1971, until May 1974, the lessee continued paying\n$450 a month rent and the lessors accepted those monthly payments without protest. In May 1974, the lessors served two notices to quit upon the lessee, each demanding that he surrender the premises by June 1, 1974. The first of said notices\nasserted that the lessee was selling wine in violation of the lease, and the second\nnotice advised that the lessors had elected to terminate the lease because the\npremises had become uninhabitable. This litigation followed.\n[\xc2\xb67] 1. A covenant to extend a lease upon such terms as may be agreed upon is\na nullity and unenforceable since all the terms of the extension are left for future\nagreement. City of Reno v. Silver State Flying Serv., 84 Nev. 170, 175, 438 P.2d\n257 (1968). In the case before us, however, all terms and conditions of the renewal were settled, leaving only the rental to later be determined. There is a division\nof authority as to enforceability in this circumstance. We are persuaded that the\nbetter view is to enforce such a provision for extension. * * * *\n[\xc2\xb68] It is appropriate to enforce such a provision since the clause for renewal\nconstitutes part of the consideration for the original lease, and was without question intended by the parties to have meaning and to be effective. Surely we may\nnot presume that one of the signatories agreed to the provision only in the secret\nbelief that it would prove unenforceable. It is proper, then, to imply that the parties intended a reasonable rent for the extended period. If unable to agree, a court\nshould be allowed to fix the rental since economic conditions are ascertainable\nwith sufficient certainty to make the clause capable of enforcement. This view, we\nthink, carries out the true intention of the parties, and does not constitute a making\nof a lease by the court in opposition to the desire of lessor and lessee.\n[\xc2\xb69] Consequently, we reverse the determination below that the provision for\nextending the term of the lease is too vague to be enforceable.\n[\xc2\xb610] 2. The lessee surrendered possession of the leased premises to the lessors\nin compliance with the decision below and did not endeavor to secure a stay pending appeal. The building, a portion of which was the subject of the lease in issue,\nhas been demolished by the lessors and the land on which it was located is now\n390\n\n\x0cbeing used as a parking lot. The lessee presently is conducting his restaurant business at another location. Of these facts we take judicial notice. NRS 47.130(2).\n[\xc2\xb611] Thus, it is apparent that the injunctive relief sought by the lessee in the\nfirst instance, and his request that the renewal covenant be specifically enforced,\nno longer tenders a viable issue.\n[\xc2\xb612] The lessee, however, also sought to recover damages * * * *. That issue\nwas not fully litigated since the hearing centered upon the effectiveness of the renewal provision of the lease. In view of our disagreement with the trial court on\nthat central issue, a remand is in order to consider the question of damages, if any,\nsustained by the lessee.\nReversed and remanded.\nGUNDERSON, C.J., and BATJER, ZENOFF and MOWBRAY, JJ., concur.\nQuestion: Is Cassinari consistent with Schumacher?\n\nUniform Commercial Code \xc2\xa7 2-305. Open Price Term.\n\nUniform Commercial Code \xc2\xa7 2-307. Delivery in Single Lot of Several Lots.\n\nUniform Commercial Code \xc2\xa7 2-308. Absence of Specified Place for Delivery.\n\nUniform Commercial Code \xc2\xa7 2-309. Absence of Specific Time Provisions; Notice of Termination.\n\nUniform Commercial Code \xc2\xa7 2-310. Open Time for Payment or Running of\nCredit; Authority to Ship Under Reservation.\n\nUniform Commercial Code \xc2\xa7 2-311. Options and Cooperation Respecting\nPerformance.\n\n391\n\n\x0cPROBLEM 49. Alice and Cheshire agree that Alice will buy Cheshire\'s car. They\nsign the following paper:\nCheshire will sell his car to Alice, who will buy. Signed, Alice Cheshire\n1. What is the price of Cheshire\'s car? Who decides?\n2. When must Cheshire deliver?\n3. Where must Cheshire deliver?\n4. When must Alice pay?\n5. Does a contract exist despite the lack of specification?\n\nB. The Preliminary Agreement\nThe DACOURT GROUP, INC. v. BABCOCK INDUSTRIES, INC.,\nFKI Babcock PLC, Dennis F. Flint, Jeffrey L. Currier, Peter W. Krehbiel,\nand Robert M. Miller (1990)\nUnited States District Court, D. Connecticut\n747 F. Supp. 157\nRULING ON MOTION TO DISMISS OR FOR SUMMARY JUDGMENT\nEGINTON, District Judge.\n[\xc2\xb61] Plaintiff, The Dacourt Group, Inc. (\xe2\x80\x9cDacourt\xe2\x80\x9d), brought this action against\ndefendants Babcock Industries, Inc. (\xe2\x80\x9cBabcock\xe2\x80\x9d), FKI Babcock PLC (\xe2\x80\x9cFKI\xe2\x80\x9d), the\ncorporate parent of Babcock, and certain named officers of Babcock. This action\narises out of a proposed $80 million sale-leaseback transaction involving commercial properties owned by Babcock. Dacourt, as the prospective purchaser and\nlessor, alleges that it suffered damages when, due to the actions of the various defendants, the sale and leaseback were not consummated. Jurisdiction in this action\nis based on diversity of citizenship, pursuant to 28 U.S.C. \xc2\xa7 1332.\nFACTS\n[\xc2\xb62] In 1988, Babcock and Dacourt entered into negotiations for the sale and\nleaseback of sixteen commercial properties owned by Babcock. The initial marketing package for the transaction circulated to potential investors by Babcock\xe2\x80\x99s\nbroker made the representation that FKI would provide a \xe2\x80\x9ckeep-well\xe2\x80\x9d letter to assure an institutional investor/lessor interested in the properties that its subsidiary,\nBabcock, would maintain a certain, unspecified, minimum net worth. This representation allegedly had the express approval of Babcock and FKI.\n\n392\n\n\x0c[\xc2\xb63] On November 3, 1988 the representatives for the parties met to negotiate\nthe terms of the sale-leaseback transaction. At the conclusion of the meeting, two\ndocuments were drafted to memorialize the negotiations. A \xe2\x80\x9crevised Offer to Purchase and Leaseback the [Babcock] Properties\xe2\x80\x9d (the \xe2\x80\x9cRevised Offer\xe2\x80\x9d) was drafted\nand executed by the President of Dacourt. The Revised Offer was never subscribed to by Babcock or any authorized agent. Next, the attorney for Babcock\ndrafted a letter (the \xe2\x80\x9cNovember 3 Letter\xe2\x80\x9d) on Babcock\xe2\x80\x99s behalf which stated that\n\xe2\x80\x9c[w]e have come to a tentative agreement on basic terms.\xe2\x80\x9d The letter was signed\nby Babcock\xe2\x80\x99s broker, David J. Daddario, who was retained for the transaction.\nDaddario had no express authority to execute documents or to enter into contractual agreements on behalf of Babcock. The specific terms of the FKI \xe2\x80\x9ckeep-well\xe2\x80\x9d\nremained unresolved.\n[\xc2\xb64] Substantial negotiations did not resume until April 11, 1989. At this meeting Dacourt demanded from FKI, in addition to the \xe2\x80\x9ckeep-well\xe2\x80\x9d guaranty, a complete indemnification for all environmental liabilities on the sixteen properties.\nFKI refused to satisfy either of Dacourt\xe2\x80\x99s demands and the transaction was placed\non \xe2\x80\x9chold.\xe2\x80\x9d\n[\xc2\xb65] Dacourt alleges that the individual defendants contacted FKI and attempted to discourage it from completing the Dacourt financing by impressing upon\nFKI that a contemplated management buy-out of Babcock would be less likely if\nBabcock had closed the sale-leaseback transaction with Dacourt. Dacourt maintains that as a result of these communications FKI notified the parties that it\nwould not be willing to provide a \xe2\x80\x9ckeep-well\xe2\x80\x9d agreement or any other form of\nguaranty. In May, 1989, Dacourt was informed that Babcock would not proceed\nwith the sale-leaseback because FKI was auctioning Babcock.\n[\xc2\xb66] In its eleven count complaint, Dacourt asserts that Babcock is liable for\nbreach of contract, breaches of obligations to negotiate in good faith, negligent\nmisrepresentation and on promissory estoppel grounds. Dacourt claims that FKI is\nliable to it under promissory estoppel because Dacourt relied to its detriment on\nFKI\xe2\x80\x99s representation that it would provide a \xe2\x80\x9ckeep-well\xe2\x80\x9d guaranty as part of the\nsale-leaseback transaction. Dacourt also asserts claims for tortious interference\nagainst the individual defendants arising from the named officers\xe2\x80\x99 alleged attempts to influence FKI to abandon the sale-leaseback transaction. Defendants\nhave moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(2) for lack of\njurisdiction over FKI, pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim\nupon which relief can be granted, or for summary judgment.\nI. Motion to Dismiss on Jurisdictional Grounds\n[Ricks-The court\xe2\x80\x99s discussion of the defendants\xe2\x80\x99 12(b)(2) motion is omitted.]\nII. Motion to Dismiss for Failure to State a Claim Upon Which Relief Can be\nGranted or for Summary Judgment\n****\n393\n\n\x0cA.\n\nBreach of Contract Claim\n\n[\xc2\xb67] The threshold issue to be addressed is whether the parties ever entered into\na binding agreement for the sale-leaseback transaction. Plaintiff argues that the\nRevised Offer and the November 3 Letter evidence the existence of an agreement\nbetween the parties. The Court does not find that the parties, as of November 3,\n1988, had come to an agreement as to the terms of the transaction.\n[\xc2\xb68] A binding agreement can arise, if the parties so intend, prior to the signing\nof a formal contract. Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69\n(2d Cir. 1989); Teachers Ins. and Annuity Assoc. v. Tribune Co., 670 F. Supp. 491\n(S.D.N.Y. 1987). The Court does not find Babcock ever evidenced the requisite\nintent to be bound by the documentation prepared on November 3. It is clear from\nthe documents and the affidavits that the Revised Offer reflected the status of negotiations as of that date, but that material terms remained open for negotiation.\nThe Revised Offer expressly called for the preparation of formal contractual documentation, and escrow deposit and financial and environmental covenants remained material open terms. \xe2\x80\x9cThere is a strong presumption against finding binding obligation in agreements which include open terms, call for future approvals\nand expressly anticipate future preparation and execution of documents.\xe2\x80\x9d Teachers Ins. and Annuity Assoc., 670 F. Supp. at 499. The absence of an expression of\nintent by an officer of Babcock to be bound by the terms of the Revised Offer and\nthe fact that material terms remained unresolved as of November 3, 1988, lead the\nCourt to conclude that as a matter of law a binding agreement for the saleleaseback transaction did not exist between Dacourt and Babcock. Summary\njudgment is therefore granted in favor of the defendants on Count I of the complaint.\nB.\n\nClaims for Breach of the Duty of Good Faith\n\n[\xc2\xb69] Counts II, V and IX of the complaint assert claims that Babcock breached\nits duty to negotiate in good faith. Absent an agreement between the parties, no\nduty of good faith can be implied. Reprosystem B.V. v. SCM Corp., 727 F.2d 257,\n264 (2d Cir.), cert. denied, 469 U.S. 828, 105 S. Ct. 110, 83 L.Ed.2d 54 (1984). In\nopposing the motion for summary judgment, the plaintiff asserts that the November 3 Letter \xe2\x80\x9ccreated a binding preliminary agreement\xe2\x80\x9d sufficient to support the\nfinding of an implied duty of good faith. Teachers Ins. and Annuity Assoc. v. Tribune, 670 F. Supp. at 498. Based upon the evidence presented, the Court does not\nfind that, as of November 3, 1988, a binding preliminary agreement sufficient to\nsupport an implied duty of good faith existed. The parties negotiating this transaction were experienced professionals and there is insufficient evidence to conclude\nthat there was a bilateral intention to be bound by the November 3 documentation\nprior to the execution of a formal contract or prior to the resolution, through further negotiation, of the numerous open terms. Given the absence of an enforceable\nobligation, no duty of good faith can be implied. * * * *\n394\n\n\x0cD. Claims for Promissory Estoppel\n[\xc2\xb610] Counts VI and VII assert claims against Babcock and FKI for promissory\nestoppel arising from representations or promises which were allegedly made by\nthe defendants during the negotiations. In light of the Court\xe2\x80\x99s ruling, supra, that\nthe court lacks jurisdiction over FKI, these claims will only be analyzed with respect to Babcock.\n[\xc2\xb611] A claim for promissory estoppel requires \xe2\x80\x9c[1] a clear and unambiguous\npromise; [2] a reasonable and foreseeable reliance by the party to whom the\npromise is made; and [3] an injury sustained by ... reason of his reliance.\xe2\x80\x9d R.G.\nGroup, Inc. v. Horn & Hardart Co., 751 F.2d 69, 78 (2d Cir. 1984). Dacourt bases\nits promissory estoppel claims on Babcock\xe2\x80\x99s alleged representations to third parties that \xe2\x80\x9cBabcock had agreed to the Dacourt financing,\xe2\x80\x9d and Babcock\xe2\x80\x99s alleged\nrepresentations to Dacourt that it would \xe2\x80\x9cproceed diligently to negotiate all relevant documents\xe2\x80\x9d and that \xe2\x80\x9cFKI would provide a keep-well agreement.\xe2\x80\x9d The Court\nfinds that while these representations may have been made they do not constitute\n\xe2\x80\x9cclear and unambiguous promises\xe2\x80\x9d sufficient to support a claim for damages on\npromissory estoppel grounds. Each of these representations were made in the\ncourse of negotiations and are too vague to satisfy the requirement of a \xe2\x80\x9cclear and\nunambiguous promise\xe2\x80\x9d on the part of the promisee. Id.; D\xe2\x80\x99Ulisse-Cupo v. Board\nof Directors, 202 Conn. 206, 213, 520 A.2d 217, 221 (1987). At the time these\nalleged promises were made, material terms remained unresolved regarding each\nof the representations. Given the context in which the alleged representations\nwere made, the Court concludes that no \xe2\x80\x9cclear and unambiguous promises\xe2\x80\x9d were\nmade by Babcock and the defendant is entitled to summary judgment on Counts\nVI and VII of the complaint.\nE. Claims for Negligent Misrepresentation\n[\xc2\xb612] In Count VIII of the complaint, Dacourt alleges that Babcock\xe2\x80\x99s representation in the marketing package circulated for the transaction and in the November\n3 documentation that a \xe2\x80\x9ckeep-well\xe2\x80\x9d guaranty would be provided constitutes a negligent misrepresentation. Plaintiff has failed to submit any credible evidence\nwhich would lead the Court to conclude that at the time the representations were\nmade Babcock knew or had reason to know they were false. Absent evidence to\nsupport plaintiff\xe2\x80\x99s claims that Babcock knew or should have known that FKI\xe2\x80\x99s\nwillingness to provide a \xe2\x80\x9ckeep-well\xe2\x80\x9d guaranty was not certain, the Court finds\nsuch claims unpersuasive. Rather, it appears the \xe2\x80\x9ckeep-well\xe2\x80\x9d guaranty was withdrawn as a result of the flow of the negotiations. The withdrawal of guaranties or\nindemnifications being a result not uncommon in the negotiation of sophisticated\ncorporate transactions. Finding no genuine issue of material fact as to the negligent misrepresentation claim, the defendants are entitled to summary judgment on\nCount VIII of the complaint.\n395\n\n\x0cCONCLUSION\n[\xc2\xb613] For the foregoing reasons, FKI\xe2\x80\x99s motion to dismiss is GRANTED and the\nonly claims which remain to be litigated are Counts X and XI of the complaint.\nSummary judgment is GRANTED on all other counts in accordance with this ruling.\nSO ORDERED.\nQuestions:\n1. Why didn\'t the court hold that Babcock breached a duty of good faith?\n2. Why did the promissory estoppel claim fail?\n3. What difference do you spot between promissory estoppel as formulated in this\ncase and in R2K \xc2\xa7 90?\n\nCHANNEL HOME CENTERS v. Frank GROSSMAN,\nTri Star Associates, Baker Investments Corporation,\nCedarbrook Associates, a Pennsylvania Limited Partnership (1986)\nUnited States Court of Appeals, Third Circuit\n795 F.2d 291\nOPINION OF THE COURT\nBECKER, Circuit Judge.\n[\xc2\xb61] This diversity case presents the question whether, under Pennsylvania law,\na property owner\xe2\x80\x99s promise to a prospective tenant, pursuant to a detailed letter of\nintent, to negotiate in good faith with the prospective tenant and to withdraw the\nlease premises from the marketplace during the negotiation, can bind the owner\nfor a reasonable period of time where the prospective tenant has expended significant sums of money in connection with the lease negotiations and preparation and\nwhere there was evidence that the letter of intent was of significant value to the\nproperty owner. We hold that it may. We therefore vacate and reverse the district\ncourt\xe2\x80\x99s determination that there was no enforceable agreement, and remand the\ncase for trial.\nI.\n[\xc2\xb62] Appellant Channel Home Centers (\xe2\x80\x9cChannel\xe2\x80\x9d), a division of Grace Retail\nCorporation, operates retail home improvement stores throughout the Northeastern United States, including Philadelphia and its suburbs. Appellee Frank Grossman, a real estate broker and developer, with his sons Bruce and Jeffrey Grossman, either owns or has a controlling interest in appellees Tri-Star Associates\n396\n\n\x0c(\xe2\x80\x9cTri-Star\xe2\x80\x9d), Baker Investment Corporation (\xe2\x80\x9cBaker\xe2\x80\x9d), and Cedarbrook Associates,\na Pennsylvania Limited Partnership (\xe2\x80\x9cCedarbrook\xe2\x80\x9d).*\n[\xc2\xb63] Between November, 1984 and February, 1985, the Grossmans, through\nBaker, were in the process of acquiring ownership of Cedarbrook Mall (\xe2\x80\x9cthe mall\xe2\x80\x9d)\nlocated in Cheltenham Township, Pennsylvania, a northern suburb of Philadelphia.\nDuring these months, Baker was the equitable owner of the mall, Tri-Star was acting as the mall\xe2\x80\x99s leasing agent, and legal title was in Equitable Life Assurance Society. It was anticipated that, upon closing in February, 1985, Baker would become both legal and equitable owner of the mall. App. at 218a- 219a, 496a. The\nGrossmans intended to revitalize the mall, which had fallen on hard times prior to\ntheir acquisition, through an aggressive rehabilitation and leasing program.\n[\xc2\xb64] In the third week of November, 1984, Tri-Star wrote to Richard Perkowski,\nDirector of Real Estate for Channel, informing him of the availability of a store\nlocation in Cedarbrook Mall which Tri-Star believed Channel would be interested\nin leasing. Perkowski expressed some interest, and met the Grossmans on November 28, 1984. After Perkowski was given a tour of the premises, the terms of a\nlease were discussed. App. at 457a, 496a. Frank Grossman testified that \xe2\x80\x9cwe discussed various terms, and these terms were, some were loose, some were more or\nless terms.\xe2\x80\x9d App. at 364a, 496a- 497a.\n[\xc2\xb65] In a memorandum dated December 7, 1984, to S. Charles Tabak, Channel\xe2\x80\x99s senior vice-president for general administration, Perkowski outlined the salient lease terms that he had negotiated with the Grossmans. App. at 97a. On or\nabout the same date, Tabak and Leon Burger, President of Channel, visited the\nmall site with the Grossmans. They indicated that Channel desired to lease the site.\nApp. at 413a-415a. Frank Grossman then requested that Channel execute a letter\nof intent that, as Grossman put it, could be shown to \xe2\x80\x9cother people, banks or\nwhatever.\xe2\x80\x9d App. at 366a-367a. Tabak testified that the Grossmans wanted to get\nChannel into the site because it would give the mall four \xe2\x80\x9canchor\xe2\x80\x9d stores. App. at\n414a. Apparently, Frank Grossman was anxious to get Channel\xe2\x80\x99s signature on a\nletter of intent so that it could be used to help Grossman secure financing for his\npurchase of the mall. App. at 366a-367a, 497a.\n[\xc2\xb66] On December 11, 1984, in response to Grossman\xe2\x80\x99s request, Channel prepared, executed, and submitted a detailed letter of intent setting forth a plethora of\nlease terms which provided, inter alia, that\n[t]o induce the Tenant [Channel] to proceed with the leasing of the Store,\nyou [Grossman] will withdraw the Store from the rental market, and only\nnegotiate the above described leasing transaction to completion.\n*\n\nTri-Star Associates is a fictitious name under which Frank Grossman trades; Baker Investment\nCorporation is a corporation whose sole shareholders are Frank Grossman and his sons Bruce and\nJeffrey; Cedarbrook Associates is a Pennsylvania limited partnership whose general partner is\nBaker and whose limited partners are Frank, Bruce, and Jeffrey Grossman. App. at 208(a)-212(a).\n\n397\n\n\x0cPlease acknowledge your intent to proceed with the leasing of the store\nunder the above terms, conditions and understanding by signing the enclosed copy of the letter and returning it to the undersigned within ten (10)\ndays from the date hereof.\nApp. at 31a.*\n*\n\nThe full December 11, 1984 letter, on Channel stationery, reads as follows:\nDear Mr. Grossman:\nThe Channel Home Centers Division of Grace Retail Corporation has approved\nthe leasing of a store at the above described location subject to the terms and conditions\nof this letter. The purpose of this letter is to express the understanding under which an\nAgreement of Lease, prepared by Tenant, but in a mutually satisfactory form, is to be executed by the owner of the Shopping Center, as Landlord and Grace Retail Corporation,\nas Tenant. The Landlord will lease to the Tenant the following described Store located in\nthe captioned Shopping Center, all as shown and described on the copy of your leasing\nbrochure attached to this letter and on the following terms:\n1. Store: Existing 70,400 sq. ft. area designated in the attached leasing\nbrochure as space \xe2\x80\x9c1\xe2\x80\x9d on lower level of mall beneath Jamesway Department Store, together with use of outdoor area for storage and sales. Such area located in portion of\nparking lot adjacent to space \xe2\x80\x9c1\xe2\x80\x9d.\n2. Term & Rent: Term of twenty-five (25) years commencing the date Tenant\nopens for business during which Tenant will pay Annual Rent in the amounts set forth below plus Percentage Rent of two (2) percent of Gross Sales during each lease year in excess of the Gross Sales Break\nPoint set forth below:\nGross Sales\nLease Year\nAnnual Rent\nBreak Point\n1-5\n$112,500\n$10.0 MM\n6-10\n137,500\n11.0 MM\n11-15\n162,500\n12.1 MM\n16-20\n187,500\n13.3 MM\n20-25\n212,500\n14.6 MM\n3. Option Periods: Tenant\xe2\x80\x99s right to extend for four (4) option periods of five (5)\nyears each, on the same terms as during the initial term, except that during each exercised\noption period, the Annual Rent shall be increased once by $25,000 per year, and the\nGross Sales Break Point shall be increased by 10% over the sums in effect for the prior 5year period (i.e. during Lease Years 26-30 of first option period, Annual Rent shall be\n$237,500 per year and Gross Sales Break Point shall be $16.06 million);\n4. Real Estate Taxes: Landlord\xe2\x80\x99s obligation, Tenant does not make contributions;\n5. Common Area Maintenance: Landlord\xe2\x80\x99s obligation to maintain and repair existing 850 car parking lot in northeast portion of Shopping Center, which will be the Tenant\xe2\x80\x99s primary parking area, and other common areas of the Shopping Center; Tenant does\nnot make contributions;\n6. Landlord\xe2\x80\x99s Pre-term Responsibilities: Landlord will deliver Store empty and\nbroom clean including the removal of all partitions, and with HVAC system in working\norder. The Landlord will submeter and locate the major electric service to the area of the\nStore, as Channel designates. Landlord will remove the existing escalator and provide escape stairs as per fire code, and will insure that the building is free of any asbestos hazard.\nThe service elevator and two receiving bays on the lower level, will be boxed-out from\nthe Tenant\xe2\x80\x99s Store, to serve the upper levels of the Shopping Center.\n7. Maintenance & Repairs: Landlord will maintain repair and replace if necessary the HVAC system, roof and structural and exterior portions of the building. Tenant\n\n398\n\n\x0c[\xc2\xb67] Frank Grossman promptly signed the letter of intent and returned it to\nChannel. App. At 499a. Grossman contends that Perkowski and Tabak also agreed\norally that a draft lease be submitted within thirty (30) days. App. at 331a-332a,\n365-366a. Perkowski and Tabak denied telling Grossman that a lease would be\nforthcoming within 30 days or any finite period of time. App. at 445a, 473a.\n[\xc2\xb68] Thereafter, both parties initiated procedures directed toward satisfaction of\nlease contingencies. The letter of intent specified that execution of the lease was\nexpressly subject to each of the following: (1) approval by Channel\xe2\x80\x99s parent corporation, W.R. Grace & Company (\xe2\x80\x9cGrace\xe2\x80\x9d), of the essential business terms of the\nlease; (2) approval by Channel of the status of title for the site; and (3) Channel\xe2\x80\x99s\nobtaining, with Frank Grossman\xe2\x80\x99s cooperation, all necessary permits and zoning\nvariances for the erection of Channel\xe2\x80\x99s identification signs. App. at 30a; see supra\nnote 2.\n[\xc2\xb69] On December 14, 1984, Channel directed the Grace legal department to\nprepare a lease for the premises. Channel\xe2\x80\x99s real estate committee approved the\nlease site on December 20, 1984. App. at 472a. Channel planning representatives\nresponsible for building interior and store front and will pay its prorate share of HVAC\nusage. Execution of the Agreement of Lease by Landlord and Tenant is specifically subject to each of the following:\na. Tenant\xe2\x80\x99s authority: Approval by Tenant\xe2\x80\x99s parent corporation, W.R.\nGrace & Co., and its Retail Group, of the essential business terms of\nthe Agreement of Lease;\nb. Legal Title: Approval by the Tenant of the status of title for the site,\nincluding any access easements.\nc. Sign Contingency: The Tenants obtaining all necessary permits with\nthe Landlords cooperation (including obtaining any sign variances) for\nthe erection of Tenant\xe2\x80\x99s identification signs, on two (2) pylons located\non Cheltenham Ave. and Easton Ave., respectively, and two building\nsigns on the front of the mall and the front of the Store.\nThe Tenant has and will not incur any brokerage fees in connection with this proposed\nlease. Any expenditure by the Landlord or Tenant prior to execution of the Agreement of\nLease shall be at the party\xe2\x80\x99s own risk. A store opening date during the first half of 1985 is\nplanned. Lease preparation, obtaining the sign permits and approvals described above and\ndelivery of possession of the Store to Tenant would commence immediately and proceed\nto achieve that estimated opening date. To induce the Tenant to proceed with the leasing\nof this Store, you will withdraw the Store from the rental market, and only negotiate the\nabove described leasing transaction to completion. Please acknowledge your intent to\nproceed with the leasing of the captioned store under the above terms, conditions and understanding by signing the enclosed copy of this letter and returning it to the undersigned\nwithin ten (10) days from the date hereof.\nVery truly yours,\n/s/\nS.C. Tabak\nSenior Vice President\nChannel Home Center Division\nApp. at 29a-31a.\n\n399\n\n\x0cvisited the premises on December 21, 1984, to obtain measurements for architectural alterations, renovations and related construction. App. at 379a. Detailed\nmarketing plans were developed, building plans drafted, delivery schedules were\nprepared and materials and equipment deemed necessary for the store were purchased. App. at 91a-96a, 99a-135a, 422a-423a, 517a- 547a. The Grossmans applied to the Cheltenham Township building and zoning committee for permission\nto erect commercial signs for Channel and other tenants of the mall. App. at 15a.