Contracts Cases

Hawkins v. McGee, 84 N.H. 114, 146 A. 641 (1929): Plantiff entered into a contract with defendant, a surgeon, to remove a section of tissue from plantiff's chest and graft it in replacment of scar tissue on the palm of plantiff's right hand. Plantiff alleges that defendant at some point guaranteed that he would "make the hand... a hundred percent good hand". The jury was instructed to consider two elements of damage: (1) pain and suffering due to the operation, and (2) positive ill effects of the operation. Held The defendant owes the plantiff the difference in value between a "hundred percent good hand" and the hand in its present condition. The jury instructions were therefore incorrect. The measure of damages is the difference between the value of the item with the warranty, had it been true, and the actual condition of the item at the time of sale, and other damages as could be reasonably anticipated as likely to be caused by lack of performance.
Groves v. John Wunder Co., 205 Minn. 163, 286 N.W. 235. (1939): Plaintiff owned land and the plant for screening gravel that was on the land. Defendant owned a similar plant nearby. Plaintiff agreed for the defendant to lease the land, use the plant, and process the sand and gravel in the land, leaving the property at uniform grade, substantially the same grade as the road. Defendant paid $106,000 for the use of the land. Defendant removed only arbitrary gravel, leaving the land at the end of the lease not at any uniform grade. The ground was "broken, rugged, and uneven". Finishing removal of the gravel and grading would cost defendant over $60,000, but the end result of the land if the contract would have been upheld would be a little over $12,000. Held The defendant owes plaintiff, not the difference between the value of the land if defendant had performed and the original value of the land, but the value of the actual performance lacking by breach of the contract. The law aims to give the promisee what was promised, not the fair market value of the outcome of performance. One might contract for something that lowers the value of property, for instance, and the promisor would still be liable for the work, not the low-value result.
Acme Mills & Elevator Co. v. Johnson, 141 Ky. 718, 133 S.W. 784 (1911): Plaintiff contracted with defendant on 29 April 1909 for 2,000 bushels of wheat at $1.03 per bushel "to be delivered from [the] thresher", and supplied sacks for use in delivering the wheat. Defendant around 13-15 July 1909 sold his wheat to another party for the price of $1.16 per bushel. Defendant processed more wheat on 25 July 1909 and the wheat was ready for sale around 29 July 1909, at which time the price of wheat was below $1 per bushel. Held Failure to perform in a contract by not providing a product only brings about liability for the difference between the current market price of the product and the contract price. A defendant on failure is only liable for the difference in value between a contract price and the market price of the property at time of delivery. At the time defendant would have made delivery (the contract doesn't state any particular type of wheat), the market price for wheat was below the contract price, and the defendant's failure actually benefited the plaintiff.
Louise Caroline Nursing Home, Inc. v. Dix Constr. Corp. (1972): A construction company that did not finish construction on time is only liable for the amount it would cost to finish construction minus amount not paid. In this case, the amount not paid was more than it would cost to finish construction, so nothing was owed plaintiff.
Rockingham County v. Luten Bridge Co. (1929): A bridge company was contracted by a county to construct a bridge. After the county breached the contract and notified the company, the company continued and finished work anyway. The county is only liable for work performed up to the breach, not afterwards.
Leingang v. City of Mandan Weed Board (1991): When the Weed Board breached a contract by assigning weed cutting jobs to companies other than Leingang, the trial court said that Leingang must, besides taking the price of the lost jobs and subtracting per-job expenses, also subtract other costs such as insurance to arrive at a net profit. The appeal court held that fixed cost would have to be paid by plaintiff with or without breach, so subtracting those costs would make plaintiff pay for them twice—defendant therefore owed those costs as well.
Kearsarge Computer, Inc. v. Acme Staple Co. (1976): Acme breached a contract with Kearsarge in which Kearsarge was to perform services for Acme. Acme had to pay Kearsarge the full contract price, even though Kearsarge serviced other clients after the breach, because it wasn't shown that it would have been impossible to service the other clients but for the Acme breach.
Parker v. Twentieth Century-Fox Film Corp. (1970): Parker was awarded the entire amount of a breached acting contract, even though she turned down a similar contract Fox had offered her in its place for acting in another film of a different genre in a different location with slightly different provisions.
Billeter v. Posell (1949): Defendant was awarded full wages for employer hiring someone else (for "floor lady and designer") and offering defendant a lower wage. The amount owed does not subtract unemployment compensation, nor does it subtract the lower salary offered to the employee.
Missouri Furnace Co. v. Cochran (1881): Missouri contracted with Cochran to deliver a year's worth of coal at specified delivery dates, and when Cochran breached Missouri purchased the remainder from another individual. The courts ruled that Missouri is entitled only to the difference of the original contract price and the market price on each of the breached delivery dates—no forward purchasing.
Reliance Cooperage Corp. v. Treat: For a breach in September for staves due in December, a trial court awarded Reliance the difference between the contract price and the price at the time of breach, but on appeal the reversal said that "there is no duty to mitigate damages until there are damages to mitigate", so the difference between contract price and the price when the contract was due was awarded.
Neri v. Marine Retail Corp. (1972): Buyer breaching contract for boat from boat reseller is awarded repayment of downpayment minus the profit seller would have made as well as seller's incidental expenses, even though seller found another buyer for the boat.
Commonwealth Edison Co. v. Decker Coal Co. (1987): UCC 2-708 remedies are available only for sellers who are not entitled to the contract price, so 2-708 is a seller's "fallback" position and should be limited in scope.
Hadley v. Baxendale (1854): Mill that paid extra to have a new crank shaft created and delivered was not entitled to damages from lost profits from the new shaft being delivered days late, because the damages did not naturally flow from a late delivery in general and the special circumstances were not communicated to the other party.
Lamkins v. International Harvester Co. (1944): Farm owner that ordered a tractor with lights for running at night did not receive the lights for about a year, but could not collect for not being able to harvest a crop because of not running at night because, in the absence of an agreement with the dealer, it is unlikely the dealer agreed to be liable for these special circumstances in such large proporion to the cost of the lights. "tacit agreement" test.
Victoria Laundry (Windsor) Ltd. v. Newman Indus., Ltd. (1949): Laundry owner ordered boiler from engineering company and, because of damages, it delivered five months later than promised. Defendant is liable for lost profits except a few lucrative deals defendant could not have known about. There are two types of knowledge: imputed, that a reasonable person would know in the "ordinary course of things" would cause liability, and actual knowledge of special circumstances outside the "ordinary course of things". In this case it was the first, as the obvious purpose of the boiler by the launderers was for laundry; had the defendant known about the stopped mill in Hadley, it would have been the second.
Hector Martinez & Co. v. Southern Pacific Transp. Co. (1980): Shipping company late in delivering a dragline for strip mining was on appeal liable for the fair rental value for the period of delay. Unlike Hadley, the dragline was valuable in itself, and that it could have been rented "should have been foreseen", not that it was "the most foreseeable of possible harms."
Prutch v. Ford Motor Co. (1980): Ford is liable for crop damages from defective equipment, not because Ford foresaw the consequential damages, but that the damages were "foreseeable".
Valentine v. General American Credit, Inc. (1984): Valentine was not awarded damages from breach of employment contract for mental anguish because an employment contract is primarily about economic issues—emotional satisfaction through job security is secondary.
Hancock v. Northcut (1991): A contract for building a house is not sufficiently concerned with emotional well-being that a breach could bring about emotional disturbance damages.
Brown v. Fritz (1985): Plaintiff awarded damages for negligent infliction of emotional distress from breach of contract to sell land, but on appeal the court reversed the emotion-related damages. In a breach of contract case, there is no tort of inflicting emotional distress independent of the actual breach of contract.
Freund v. Washington Square Press, Inc. (1974): Plaintiff sued because publisher didn't publish his book as promised. Trial court wanted to give plaintiff $10,000 so that he could publish the books himself, but the Court of Appeals gave him nominal damages. Correct damages consist of the benefit to the plaintiff (in this case, the expected royalties), not the cost to the defendant (in this case, the cost of publishing), of contract performance.
Fera v. Village Plaza, Inc., 396 Mich. 639, 242 N.W.2d 372 (1976): Plaintiffs signed a 10-year lease for a "book and bottle shop" in defendants' proposed shopping center, but plaintiff's space was given to another tenant. Whether lost profits can be given as damages. Jury awarded plaintiff $200,000 in lost profits. Although earlier cases had not given profits, that's not a rule, just an indication of how hard it is to pin down lost profits. (In this case, there is a certain certainty of profits.) The precise amount is for the jury to decide.
Chicago Coliseum Club v. Dempsey, 256 Ill.App. 542 (1932): Club contracted with Dempsey for a boxing match, and Dempsey breached. Lost profits weren't awarded, because they were too speculative. Expenses made before the contract are never awarded. Expenses made trying to force the defendant to comply are not awarded as anything after the breach to try to get defendant to comply are made at the plaintiff's own risk. Some related expenses made after the contract could be awarded.
Security Stove & Mfg. Co. v. American Ry. Express Co., 227 Mo.App 175, 51 S.W.2d 572 (1932): Plaintiffs secured a booth at a conference and contracted with defendant to deliver a stove, stressing the urgency that it arrive on time. No profits were expected. Crucial parts of the stove did not arrive. Shipping costs were awarded (restitution). Hotel costs and employee wages (reliance) were awarded, even though they would have been made had the contract terms been performed. Booth costs (reliance) made before the contract were awarded, because it relied on the shipping contract, which was always available to be made.
Anglia Television Ltd. v. Reed, 3 All E.R. 690 (Court of Appeal, 1970): Anglia made arrangements to produce a play for television, spending £1895.35 before contracting with Reed for a leading man, and then spending £854.65 afterwards. Reed repudiated, and Anglia was awarded the entire £2750 because Reed knew and could have assumed he would be liable for this waste and still chose to accept the contract. (One can have lost profits and wasted expenditures, but not both.)
L. Albert & Son v. Armstrong Rubber Co., 178 F.2d 182 (2d Cir.1949): Plaintiff agreed to buy machines from defendant for reconditioning old rubber, and two of four were delivered after WWII had ended. Plaintiff had prepared foundations for the machines, but this cost might have been more than the profit plaintiff would have made. Plaintiff can be awarded reliance expenses minus whatever the defendant can show would have been plaintiff's loss had the contract been fulfilled.
Boone v. Coe, 153 Ky. 233, 154 S.W. 900 (1913): Coe verbally promised Boon he could live on a farm in Texas for 12 months and receive part of the crops, and promised to have a house constructed and waiting for him when he arrived. When plaintiff arrived with family after traveling 55 days from Kentucky, defendant breached and plaintiff had to return to Kentucky. Under the Kentucky statute of frauds, a verbal contract for performance over a year later is unenforceable, so plaintiff cannot receive damage of reliance expenses. (They could receive restitution interest if defendant had benefitted from the contract.)
United States v. Algernon Blair, Inc., 479 F.2d 638 (1973): Coastal Steel Erectors, Inc. subcontracted to Blair, who was contracted to the US, to erect steel using Blair's equipment. Blair refused to allow Coastal to use equipment, breaching contract, so Coastal stopped work. Even though Coastal would have made a loss under performance, under quantum meruit Coastal should be awarded full damages—not for contract amount but for what the services could have been purchased from one in the plaintiff's position (i.e. not what the defendant promised to begin with).
Kearns v. Andree, 107 Conn. 181, 139 A. 695 (1928)
Farash v. Sykes Datatronics, Inc., 59 N.Y.2d 500, 465 N.Y.S.2d 917, 452 N.E.2d 1245 (1985)
Curtis v. Smith, 48 Vt. 116 (1874)
Oliver v. Campbell, 43 Cal.2d 298, 273 P.2d 15 (1954): Read
Britton v. Turner, Supreme Court of New Hampshire, 6 N.H. 481 (1834): Plaintiff contracted to work a farm for $120/year, and then breached after 9.5 months, suing for $100. The jury awarded him $95. Is plaintiff entitled to what his labor was reasonably worth, even though he left without defendant's consent and without good cause? Yes; in this case, the defendant has received more than if the plaintiff had immediately breached, and without quantum meruit the plaintiff would be at a worse place than if he had immediately breached. (This is different than a construction project that, when finished, the owner may refuse it all and gain no benefit. The party contracting for labor does so with full knowledge that every day they are accepting performance.)
Cases skipped.
Pinches v. Swedish Evangelical Lutheran Church, Supreme Court of Errors of Connecticut, 55 Conn. 183, 10 A. 264 (1887): Plaintiff contracted to construct a building for defendant, but through a combined error of the plaintiff and the defendant's architect the ceilings were lower, the windows narrower, and the seats narrower than the specifications require. Should the plaintiff's contract price subtract the cost to correct the damages (which would result in partially dismantling the building), even though the plaintiff acted in good faith? The plaintiff should be compensated for services and materials under a special contract, not entire conformity, if the deviation was not willful, the other party benefitted, and the compensation is based on the benefit gained, referencing the contract price. Plaintiff should be awarded the contract price minus the diminuation in value from the deviation.
Schwasnick v. Blandin, 65 F.2d 354 (2d Cir.1933): A lumberman contrated to cut timber left when defendant, claiming defective work, refused to pay a salary installment. The plaintiff should get the net benefit for his services minus any injuries from the defective work. If the promisee unwillfully breached, he may receive the amount his work benefitted the promisor. If the promisor breaches, the promisee may abandon the contract and sue for restitution based upon fair market value, not benefit to the promisor.
Kelley v. Hance, 108 Conn. 186, 142 A. 683 (1928): Plaintiff contracted to construct a sidewalk and curb, then left after only digging a hole. Plaintiff abandoned the work with no justification, and defendant didn't accept any of the work, so plaintiff is due nothing. (A contractor who deviates slightly in good faith can recover if there has been "substantial performance". If performance is not substantial but the breach is through negligence, contractor can recover through quasi-contract. Voluntary acceptance may create an implied promise.)
Vines v. Orchard Hills, Inc., Supreme Court of Connecticut, 181 Conn. 501, 435 A.2d 1022 (1980): Plaintiffs put a downpayment of $78,800 on real estate and then breached becaues of job transfer. They sued for the return of their deposit, claiming the fair market value of the property had doubled by the time of trial. A liquidated damages clause stipulated damages would be 10% of the purchase price. Does the presence of the liquidated damages clause and the breach of the plaintiff prevent the return of their deposit? A purchaser may recover in restitution if able to prove the seller was injustly enriched, but the burden is on the purchaser. Only partial performance triggers a claim for restitution, and partial performance will usually not be worse than no performance. Similarly, the liquidated damages clause is rebuttable if the purchaser can show that the seller's damages are substantially less than that specified in the clause, but the burden of proof is on the purchaser. (In this case, the purchaser must show that the property value was higher on the date of breach, not on the date of trial.)
De Leon v. Aldrete, 398 S.W.2d 160 (Tex.Civ.App.1965): Plaintiff contracted to buy defendant's land and, after late payments equalling two/thirds of the purchase price, defendant declared default and gave the land to someone else. Can plaintiff get payments back? Plaintiff can get back the payments minus the damage done to defendant. (A default in itself doesn't qualify the purchaser for restitution, nor does it terminate the contract or the vendor's contract rights, but it does give vendor the option to terminate the contract.)
Pacheco v. Scoblionko, 532 A.2d 1036 (Me.1987): Plaintiff paid full price of summer camp for child with a contract indicating no refunds were available after a certain date. After being informed that child had to take summer school, plaintiff called defendent but defendant wouldn't allow a refund. Is such a "no refund" clause enforceable? No; to be enforceable, the damages must be "difficult to estimate accurately" and the fixed amount must be a "reasonable forecast". Here, there was no evidence the amount was in any way in proportion to actual damage, and probably placed in the contract "for its in terrorem effect".
City of Rye v. Public Service Mut. Ins. Co., Court of Appeals of New York, 34 N.Y.2d 470, 358 N.Y.S.2d 391, 315 N.E.2d 458: City contracted with construction company to erect buildings, and the contract had a clause that charged developers $200/day for each day the buildings' completion was past due. The fee may not be recovered by the city. This was not a reasonable estimate of probably monetary harm to the city, and was therefore a penalty. Estimations of lost tax revenues are speculative, and other damages are not pecuniary in nature.
Yockey v. Horn, 880 F.2d 945 (7th Cir.1989): Yockey and Horn parted ways with an agreement not to participate in a suite against the other, with breach bringing damages of $50,000. Horn later voluntarily testified in a $110,00 suit against Yockey by a third party. Does Horn's actions warrant Yockey's recovery of $50,000 because of the liquidated damages clause? Rest.2d § 356 holds that a liquidated damages clause is enforcable if it was reasonable at the time of contracting or at the time of injury. Horn's testimony could have hurt Yockey in several hard-to-determine ways, such as in the business community, and was thus "difficult to evaluate"—exactly the purpose of such a clause. Furthermore, they were also "what was anticipated".
Muldon v. Lynch, 66 Cal. 536, 6 P. 417 (1885): Plaintiff agreed in writing to create for defendant in a San Francisco cemetery a marble monument, to be completed within 12 months for $18,788. The contract stipulated a "forfeiture" of $10/day for every day it was late. The marble waited for over two years in Italy, and the defendant tried to withold $7820 because of lateness. Defendant must pay entire price, as defendant had not suffered any damages that could be monetarily compensated, and the payment was therefore a penalty which cannot be recovered. (Anyway, the contract used "forfeiture", which is equivalent to "penalty".)
Massman Constr. Co. v. City Council of Greenville, Miss., 147 F.2d 925 (5th Cir.1945)
Equitable Lumber Corp. v. IPA Land Dev Corp., 38 N.Y.2d. 516, 381 N.Y.S.2d 459, 344 N.E.2d 391 (1976): UCC § 2-302 allows liquidation of damage clauses to be invalidated because of unconscionability, but in this case the parties were "commercial entities dealing at arms length with relative equity of bargaining power."
Wilt v. Waterfield, Supreme Court of Missouri, 273 S.W.2d 290 (1954): Defendant contracted to sell land for $19,000, plaintiff paid $1,900, and defendant breached and sold the land for $26,000. Is a liquidated damages clause of 10% of purchase price punitive and, if so, can defendant recover more than stated in the liquidated damages clause? Yes, and yes. Plaintiff was not harmed other than not getting the land, so the 10% is punative and invalid. [Wrong, says Garvey; this is not punative, but is a "shotgun clause" trying to cover crops and such with just one number.] The land is now worth $26,000, the plaintiff paid $1,900, so the difference between the unpaid $17,100 and the value $26,000 gives damages of $8,900.
City of Elmira v. Larry Walter, Inc., 76 N.Y.2d 912, 563 N.Y.S.2d 45, 564 N.E.2d 655 (1990): Defendant stopped work after disputes on contract for construction of parking garage. Liquidated damages clause was held not valid because it dealt with damages for "delay", not abandonment.
City of Boston v. New England Sales & Mfg. Corp., 386 Mass. 820, 438 N.E.2d 68 (1982): Plaintiff delayed building a bridge for defendant city, and although contract specified liquidated damages for delay based upon flow of traffic, the state didn't have a road ready to connect to the bridge. "[If] the contingency upon which the presupposition [of the damages a breach would incur] is based never happens, the presupposition must vanish," and the clause is unreasonable.
H.J. McGrath C. v. Wisner, 289 Md. 260, 55 A.2d 793 (1947): Farmer, after partial performance, sold tomatoes on the open market. Contract liquidated damages as difficult to determine and as calculation of the plaintiff's losses from expected partial performance. Liquidated damages unenforceable because they did not differentiate full and partial performance, and because damages from delivering tomatoes on the open market is ascertainable.
Fretwell v. Protection Alarm Co., Supreme Court of Oklahoma ,764 P.2d 149 (1988): Fretwells sued alarm company for negligently failing to fully investigate an alarm, resulting in $19,000 worth of property being stolen. Contract limited damages to $50. (Contract, with Fretwells, Inc., applies to the Fretwells, the third-party beneficiaries.) (A contract, which creates the duty for related negligence cases, can also be used to determine damages in a negligence case.) Clauses limiting damages are not the same as those liquidating damages and, if explicit, are valid. (From Laughlin v. Baltalden, Inc., 191 Pa.Super. 611, 159 A.2d 26 (1960), the name given a clause in a contract "is but of slight weight, and the controlling elements are the intention of the parties and the circumstances of the case.")
Van Wagner Advertising Corp. v. S & M Enterprises, Court of Appeals of New York, 67 N.Y.2d 186, 501 N.Y.S.2d 628, 492 N.E.2d 756 (1986): Van Wagner resold buildboard space, and S & M breached a lease contract when they bought a building from another company. The space was "unique as to location for the particular advertising purpose intented". Physical uniqueness of a property does not in itself warrant specific performance, but rather difficulty in determining the property's value for economically equitable damages to be calculated.
Curtice Bros Co v. Catts, 72 N.J.Eq 831, 66 A. 935 (Ch.1907): Canning plant sued farmer for not delivering his entire crop of tomatoes. (Specific performance can be administered for real estate or for personal property.) Specific performance is proper. Delivery of the tomatoes might not be able to be replaced monetarily, and this would directly affect the economic viability of the factory. "The breach of the contract by one planter differs but in degree from a breach by all."
Manchester Dairy System v. Hayward, 82 N.H. 193, 132 A. 12 (1926): Manchester sued Hayward for failing to deliver milk from his cows. The contract stipulated that the damages from a breach by one party would be hard to calculate, that there would be liquidated damages of $5 per cow, and that plaintiff would be entitled to specific performance. Held: (Parties cannot by contract decide for specific performance.) The $5 was inadequate, because the damages were far-reaching could not be measured. Specific performance is appropriate, because of the difficulty in assessing damages and to keep others from breaching. (Instead of affirmative specific performance, negative specific performance, in which the farmer cannot sell to others rather than being forced to sell to plaintiff, might be more manageable to the court.)
Paloukos v. Intermountain Chevrolet Co., 99 Idaho 740, 588 P.2d 939 (1978): Paloukos gave a downpayment and signed a contract for a 1974 Chevy pickup, and Intermountain later said that it could not give him one. Held: Specific performance is not appropripate and "remains an extraordinary remedy." 1) Market value is readily ascernable. 2) Paloukos doesn't allege that Intermountain has such a pickup, and the courts can't order the impossible.
Eastern Rolling Mill Co. v. Michlovitz, 157 Md. 51, 145 A. 378 (1929): Plaintiff sells scrap metal and contracted with Eastern to provide scrap metal (which it produced as a byproduct) for five years at $3 a ton less than the current market for scrap metal. Defendant breached. Held: Specific performance is appropriate. It is impossible to know how much scrap metal Eastern will produce, but specific performance will not be difficult, since Eastern will be producing scrap metal anyway.
Gartrell v. Stafford, 12 Neb. 545, 11 N.W. 732 (1982): Standard case that explains that, as land is unique with unique locality, soil, etc., an action for damages would not "afford adequate relief."
Loveless v. Diehl, 235 Ark. 805 364 S.W.2d 317 (1962): When plaintiff wanted to resell land (and could only resell it if the deal went through), the Arkansas Supreme Court at first awarded only $1,000 in damages. Upon rehearing, it said that land should be awarded specific performance as a matter of course. (The plaintiff had also invested $5,000 in improvements which would have unjustly enriched the defendant unless specific performance were granted.)
Fitzpatrick v. Michael, Court of Appeals of Maryland, 177 Md. 248, 9 A.2d 639 (1939): Michael, after the death of his wife, asked Fitzpatrick, their nurse, to manage the house, drive the car, and care for him when ill. In return, Michael would pay her $8/week and would in his will award her the house and cars. About two years later, Michael changed his mind. Is specific performance appropriate for rendering services? Held: No, because services (as opposed to property) are in general so personal there is no desire or ability of the court to enforce general performance without the assent of both parties.
Dallas Cowboys Football Club, Inc. v. Harris, 348 S.W.2d 37 (Tex.Civ.App.1961): Harris contracted to play exclusively for the Los Angeles Rams Football Club. The contract, specifying Harris as having "special, exceptional, and unique knowledge, skill and ability as a football player," gave the Rams the option to extend the contract. The Rams chose to renew, and Harris retired and then switched to Dallas. Is a football player unique to allow specific performance to force the player not to play for another team? Held: A football player is not unique, but other similar players may not be available. A temporary injunction was ordered and the case proceeded to trial.
Pingley v. Brunson, 272 S.C. 421, 252 S.E.2d 560 (1970): Brunson contracted to play organ for Pingley's restaurant for three nights a week for $50 per night, for three years. Brunson breached after 10 performances. Is specific performance appropriate to compel a musician to perform on a continued basis for a long period? Held: No, specific performance is not appropriate for continued services over a long period of time, and others with defendant's capabilities were available.
American Broadcasting Companies v. Wolf, Court of Appeals of New York, 52 N.Y.2d 394, 438 N.Y.S.2d 482, 420 N.E.2d 363 (1981): Wolf, a broadcaster at ABC, had signed a contract that contained A) a good-faith negotiation clause concerning the last 90 days of the contract, and B) a right of first refusal clause for three months after the contract. Before the contract was over, Wolf signed an exclusive contract with CBS. Did Wolf breach his contract, and is equitable relief warranted? Held Wolf breached the good-faith negotiation clause because the exclusive agreement with CBS did not permit him to sign with ABC. He did not breach the right of first refusal, because that was specified to be only after the contract expired. Equitable relief is not warranted, however; the courts do no like non-compete clauses after the contract has expired unless the defendant is engaging in unfair or illegal activities, because anticompetition impedes the market and keeps the defendant from earning a living. Injunction for service is both difficult to inforce and against the Thirteenth Amendment. Monetary damages may be available, though.
Fullerton Lumber Co. v. Torborg, 270 Wis. 133, 70 N.W.2d 585 (1955): Defendant was hired as a manager at plaintiff's lumber company, a Minnesota corporation. The contract had a 10-year non-compete clause. After three years, the company's business tripled and after 15 years of employment defendant left to start his own lumber company. Is the non-compete clause enforceable? Held No, because it is excessive, an unreasonable and illegal restraint of trade. (Although Wisconsin usually makes unreasonable restraints void, the court said it should be reduced and suggested three years, reflecting the time in which defendant had made the business successful.)
Data Management, Inc. v. Greene, 757 P.2d 62 (Alaska 1988): Plaintiff alleged breach of a five-year noncompetition contract for computer services covering all of Alaska. Is such an overbroad noncompetition contract modifiable by the courts? Held Yes, if the company acted in good faith the contract may be reasonably altered to render it inforceable. (There are two other options the court could take: simply characterizing the clause as "unconscionable" and making if void, and adopting the "blue pencil" rule by deleting parts of the clause if it is divisible.) If the company overreached willfully, alteration will be refused.
Northern Delaware Indus. Dev. Corp. v. E.W. Bliss Co., Court of Chancery of Delaware, 245 A.2d 431 (1968): Plaintiffs contracted with defendants to expand and modernize a steel mill. Work did not progress as quickly as planned, and plaintiffs claimed the contract allowed for extra workers to speed the work. Should the court order extra workers to get the job done? Held No; the court cannot get involved in supervising a complex construction project, and it's not even obvious that adding new workers would make the work progress more quickly. Besides, specific performance of personal services cannot be enforced. Plaintiffs can seek monetary damages later if appropriate.
City Stores Co. v. Ammerman, 266 F.Supp. 766 (D.D.C.1967): Defendant was constructing a shopping center and was trying to convince the Board of County Supervisors to rezone the land. Defendant convinced plaintiff, negotiating a lease at a rival company's site which was also petitioning for rezoning, to write a letter stating that he would become a tenant if the rezoning went through, and in return plaintiff could have a lease. Upon rezoning, defendant didn't allow plaintiff to have a lease in the shopping center. Can the court grant equity? Held Yes; damages are difficult to measure, and benefit to the plaintiff of expanding business in this location would be almost incalculable in the future. Specific performance would only be denied if the difficulty of enforcement by the court would exceed the benefit to the plaintiff.
Grayson-Robinson Stores v. Iris Constr. Corp., 8 N.Y.2d 133, 202 N.Y.S.2d 303, 168 N.E.2d 377 (1960): Iris owned a lot and contracted with Grayson to erect a building that Grayson could rent as a retail department store for 25 years. The contract stipulated that an arbitrator would handle all disputes. Iris then ran out of money, couldn't raise more, and told Grayson the work would stop unless Iris would pay more rent. An arbitrator said that there was no evidence Iris couldn't raise more money and ordered Iris to complete the job. Should the courts uphold the arbitrator's decision? Held Yes; A New York statute says that a written agreement stipulating arbitration means the court must enforce the decision, and the court must not make decisions about the merits of the dispute.
Staklinski v. Pyramid Electric Co., 6 N.Y.2d 159, 188 N.Y.S.2d 541, 160 N.E.2d 78 (1959): New York Court of Appeals upheld arbitration compelling specific performance by employer of employee.
Matter of Sprinzen and Nomberg, 46 N.Y.2d 623, 415 N.Y.S.2d 974, 389 N.E.2d 456 (1979): New York Court of Appeals upheld arbitrator's extremely long noncompete decision.
Garrity v. Lyle Stuart, Inc., 40 N.Y.2d 354, 386 N.Y.S.2d 831, 353 N.E.2d 793 (1976): New York Court of Appeals did not uphold an aribitrator's judgment of punitive damages.
John T. Brady & Co. v. Form-Eze Systems, Inc., 623 F.2d 261 (2d Cir.1980): New York Court of Appeals upheld arbitrator's large liquidated damages because they were not explicitly referred to as punitive.
Congregation Kadimah Toras-Moshe v. DeLeo, Supreme Judicial Court of Massachusetts, 405 Mass. 365, 540 N.E.2d 691 (1989): A dying man makes a promise to give money to a synagogue, put the expected money into their budget, and promised to convert a storage room into a library and name it after him. Should the estate be held to the man's oral statement? Held No, there was no consideration, as the synagogue declared their intention of what to do with the money independent of the man's promise. (Putting the money in the budget does not constitute reliance, but merely a record of the synagogue to itself that it expected the money.)
Hamer v. Sidway, Court of Appeals of New York, 124 N.Y. 538, 27 N.E. 256 (1891): Uncle promised nephew that, if the nephew would not drink, use tobacco, swear, or play cards until his 21st birthday, the uncle would give him $5,000. The nephew did so, and after the uncle died the nephew brought this action against the estate. Should the uncle be held to the promise, even if the nephew's actions helped the nephew rather than hurt him? Held Yes; a suspension of a legal right is consideration, regardless of whether it helps or hurts the party.
Earle v. Angell, 157 Mass. 294, 32 N.E. 164 (1892): Mary promised her nephew that, if he would come to her funeral in the event that he outlived her, she would give him $500 from her estate. Is a promise to give money after death in exchange for an action valid? Held Yes.
Written v. Greeley-Shaw, 520 A.2d 1307 (Me. 1987): A man and woman had participated in an extra-marital affair for some years. The woman wrote up a paper saying that the man would pay her money, buy her jewelry, visit her, call her, and take her on trips. The paper also said that the woman would not call the man at his homes or offices without his permission. Does this contract contain consideration? Held No, the clause put in by the woman does not express that it is a condition for the man's upholding the bargain. For valid consideration, there must be evidence that the party "sought after" and was "motivated by" the benefits.
Fischer v. Union Trust Co., Supreme Court of Michigan, 138 Mich. 612, 101 N.W. 852 (1904): A father gave his daughter a deed to his land, on which there were several mortgages, and in return the daughter gave him a dollar. After his death, the mortgages were not paid. Was there enough consideration to make this a valid contract? Held No; the dollar was obviously in context just a joke. The real consideration was the daughter's love and effection, which was meritorious but not sufficient to make this a contract rather than a gift. Since the father didn't pay the mortgages, the gift was not completed and, being null in one part, is null in its entirety.
Simmons v. United States, 308 F.2d 160 (4th Cir. 1962): American Brewery tagged a fish and offered an award for catching it. Simmons had heard of the award, but wasn't thinking of it when he caught the fish. Was the prize money taxable? Held Yes; If one knows of an offer in a unilateral contract, one may accept the offer by rendering performance even if the performance is unrelated to the author.
Schnell v. Nell, 17 Ind. 29 (1861): Zacharias Schnell made a contract to pay three persons $200 each in annual installments, and in return they would give one cent each (in addition to his wife's services and his love to her). Held The contract was invalid because the values were unequal, being "fixed"—not indeterminate. One cent is a nominal amount. (The wife's services and his love were irrelevant as they occurred in the past.)