\n[\xc2\xb610] On January 11, 1985, Frank Shea, Esquire, of the Grace legal department\nsent to Frank Grossman two copies of a forty-one (41) page draft lease and, in a\ncover letter, requested copies of several documents to be used as exhibits to the\nlease. App. at 43a- 44a. On January 16, 1985, Frank Shea received the following\nletter from Bruce Grossman:\nDear Mr. Shea:\nAs you requested, enclosed please find the following documents:\n1) A copy of a recent title report for the Cedarbrook Mall (the\n\xe2\x80\x9cMall\xe2\x80\x9d),\n2) A legal description of the Mall,\n3) A site plan of the Mall, and\n4) A description of the Landlord\xe2\x80\x99s construction.\nAs we discussed, we have commenced work on the Channel location at\nthe Mall and would, therefore, appreciate your assistance in expediting\nthe execution of the Channel lease.\nI look forward to hearing from you soon.\nVery truly yours,\nBAKER INVESTMENT CORPORATION\n/s/\nBruce S. Grossman,\nExecutive Vice President\nApp. at 16a. On January 21, 1985, Frank Shea received a copy of a letter from\nFrank Grossman to Richard Perkowski dated January 17, 1985. It provided:\nAt Frank Shea\xe2\x80\x99s request, enclosed is a site plan for the Cedarbrook Mall\nand also a copy of the proposed pylon sign design. We look forward to executing the lease agreement in the very near future. If you have any questions, please feel free to call me.\nApp. at 46a.\n[\xc2\xb611] Bruce Grossman called Shea on January 23, 1985 to discuss the lease. The\nonly item Grossman could recall discussing pertained to the \xe2\x80\x9cuse\xe2\x80\x9d clause in the\nlease, specifically whether Channel could use the site for warehouse facilities at\nsome future point. App. at 286a-287a, 502a. Apparently, Grossman then related\nother areas of concern and Shea suggested that a telephone conference be arranged with all parties the following week. App. at 382a, 502a. Grossman agreed.\nAccording to Grossman, Shea was supposed to initiate the conference call; however, when the call was not forthcoming, Grossman did not attempt to reach Shea\n400\n\n\x0cor anyone else at Channel. App. at 389a-390a. Shea understood that the Grossmans were going to discuss the lease among themselves and get back to him. App.\nat 448a.\n[\xc2\xb612] On or about January 22, 1985, Stephen Erlbaum, Chairman of the Board\nof Mr. Good Buys of Pennsylvania, Inc. (\xe2\x80\x9cMr. Good Buys\xe2\x80\x9d), contacted Frank\nGrossman. Like Channel, Mr. Good Buys is a corporation engaged in the business\nof operating retail home improvement centers; it is a major competitor of Channel\nin the Philadelphia area. App. at 20a-21a. Erlbaum advised Grossman that Mr.\nGood Buys would be interested in leasing space at Cedarbrook Mall, and sent\nGrossman printed information about Mr. Good Buys. App. at 202a.\n[\xc2\xb613] On January 24, 1985, construction representatives from Channel met at the\nmall site to go over building alterations and designs. App. at 287a-288a, 503a.\nThe next day, January 25, 1985, Erlbaum and other representatives from Mr.\nGood Buys met with the Grossmans and toured Channel\xe2\x80\x99s proposed lease location.\nApp. at 503a. When Erlbaum expressed an interest in leasing this site, lease terms\nwere discussed. Id.\n[\xc2\xb614] On February 6, 1985, Frank Grossman notified Channel that \xe2\x80\x9cnegotiations\nterminated as of this date\xe2\x80\x9d due to Channel\xe2\x80\x99s failure to submit a signed and mutually acceptable lease for the mall site within thirty days of the December 11, 1984\nletter of intent. App. at 42a. (This was the first and only written evidence of the\npurported thirty day time limit. The letter of intent contained no such term. See\ndiscussion supra at 8.) On February 7, 1985, Mr. Good Buys and Frank Grossman\nexecuted a lease for the Cedarbrook Mall. App. at 147a-196a. Mr. Good Buys\nagreed to make base-level annual rental payments which were substantially greater than those agreed to by Channel in the December 11, 1984 letter of intent. App.\nat 147a. * Channel\xe2\x80\x99s corporate parent, Grace, approved the terms of Channel\xe2\x80\x99s\nproposed lease on February 13, 1985. App. at 443a-444a.\nII.\n[\xc2\xb615] Channel commenced this diversity action, 28 U.S.C. \xc2\xa7 1332(a), in the district court for the Eastern District of Pennsylvania on February 15, 1985. Count I\nof Channel\xe2\x80\x99s complaint alleged that appellees\xe2\x80\x99 conduct violated the December 11,\n1984 letter of intent and constituted a breach of contract; Count II was in the form\nof a motion for a temporary restraining order (\xe2\x80\x9cTRO\xe2\x80\x9d) and preliminary injunction\n*\n\nChannel had agreed to rental payments of $112,500 for years 1-5; $137,500 for years 6-10;\n$162,500 for years 11-15; $187,500 for years 16- 20, and $212,500 for years 20-25. Additionally,\nChannel agreed to pay percentage rent of two (2) percent of gross sales above the following gross\nsales break points: $10,000,000 for years 1-5; $11,000,000 for years 6- 10; $12,100,000 for years\n11-15; $13,300,000 for years 16-20, and $14,600,000 for years 20-25. See supra note 3. Mr. Good\nBuys agreed to rental payments of $249,750 for years 1-5; $360,750 for years 6-10; $388,500 for\nyears 11-15; $416,250 for years 6-20; and $444,000 for years 21-25. App. at 147a. Mr. Good Buys\ndid not have to pay additional percentage rent based on gross sales, however. Id.\n\n401\n\n\x0cto restrain appellees from violating the letter of intent by entering into a lease\nagreement with Mr. Good Buys for the Cedarbrook Mall premises. App. at 4a-8a.\nIn a supporting affidavit, S. Charles Tabak averred that Channel had substantially\ncompleted all tasks necessary to meet the opening date contemplated in the letter\nof intent and that it had made out- of-pocket expenditures to this end in the sum of\n$25,000. App. at 9a-14a.\n[\xc2\xb616] On February 15, 1985 the district court granted a TRO restraining and enjoining appellees from surrendering or tendering possession of the premises described in the letter of intent to anyone other than Channel pending a determination of Channel\xe2\x80\x99s motion for preliminary injunction. App.at 2a. A preliminary injunction hearing was held on February 25, 1985. App.at 2a. At the hearing, which\nlasted approximately ten minutes, the district court requested that live testimony\nbe limited to matters not covered in depositions. The testimony taken was not fully transcribed. See Brief of Appellant at 3.\n[\xc2\xb617] Thereafter, on March 26, 1985, the district court filed a Memorandum\nOpinion and Order that consolidated Channel\xe2\x80\x99s motion for a preliminary injunction with the trial on the merits. App. at 495a-508a. Fed. R. Civ. P. 65(a)(2). The\ncourt\xe2\x80\x99s Order denied Channel\xe2\x80\x99s motion for preliminary injunction and entered\njudgment in favor of appellees. Additionally, the Order denied as moot Mr. Good\nBuy\xe2\x80\x99s motion for leave to intervene as a party plaintiff.\n[\xc2\xb618] In its opinion, the district court rejected Channel\xe2\x80\x99s arguments that the letter\nof intent constituted either a valid unilateral or a valid bilateral agreement. The\ncourt concluded that the letter of intent (1) did not bind the parties to any obligation; (2) was unenforceable for lack of consideration; and, (3) was insufficient to\nsatisfy the Pennsylvania Statute of Frauds for leases, inasmuch as it contemplated\na future negotiation, Pa.Stat.Ann. tit. 68 \xc2\xa7 250.202-203 (Purdon\xe2\x80\x99s 1965 &\nSupp.1986).\n[\xc2\xb619] On April 5, 1985, Channel filed a motion for reconsideration, arguing that\nthe district court erred by consolidating its denial of the preliminary injunction\nwith an adjudication on the merits without prior notice to the parties. Channel argued that, because the preliminary injunction hearing had been held only ten days\nafter Channel had filed its complaint, there had been insufficient time to complete\ndiscovery. Full evidentiary development, Channel contended, required substantially more discovery by way of interrogatories, document requests, and depositions\nfrom other persons and entities including but not limited to Jeffrey Grossman (a\nprincipal of appellee\xe2\x80\x99s Baker Investment Corp. and Cedarbrook Associates); ToysR-Us and Jamesway (other anchor stores at Cedarbrook Mall); and Equitable Life\nAssurance Society (the former legal owner of Cedarbrook Mall which, Channel\nargued, had committed to permanent financing of the project on the strength of\nChannel\xe2\x80\x99s letter of intent commitment).\n\n402\n\n\x0c[\xc2\xb620] Upon reconsideration, the district court entered an order on May 7, 1985,\naffirming its March 26, 1985 judgment, with the proviso that Channel would be\npermitted to present additional evidence at another hearing if it made a request to\ndo so within fifteen days of the date of the order. App. at 510a- 515a. The district\ncourt stated that, despite the lack of notice and Channel\xe2\x80\x99s averments to the contrary, \xe2\x80\x9cit was of the understanding that the parties had agreed to the consolidation.\xe2\x80\x9d\nApp. at 514a.* Channel did not request another evidentiary hearing. This appeal\nfollowed. * * * *\nIV.\n[\xc2\xb621] Channel\xe2\x80\x99s second contention on appeal is that the district court erred in\nholding that the letter of intent was unenforceable and did not bind the parties to\nany obligation. Channel argues that the letter, coupled with the surrounding circumstances, constitutes a binding agreement to negotiate in good faith. Appellees\nrejoin that a promise to negotiate in good faith or to use best efforts to reduce to\nformal writing an agreement between the parties is enforceable only if the parties\nhave in fact reached agreement on the underlying transaction. Because it is conceded that the letter of intent did not constitute a final agreement between the parties, appellees contend that it is merely evidence of preliminary negotiations and,\nas such, is unenforceable at law. Appellees further argue that even if the agreement were an otherwise enforceable contract, the letter of intent and any promises\ncontained therein are unenforceable by virtue of Channel\xe2\x80\x99s lack of consideration.\nThe parties agree that Pennsylvania law applies to the case.\n[\xc2\xb622] It is hornbook law that evidence of preliminary negotiations or an agreement to enter into a binding contract in the future does not alone constitute a contract. See Goldman v. McShain, 432 Pa. 61, 68, 247 A.2d 455, 458 (1968); Lombardo v. Gasparini Excavating Co., 385 Pa. 388, 392, 123 A.2d 663, 666 (1956);\nKazanjian v. New England Petroleum Corp., 332 Pa. Super. 1, 7, 480 A.2d 1153,\n1157 (1984); see Restatement (Second) of Contracts \xc2\xa7 26 (1979). Appellees believe that this doctrine settles this case, but, in so arguing, appellees misconstrue\nChannel\xe2\x80\x99s contract claim. Channel does not contend that the letter of intent is\nbinding as a lease or an agreement to enter into a lease. Rather, it is Channel\xe2\x80\x99s position that this document is enforceable as a mutually binding obligation to negotiate in good faith.\xe2\x80\xa0 By unilaterally terminating negotiations with Channel and\nprecipitously entering into a lease agreement with Mr. Good Buys, Channel arThe district court also rejected Channel\xe2\x80\x99s additional contention that the letter of intent should be\nenforced under the doctrine of promissory estoppel. In light of our disposition on appeal, we need\nnot reach the propriety of the district court\xe2\x80\x99s determinations that neither a unilateral contract analysis nor the doctrine of promissory estoppel is applicable to the instant case.\n\xe2\x80\xa0\nBecause Channel does not argue that the letter of intent is enforceable as a lease between the\nparties, appellees\xe2\x80\x99 reliance upon the district court\xe2\x80\x99s conclusion that the letter of intent is insufficient to satisfy the Pennsylvania Statute of Frauds for Leases, Pa.Stat.Ann. tit. 68, \xc2\xa7\xc2\xa7 250.202-203\n(Purdon 1965 & Supp.1986), is misplaced. The district court therefore erred in holding that the\nletter of intent was insufficient to satisfy the Statute of Frauds for leases.\n*\n\n403\n\n\x0cgues, Grossman acted in bad faith and breached his promise to \xe2\x80\x9cwithdraw the\nStore from the rental market and only negotiate the above-described leasing transaction to completion.\xe2\x80\x9d See supra note 2.\n[\xc2\xb623] Under Pennsylvania law, the test for enforceability of an agreement is\nwhether both parties have manifested an intention to be bound by its terms and\nwhether the terms are sufficiently definite to be specifically enforced. * * * *\nConsideration \xe2\x80\x9cconfers a benefit upon the promisor or causes a detriment to the\npromisee and must be an act, forbearance or return promise bargained for and\ngiven in exchange for the original promise.\xe2\x80\x9d Curry v. Estate of Thompson, 332 Pa.\nSuper. 364, 371, 481 A.2d 658, 661 (1984).\n[\xc2\xb624] Although no Pennsylvania court has considered whether an agreement to\nnegotiate in good faith may meet these conditions, the jurisdictions that have considered the issue have held that such an agreement, if otherwise meeting the requisites of a contract, is an enforceable contract. See, e.g., Thompson v. Liquichimica of America, Inc., 481 F. Supp. 365, 366 (E.D.N.Y. 1979); (\xe2\x80\x9cUnlike an agreement to agree, which does not constitute a closed proposition, an agreement to use\nbest efforts [or to negotiate in good faith] is a closed proposition, discrete and actionable.\xe2\x80\x9d); accord Reprosystem, B.V. v. SCM Corp., 727 F.2d 257, 264 (2d Cir.\n1984); Chase v. Consolidated Foods Corp., 744 F.2d 566, 571 (7th Cir. 1984);\nArnold Palmer Golf Co. v. Fuqua Industries Inc., 541 F.2d 584 (6th Cir. 1976);\nItek Corp. v. Chicago Aerial Industries, Inc., 248 A.2d 625 (Del. 1968); Restatement (Second) of Contracts \xc2\xa7 205 comment (c) (1979) (\xe2\x80\x9cGood faith in negotiation\xe2\x80\x9d); see generally Kessler and Fine, Culpa in Contrahendo, Bargaining in Good\nFaith, and Freedom of Contract; a Comparative Study, 77 Harv. L. Rev. 401\n(1964). * We are satisfied that Pennsylvania would follow this rule. Applying\nPennsylvania law, then, we must ask (1) whether both parties manifested an intention to be bound by the agreement; (2) whether the terms of the agreement are sufficiently definite to be enforced; and (3) whether there was consideration.\n[\xc2\xb625] In determining the parties\xe2\x80\x99 intentions concerning the letter of intent, we\nmust examine the entire document and the relevant circumstances surrounding its\nadoption. United Refining Co. v. Jenkins, 410 Pa. 126, 137, 189 A.2d 574, 580\n(1963); Hillbrook Apartments, Inc. v. Nyce Crete Co., 237 Pa. Super. 565, 572,\n352 A.2d 148, 151 (1975). The letter of intent, signed by both parties, provides\nthat \xe2\x80\x9c[t]o induce the Tenant [Channel] to proceed with the leasing of the Store,\nyou [Grossman] will withdraw the Store from the rental market, and only negotiate the above described leasing transaction to completion.\xe2\x80\x9d See supra note 2. The\nagreement thus contains an unequivocal promise by Grossman to withdraw the\nstore from the rental market and to negotiate the proposed leasing transaction with\nChannel to completion.\n\n*\n\nGood faith in the bargaining or formation stages of the contracting process is distinguishable\nfrom the common law duty to perform in good faith. [Citations omitted.]\n\n404\n\n\x0c[\xc2\xb626] Evidence of record supports the proposition that the parties intended this\npromise to be binding. After the letter of intent was executed, both Channel and\nthe Grossmans initiated procedures directed toward satisfaction of lease contingencies. Channel directed its parent corporation to prepare a draft lease; Channel\nplanning representatives visited the lease premises to obtain measurements for\narchitectural alterations, renovations, and related construction. Channel developed\nextensive marketing plans; delivery schedules were prepared and material and\nequipment deemed necessary for the store were purchased. The Grossmans applied to the township zoning committee for permission to erect Channel signs at\nvarious locations on the mall property. Channel submitted a draft lease on January\n11, 1985, and the parties, through correspondence and telephone conversations\nand on-site visits, exhibited an intent to move toward a lease as late as January 23,\n1985. See discussion supra at 294-96. Accordingly, the letter of intent and the circumstances surrounding its adoption both support a finding that the parties intended to be bound by an agreement to negotiate in good faith.\n[\xc2\xb627] We also believe that Grossman\xe2\x80\x99s promise to \xe2\x80\x9cwithdraw the Store from the\nrental market and only negotiate the above described leasing transaction to completion,\xe2\x80\x9d viewed in the context of the detailed letter of intent (which covers most\nsignificant lease terms, see supra n.2), is sufficiently definite to be specifically\nenforced, provided that Channel submitted sufficient legal consideration in return.\n[\xc2\xb628] Appellees argue that \xe2\x80\x9c[n]o money or thing of value was paid, either at the\ntime of the letter or at any other time that would convert an agreement to negotiate into some enforceable type of contract.\xe2\x80\x9d Brief of Appellees at 16. We disagree.\nIt seems clear that the execution and tender of the letter of intent by Channel was\nof substantial value to Frank Grossman. At the time the letter of intent was executed, Grossman was in the process of obtaining financing for his purchase of the\nmall. When it became apparent to Grossman that Channel\xe2\x80\x94a major corporate\ntenant\xe2\x80\x94was seriously interested in leasing the mall site, he requested that Channel sign a letter of intent which, as Grossman put it, could be shown to \xe2\x80\x9cother\npeople, banks or whatever with a view to getting permanent financing.\xe2\x80\x9d App. at\n366a-367a. Fully aware of Grossman\xe2\x80\x99s desire to obtain financing, Channel sought\nto solidify its bargaining position by requesting that Grossman also sign the letter\nof intent and promise to \xe2\x80\x9cwithdraw the store from the rental market and only negotiate the above- described leasing transaction to completion.\xe2\x80\x9d There being evidence that value passed from each party to the other, we conclude that the record\nwould support a finding that Channel\xe2\x80\x99s execution and tender of the letter of intent\nconferred a bargained for benefit on Grossman which was valid consideration for\nGrossman\xe2\x80\x99s return promise to negotiate in good faith.\nV.\n[\xc2\xb629] In sum, we agree with Channel that the record contains evidence that supports a finding that the parties intended to enter into a binding agreement to negotiate in good faith. We further hold that the agreement had sufficient specificity to\n405\n\n\x0cmake it an enforceable contract if the parties so intended, and that consideration\npassed between the parties. We will therefore remand this case to the district court\nfor trial.\n[\xc2\xb630] At least two significant issues must be resolved at trial. First, although our\nreview of the record reveals that there is sufficient evidence to support a finding\nthat the parties intended to be bound by the letter of intent, we do not hold that the\nevidence requires this conclusion. At trial, evidence will presumably be brought to\nlight that will aid the trier of fact in deciding this issue.\n[\xc2\xb631] As noted above, there is also some dispute over whether there was a time\nlimit on the negotiations that was not specified in the letter of intent. Because the\ndistrict court erroneously concluded that the letter of intent was unenforceable as\na matter of law, it made no factual findings with regard to this critical term. If, as\nappellees suggest, Channel orally agreed to forward a draft lease within 30 days\nof the date on which the letter of intent was executed, Channel\xe2\x80\x99s failure to do so\ncould have terminated the agreement. Alternatively, if, as Channel argues, the parties did not fix a definite time for the duration of negotiations, then a reasonable\ntime would be applicable. See Darlington v. General Electric Corp., 350 Pa. Super. 183, 192-93, 504 A.2d 306, 310-11 (1986), and a determination must be made\nas to what constitutes a reasonable time under all the circumstances.\n[\xc2\xb632] The judgment of the district court will therefore be reversed, and the case\nremanded for further proceedings consistent with this opinion.\n\n406\n\n\x0cChapter 9. Limits on the\nReach of Contract Law\nA. Public Policy\nHazel Virginia REHAK v. Archie S. MATHIS (1977)\nSupreme Court of Georgia\n238 S.E.2d 81\nBOWLES, Justice.\n[\xc2\xb61] This is an appeal from an order of the Superior Court of Floyd County\ngranting appellee\xe2\x80\x99s motion for summary judgment.\n[\xc2\xb62] The appellant, Hazel Rehak, filed an action in equity against the appellee,\nArchie Mathis, and in her complaint alleged that the parties, in 1957, had jointly\npurchased a home in Floyd County, Georgia. For the first two years, 1957 and\n1958, she paid all installment payments upon the home. From 1959 through February of 1975, the appellant and appellee each made one-half of the monthly installment payments on the house. The complaint further alleged that both parties\nlived and cohabited together in the house for 18 years, during which time, appellant alleged she \xe2\x80\x9ccooked for, cleaned for, and in general cared for the comforts,\nneeds, and pleasures of the (appellee) . . . while they cohabited together.\xe2\x80\x9d The appellant alleged that on numerous occasions the appellee told her that the house\nbelonged to them jointly and that for the rest of her life he would support and take\ncare of her and her financial needs.\n[\xc2\xb63] In December of 1975, the appellee moved out of the house and told the\nappellant to vacate the home. The appellee refused to pay her anything for her\npurchase money interest in the house or for the services rendered to the appellee\nover the 18-year period during which they cohabited.\n[\xc2\xb64] The appellant, in January of 1976, filed a verified petition for divorce\nagainst appellee in the Superior Court of Floyd County, wherein the appellant\nadmitted that she cohabited with the appellee for 18 years. Following repeated\nhearings and negotiations between the parties, the appellant filed a motion to dismiss the divorce action with prejudice. The court entered an order dismissing the\ncomplaint, said dismissal to affect the question of marriage only and in no way to\naffect any future civil suit of equitable action by either party against the other.\n407\n\n\x0c[\xc2\xb65] Following the dismissal, the appellant brought the present equitable action\nseeking an award of $100.00 a month for the 18 years that she lived with and took\ncare of the needs of the appellee and additionally sought exclusive title and possession to the house in Floyd County.\n[\xc2\xb66] Subsequent to the filing of the complaint a motion for summary judgment\nwas made by the appellee, which motion was supported by a brief. The appellant\nfiled no response to appellee\xe2\x80\x99s motion. The court entered an order granting the\nappellee\xe2\x80\x99s motion for summary judgment for reason that there was no genuine issue as to any material fact and, therefore, appellee was entitled to judgment as a\nmatter of law. The appellant appeals that order.\n[\xc2\xb67] Summary judgment will be granted only where there is no issue as to any\nmaterial fact, and as a matter of law the moving party is entitled to a judgment.\nCode Ann. s 81A-156(c). * * * *\n[\xc2\xb68] In the instant case, the appellee moved for a summary judgment contending \xe2\x80\x9cthe pleadings in this case conclusively show that all property and monetary\nclaims asserted thereon are based upon a meretricious relationship, which claims\nare not recoverable because contrary to the public policy of this State.\xe2\x80\x9d\n[\xc2\xb69] It is well settled that neither a court of law nor a court of equity will lend\nits aid to either party to a contract founded upon an illegal or immoral consideration. Code Ann. s 20-501; Wellmaker v. Roberts, 213 Ga. 740, 101 S.E.2d 712\n(1958); Watkins v. Nugen, 118 Ga. 372, 45 S.E. 262 (1903).\n[\xc2\xb610] The appellee\xe2\x80\x99s motion for summary judgment was supported by the verified pleadings in the former complaint for divorce between the parties, and the\npleadings in the present case. The parties being unmarried and the appellant having admitted the fact of cohabitation in both verified pleadings, this would constitute immoral consideration under Code Ann. s 20-501, and it was appellant\xe2\x80\x99s duty\nto come forward and introduce evidence which would rebut that conclusion. Appellant having failed to introduce any rebuttal evidence sufficient to show to the\ncourt that there was a genuine issue of fact to be decided, it was not error for the\ncourt to grant summary judgment in favor of the appellee.\n[\xc2\xb611] Judgment affirmed.\nAll the Justices concur, except HALL and HILL, JJ., who dissent.\nHILL, Justice, dissenting.\n[\xc2\xb61] Courts normally do not deny judicial relief to sinners. If that were the rule,\nthe caseload in all courts would be drastically reduced. Courts normally do not\n408\n\n\x0cdeny judicial relief where both plaintiff and defendant have been immoral. If that\nwere the rule, the divorce rate would be reduced.\n[\xc2\xb62] What courts invariably do is refuse to enforce a contract where, as the majority says, the contract is \xe2\x80\x9cfounded upon\xe2\x80\x9d an illegal or immoral consideration; i.e.,\nwhere the consideration for the contract is the agreement by one or both parties to\nperform an illegal or immoral act. Thus, where a man and woman have contracted\nwith each other to cohabit together illegally, a court will not require the woman to\nperform her promise nor will it require the man to pay for her services. However,\nwhere a man hires a maid to clean house for him, his obligation to pay wages is\nenforceable in court even though he seduces her. The difference is that in the former case the illegal conduct is part of the consideration for the contract whereas in\nthe latter case the illegal conduct is not part of the consideration but is incidental\nto the contract. I do not find evidence that the female in this case agreed to make\nhouse payments in consideration of the male\xe2\x80\x99s promise to seduce her or to cohabit\nwith her illegally.\n[\xc2\xb63] In the case before us, the movant has not carried the burden on a movant\nfor summary judgment of showing that sex was any part of the consideration of\nthis alleged contract. This court has simply presumed that sex was agreed to. We\nwill not guess at the terms of contracts in other cases but here we knowingly imagine what the terms of this agreement were. In my opinion we should not use\nconjecture to imagine what the parties agreed to do.\n[\xc2\xb64] Let the defendant state under oath what he says was agreed to and what he\nsays was done and if the contract be illegal let the district attorney represent the\nstate. This court should not deny relief to the plaintiff based on our inference as to\nwhat constituted the consideration for the alleged agreement sued on here. I therefore dissent.\n[\xc2\xb65]\n\nI am authorized to say, that Justice HALL joins in this dissent.\n\nQuestions:\n1. What rule of law resolves the case?\n2. What does the court say is immoral consideration here?\n3. What is the dissent\'s primary point of contention?\n4. How does the majority know that sex was what induced the promise to pay?\n5. Why does the dissent say at the end, "Let the defendant state under oath what\nhe says was agreed to and what he says was done and if the contract be illegal let\nthe district attorney represent the state"?\n409\n\n\x0c6. Is this case really about illegal consideration?\n7. Does religion influence this decision?\n8. What should Rehak have alleged?\n\nCampaign Promises\nAre campaign promises enforceable? Consider the following from May v. Kennard Indep. Sch. Dist., Memorandum Order Adopting the Magistrate Judge\'s Report and Recommendation, 1996 WL 768039Y, (E.D. Texas 1996):\n* * * * Breach of Contract Claim\n[\xc2\xb61] Plaintiff claims breach of contract against former Texas Governor Ann\nRichards. He claims that a legally enforceable contract was formed between former governor Richards and the citizens of the state based upon certain campaign\npromises made during her gubernatorial campaign. Plaintiff asserts Richards\nbreached this contract by failing to segregate proceeds from the state lottery in a\nseparate fund to be used solely for education-related expenses. He complains that\nthe filtering of lottery proceeds into a general fund \xe2\x80\x9cis a flagrant breach of contract and faith with the Texas state taxpayers.\xe2\x80\x9d Plaintiff\xe2\x80\x99s Amended Complaint at 2.\n[\xc2\xb62] A political campaign promise is legally insufficient to create a binding\ncontract unless it is so intended by the promisor and promisee. Russell v. District\nof Columbia, 747 F. Supp. 72, 80 (D.D.C.1990), aff\xe2\x80\x99d, 984 F.2d 1255 (D.C.Cir.\n1993). Plaintiff neither presents evidence nor claims of any personal representations by Richards that he would not have to pay his property taxes. Thus, the\nCourt must determine whether Richards\xe2\x80\x99 campaign speeches created an oral contract with plaintiff.\n[\xc2\xb63] The statements upon which plaintiff\xe2\x80\x99s claim are based were not made specifically to plaintiff by then gubernatorial candidate Richards. It may be reasonably concluded that she made them for the general benefit of the citizens of the\nstate of Texas. It would be wholly unreasonable for any listener to interpret a\ncampaign promise, by its inherent nature, to serve as an offer to enter into a legally binding contract. Thus, it would be unreasonable for plaintiff to believe that\nRichards had made a legally enforceable promise. Plaintiff also had reason to\nknow that the candidate did not intend for her statements to be legally binding.\nBecause plaintiff had reason to know that Richards would not intend for her\n\n410\n\n\x0cstatements to create a binding contract, there could be no mutual assent and no\ncontract.*\n[\xc2\xb64] Plaintiff\xe2\x80\x99s attempted breach of contract claim should be dismissed as\nfrivolous. * * * *\nQuestions: Should the plaintiff have alleged promissory estoppel? Unjust enrichment?\n\nB. Plea Bargains\nBROOKS v. UNITED STATES of America (1983)\nUnited States Court of Appeals, Seventh Circuit\n708 F.2d 1280\nPOSNER, Circuit Judge.\n[\xc2\xb61] The appellant, Brooks, pleaded guilty to a drug charge, pursuant to a plea\nagreement with the government that stated, \xe2\x80\x9cThe government would recommend\nneither for nor against an executed sentence in this cause.\xe2\x80\x9d The government made\nno recommendation for sentence at the sentencing hearing, and Brooks was sentenced to 4 years in prison and fined $5,000. He later moved under Rule 35(b) of\nthe Federal Rules of Criminal Procedure for a reduction of sentence. The government responded that Brooks\xe2\x80\x99 motion \xe2\x80\x9cfails to recite any change in circumstances\nor any matter in mitigation that was not brought to the attention of the Court, or\nthat could [not] have been brought to the attention of the Court at the defendant\xe2\x80\x99s\ndisposition hearings. Defendant has made no showing which would justify any\nfurther leniency by the Court.... The defendant has already received consideration\nand mercy having been sentenced to serve four (4) years upon conviction of\ncharges that carried a maximum sentence of five (5) years.\xe2\x80\x9d The district court denied Brooks\xe2\x80\x99 Rule 35(b) motion, and he then filed a motion under 28 U.S.C. \xc2\xa7\n2255 to set aside his conviction on the ground that the government had broken its\nplea agreement by opposing the Rule 35(b) motion. He appeals from the district\ncourt\xe2\x80\x99s denial of his section 2255 motion.\n[\xc2\xb62] A plea bargain is, in law, just another contract, United States v. Mooney,\n654 F.2d 482, 486 (7th Cir. 1981), so if by opposing Brooks\xe2\x80\x99 motion for reduction\nof sentence the government broke its promise not to recommend for or against an\nexecuted sentence he is entitled to appropriate relief. Whether that relief would be\n\n*\n\nFurther, May does not present any evidence that he performed any action that constitutes acceptance or consideration for the candidate\xe2\x80\x99s promise even if, assuming arguendo, there\nhad been an offer.\n\n411\n\n\x0cto be resentenced by the same or by a different judge or to be allowed to withdraw\nhis plea of guilty we need not decide, for we do not think the government broke\nits promise. All the government promised was not to make a sentence recommendation; it does not appear that the word \xe2\x80\x9cexecuted\xe2\x80\x9d qualifies \xe2\x80\x9csentence\xe2\x80\x9d in any\nway relevant to this case or that the words \xe2\x80\x9cin this cause\xe2\x80\x9d have some special significance. The government fulfilled its promise and Brooks was then duly sentenced. The government did not make a further promise that after Brooks was sentenced it would stand mute in the face of any efforts he might make to get the sentence reduced. It is stretching the language of the agreement to interpret the government\xe2\x80\x99s opposition to Brooks\xe2\x80\x99 Rule 35(b) motion as a recommendation for the\nfour-year sentence that the judge had imposed. And we do not see why the language should be stretched. The government gives up a lot when it gives up its\nright to oppose the defense counsel\xe2\x80\x99s arguments for leniency at the sentencing\nhearing; it would be giving up much more if it gave counsel another free shot at\nthe judge in the form of a Rule 35(b) motion.\n[\xc2\xb63] Therefore, \xe2\x80\x9cIn the absence of any indication that the parties expected the\nGovernment not to oppose a Rule 35 motion, we would hesitate to imply such a\ncondition. The prosecutor honored his commitment to make the agreed sentence\nrecommendation at the sentencing hearing. The short motion in opposition to the\ndefendant\xe2\x80\x99s Rule 35(b) motion essentially recounted the details of the sentencing\nproceeding. The defendant complains that the prosecutor\xe2\x80\x99s position was not neutral ..., particularly because of the Government\xe2\x80\x99s inclusion of the statement that\n\xe2\x80\x98Mooney\xe2\x80\x99s sentence is lawful, appropriate, not excessive, justified, and as such,\nhis motion should be denied.\xe2\x80\x99 We are not prepared, however, to say that this plea\nagreement necessarily required the Government to remain wholly neutral.\xe2\x80\x9d United\nStates v. Mooney, supra, 654 F.2d at 486. Yet Mooney had a better case than\nBrooks. The government had agreed to recommend 10 years but the judge had\nsentenced him to 25. Although one might have thought that the government\xe2\x80\x99s\nagreement to recommend a 10-year sentence carried with it an obligation to support or at least not impede the defendant\xe2\x80\x99s effort to get a longer sentence reduced\nto the recommended length, this court was unwilling to interpret the plea agreement even that broadly.\n[\xc2\xb64] In Bergman v. Lefkowitz, 569 F.2d 705, 707 n.3 (2d Cir. 1977), a state\nprosecutor, as part of a plea agreement, promised that he would \xe2\x80\x9crecommend to\nthe Judge of the New York State Supreme Court who will sentence Bernard\nBergman on his plea of guilty ... that ... no sentence additional to that imposed by\nthe United States District Court Judge on the federal indictment be imposed here.\xe2\x80\x9d\nThe prosecutor made the recommendation but later opposed Bergman\xe2\x80\x99s motion\nfor a reduction of the sentence imposed by the state judge, who had disregarded\nthe prosecutor\xe2\x80\x99s recommendation. Id. at 713. The Second Circuit held that the\nplea agreement had not been violated by the prosecutor\xe2\x80\x99s opposition to the motion\nfor reduction of sentence. \xe2\x80\x9cBefore accepting the agreement the judge had placed\neveryone on notice that he might decide not to follow that recommendation and\nthe agreement did not require the Special Prosecutor to join in any appeal or post412\n\n\x0cconviction proceeding with respect to any additional sentence so imposed.\xe2\x80\x9d Id. at\n716. The only difference between Bergman and this case is that the agreement\nhere was to make no sentence recommendation, rather than to recommend no additional sentence; and we cannot see how this difference can help Brooks.\n[\xc2\xb65] His best cases are United States v. Ewing, 480 F.2d 1141 (5th Cir. 1973)\n(per curiam), and United States v. Arnett, 628 F.2d 1162 (9th Cir. 1979). In Ewing,\nthe prosecutor promised not to oppose probation for the defendant but the court\nsentenced the defendant to prison anyway, and when he moved under Rule 35 to\nhave the prison sentence converted to probation the government opposed his motion. The Fifth Circuit held that the government\xe2\x80\x99s opposition was a breach of the\nplea agreement. Ewing is like Mooney: an agreement not to oppose probation\ncould be interpreted to mean that the government would not oppose a postsentence motion designed just to obtain what the government had said it would\nnot oppose. Ewing cannot have much vitality in this circuit after Mooney; and\nwhile it is true that Mooney purports to distinguish rather than to reject Ewing, the\ndifference between distinguishing and rejecting is in this instance one of judicial\ndecorum rather than of substance. As noted in Mooney, Ewing has been interpreted narrowly, even in the Fifth Circuit. See 654 F.2d at 485, citing United States v.\nJohnson, 582 F.2d 335, 337 (5th Cir. 1978) (per curiam). One of the cases that\nconstrues Ewing narrowly is Arnett, see 628 F.2d at 1164, 1165 n.4, which rejected on facts virtually identical to those in the present case the proposition \xe2\x80\x9cthat a\nplea bargain committing the government \xe2\x80\x98to take no position as to the appropriate\nsentence\xe2\x80\x99 binds the government, as a matter of law, to remain silent at the time of\na motion for reduction of sentence,\xe2\x80\x9d id. at 1164-65. The only thing in Arnett that\nis helpful to Brooks is the statement that \xe2\x80\x9cresolution of the good-faith disputes\nover the terms of an agreement should be made by the district court, to whom the\nplea was originally submitted, \xe2\x80\x98on the basis of adequate evidence,\xe2\x80\x99 \xe2\x80\x9c id. at 1164,\nwhich led the court to remand the case for a factual hearing to determine whether\nthe agreement had been violated. There is no indication in the present case that a\nfactual hearing would clarify the plea agreement. Brooks\xe2\x80\x99 argument is not that the\nagreement is ambiguous and therefore that extrinsic facts are necessary to bring\nits intended meaning to light but that the agreement on its face requires the government not to oppose any Rule 35(b) motion that he might make. As we cannot\naccept this argument we conclude that the judgment denying Brooks\xe2\x80\x99 motion for\nrelief under 28 U.S.C. \xc2\xa7 2255 must be AFFIRMED.\nQuestions:\n1. What did the government agree to do or not to do?\n2. Who wrote the plea bargain, do you suppose?\n3. Can\'t the prosecutor and the judge collusively agree (even tacitly) that the prosecutor will withhold comment on the sentence until the Rule 35 motion, at\n\n413\n\n\x0cwhich time the judge will really find out what the state thinks?\n4. If the agreement was ambiguous, who should take responsibility for the ambiguity, as between the government and the defendant?\n5. Why should the law enforce plea agreements?\n\nWATKINS v. COMMONWEALTH of Virginia (1997)\nCourt of Appeals of Virginia\n491 S.E.2d 755\nANNUNZIATA, Judge.\n[\xc2\xb61] Appellant, John Edward Watkins, s/k/a John Edward Watkins, Sr., appeals\nhis conviction for feloniously operating a motor vehicle after having been adjudicated an habitual offender. He contends that the trial court erred in refusing to\ncompel the Commonwealth to uphold its agreement to reduce the charge to a misdemeanor offense. We agree and reverse his conviction.\nI.\n[\xc2\xb62] On July 10, 1995, appellant appeared in general district court for a preliminary hearing on the felony charge of driving after having been declared an habitual offender and for trial on a misdemeanor charge of driving while intoxicated.\nBefore the cases were called, the Assistant Commonwealth\xe2\x80\x99s attorney informed\nappellant\xe2\x80\x99s counsel that she did not have a copy of the order adjudicating appellant an habitual offender and that she would like a continuance. Plea negotiations\nensued, and the resulting agreement followed: appellant promised not to oppose\nthe Commonwealth\xe2\x80\x99s request for a continuance, and the Commonwealth promised\nto reduce the habitual offender charge from a felony to a misdemeanor, to which\nappellant would then plead guilty. Appellant also agreed to plead guilty to driving\nwhile intoxicated.\n[\xc2\xb63] Appellant stood silent, as the Commonwealth requested, and the trial court\ngranted a continuance. When the hearing reconvened on August 2, 1995, appellant\nwas prepared to plead guilty to the misdemeanor habitual offender charge and to\ndriving while intoxicated. The Commonwealth, however, represented by a different attorney, refused to reduce the habitual offender charge and announced its intent to prosecute the felony offense.\n[\xc2\xb64] The trial court rejected appellant\xe2\x80\x99s motion to compel the Commonwealth\nto reduce the charge in accord with the prior agreement, finding that\n\n414\n\n\x0cuntil the Defendant is substantially prejudiced, \xe2\x80\xa6 there is no agreement\nenforceable by the Defendant with the Commonwealth. And, in fact, the\nCommonwealth can withdraw its agreement at any time up until that point.\nAppellant pled not guilty, was tried by the court, and was convicted.\nII.\n[\xc2\xb65] Under the terms of the parties\xe2\x80\x99 agreement, the Commonwealth promised to\nreduce the charge against appellant from a felony to a misdemeanor in exchange\nfor appellant\xe2\x80\x99s promise not to oppose the Commonwealth\xe2\x80\x99s request for a continuance and to plead guilty to two misdemeanor offenses. Appellant performed all\nthat was required of him by the agreement prior to the Commonwealth\xe2\x80\x99s obligation to perform. The Commonwealth failed to perform. The issue on appeal is\nwhether the trial court erred in refusing to compel the Commonwealth\xe2\x80\x99s performance. Under the facts of this case, we hold that the trial court erred, and we reverse appellant\xe2\x80\x99s conviction.\n[\xc2\xb66] The principles which guide our decision are \xe2\x80\x9can amalgam of constitutional,\nsupervisory, and private [contract] law concerns,\xe2\x80\x9d which comprise a body of law\nunique to plea bargaining. United States v. Harvey, 791 F.2d 294, 300 (4th Cir.\n1986). While plea bargains are analogous to commercial contracts, they do not\ndemand strict application of the common law principles of contract. See, e.g., id.;\nUnited States v. Mozer, 828 F. Supp. 208, 215 (S.D.N.Y. 1993); State v. Brockman,\n277 Md. 687, 357 A.2d 376, 383 (1976); see generally, William M. Ejzak, Plea\nBargains and Nonprosecution Agreements: What Interests Should Be Protected\nWhen Prosecutors Renege?, 1991 U. Ill. L. Rev. 107 (1991); Lawrence K.\nRynning, Note, Constitutional Recognition for Defendant\xe2\x80\x99s Plea Bargaining Expectations in the Absence of Detrimental Reliance, 58 N.C.L. Rev. 599 (1980).\n\xe2\x80\x9cThe rigid application of contract law to plea negotiations would be incongruous\nsince, for example, the trial court is not ordinarily bound by the compact and [the\ngovernment] cannot obtain \xe2\x80\x98specific performance\xe2\x80\x99 of a defendant\xe2\x80\x99s promise to\nplead guilty.\xe2\x80\x9d Brockman, 357 A.2d at 383. Furthermore, rigid application of contract principles is tempered by the fact that \xe2\x80\x9cthe defendant\xe2\x80\x99s underlying \xe2\x80\x98contract\xe2\x80\x99\nright is constitutionally based and, therefore, reflects concerns that differ fundamentally from and run wider than those of commercial contract law.\xe2\x80\x9d Harvey, 791\nF.2d at 300. Moreover, underlying any criminal prosecution are concerns for the\n\xe2\x80\x9c \xe2\x80\x99honor of the government, public confidence in the fair administration of justice,\nand the effective administration of justice.\xe2\x80\x99\xe2\x80\x9d Id. (quoting United States v. Carter,\n454 F.2d 426, 428 (4th Cir. 1972), cert. denied, 417 U.S. 933, 94 S. Ct. 2646, 41\nL.Ed.2d 237 (1974)).\n[\xc2\xb67] \xe2\x80\x9cThe prevailing doctrine is that \xe2\x80\x98the State may withdraw from a plea\nagreement at any time prior to, but not after, the actual entry of the guilty plea by\nthe defendant or other action by him constituting detrimental reliance upon the\nagreement.\xe2\x80\x99\xe2\x80\x9d * * * * The decision to compel enforcement of the agreement, in\n415\n\n\x0cother words, is determined according to the action taken by the defendant, if any,\nin reliance on the agreement.\n[\xc2\xb68] When a defendant enters a plea of guilty in reliance on an agreement with\nthe government, enforcement of the agreement will be compelled. Santobello v.\nNew York, 404 U.S. 257, 264, 92 S. Ct. 495, 500, 30 L.Ed.2d 427 (1971)\n(\xe2\x80\x9c[W]hen a plea rests in any significant degree on a promise or agreement of the\nprosecutor, so that it can be said to be part of the inducement or consideration,\nsuch promise must be fulfilled.\xe2\x80\x9d); * * * *.*\n[\xc2\xb69] When a defendant has taken no action in reliance on the agreement, however, the contrary result obtains. An offer by the government alone, even if accepted by the defendant under common law contract principles, does not require\nspecific enforcement of the agreement. See Mabry v. Johnson, 467 U.S. 504, 50708, 104 S. Ct. 2543, 2546-47, 81 L.Ed.2d 437 (1984) (\xe2\x80\x9cA plea bargain standing\nalone is without constitutional significance; in itself it is a mere executory agreement which, until embodied in the judgment of a court, does not deprive an accused of liberty or any other constitutionally protected interest. It is the ensuing\nguilty plea that implicates the Constitution.\xe2\x80\x9d); People v. Heiler, 79 Mich. App.\n714, 262 N.W.2d 890, 895 (1977) (\xe2\x80\x9cTo hold the prosecutor bound by the agreement under [such circumstances] would \xe2\x80\xa6 actually inhibit the dispositional use of\nplea bargaining by placing the prosecutor at an absolute disadvantage.\xe2\x80\x9d). Enforcement is not compelled absent some performance by the defendant because,\nunder such circumstances, the defendant\xe2\x80\x99s right to trial by jury remains a sufficient remedy to the government\xe2\x80\x99s withdrawal of the agreement. Indeed,\n[the] fundamental right [to trial by jury] would be belittled if [it were] held\n[ ] to be an insufficient \xe2\x80\x9cremedy\xe2\x80\x9d or result for a defendant who has not\nbeen induced to rely on the plea to his detriment. The prosecutor is under\nno duty to plea bargain if no offer is made, and the defendant is entitled to\ntrial. There is no rational basis for holding, in essence, that a trial is sufficient for the defendant who has not been offered a plea and insufficient for\nthe one who has.\nGovernment of the Virgin Islands v. Scotland, 614 F.2d 360, 365 (3rd Cir. 1980).\n[\xc2\xb610] A middle ground exists when the defendant, although not having pled\nguilty, has taken some \xe2\x80\x9cother action\xe2\x80\x9d pursuant to a plea agreement. In such a case,\nthe full panoply of constitutional protections attending a plea of guilty does not\nattain, yet, the agreement cannot be dismissed as executory when the defendant\nhas acted in accordance with the terms of the agreement. The issue is what \xe2\x80\x9cother\naction\xe2\x80\x9d taken by the defendant, short of pleading guilty, compels enforcement of\nthe agreement.\nIndeed, a defendant\xe2\x80\x99s \xe2\x80\x9cdetrimental reliance\xe2\x80\x9d is manifest when he or she enters a plea of guilty\npursuant to an agreement with the government because \xe2\x80\x9cthe entry of a guilty plea is a waiver of\ncertain constitutional rights \xe2\x80\xa6 [including] the Fifth Amendment right against compulsory selfincrimination, the Sixth Amendment right to trial by jury, and the Sixth Amendment right of confrontation.\xe2\x80\x9d See, e.g., Gardner v. Warden, 222 Va. 491, 493-94, 281 S.E.2d 876, 877 (1981).\n*\n\n416\n\n\x0c[\xc2\xb611] Some courts hold that enforcement of the agreement should be compelled\nonly where the defendant\xe2\x80\x99s performance implicates his or her constitutional rights.\nSee, e.g., People v. Navarroli, 121 Ill.2d 516, 118 Ill. Dec. 414, 418, 521 N.E.2d\n891, 895 (1988) (agreement not enforced because defendant\xe2\x80\x99s cooperation in informing police with respect to ongoing drug transactions did not implicate constitutional right). We disagree with that position because, as stated above, a defendant\xe2\x80\x99s constitutional rights are not always, necessarily, the basis for compelling enforcement of plea agreements. * Rather, the decision to compel enforcement is\nguided by \xe2\x80\x9can amalgam of constitutional, supervisory, and private [contract] law\nconcerns.\xe2\x80\x9d Harvey, 791 F.2d at 300. See also Navarroli, 118 Ill. Dec. at 422, 521\nN.E.2d at 899 (Clark, J., dissenting) (criticizing majority for failing to look beyond constitutional implications of defendant\xe2\x80\x99s performance to enforce agreement\non other grounds); Workman v. Commonwealth, 580 S.W.2d 206, 207 (Ky.1979),\noverruled on other grounds, 817 S.W.2d 218 (Ky.1991) (\xe2\x80\x9cIf the government\nbreaks its word, it breeds contempt for integrity and good faith. It destroys the\nconfidence of citizens in the operation of their government and invites them to\ndisregard their obligations. That way lies anarchy. We deal here with a \xe2\x80\x98pledge of\npublic faith-a promise made by state officials-and one that should not be lightly\ndisregarded.\xe2\x80\x99 \xe2\x80\x9d); see generally Rynning, supra, at 606-07 (Examples of detrimental reliance requiring enforcement of an agreement have included:\n\xe2\x80\x9c[p]roviding information to government authorities, testifying for the government,\nconfessing guilt, returning stolen property, making monetary restitution, failing to\nfile a motion to have charges presented to a grand jury, submitting to a lie detector\ntest and waiving certain procedural guarantees.\xe2\x80\x9d) (citations omitted).\n[\xc2\xb612] Guided by such principles, we hold that where a plea agreement calls for\nperformance by the defendant and the defendant has performed pursuant to the\nterms of the agreement, the agreement will be enforced. We find no authority to\nsupport a qualitative analysis of a defendant\xe2\x80\x99s performance and find, instead, that\n*\n\nWe recognize that the procedural posture of a case may demand that enforcement be determined\nin strict adherence to constitutional principles. See Mabry, 467 U.S. at 507, 104 S. Ct. at 2546\n(where defendant could \xe2\x80\x9cobtain \xe2\x80\xa6 relief only if his custody is in violation of the Federal Constitution\xe2\x80\x9d). Our decision here, however, is not constrained by such principles.\nIn addition, we note that the performance necessary to implicate the constitution as a vehicle for enforcing a plea agreement has received varying interpretation. Some courts have held\nthat the constitution requires enforcement only where a defendant enters an involuntary plea in\nreliance on the agreement. See United States v. Coon, 805 F.2d 822, 825 (8th Cir. 1986). Under\nthat theory, even cooperation with the government that leads to incriminating statements does not\nimplicate the constitution, because incriminating statements can simply be suppressed at trial.\nSee id. Other courts have held that the constitution requires enforcement only when a defendant\nwaives a constitutional right in reliance on the agreement. See Navarroli, 118 Ill. Dec. 414, 521\nN.E.2d at 895 (agreement not enforced because defendant\xe2\x80\x99s cooperation in informing police with\nrespect to ongoing drug transactions did not implicate constitutional right). Yet other courts hold\nthat enforcement on constitutional grounds does not require a defendant\xe2\x80\x99s reliance on the agreement to implicate constitutional rights. See People v. Macrander, 756 P.2d 356, 360-61 (Colo.1988) (waiver of preliminary hearing in reliance on agreement sufficient to require enforcement\nof agreement).\n\n417\n\n\x0cthe terms of the parties\xe2\x80\x99 agreement best define their respective performance obligations.\n[\xc2\xb613] In the present case, appellant did not enter a guilty plea in reliance on the\nplea agreement; thus, his reliance on Santobello, Johnson, Jordan, and Jones is\nmisplaced. This is not a case, however, where the government sought to withdraw\nan agreement that consisted solely of an exchange of executory promises upon\nwhich the defendant had not acted. Cf. Mabry, 467 U.S. at 507-08, 104 S. Ct. at\n2546-47; Heiler, 262 N.W.2d at 892. Rather, this case presents the middle ground.\nHere, because appellant had fully performed his obligation under the terms of the\nagreement, he was entitled to have the agreement enforced.\n[\xc2\xb614] Accordingly, we reverse appellant\xe2\x80\x99s conviction on the habitual offender\ncharge 5 and remand for further proceedings consistent with this opinion.\n[\xc2\xb615] Reversed and remanded.\nQuestions:\n1. Is the plea agreement enforceable even though Watkins did not enter a guilty\nplea in accord with it?\n2. What rationales does the court give for enforcement of plea agreements?\n(Please list them.)\n3. The prior cases cited by the court rest on a waiver of a constitutional right (to a\njury trial) in reliance on a plea agreement. Does this case?\n4. Why not give effect to assent?\n\nC. Employment at Will\nIn the following case, I am not as concerned that you know the law established in\nthis case as I am that you understand the courts\xe2\x80\x99 methodology for discerning and\nproving public policy.\nBANAITIS v. MITSUBISHI BANK, LTD. (1994)\nOregon Supreme Court\n879 P.2d 1288 (1994)\nLANDAU, Judge.\n[\xc2\xb61] Defendants appeal from a judgment awarding plaintiff compensatory\ndamages on his claim for wrongful discharge against defendant The Bank of Cali418\n\n\x0cfornia, N.A. (BanCal), and on his claim for interference with a contractual relationship against defendant Mitsubishi Bank, Ltd. (MBL). Plaintiff cross-appeals a\njudgment notwithstanding the verdict that deprived him of a jury award of punitive damages against both defendants. We affirm on the appeal and reverse on the\ncross-appeal.\n[\xc2\xb62] We state the facts in the light most favorable to plaintiff. Plaintiff, a former\nvice president of BanCal, began working for the bank in 1980. MBL is a financial\ninstitution in the "Mitsubishi Group," a collection of related companies in Japan.\nIn 1984, MBL acquired directly 13 percent of the stock in BanCal. It then acquired a holding company that held the balance of BanCal\'s stock. MBL transferred a number of its officers from Tokyo to manage the bank. One of those officers, Tanaka, remained an MBL employee, but was given a title at BanCal.\nTanaka was plaintiff\'s supervisor from late 1986 until plaintiff\'s termination.\n[\xc2\xb63] BanCal had a policy of keeping its customers\' financial information confidential. It stated that policy in its employee policy manual, and each year employees were required to certify that they understood the policy. An employee who\nbreached the confidentiality policy was subject to immediate dismissal.\n[\xc2\xb64] When MBL acquired BanCal, a number of BanCal\'s customers expressed\nconcern that MBL would acquire information from BanCal that would be used by\nother members of the Mitsubishi Group for competitive advantage. Some customers stopped doing business with BanCal. Others demanded written confidentiality\nagreements that would insure that their financial information would not be disclosed to MBL.