Batsakis v. Demotsis Court of Civil Appeals of Texas, 226 S.W.2d 673 (1949): Defendant, in Greece during WWII, needed money so she asked plaintiff for 500,000 drachmas (US$25 at the time), and she signed a contract with plaintiff saying he had given her US$2,000 and that she would pay back US$2,000 with 8% per annum interest. Must defendant abide by the $2,000 plus interest in the contract even though plaintiff only loaned her the equivalent of $25? Held Yes; inadequacy of consideration does not void a contract. In effect, plaintiff paid defendant $25 to sign saying she owed him $2000, and the document in that agreement amounts to valuable consideration.
Embola v. Tuppela, 127 Wash. 285, 220 P. 789 (1923): Tuppela's $500,000 Alaskan gold mind was sold by his guardian while he was insane. He told the plaintiff, after loaning him $270, that if he would loan Tuppela $50 more, if he won his mine back in court he would give plaintiff $10,000. After winning back his mine, Tuppela (apparently incompetant again) asked his trustee to pay plaintiff the money. Was the contract unconscionable because of the disparity of sums? Held No; Tuppela was of a sound mind at the time and considered the contract fair and to his advantage. The uncertainty of the payback event supports the adequacy of the consideration.
Duncan v. Black, Court of Appeals of Missouri, 324 S.W.2d 483 (1959): Black contracted to sell Duncan 359 acres of farm land, with a 65 acre cotton allotment. The cotton allotment system was set up by the Secretary of Agriculture. When the land was only allotted 49.6 acres, Black let Duncan use a 15.4 acre allotment on adjacent land, but the next year Black refused to do the same. Is land allotment valid consideration? Held No; Consideration the party has no control over is not valid. Land under the Act was only allotted every year, so there is no way to know what land will be allotted the next year. Trying to sell an allottment is like the "purchase of the green cheese monopoly on the moon." (Besides, selling an allotment would contravert the Act and would therefore be illegal.) [This needs updated to talk about the $1500 note, which is the real promise, and if there is consideration in return.]
Military College Co. v. Brooks, 107 N.J.L. 28, 147 A. 488 (1929): Defendant wrote a note promising to pay son's school tuition and equipment. His son was discharged (wrongfully, the defendant claims), but defendant still wrote notes extending the payment because he was in no financial condition for a lawsuit. Even though his son was discharged, is there consideration to support the note? Held Yes; defendant wrote the note to buy himself time because he could not afford a lawsuit then alleging wrongful discharging of the son. The time he bought is adequate consideration to support the note.
Martin v. Little, Brown & Co., Superior Court of Pennsylvania, 304 Pa.Super. 424, 450 A.2d 984 (1981): Plaintiff told defendant publisher that parts of a book were plagiarized, and offered to provide a copy of a book with notes pointing out the plagiarized parts. Defendant accepted, and when plaintiff learned that the defendant was pressing claims for copyright violation, plaintiff sued for payment for his "services". Defendant sent plaintiff a check for $200, but plaintiff sued for a third of the damages received by defendant in the separate lawsuit. Defendant countersued. Was there an implied contract? Held No; An implied contract is one in which it is apparent that there was an agreement with consideration. Here, there was no negotiation of money in exchange for services. Was there a quasi-contract in which restitution is due? Held No; volunteers have no right to restitution, and plaintiff volunteered his services. Can plaintiff get damages for intentional infliction of mental distress because of the countersuit? Held No; mental distress damages only arise when the actions surrounding the action would lead a reasonable person to say "outrageous," and simply furthering the litigation started by the plaintiff is not outrageous.
Collins v. Lewis, 111 Conn. 299, 149 A. 668 (1930): Plaintiff sheriff attached cows from Kline and then realized they belonged to defendant but that Kline held them under a conditional sale contract. Kline wouldn't take them back and defendant didn't have any place to put them, so the sheriff kept them and sent a letter to defendant saying that the defendant would be responsible for paying for their upkeep. After the defendant sold the cows, the sheriff tried to collect for the 38 days' care and keep. Is there an implied contract? Held Yes, an implied contract in law, says the courts. An implied contract is when one party does something for another without being asked, expecting payment, and the other party, knowing the first expects to be paid, avails him/herself to the offered benefits. By selling the cows, defendant acknowledged and took advantage of the care and keep by plaintiff. (A true implied contract can only exist when there is no express one.)
Seaview Ass'n of Fire Island, N.Y., Inc. v. Williams, 69 N.Y.2d 987, 517 N.Y.S.2d 709, 510 N.E.2d 793 (1987): Defendants owned seven houses in Seaview but over an eight year period refused to pay homeowners' fees because they were not members and did not use the recreational facilities. Was there an implied contract to pay homeowners' fees? Held Yes; Defendants knew of the fees and, by owning houses implicitly took advantage of and must pay for the upkeep of facilities and services, even if they didn't use them all.
Martin v. Campanaro, 156 F.2d 127 (2d Cir.1946): Implied contracts are "implied in fact" and arise from intent, while quasi-contracts are "implied in law" and are "imposed by law ... irrespective of, and sometimes in violation of, ... intention." quantum meruit usually refers to quasi-contracts.
Mills v. Wyman, Supreme Judicial Court of Massachusetts, 20 Mass. (3 Pick.) 207 (1825): Defendant's 25-year-old son was travelling, fell ill, and was cared for by plaintiff. Defendant afterwards heard and wrote a letter to plaintiff promising to pay his expenses, but then later went back on his promise. Is a promise after the fact concerning a third party a valid contract? Held No, there is no legal consideration received. Although there may be a moral duty, there is no legal duty to pay this promise after the fact, making this an "imperfect obligation." (Some promises after the fact are valid if they involve prior obligations, such as debts barred by the Statute of Limitations, debts incurred by infants, and debts of bankrupts.)
Webb v. McGowin, Court of Appeals of Alabama, 27 Ala.App. 82, 168 So. 196 (1935): Plaintiff Webb, dropping from an upper level a heavy block as part of his job saw defendant McGowin below and, in order to save him from death by the block, fell with the block and seriously injured himself. Defendant agreed to support him for the rest of plaintiff's life, but after defendant's death the estate tried to stop payments. Is a promise based upon moral obligation a valid contract? Held In this case, yes, because plaintiff conferred upon McGowin sufficient legal consideration in saving his life, something that was worth more than, for example, keeping a cow for someone.
Harrington v. Taylor, 225 N.C. 690, 36 S.E.2d 227 (1945): Defendant was assaulting his wife when she knocked him down and attempted to "split his head open" with an ax. Plaintiff stopped her, which mutilated his hand, and defendant promised to pay defendant her damages, but later stopped payments. Held A voluntary humanitarian act is not legal consideration.
Edson v. Poppe, 24 S.D. 466, 124 N.W. 441 (1910): Defendant asked plaintiff to dig a well, and plaintiff later noted the value of the well so defendant promised to pay defendant. Held Digging of the well was not voluntary and it conveyed value, so it is sufficient legal consideration to uphold the contract.
Muir v. Kane, 55 Wash. 131, 104 P. 153 (1909): Defendants promised orally to pay plaintiff, a real estate broker, to find a purchaser for their home. A state statute of frauds said that any such oral agreement was void. After plaintiff found a buyer, defendants and buyer signed an agreement containing a clause to pay $200 to plaintiff. Held Even though the original agreement was still void, the clause was a valid promise based on past consideration, just like a promise after the end of a statute of limitations period.
In Re Schoenkerman's Estate, 236 Wis. 311, 294 N.W. 810 (1940): Schoenkerman, after his wife died, asked his wife's mother and sister to move in and held take care of the kids. Before he died, he executed notes promising to pay them. Held The note is valid, as it acknowledged a moral obligation that "afforded more than ample consideration", even if there was no prior legally enforceable obligation.
Kirksey v. Kirksey, Supreme Court of Alabama, 8 Ala. 131 (1845): Defendant, upon hearing that his brother had died, told his brother's wife and children to come live on some of his land. They abandoned their house, seventy miles away. Two years later he told them to move off his land. Does reliance on defendant's promise make the promise enforceable? Held No, defendant's promise was "a mere gatuity".
Ricketts v. Scothorn, 57 Neb. 51, 77 N.W. 365 (1898): Katie's grandfather promised to pay her $2000 if she were to quit her job (because none of his grandchildren should work), so she quit her job. Does quitting her job, relying on his promise, equitably estop the need for consideration? Held Yes; the plaintiff altered her position for the worse on the faith that the note would be paid.
Prescott v. Jones, 69 N.H. 305, 41 A. 352 (1898): Defendant insurance agents sent a letter saying they would renew an insurance policy for another year unless the plaintiff notified them otherwise. When the building was destroyed by fire, the defendants maintained the policy was not in effect. Held The plaintiff did not pursue any actions in return (such as answering with a letter) so there was acceptance and no contract. The statement by the defendant was not a statement of a current state of fact but of future intentions, subject to be modified, and therefore the doctrine of estoppel does not apply.
Allegheny College v. National Chautauqua County Bank, Court of Appeals of New York, 246 N.Y. 369, 159 N.E. 173 (1927): A woman promised a $5,000 donation to the college after her death if they would set up a fund in her name. She gave them $1,000, the plaintiff accepted, and then plaintiff sued for the rest after her death. Held The condition of the fund in her name was sufficient consideration, and the plaintiff accepted those terms, so there is a valid contract with no need to consider promisory estoppel. (The general rule is that consideration must be a benefit to the promisor or a detriment to the promisee, and that detriment must be something bargained for in exchange for the promise. Promisory estoppel is really an exception to this rule, in which the detriment is something that isn't necessarily a bargained for condition but is nevertheless done in reliance of the promise, estopping the need for consideration.)
Siegel v. Spear & Co., 234 N.Y. 479, 138 N.E. 414 (1923): Siegel had purchased furniture from defendant, but had done so by giving them a mortgage. Plaintiff needed some place to store the furniture for a while, so defendant offered to store them and to insure them because he could get a cheaper rate which plaintiff could pay with the next installment. The furniture perished in a fire with no insurance. Was the promise to provide insurance binding? Held Yes, because plaintiff's bringing the furniture after the promise to get insurance was consideration to make the promise binding. (Whether the defendant relied on the promise to not get insurance therefore not need be considered.)
Carr v. Maine Central R.R., 78 N.H. 502, 102 A. 532 (1917): Plaintiff shippers were overcharged by defendant, who said they could not give a refund without the permission of the Interstate Commerce Commission. Defendant promised, if plaintiff would fill out the papers, to forward the request to the ICC, but then failed to do so before the expiration date, barring any refund. Held By accepting the papers for the purpose of forwarding them, defendant is liable for whatever harm occurred, because their promise imposed upon them a tort duty. As a contract, though, there was no consideration to make this a legally enforceable agreement.
Hart v. Ludwig, 347 Mich. 559, 79 N.W.2d 895 (1956): Defendant promised to care for plaintiff's orchard, but stopped after the first year. Can an action be brought in tort for nonperformance? Held No; misfeasance may bring either a contract or a tort action alleging negligence, but nonfeasance—"simply the violation of a promise to perform the agreement"—may only bring a contract action, as there is no duty separate from the contract.
Sommer v. Federal Signal Corp., 79 N.Y.2d 540, 583 N.Y.S.2d 957, 593 N.E.2d 1365 (1992): Plaintiff sued defendant fire alarm monitoring company in tort for damages in not reporting a fire quickly enough. Held When duty arises out of law, an action should be in tort, and when a duty arises out of an agreement, the action should be on contract. Special relationships will allow a tort, but not simple claims of negligence arising out of a contract. The action should proceed under contract when essentially the plaintiff is seeking enforcement of a bargain. The terms "misfeasance" and "nonfeasance" should not be controlling.
East Providence Credit Union v. Geremia, Supreme Court of Rhode Island, 103 R.I. 597, 239 A.2d 725 (1968): Plaintiff loaned defendant money, holding a vehicle for collateral with a promise from defendant to pay insurance on it. Defendant became unable to pay insurance and plaintiff agreed to pay insurance, adding the insurance plus interest to plaintiff's bill. The vehicle was involved in a collision. Is plaintiff precluded from recovering on its loan contract because it failed to fulfill its promise to pay the insurance? Held Yes; the interest promised in return is legal consideration. Even if there were no interest (i.e. this is a purely gratuitous promise), under the Restatement there would have been promisory estoppel (promise of future action, in contrast with equitable estoppel, a promise based on the current facts) because 1) there was a promise that would reasonably induce action or forebearance, 2) the forebearance occurred, and 3) injustice can only be avoided by enforcing the promise.
I. & I. Holding Corp. v. Gainsburg, 276 N.Y. 427, 12 N.E.2d 532 (1938): Defendant promised money to the Beth Israel Hospital Ass'n to help with its humanitarian work. Held The promise can be enforced as a unilateral contract binding when acted upon, without resort to promissory estoppel, because the Ass'n incurs expenses in its humanitarian work and the gift was for those expenses. Dissent There needs to be evidence that the promise induced the acts of the Ass'n and that the acts would not have occurred but for the promise.
Salsbury v. Northwestern Bell Tel. Co., 221 N.W.2d 609 (Iowa 1974): Defendant telephone company sent a letter to a newly-formed college promising to pay $15,000. The college failed shortly after opening. Held Charitable subscriptions should be enforced even in the absence of consideration, unless the fund raising compaign does not call for binding subscriptions. This is for public policy reasons, and to follow the tentative draft of Restatement of Contracts § 90(2).
Seavey v. Drake, Supreme Court of New Hampshire, 62 N.H. 393 (1882): Plaintiff alleged Seavey was his father and that Seavey had given him a strip of land. In return, plaintiff had gave up defendant's debt of $200. Plaintiff thereafter improved the land and built a house. Held In equity, the improvement of the land is sufficient consideration, whether the promise was a promise to give or to sell the land—the giving up of the debt is irrelevant. This part performance allows the equity court to get around the statute of frauds concerning transfer of land not in writing.
Monarco v. Lo Greco, 35 Cal.2d 621, 220 P.2d 737 (1950): Natale and Carmela Castiglia were married in 1919 and convinced Carmela's son Christie to come work on the farm they bought half ownership in. In return, Natale promised to give Christie their half of the farm. After 20 years, Natale died and in a will left everything to his grandson. Held The farm goes to Christie. Christie's reliance in working half his life on the farm estopped the grandson from pleading the statue of frauds.
Forrer v. Sears, Roebuck & Co., Supreme Court of Wisconsin, 36 Wis.2d 388, 153 N.W.2d 587 (1967): Sears (defendant) convinced plaintiff farmer, who used to work at Sears, to leave his farm and come back to Sears to receive "permanent employement." Plaintiff sold his farm and rented his barn at a loss and, four months after becoming a permanent employee at Sears, was discharged without cause. Held There is no cause of action. The promise given by Sears was one that was foreseeable to induce an action, and the plaintiff did perform that action, but there's no justice that only promisory estoppel can bring about, as the promise for "permanent employment", which can be terminated at will, was performed the moment plaintiff was hired. (There was furthermore no additional consideration that would have prevented permanent employment from being terminable at will.)
Hunter v. Hayes 533 P.2d 952 (Colo.Ct.App.1975): Defendant promised plaintiff a job on a construction project if she would quit her $350/month job at a telephone company. Plaintiff quit, defendant refused to hire her, so Plaintiff went without work for two months. Held Plaintiff awarded $700 because of promissory estoppel. Damages are calculated by the reliance interest loss.
Stearns v. Emery-Waterhouse Co., Supreme Judicial Court of Maine, 596 A.2d 72 (1991): Defendant hardware store orally promised 50-year-old plaintiff a job until he turned 55. Plaintiff left his job at Sears and was hired by defendant. Plaintiff's position was eliminated before he turned 55. Does plaintiff's detrimental reliance on the promise get around the statute of frauds stipulation against oral contracts that cannot be performed in one year? Held No; although other jurisdictions have held otherwise, reliance actions by the plaintiff cannot bring about promissory estoppel to counteract the statute of frauds unless the promisor is shown to have fraudulent intent. (Similarly part performance is rejected in counteracting the statute of frauds in an employment context.) (Equitable estoppel can avoid application of the statute of frauds for employment.) (If services were performed, plaintiff can seek application of quantum meruit.)