\n[\xc2\xb65] In the fall of 1986, an employee of MBL telephoned plaintiff and asked\nhim to supply a "comparison chart on [BanCal\'s] grain company customers.\xe2\x80\x9d The\ncomparison chart that MBL requested contains information that shows the relative\nfinancial positions of five large grain shippers, including each company\'s cash on\nhand, accounts receivable, inventory of grain, accounts and notes payable, longterm indebtedness, net worth, cost of goods, operating expenses, profit and inventory turnover. Knowledge of that information would give a competitor an advantage in the marketplace. Plaintiff refused the MBL employee\'s request for the\nchart, explaining that disclosure of the information was against bank policy,\nagainst the law and unethical. When the MBL employee explained that he sought\nthe information for MBL\'s internal use only, plaintiff responded that he would not\nrelease the information without written authorization from the bank\'s president.\n[\xc2\xb66] In September, 1986, the manager of MBL\'s Portland office made a similar\nrequest of plaintiff, this time asking for confidential financial information about a\nparticular customer, Schnitzer Steel Industries, Inc. (Schnitzer). Schnitzer was one\nof the BanCal customers that had demanded express promises from BanCal that\nconfidential information would not be disclosed to MBL or any member of the\nMitsubishi Group. Plaintiff again refused MBL\'s request.\n419\n\n\x0c[\xc2\xb67] Soon after that, in February, 1987, Tanaka wrote a performance evaluation\nthat falsely accused plaintiff of not meeting his 1986 budget. In June, 1987,\nTanaka falsely accused plaintiff of going to New York on business without approval. Tanaka also accused plaintiff of being dishonest and questioned his integrity. In August, 1987, BanCal put plaintiff on probation for 90 days, based on another evaluation that reiterated the earlier falsehoods and added new false charges.\n[\xc2\xb68] Plaintiff\'s probation was over in mid-November, but BanCal did not dismiss him. Meanwhile, plaintiff informed BanCal\'s Human Resources Department\nthat he could not stay at the bank and offered to negotiate a smooth departure. On\nDecember 16, while negotiations continued, plaintiff told his staff at a breakfast\nmeeting that he would be leaving the bank soon. He had anticipated that he would\ncontinue to work at least through December 31, 1987, so that he would receive the\nfull value of the bank\'s contributions to his pension fund for 1987. However,\nTanaka and BanCal\'s Human Resources Department accelerated his departure\ndate to December 30, 1987, thus depriving him of those pension benefits. Plaintiff\nreceived notice of that decision in a letter hand-delivered by Tanaka. Plaintiff then\nwas instructed that he had 30 minutes to "clean out his desk.\xe2\x80\x9d He protested that he\ncould not possibly complete the task that quickly, so he was allowed to remove\nhis things the next day after working hours. Other employees were instructed to\nwatch him while he packed.\n[\xc2\xb69] Plaintiff commenced this action on December 12, 1989. He alleged a\nclaim against BanCal for wrongful discharge and a claim against MBL for interference with a contractual relationship. The complaint included demands for punitive damages against both defendants.\n[\xc2\xb610] At the close of the evidence at trial, defendants moved for directed verdicts on both claims. The trial court denied the motions, and the jury returned a\nverdict for plaintiff, awarding plaintiff compensatory and punitive damages\nagainst both defendants. Defendants then moved for a judgment notwithstanding\nthe verdict or, in the alternative, for a new trial. The trial court denied that motion\nwith respect to the verdict for compensatory damages. It granted the motion with\nrespect to punitive damages on both claims, and it denied the alternative motion\nfor a new trial.\n[\xc2\xb611] In the first assignment of error, BanCal contends that the trial court erred\nin denying its motion for directed verdict, because plaintiff failed to produce evidence of a prima facie case for wrongful termination. BanCal concedes, for the\npurpose of the motion, that it deliberately made plaintiff\'s working environment\nso unpleasant that he had to leave, and that it did so in retaliation for his withholding BanCal\'s confidential customer information from MBL. According to BanCal,\nthat does not constitute wrongful termination, because plaintiff was an at-will employee, and the reason for his discharge does not fall within any exception to the\ngeneral rule that at-will employees may be discharged at any time, for any reason.\n420\n\n\x0c[\xc2\xb612] In reviewing the denial of the motion for directed verdict, we consider the\nevidence, including the inferences, in the light most favorable to the nonmoving\nparty, and the verdict cannot be set aside "unless we can affirmatively say that\nthere is no evidence from which the jury could have found the facts necessary" to\nsupport the verdict. * * * *\n[\xc2\xb613] In general, an employer may discharge an employee at any time, for any\nreason, unless doing so violates a contractual, statutory or constitutional requirement. Patton v. J.C. Penney Co., 301 Or. 117, 120, 719 P.2d 854 (1986). There are\nexceptions to the general rule. A cause of action will lie against an employer who\ndischarges an employee for performing a public duty, or fulfilling a societal obligation such as serving on a jury, Nees v. Hocks, 272 Or. 210, 219, 536 P.2d 512\n(1975), or refusing to commit a potentially tortious act of defamation. Delaney v.\nTaco Time Int\'l., 297 Or. 10, 17, 681 P.2d 114 (1984). An employer also may be\nheld liable for discharging an employee for pursuing private statutory rights that\nare directly related to the employment, such as resisting sexual harassment by a\nsupervisor, Holien v. Sears, Roebuck and Co., 298 Or. 76, 90-97, 689 P.2d 1292\n(1984), or filing a claim for workers\' compensation benefits. Brown v. Transcon\nLines, 284 Or. 597, 588 P.2d 1087 (1978).\n[\xc2\xb614] In this case, plaintiff contends that his termination for refusing to disclose\nconfidential information falls within the "societal obligation" or "public duty" exception to the at-will rule. According to plaintiff, there is a public duty to avoid\ndisclosing valuable, confidential customer financial information held by a bank.\nThat public duty, he argues, is evidenced by a host of state and federal statutes\nthat generally protect business information from discovery by or disclosure to the\npublic or to government agencies. In particular, plaintiff relies on federal and state\npublic records statutes, rules of civil procedure and various criminal statutes, all\nof which protect against disclosure of confidential financial information.\n[\xc2\xb615] BanCal argues that plaintiff\'s refusal to divulge the requested information\nimplicates no societal obligation or public duty. It argues that none of the statutes\non which plaintiff relies specifically applies to the disclosure of customer financial information held by a bank. Without such statutes, "carefully tethered" to the\nspecific conduct at issue, BanCal contends, there can be no societal obligation or\npublic duty.\n[\xc2\xb616] We first address the parties\' arguments concerning the standard that we\nmust apply in determining whether a societal obligation or public duty is implicated. In deciding the question whether an employer could be held liable for discharging an employee for serving on a jury, the Supreme Court in Nees v. Hocks,\nsupra, looked to the provisions in the Oregon Constitution preserving the right of\njury trials, to various statutes describing exemptions from jury service and consequences for neglecting to show up for jury service, and to caselaw from other jurisdictions concerning the importance of jury duty. The court concluded:\n421\n\n\x0c"These actions by the people, the legislature and the courts clearly indicate\nthat the jury system and jury duty are regarded as high on the scale of\nAmerican institutions and citizen obligations. * * * * For these reasons we\nhold that the defendants are liable for discharging plaintiff because she\nserved on the jury." 272 Or. at 218, 536 P.2d 512.\nThe constitutional provisions on which the court relied, as well as the statutes and\nthe caselaw, do not impose an obligation of jury service. Nevertheless, the court\ndrew on them as indicia of the public policy that it found to be the basis for liability.\n[\xc2\xb617] Likewise, in Delaney v. Taco Time Int\'l., supra, in which the Supreme\nCourt considered whether an employer could be found liable for discharging an\nemployee who refused to sign a false performance evaluation, the court relied on\ntwo provisions of the Oregon Constitution, Article I, sections 8 and 10. Neither of\nthose provisions prohibits a person from defaming another. Nevertheless, the\ncourt concluded that "[t]hese two sections indicate that a member of society has\nan obligation not to defame others.\xe2\x80\x9d 297 Or. at 17, 681 P.2d 114; see also Holien v.\nSears, Roebuck and Co., supra, 298 Or. at 83, 689 P.2d 1292.\n[\xc2\xb618] In short, there is no requirement, as BanCal contends, that a specific statute has been violated before we may conclude that a societal obligation or a public duty has been implicated. We must review all the relevant "evidence" of a particular public policy, whether that be expressed in constitutional and statutory\nprovisions or in the caselaw of this or other jurisdictions. We turn, then, to the issue of whether discharging an employee for refusing to disclose a customer\'s confidential financial information falls within the societal obligation exception to the\nat-will rule. We conclude that it does.\n[\xc2\xb619] Numerous statutes reflect a legislative recognition of the important public\npolicy of protecting from disclosure confidential commercial and financial information. The Federal Right to Financial Privacy Act of 1978, 12 U.S.C. \xc2\xa7 3401 et\nseq., prohibits, with certain exceptions, the disclosure of a customer\'s records by a\nfinancial institution to a government authority without the customer\'s consent.\nThe Federal Freedom of Information Act, 5 U.S.C. \xc2\xa7 552, similarly exempts from\ndisclosure by public agencies any "commercial or financial information" that is\nprivileged or confidential. 5 U.S.C. \xc2\xa7 552(b)(4). The Oregon Public Records Act,\nORS 192.501(2), likewise exempts from disclosure any\n"compilation of information which is not patented, which is known only to\ncertain individuals within an organization and which is used in a business\nit conducts, having actual or potential commercial value, and which gives\nits user an opportunity to obtain a business advantage over competitors\nwho do not know or use it."\nIn a related vein, ORCP 36 C(7) authorizes courts to issue protective orders to\navoid disclosure of "a trade secret or other confidential * * * * commercial information.\xe2\x80\x9d See also FRCP 26(c)(7).\n422\n\n\x0c[\xc2\xb620] Various criminal statutes reflect a public interest in protecting the confidentiality of commercial financial records. ORS 165.095(1) provides that a person\nwho "misapplies" property entrusted to a financial institution commits a crime.\nRemoval or disclosure of a bank\'s files or other property is a Class C felony. ORS\n708.715.*\n[\xc2\xb621] At common law, the courts in a number of jurisdictions have recognized a\nbank\'s duty not to divulge to a third party, without the customer\'s consent, any information relating to the customer acquired through the keeping of the customer\'s\naccount. As the Idaho Supreme Court said in Peterson v. Idaho First National\nBank, 83 Idaho 578, 367 P.2d 284 (1961):\n"It is inconceivable that a bank would at any time consider itself at liberty\nto disclose the intimate details of its depositors\' accounts. Inviolate secrecy\nis one of the inherent and fundamental precepts of the relationship of the\nbank and its customers or depositors.\xe2\x80\x9d 83 Idaho at 588, 367 P.2d 284.\nSee also Burrows v. Superior Court, 13 Cal.3d 238, 243, 118 Cal.Rptr. 166, 529\nP.2d 590 (1974); Barnett Bank of West Florida v. Hooper, 498 So.2d 923, 925 (Fla.\n1986); Indiana Nat. Bank v. Chapman, 482 N.E.2d 474, 480 (Ind. App. 1985);\nSuburban Trust Co. v. Waller, 44 Md.App. 335, 340, 408 A.2d 758 (1979); Pigg v.\nRobertson, 549 S.W.2d 597, 600 (Mo. App. 1977); Djowharzadeh v. City Nat.\nBank & Trust Co., 646 P.2d 616, 619-20 (Okla. Ct. App. 1982). Consistent with\nthat rule, BanCal\'s own internal policy prohibits the disclosure of confidential\ncustomer financial information.\n[\xc2\xb622] Those statutory provisions, rules and common law principles reflect a\ncommon concern for the protection of valuable commercial financial information,\nparticularly when that information has been entrusted to a bank. Permitting a bank\nto discharge with impunity its employee for refusing to disclose confidential customer financial information would violate that public policy and compromise the\nprotections that the statutes, rules and common law duties were designed to afford.\n[\xc2\xb623] BanCal acknowledges the foregoing authorities. It also concedes that they\nconcern the type of confidential customer financial information that is involved in\nthis case. It nevertheless maintains that most of the statutory provisions only establish limitations on the authority of governmental agencies\xe2\x80\x94not banks\xe2\x80\x94to disclose that confidential customer financial information. It also insists that the authorities that do concern the disclosure of information entrusted to banks only\n*\n\nPlaintiff argues that other statutes reflect a public policy of protecting confidential customer financial information. In particular, plaintiff relies on the Oregon Trade Secrets Act, ORS\n646.461(4), and the Federal Antitrust Improvements Act, 18 U.S.C. \xc2\xa7 1905, which governs disclosure of confidential information by officials of the United States government. BanCal argues that\nthose statues are irrelevant, because the information involved in this case does not constitute a\n"trade secret" within the meaning of those statutes. Because we find ample evidence in other statutes of a public policy to protect confidential customer financial information, we do not address\nwhether the trade secrets statutes apply.\n\n423\n\n\x0cgive rise to private remedies and, therefore, cannot be evidence of important public policies.\n[\xc2\xb624] BanCal\'s arguments rest on an incorrect characterization of the standard\nwe apply in discerning the existence of a societal obligation or public duty. As we\nhave said, it is not necessary that a statute specifically regulate the conduct that\nprecipitated the discharge. We review statutes and other authorities for evidence\nof a substantial public policy that would, as the Supreme Court said in Nees v.\nHocks, supra, be "thwarted" if an employer were allowed to discharge its employee without liability. 272 Or. at 219, 536 P.2d 512.\n[\xc2\xb625] Moreover, BanCal\'s argument rests on an incorrect characterization of the\nstatutes. Several do more than merely create private remedies. ORS 165.095(1),\nfor example, makes it a crime for any person to misapply property entrusted to a\nfinancial institution.* And ORS 708.715 establishes criminal penalties for removal of files or other property from a bank. The legislature\'s decision to attach a\ncriminal penalty to that conduct is a strong indication that it views the protection\nof property entrusted to a bank to be a matter of public importance. Nees v. Hocks,\nsupra, 272 Or. at 219, 536 P.2d 512; McQuary v. Bel Air Convalescent Home, Inc.,\n69 Or. App. 107, 110, 684 P.2d 21, rev. den., 298 Or. 37, 688 P.2d 845 (1984).\n[\xc2\xb626] The trial court did not err in denying BanCal\'s motion for a directed verdict. * * * *\n[\xc2\xb627] In the next two assignments of error, BanCal contends that the trial court\ngave improper jury instructions on the wrongful discharge claim. We review the\ntrial court\'s rulings on requests for instructions to determine whether the instructions probably created in the minds of the jurors an erroneous impression of the\nlaw that affected the outcome of the case. * * * *\n[\xc2\xb628] The court delivered the following two instructions:\n"To recover under this claim, plaintiff must show by a preponderance of\nthe evidence either, one, the Bank of California terminated plaintiff\'s employment for refusing to violate public policy, or two, constructively discharged plaintiff\'s employment or plaintiff for refusing to violate public\npolicy and three, that plaintiff was damaged as a result.\n"The public policy of this state protects financial and other business information having independent economic value which is entrusted to a fi*\n\nBanCal asserts that ORS 165.095(1) "is aimed at the likes of embezzlement and diversion of\nfunds or property, not at information sharing." That argument is contradicted by the Supreme\nCourt\'s decision in State v. Hitz, 307 Or. 183, 766 P.2d 373 (1988), in which the court held that\n"[t]he section was designed by the Criminal Law Revision Commission to define an offense distinct from existing crimes of embezzlement and fraudulent misapplication of entrusted property by not requiring an intent to deceive, injure, or defraud anyone." 307 Or.\nat 185, 766 P.2d 373. (Emphasis supplied.)\n\n424\n\n\x0cnancial institution on a confidential basis from intentional disclosure by\nthe financial institution unless the disclosure is authorized by the entity to\nwhich it pertains or by law."\nAccording to BanCal, the instructions should have used the term "societal obligation," instead of the phrase, "public policy.\xe2\x80\x9d The term "public policy," it contends,\nwas repudiated by the Supreme Court in Harrell v. Travelers Indemnity Company,\n279 Or. 199, 567 P.2d 1013 (1977). BanCal argues that the second instruction\ncompounded that error by describing the so-called "public policy" in terms that\nfind no support in constitutional or statutory provisions that are directly applicable\nto this case.\n[\xc2\xb629] Although it may be true that the phrase "public policy" is, in some ways,\nless precise than the words "societal obligation," we cannot say that that rendered\nthe trial court\'s instructions incorrect. The Supreme Court, in fact, frequently has\ndescribed the exception to the at-will rule using the terms "public duty," "societal\nobligation" and "public policy," with no apparent intention to draw distinctions\namong those terms. See, e.g., Holien v. Sears, Roebuck and Co., supra, 298 Or. at\n83, 689 P.2d 1292; Delaney v. Taco Time Int\'l., supra, 297 Or. at 15-16, 681 P.2d\n114. BanCal\'s reliance on Harrell v. Travelers Indemnity Company, supra, for its\nargument to the contrary is misplaced. That case was not a wrongful discharge\ncase and did not discuss any exception to the at-will rule. At issue was whether\n"public policy" provided a basis for invalidating a provision in an insurance policy.\nIn that context, the court commented that\n"for a court to undertake to invalidate private contracts upon the ground of\n`public policy\' is to mount `a very unruly horse, and when you once get\nastride it you never know where it will carry you.\'\xe2\x80\x9c 279 Or. at 206, 567\nP.2d 1013 (quoting 14 Williston on Contracts 7-8, \xc2\xa7 1629 (3d ed 1972)).\nThe court nevertheless articulated a rule that, in certain circumstances, a contract\nmay be held invalid as contrary to public policy.\n[\xc2\xb630] In any event, BanCal has not asserted, much less demonstrated, any prejudicial effect of using the term "public policy" in the jury instructions. Apart from\nthe use of those two words, the instructions the court delivered did not substantially depart from the instructions BanCal itself requested. Particularly when the\ncourt instructed the jury on the specific public policy that applied in this case, we\ncannot say that the instructions, taken as a whole, caused the jury to decide the\ncase one way or the other. * * * *\n[\xc2\xb631] BanCal insists that the court\'s description of the relevant public policy\xe2\x80\x94\nthe protection of financial and other business information that has been entrusted\nto a bank\xe2\x80\x94was incorrect, because it finds no basis in any specific constitutional\nor statutory provision. That, however, is the same argument that BanCal asserts in\nurging reversal of the trial court\'s denial of the motion for a directed verdict on the\nwrongful discharge claim. For the same reasons we rejected the argument in that\ncontext, we reject it again here. The trial court did not err in delivering its instructions on the wrongful discharge claim. * * * *\n425\n\n\x0cQuestions:\n1. How does one prove a public policy in an Oregon employment-at-will public\npolicy exception case?\n2. What must a plaintiff prove to win a wrongful discharge case in Oregon?\n3. What public policies does Banaitis suggest in this case?\n4. What business justifications does the defendant offer?\n5. Has the court created a new category of wrongful discharge in the state?\n6. How confident are you that you can predict what other exceptions to at-will\nemployment will succeed under Oregon law?\n\nD. Covenants Not to Compete\nStephen FREIBURGER v. J-U-B ENGINEERS, INC. (2005)\nSupreme Court of Idaho\n111 P.3d 100\nTROUT, Justice.\n[\xc2\xb61] Stephen Freiburger brought this declaratory judgment action against J-U-B\nEngineers, Inc. (J-U-B), seeking a judicial declaration that J-U-B\xe2\x80\x99s non-compete\nclause in his employment contract was invalid and unenforceable under Idaho law.\nThe district court granted summary judgment to Freiburger, from which J-U-B\nnow appeals. Because we agree with the trial court that the clause is unreasonable\nand greater than necessary to protect J-U-B\xe2\x80\x99s legitimate business interests, we affirm.\nI.\nFACTUAL AND PROCEDURAL BACKGROUND\n[\xc2\xb62] In December 1991, J-U-B hired Stephen Freiburger and, as part of his employment application, he signed an Applicant\xe2\x80\x99s Certification and Agreement\n(Agreement). The Agreement included a restrictive covenant (Covenant), which is\nat the center of this controversy. That Covenant reads, in part:\nShould I become an employee of JUB, it is anticipated that my responsibilities may increase with time and that I may be an official representative\nto many clients served by JUB. Therefore, I agree that for a period of two\nyears following any date of termination of my employment with JUB, I\n426\n\n\x0cwould not attempt to take, take or join with anyone to take, (without the\nwritten consent of JUB) any of past or present clients or projects or any\npending clients or projects, for which JUB has or would be providing professional services. (emphasis added).\nJ-U-B Engineering is one of the largest privately owned engineering firms in the\nState of Idaho with offices in Boise, Twin Falls, Pocatello, Coeur d\xe2\x80\x99Alene and\nNampa, and employs approximately 250 people. It does business throughout the\nNorthwest and has been in business for more than 30 years.\n[\xc2\xb63] Freiburger became a professional engineer in 1991, just as he joined J-U-B.\nWhen he was hired, he had prior experience in consulting engineering and technical expertise in both transportation and solid waste engineering. Freiburger\nserved as J-U-B\xe2\x80\x99s project manager in Twin Falls, moving to the Boise office and\nthen to Nampa. While with J-U-B, Freiburger participated in all aspects of client\ndevelopment and knew how J-U-B engaged in client development and client service. He attended manager meetings and was privy to proprietary information\nconcerning existing clients and projects.\n[\xc2\xb64] According to J-U-B, Freiburger participated in its \xe2\x80\x9cinner circle\xe2\x80\x9d and in\nplanning efforts to \xe2\x80\x9ccapture more of the transportation engineering work\xe2\x80\x9d available in J-U-B\xe2\x80\x99s area of practice. Also, it appears that because of his prominence in\nthe transportation group, he built a relationship base with the Idaho Department of\nTransportation (IDOT), becoming one of J-U-B\xe2\x80\x99s primary liaisons with IDOT, and\nembodying J-U-B\xe2\x80\x99s goodwill effort with IDOT to secure IDOT projects and contracts.\n[\xc2\xb65] On April 25, 2001, Freiburger resigned from J-U-B. About six months later, Freiburger joined Riedesel Engineering, LLC (Riedesel). Soon after Freiburger\nbegan his new employment, Riedesel wanted to propose on an IDOT project and\ntout Freiburger\xe2\x80\x99s qualifications in order to secure IDOT projects. At that time,\nFreiburger wanted to make sure he was not in conflict with the Covenant and,\ntherefore, made several attempts, both directly and through his attorney, to obtain\nfrom J-U-B a list of clients that J-U-B considered to be covered under the terms of\nthe Covenant. When J-U-B refused to provide any list of those clients, and simply\ninstructed Freiburger that he should run any potential clients by them first, Freiburger initiated this declaratory judgment action on September 12, 2002, asking\nthe court to declare the Covenant overbroad, unreasonable, void and unenforceable as a matter of law. * * * *\n[\xc2\xb66] Freiburger then filed a motion for summary judgment, seeking to have the\nCovenant declared unenforceable as a matter of law. After oral argument on the\nmatter, the trial court issued its memorandum decision, granting summary judgment to Freiburger. The court found the Covenant unreasonable and fatally overbroad and declined to strike the offending language in the Covenant to make it\nreasonable, finding that the court would essentially have to rewrite the entire\nCovenant to make it reasonable. Freiburger then requested costs and attorney fees\n427\n\n\x0cpursuant to I.C. \xc2\xa7 12-120(3). The court granted Freiburger\xe2\x80\x99s request, awarding\nhim $117.00 in costs and $9,360.00 in fees. J-U-B timely filed this appeal. * * * *\nIII.\nANALYSIS\nA. The Covenant Not to Compete\n[\xc2\xb67] J-U-B\xe2\x80\x99s primary contention on appeal is that the district court erred in\ngranting Freiburger summary judgment because it has a legitimate interest in protecting its business from former employees who may endeavor to take J-U-B clients and the Covenant contained in the Agreement reasonably protects that interest. Restrictive covenants not to compete in an employment contract, though enforceable, are disfavored and will be strictly construed against the employer. See\nStipp v. Wallace Plating, Inc., 96 Idaho 5, 6, 523 P.2d 822, 823 (1974); Shakey\xe2\x80\x99s\nInc. v. Martin, 91 Idaho 758, 762, 430 P.2d 504, 508 (1967). In order to be enforceable, a covenant not to compete must be ancillary to a lawful contract supported by adequate consideration, and consistent with public policy. McCandless v.\nCarpenter, 123 Idaho 386, 390, 848 P.2d 444, 447 (Ct.App.1993).\n[\xc2\xb68] In addition, a covenant not to compete contained in an employment contract must be reasonable as applied to the employer, the employee, and the public.\nSee Stipp, 96 Idaho at 6, 523 P.2d at 823; Insurance Ctr., Inc. v. Taylor, 94 Idaho\n896, 899, 499 P.2d 1252, 1255 (1972); Marshall, 81 Idaho at 203, 339 P.2d at 508;\nMcCandless, 123 Idaho at 390, 848 P.2d at 447. In other words, a covenant not to\ncompete is reasonable only if the covenant: (1) is not greater than is necessary to\nprotect the employer in some legitimate business interest; (2) is not unduly harsh\nand oppressive to the employee; and (3) is not injurious to the public. See Restatement (Second) Of Contracts \xc2\xa7 188 (1981).\n[\xc2\xb69] We note that some jurisdictions have applied different standards of reasonableness, depending on the type of restrictive covenant involved and what it is\nseeking to accomplish. For instance, some courts have held that covenants not to\ncompete ought to be analyzed differently than anti-piracy covenants. See, e.g.,\nMerrill Lynch, Pierce, Fenner Smith Inc. v. Ran, 67 F. Supp.2d 764\n(E.D.Mich.1999). Under this view, covenants not to compete preclude employees\nfrom working in the same business as the employers\xe2\x80\x99 for certain periods of time\nand thus, are strictly construed against employers. See Hilb, Rogal and Hamilton\nCo. of Arizona, Inc. v. McKinney, 190 Ariz. 213, 946 P.2d 464, 467 (Ct.App.1997).\nOn the other hand, anti-piracy agreements restrict the terminated employee from\nsoliciting customers of his former employer or making use of confidential information from his previous employment. Id. These agreements have been held to a\nless stringent test of reasonableness than blanket prohibitions of competition, as\nthey are not considered nearly as oppressive and unreasonable as noncompete\nagreements. See Corroon Black of Ill., Inc. v. Magner, 145 Ill.App.3d 151, 98 Ill.\nDec. 663, 494 N.E.2d 785 (1986); Olliver/Pilcher Ins., Inc. v. Daniels, 148 Ariz.\n530, 715 P.2d 1218 (1986).\n428\n\n\x0c[\xc2\xb610] However, we think the more reasoned approach is to simply determine\nwhether or not the clause is no more restrictive than necessary to protect the employer\xe2\x80\x99s legitimate business interests. This test can aptly be applied regardless of\nwhether the clause itself seeks to limit the employee\xe2\x80\x99s work in the field entirely,\nor seeks only to limit the employee in approaching former clients. Indeed, we\nhave in the past upheld the application of a restrictive covenant, no matter what it\nis termed, only after a determination that it was no broader than necessary to protect an employer\xe2\x80\x99s legitimate business interest. See Magic Lantern Prod., Inc. v.\nDolsot, 126 Idaho 805, 892 P.2d 480 (1995); Insurance Center, Inc. v. Taylor, 94\nIdaho 896, 499 P.2d 1252 (1972).\n1. J-U-B\xe2\x80\x99s Legitimate Business Interest\n[\xc2\xb611] The first issue the Court must consider is whether J-U-B has a legitimate\nbusiness interest worthy of protection. The burden is on the employer to prove the\nextent of its protectable interest. McCandless, 123 Idaho at 391, 848 P.2d at 449.\nThe general rule is that an employer is not entitled to protection against ordinary\ncompetition. See Pinnacle Performance, Inc. v. Hessing, 135 Idaho 364, 367, 17\nP.3d 308, 311 (Ct.App.2001) (citing 54A Am.Jur.2d Monopolies \xc2\xa7 916 (1996)).\nHowever, employers are entitled to protect their businesses from the detrimental\nimpact of competition by employees who, but for their employment, would not\nhave had the ability to gain a special influence over clients or customers. See\nAmex Distrib. Co., Inc. v. Mascari, 150 Ariz. 510, 724 P.2d 596, 605\n(Ct.App.1986); American Software USA, Inc. v. Moore, 264 Ga. 480, 448 S.E.2d\n206, 208 (1994); Holloway v. Faw, Casson Co., 319 Md. 324, 572 A.2d 510, 515\n(1990); Prof\xe2\x80\x99l Bus. Services Co. v. Rosno, 256 Neb. 217, 589 N.W.2d 826, 831\n(1999). Thus, \xe2\x80\x9cthe employer has a protectable interest in the customer relationships its former employee established and/or nurtured while employed by the employer, and is entitled to protect itself from the risk that a former employee might\nappropriate customers by taking unfair advantage of the contacts developed while\nworking for the employer.\xe2\x80\x9d W.R. Grace Co. v. Mouyal, 262 Ga. 464, 422 S.E.2d\n529, 531 (1992); See also 54a Am.Jur.2d Monopolies \xc2\xa7 919 (1996).\n[\xc2\xb612] Freiburger entered into an employment relationship with J-U-B that clearly both placed him in direct contact with J-U-B clients, as well as placed him in\nthe forefront in developing J-U-B\xe2\x80\x99s goodwill effort with several clients. Therefore,\nwe conclude that J-UB has a legitimate business interest worthy of protection in\nthe client relationships Freiburger helped to develop while in J-U-B\xe2\x80\x99s employ.\n2. The Covenant as a Reasonable Means of Protecting the Interest\n[\xc2\xb613] The second step in analyzing the Covenant is to determine whether it is a\nreasonable means of protecting J-U-B\xe2\x80\x99s legitimate business interest. The core provision in the Covenant provides:\n429\n\n\x0c... I agree that for a period of two years following any date of termination\nof my employment with J-U-B, I would not attempt to take, take or join\nwith anyone to take, (without the written consent of J-U-B) any of past or\npresent clients or projects or any pending clients or projects, for which JUB has or would be providing professional services....\n[\xc2\xb614] The district court found that the Covenant was an overbroad means of protecting J-U-B\xe2\x80\x99s interest in the goodwill developed by Freiburger because the Covenant unreasonably prohibited Freiburger from providing any services to J-U-B\xe2\x80\x99s\nclients, current, past and potential, without regard to whether Freiburger had any\ncontact with these clients. This conclusion is similar to an Idaho Court of Appeals\ndecision that analyzed a restrictive covenant similar to the one at issue here. See\nPinnacle Performance, Inc. v. Hessing, 135 Idaho 364, 17 P.3d 308 (Ct.App.2001).\n[\xc2\xb615] In Pinnacle, the employer entered into a written employment agreement\nwith Hessing, as an independent contractor, to develop a prototype card shuffler\nfor the employer\xe2\x80\x99s client, Casinovations. The agreement contained a noncompetition clause that read: \xe2\x80\x9cContractor agrees to not offer, sell, or trade his services directly to Company clients, both current and past, for a period of two (2)\nyears from completion of Contractor\xe2\x80\x99s work for the Company ....\xe2\x80\x9d Pinnacle, 135\nIdaho at 366, 17 P.3d at 310. After developing the prototype, Hessing signed an\nemployment agreement with Casinovations, and the employer filed a complaint\nagainst Hessing alleging that he had breached the covenant not to compete.\n[\xc2\xb616] The Court of Appeals noted that if a court finds that an employer has a legitimate business interest, such a business interest is reasonably protected by prohibiting the employee from providing services to those clients with whom the employee developed customer goodwill. Id. at 368, 17 P.3d at 312. \xe2\x80\x9cHowever, a prohibition against doing business with an employer\xe2\x80\x99s clients, without regard to\nwhether a relationship existed between the client and the employee, is an overbroad means of protecting the employer\xe2\x80\x99s interest in the goodwill developed by\nthe employee.\xe2\x80\x9d Id. (citing American Software, 448 S.E.2d at 209). Thus, the court\nfound that since the covenant not to compete failed to reasonably limit the scope\nof the prohibited activity to those clients with whom Hessing had contact, the\nprohibitive impact of the covenant was greater than necessary to protect the employer\xe2\x80\x99s legitimate business interest.\n[\xc2\xb617] The decision also noted that a covenant not to compete which prohibits an\nemployee from working in any capacity or which fails to specify with particularity the activities the employee is prohibited from performing is too overbroad and\nindefinite to be considered reasonable. Id. at 368-69, 448 S.E.2d 206, 17 P.3d at\n312-13; See also National Teen-Ager Co. v. Scarborough, 254 Ga. 467, 330\nS.E.2d 711, 713 (Georgia 1985); American Family Life Assurance Co. v. Tazelaar,\n135 Ill.App.3d 1069, 90 Ill. Dec. 789, 482 N.E.2d 1072, 1075 (1985). The court\nfound that the term \xe2\x80\x9cservices\xe2\x80\x9d was not expressly defined in the covenant and,\ntherefore, it failed to limit the scope of activities Hessing was prohibited from per430\n\n\x0cforming. The covenant was too overbroad and indefinite to be considered reasonable.\n[\xc2\xb618] The Covenant at issue here is clearly an overbroad means of protecting JU-B\xe2\x80\x99s legitimate business interest. First, J-U-B has actively operated throughout\nthe Northwest region for nearly thirty years and clearly has a large client base\nboth past and present, yet the Covenant prohibits Freiburger from taking any of\nthis large group of clients regardless of whether Freiburger helped to develop J-UB\xe2\x80\x99s goodwill effort toward that client. Instead of the reference point of the Covenant being goodwill created through the efforts of Freiburger, the Covenant prohibits contact with any past, present or potential client of J-U-B at the time Freiburger left J-U-B\xe2\x80\x99s employ. It is possible, under the plain language of the Covenant, that if J-U-B had a client or project twenty years ago and had not had contact with that client since, Freiburger would still be prohibited from taking that\nclient for a period of two years after he left J-U-B. Since the Covenant includes\npast clients or projects, without any meaningful limitation, it is an overbroad\nmeans of protecting the employer\xe2\x80\x99s interest in the goodwill Freiburger helped to\ndevelop.\n[\xc2\xb619] Secondly, just as in Pinnacle, the Covenant at issue unreasonably prohibits\nFreiburger from providing any services to J-U-B\xe2\x80\x99s clients, current, past, or pending. We note that nothing in the Covenant limits the scope of activities Freiburger\nis prohibited from offering. The prohibitive impact of this limitation is especially\nharsh and oppressive to Freiburger considering the nature of the clients involved\nin this area of business. The Covenant would likely prevent Freiburger from performing any services to a number of state and local governmental agencies\nthroughout the Northwest.\n[\xc2\xb620] Third, the portion of the Covenant that refers to taking any \xe2\x80\x9cpending\xe2\x80\x9d clients or projects for whom J-U-B \xe2\x80\x9cwould be providing professional services\xe2\x80\x9d is\nalso unreasonable and overbroad. J-U-B contends that \xe2\x80\x9cpending\xe2\x80\x9d can reasonably\nbe defined as \xe2\x80\x9cimminent,\xe2\x80\x9d and should be interpreted to mean identified clients in\nwhom J-U-B has invested goodwill and to whom J-U-B has sufficiently recruited\nand engaged such that the client will hire J-U-B. However, this ignores the fact\nthat the term is not defined in the Agreement and can reasonably be given more\nthan one possible interpretation, making it an overbroad description of the clients\nFreiburger is prohibited from \xe2\x80\x9ctaking.\xe2\x80\x9d There is no \xe2\x80\x9cgoodwill\xe2\x80\x9d limitation to be\nfound, nor is there language that limits the interpretation of \xe2\x80\x9cpending\xe2\x80\x9d clients or\nprojects. Instead, the clause appears to require Freiburger to know to which\n\xe2\x80\x9cpending\xe2\x80\x9d clients or projects J-U-B \xe2\x80\x9cwould be\xe2\x80\x9d providing professional services in\nthe future. Therefore, it is clear that the Covenant is overbroad and an unreasonable means of protecting J-U-B\xe2\x80\x99s legitimate business interest.\n3. Judicial Modification of the Covenant\n\n431\n\n\x0c[\xc2\xb621] J-U-B finally argues that even if the Covenant is determined to be too\noverbroad to be enforced, Idaho case law suggests that a non-compete covenant\ncan be altered by the court to render it reasonable and enforceable. In fact, J-U-B\nargues this Court should do so unless it determines the Covenant was not drafted\nin good faith. See Data Management, Inc. v. Greene., 757 P.2d 62 (Alaska 1988).\nThis Court has approved of the modification of otherwise unreasonable covenants\nnot to compete. See Insurance Ctr., Inc., v. Taylor, 94 Idaho 896, 899, 499 P.2d\n1252, 1255 (1972). In doing so the Court explained:\nIt is the conclusion of this Court that the cases which authorize a modification of restrictive covenants ancillary to employment agreements are more\nconsistent with the inherent concerns of a court of equity\xe2\x80\x94fairness and\nreasonableness. Adoption of the modification principle allows a court to\nescape the rule of arbitrary refusal to enforce a covenant which, while unreasonable or indefinite in some of its terms, nevertheless serves to protect\na legitimate interest of the parties or the public as the case may be ....\n[T]his Court seeks to provide flexibility to determining remedies available\nto the parties and the public. Consequently, enforcement is variable upon\nthe circumstances of each case. Rather than choosing between absolute enforcement or unenforcement, there will be a wide range of alternatives\navailable to meet the particular facts of the case being tried.\nId. at 900-901, 499 P.2d at 1255-56. Nevertheless, \xe2\x80\x9ca covenant not to compete\nmay not be modified to make it reasonable if the covenant is \xe2\x80\x98so lacking in the\nessential terms which would protect the employee\xe2\x80\x99 such that the trial court is no\nlonger modifying but rewriting the covenant.\xe2\x80\x9d Pinnacle Performance, 135 Idaho\nat 369, 17 P.3d at 313 (quoting Insurance Ctr., 94 Idaho at 900, 499 P.2d at 1256).\n[\xc2\xb622] Here, it would be necessary not only to strike some of the words of the\nCovenant, but in addition, to add clauses relating to good will and relationships\nbetween Freiburger and the clients and defining the parameters of what services\nFreiburger would be prohibited from providing to J-U-B clients. This is far more\nthan a \xe2\x80\x9cblue pencil\xe2\x80\x9d approach to an unreasonable word or two and would have the\ndistrict court or this Court re-writing the parties\xe2\x80\x99 contract. The district court correctly concluded that merely striking a few words from the Covenant could not\nachieve the goals of making it reasonable and enforceable and we agree that the\nonly alternative was to declare the entire clause void and unenforceable as a matter of law. * * * *\nIV.\nCONCLUSION\n[\xc2\xb623] The Covenant at issue is unenforceable as a matter of law because it is unreasonable and much broader than necessary to protect J-U-B\xe2\x80\x99s legitimate business interest in the client goodwill developed by Freiburger while in J-U-B\xe2\x80\x99s employ. The Court cannot simply strike a few words from the Covenant to make it\nreasonable and enforceable and would be forced to rewrite the contract, adding\n432\n\n\x0cessential limiting language in order to bring the Covenant into compliance with\napplicable law. * * * *\nChief Justice SCHROEDER and Justices EISMANN, BURDICK and JONES\nconcur.\nQuestions:\n1. What does ancillary mean? In what ways could a covenant not to compete be\nancillary to the sale of a business? An employment agreement? When would a\ncovenant not to compete not be ancillary?\n2. Courts often draw a distinction between sales of business and employment\nagreements when judging whether an ancillary covenant not to compete should be\nenforceable. Why might a court be less likely to enforce a covenant not to compete in an employment agreement, or to enforce it less rigidly?\n3. The \xe2\x80\x9cblue pencil\xe2\x80\x9d approach that the court names allows a court to cut back to a\nreasonable limit the scope, time, or geographic reach of a non-compete clause.\nSome courts have rejected the use of the blue pencil rule in employment cases,\ninstead striking the clause at issue down.\n\n433\n\n\x0cChapter 10. Warranties\nUniform Commercial Code \xc2\xa7 2-312. Warranty of Title and Against Infringement; Buyer\xe2\x80\x99s Obligation Against Infringement.\n\nUniform Commercial Code \xc2\xa7 2-313. Express Warranties by Affirmation,\nPromise, Description, Sample, and cmts. 1, 3, 4, and 8.\n\nUniform Commercial Code \xc2\xa7 2-314. Implied Warranty: Merchantability; Usage of Trade.\n\nUniform Commercial Code \xc2\xa7 2-315. Implied Warranty: Fitness for Particular\nPurpose.\n\nUniform Commercial Code \xc2\xa7 2-316. Exclusion or Modification of Warranties.\n\nUniform Commercial Code \xc2\xa7 2-317. Cumulation and Conflict of Warranties\nExpress or Implied.\n\nUniform Commercial Code \xc2\xa7 2-318. Third Party Beneficiaries of Warranties\nExpress or Implied, Alternatives A, B, and C.\n\nUniform Commercial Code \xc2\xa7 2-719. Contractual Modification or Limitation\nof Remedy.\nQuestions:\n1. In a sale of goods, does the seller normally promise that the buyer will actually\nown the goods?\n2. Can a buyer of goods normally rest assured that the seller promises that no\nbank has taken a collateral interest in the goods that would allow the bank to take\nthe goods back after the sale?\n434\n\n\x0c3. A Horizon Organic Milk carton says that the milk is fat free. Is that a warranty?\nWhat makes you think it was the basis of the bargain? (See \xc2\xa7 2-313 cmts. 3 & 8.)\nMust reliance on the warranty be shown in order to prove that it is the basis of the\nbargain?\n4. The Horizon carton also says that Horizon Organic milk "is always the very\nhighest quality milk.\xe2\x80\x9d Is that a warranty?\n5. A farmer says that his bull is "the greatest living dairy bull.\xe2\x80\x9d Is that a warranty?\n6. What if the used car dealer says of a certain car, "This car is in great shape"? Is\nthat a warranty?\n7. Must Horizon milk purchased from Kroger (a grocery store chain) be merchantable?\n8. If I buy the Horizon milk and my neighbor who is dining with us drinks it and\nas a result becomes ill, can he sue?\n9. Do garage sale items come with a warranty of merchantability?\n10. Might garage sale items come with a warranty of fitness for a particular purpose?\n\nKaren BENTLEY v. Charles SLAVIK and Rosemary Slavik (1987)\nUnited States District Court, S.D. Illinois\n663 F. Supp. 736\nMEMORANDUM AND ORDER\nSTIEHL, District Judge:\n[\xc2\xb61] This cause was tried before the Court, without a jury, on May 26 and 27,\n1987. Having heard and considered the evidence and arguments of all parties, the\nCourt makes the following findings of fact and conclusions of law as required by\nRule 52(a) of the Fed.R.Civ.P.\n\n435\n\n\x0cFINDINGS OF FACT\n****\n[\xc2\xb62] During January, 1984, plaintiff observed, on a bulletin board located at\nIndiana University, a notice which the defendant, Charles Slavik, asked to be\nplaced there. In the notice, Slavik represented that he had for sale an Auguste Sebastien Philippe Bernardel violin made in 1835 with an appraised value ranging\nfrom $15,000 to $20,000.\n[\xc2\xb63] In response to the notice, plaintiff contacted Slavik by telephone to inquire\nabout the violin. During the telephone conversation, Slavik again represented that\nhe had an authentic 1835 Bernardel violin with an appraised value ranging from\n$15,000 to $20,000, and invited the plaintiff to visit the defendants at their home\nin Edwardsville, Illinois, to see the violin.\n[\xc2\xb64] On January 28, 1984, plaintiff travelled to defendants\xe2\x80\x99 home, saw the violin, played and inspected it for at least two hours. During the plaintiff\xe2\x80\x99s visit,\nCharles Slavik again represented to the plaintiff that the violin was an authentic\n1835 Auguste Sebastien Philippe Bernardel violin, and further showed her Certificate No. 5500 from one Robert Bernard Tipple dated September 21, 1980, which\ncertificate estimated that the violin was an authentic Auguste Sebastien Philippe\nBernardel violin, which had a value of $15,000 to $20,000. Tipple, since deceased,\nwas a violin maker, authenticator, and appraiser in Mount Vernon, Illinois.\n[\xc2\xb65] In reliance upon the representations of Slavik, and the certificate presented\nby him, plaintiff purchased the violin from defendant, Charles Slavik, for $17,500.\nAt that time, plaintiff paid Charles Slavik $15,000 by check, and agreed to pay the\nbalance of $2,500 by February 15, 1984. The bill of sale signed by Slavik referred\nto the sale of \xe2\x80\x9cOne Bernardel A.S.P. Violin.\xe2\x80\x9d The second payment was made by\ncheck dated February 13, 1984, mailed from Indiana. A letter which accompanied\nthe $2,500 check expressed the plaintiff\xe2\x80\x99s pleasure with the violin. From the date\nof purchase until the end of 1985, the plaintiff played the violin for an average of\neight hours a day.\n[\xc2\xb66] Sometime in April of 1985, plaintiff became aware that the violin might\nnot be a genuine work of Auguste Sebastien Philippe Bernardel made in 1835.\nShortly after the plaintiff became aware the violin might not be a genuine Bernardel, plaintiff made demand upon Charles Slavik to return the purchase price and\noffered to return the violin, but Slavik refused to do so. Despite this, the plaintiff\ncontinued to play the violin until December of 1985.\n[\xc2\xb67] During the plaintiff\xe2\x80\x99s use of the violin it required serious repair. In November of 1984, the top of the violin was removed, a procedure considered \xe2\x80\x9cma436\n\n\x0cjor surgery\xe2\x80\x9d in the bowed-stringed-instrument community. The repair was poorly\ndone, and the violin now has adhesive residue visible on its exterior. At this time,\nthe violin has a crack near the fingerboard and a crack under the chin rest. The\nneck of the violin was recently broken in transit, although it has since been reattached. Finally, the Court finds from the testimony of Professor R. Kent Perry that\nthe violin has a \xe2\x80\x9cbuzz\xe2\x80\x9d due to either the poor repair or the poor condition of the\ninstrument. The Court finds that the violin is in poorer condition now than it was\nwhen purchased by the plaintiff.\n[\xc2\xb68] Although the defendants presented this evidence of the changed condition\nof the violin with fervor, they presented a theme without a resolution. No evidence was introduced to establish the extent to which the damage and repairs decreased the value of the violin. By failing to complete the theme, the defendants,\nin effect, leave the Court to speculate as to the measure of the diminution in the\nvalue of the violin and thereby improvise the final passage. The Court must, however, decline this offer.\n[\xc2\xb69] On the crucial question of authenticity, the plaintiff presented the testimony of Lowell Gene Bearden, and the evidence deposition of Frank Passa, both experts in the authentication and appraisal of violins. Bearden, of St. Louis, learned\nhis craft from his father, and has operated his own violin shop for 24 years, where\nhe has crafted three violins. He is a member of the International Society of Violin\nand Bow Makers, of which there are fewer than 25 members in this country.\nFrank Passa, of San Francisco, has operated a violin shop for 56 years, serving\nmostly members of major symphony orchestras. His skill also came under the tutelage of family members. Passa is also a member of the International Society of\nViolin and Bow Makers, and founded the American Federation of Violin and Bow\nMakers. Bearden and Passa, while not members of the academic music community, make their living in part from, and have based their reputations on, their ability\nto correctly identify, authenticate and appraise violins made centuries ago. These\nmen examined the violin in question, and both asserted unequivocally that the instrument is not a Bernardel. They placed its value at between $750 and $2,000.\n[\xc2\xb610] As counterpoint, defendants offered the testimony of R. Kent Perry, Ph.D.,\nprofessor of violin and chamber music at Southern Illinois University\xe2\x80\x94\nEdwardsville. Professor Perry supplemented his testimony by playing brief excerpts from the classics on the violin in question, thereby both educating and entertaining the Court, as had plaintiff at the conclusion of her testimony. While the\nevidence presented by Professor Perry was helpful to the Court, it is clear that he\nis not an expert in the field of authenticating violins.\n[\xc2\xb611] Additional evidence as to the authenticity of the violin as a Bernardel\ncame in the form of the certificate of authenticity issued by Tipple and introduced\nas a joint exhibit of the parties. Tipple\xe2\x80\x99s certificate was less than compelling; it\nmerely stated that it was his \xe2\x80\x9cestimation\xe2\x80\x9d the violin was a Bernardel.\n\n437\n\n\x0c[\xc2\xb612] Defendants also presented the evidence of Mr. Slavik\xe2\x80\x99s daughter, Suzanne\nvon Frasunkiewicz, a concert violinist from Brazil, who testified that she had\nplayed the violin on tour, found it to be a fine instrument, and believed it to be a\nBernardel. Her belief was primarily based on what she had heard over the years in\nher father\xe2\x80\x99s home, and she admitted that she had had no training or experience in\nauthenticating or appraising violins.\n[\xc2\xb613] The Court finds the evidence presented by plaintiff on the determinative\nquestion of authenticity to be the more credible, and finds from a preponderance\nof the evidence that the violin is not the work of Auguste Sebastien Phillipe Bernardel, and that its value at the time of sale was $2,000.\n[\xc2\xb614] Despite this, the Court finds that Charles Slavik neither purposefully nor\nwillfully misrepresented the maker or value of the violin, though he referred to the\ninstrument as a Bernardel both orally and on the Bill of Sale. Slavik is neither an\nexpert on the masters of violins, nor is he in the business, occupation or vocation\nof selling violins.\n[\xc2\xb615] The Court further finds that there has been no evidence that defendant,\nRosemary Slavik, had any ownership interest in the violin, nor that she played any\nrole in the sale of the violin to plaintiff. In other words, the sale of this violin was\nnot a duet by the defendants, but rather a solo by Charles Slavik.\nCONCLUSIONS OF LAW\n****\n[\xc2\xb616] The plaintiff alleges in Count III that defendants breached the contract by\nnot delivering a Bernardel. The defendants deny this, and assert that Charles\nSlavik delivered the violin bargained for and that the contract was ratified through\na letter written by the plaintiff on February 13, 1984. Under the Illinois Uniform\nCommercial Code, Ill.Rev.Stat. ch. 26, para. 2-313(1)(b) (1983), an express warranty is created at time of sale that the goods sold by a seller will conform to any\ndescription of the goods that is a part of the basis of the bargain. The plaintiff, in\neffect, asserts that the certificate of authentication issued by Tipple and the sellers\xe2\x80\x99\nreference to the violin as a Bernardel, both orally and in the bill of sale, as well as\nin the announcement letter posted on the bulletin board, was an express warranty\nby Charles Slavik to plaintiff.\n[\xc2\xb617] In a similar dispute arising more than 50 years ago, a California Court of\nAppeals found that a bill of sale reciting the sale of two violins, a \xe2\x80\x9cStradivarius\xe2\x80\x9d\nand a \xe2\x80\x9cGuarnerius,\xe2\x80\x9d served as a warranty from the seller to the buyer that the violins sold were, in fact, Stradivarius and Guarnerius violins. Smith v. Zimbalist, 2\nCal.App.2d 324, 38 P.2d 170 (1934), hearing denied by California Supreme Court.\n\n438\n\n\x0c[\xc2\xb618] To determine whether a warranty was created under Illinois law, the Court\nmust examine the intent of the parties as expressed in the bill of sale and in the\ncircumstances surrounding the sale itself. Alan Wood Steel Co. v. Capital Equipment Enterprises, Inc., 39 Ill.App.3d 48, 349 N.E.2d 627 (1976). This determination is generally considered a question of fact. Redmac, Inc. v. Computerland of\nPeoria, 140 Ill.App.3d 741, 95 Ill. Dec. 159, 489 N.E.2d 380 (1986). When examining \xc2\xb6 2-313(1)(b) of the Illinois Uniform Commercial Code, courts have used a\n\xe2\x80\x9cbasis of the bargain\xe2\x80\x9d test which looks to the descriptions or affirmations forming\nthe basic assumption of the bargain between the parties. Alan Wood, at 632.\n[\xc2\xb619] From the evidence presented to the Court, it is clear that the description of\nthe violin as a Bernardel, the affirmation created by the seller\xe2\x80\x99s repeated use of the\nterm \xe2\x80\x9cBernardel,\xe2\x80\x9d and the presentation of a certificate of authentication support\nthe conclusion that there existed a basic assumption that the transaction concerned\na 1835 Auguste Sebastien Philippe Bernardel violin. The Court finds that \xc2\xb6 2313(1)(b) applies to this dispute, and that a warranty under the statute was created\nby Charles Slavik. Consistent with the findings of fact, the Court concludes that\nan Auguste Sebastien Philippe Bernardel violin was not delivered by Charles\nSlavik to Bentley, and therefore Slavik breached the contract with plaintiff.