Goldstick v. ICM Realty, 788 F.2d 456, 465 (7th Cir.1986): Using promissory estoppel to get around the statute of frauds for continued employment is particularly troublesome because it is too easy to show reliance and most employment is employment at will.
Goodman v. Dicker, United States Court of Appeals, District of Columbia, 169 F.2d 684 (1948): Defendants, local distributors for Emerson Radio & Phonograph Corp. in D.C., told plaintiffs that their application for a franchise had been approved and that radios were coming. Plaintiffs hired salespeople and sold radios, but no radios came and the franchise was not approved. Held The detrimental actions by plaintiffs because of defendants' promise estopped the lack of proving there was a contract. Under such promissory estoppel, the damage is the loss sustained—the cash outlays (reliance), not the lost profits (expectancy).
American Nat'l Bank v. A.g. Sommerville, Inc., 191 Cal. 364, 216 P. 376 (1923): Sommerville sold Tomlinson (defendant) two automobiles, and Tomlinson signed two contracts stating that he received the automobiles and that if Sommerville assigned the payments to a third party, Tomlinson could not claim lack of consideration or lack of delivery. Sommerville assigned debts to investment company who assigned debts to plaintiff Bank, and Tomlinson claimed the automobiles had never existed. Held The wording of the contract cannot of their own force preclude Tomlinson from claiming lack of consideration, but if plaintiff relied on the statements in the contract, estoppel in pais would preclude Tomlinson from showing the falsity of those statements.
D'Ulisse-Cupo v. Board of Directors of Notre Dame High School, 202 Conn. 206, 520 A.2d 217, 221-223 (1987): Held Even though a misrepresentation is not sufficiently promissory or definite to invoke promissory estoppel in contract, if the representation contained false information defendant might still be liable in tort even for innocent misrepresentation if defendant had a duty to know the truth.
Fried v. Fisher, 328 Pa. 497, 196 A. 39 (1938): Brill and Fisher were partners in a florist business, and they leased a building from Fried. Fisher wanted to get out of the florist business and start a restaurant in another town, so Brill agreed and Fried said that he would release Fisher from his obligation under the lease. Brill later defaulted, and Fried sued Fisher. Held Fried's promise to release Fisher from the lease caused Fisher to reliantly change his position, so under promissory estoppel Fried's promise must be enforced.
Mahban v. MGM Grand Hotels, Inc., 100 Nev. 593, 100 Nev. 593, 691 P.2d 421 (1984): Defendant leased space in a hotel for an arcade, and the contract gave either party the right to terminate if premises were damaged and lessor could not put them in tenatable condition within 180 days. The building burned, but 10 weeks later defendant sent a letter saying that reconstruction would occur. After defendant decided not to reopen, is defendant liable for breach? Held Yes; although the letter did not waive the right to terminate, the doctrine of equitable estoppel precludes defendant from using the right to terminate because of the implications of the letter. Equitable estoppel is thus here a defense to a defense, not in itself a cause of action.
Levine v. Blumenthal, Supreme Court of New Jersey, 117 N.J.L. 23, 186 A. 457 (1936): Plaintiff leased space to defendants for a women's clothing store at $2100 for the first year and $2400 for the second year, divided into equal montly payments. Defendant during the first year said that because of economic conditions they could not pay the increased price for the second year, and would go out if business if forced to pay the original second year price, so plaintiff continued to accept the first year's monthly rate for the second year. Plaintiff then sued to collect the difference. Held The original agreement is enforceable. Any agreement to lower the agreed price is a separate agreement and must come with its own consideration—promising to pay what one legally already had a duty to pay is not consideration. General economic adversity would not have released defendants from their original obligation to pay. (Acceptance of part payment does not relieve defendant from full performance, but slight variations, such as prepayment, could be considered consideration.)
Davis v. General Foods Corp., 21 F.Supp. 445 (S.D.N.Y.1937): Plaintiff wrote defendant saying she had created a recipe, and defendant wrote back saying any compensation would be at defendant's discretion. Held A letter giving defendant unlimited right to decide later the nature and extent of compensation is not consideration. (Since there is no contract, there is consequently no recovery in quantum meruit.)
Nat Nal Service Stations, Inc. v. Wolf, 304 N.Y. 332, 107 N.E.2d 473 (1952): Defendant, wishing to get a discount from its supplier, told plaintiff Wolf that if he purchased gasoline from defendant and they accepted the order, they would pass on their discount. Is this a contract not to be completed within one year and consequently barred by the statute of frauds? Held There is no contract covered under the statute of frauds. [There was a cause of action on completed sales.] The original contract did not bind either party to take any action—the defendant could buy gas anywhere, the defendant could decline to accept the order, and defendant could at any time decline to give future discounts. Each time defendant accepted an order a separate contract forcing a discount, which was not covered by the statute of frauds, came into play.
Obering v. Swain-Roach Lumber Co., Appellate Court of Indiana, 86 Ind.App. 632, 155 N.E. 712 (1927): Plaintiff lumber company signed a contract with defendants, relatives and heirs of J. Henry Buhner, that if plaintiff bought Buhner's land plaintiff would sell it to defendants and keep the lumber from it. Does this contract have mutuality? Held Yes; even though the contract upon signing was binding on neither party because it was contingent upon an act by plaintiff, the moment plaintiff performed that act the content was binding on both parties. If a contract is dependent upon a future act of plaintiff, that act will provide an acceptance of the offer and consideration.
Paul v. Rosen, 3 Ill.App.2d 423, 122 N.E.2d 603 (1954): Defendant made an agreement to sell retail liquor business to plaintiff at a price to be determined by inventory, contingent on plaintiff securing a five-year lease from the owner. Before defendant could get the lease, plaintiff refused to do an inventory, so defendant sued claiming an anticipatory breach. Held The contract was void and therefore unenforceable because it was contingent on plaintiff securing the lease but put no duty on plaintiff so secure it, so there was no mutuality.
Gurfein v. Werbelovsky, 97 Conn. 703, 118 A. 32 (1922): Defendant sold plate glass to plaintiff with the option of plaintiff to cancel the order up to the time of shipment. Can the plaintiff sue for specific performance? Held Yes; As the plaintiff only had an option to cancel before shipment, after shipment the contract would be binding on plaintiff so there was consideration to make this a binding contract.
Wood v. Lucy, Lady Duff-Gordon, Court of Appeals of New York, 222 N.Y. 88, 118 N.E. 214 (1917): Lady defendant, who gave her approval to apparel, made an agreement with plaintiff to have the exclusive right to place her indorsements on articles of clothing, subject to her approval. In return he would give her one half of all profits, take out any needed copyrights and trademarks, and provide reports of sales. Defendant breached the exclusivity and marketed her own designs, claiming the orginal agreement was void because, under it, the plaintiff was not obligated to do anything. Held The agreement might not have obligated plaintiff in so many words, but the exclusivity of the agreement implied he was to make his best efforts to sell her label, giving consideration to the agreement.
Omni Group, Inc. v. Seattle-First Nat'1 Bank, Court of Appeals of Washington, 32 Wash.App. 22, 645 P.2d 727 (1982): Defendants Clarks (now represented by First National Bank) sold property to Omni with a contract that Omni would get an engineer's and architect's feasibility report and, if satisfactory, would notify defendants. Omni didn't express whether it was satisfied or not. The Clarks refused to proceed with the purchase, claiming the contract was not valid because Omni's promise was illusory. Held Omni, if satisfied, was obligated to notify Clarks of their acceptance, so their promise was not illusory. This falls into the strain of cases in involving promisor "satisfaction" and is therefore not an illusory promise.
Lima Locomotive & Mach. Co. v. National Steel Castings Co., 155 F. 77 (6th Cir. 1907): Agreement for purchase of steel stated that seller would supply "all [the buyer's] requirements in steel castings for the remainder of the present year ...." Held There is mutuality because the buyer is not just promising to supply the steel the buyer desires, but all the steel the buyer requires for the business, and the buyer is obligated to buy from the seller.
Feld v. Henry S. Levy & Sons, Inc., Court of Appeals of New York, 37 N.Y.2d 466, 373 N.Y.S.2d 102, 335 N.E.2d 320 (1975): Plaintiff, owner of the Crushed Toast Co., made an agreement to purchase and defendant to sell all the bread crumbs produced by defendant, with six-month notification by either party for termination. Defendant stopped producing breadcrumbs and, after plaintiff refused to pay a higher price, dismantled the equipment and started selling the input bread product to others. Defendant maintains the contract did not require it to produce bread crumbs, only to sell those it produced. Held This is known as an "output" contract and under section 2-306 of the UCC there is sufficient mutuality to uphold the contract. The UCC also states that for exclusive agreements the seller must use good-faith efforts to supply the product—something that is a question of fact here. Only a "genuine imperiling of the very existence of its entire business caused by the production of the crumbs would warrant cessation of production of that item."
Fort Wayne Corrugated Paper Co. v. Anchor Hocking Glass Corp., 130 F.2d 471 (3d Cir.1942): Fort Wayne contracted to supply corrugated paper to Capstan Glass Co. for packaging glass products, and Capstan agreed to buy it. The agreement could be cancelled with a one-year notification, with stipulations of how much paper had to be supplied and purchased during that period. Capstan's parent corporation suspended all glass production, but Capstan didn't give notice for over a year. Held Fort Wayne had no cause of action because Capstan's requirements had ceased. Cancellation by notice, on the other hand, was appropriate when Capstan wanted to avoid its obligations, which was not the case here.
Corenswet, Inc. v. Amana Refrigeration, Inc., 594 F.2d 129 (5th Cir.1979): Corenswet had an exclusive wholesale dealership which Amana wanted to terminate based upon a contract for indefinite duration but that any party could terminate "at any time for any reason." Corenswet said the termination was "arbitrary and capricious." The UCC has a general obligation of good faith, but § 2-309(2) allows successive, indefinite contracts to be terminated at any time. Held UCC § 2-309(2) applies, allowing termination with the notice given in the contract for franchises and dealerships. Both parties were given equal ability to "cut the knot" should the relationship turn sour. "What public policy does abhor is economic overreaching—the use of superior bargaining power to secure grossly unfair advantage." That's different from the "good faith" provision.
Sheets v. Teddy's Frosted Foods, Inc., Supreme Court of Connecticut, 179 Conn. 471, 427 A.2d 385 (1980): Defendant had hired Sheets indefinitely as a quality control director. Plaintiff alerted defendant to substandard quality of frozen food products that violated the Connecticut Uniform Food, Drug and Cosmetic Act, and in return defendant fired plaintiff. Should the defendant's motion for strike based upon insufficient complaint be sustained? Held No; Although contracts terminable at will do not require a showing of just cause, an employer can be "responsible for damages in tort for a demonstrably improper reason for dismissal, a reason whose impropriety is derived from some important violation of public policy." The employee's job and expertise was to check quality, so the employer can't make him chose between termination and criminal sanction. Dissent This ruling would give employees a "sword" to force their employers to keep them. The Act in this case concerned grades of food and did not jeopardize consumer safety, so the plaintiff should have called in an anonymous tip to the commissioner. Besides, this is the sort of decisions the legislature makes, so it's out of scope for the judiciary.
Price v. Carmack Datsun, Inc., 109 I11.2d 65, 485 N.E.2d 359 (1985): Plaintiff Price was injured in an automobile accident and filed under his employer's group health insurance plan. Defendant, who had sought to discourage him from filing, discharged the plaintiff. Held Plaintiff failed to state a cause of action. Discharge can only sanctioned if it violates a "clearly mandated public policy," but this was a private matter. "We consider that the discharge of an employee for filing a claim under a policy in which he is a beneficiary does not violate a clearly mandated public policy."
Embry v. Hargadine-McKittrick Dry Goods Co., Court of Appeals, Missouri, 127 Mo.App. 383, 105 S.W. 777 (1907): Plaintiff empry had been requesting a decision on reemployment from defendant McKittrick, so a few days before the end of the year he went to see McKittrick to say that, if he wasn't given an answer on reemployment, he would quit then and there. Defendant asked how his work was going, and plaintiff said they were busy. Defendant said, "Go ahead, you are all right. Get your men out, and do not let that worry you." Is defendant held to a reemployment contract? Held Yes; Even though there must be a meeting of minds by an agreement of intentions in a contract, intentions are judged by words and actions, and in this case a reasonable person would judge defendant's words as promising reemployment.
Kabil Developments Corp. v. Mignot, Supreme Court of Oregon, 279 Or. 151, 566 P.2d 505 (1977): Plaintiff Kabil negotiated an oral contract with Mignot's Inland Helicopters for helicopter service, but Mignot later claimed that there was no contract. Defense objected to letting the jury hear Kabil's testimony that Mr. Monroe (Kabil's vice president) thought there was a contract. Held Even though an objective test has won over the old "actual intent" or "meeting of the minds" test, and even though the actual words of the contract as interpreted by a reasonable person still win, that's no reason to prevent testimony of one's intent to have a contract, which is different than intent of terms of the contract, anway.
New York Trust Co. v. Island Oil & Transport Corp., 34 F.2d 655 (2d Cir.1929): Island Oil, in order to operate near Mexico, set up subsidiaries operated by Mexicans and sold oil back to Island. Some of these subsidiaries were mortgaged and lost by foreclosure, and one of them sued the company that had bought Island to pay for the oil it had "purchased." Held There was no contract to uphold. Besides writings, the general situation should be examined to determine intent, and a reasonable personal would have seen that this was a sham to evade the law and that there were really no sales or commercial transactions going on.
Robbins v. Lynch, 836 F.2d 330, 332 (7th Cir.1988): In law, intent is a conclusion rather than a fact.
McDonald v. Mobil Coal Producing, Inc., Supreme Court of Wyoming, 820 P.2d 986 (1991): McDonald was terminated from Mobile, and he sued alleging that the employee handbook, which indicated that open communication was better than unionizing, overrode the original at-will contract. The handbook contained a welcome letter that indicated that its contents would be in effect until changed, and also contained the sentence, "It is not a comprehensive policies and procedures manual, nor an employment contract." Held (The "nor an employment contract" disclaimer was not conspicuous, so it isn't valid.) "Mobil's subjective 'intent' to contract is irrelevant, if Mobil's intentional, objective manifestations to McDonald indicated assent to a contractual relationship." Whether the objective manifestations of assent were sufficient is a mixed question of law and fact that must be determined through further proceedings. Dissent The handbook was available before McDonald signed the original contract, so how could it modify the original contract? This decision effectively does away with employment-at-will in Wyoming, because it says that a company might inadvertently by any communication alter the original contract. Besides, there was insufficient consideration for the alteration.
Kari v. General Motors Corp., 79 Mich.App. 93, 261 N.W.2d 222 (1977): An employee handbook talked about severance pay but stated in two sections that the handbook did not constitute a contract. Held The handbook was not a contract as it contained no promise and no expectations of the employee to perform so as to rely on the promise. There's hardly any way the defendant could have indicated more that this was not a contract other than by not mentioning the severance plan.
Pine River State Bank v. Mettille, 333 N.W.2d 622 (Minn.1983): An employee handbook can be a contract if it contains an offer and it is communicated to an employee by dissemination. In an at-will situation, the employee's continued employment can be considered acceptance and consideration for a new unilateral contract.
Torosyan v. Boehringer Ingelheim Pharmaceuticals, Inc., 234 Conn. 1, 662 A.2d 89 (1995): Held 1) All employer-employee relationship have a contract, if only implied. 2) The default rule for implied employment contracts is employment at will. ... (the rest is semi-important as a summary)
Moulton v. Kershaw, Supreme Court of Wisconsin, 59 Wis. 316, 18 N.W. 172 (1884): Defendant sent plaintiff a wire stating that they were in the position to offer Michegan salt at a low price. Plaintiff wired back ordering 2,000 barrels of salt, but defendant wired back withdrawing their letter. Was there a contract (i.e. an offer an acceptance)? Held No, this was just a general business notice trying to get the plaintiff to deal with them. There was no offer to sell a specific quantity of salt. (This is not to say that an offer might not specifically allow the specific quantity to be specified later, but this was not one of those offers.)
Joseph Martin, Jr. Delicatessen v. Schumacher, Court of Appeals of New York, 52 N.Y.2d 105, 436 N.Y.S.2d 247, 417 N.E.2d 541 (1981): Plaintiff tenant and landlord agreed to rent an apartment for five years from $500/month for the first year up to $650 for the fifth, with a renewal option for five years more "at annual rentals to be agreed upon." Landlord, when the tendant wanted to renew, raised the price to $900/month. Was there a contract for the renewal? Held No; an agreement to agree with a material term left for future negotiation is unforceable. There was not even a hint of what the price might be.