\n****\n[\xc2\xb620] The plaintiff claims $20,000 in damages for the breach of contract allegation of Count III. The Court has concluded there was a breach of contract resulting from the warranty created by Slavik. Under Ill.Rev.Stat. ch. 26 \xc2\xb6 2-714(2)\n(1983), \xe2\x80\x9cthe measure of damages for breach of warranty is the difference at the\ntime and place of acceptance between the value of the goods accepted and the\nvalue they would have had if they had been as warranted....\xe2\x80\x9d Id. The Court has\nfound the violin had a value of $2,000 when sold, and that it was sold for $17,500,\na value it would have had were it a Bernardel as warranted.\n[\xc2\xb621] In this case, the sale may be over, but the warranty lingers on. The plaintiff\xe2\x80\x99s measure of damages under Count III, therefore, is $15,500. * * * *\nCADENZA\n[\xc2\xb622] This case gave the Court an insight into the relationship classical musicians develop with their instruments. The plaintiff referred to violins as \xe2\x80\x9cliving,\xe2\x80\x9d\n\xe2\x80\x9cbreathing\xe2\x80\x9d and possessing \xe2\x80\x9csouls.\xe2\x80\x9d Mr. Slavik spoke of his care of the violin over\n33 years of ownership with pride and intensity. It is clear that this dispute concerned more than a simple commercial transaction. The defendant felt his integrity attacked; the plaintiff felt victimized.\n[\xc2\xb623] While sympathetic, the law is ill-equipped to soothe such emotions. The\nCourt must examine the matter with detachment. Yet, it is this detachment that\ngives the law a timeless quality similar to that of the music the litigants so love.\nThe law\xe2\x80\x99s disinterest gives it consistency, and its consistency, in turn, gives it en439\n\n\x0cdurance. It is this enduring quality that the law and great music share. Just as\nmany classic works of music are based on a simple melody, the law of this case is\nbased on a consistent rule: that a seller\xe2\x80\x99s description of an item amounts to a warranty that the object sold is as described. Returning to an earlier refrain: the sale\nmay be over, but the warranty lingers on.\nFINALE\n[\xc2\xb624] In summary, * * * * [t]he Court finds in favor of plaintiff, Karen Bentley,\nand against defendant, Charles Slavik, on Counts III and IV of plaintiff\xe2\x80\x99s complaint, and awards damages in favor of plaintiff, Karen Bentley, and against defendant, Charles Slavik, in the amount of $15,500. The Clerk of the Court is hereby ORDERED to enter judgment accordingly.\nIT IS SO ORDERED.\nQuestions:\n1. Karen Bentley Pollick likes older violins. \xe2\x80\x9cPollick performs on a violin made\nby Jean Baptiste Vuillaume in Paris in 1860.\xe2\x80\x9d http://www.kbentley.com/#/bio-andreviews/. Is it possible that Karen Bentley actually believed completely, without a\nsecond thought, Slavik\'s statement that this was a Bernardel?\n2. If Slavik were a twelve-year-old, would Bentley have been justified in so believing?\n3. Let\'s just suppose that Ms. Bentley realized that the violin might not have been\nas \xe2\x80\x9cestimated.\xe2\x80\x9d Would that matter? How would Slavik have argued that to the\ncourt?\n4. What\'s with Dr. Perry and Ms. von Frasunkiewicz? Did their testimony have\nany relevance? Why were they put on the stand?\n\nThe Estate of Martha NELSON v. Carl RICE and Anne Rice (2000)\nCourt of Appeals of Arizona\n12 P.3d 238\nESPINOSA, Chief Judge.\n[\xc2\xb61] Plaintiff/appellant the Estate of Martha Nelson, through its copersonal representatives Edward Franz and Kenneth Newman, appeals from a summary judgment in favor of defendants/appellees Carl and Anne Rice in the Estate\xe2\x80\x99s action\nseeking rescission or reformation of the sale of two paintings to the Rices. The\n440\n\n\x0cEstate argues that these remedies are required because the sale was based upon a\nmutual mistake. * * * *\nWe affirm.\nFacts and Procedural History\n[\xc2\xb62] We view the evidence and all reasonable inferences therefrom in the light\nmost favorable to the party opposing the summary judgment. Hill-Shafer Partnership v. Chilson Family Trust, 165 Ariz. 469, 799 P.2d 810 (1990). After Martha\nNelson died in February 1996, Newman and Franz, the copersonal representatives\nof her estate, employed Judith McKenzie-Larson to appraise the Estate\xe2\x80\x99s personal\nproperty in preparation for an estate sale. McKenzie-Larson told them that she did\nnot appraise fine art and that, if she saw any, they would need to hire an additional\nappraiser. McKenzie- Larson did not report finding any fine art, and relying on\nher silence and her appraisal, Newman and Franz priced and sold the Estate\xe2\x80\x99s personal property.\n[\xc2\xb63] Responding to a newspaper advertisement, Carl Rice attended the public\nestate sale and paid the asking price of $60 for two oil paintings. Although Carl\nhad bought and sold some art, he was not an educated purchaser, had never made\nmore than $55 on any single piece, and had bought many pieces that had \xe2\x80\x9cturned\nout to be frauds, forgeries or ... to have been [created] by less popular artists.\xe2\x80\x9d He\nassumed the paintings were not originals given their price and the fact that the Estate was managed by professionals, but was attracted to the subject matter of one\nof the paintings and the frame of the other. At home, he compared the signatures\non the paintings to those in a book of artists\xe2\x80\x99 signatures, noticing they \xe2\x80\x9cappeared\nto be similar\xe2\x80\x9d to that of Martin Johnson Heade. As they had done in the past, the\nRices sent pictures of the paintings to Christie\xe2\x80\x99s in New York, hoping they might\nbe Heade\xe2\x80\x99s work. Christie\xe2\x80\x99s authenticated the paintings, Magnolia Blossoms on\nBlue Velvet and Cherokee Roses, as paintings by Heade and offered to sell them\non consignment. Christie\xe2\x80\x99s subsequently sold the paintings at auction for\n$1,072,000. After subtracting the buyer\xe2\x80\x99s premium and the commission, the Rices\nrealized $911,780 from the sale.\n[\xc2\xb64] Newman and Franz learned about the sale in February 1997 * * * *. During 1997, the Rices paid income taxes of $337,000 on the profit from the sale of\nthe paintings, purchased a home, created a family trust, and spent some of the\nfunds on living expenses.\n[\xc2\xb65] The Estate sued the Rices in late January 1998, alleging the sale contract\nshould be rescinded or reformed on grounds of mutual mistake and unconscionability. In its subsequent motion for summary judgment, the Estate argued the parties were not aware the transaction had involved fine art, believing instead that the\nitems exchanged were \xe2\x80\x9crelatively valueless, wall decorations.\xe2\x80\x9d In their opposition\nand cross-motion, the Rices argued the Estate bore the risk of mistake * * * *. The\n441\n\n\x0ctrial court concluded that, although the parties had been mistaken about the value\nof the paintings, the Estate bore the risk of that mistake. * * * * Accordingly, the\ncourt denied the Estate\xe2\x80\x99s motion for summary judgment and granted the Rices\xe2\x80\x99\ncross-motion. The Estate\xe2\x80\x99s motion for new trial was denied, and this appeal followed. * * * *\nMutual Mistake\n[\xc2\xb66] The Estate first argues that it established a mutual mistake sufficient to\npermit the * * * * rescission of the sale of the paintings to the Rices. A party seeking to rescind a contract on the basis of mutual mistake must show by clear and\nconvincing evidence that the agreement should be set aside. Emmons v. Superior\nCourt, 192 Ariz. 509, 968 P.2d 582 (App.1998). A contract may be rescinded on\nthe ground of a mutual mistake as to a \xe2\x80\x9c \xe2\x80\x98basic assumption on which both parties\nmade the contract.\xe2\x80\x99 \xe2\x80\x9c Renner v. Kehl, 150 Ariz. 94, 97, 722 P.2d 262, 265 (1986),\nquoting Restatement (Second) of Contracts \xc2\xa7 152 cmt. b (1979). Furthermore, the\nparties\xe2\x80\x99 mutual mistake must have had \xe2\x80\x9c \xe2\x80\x98such a material effect on the agreed exchange of performances as to upset the very bases of the contract.\xe2\x80\x99 \xe2\x80\x9c Id., quoting\nRestatement \xc2\xa7 152 cmt. a. However, the mistake must not be one on which the\nparty seeking relief bears the risk under the rules stated in \xc2\xa7 154(b) of the Restatement. Emmons; Restatement \xc2\xa7 152.\n[\xc2\xb67] In concluding that the Estate was not entitled to rescind the sale, the trial\ncourt found that, although a mistake had existed as to the value of the paintings,\nthe Estate bore the risk of that mistake under \xc2\xa7 154(b) of the Restatement, citing\nthe example in comment a. Section 154(b) states that a party bears the risk of mistake when \xe2\x80\x9che is aware, at the time the contract is made, that he has only limited\nknowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient.\xe2\x80\x9d In explaining that provision, the Washington Supreme Court stated, \xe2\x80\x9cIn such a situation there is no mistake. Instead, there is an\nawareness of uncertainty or conscious ignorance of the future.\xe2\x80\x9d Bennett v. Shinoda\nFloral, Inc., 108 Wash.2d 386, 739 P.2d 648, 653-54 (1987); see also State Farm\nFire & Cas. Co. v. Pacific Rent-All, Inc., 90 Hawai\xe2\x80\x99i 315, 978 P.2d 753 (1999).\n[\xc2\xb68] The Estate contends neither party bore the risk of mistake, arguing that \xc2\xa7\n154 and comment a are not applicable to these facts. * * * * [But] comment c\nclearly applies here and states:\nConscious ignorance. Even though the mistaken party did not agree to\nbear the risk, he may have been aware when he made the contract that his\nknowledge with respect to the facts to which the mistake relates was limited. If he was not only so aware that his knowledge was limited but undertook to perform in the face of that awareness, he bears the risk of the\nmistake. It is sometimes said in such a situation that, in a sense, there was\nnot mistake but \xe2\x80\x9cconscious ignorance.\xe2\x80\x9d\n\n442\n\n\x0c[\xc2\xb69] Through its personal representatives, the Estate hired two appraisers,\nMcKenzie- Larson and an Indian art expert, to evaluate the Estate\xe2\x80\x99s collection of\nIndian art and artifacts. McKenzie-Larson specifically told Newman that she did\nnot appraise fine art. In his deposition, Newman testified that he had not been\nconcerned that McKenzie- Larson had no expertise in fine art, believing the Estate\ncontained nothing of \xe2\x80\x9csignificant value\xe2\x80\x9d except the house and the Indian art collection. Despite the knowledge that the Estate contained framed art other than the\nIndian art, and that McKenzie-Larson was not qualified to appraise fine art, the\npersonal representatives relied on her to notify them of any fine art or whether a\nfine arts appraiser was needed. Because McKenzie-Larson did not say they needed an additional appraiser, Newman and Franz did not hire anyone qualified to\nappraise fine art. By relying on the opinion of someone who was admittedly unqualified to appraise fine art to determine its existence, the personal representatives consciously ignored the possibility that the Estate\xe2\x80\x99s assets might include fine\nart, thus assuming that risk. See Klas v. Van Wagoner, 829 P.2d 135, 141 n.8 (Utah\nApp. 1992) (real estate buyers not entitled to rescind sale contract because they\nbore risk of mistake as to property\xe2\x80\x99s value; by hiring architects, decorators, and\nelectricians to examine realty, but failing to have it appraised, purchasers executed\nsale contract knowing they \xe2\x80\x9chad only \xe2\x80\x98limited knowledge\xe2\x80\x99 with respect to the value of the home\xe2\x80\x9d). Accordingly, the trial court correctly found that the Estate bore\nthe risk of mistake as to the paintings\xe2\x80\x99 value. * * * *\n[\xc2\xb610] Furthermore, under Restatement \xc2\xa7 154(c), the court may allocate the risk\nof mistake to one party \xe2\x80\x9con the ground that it is reasonable in the circumstances to\ndo so.\xe2\x80\x9d In making this determination, \xe2\x80\x9cthe court will consider the purposes of the\nparties and will have recourse to its own general knowledge of human behavior in\nbargain transactions.\xe2\x80\x9d Restatement \xc2\xa7 154 cmt. d. Here, the Estate had had ample\nopportunity to discover what it was selling and failed to do so; instead, it ignored\nthe possibility that the paintings were valuable and attempted to take action only\nafter learning of their worth as a result of the efforts of the Rices. Under these circumstances, the Estate was a victim of its own folly and it was reasonable for the\ncourt to allocate to it the burden of its mistake. * * * *\n[\xc2\xb611] Affirmed. * * * *\nQuestions:\n1. Why are the results different in Bentley and Nelson?\n2. How would you make a Nelson argument within the legal framework of Bentley? [Remember Nelson. You might place it in your outline under the mutual mistake section, too.]\n3. Did Slavik intend to make a warranty? Did that matter?\n\n443\n\n\x0c4. Why do we have a statute giving warranty effect to affirmations of fact made\nby sellers of goods?\nNote: Martin Johnson Heade painted nearly twenty known replicas of magnolias\non cloth. They turn up from time to time.\nhttp://www.nytimes.com/1999/06/04/arts/painting-packs-a-million-dollarsurprise.html. The one mentioned in the Times article still hangs in Houston at the\nMuseum of Fine Arts. http://www.mfah.org/art/detail/magnolias-gold-velvetcloth/.\n\nPriscilla D. WEBSTER v. BLUE SHIP TEA ROOM, INC. (1964)\nSupreme Judicial Court of Massachusetts\n198 N.E.2d 309\nREARDON, Justice.\n[\xc2\xb61] This is a case which by its nature evokes earnest study not only of the law\nbut also of the culinary traditions of the Commonwealth which bear so heavily\nupon its outcome. It is an action to recover damages for personal injuries sustained by reason of a breach of implied warranty of food served by the defendant\nin its restaurant. An auditor, whose findings of fact were not to be final, found for\nthe plaintiff. On a retrial in the Superior Court before a judge and jury, in which\nthe plaintiff testified, the jury returned a verdict for her. The defendant is here on\nexceptions to the refusal of the judge (1) to strike certain portions of the auditor\xe2\x80\x99s\nreport, (2) to direct a verdict for the defendant, and (3) to allow the defendant\xe2\x80\x99s\nmotion for the entry of a verdict in its favor under leave reserved.\n[\xc2\xb62] The jury could have found the following facts: On Saturday, April 25,\n1959, about 1 P. M., the plaintiff, accompanied by her sister and her aunt, entered\nthe Blue Ship Tea Room operated by the defendant. The group was seated at a table and supplied with menus.\n[\xc2\xb63] This restaurant, which the plaintiff characterized as \xe2\x80\x98quaint,\xe2\x80\x99 was located\nin Boston \xe2\x80\x98on the third floor of an old building on T Wharf which overlooks the\nocean.\xe2\x80\x99\n[\xc2\xb64] The plaintiff, who had been born and brought up in New England (a fact\nof some consequence), ordered clam chowder and crabmeat salad. Within a few\nminutes she received tidings to the effect that \xe2\x80\x98there was no more clam chowder,\xe2\x80\x99\nwhereupon she ordered a cup of fish chowder. Presently, there was set before her\n\xe2\x80\x98a small bowl of fish chowder.\xe2\x80\x99 She had previously enjoyed a breakfast about 9 A.\nM. which had given her no difficulty. \xe2\x80\x98The fish chowder contained haddock, potatoes, milk, water and seasoning. The chowder was milky in color and not clear.\n444\n\n\x0cThe haddock and potatoes were in chunks\xe2\x80\x99 (also a fact of consequence). \xe2\x80\x98She agitated it a little with the spoon and observed that it was a fairly full bowl * * *. It\nwas hot when she got it, but she did not tip it with her spoon because it was hot\n* * * * but stirred it in an up and under motion. She denied that she did this because she was looking for something, but it was rather because she wanted an\neven distribution of fish and potatoes.\xe2\x80\x99 \xe2\x80\x98She started to eat it, alternating between\nthe chowder and crackers which were on the table with * * * * [some] rolls. She\nate about 3 or 4 spoonfuls then stopped. She looked at the spoonfuls as she was\neating. She saw equal parts of liquid, potato and fish as she spooned it into her\nmouth. She did not see anything unusual about it. After 3 or 4 spoonfuls she was\naware that something had lodged in her throat because she couldn\xe2\x80\x99t swallow and\ncouldn\xe2\x80\x99t clear her throat by gulping and she could feel it.\xe2\x80\x99 This misadventure led\nto two esophagoscopies at the Massachusetts General Hospital, in the second of\nwhich, on April 27, 1959, a fish bone was found and removed. The sequence of\nevents produced injury to the plaintiff which was not insubstantial.\n[\xc2\xb65] We must decide whether a fish bone lurking in a fish chowder, about the\ningredients of which there is no other complaint, constitutes a breach of implied\nwarranty under applicable provisions of the Uniform Commercial Code, * the annotations to which are not helpful on this point. As the judge put it in his charge,\n\xe2\x80\x98Was the fish chowder fit to be eaten and wholesome? * * * * [N]obody is claiming that the fish itself wasn\xe2\x80\x99t wholesome. * * * * But the bone of contention\nhere\xe2\x80\x94I don\xe2\x80\x99t mean that for a pun\xe2\x80\x94but was this fish bone a foreign substance that\nmade the fish chowder unwholesome or not fit to be eaten?\xe2\x80\x99\n[\xc2\xb66] The plaintiff has vigorously reminded us of the high standards imposed by\nthis court where the sale of food is involved (see Flynn v. First Natl. Stores Inc.,\n296 Mass. 521, 523, 6 N.E.2d 814) and has made reference to cases involving\nstones in beans (Friend v. Childs Dining Hall Co., 231 Mass. 65, 120 N.E. 407, 5\nA.L.R. 1100), trichinae in pork (Holt v. Mann, 294 Mass. 21, 22, 200 N.E. 403),\nand to certain other cases, here and elsewhere, serving to bolster her contention of\nbreach of warranty.\n[\xc2\xb67] The defendant asserts that here was a native New Englander eating fish\nchowder in a \xe2\x80\x98quaint\xe2\x80\x99 Boston dining place where she had been before; that \xe2\x80\x98[f]ish\nchowder, as it is served and enjoyed by New Englanders, is a hearty dish, originally designed to satisfy the appetites of our seamen and fishermen\xe2\x80\x99; that \xe2\x80\x98[t]his\n\xe2\x80\x98(1) Unless excluded or modified by section 2-316, a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that\nkind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale. (2) Goods to be merchantable must at least be such as * * * (c) are fit\nfor the ordinary purposes for which such goods are used * * *.\xe2\x80\x99 G.L. c. 106, s 2-314. \xe2\x80\x98* * * (3)(b)\n[W]hen the buyer before entering into the contract has examined the goods or the sample or model\nas fully as he desired or has refused to examine the goods there is no implied warranty with regard\nto defects which an examination ought in the circumstances to have revealed to him * * *.\xe2\x80\x99 G.L. c.\n106, s 2-316.\n*\n\n445\n\n\x0ccourt knows well that we are not talking of some insipid broth as is customarily\nserved to convalescents.\xe2\x80\x99 We are asked to rule in such fashion that no chef is\nforced \xe2\x80\x98to reduce the pieces of fish in the chowder to miniscule size in an effort to\nascertain if they contained any pieces of bone.\xe2\x80\x99 \xe2\x80\x98In so ruling,\xe2\x80\x99 we are told (in the\ndefendant\xe2\x80\x99s brief), \xe2\x80\x98the court will not only uphold its reputation for legal\nknowledge and acumen, but will, as loyal sons of Massachusetts, save our worldrenowned fish chowder from degenerating into an insipid broth containing the\nmere essence of its former stature as a culinary masterpiece.\xe2\x80\x99 Notwithstanding\nthese passionate entreaties we are bound to examine with detachment the nature\nof fish chowder and what might happen to it under varying interpretations of the\nUniform Commercial Code.\n[\xc2\xb68] Chowder is an ancient dish preexisting even \xe2\x80\x98the appetites of our seamen\nand fishermen.\xe2\x80\x99 It was perhaps the common ancestor of the \xe2\x80\x98more refined cream\nsoups, purees, and bisques.\xe2\x80\x99 Berolzheimer, The American Woman\xe2\x80\x99s Cook Book\n(Publisher\xe2\x80\x99s Guild Inc., New York, 1941) p. 176. The word \xe2\x80\x98chowder\xe2\x80\x99 comes from\nthe French \xe2\x80\x98chaudiere,\xe2\x80\x99 meaning a \xe2\x80\x98cauldron\xe2\x80\x99 or \xe2\x80\x98pot.\xe2\x80\x99 \xe2\x80\x98In the fishing villages of\nBrittany * * * * \xe2\x80\x98faire la chaudiere\xe2\x80\x99 means to supply a cauldron in which is\ncooked a mess of fish and biscuit with some savoury condiments, a hodge-podge\ncontributed by the fishermen themselves, each of whom in return receives his\nshare of the prepared dish. The Breton fishermen probably carried the custom to\nNewfoundland, long famous for its chowder, whence it has spread to Nova Scotia,\nNew Brunswick, and New England.\xe2\x80\x99 A New English Dictionary (MacMillan and\nCo., 1893) p. 386. Our literature over the years abounds in references not only to\nthe delights of chowder but also to its manufacture. A namesake of the plaintiff,\nDaniel Webster, had a recipe for fish chowder which has survived into a number\nof modern cookbooks* and in which the removal of fish bones is not mentioned at\nall. One old time recipe recited in the New English Dictionary study defines\nchowder as \xe2\x80\x98A dish made of fresh fish (esp. cod) or clams, stewed with slices of\npork or bacon, onions, and biscuit. \xe2\x80\x98Cider and champagne are sometimes added.\xe2\x80\x9d\nHawthorne, in The House of the Seven Gables (Allyn and Bacon, Boston, 1957) p.\n8, speaks of \xe2\x80\x98[a] codfish of sixty pounds, caught in the bay, [which] had been dissolved into the rich liquid of a chowder.\xe2\x80\x99 A chowder variant, cod \xe2\x80\x98Muddle,\xe2\x80\x99 was\nmade in Plymouth in the 1890s by taking \xe2\x80\x98a three or four pound codfish, head\nadded. Season with salt and pepper and boil in just enough water to keep from\n\xe2\x80\x98Take a cod of ten pounds, well cleaned, leaving on the skin. Cut into pieces one and a half\npounds thick, preserving the head whole. Take one and a half pounds of clear, fat salt pork, cut in\nthin slices. Do the same with twelve potatoes. Take the largest pot you have. Fry out the pork first,\nthen take out the pieces of pork, leaving in the drippings. Add to that three parts of water, a layer\nof fish, so as to cover the bottom of the pot; next a layer of potatoes, then two tablespoons of salt,\n1 teaspoon of pepper, then the pork, another layer of fish, and the remainder of the potatoes. Fill\nthe pot with water to cover the ingredients. Put over a good fire. Let the chowder boil twenty-five\nminutes. When this is done have a quart of boiling milk ready, and ten hard crackers split and\ndipped in cold water. Add milk and crackers. Let the whole boil five minutes. The chowder is then\nready to be first-rate if you have followed the directions. An onion may be added if you like the\nflavor.\xe2\x80\x99 \xe2\x80\x98This chowder,\xe2\x80\x99 he adds, \xe2\x80\x98is suitable for a large fishing party.\xe2\x80\x99 Wolcott, The Yankee Cook\nBook (Coward-McCann, Inc., New York City, 1939) p. 9.\n*\n\n446\n\n\x0cburning. When cooked, add milk and piece of butter.\xe2\x80\x99* The recitation of these ancient formulae suffices to indicate that in the construction of chowders in these\nparts in other years, worries about fish bones played no role whatsoever. This\nbroad outlook on chowders has persisted in more modern cookbooks. \xe2\x80\x98The chowder of today is much the same as the old chowder * * *.\xe2\x80\x99 The American Woman\xe2\x80\x99s\nCook Book, supra, p. 176. The all embracing Fannie Farmer states in a portion of\nher recipe, fish chowder is made with a \xe2\x80\x98fish skinned, but head and tail left on.\nCut off head and tail and remove fish from backbone. Cut fish in 2-inch pieces\nand set aside. Put head, tail, and backbone broken in pieces, in stewpan; add 2\ncups cold water and bring slowly to boiling point * * *.\xe2\x80\x99 The liquor thus produced\nfrom the bones is added to the balance of the chowder. Farmer, The Boston Cooking School Cook Book (Little Brown Co., 1937) p. 166.\n[\xc2\xb69] Thus, we consider a dish which for many long years, if well made, has\nbeen made generally as outlined above. It is not too much to say that a person sitting down in New England to consume a good New England fish chowder embarks on a gustatory adventure which may entail the removal of some fish bones\nfrom his bowl as he proceeds. We are not inclined to tamper with age old recipes\nby any amendment reflecting the plaintiff\xe2\x80\x99s view of the effect of the Uniform\nCommercial Code upon them. We are aware of the heavy body of case law involving foreign substances in food, but we sense a strong distinction between\nthem and those relative to unwholesomeness of the food itself, e. g., tainted\nmackerel (Smith v. Gerrish, 256 Mass. 183, 152 N.E. 318), and a fish bone in a\nfish chowder. Certain Massachusetts cooks might cavil at the ingredients contained in the chowder in this case in that it lacked the heartening lift of salt pork.\nIn any event, we consider that the joys of life in New England include the ready\navailability of fresh fish chowder. We should be prepared to cope with the hazards\nof fish bones, the occasional presence of which in chowders is, it seems to us, to\nbe anticipated, and which, in the light of a hallowed tradition, do not impair their\nfitness or merchantability. While we are buoyed up in this conclusion by Shapiro v.\nHotel Statler Corp., 132 F. Supp. 891 (S.D. Cal.), in which the bone which afflicted the plaintiff appeared in \xe2\x80\x98Hot Barquette of Seafood Mornay,\xe2\x80\x99 we know that the\nUnited States District Court of Southern California, situated as are we upon a\ncoast, might be expected to share our views. We are most impressed, however, by\nAllen v. Grafton, 170 Ohio St. 249, 164 N.E.2d 167, where in Ohio, the Midwest,\nin a case where the plaintiff was injured by a piece of oyster shell in an order of\nfried oysters, Mr. Justice Taft (now Chief Justice) in a majority opinion held that\n\xe2\x80\x98the possible presence of a piece of oyster shell in or attached to an oyster is so\nwell known to anyone who eats oysters that we can say as a matter of law that one\nwho eats oysters can reasonably anticipate and guard against eating such a piece\nof shell * * *.\xe2\x80\x99 (P. 259 of 170 Ohio St., p. 174 of 164 N.E.2d.)\n[\xc2\xb610] Thus, while we sympathize with the plaintiff who has suffered a peculiarly\nNew England injury, the order must be\n*\n\nAtwood, Receipts for Cooking Fish (Avery & Doten, Plymouth, 1896) p. 8.\n\n447\n\n\x0c[\xc2\xb611] Exceptions sustained.\n[\xc2\xb612] Judgment for the defendant.\n\nBone of Contention\nSit down for chowder\neat fish bone, cry warranty\nbreach, high court says no.\nChowderhead\nIn quaint eatery\nsit down for hearty chowder\nexpect bone or two.\nNot for Tourists\nHave shame for thinking\nwe must dilute our chowder\nGive us chunks or death.\n\xe2\x80\x94George R. Kelley, STCL Class of 2002\nQuestions:\n1. Is the Blue Ship Tea Room a merchant?\n2. Is a soda bottle with a mouse in it fit for ordinary use? How about a fried\nchicken head found in a McDonald\'s chicken McNugget carton? How about a\npassenger\'s side seat belt that unbuckles when a car is hit mostly head-on but\nslightly from the car\'s left side and the passenger\'s weight is thrown against the\nbuckle itself?\n3. Are cigarettes fit for ordinary use? Is butter? (Consider comment 4 to \xc2\xa7 2-313.)\n4. What sort of warranty disclaimer would have removed the possibility of Webster\'s suit? Where would the Tea Room have had to put the disclaimer?\nImages of the restaurant can be found at http://cca.li/QF and http://cca.li/QG and\nhttp://cca.li/QH.\n\n448\n\n\x0cMichael CATANIA et al. v. Charles J. BROWN (1967)\nCircuit Court of Connecticut, Appellate Division\n231 A.2d 668\nJACOBS, Judge.