Southwest Eng'g Co. v. Martin Tractor Co., 205 Kan. 684, 473 P.2d 18 (1970): Parties did not reach agreement on terms of payment for a generator. Held The contract is enforceable—even though one or more terms are left open does not make the contract indefinite, if the parties intended to make the contract and there is a reasonably certain basis for remedy.
Empro Mfg. Co. v. Ball-Co Mfg., Inc., United States Court of Appeals, Seventh Circuit, 870 F.2d 423 (1989): Empro gave Ball-Co a letter of intent to buy the latter, "subject to" the approval of the Empro board of directors and shareholders, and with general terms and conditions to be placed in a later "Asset Purchase Agreement." Ball-Co backed out, and Empro sued. Held The letter is not binding. Terms missing does not always make the contract invalid. (The key thing is whether the missing terms are so important that a contract would not arise even if the parties wished to be bound.) The words "subject to" should not be dispositive, but in this case they objectively indicate that the parties did not intend to be bound. (Expenditures surrounding drafting the letter do not make the letter a valid contract.)
Wheeler v. White, Supreme Court of Texas, 398 S.W.2d 93 (1965): White promised Wheeler that he would get him a loan from a third party and that, if he couldn't get him a loan, he would loan him the money himself. Terms such as amount and payment of interest were not spelled out. White said that Wheeler could go ahead and tear down buildings and prepare land in preparation for the construction Wheeler wanted to do. White couldn't get the loan, so Wheeler sued. Held The contract is indefinite and therefore unenforceable, but White cannot plead this because he is estopped by his tacitly allowing Wheeler to reliantly tear down buildings. There is no contract, so damages are only the reliance costs, not the loss of future profits.
Howard v. Beavers, 128 Colo. 541, 264 P.2d 858 (1953): Plaintiff in Colorado agreed to exchange houses with defendant in Hollywood, who owned a more expensive house, with a mortgage for the difference in price. Mortgage repayment terms were not spelled out. Defendant refused to move. Held The terms are too indefinite for there to be a contract, but plaintiff is due his $36 expenditures in coming to Hollywood to see the house.
Raffles v. Wichelhaus, Court of Exchequer, 2 Hurlstone & Coltman 906 (1864): Defendant contracted with plaintiff to buy cotton arriving from Bombay, and the contract noted that the cotton would be aboard the Peerless. A ship named Peerless arrived in October with nothing aboard, and when another ship named Peerless arrived in December with the cotton, defendant refused to buy the cotton. Held If the two parties meant two different ships named Peerless, there is ambiguity in the contract and therefore no contract.
Flower City Painting Contractors v. Gumina Constr. Co., 591 F.2d 162 (2d Cir. 1979): Flower contracted to paint apartments, and Flower took the terms to mean that Flower would only paint the internal walls. When Flower refused to paint the external walls, Gumina cancelled the contract. Held The contract could be intepreted two different ways, so as there was no meeting of the minds there was no contract. There was an industry standard practice that could interpret the express terms to mean both internal and external walls, but Flower was a new contractor and couldn't be expected to know that.
Dickey v. Hurd, 33 F.2d 415 (1st Cir.1929): Hurd in Massachussetts offered to Dickey in Georgia to sell land in Georgia, stipulating that Dickey had until 18 July 1926 to accept. Hurd really meant that the price should have be paid by then, but Dickey only thought he had to accept by then, which he did. Hurd refused to sell the land. Held The contract is effective, because Dickey made it clear his interpretation in letters, so Hurd cannot sit by and allow Dickey's misinterpretation until the time limit expires.
Cobaugh v. Klick-Lewis, Inc., Superior Court of Pennsylvania, 385 Pa.Super. 587, 561 A.2d 1248 (1989): Golfer Cobaugh, upon reaching the ninth hole, found a car with signs indicating that anyone making a hole-in-one would win the car. Cobaugh did, but defendant refused to give the car, saying that it was a prize for a tournament two days earlier. Held Cobaugh gets the car. A offeror is held to the manifest intent, not subjective intent. Klick-Lewis should have taken down the signs or specified which tournament the car was for. Plaintiff had no reason to know that the car was for a different tournament, so the mistake was unilateral. (There was also consideration: the promisor benefitted by the publicity it gets when it gives away a car.) Dissent A hole-in-one is governed by chance, so this was a gambling contract, illegal under Pennsylvania law, even though many illegal gamblings occur all the time for charity events.
Glover v. Jewish War Veterans of United States, Post No. 58, 68 A.2d 233 (D.C.Mun.Ct.App. 1949): Held Offers of reward are governed by contract law, so if a party does not know of they offer they are not eligible for the reward, even if they perform.
Caldwell v. Cline, 109 W.Va. 553, 156 S.E. 55 (1930): Cline sent a letter offering to sell Caldwell land but that Caldwell must accept within eight days. Caldwell accepted within six days of receiving the letter, which was more than eight days after it was sent. Held An offer made by post is made when it is received—before that, the words have "no legal existence."
Textron, Inc. v. Froelich, 223 Pa.Super. 506, 302 A.2d 426 (1973): A broker had a telephone conversation to sell rods, and the buyer said he would check and get back to the seller. Five weeks later the buyer called back and accepted, to which the seller replied, "Fine, thank you." Do oral offers terminate at the end of the conversation? Held Not necessarily; if no expiration is specified, the offer terminates at the end of a reasonable time based upon the nature of the contract and the circumstances either knows or has reason to know.
Allied Steel & Conveyors, Inc. v. Ford Motor Co., United States Court of Appeals, Sixth Circuit, 277 F.2d 907 (1960): Ford purchased machinery from Allied and sent them an agreement that said it was not binding until signed by Allied. The agreement also said that Allied would be liable for injuries from Allied negligence and from Ford negligence during installation. While installing the machinery, an Allied employee was hurt from a Ford employee's negligence. Allied, who later signed the agreement, claimed the agreement was not in effect at the time of injury. Held Allied accepted the contract when it began the installation, and the later signing was just a record of that agreement. An indication of a method of acceptance did not exclude other methods of acceptance, and acceptance occurred when Allied started performance.
Panhandle Eastern Pipe Line Co. v. Smith, 637 P.2d 1020, 1022 (Wyo.1981): Held Exclusive methods of acceptance, especially if unreasonable, must be expressed explicitly if they are to be upheld.
Davis v. Jacoby, Supreme Court of California, 1 Cal.2d 370, 34 P.2d 1026 (1934): Caro Davis was treated as a daughter by her uncle and aunt Whitehead, so years later when the Davises were living in Canada and Mrs. Whitehead became ill, Mr. Whitehead wrote them and asked them to come look after him and Mrs. Whitehead. Mr. Whitehead promised that, if they were to come care for the Whiteheads, the Whiteheads would leave the Davises everything in their will. Mr. Davis said they would come after finishing up some business, and on the day the business was taken care of they found out Mr. Whitehead had committed suicide. After arriving and caring for Mrs. Whitehead, the Davises discovered everything had been left to nephews. Held Mr. Whitehead made a contract to create a will, and Mr. Davis accepted his offer with a promise to come care for Mrs. Whitehead. In ambiguous cases such as this, the law is predisposed to find a bilateral rather than a unilateral contract—that is, a promise for a promise rather than a promise for performance.
Jordan v. Dobbins, 122 Mass. 168 (1877): Dobbins promised Jordan that if Moore refused to pay Jordan for goods sold on credit, Dobbins would guarantee the amount. Jordan sold goods to Jordan not knowing that Dobbins had died. Held The death of Dobbins revoked the offer because Jordan had not need performed. [The same goes for incapacity as for death.]
Petterson v. Pattberg, Court of Appeals of New York, 248 N.Y. 86, 161 N.E. 428 (1928): Defendant had a bond on Petterson secured by a mortgage on land. Defendant told Petterson that if he paid off the mortgage early, he would write off the $780 bond. When Petterson came to defendant's house, defendant said that he had sold the mortgage and that the deal was off. Held The offeror can revoke a unilateral offer at any time, even immediately before acceptance by the offeree—even if the offeror sees the offer coming to accept. [Now Restatement of Contracts Section 45 says that once performance begins, the offer cannot be revoked, as an option contract has been created.]
Brackenbury v. Hodgkin, Supreme Judicial Court of Maine, 116 Me. 399, 102 A. 106 (1917): A mother asked a daughter in a letter to come live with her and take care of her, and in return the daughter could have the house. After plaintiff daughter moved in the mother instigated arguments and finally deeded the house to a son. Held The mother owes the daughter the land, because the mother's letter was an offer, in writing as required for land, and the plaintiff came and began performance on the offer.
Dickinson v. Dodds, (Court of Appeal, Chancery Division), 2 Ch.D. 463: Dodds on Wednesday offered in writing to sell Dickenson a piece of property and said the offer would be open until Friday. On Thursday Dodds sold the property to Allan, and Berry told this to Dickenson. Held Dodds could withdraw the offer at any time, even though he said it would be open for a certain amount of time, because there was no consideration. Barry's informing Dickenson of the sale was adequate notice of Dodd's revocation.
Thomason v. Bescher, Supreme Court of North Carolina, 176 N.C. 622, 97 S.E. 654 (1918): Defendants Bescher executed a writing under seal promising, with consideration of $1, to convey land to Thomason if he paid $6,000 before a certain time. Thomason within that time declared his acceptance and indicated he was willing to pay, after which Bescher tried to withdraw the offer. Held Bescher must give specific performance without need for consideration, because the writing was under seal. Once plaintiff indicated acceptance and was ready and willing to comply, defendant has to perform.
Marsh v. Lott, 8 CalApp. 384, 97 P. 163 (1908): Plaintiff paid defendant $0.25 for the option to buy property, and the option could be extended for 30 days. Defendant extended the option and the next day the defendant withdrew the option. Held The plaintiff is owed specific performance; the $0.25 is not too small consideration for an option. Any consideration, however small, is sufficient for an option, because § 3391 only says that there has to be adequate consideration for the exchange, and the price of the land itself was sufficient.
Smith v. Wheeler, 233 Ga. 166, 210 S.E.2d 702 (1974): Held A seller may not withdraw from an option even if the consideration for the option was not actually given, because an agreement that says there is consideration is an implied promise to pay that consideration.
James Baird Co. v. Gimbel Bros., Inc., United States Court of Appeals, Second Circuit, 64 F.2d 344 (1933): Plaintiff and other contractors were bidding on a project. Defendant measured amount of linoleum needed, underestimating by 50%, and sent an offer to all contractors. Plaintiff got the bid but before accepting the offer for the linoleum, the defendant rescinded the offer. Held Defendant could withdraw the offer before it was accepted. Plaintiff's acceptance of a separate bid does not create promissory estoppel and would not constitute acceptance, because plaintiff would not have been bound to the defendant by the acceptance of the bid. There was no consideration for an option, either.
Drennan v. Star Paving Co., Supreme Court of California, 51 Cal.2d 409, 333 P.2d 757 (1958): Plaintiff contractor was creating a proposal for the "Monte Vista School Job", and defendant telephoned a bid. Plaintiff received the contract, but when conveying acceptance to defendant, defendant rescinded the offer because they had made a mistake. Held Defendant is bound to the offer. Referencing Restatement Section 90, defendant submitted the bid with the full knowledge and indeed the desire that plaintiff would rely on the bid in bidding for the larger contract. The loss resulting from the mistake should fall on the party who caused it. (General contractor is not free to delay acceptance in hopes of getting a better price, though.) [Drennan is "the law in most places" (407).]
Loranger Constr. Corp. v. E.F. Hauserman Co., 376 Mass. 757, 384 N.E.2d 176 (1978)
E.A. Coronis Associates v. M. Gordon Constr. Co., 90 N.J.Super. 69, 216 A.2d 246 (1966): Subcontractor Coronis gave a bid to Gordon, and Gordon's general contracting bid was accepted. Before Gordon accepted Coronis' offer, Coronis revoked it. Held The promise could be enforced under promissory estoppel, but under UCC § 2-205 the promise could not be enforced because there was no writing indicating the offer would be held open.
Southern California Acoustics Co. v. C.V. Holder, Inc., 71 Cal.2d 719, 79 Cal.Rptr. 319, 456 P.2d 975 (1969): Holder used subcontractor Acoustic's bid in its own bid, publishing Acoustic as the subcontractor, but then later changed subcontractors. Acoustic sued claiming they had forgone subcontracting with other general contracts because of the publication. Held Holder was not bound to use Acoustic; there was no promissory estoppel because there was no promise to uphold—Holder did not promise Acoustic anything.
Hoffman v. Red Owl Stores, Inc., Supreme Court of Wisconsin, 26 Wis.2d 683, 133 N.W.2d 267 (1965): Red Owl Stores promised Hoffman that he could have a franchise for $18,000, so Hoffman sold his store's fixtures an inventory, bought a lot, bought a house in another town and moved his family, all on Red Owl's suggestion. Red Owl later raised the price Held Hoffman should be awarded the price of his actions through promissory estoppel under Restatement § 90 (Hoffman relied on promises that would reasonably induce action), paying amounts to avoid injustice. Held That specific terms such as lease, building space, etc. were not presence does not matter, as promissory estoppel is not a breach of contract concept. Held Promissory estoppel applies to Hoffman's wife's selling of a bakery building, even though § 90 does not usually apply to third parties, because Red Owl's had reason to foresee action by the third party in reliance on the promise.
Skycom Corp. v. Telstar Corp., 813 F.2d 810 (7th Cir. 1987): Citing Hoffman, Held "Even when a contract fails to become effective as a whole, particular terms may bind under promissory estoppel ...."
Livingstone v. Evans, Supreme Court of Alberta, 4 D.L.R. 769 (1925): Defendant offered to sell land to plaintiff for $1800. Plaintiff wired back to send the lowest price, offering to pay $1600. Defendant wired back that he could not lower the price. Plaintiff then accepted the original offer, but defendant had already sold the land. Held There is an enforceable contract. Even though the counter-offer by plaintiff amounts to a rejection (even though it was attached to an inquiry), defendant's specifically standing by the original price amounts to a reinstatement of the original offer.
Idaho Power Co. v. Westinghouse Electric Corp., United States Court of Appeals, Ninth Circuit, 596 F.2d 924 (1979): Idaho Power inquired to Westinghouse about a voltage generator, and Westinghouse sent back a price quote that limited their liability. Idaho Power sent back a purchase order that did not include any liability limitations and claimed that it "supercedes all previous agreements." The generator allegedly caused fire damage. Held Idaho Power's purchase order constituted acceptance to Westinghouse's offer because it contained essentially the same terms. It was not a counter-offer, even though some things differed, because UCC § 2-207(1) changes the common law to allow a "definite and seasonable expression of acceptance or a written confirmation" to constitute an acceptance. Held The acceptance was valid because the variances did not expressly make the contract conditional upon them, as provided for by UCC § 2-207(1). Held The "knockout" rule, in which differing terms can be decided later, does not apply because there were no explicit liability limitations in the purchase order.
Roto-Lith, Ltd. v. P.P. Bartlett Co., 297 F.2d 497 (1st Cir. 1962): Roto-Lith ordered adhesive that proved to be defective from Bartlett. Bartlett sent an acknowledgement with the shipment that denied warranties, and stated that the buyer should notify seller if that was unacceptable. Held The terms were not part of the original contract, as they constitute material alterations under UCC § 2-207(2). Held The reply, though, was not an unconditional acceptance under UCC § 2-207(1) because it was contingent upon acceptance of the buyer of the new demands. The seller did not intend to make an unconditional acceptance, because the additions were only burdensome to the offeror—the buyer. Held The buyer is bound to the clause disclaiming warranties, because the reply constituted a counter-offer, and the buyer accepted that offer by its use of the product. [Roto-Lith was later overruled.]
Morrison v. Thoelke, District Court of Appeal of Florida, 155 So.2d 889 (1963): Buyers of property in Orange County sent a contract to the owners in Texas, who signed the contract and sent it to the buyers' attorney in Florida. Before the letter reached the attorney, the sellers called the attorney and repudiated the acceptance. Since the mail service allows delivery to be stopped, should the postal service be considered an agent of the offeree, making acceptance binding upon receipt? Held The repudiation was invalid, and the buyers own the land. An acceptance is binding upon being deposited in the mail, not upon receipt. The line must be drawn somewhere, and precedent has usualy went with binding-upon-mailing.
Kibler v. Caplis, 140 Mich. 28, 103 N.W. 531 (1905): Caplis gave Kibler an option to buy hides, the option set to expire at a certain point. Kibler accepted by telegram and confirmed by letter. The telegram was never delivered, and the letter arrived after the option had expired. Held There is no contract, because both parties knew that the option would expire at the given time. With options, the acceptance is valid upon receipt.
H.B. Toms Tree Surgery, Inc. v. Brant, Supreme Court of Connecticut, 187 Conn. 343, 446 A.2d 1 (1982): Toms contracted with defendant to do landscaping work. Defendant kept asking the workers to do more work, and after a while Toms requested that Defendant pay more, which Defendant did. This kept occuring for the rest of the work, and Toms couldn't keep track of everything defendant kept asking the workers to do, so the trial court awarded Toms more money "on a time basis" on the theory of imlied contract. Does the presence of an express contract preclude recovery under an implied contract? Held In theory, yes, but here there was no "factual foundation" for the express contract. In other words, both Toms and the defendant knew that work wasn't going according to the express contract and did not intend to commit themselves to it.
Hobbs v. Massasoit Whip Co., Supreme Judicial Court of Massachusetts, 158 Mass. 194, 33 N.E. 495 (1893): Plaintiff sent eel skins to the defendant, who kept them for several months before destroying them. Plaintiff had sent eel skins in the past, and defendant had paid for them. Held Defendant's silence constitute an acceptance of an implied contract to purchase the skins that the defendant had sent, because past actions had created a pattern of dealing that would make it reasonable for the plaintiff to expect payment for the skins. This does not mean that anyone can unilaterally impose a duty on someone, forcing them to incur an expense in rejecting an offer.
Austin v. Burge, 156 Mo.App. 286, 137 S.W. 618 (1911): Defendant's father-in-law bought gift subscription to a newspaper for defendant. After the subscription expired, defendant paid several bills from plaintiff, telling plaintiff not to send more. The newspapers kept coming, and defendant took them home and read them. Held There is an implied contract. Even though the defendant hadn't ordered the newspapers, by using them the defendant implicitly agreed to pay their value.
Morone v. Morone, Court of Appeals of New York, 50 N.Y.2d 481, 429 N.Y.S.2d 592, 413 N.E.2d 1154 (1980): An unmarried couple had been living together since 1952, with the woman performing "domestic duties and business services", expecting to be paid for her services. The man, moreover, orally told her that he would in return take care of her and share the net profits of his business with her. Can there be an implicit contract between an unmarried couple living together? Held No, because if people are living together there is oftentimes an assumptions that work will be performed gratuitously. Allowing implied contracts raises the risk of misunderstanding and allows for fraud. Can there be an explicit contract between unmarried people living together? Held Yes; nothing about living together precludes an explicit agreement from being put into place, as long as sexual services doesn't form part of the consideration.
Mitchill v. Lath, Court of Appeals of New York, 247 N.Y. 377, 160 N.E. 646 (1928): Mrs. Mitchill wanted to buy a farm from the Laths, but she didn't like the ice house. The defendants orally promised that if she bought the farm, they would remove the ice house. Mrs. Mitchell bought the farm, with a written agreement, and started improving it, but Laths didn't remove the ice house. Is the agreement to buy the ice house valid? Held No; that oral agreement is obviously linked to, though legally separate from, the written agreement to buy the farm. Such an oral contract that modifies the written one is only valid if 1) the agrement is a collateral one, 2) it doesn't contradict express or implied provisions in the written contract, and 3) it relates to things one wouldn't expect would be in the written contract. In this case, the written contract seems to be full and complete, and one would expect anything relating to an ice house to be included in the written contract. Dissent A written contract is only meant to cover a "limited field," so it couldn't be expected to necessarily cover later negotiations that rely on the first agreement. The rule for parole agreements should be 1) there is sufficient evident of such an agreement, and 2) that the written contract does not expressly or implicitly preclude any other provisions outside the written contract.
Hatley v. Stafford, Supreme Court of Oregon, 284 Or. 523, 588 P.2d 603 (1978): Stafford, manager of Stafford Farm, agreed to rent land to Hatley. The written agreement said that Stafford could buy out Hatley at a price not to exceed $70 per acre. Almost eight months later Stafford tried to buy out Hatley, but Hatley wanted $400 per ace because he had wheat growing on the field. Stafford came in and cut down the wheat. Hatley claimed there was an oral agreement that the buyout period in the written agreement would only last for 30-60 days from the execution of the lease. The parties do not dispute that there was no consideration for the oral agreement. Does the parole evidence rule throw out the oral agreement, if there was one? Held No. (The court only decides whether the parole agreement, if there was one, would legally be effective. If the court determines it would be, the jury decides whether there actually was a parole agreement.) The parol evidence rule applies only to those aspects of a bargain that the parties intended to go into the written document. The court should assume the written agreement was complete and only allow a parole agreement if there is substantial evidence the parties did not intend the writing to embody the entire agreement. 1) A parole agreement must not be "inconsistent" with the written document. It is only "inconsistent" if it condradicts an express term in the written contract. It must be a term not naturally placed in the document. Whether a term "naturally" should have been included in a written document should be construed liberally. Parties with less business experience may be included not to include all terms in the written document. Dissent The parole evidence statute in Oregon says that a written agreement contains all the terms of the agreement, and it should be interpreted that way.
Hayen v. Hoadley, 94 Vt. 345, 111 A. 343 (1920): Two parties contracted in writing to exchange properties. As part of the deal, defendants promised to fix up the property by shingling the barn, fixing the house roof, and repairing the cellar wall. Defendants claim there was an oral agreement that they would have "until October 1, 1919" to complete repairs, would only use up to $60, and would use No. 2 shingles. Held Evidence of the oral agreement cannot be introduced. The written contract was complete in itself. (An incomplete written agreement can be supplemented by parole.) As it was silent as to the length of repairs, a reasonable time was implied by the law, and this is part of the written contract just as much as it had said "reasonable time," so the court can't allow evidence of oral agreements to change the written agreement. The plaintiff might have introduced evidence of an oral agreement to specify what the reasonable time should be, but they didn't do that.
Interform Co. v. Mitchell, 575 F.2d 1270, 1275-1277 (9th Cir.1978): There are two views as to integration. The first holds written agreements to be special and to be integrated as a reasonble person would see it. Courts can make most of the decisions here. The other view, held by Corbin, is that written agreements have unique compelling force and are integrated when the parties desire them to be and they mean what the parties intend to mean—what a reasonable person would think doesn't really matter. Here, the jury has a bigger responsibility of determining when the written agreement means what the parties want to express. Corbin's view holds more sway today, but most jurisdictions don't hold one view to the exclusion of the other.
Luria Bros. & Co. v. Pielet Bros. Scrap Iron & Metal, Inc., 600 F.2d 103 (7th Cir. 1979): Pielet contracted with Luria to deliver a large quantity of scrap metal but completely did not perform. Pielet claimed that they had an oral understanding beforehand that Pielet was depending upon another company for shipment and that they may not come through, in which case Pielet would not be able to deliver. Held Parole evidence is not allowable. Pielet's own form contained a merger clause, bringing UCC § 2-202 into play. This court views "inconsistent" as meaning the absence of reasonable harmony with explicit terms as well as language and respective obligations of the parties. The written agreement was for an unconditional shipment of goods, making any oral agreement of conditional shipment inconsistent with the written agreement. Held Furthermore, parole evidence of additional terms must be excluded if they would have almost certainly been included in the document if agreed upon, and here an agreement of conditional shipping of such a large order would likely have been included in the written agreement.
Long Island Trust Co. v. International Inst. for Packaging Educ., Ltd., Court of Appeals of New York, 38 N.Y.2d 493, 381 N.Y.S.2d 445, 344 N.E.2d 377 (1976): Long Island Trust, plaintiff, loaned the defendant $25,000 for 90 days, and then later renewed the loan for another 30 days and loaned an additional $10,000. Defendant claims the latter note is not enforceable, because one of the signators had discussed with the officer of the bank that certain other guarantors, and one guarantors was missing. Held The note could unenforceable because of the oral agreement—there cannot be summary judgment against the defendant. The note did not expressly state that it was an unconditional guarantee, and therefore the oral agreement did not contradict it. (The defendants were not "untrustworthy," "devious," or "negligent," any of which would have made the parole agreement invalid.)
Western Commerce Bank v. Gillespie, 108 N.M. 535, 775 P.2d 737 (1989): The Gillespie estate owed Western $316,000, but the estate made a deal with Western to settle for $275,000 if the estate could secure financing within a reasonable time. When the estate had almost secured the funding, Western tried to repudiate. Held Western cannot repudiate. The "reasonable time" term was a condition upon performance of the contract, not on its formation. The contract was formed, and if Gillespie performs within a reasonable time, Western cannot repudiate the contract.
Hargrave v. Oki Nursery, Inc., 636 F.2d 897 (2d Cir. 1980): Vinyard plaintiffs brought a suit against Oki after purchasing grape vines, alleging Oki had represented the vines to be healty, disease-free, and suitable for growing grapes. Held One can sue for a tort of fraudulent misrepresentation separate from the contract if there is harm to the plaintiff, not just a dispute about holding the defendant to a promise.
Lipsit v. Leonard, Supreme Court of New Jersey, 64 N.J. 276, 315 A.2d 25 (1974): Plaintiff Lipsit worked for Leonard for nine years in New York under written contracts (during which time Leonard became incorporated), with Leonard allegedly promising Lipsit that he would get equity in the business. When they discussed equity, the terms were unacceptable by the plaintiff. Lipsit accuses Leonard of breach of contract and fraud because Leonard allegedly never intended to give Lipsit a stake in the company. Should summary judgment be issued against the breach of contract complaint? Held Summary judgment is valid against the complaint of breach of contract, because 1) the oral discussions never reached the stage of an enfoceable contract, and 2) the parole evidence rule would bar the oral discussions because of the written employment contracts. Should the tort of fraud and misrepresentation be allowed? Held The tort action should be allowed to proceed. New York law allows tort cases based upon fraud to go forward even if not grounded in breach of contract. However, the damages will not be based on expectation of the contract, but on restitution—the "out of pocket rule." If successful, the plaintiff will only be able to recover out of pocket expenses. [Would he be able to recove any equity at all?]
Bank of America Nat. Trust & Sav. Ass'n v. Pendergrass, 4 Cal.2d 258, 48 P.2d 659 (1935): Defendants signed a promissory note with the bank "payable on demand." When the bank tried to collect, defendants claimed the bank had promised them that they would be allowed to operate the ranch on which they farmed for 1932 without being bothered, that they made the promise without intending to keep it, and that the bank soon seized the land on which the mortgage was held after the note was signed. Held Parole evidence to prove a tort of fraud is inadmissable here. Parole evidence is allowed to prove independent facts, but this promise effectively extended the payment of the note for another year, directly contradicting the words of the written agreement. [Courts that make an intrinsic/extrinsic distinction of the parole evidence rule for preventing the rule to allow claims for fraud in tort are in the minority and criticized.]
Sabo v. Delman, 3 N.Y.2d 155, 164 N.Y.S.2d 714, 143 N.E.2d 906 (1957): Defendant made a written conract to get plaintiff's patent on a shoe-cutting machine, and promised orally before signing the contract to manufacture the machine and use best efforts to promote it. Defendant only made two machines, and plaintiff sued for fraud in tort to anull the contract. Does the parole evidence rule preclude a request to set aside a contract by the oral arrangement's contradicting the written contract? Held No; the oral arrangement isn't contracting the terms of the written contract, but instead there is a complaint of fraud based upon previous oral arrangement and the request is to set aside the agreement, not enforce a new term. [Why does this case say that extrinsic evidence would ever not be disallowed? Isn't it intrinsic parole evidence that's disallowed?]
LaFazia v. Howe, Supreme Court of Rhode Island, 575 A.2d 182 (1990): The Howes purchased a deli from plaintiffs Arthur LaFazia and Dennis Gasrow. The plaintiffs said that, as they dealt in cash, they didn't have records of income. They showed tax records, but said that the low numbers were not indicative of the actual income. The Howes were convinced the deli would make money, so they bought it. There were clauses in the contract stating that the Buyer was relying on their judgment, thta no representations or warranties were made, and that the agreement constituted the whole agreement. The business never was profitable, but the Howes kept paying on the contract. They finally sold the deli and refused to pay the rest. Plaintiffs filed a suit for the money, and the Howes filed a counter-claim for misrepresentation. Held The Howes cannot claim misrepresentation, because they understood and signed a contract that stated they had not relied on other representation, while represented by an attorney (who happened to be their son). This was more than a merger clause—it was specific that there was no other representation. If the non-reliance clause isn't true, then there is no way for two parties dealing at arms length to indicate no reliance. (A person induced by fraud may normally either sue on the contract to rescind the contract or sue in tort for damages.)
Rio Grande Jewelers Supply v. Data General Corp., 101 N.M. 798, 689 P.2d 1269 (1984): A buyer of a computer system sued claiming negligent representation of the system's capabilities. The contract disclaimed all prior representations. Held The plaintiff cannot collect damages, because if a contract that is valid under the UCC and has a valid disclaimer of warranties under UCC 2-316, allowing the claim to go forward would effectively allow the contract to be written and the UCC to be circumvented.
Hoffman v. Chapman, Court of Appeals of Maryland, 1943, 182 Md. 208, 34 A.2d 438: Joseph Stanley Hoffman and his wife sold a house on Lot 4 at Kensington, on which defendants lived after the agreement was made, but the draftsperson accidentally made up a deed conferring the entire lot, not just Lot 4. Plaintiffs sued in equity to have the deed modified. Should parole evidence be excluded from modifying the written agreement? Held No, because fraud, accident and mistake are exceptions to the parole rule. Is the agreement so vague that the contract must be void? Held No, a contract must be upheld if by its express terms or implications the intent of the parties can be determined. Here, there was no mistake between the parties as to the identity of the property, there was only an incorrect description. Is there unilateral negligence on the part of plaintiffs that would allow the defendants to keep the land? Held No, mere mistake does not necessarily indicate negligence, and the error of the draftperson modified the agreement to contradict the understanding of both parties, so it was not a unilateral mistake.
Bethlehem Steel Co. v. Turner Constr. Co., 2 N.Y.2d 456, 161 N.Y.S.2d 90, 141 N.E.2d 590 (1957): Plaintiff Bethlehem Steel contracted with a general contractor to furnish steel for a project. The contract said that prices could be adjusted up to $15 per ton if "prices for component materials, labor rates applicable to the fabrication and erection thereof and freight rates" increased or decreased. Bethlehem raised prices based upon steel items, and defendant said that the adjustment clause only referred to materials used to make steel. Held Plaintiff should be granted summary judgment, because when the clause is clear on its face, information extrinsic to the contract cannot be used to modify the written contract. Dissent The contract is ambiguous, and the plaintiff is trying to assign other meanings to commonly used language.
Robert Indus., Inc. v. Spence, 362 Mass. 751, 291 N.E.2d 407 (1973): While external evidence may not be used to contradict or change terms, the facts and circumstances surrounding the transaction may be used to elucidate that terms and remove or explain any uncertainty.
Pacific Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging Co., Supreme Court of California, 1968, 69 Cal.2d 33, 69 Cal.Rptr. 561, 442 P.2d 641: Defendant contracted to fix plaintiff's steam turbine, and the contract indemnified and insured the plaintiff against damage to property. Defendant damaged plaintiff's turbine during the work and plaintiff sued defendant. Defendant claimed the contract only referred to the property of third parties. Is the contract unambiguous on its face to disallow extrinsic information of the circumstances surrounding the contract? Held No. Even though extrinsic evidence may not be used if a contract is unambiguous, that extrinsic evidence of circumstances may be used to determine if the words of the contract actually are ambiguous. Words are mere symbols that represent ideas which may be different than those of the judge, and in California "magic words" may not override the intent of the parties.
Federal Dep. Ins. Corp. v. W.R. Grace & Co., 877 F.2d 614 (7th Cir.1989): Posner: The old "four corners" rule, limiting inerpretation to the words on the page if they appear unambiguous, has some merit by reducing litigation.