\n[\xc2\xb61] We are justified in assuming from the finding that the defendant is engaged in the retail paint business. In June, 1964, the plaintiff Michael Catania\nasked the defendant to recommend a paint to cover the exterior stucco walls of the\nplaintiffs\xe2\x80\x99 house. The defendant was told that the stucco was in a \xe2\x80\x98chalky\xe2\x80\x99 and\n\xe2\x80\x98powdery\xe2\x80\x99 condition. He recommended and sold to Catania a product known as\nPierce\xe2\x80\x99s shingle and shake paint. At the time of the sale, the defendant advised\nCatania to \xe2\x80\x98wire-brush\xe2\x80\x99 any loose particles which were \xe2\x80\x98flaky\xe2\x80\x99 or \xe2\x80\x98scaly\xe2\x80\x99 before\napplying the paint; the defendant also told Catania to mix two or three gallons of\nthe paint in a container and to add a thinner. No other instructions or directions\nwere given. Catania followed the instructions as given. In November, 1964, the\npaint on the exterior walls of the plaintiffs\xe2\x80\x99 house began to peel, flake and blister.\nThe paint did not adhere to the surface because the condition of the walls was\nsuch that a thorough \xe2\x80\x98wire-brushing\xe2\x80\x99 and sandblasting of the entire surface were\nrequired before application of the paint.\n[\xc2\xb62] The trial court made two crucial findings of fact: (1) Catania relied upon\nthe defendant\xe2\x80\x99s skill and judgment in the selection of suitable paint for the purpose of painting the exterior walls; and (2) the defendant was at fault in recommending the particular paint as suitable for the purpose intended.\n[\xc2\xb63] In Corneliuson v. Arthur Drug Stores, Inc., 153 Conn. 134, 136, 214 A.2d\n676, 678, our Supreme Court said: \xe2\x80\x98In Crotty v. Shartenberg\xe2\x80\x99s-New Haven, Inc.,\nsupra (147 Conn. 460, 162 A.2d 513), we had occasion to consider the development of the law in the field of products liability and analyze the provisions of the\nConnecticut statute on implied warranties.\xe2\x80\x99 See General Statutes ss 42a-2-314,\n42a-2-315. In the Crotty case, the court held (p. 464, 162 A.2d p. 515) that \xe2\x80\x98under\nour statute, there may be an implied warranty (1) that the goods shall be reasonably fit for a particular purpose, or (2) that the goods shall be of merchantable quality. The existence, nature and extent of either implied warranty depend upon the\ncircumstances of the case.\xe2\x80\x99 See note, 79 A.L.R.2d 431, 469. Under the statute\ngoverning implied warranty of fitness for a particular purpose (s 42a-2-315), two\nrequirements must be met: (a) the buyer relies on the seller\xe2\x80\x99s skill or judgment to\nselect or furnish suitable goods; and (b) the seller at the time of contracting has\nreason to know the buyer\xe2\x80\x99s purpose and that the buyer is relying on the seller\xe2\x80\x99s\nskill or judgment. \xe2\x80\x98It is a question of fact in the ordinary case whether these conditions have been met and the warranty arises.\xe2\x80\x99 1 Anderson, Uniform Commercial\nCode s 2-315:3, p. 213.\n\n449\n\n\x0c[\xc2\xb64] The implied warranty of fitness is not founded on negligence; Ireland v.\nLouis K. Liggett Co., 243 Mass. 243, 137 N.E. 371; Lundquist v. Coca Cola Bottling Co., 42 Wash.2d 170, 254 P.2d 488; nor is it founded on fraud or lack of\ngood faith. Aegis Productions, Inc. v. Arriflex Corporation, 25 A.D.2d 639, 268\nN.Y.S.2d 185; 77 C.J.S. Sales s 325. \xe2\x80\x98The raising of an implied warranty of fitness\ndepends upon whether the buyer informed the seller of the circumstances and\nconditions which necessitated his purchase of a certain character of article or material and left it to the seller to select the particular kind and quality of article suitable for the buyer\xe2\x80\x99s use. So when the buyer orders goods to be supplied and trusts\nto the judgment or skill of the seller to select goods or material for which they are\nordered, there is an implied warranty that they shall be reasonably fit for that purpose.\xe2\x80\x99 Green Mountain Mushroom Co. v. Brown, 117 Vt. 509, 513, 95 A.2d 679,\n681 (improper type of roof cement); see Kirk v. Stineway Drug Store Co., 38\nI11.App.2d 415, 187 N.E.2d 307, 6 A.L.R.3d 1 (household stepladder purchased\nfrom defendant); Martin v. J. C. Penney Co., 50 Wash.2d 560, 313 P.2d 689, 80\nA.L.R.2d 697 (shirt purchased from defendant burst into flames on contact with\nelectric stove); Frisken v. Art Strand Floor Coverings, Inc., 47 Wash.2d 587, 288\nP.2d 1087 (asphalt tile recommended by defendant); Handy v. Holland Furnace\nCo., 11 Wis.2d 151, 105 N.W.2d 299 (reliance on seller\xe2\x80\x99s skill where seller recommended thermostatic fan for plaintiff\xe2\x80\x99s furnace); cf. Houstone-Starr Co. v. Berea Brick & Tile Co., D.C. 197 F. Supp. 492 (seller did not impliedly warrant that\ncull bricks were fit for use in exterior homes). \xe2\x80\x98Reliance can, of course, be more\nreadily found where the retailer selects the product or recommends it.\xe2\x80\x99 2 Frumer\n& Friedman, Products Liability s 19.03(4), p. 523.\n[\xc2\xb65] The finding, which may not be corrected, discloses that the buyer, being\nignorant of the fitness of the article offered by the seller, justifiably relied on the\nsuperior information, skill and judgment of the seller and not on his own\nknowledge or judgment, and under such circumstances an implied warranty of\nfitness could properly be claimed by the purchaser. We cannot and do not consider\ncontradictions or inconsistencies in the testimony.\n[\xc2\xb66] As we have construed s 42a-2-315, the facts of this case fall within its\nprovisions.\n[\xc2\xb67]\n\nThere is no error.\n\n[\xc2\xb68]\n\nIn this opinion PRUYN and KINMONTH, JJ., concurred.\n\n450\n\n\x0cMOHASCO INDUSTRIES, INC. v. ANDERSON HALVERSON CORPORATION,\nand United Resort Hotels, Inc., which does business as Stardust Hotel (1974)\nSupreme Court of Nevada\n520 P.2d 234\nOPINION\nTHOMPSON, Chief Justice:\n[\xc2\xb61] Alexander Smith Carpets, a division of Mohasco Industries, Inc., brought\nthis action to recover $18,242.50 for specially fabricated carpet which it manufactured and delivered for installation in the hotel lobby and casino showroom of the\nStardust Hotel at Las Vegas, Nevada. The Stardust had refused to pay since the\ncarpet \xe2\x80\x98shaded\xe2\x80\x99 excessively giving it a mottled effect and the appearance of being\nwater stained. The trial court found that its refusal to pay was justified, and denied\nrecovery to the plaintiff. This appeal followed.\n[\xc2\xb62] 1. The relevant facts are these. One Fritz Eden, an interior decorator selected and hired by Stardust, designed a pattern for the carpet to be used in the\nhotel lobby and casino showroom. A sample run of the chosen pattern was taken\nto the hotel by Eden, and was approved. Eden then specified the material and\ngrade of carpet which the Stardust also approved. The Stardust then issued a detailed purchase order designating the type and length of yarn, weight per square\nyard, type of weave, color and pattern. No affirmation of fact or promise was\nmade by any representative of Alexander Smith Carpets, the seller, to Stardust, the\nbuyer. The carpet which was manufactured, delivered and installed was consistent\nwith the sample (cf. Mobile Housing, Inc. v. Stone, 490 S.W.2d 611 (Tex. Civ. App.\n1973)), and precisely conformed to the detailed purchase order. There were no\nmanufacturing defects in the carpet. Cf. Santor v. A. and M. Karagheusian, Inc.,\n44 N.J. 52, 207 A.2d 305 (1965).\n[\xc2\xb63] Upon installation, however, the carpet did shade and, apparently, to a\nmuch greater extent than the Stardust or its representative had anticipated. It is\nclear from the testimony that \xe2\x80\x98shading\xe2\x80\x99 is an inherent characteristic of all pile carpeting. When the tufts of the carpet are bent in different angles, the light reflection\ncauses portions of the carpet to appear in different shades of the same color. The\nonly explanation in the record for the \xe2\x80\x98excessive shading\xe2\x80\x99 was that Fritz Eden, the\ndecorator for Stardust, decided not to specify the more expensive \xe2\x80\x98twist yarn.\xe2\x80\x99\nThat type yarn causes the tufts to stick straight up (or at least tends to do so) thus\naiding in the elimination of excessive shading.\n[\xc2\xb64] The trial court found that the sale of the carpet was a sale by sample which\nwas made a part of the basis of the bargain and created an express warranty that\nthe carpet delivered for installation would conform to the sample. Moreover, that\n451\n\n\x0cthe express warranty was breached by the seller, thus precluding its claim for relief. The judgment entered rests squarely upon that finding.\n[\xc2\xb65] That finding is clearly erroneous. The installed carpet conformed precisely\nto the description of the goods contained in the purchase order. Moreover, it conformed precisely to the sample which the buyer approved. Whether the sale be\ndeemed a sale by description or by sample, in either event the express warranty of\nconformity was met. The seller delivered the very carpet which the buyer selected\nand ordered.\n[\xc2\xb66] Although there is substantial evidence to support the trial court\xe2\x80\x99s finding\nthat the installed carpet shaded excessively, that consequence may not be equated\nwith a breach of an express warranty since the seller delivered and installed the\nvery item which the buyer selected and ordered. Had the buyer, through its interior decorator, selected the more expensive carpet with \xe2\x80\x98twist yarn,\xe2\x80\x99 perhaps this\ncontroversy would not have arisen. The buyer, not the seller, must bear the consequence of that mistake.\n[\xc2\xb67] 2. As already noted, the judgment below rests upon an erroneous finding\nthat the seller breached an express warranty that the whole of the carpet would\nconform to the sample which the buyer had approved. The buyer suggests, however, that the judgment should be sustained in any event since it is otherwise clear\nthat the seller breached the implied warranties of merchantability and fitness. We\nturn to consider this contention.\n[\xc2\xb68] a. Unless excluded, or modified, a warranty of merchantability is implied\nin a contract if the seller is a merchant with respect to the goods in question. We\nhave not, heretofore, had occasion to consider the impact, if any, of the implied\nwarranty of merchantability upon a case where the goods are sold by sample or\ndescription and the buyer\xe2\x80\x99s specifications are so complete that it is reasonable to\nconclude that he had relied upon himself and not the seller with regard to the merchantability of the goods. In a related context, that of a building contractor who\nperformed his work in accordance with detailed plans and specifications supplied\nby the owner, we have ruled that he may recover for his services even though his\nwork may not have fully accomplished the purposes intended. Home Furniture,\nInc. v. Brunzell Construction Company, 84 Nev. 309, 314, 440 P.2d 398 (1968).\n[\xc2\xb69] It is apparent that in a case where the sample or description of the goods\nmay, for some reason, result in an undesirable product, the seller is placed in a\ndilemma. In Hawkland, A Transactional Guide to the Uniform Commercial Code,\nsec. 1.190206, at 65, the following example is given. Suppose a buyer provides\nhis seller with minute specifications of the material, design and method of construction to be utilized in preparation of an order of shoes, and the seller delivers\nto the buyer shoes which exactly conform to the specifications. If the blueprints\nare in fact designs of defective shoes, the buyer should not be able to complain\nthat the shoes are defective. For such an order might put the seller in the dilemma\n452\n\n\x0cof being forced to breach either the express warranty of description or the implied\nwarranty of merchantability.\n[\xc2\xb610] The matter at hand is similar to the example just given. Although the carpet was not defective, it did shade excessively and was, in the view of the buyer,\nan undesirable product. Yet, it was the product which the buyer specified and ordered. The manufacturer-seller was not at liberty to add \xe2\x80\x98twist yarn\xe2\x80\x99 and charge a\nhigher price. The buyer relied upon its decorator, Fritz Eden, and the seller performed as directed. In these limited circumstances we conclude that the reasoning\nof Home Furniture, Inc. v. Brunzell Construction Company, supra, applies with\nequal force to this case. More precisely, we hold that the implied warranty of merchantability is limited by an express warranty of conformity to a precise description supplied by the buyer, and if the latter warranty is not breached, neither is the\nformer.\n[\xc2\xb611] b. \xe2\x80\x98Where the seller at the time of contracting had reason to know any particular purpose for which the goods are required and that the buyer is relying on\nthe seller\xe2\x80\x99s skill or judgment to select or furnish suitable goods, there is unless\nexcluded or modified . . . an implied warranty that the goods shall be fit for such\npurpose.\xe2\x80\x99 NRS 104.2315.\n[\xc2\xb612] Buyer reliance is lacking in this case. The buyer used its own judgment,\nmade its own selection and supplied the seller with detailed specifications which\nomitted twist yarn. A warranty of fitness may not be implied in these circumstances.\n[\xc2\xb613] 3. The judgment for United Resort Hotels, Inc., doing business as Stardust\nHotel is reversed, and since there is no dispute concerning the amount of the\nplaintiff\xe2\x80\x99s claim, the cause is remanded to the district court to enter judgment for\nthe plaintiff against the said defendant for $18,242.50, together with appropriate\ninterest and costs. * * * *\nMOWBRAY, GUNDERSON, BATJER and ZENOFF, JJ., concur.\n\n453\n\n\x0cDOW AGROSCIENCES, LLC v. Dennis BATES (2002)\nUnited States District Court, N.D. Texas\n205 F. Supp.2d 623\nORDER\nCUMMINGS, District Judge.\n[\xc2\xb61] On this day the Court considered Plaintiff\xe2\x80\x99s Motion for Summary Judgment filed March 13, 2002. Defendants filed a Response to Plaintiff\xe2\x80\x99s Motion to\nDismiss on April 2, 2002. Plaintiff filed a Reply on April 19, 2002. After considering all relevant arguments and evidence, the Court GRANTS Plaintiff\xe2\x80\x99s Motion\nfor Summary Judgment.\nI. BACKGROUND\n[\xc2\xb62] Plaintiff, Dow AgroSciences, manufactures pest management and biotechnology products. Plaintiff introduced Strongarm in the spring of 2000. Strongarm\nis used as a preemergence herbicide to control certain weeds in peanuts. Plaintiff\nbegan receiving demand letters from individual peanut growers (Defendants) contending that Strongarm was \xe2\x80\x9chighly toxic\xe2\x80\x9d and failed to control the weeds in their\npeanut crops. The Defendants also contended that Plaintiff misrepresented the\nproduct and that the misrepresentations constituted false, misleading, and deceptive acts and practices. In addition, Defendants alleged false advertising, breach of\nwarranty, and statutory claims for alleged deceptive and fraudulent trade practices.\nDefendants\xe2\x80\x99 demand letters demanded payment from Plaintiff for certain damages,\nincluding consequential and incidental damages, treble damages, and attorneys\xe2\x80\x99\nfees and expenses. On December 21, 2001, Plaintiff brought suit seeking declaratory judgment. * * * *\nIII. DISCUSSION\n[\xc2\xb63] Plaintiff filed this suit in an effort to have the Court determine the parties\xe2\x80\x99\nrights and obligations under the applicable federal law. Plaintiff contends that the\nFederal Insecticide, Fungicide and Rodenticide Act (\xe2\x80\x9cFIFRA\xe2\x80\x9d) expressly\npreempts all of Defendants\xe2\x80\x99 claims against Plaintiff. Defendants assert that their\nclaims are not expressly preempted by FIFRA. [The court held plaintiffs correct.]\n****\n[\xc2\xb64] Additionally, Plaintiff claims that Defendants\xe2\x80\x99 alleged breach of implied\nand express warranty claims are foreclosed by Strongarm\xe2\x80\x99s label provisions.\nStrongarm\xe2\x80\x99s label provisions specifically disclaim any implied warranties and\n\n454\n\n\x0cprovide a limited express warranty.* In Texas, the UCC provides for the exclusion\nor modification of warranties. Tex.Bus. & Com. Code Ann. \xc2\xa7 2.316(b) (Vernon\n2000). Section 2.316(b) provides as follows:\n(b) Subject to subsection (c), to exclude or modify the implied warranty of\nmerchantability or any part of it the language must mention merchantability and in case of a writing it must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be in writing and\nconspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example \xe2\x80\x9cthere are no warranties which extend beyond the description on the face hereof\xe2\x80\x9d.\nWhether a disclaimer is conspicuous or not is a question of law. Section 1.201(10)\nof the Texas Business and Commerce Code states that \xe2\x80\x9ca term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. A printed heading in capitals is conspicuous.\xe2\x80\x9d Tex.\nBus. & Com. Code Ann. \xc2\xa7 1.201(10) (Vernon Supp.2002). Strongarm\xe2\x80\x99s label provision excluding any express or implied warranty meets the letter of the Texas\nUCC and thus is enforceable. Tex.Bus. & Com. Code Ann. \xc2\xa7 2.316(b); 2.316(b),\n(c) (Vernon 2000). Assuming arguendo that Defendants\xe2\x80\x99 claims for an alleged\nbreach of express and implied warranties were not preempted by FIFRA, the\nclaims would be foreclosed by Strongarm\xe2\x80\x99s label provisions. Plaintiff\xe2\x80\x99s Motion\nfor Summary Judgment on Defendants\xe2\x80\x99 breach of implied and express warranty\nclaims is GRANTED. * * * *\nIV. CONCLUSION\n[\xc2\xb65] For the reasons previously discussed, Plaintiff\xe2\x80\x99s Motion for Summary\nJudgment is GRANTED. All other pending motions are DENIED as MOOT. All\nrelief not expressly granted is DENIED.\n[\xc2\xb66]\n\nSO ORDERED.\n\nStrongarm\xe2\x80\x99s label provides as follows: \xe2\x80\x9cDow AgroSciences warrants that this product conforms\nto the chemical description on the label and is reasonably fit for the purposes stated on the label\nwhen used in strict accordance with the directions, subject to the inherent risks set forth below\xe2\x80\x9d.\nDow AgroSciences MAKES NO OTHER EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER EXPRESS OR IMPLIED WARRANTY.\n*\n\n455\n\n\x0cJohn MURRAY and Alice Murray v. HOLIDAY RAMBLER, INC.,\nKOA Trailer Sales, Inc. (1978)\nSupreme Court of Wisconsin\n265 N.W.2d 513\nCONNOR T. HANSEN, Justice.\n[\xc2\xb61] On January 23, 1974, the plaintiffs purchased a 22-foot 1973 Avenger motorhome for a total sales price, including sales tax, license fees and trade-in allowance on another motorhome owned by the plaintiffs, of $11,007.15.\n[\xc2\xb62] Before taking delivery of the motorhome on January 30, 1974, Mr. Murray\nsigned a \xe2\x80\x9cPRE-DELIVERY INSPECTION & ACCEPTANCE DECLARATION,\xe2\x80\x9d\nacknowledging that he had inspected or had been given a demonstration of various components of the motorhome, and that these items had performed or had\nbeen explained to his satisfaction. Mr. Murray testified that he had gone through\nthe items on this check list and had accepted the motorhome. He further testified\nthat he had read \xe2\x80\x9csome\xe2\x80\x9d of the document and received a copy of it. The \xe2\x80\x9cPREDELIVERY INSPECTION & ACCEPTANCE DECLARATION\xe2\x80\x9d contained the\nwarranty which is the basis for this litigation.\n[\xc2\xb63] The plaintiffs had problems with the motorhome from the day they took\npossession. It was returned repeatedly to KOA Trailer Sales, Inc., (hereinafter\nKOA) as an authorized dealer for the manufacturer, Holiday Rambler, Inc., (hereinafter Holiday Rambler), and various repairs and adjustments were performed at\nthe expense of Holiday Rambler. Mr. Murray estimated that by July, 1974, the\nmotorhome had been returned to KOA nine or ten times.\n[\xc2\xb64] In July, 1974, the plaintiffs traveled to Colorado in the motorhome. On the\ntrip they experienced difficulty with the operation of it in a number of respects.\nWe describe the various problems with the vehicle in greater detail in discussing\nthe issue of whether the limited warranty remedy had failed its essential purpose.\n[\xc2\xb65] On returning to Wisconsin in mid-July, the Murrays took the motorhome\nto KOA, and were assured that it would be repaired, either by KOA or by Holiday\nRambler, apparently without expense to the Murrays. There was testimony that\nthe Murrays agreed to this.\n[\xc2\xb66] Arrangements were then made to have the vehicle taken to the Holiday\nRambler factory in Wakarusa, Indiana, for any necessary adjustments. Holiday\nRambler informed the Murrays, however, that they would be required to pick up\nthe vehicle at the Indiana factory themselves.\n[\xc2\xb67] Mr. Murray decided not to have the repairs made. Instead, he picked up\nthe motorhome at KOA, drove it home and hired a lawyer. By letter dated August\n456\n\n\x0c15, 1974, the Murrays informed KOA that they were revoking acceptance of the\nmotorhome and that they demanded payment of $11,900. In September, 1974,\nKOA apparently offered to reimburse the Murrays for the expense of traveling to\nthe Holiday Rambler factory, but the Murrays rejected this offer, and this action\nwas commenced.\n[\xc2\xb68] The after-verdict motions of defendant, KOA, to change the jury\xe2\x80\x99s answers\nto certain questions and for judgment notwithstanding the verdict were denied,\nand judgment was entered in accordance with the verdict.*\n[\xc2\xb69] Holiday Rambler has appealed, and the plaintiffs have filed a notice of review with regard to the trial court\xe2\x80\x99s exclusion of evidence of plaintiffs\xe2\x80\x99 litigation\nexpenses. KOA has been admitted as a party pursuant to sec. 817.12(6), Stats.\n[\xc2\xb610] The issues presented are as follows:\n1. Does Holiday Rambler\xe2\x80\x99s limited warranty, together with its disclaimer\nof all other warranties, preclude revocation of acceptance of the motorhome?\n2. Were the plaintiffs entitled to revoke acceptance of the motorhome?\n****\nLIMITED WARRANTY AND WARRANTY DISCLAIMER.\n[\xc2\xb611] Holiday Rambler and KOA contend on this appeal that the limited express\nwarranty given by Holiday Rambler prevents the plaintiffs from revoking acceptance of the motorhome.\n[\xc2\xb612] Under the Uniform Commercial Code, (hereinafter UCC) a seller of goods\nmay limit his contractual liability in two ways. He may disclaim or limit his warranties, pursuant to sec. 402.316, Stats., or he may limit the buyer\xe2\x80\x99s remedies for a\nbreach of warranty, pursuant to sec. 402.719. These methods are closely related,\nand in many cases their effect may be substantially identical. K-Lines, Inc. v. Roberts Motor Co., 273 Or. 242, 541 P.2d 1378 (1975); White and Summers, Handbook of the Law Under the Uniform Commercial Code (hornbook series, 1972)\n(hereinafter White and Summers), sec. 12-8, p. 375. Conceptually, however, they\nare distinct. A disclaimer of warranties limits the seller\xe2\x80\x99s liability by reducing the\nnumber of circumstances in which the seller will be in breach of the contract; it\nprecludes the existence of a cause of action. A limitation of remedies, on the other\nhand, restricts the remedies available to the buyer once a breach is established.\nWhite and Summers, supra, sec. 12-11, pp. 383, 384.\n\n*\n\nThe judgment in the amount of $14,923.03 includes $11,007.15 for the purchase price of the\nvehicle, $110 for inspection fees, $51.72 as reimbursement for repairs, $800 for interest and transportation costs, $2,500 for loss of use of the motorhome, and $455.78 in costs.\n\n457\n\n\x0c[\xc2\xb613] In the present case we believe the \xe2\x80\x9cPRE-DELIVERY INSPECTION &\nACCEPTANCE DECLARATION\xe2\x80\x9d is an attempt to both disclaim warranties and\nlimit the remedies available to the buyer upon breach.\n[\xc2\xb614] Sec. 402.316, Stats. [UCC 2-316] permits a seller to limit or exclude both\nimplied and express warranties. See: Recreatives, Inc. v. Myers, 67 Wis.2d 255,\n264, 265, 226 N.W.2d 474 (1975). Language limiting implied warranties must be\nconspicuous and otherwise consistent with the provisions of sec. 402.316 and\nmust not be unconscionable in light of the circumstances at the time the contract\nwas made. Sec. 402.302.\n[\xc2\xb615] The document signed by Mr. Murray purported to exclude all warranties,\nexpress or implied, and stated in part, above his signature:\n\xe2\x80\x9cWARNING: THE PURCHASER IS EXPECTED TO READ THIS\nDOCUMENT BEFORE IT IS SIGNED.\n\xe2\x80\x9c. . . THE PURCHASER SHOULD NOT SIGN THIS STATEMENT UNTIL ALL OF THE ITEMS INDICATED ABOVE HAVE EITHER BEEN\nPERFORMED OR EXPLAINED TO HIS SATISFACTION. . . .\xe2\x80\x9d\n\xe2\x80\x9cThe undersigned parties attest to the fact that the above representations\nare, to the best of their knowledge, true and that the purchaser has received\na copy of this Pre-Delivery Inspection and Acceptance Declaration and\nread thoroughly the MANUFACTURER\xe2\x80\x99S UNDERTAKING AVENGER\nCORPORATION on the reverse side.\xe2\x80\x9d\nThe reverse side of this document stated:\n\xe2\x80\x9cMANUFACTURER\xe2\x80\x99S UNDERTAKING-AVENGER CORPORATION*\n\xe2\x80\x9cTHERE ARE NO WARRANTIES EXPRESSED OR IMPLIED AND\nPARTICULARLY THERE ARE NO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE MADE BY\nAVENGER CORPORATION FOR ITS PRODUCTS.\n\xe2\x80\x9cAVENGER CORPORATION, as the manufacturer, in lieu thereof undertakes and agrees that the product identified on the Pre-Delivery and Acceptance Declaration (reverse side) was free of defects in material and\nworkmanship at the time of its delivery to the dealer and the initial user\nand owner; and\n\xe2\x80\x9cIf the attached Pre-Delivery and Acceptance Declaration is properly filled\nout and returned to Avenger Corporation at Nappanee, Indiana, within five\ndays of delivery of this trailer to the original user; and\n\xe2\x80\x9cIf such Avenger product or its component parts (other than tires *) shall\nfail within one year from the date of delivery to the original user because\nthe product or component part was defective when installed; and\n\xe2\x80\x9cIf the owner-user will return the trailer to a service facility authorized by\nAvenger Corporation within fifty-two (52) weeks after initial delivery,\nAvenger Corporation will in the method it determines to be necessary re*\n\nThe Avenger Corporation, now dissolved, was a wholly-owned subsidiary of Holiday Rambler.\n\n458\n\n\x0cplace, or repair, at its sole option any such defective product or component\nat its own cost and expense.\n\xe2\x80\x9cTHERE ARE NO OTHER WARRANTIES OF ANY KIND, EXPRESS\nOR IMPLIED, AND NO OTHER OBLIGATIONS, EITHER EXPRESS\nOR IMPLIED, INCLUDING SPECIFICALLY ANY OBLIGATION FOR\nINCIDENTAL EXPENSES OF ANY NATURE UNDERTAKEN BY\nAVENGER CORPORATION AS THE MANUFACTURER.\xe2\x80\x9d (Emphasis\nadded.)\n[\xc2\xb616] The language used in the document constitutes a warranty \xe2\x80\x9c. . . that the\nproduct . . . was free of defects in material and workmanship at the time of its delivery . . .\xe2\x80\x9d* Because this express warranty conflicts with the preceding disclaimer\nof all warranties, the language of express warranty must control. White and Summers, supra, at sec. 12-3, p. 352.\n[\xc2\xb617] Official Comment 1 to sec. 2-316, UCC (sec. 402.316, Stats., supra) states\nthat that section:\n\xe2\x80\x9c. . . is designed principally to deal with those frequent clauses in sales\ncontracts which seek to exclude \xe2\x80\x98all warranties, express or implied.\xe2\x80\x99 It\nseeks to protect a buyer from unexpected and unbargained language of\ndisclaimer by denying effect to such language when inconsistent with language of express warranty . . ..\xe2\x80\x9d\nThe undertaking in the instant case therefore constitutes a warranty that the motorhome was free of defects at the time of delivery, subject to whatever limitation\nis effected by the limitation of remedies language contained therein.\xe2\x80\xa0\n[\xc2\xb618] The damages which would otherwise be available upon a breach of contract may be altered or limited by the parties pursuant to sec. 402.719, Stats [UCC\n2-719]. This section gives the parties substantial latitude to fashion their own\nremedies for breach of the contract. However, the UCC disfavors limitations on\nremedies and provides for their deletion where they would effectively deprive a\nparty of reasonable protection against breach. Chemetron Corporation v. McLouth\nSteel Corporation (D.C. Ill. 1974), 381 F. Supp. 245, 250, affirmed 522 F.2d 469\n(7th Cir. 1975).\n[\xc2\xb619] The drafters of the UCC recognized that:\n\xe2\x80\x9c. . . it is of the very essence of a sales contract that at least minimum adequate remedies be available. If the parties intend to conclude a contract for\nsale within this Article they must accept the legal consequence that there\nThe fact that this warranty is denominated an \xe2\x80\x9cundertaking\xe2\x80\x9d is not significant. Formal words\nsuch as \xe2\x80\x9cwarrant\xe2\x80\x9d or \xe2\x80\x9cguarantee\xe2\x80\x9d need not be used to create an express warranty. Sec. 402.313(2),\nStats. Further, an \xe2\x80\x9cundertaking\xe2\x80\x9d is defined in part as \xe2\x80\x9c3. A promise or pledge; a guarantee; . . .\xe2\x80\x9d\nWebster\xe2\x80\x99s New International Dictionary (2d ed.).\n\xe2\x80\xa0\nHoliday Rambler and KOA apparently acknowledge this point. Despite the drafter\xe2\x80\x99s efforts to\navoid the word \xe2\x80\x9cwarranty,\xe2\x80\x9d both Holiday Rambler and KOA refer, in their briefs, to the \xe2\x80\x9cundertaking\xe2\x80\x9d as a \xe2\x80\x9cwarranty.\xe2\x80\x9d\n*\n\n459\n\n\x0cbe at least a fair quantum of remedy for breach of the obligations or duties\noutlined in the contract . . .\xe2\x80\x9d\nOfficial Comment 1, sec. 2-719, UCC; accord: Conte v. Dwan Lincoln- Mercury,\nInc., 172 Conn. 112, 374 A.2d 144 (1976); Wilson Trading Corporation v. David\nFerguson, Ltd., 23 N.Y.2d 398, 297 N.Y.S.2d 108, 244 N.E.2d 685 (1968).\n[\xc2\xb620] Accordingly, any clause purporting to limit remedies in an unconscionable\nmanner will be deleted, making the ordinary UCC remedies available as though\nthe stricken clause had never existed. Official Comment 1, sec. 2-719, UCC.\n[\xc2\xb621] In addition, sec. 402.719(2), Stats. provides:\n\xe2\x80\x9c(2) Where circumstances cause an exclusive or limited remedy to fail of\nits essential purpose, remedy may be had as provided in this code.\xe2\x80\x9d\nThis provision dictates that:\n\xe2\x80\x9c. . . (W)here an apparently fair and reasonable clause because of circumstances fails in its purpose or operates to deprive either party of the substantial value of the bargain, it must give way to the general remedy provisions of this Article (Chapter 402, Stats.).\xe2\x80\x9d Official Comment 1, sec. 2-719,\nUCC.\n[\xc2\xb622] The warranty in the present case, like most motor vehicle warranties, limited the buyer\xe2\x80\x99s remedies to repair or replacement of defective parts. Specifically,\nthe \xe2\x80\x9cundertaking\xe2\x80\x9d provides:\n\xe2\x80\x9c. . . Avenger Corporation will in the method it determines to be necessary\nreplace or repair, at its sole option any such defective product or component at its own cost and expense. \xe2\x80\x9cTHERE ARE NO OTHER WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, AND NO OTHER OBLIGATIONS, EITHER EXPRESS OR LIMITED, INCLUDING SPECIFICALLY ANY OBLIGATION FOR INCIDENTAL EXPENSES OF ANY\nNATURE UNDERTAKEN BY AVENGER CORPORATION AS THE\nMANUFACTURER.\xe2\x80\x9d\nSuch a limitation is not, on its face, unconscionable. Cox Motor Car Company v.\nCastle (Ky. 1966), 402 S.W.2d 429; Potomac Electric Pow. Co. v. Westinghouse\nElec. Corp. (D.C. 1974), 385 F. Supp. 572. Sec. 402.719(2), Stats., specifically\nrecognizes the possibility of such a limitation.\n[\xc2\xb623] However, where the limited remedy fails of its essential purpose, the limitation will be disregarded and ordinary UCC remedies will be available. Sec.\n402.719(2), Stats. The purpose of an exclusive remedy of repair or replacement,\nfrom the buyer\xe2\x80\x99s standpoint, is to give him goods which conform to the contract\nin this case, a motorhome substantially free of defects within a reasonable time*\nafter a defect is discovered. Conte v. Dwan Lincoln-Mercury, supra; Beal v. GenWhat is a \xe2\x80\x9creasonable time\xe2\x80\x9d for taking any action under the Uniform Commercial Code depends\non the nature, purpose and circumstances of such action. Sec. 401.204(2), Stats.\n*\n\n460\n\n\x0ceral Motors Corp. (D.C. Del. 1973), 354 F. Supp. 423; Moore v. Howard PontiacAmerican, Inc. (Tenn. App. 1972), 492 S.W.2d 227.\n\xe2\x80\x9c. . . (E)very buyer has the right to assume his new car, with the exception\nof minor adjustments, will be \xe2\x80\x98mechanically new and factory furnished,\noperate perfectly, and be free of substantial defects\xe2\x80\x99 . . . \xe2\x80\x9cAfter the purchase of an automobile, the same should be put in good running condition;\nthat is the seller does not have an unlimited time for the performance of\nthe obligation to replace and repair parts. The buyer of an automobile is\nnot bound to permit the seller to tinker with the article indefinitely in the\nhope that it may ultimately be made to comply with the warranty. 46\nAm.Jur. Sales s 732; 77 C.J.S. Sales s 340. At some point in time, if major\nproblems continue to plague the automobile, it must become obvious to all\npeople that a particular vehicle simply cannot be repaired or parts replaced\nso that the same is made free of defect. . . .\xe2\x80\x9d Orange Motors of Coral Gables v. Dade Co. Dairies, 258 So.2d 319, 320, 321 (Fla. App. 1972), quoting Zabriskie Chevrolet, Inc. v. Smith, 99 N.J.Super. 441, 240 A.2d 195\n(1968). Accord: General Motors Corporation v. Earnest, 279 Ala. 299,\n184 So.2d 811, 814 (1966).\nAlthough individual nonconformities may not be substantial in and of themselves,\nthe obligation to repair or replace parts may fail of its essential purpose where the\ncumulative effect of all the nonconformities substantially impairs the value of the\ngoods to the buyer. Zoss v. Royal Chevrolet, Inc., 11 UCC Rep. 527, 532 (Ind. Super. 1972).\n[\xc2\xb624] Where the seller is given reasonable opportunity to correct the defect or\ndefects, and the vehicle nevertheless fails to operate as should a new vehicle free\nof defects, the limited remedy fails of its essential purpose. See: Soo Line Railroad Co. v. Fruehauf Corp. (8th Cir. 1977), 547 F.2d 1365; Ehlers v. Chrysler Motor Corporation (S.D. 1975), 226 N.W.2d 157; Kohlenberger, Inc. v. Tyson\xe2\x80\x99s\nFoods, Inc., 256 Ark. 584, 510 S.W.2d 555 (1974); Beal v. General Motors Corp.,\nsupra; Ford Motor Company v. Gunn, 123 Ga. App. 550, 181 S.E.2d 694 (1971).\nThe buyer may then invoke any of the remedies available under the UCC, including the right to revoke acceptance of the goods, under sec. 2-608 of the UCC (sec.\n402.608, Stats.). Moore v. Howard Pontiac-American, Inc., supra; Jacobs v. Metro\nChrysler-Plymouth, Inc., 125 Ga. App. 462, 188 S.E.2d 250 (1972).\n[\xc2\xb625] In the present case the jury determined that the plaintiffs had cause to revoke the acceptance of the motorhome. The verdict of a jury will not be disturbed\nby this court if, viewing the evidence in the light most favorable to the verdict,\nany credible evidence fairly admits of an inference supporting the verdict. Nolden\nv. Mutual Benefit Life Ins. Co., 80 Wis.2d 353, 359, 259 N.W.2d 75 (1977). Here\nthere was ample credible evidence to support the jury\xe2\x80\x99s implicit finding that the\ndefendants had failed to provide the plaintiffs with a motorhome substantially free\nof material defects within a reasonable time.\n\n461\n\n\x0c[\xc2\xb626] The testimony favorable to the verdict showed the following: Mr. Murray\nexperienced problems with the lights and battery of the vehicle on the day he took\npossession and, although repairs were attempted, the lights continued to dim, the\nelectrical system went dead on several occasions, and the generator did not charge\nthe battery properly. The wiring of an outdoor light short-circuited where it passed\nthrough a sharp-edged metal wall. There were problems with the clock. There was\nan exposed, allegedly non-energized, 120-volt wire coming from the main electrical panel. Plaintiffs\xe2\x80\x99 expert witness testified that the wiring in the 12-volt electrical system was of an insufficient gauge for the type of fuses used by the manufacturer, that this wiring was not in conformity with the applicable electrical code,\nand that there was a danger of overheating in the electrical system.\n[\xc2\xb627] The original gas tank and an auxiliary gas tank, installed by KOA at the\nMurrays\xe2\x80\x99 request prior to delivery, were both apparently improperly vented. As a\nresult, it was extremely difficult to fill the tanks; gasoline would spew out of the\ntanks when the caps were removed; and gasoline fumes came up into the passenger compartment. Mr. Murray testified that on one occasion, service station attendants were able to put only twenty cents\xe2\x80\x99 worth of gasoline into both tanks.\nApparently as a result of problems with the carburetor, the vehicle would stall.\nDirt and soldering flux were found in the fuel filter, which was replaced, as was\nthe fuel pump.\n[\xc2\xb628] There were problems with the air suspension system. There was testimony\nthat this resulted in uneven distribution of weight on the tandem set of wheels in\nthe rear of the vehicle, putting insufficient weight on the front wheels and causing\nsteering problems. Repairs were made to the suspension system, but the steering\nproblems persisted. Mr. Murray complained that the front brakes were not operating properly, and despite adjustments, had difficulty with the front wheels.\n[\xc2\xb629] KOA apparently remedied various problems with the furnace and refrigerator, with an oil filter, and with a rattling engine cowling. KOA corrected the LP\nfuel tank gauge, which, as installed at the factory, indicated \xe2\x80\x9cfull\xe2\x80\x9d when the tank\nwas empty, and vice versa; KOA also supplied a missing handle for the tank and\ndrained water which was inside the tank when it left the factory.\n[\xc2\xb630] Unusual pressure caused a water line to come uncoupled. Mr. Murray advised KOA about this problem but repaired it himself.\n[\xc2\xb631] There was also testimony regarding problems with folding seats, the furnace fan, the exhaust fan above the stove, a splash board which came unfastened,\nand the oven door, which fell off. Although there was conflicting testimony as to\nwhether these parts were defective, the testimony of the Murrays with regard to\nthese problems was not inherently incredible.\n[\xc2\xb632] It is the position of the defendants that KOA successfully repaired every\ndefect complained of by the Murrays, and that the Murrays were satisfied with the\n462\n\n\x0crepair service. The evidence on this point was conflicting, and the jury could reasonably have believed Mr. Murray\xe2\x80\x99s testimony that he had never told KOA he was\nsatisfied with the vehicle and that, on the contrary, he had repeatedly sought to\nreturn the troublesome Avenger and to recover his purchase price and the motorhome he had traded in.\n[\xc2\xb633] Although the Murrays agreed that KOA had never refused to attempt a requested repair, this testimony does not affect their right to revoke acceptance. The\nlimited remedy of repair or replacement of defective parts fails of its essential\npurpose whenever, despite reasonable opportunity for repair, the goods are not\nrestored to a nondefective condition within a reasonable time, whether or not the\nfailure to do so is willful. Soo Line Railroad Co. v. Fruehauf Corp., supra, at 1371,\nfn. 7; Beal v. General Motors Corp., supra, at 427.\n[\xc2\xb634] In July, 1974, the Murrays traveled to Colorado in the motorhome. They\nexperienced continued problems filling the gasoline tanks. At one point they were\nforced to leave the vehicle to avoid gasoline fumes which filled the interior. Gasoline spewed from the tanks when the tank caps were removed, and they were\nasked to leave one service station after the attendant was thus doused with gasoline.\n[\xc2\xb635] Mr. Murray testified that the vehicle stalled while ascending one mountain\nand that the rear brakes malfunctioned while descending another.\n[\xc2\xb636] On the return trip, the electrical system malfunctioned while the Murrays\nwere inside a South Dakota restaurant. Lights came on; smoke filled the vehicle,\nand wiring was burned. Defendants\xe2\x80\x99 expert agreed that this fire may have been\ncaused by a short circuit where a wire passed through the sharp-edged metal wall\nof the vehicle.\n[\xc2\xb637] After this incident, the electrical system did not charge properly, and the\nplaintiffs were unable to use the air-conditioner. The plaintiffs opened the windows, and several screens blew out. The electrical system went out completely in\nEllsworth, Wisconsin, and the plaintiffs traveled the rest of the way to their home\nnear Menomonie, Wisconsin, by automobile.\n[\xc2\xb638] This evidence amply supports the conclusion that, despite reasonable opportunity for repair, the defendants had failed to provide the Murrays with goods\nconforming to the contract that is, with a safe and substantially non-defective motorhome within a reasonable time after purchase. The limited remedy therefore\nfailed of its essential purpose, and the remedy of revocation became available. Also, under the warranty, Holiday Rambler was to bear the expense of repairs or replacements. Nevertheless, they initially insisted the Murrays travel to Indiana, at\ntheir own expense, to pick up the motorhome after it had been repaired. * * * *\n\n463\n\n\x0cQuestions:\n1. Why isn\xe2\x80\x99t the limitation of the warranty effective?\n2. Can you think of another doctrine that might affect the enforceability of a warranty disclaimer?\n3. Is the movement of this case toward contract or status?\n\n464\n\n\x0cAppendix\xe2\x80\x94Answers to Problems 7-12\n\nPROBLEM 7 ANSWER: The court in Miami Coca-Cola Bottling Co. v. Orange\nCrush Co., 296 F. 693 (5th Cir. 1924), ruled for Crush. Here is the court\xe2\x80\x99s reasoning:\nWe agree with the District Judge that the contract was void for lack of mutuality. It may be conceded that the appellee is liable to the appellant for\ndamages for the period during which the contract was performed; but for\nsuch damages the appellant has an adequate remedy at law. So far, however, as the contract remains executory, it is not binding, since it can be terminated at the will of one of the parties to it. The consideration was a\npromise for a promise. But the appellant did not promise to do anything,\nand could at any time cancel the contract. According to the great weight of\nauthority such a contract is unenforceable.\nDid the court reach the correct result?\n\nPROBLEM 8 ANSWER: The court in Johnson Lakes Development, Incorporated v. Central Nebraska Public Power & Irrigation District, 576 N.W.2d 806\n(Neb. 1998), answered in two ways:\n[T]he \xe2\x80\x98reservation of such a power to terminate does not invalidate the\ncontract or render the consideration for a promise insufficient, so long as\nthe party reserving the power to terminate is irrevocably bound for any\nappreciable period of time or has materially changed any of his legal relations or otherwise rendered some performance capable of operating as\nconsideration. If a period of notice is required, the contract remains in\nforce and must continue to be performed according to its terms during the\nspecified period after receipt of the notice of termination.\n****\nEven a slight restriction on the exercise of the right of termination, such as\nthe requirement that advanced notice be given, is sufficient to prevent a\nunilateral right of termination from being regarded as illusory in nature.\nThe court also addressed the fact that only one party of the two had a termination\nright:\n[W]e do not regard the reserved power to terminate in the instant case as\ninvalid simply because it is unilateral. As observed in Williston on Contracts:\nThe confusion attendant upon the use of the term mutuality has\narisen most frequently when one party under a contract has an option, not given to the other, of discontinuing or extending performance or of cancelling or renewing the contract, or in some manner of determining the extent of performance. If the power conferred goes so far as to render illusory the promise of the party\n465\n\n\x0chaving the option, there is indeed no consideration, and therefore\nno contract. However, the mere fact that the option prevents the\nmutual promises from being coextensive with one another does not\nprevent both promises from being binding according to their respective terms.\n2 Richard A. Lord, Williston on Contracts \xc2\xa7 7:14 at 297-300 (4th ed. 1992).\nSimilarly, it is stated in Corbin on Contracts:\nThe power to terminate that is reserved is invariably a power to\nterminate the whole contract, including both promises alike. Where\none promise is illusory and the other is not, it looks as if the one\npromised performance must be rendered whether the other is performed or not. This is not so in the case of a power to terminate. If\nthe power is exercised, both parties are freed from their promissory\nduties. If it is not exercised, neither is freed. It does not appear to\ninvolve an attempt to get something for nothing, and there is no\nsuch result whether the power is exercised or not.\nThis being so, the contract should not be regarded as unfair for its\nsupposed lack of \xe2\x80\x9cmutuality.\xe2\x80\x9d\n2 Joseph M. Perillo and Helen H. Bender, Corbin on Contracts, \xc2\xa7 6.10 at\n293 (rev. ed. 1995).\nDid this court get it right?\n\nPROBLEM 9 ANSWER: No. Here is the court\xe2\x80\x99s language from Scott v.\nMoragues Lumber Co., 80 So. 394 (Ala. 1918):\nIt is said, in the first place, that the alleged contract between the parties\nwas conditioned upon the will of [Scott,] and was therefore void for want\nof consideration or mutuality of obligation. A valid contract may be conditioned upon the happening of an event, even though the event may depend\nupon the will of the party who afterwards seeks to avoid its obligation.\n* * * * [Scott] was not bound to purchase the vessel; but, when he did, the\noffer\xe2\x80\x94or the contract, if the offer had been accepted\xe2\x80\x94thereafter remained\nas if this condition had never been stipulated, its mutuality or other necessary incidents of obligation depending upon its other provisions and the\nactions of the parties thereunder.\nWe will deal with conditions throughout the law of contract, and this holding in\nScott will come back to help or haunt you (depending on whether you think it is\nwise).\nDoes the language from Scott also resolve the real estate purchase financing condition problem?\n\n466\n\n\x0cPROBLEM 10 ANSWER: Cardozo concluded that Wood actually promised\nsomething. Because that is not immediately apparent on the facts, Cardozo spent\nsome time discussing it:\nIt is true that he does not promise in so many words that he will use reasonable efforts to place the defendant\xe2\x80\x99s indorsements and market her designs. We think, however, that such a promise is fairly to be implied. The\nlaw has outgrown its primitive stage of formalism when the precise word\nwas the sovereign talisman, and every slip was fatal. It takes a broader\nview to-day. A promise may be lacking, and yet the whole writing may be\n\xe2\x80\x9cinstinct with an obligation,\xe2\x80\x9d imperfectly expressed * * * *. If that is so,\nthere is a contract.\nThe implication of a promise here finds support in many circumstances.\nThe defendant gave an exclusive privilege. She was to have no right for at\nleast a year to place her own indorsements or market her own designs except through the agency of the plaintiff. The acceptance of the exclusive\nagency was an assumption of its duties * * * *. We are not to suppose that\none party was to be placed at the mercy of the other * * * *. Many other\nterms of the agreement point the same way. We are told at the outset by\nway of recital that \xe2\x80\x9cthe said Otis F. Wood possesses a business organization adapted to the placing of such indorsements as the said Lucy, Lady\nDuff-Gordon has approved.\xe2\x80\x9d\nThe implication is that the plaintiff\xe2\x80\x99s business organization will be used\nfor the purpose for which it is adapted. But the terms of the defendant\xe2\x80\x99s\ncompensation are even more significant. Her sole compensation for the\ngrant of an exclusive agency is to be one-half of all the profits resulting\nfrom the plaintiff\xe2\x80\x99s efforts. Unless he gave his efforts, she could never get\nanything. Without an implied promise, the transaction cannot have such\nbusiness \xe2\x80\x9cefficacy as both parties must have intended that at all events it\nshould have\xe2\x80\x9d (BOWEN, L. J., in The Moorcock, 14 P. D. 64, 68). But the\ncontract does not stop there. The plaintiff goes on to promise that he will\naccount monthly for all moneys received by him, and that he will take out\nall such patents and copyrights and trademarks as may in his judgment be\nnecessary to protect the rights and articles affected by the agreement. It is\ntrue, of course, as the Appellate Division has said, that if he was under no\nduty to try to market designs or to place certificates of indorsement, his\npromise to account for profits or take out copyrights would be valueless.\nBut in determining the intention of the parties, the promise has a value. It\nhelps to enforce the conclusion that the plaintiff had some duties. His\npromise to pay the defendant one-half of the profits and revenues resulting\nfrom the exclusive agency and to render accounts monthly, was a promise\nto use reasonable efforts to bring profits and revenues into existence. For\nthis conclusion, the authorities are ample * * * *.\n\n467\n\n\x0cBecause Wood actually promised something, Cardozo concluded, Lady Lucy\ncould be bound to her own promises. But, Cardozo\xe2\x80\x99s analysis raises questions:\n1. Who do you suppose drafted this agreement? Why was it drafted the way it was?\n2. This is a four-three decision in the NY Court of Appeals. Would the dissenters\nhold that no mutuality existed? Under what circumstances would that be fair to\nWood?\n3. If the contract is taken as is, without any implied terms, what is Lucy\xe2\x80\x99s remedy\nif Wood does nothing to promote her designs?\n4. I think this case was decided on incorrect grounds and probably reached the\nwrong result, even though in the practical legal world the opinion is taken as unquestionable, though easily distinguishable, authority. Why wasn\xe2\x80\x99t this a case of\nunilateral contract\xe2\x80\x94a bargain for some sort of action rather than a bargain for a\npromise in return?\nWood, that ingenious drafta\nWrote \xe2\x80\x9cduties\xe2\x80\x9d that he didn\xe2\x80\x99t hafta,\nBut the court didn\xe2\x80\x99t suffer\nThat clever old duffer\nTo lose, so he had the last laughta.\nOf course, Lucy, Lady Duff-Gordon, is still famous as a designer, though somewhat out of fashion now. She is also famous as a Titanic survivor.\n\nPROBLEM 11 ANSWER: Comment 2 provides quite expressly that the answer\nis \xe2\x80\x9cno.\xe2\x80\x9d Is the Lumenera contract for requirements or output? Why? Answers to\nthe other questions are reserved for class discussion.\n\nPROBLEM 12 ANSWER: No. Here is the court\xe2\x80\x99s language, Mattei v. Hopper,\n330 P.2d 265 (Cal. 1958):\nWhile contracts making the duty of performance of one of the parties conditional upon his satisfaction would seem to give him wide latitude in\navoiding any obligation and thus present serious consideration problems,\nsuch \xe2\x80\x9csatisfaction\xe2\x80\x9d clauses have been given effect. They have been divided\ninto two primary categories and have been accorded different treatment on\nthat basis. First, in those contracts where the condition calls for satisfaction as to commercial value or quality, operative fitness, or mechanical\nutility, dissatisfaction cannot be claimed arbitrarily, unreasonably, or capriciously * * *, and the standard of a reasonable person is used in determining whether satisfaction has been received. * * * * Of the cited cases,\ntwo have expressly rejected the arguments that such clauses either rendered the contracts illusory (Collins v. Vickter Manor, Inc., supra) or deprived the promises of their mutuality of obligation. (Melton v. Story, su468\n\n\x0cpra.) The remaining cases tacitly assumed the creation of a valid contract.\nHowever, it would seem that the factors involved in determining whether a\nlease is satisfactory to the lessor are too numerous and varied to permit the\napplication of a reasonable man standard as envisioned by this line of cases. Illustrative of some of the factors which would have to be considered\nin this case are the duration of the leases, their provisions for renewal options, if any, their covenants and restrictions, the amounts of the rentals,\nthe financial responsibility of the lessees, and the character of the lessees\xe2\x80\x99\nbusinesses.\nThis multiplicity of factors which must be considered in evaluating a lease\nshows that this case more appropriately falls within the second line of authorities dealing with \xe2\x80\x9csatisfaction\xe2\x80\x9d clauses, being those involving fancy,\ntaste, or judgment. Where the question is one of judgment, the promisor\xe2\x80\x99s\ndetermination that he is not satisfied, when made in good faith, has been\nheld to be a defense to an action on the contract. * * * * Although these\ndecisions do not expressly discuss the issues of mutuality of obligation or\nillusory promises, they necessarily imply that the promisor\xe2\x80\x99s duty to exercise his judgment in good faith is an adequate consideration to support the\ncontract. None of these cases voided the contracts on the ground that they\nwere illusory or lacking in mutuality of obligation. Defendant\xe2\x80\x99s attempts\nto distinguish these cases are unavailing, since they are predicated upon\nthe assumption that the deposit receipt was not a contract making plaintiff\xe2\x80\x99s performance conditional on his satisfaction. As seen above, this was\nthe precise nature of the agreement. Even though the \xe2\x80\x9csatisfaction\xe2\x80\x9d clauses\ndiscussed in the above-cited cases dealt with performances to be received\nas parts of the agreed exchanges, the fact that the leases here which determined plaintiff\xe2\x80\x99s satisfaction were not part of the performance to be rendered is not material. The standard of evaluating plaintiff\xe2\x80\x99s satisfaction\xe2\x80\x94\ngood faith\xe2\x80\x94applies with equal vigor to this type of condition and prevents\nit from nullifying the consideration otherwise present in the promises exchanged.\nMoreover, the secondary authorities are in accord with the California cases\non the general principles governing \xe2\x80\x9csatisfaction\xe2\x80\x9d contracts. \xe2\x80\x9cIt has been\nquestioned whether an agreement in which the promise of one party is\nconditioned on his own or the other party\xe2\x80\x99s satisfaction contains the elements of a contract\xe2\x80\x94whether the agreement is not illusory in character\nbecause conditioned upon the whim or caprice of the party to be satisfied.\nSince, however, such a promise is generally considered as requiring a performance which shall be satisfactory to him in the exercise of an honest\njudgment, such contracts have been almost universally upheld.\xe2\x80\x9d * * * * \xe2\x80\x9cA\npromise conditional upon the promisor\xe2\x80\x99s satisfaction is not illusory since it\nmeans more than that validity of the performance is to depend on the arbitrary choice of the promisor. His expression of dissatisfaction is not conclusive. That may show only that he has become dissatisfied with the con469\n\n\x0ctract; he must be dissatisfied with the performance, as a performance of\nthe contract, and his dissatisfaction must be genuine.\xe2\x80\x9d (Rest., Contracts\n(1932), \xc2\xa7 265, comment a.)\nQuestions:\n1. Is Mattei different from Scott v. Moragues Lumber Co.?\n2. See if you can imagine examples of kinds of cases in which satisfaction is governed by a good faith standard, or by a reasonableness standard. Which standard is\nmore likely to result in settlement before trial?\n\nWhen Hopper spoke her bottom line,\nAnd Mattei could finally sign,\nHe could be satisfied,\nAnd she couldn\xe2\x80\x99t hide,\nNo matter how much she could whine.\n\n470\n\n\x0c'