Spaulding v. Morse, 322 Mass. 149, 76 N.E.2d 137 (1947): Defendant and ex-wife had set up a trust that would pay son Richard D. Morse (through trustee) $1200/year until he entered college or university, and then pay him $2400/year for four years. When Richard joined the US Army, defendant stopped paying. Held Defendant doesn't have to pay. The agreement should be interpreted in light of the material circumstances and pertinent facts of which they had knowledge. The purpose of the trust was to provide for Richard's maintenance and education, and this was not needed when he was in the Army.
Allied Van Lines, Inc. v. Bratton, 351 So.2d 344 (Fla. 1977): Held One cannot defend against enforcement of a contract on the grounds that the party signed the contract without reading it.
Agricultural Ins. Co. v. Constantine, 144 Ohio St. 275, 58 N.E.2d 658 (1944): Woman parked her car at an attended parking lot twice a week for five or six years. She always received a ticket after leaving the keys in the ignition saying the parking lot was not liable for the car, but she never read it. One day she came back to find her car had been stolen and damaged, so she sued for the price she had to pay to repair the car after her insurance paid the rest. Was the woman bound to the terms on the ticket? Held No. 1) Since the attendant assumed control over the automobile, the defendant became a bailee, not a mere lessor of a parking space. 2) The ticket was only a "token of identification," not a bailment contract. The woman had never read it and the attendant had never pointed out what it said. 3) Even if she would have read the ticket, public policy does not allow bailees to relieve themselves of liability from negligence.
Mundy v. Lumberman's Mut. Cas. Co., United States Court of Appeals, First Circuit, 1986, 783 F.2d 21: Some silverware was stolen from the Mundys, and their insurance policy limited the liability for theft of silverware to $1,000. The insurance policy did not originally have such a limitation, and when the change occurred an update was sent out informing the Mundays of the change. The Mundays claim the notice was insufficient. Are the Mundays bound to the new terms? Held Yes; the notice included a distinctive heading noting that there had been changes, there was a special section noting the changes (including the one in question), and the actual new text was printed in its own section.
Weisz v. Parke-Bernet Galleries, Inc. 67 Misc.2d 1077, 325 N.Y.S.2d 576 (N.Y.Civ.Ct.1971): Weisz and Schwartz bought paintings purportedly by Raoul Dufy for ~$3,000 and ~$9,000, respectively, and then found out they were fakes. The Park-Bernet catalog contained a disclaiming stating that, although attempts had been made to verify authenticity, there was no warranty of such. The auctioneer also announced the disclaimer at the start of the auction. Held Weisz was not held to the disclaimer, because he didn't know about it. Held The Schwartz' are not bound by the disclaimer, because even though they knew about it the reputation of Park-Bernet and the form of the catalog gave the air of authenticity and implied that warnings should be taken lightly. [The judgment for Weisz was reversed because the display in the catalog was prominent and auctions have in general an implication of caveat emptor.]
Henningsen v. Bloomfield Motors, Inc., Supreme Court of New Jersey, 1960, 32 N.J. 358, 161 A.2d 69: Henningsen purchased a new car from Bloomfield. At ten days and 468 miles the steering wheel spun while his wife was driving and the car was totalled. The sales contract contained, in small print, a merger clause and a paragraph limiting the warranty to replacement of defective parts to 90 days or 4,000 miles, whichever was shorter. They sued to recover for personal injuries, and Bloomfield said that the warranty disclaimer precluded suits for personal injury. Is the warranty disclaimer valid? Held No. 1) The disclaimer was in a small font in the midst of other text that made it hard to find, and there is no evidence that the plaintiff ever read it. 2) As public policy, the dealership had unequal bargaining power in relation to the customer, so the warranty wasn't really bargained for—the salesperson didn't have the authority to change the clause if he would have wanted to. 3) Even if the warranty disclaimer were valid, it was ambiguous to a normal person because it made it seem like it was only limiting a warranty for parts, not for personal liability.
Superwood Corp. v. Siempelkamp Corp., 311 N.W.2d 159 (Minn.1981): Plaintiff purchased a press from defendant. The press failed and plaintiff sued defendant for negligence. Is a manufacturer of defective equipment liable in tort for negligence or strict liability? Held No, those are contracts-based issues that are covered by the UCC.
Richards v. Richards, Supreme Court of Wisconsin, 1994, 181 Wis.2d 1007, 513 N.W.2d 118: Mrs. Richards wanted to ride with her husband as he drove a truck for Monkem Co. They said that she could if she would sign a "Passenger Authorization" form that authorized her to ride in a particular vehicle, as well as purported to release Monkem from liability from any future injury in any Monkem vehicle or on any Monkem property. Mr. Richards had an accident, pinning Mrs. Richards in the truck, so she sued. Is the exculpatory contract valid? Held No, the exculpatory contract is void as against public policy. The point of tort law is to compensate people for their injuries and provide a deterrance for harmful behavior. Courts disfavor exculpatory contracts but do not categorically deny them. This contract had three problems, none of which alone would have invalidated the contract: 1) the exculpatory purpose is not evident from the title of the agreement; 2) the release is overly broad an all-inclusive, allowing riding in one vehicle but relieving liability for all vehicles;, and 3) it is a standardized form that did not give plaintiff any room to negotiate terms.
Broemmer v. Abortion Services of Phoenix, Supreme Court of Arizona, 1992, 173 Ariz. 148, 840 P.2d 1013: Plaintiff Broemmer was a 21-year-old unmarried high school student who went to get an abortion. The clinic provided her with a consent-to-operate form, a medical history form, and an agreement to arbitrate specifying that the arbitrators would be doctors, all of which the plaintiff filled out within five minutes. No one explained the contents of the form to her. During the operation she suffered a punctured uterus and sued for malpractice. Is the agreement to arbitrate an adhesion contract? Held Moeller: Yes. An adhesion contract is one offered to consumers with no opportunity to bargain without which the consumer cannot get the goods or services. It was offered on a take-it-or-leave-it basis, it was particularly advantageous to the clinic, no one explained the terms or indicated that she could refuse, and the terms were not negotiable. Is the adhesion contract enforceable? Held No. The courts like agreements to arbitrate, as they remove the load on the courts, but only if both parties agree to them. Adhesion contracts are not enforceable if they exceed the reasonable expectations of the plaintiff or if they are unconscionable. Here it wasn't clear that the plaintiff was waiving a right to a jury trial, and the high school girl still isn't quite sure what arbitration is. As it was beyond her expectations that the right to jury trial would be denied, the issue of unconscionability need not be addressed. Dissent Martone: This was clearly labeled as an agreement to arbitrate, and it was signed by an adult. How could this have went beyond plaintiff's "reasonable expectations?"
Darner Motor Sales, Inc. v. Universal Underwriters Ins. Co.: An insurance contract is essentially an adhesion contract, which Restatement (Second) of Contracts § 211 covers nicely.
Halbman v. Lemke, Supreme Court of Wisconsin, 1980, 99 Wis.2d 241, 298 N.W.2d 562: Lemke sold a car to Halbman for $1250, with Halbman paying $1000 and the title to be transferred after the balance was paid. At $1100, a connecting rod broke. Halbman took the car to a garage where the bill was $637.40, which Halbman did not pay. Lemke sent the title to Halbman, who returned it to Lemke and disaffirmed the contract. Lemke had the card towed to Halbman's father's residence, where it was vandalized. Is a minor who has entered into a contract for something that is not a necessity, having disaffirmed the contract and returned the property, liable for damage to the property? Held No. Absent any misrepresentation of age of the minor or other fraud, the minor is allowed to disaffirm a contract as long as the property is returned. To do otherwise would force Halbman to return more than is in his possession. This doctrine of incapacity or "infant doctrine" is to keep adults from cheating minors.
Webster Street Partnership v. Sheridan, 220 Neb. 9, 368 N.W.2d 439 (1985): Two minors rented an apartment then disaffirmed their lease and asked for their $500 back. The landlord sued for an additional $630 for accrued rent and expenses. Held A minor, upon disavowing a contract for a non-necessity, must be refunded the amount paid. Here the apartment is not a necessity, as the minors had a home with their parents in which to live.
Faber v. Sweet Style Mfg. Corp., Supreme Court of New York, Trial Term, 1963, 40 Misc.2d 212, 242 N.Y.S.2d 763: A manic-depressive plaintiff decided he was going to build a discount drug store and merchandise mart, so he quickly purchased land, secured an employee, hired an architect, hired laborers to begin digging, and secured State Department Labor approval. He went back to his psychiatrist saying his wife was keeping him from doing what he wanted to do. The contract for land was signed on 28 September, and the plaintiff was placed in a mental institution on 8 October. Later plaintiff wanted to rescind contract. Can a manic-depressive rescind a contract for lack of competence? Held Yes, if the status quo can be restored. Originally competence to contract referred simply to understanding, but "[i]incompetence to contract also exists when a contract is entered into under the compulsion of a mental disease or disorder but for which the contract would not have been made." This is determined by 1) testimony of the claimed incompetent, 2) testimony of psychiatrists, and 3) behavior of the claimed incompetent in the testimony of others. Here the plaintiff's actions to quickly secure the property and begin work were abnormal.
Ortelere v. Teachers' Retirement Bd., 25 N.Y.2d 196, 303 N.Y.S.2d 362, 250 N.E.2d 460 (1969): Grace Ortelere was on leave from school because of a nervous breakdown. She was diagnosed with involutional melancholia, which made it hard for her to make decisions. She soon died of cerebral arteriosclerosis. She elected during this time to have her retirement benefits paid to her without option, giving her a high monthly pay with no pay after her death. Her husband, who had quit his job to come care for her, then had no income after her death, and sued for invalidation of the retirement contract based upon her incompetance. Held The involutional melancholia is sufficient incompetence to void the contract. Tests for incompetence based solely on cognition are old, 19th Century tests that based upon outdated psychiatry and ignore modern recognition of other forms of mental problems. The Faber rule should be followed. The Board knew of the mental problems, because she was on leave for a nervous breakdown and her decision was irrational. Dissent A bright line test of "capacity to understand the nature and consequences of the transaction" may ignore those whose condition prevent them from exercising discipline, but is outweighed by preventing frivolous claims. Her choice could have been rational by providing income to support the family.
Farnum v. Silvano, 27 Mass.App.Ct. 536, 540 N.E.2d 202 (1989): Viola Farnum at 94, in a temporary state of lucidity, sold her house to her 27-year-old landscaper for half its value. At other times she was confused and incoherent. Is temporary lucidity enough competence to make a contract? Held No. While a will can be made during a lucid interval, capacity to contract requires more than simply a comprehension of what's going on: it requres an ability to understand the "nature and quality" of the transaction by understanding the context and implications of the decision. As the landscaper was aware of her incompetence, the contract is voidable.
Odorizzi v. Bloomfield School Dist., California District Court of Appeal, 1966, 246 Cal.App.2d 123, 54 Cal.Rptr. 533: Plaintiff was arrested on criminal charges of homosexuality. After being arrested, booked, questioned, released, and without sleep for 40 hours, the District superintendent and principal came to his home and said that he should immediately resign without time to consult an attorney or the District would suspend him and publicize the proceedings. Criminal charges were later dropped, so Odorizzi sued to get his position back. Was there duress or menace? Held No, the school representatives were acting within their legal bounds under the Education Code. Was there constructive fraud? Held No, there was no special confidential relationship beyond employer/employee that would show reliance on the opinions of another. Was there undue influence? Held Maybe. Undue influence takes unfair advantage of another's weekness of mind, necessities, or distress; or an application of excessive strength by a dominant subject against a servient object. The weaknessess do not have to be longlasting or wholly incapacitating, but may be a lack of full vigor. The jury could determine that plaintiff was incapacitated from excercising judgment by exhaution and emotional turmoil. Hints of overpersuasion are 1) discussion of transaction at an inappropriate time, 2) consummation of transaction in an unusual place, 3) demand that business be finished immediately, 4) extreme emphasis on consequences of delay, 5) use of multiple persuaders, 6) absence of third-party advisors, and 7) statements that there is no time to consult advisors.
Von Hake v. Thomas, 705 P.2d 766 (Utah 1985): Von Hake was 82 years old when his ranch he had owned for 40 years was going to be sold through foreclosure. Thomas persuaded Von Hake that he wanted to help save the ranch. Is there constructive fraud if Von Hake acts on the advice of Thomas? Held No. Without some special confidential relationship in which one completely takes over the will of someone else, there is only "garden variety" fraud.
Austin Instrument, Inc. v. Loral Corp., Court of Appeals of New York, 1971, 29 N.Y.2d 124, 324 N.Y.S.2d 22, 272 N.E.2d 533: The Navy contracted with Loral for $6 million for production of radar sets, so Loral subcontracted to Austin for parts. Loral was awarded another Navy contract and solicited more bids, and selected Austin for some of the 40 parts. Austin then said that, unless Loral would accept increased prices for the first subcontract and assign all 40 parts to Austin for the second subcontract, it would cease production. Loral checked all its other suppliers and no one could even start supplying in time, and the Navy's contract had all sorts of sanctions for late delivery, so Loral agreed. Three days after the last shipment from Austin, Loral filed an action to recoup the raised prices on a theory of duress. Held This is a classic case of duress. Loral couldn't renounce the Austin contract because it needed the parts for the Navy contract, and couldn't get them elsewhere. It was justified in waiting to file suit because of the likelihood that Austin would again cease production. Dissent The Appelate division already determined that there was no damage to Loral, so this court should not change that factual decision. Loral also should have checked other suppliers in addition to the ones with which it was familiar.
Smithwick v. Whitley, 152 N.C. 369, 67 S.E. 913 (1910): Plaintiff purchased ~14 acres from defendant at $35/acre. After three years of working the land, defendant said that the deal was off unless plaintiff paid $50/acre. To keep from losing the land, plaintiff paid the new price, got the deed, and then sued for the difference in price on a theory of duress. Held There was no duress. Duress only occurs when an unlawful act has deprived another of free will. The plaintiff should have sued in equity for performance of the contract rather than paying the higher price.
Wolf v. Marlton Corp., 57 N.J.Super. 278, 154 A.2d 625 (1959): Husband and wife Wolf bought from Marlton a parcel of land in a subdivision, paying a downpayment. After running into marriage difficulties, Mr. Wolf tried to back out and wanted all his money back. When Marlton refused, Wolf threatened to go through with the deal and sell the property to someone undesirable, but Marlton refused to even let Wolf to go through with the deal. Was Marlton's refusal to go through with the deal a breach of contract? Held Not with the duress of Wolf. Wolf's statements were duress, not because of their nature, but because of the malicious motives and the state of mind induced by the threats.
Alaska Packers' Ass'n v. Domenico, United States Court of Appeals, Ninth Circuit, 1902, 117 F. 99: A group of fishers contracted to work on a ship for the season, some for $50 and some for $60 (plus more for each fish caught). Out at sea, they got together and demanded $100 or they would stop working and return to San Francisco. As the company had invested a lot of money into the enterprise, the superintendent signed a new contract with them, while stating that he had no authority to do so. Is there valid consideration for a new contract with a higher price for work someone is already obligated to do, if the contract is made in the presence of necessity? Held No. One cannot introduce consideration by one's own wrong of refusing to perform on a contract. The new contract cannot be legally enforced, even if the party requesting better terms relied on the new contract, because that would allow that party to profit from breach of the first contract.
Schwartzreich v. Bauman-Basch, Inc., 231 N.Y. 196, 131 N.E. 887 (1921): Schwartzreich was a coat designer for Bauman making $90/week. Schwartzreich got an offer for $110/week and told Bauman, who said that he would raise his pay to $100/week if he would stay, because he had to get a sample line on the road soon. They tore up the old contract and made a new one. Bauman later discharged Schwartzreich, who sued. Is the second contract enforceable? Held Yes. Two parties can mutually rescind a contract and make another one, even at the same time. Once the first contract is rescinded, their mutual promises provide consideration for the second contract. [Later decisions have upheld the result but not the reasoning, deciding that recinding and creating a new contract cannot occur at the same time if the second has better terms to one party, because that raises doubt as to the mutuality of the rescinsion, and the rescinsion of the first and the creation of the second circularly rely on each other.]
Brian Constr. & Dev. Co. v. Brighenti, Supreme Court of Connecticut, 1978, 176 Conn. 162, 405 A.2d 72: Plaintiff entered into a contract with defendant to excavate a site, but upon digging found the remains of a basement of an old factory that no one had known about. The contract stipulated that any extra work would have to be authorized by a written modification. Defendant stopped work until plaintiff orally promised to pay for the additional work. After removing the rubble from the factory, plaintiff refused to sign a written amendment, so defendant stopped work. Is the new agreement a valid contract? Held Yes. A modification of a contract is valid if some unforeseen, burdensome condition is discovered during the performance of the original contract. For unforeseen circumstances, it matters not whether there is a requirement in the original contract that additions must be in writing.
Linz v. Schuck, 106 Md. 220, 67 A. 286 (1907): Contractor started excavation for owner and found an unforeseen swamp-like condition under the ground. Both parties agreed the work should be done for more money, and the contractor then completed the work. Held If there are unforeseen circumstances, the two parties may agree to a higher price; requiring explicitly rescinding the old contract would be a useless technicality.
Schaefer v. Brunswick Laundry, Inc., 116 N.J.L. 268, 183 A. 175 (1936): Brunswick contracted with D'Elia to build a power plant, who subcontracted with Schaefer to install steel. Schaefer's employees went on strike for a while, and Brunswick promised to pay for the equipment rental during that period. Can a third-party employee of a subcontractor's employee be held to an agreement based upon a pre-existing duty? Held No, Brunswick is not bound to the agreement to pay equipment rentals. While Brunswick was not a part of the actual agreement between general and subcontractor, it's not as if it was wholly independent, as the subcontract was part of the entire job.
Joseph Lande & Son, Inc. v. Wellsco Realty, 131 N.J.L. 191, 34 A.2d 418 (1943): Plaintiff Lande contracted with a general contractor to install heating units for a Wellsco. After the general contractor breached, Wellsco asked plaintiff to install the rest of the heaters. Held The subcontractor, after the general contractor's breach, was under no obligation to finish, and its benefits to Wellsco was sufficient consideration. Performance of a duty owed to a third party can be consideration—this is a minority view, but it is gaining popularity.
McDevitt v. Stokes, 174 Ky. 515, 192 S.W. 681 (1917): Stokes was employed by Shaw to drive horse Grace. Shaw promised Stokes $1,000 to drive Grade in the Kentucky Futurity and win, and he did. Shaw only paid Stokes $200. Held Shaw doesn't owe Stokes anything more. Stokes was already under an obligation by employment to drive Grace and try to win—if he would have not, he would have not been doing his job.
Universal Builders v. Moon Motor Lodge, Supreme Court of Pennsylvania, 1968, 430 Pa. 550, 244 A.2d 10: Moon hired Universal to build a motel and restaurant, and the contract specified that modification must be in a written, signed change order. When the masonry contractor's work wasn't good enough, Moon threatened to get rid of Universal, and induced Universal to accept a supplemental agreement in which Universal would pay Moon for damages and do extra work for Moon at no extra cost. [Somewhere here there must have ben a promise by Moon to pay Universal for the extra work.] Held The agreement for Moon to pay Universal must be upheld, even though it wasn't written. A condition is waived when enforcing it would approach fraud. An owner cannot request a builder to do work, stand by and watch it be done, and then claim nothing is owed because the change order was not in writing.
Nassau Trust Co. v. Montrose Concrete Prod. Corp., 56 N.Y.2d 175, 451 N.Y.S.2d 663, 436 N.E.2d 1265 (1982): There is a difference between orally modifying a contract, which requires consideration unless legislation allows it with writing, and orally waiving a right to require certain performance of the other party. A waiver can be withdrawn.
Cole Taylor Bank v. Truck Insurance Exchange, 51 F.3d 736 (7th Cir. 1995): A waiver, which is an intentional relinquishing of a right, can be implied. A waiver has a low standard of proof, although courts don't agree on what that standard is, but it is lower than modification of the contract and usually lower than estoppel.
Quigley v. Wilson, 474 N.W.2d 277 (Iowa Ct.App.1991): Quigley sold a farm to the Wilsons, but when they could not make the payments they wrote up another contract that reduced the overall price and the yearly payments. After Quigley was placed in a nursing home, his children as "co-conservators" sued the Wilsons on the original contract, saying the modifications did not have the needed consideration. Were the changes modifications or a waiver? Held The changes are modfications. They cannot be looked at as simply a waiver of interest payments or even of price, because even payment schedules were changed. Is consideration needed fo the changes to be valid? Held No, because the drastic fall in land prices and the seller's tax concerns constituted unforeseen circumstances under Restatement (Second) § 89.
Hackley v. Headley, Supreme Court of Michigan, 1881, 45 Mich. 569, 8 N.W. 511: Hackley hired Headley to cut logs and take them to the river. When it came time for Hackley to pay Headley ~$6000, Hackley disputed the measurement standard used and said he would only pay Headley $4000. Headley would have been financially ruined had he not taken the money, so he said he would sue Hackley but took the money and gave Hackley a receipt. Has duress occurred if the leverage of the compromise depends on the paricular circumstances of the plaintiff? Held No. Duress is when "one by the unlawful act of another is induced to make a contract or perform some act under circumstances which deprive him of the exercise of free will." duress is determined solely by the actions of the defendant. Here Hackley had nothing to do with Headley's dire financial condition, and not paying the full amount on time would have not been duress had Headley been financially well off. (It's not duress if the one doing the threatening has a right to perform the action.) [Headley sued again and won, saying instead of duress that Hackley tried to pay less than he knew he owed.]
Capps v. Georgia Pacific Corp., 253 Or. 248, 453 P.2d 935 (1969): Plaintiff found a lessee for defendant's land and was owed ~$150,000 (5% of the lease price). Defendant only paid plaintiff $5,000 and, since the plaintiff would have received nothing, gave a receipt for the $5,000. Held Duress exists when a threat depends on the financial condition of the plaintiff, reversing the holding in Hackley v. Headley. Concur If one party induces another to make a deal based upon the other party's dire financial conditions, many business transactions might be subject to a charge of duress. It would be better to simply say that a receipt for a payment less than what it's acknowledged is owed is invalid without consideration.
Marton Remodeling v. Jensen, Supreme Court of Utah, 1985, 706 P.2d 607: Jenson hired Marton to remodel his house on a "time and materials" basis. Jensen claimed the resulting total of ~$6500 was too expensive and sent a $5000 check with "...full and final satisfaction of ... claims ..." written on it. Marton responded that the amount was not enough, but then wrote "not full payment" below and cashed the check. Held The check was an accord and satisfaction as it was noted "paid in full" and covered a single, unliquidated claim that was a bona fide dispute. Held One cannot get around an accord and satisfaction by writing "not full payment" on the check, because the law favors an accord and satisfaction as a means of compromise and if a creditor can reserve rights on an accord and satisfaction, it would decrease its utility.
School Lines, Inc. v. Barcomb Motor Sales, 146 Vt. 336, 503 A.2d 131 (1985): Defendant agreed to pay plaintiff ~$16,500 for two bus bodies and issued a check, but then became irritated with difficulties in the deal, stopped payment on the check, and issued a new check for ~$15,000 on which was written "payment in full." Plaintiff wrote "accepted as partial payment" on the check and cashed it. Held There was no bona fide dispute over the price owed, so cashing a check for a smaller amount still allows the creditor to maintain an action for the balance.
Kilander v. Blickle Co., 280 Or. 425, 571 P.2d 503 (1977): A tendered "final payment" of a lesser amount doesn't need to have consideration to be an accord and satisfaction. If the UCC 1-207 applies, a creditor may have the option to collect the amount "under protest" until the other party requires the first to waive that option. [In 1995 the ALI amended UCC 1-207 to explicitly not apply to an accord and satisfaction.]
Wollums v. Horsley, Court of Appeals of Kentucky, 1892, 93 Ky. 582, 20 S.W. 781: John Wollums was a poor, uneducated mountain farmer. W. J. Horsley was a big-time business man who sent his agent (paying him $80) to purchase oil, gas, and mineral rights of Wollums' land for 40 cents per acre. The agent assured Wollums he would not be bothered by the contract within his lifetime, even though Horsley knew a railroad would be built near there soon. Horsley demanded a deed, but Wollums wouldn't give it, so Horsley sued for specific performance. Held Specific performance cannot be granted unless the contract was just and fair in all respects, and all material facts must be known by both parties. The party moving for specific performance has a higher burden than the one resisting. In this case, the contract is a "harsh bargain" because Horsley knew of land prices in the area and about the railroad, while Wollums did not.
Kleinberg v. Ratett, 252 N.Y. 236, 169 N.E. 289 (1929): After paying $2000 down on a piece of land warranted to be "free of all encumbrances," plaintiffs discovered that a stream of water went four feet undergound inside a 24-inch pipe, with open streams some distance from the land going in and going out. Should plaintiffs have restitution of the $2000? Held No, there was no fraud involved. Should defendant be granted specific performance? Held No, because plaintiff did not know about the water when they signed the contract. [So what should happen?]
Seymour v. Delancy, 3 Cow. (N.Y.) 445 (1824): Ellison was to convey to Seymour two farms in exchange for one third ownership in some lots (of which Ellison already owned two thirds). The value of the two farms were ~$12,500 according to some and $5,000-$6,000 according to others. Is specific performance appropriate? Held Yes, because the value to Ellison of getting the rest of ownership in the lots might have been more than the monetary value of those portions. Dissent The weight of evidence shows a disparity in value, and if that disparity constitutes fraud by shocking the conscience, specific performance cannot be granted because it doesn't take into account individual circumstances of the parties.
Marks v. Gates, 154 F. 481 (9th Cir. 1907): A perfectly legal agreement under seal said that Gates would convey to Marks 20% of all property acquired in Alaska. Marks gave Gates $1 consideration (although Marks later said that he had given gates $1000 cash and cancelled ~$11,000 worth of debt), and Gates later wound up with about $750,000 in mining claims. Held Specific performance should be denied. Although equity usually doesn't look at the adequacy of consideration when enforcing specific performance, in this case 1) the consideration was grossly inadequate, and 2) Gates wasn't obligated to go to Alaska and neither party knew the nature of the property that might be affected, so the deal was made "in the dark."
Waters v. Min Ltd., Supreme Judicial Court of Massachusetts, 1992, 412 Mass. 64, 587 N.E.2d 231: Plaintiff was injured when she was 12 years old, and she recieved a settlement with which she bought an annuity contract. She met defendant Beauchemin, who introduced her to drugs and became romantically involved with her. He convinced her to sell the contract, worth $189,000 in cash or $694,000 at term, for only $50,000 to defendants Min Ltd., who then forgave Beauchemin's debt. Plaintiff was not represented by legal counsel, although defendants were. Held The sale was unconscionable, and defendants must repay the annuity with $18,000 interest. Traditionally, unconscionability meant "such as no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other." Later it was restated as when "the sum total of its provisions drives too hard a bargain for a court of conscience to assist." Unconscionability is decided on a case-by-case basis, taking into account oppression, unfair surprise, gross disparity in consideration, high pressure sales tactics, and misrepresentation. Here defendant introduced plaintiff to drugs, exhausted her credit cards, initiated negotations, was an agent to the negotiations, and profited from the result. Plaintiff, unlike defendants, wasn't represented by legal counsel. The payment was one fourth the present worth of the annuity.
Williams v. Walker-Thommas Furniture Co., 350 F.2d 445 (D.C.Cir.1965): From 1957-1962 defendant Williams purchased household items from plaintiff on an installment basis, with an "add-on" clause in the contract that until all the sum total of all items were paid for, the plaintiff could repossess all goods previously purchased. Williams purchased a stereo for ~$500, already owing $164 on a prior purchase, and when she defaulted plaintiff tried to repossess all items she had purchased since 1957. Defendant had never had the contract explained to her, and many times had signed the contract without being given a copy. Held The contract was unconscionable. The court can find purchases unconscionable (both under common law and under the UCC § 2-302) if there is 1) a lack of meaningful choice on the part of one party and 2) contract terms that are unreasonably favorable to the other party. Reasonableness and fairness are determined in light of the circumstances existing when the contract was made.
Smith v. Price's Creameries, Supreme Court of New Mexico, 1982, 98 N.M. 541, 650 P.2d 825: The Smiths signed a distributor agreement with Price's. Although the Smiths maintain that during negotiations it was understood that the arrangement would go on as long as they performed satisfactorily, the contract allowed for termination for any reason upon 30 days' notice, followed by two years of non-competition. After about seven months, Price's gave a thirty-day notice of termination. Is the termination clause unconscionable and void as a matter of law? Held No, Mr. Smith had an opportunity to read the contract (the law assumes he read it, because he signed it), he was an educated man, and the text was clear. Just because a contract is a hard bargain doesn't make it unconscionable, if it was negotiated at arm's length and there is no affirmative showing of mistake, fraud, or illegality. Did Price's breach its obligation of good faith by terminating the contract? Held No, Price's didn't breach its obligation of good faith regardless of its reasons for termination of the agreement, because the contract, which was negotiated and signed in good faith, allowed Price's to terminate the agreement for any reason.
Tymshare, Inc. v. Covell, 727 F.2d 1145 (D.C.Cir.1984): The doctrine of good faith performance is really no different than the principle promoted by Judge Cardozo in Wood v. Lucy, Lady Duff-Gordon: a contract may imply certain duties. "Good faith" is distinct from removing clauses that cannot be upheld by law (such as damage liquidation clauses that amount to penalties), which may have been created in perfectly good faith.
Gianni Sport Ltd. v. Gantos, Inc., Court of Appeals of Michigan, 1986, 151 MichApp. 598, 391 N.W.2d 760: Defendant, a Michegan clothing retailer, signed a contract with a New York manufacturer and distributor of women's clothing. The contract had a clause allowing the defendant to cancel any unshipped or untimely orders for any reason. In June defendants placed an order to be shipped in October, and then canceled in late September. Plaintiffs negotiated to sell the canceled goods at 50% off, but then sued defendant. Held The termination clause was unconsionable because of 1) the parties' unequal bargaining power ande 2) the unreasonableness of the clause. Did the parties have equal bargaining power? Held No; this holiday order was ~20% of plaintiff's entire business that year, and defendant's sales were 20 times that of the plaintiff. Was the clause unreasonable? Held No. Although in many situations a canceled order could be set aside and sold to another customer, in the fast-moving women's clothing industry either a canceled order would have to be absorbed by the plaintiff or the plaintiff would have to negotiate with the defendant to sell the goods at a much lower price.
Martin v. Joseph Harris Co., 767 F.2d 296 (6th Cir. 1985): A seed seller sold seeds to a farmer, and the contract limited warranty for specific diseases. Held The limitation of remedy and warranty disclaimer clauses are unconscionable because the gross disparity of knowledge between the parties and technical language of the clauses, which the farmer didn't have the power to modify, effectively removed the "fundamental principle of freedom of contract" and shifted the risk of loss from diseased seeds to the party least able to discover the problems.
Jackson v. Seymour, Supreme Court of Appeals of Virginia, 1952, 193 Va. 735, 71 S.E.2d 181: Someone came and looked at Lucy Jackson's 31 acres of land and they discussed $275 for it, but the didn't strike a deal. Later Jackson needed money, so she went to her next-door brother, to whom she was close, and he bought the land, which she had never seen, for $275. Later he found out it had a lot of timber on it, of which he cut and sold about 148,055 feet of lumber worth about $20 per 1,000 feet. Held The contract should be rescinded because of constructive fraud. There was inadequate consideration, a confidential relationship of the parties (not at arm's length), the vendor was in pecuniary distress, and there was a mutual mistake. The law therefore declares the contract fraudulent because of its deception, without any moral guilt of the fraud feasor. If there had been intent to defraud, there would have been actual fraud. Inadequacy of consideration in itself is not enough—it's important that the two were not dealing at arm's length.
Sherwood v. Walker, Supreme Court of Michigan, 1887, 66 Mich. 568, 33 N.W. 919: Plaintiff purchased a cow at a beef price of $80 that the defendant thought was was barren and would not breed, and that plaintiff thought was barren but thought it might be able to breed. Defendant later found out the cow was pregnant, which would make it worth at least $750, and refused to deliver the cow. Held Morse: A defendant should be able to rescind a contract if the cow was sold on the understanding of both parties that it was barren and useless for breeding and it turns out it was not, because whether the cow is breedable or not goes to the whole substance of the agreement—it is not just a difference of some quality of the object. Even though the identify of the cow is not in question, "A barren cow is substantially a different creature than a breeding one." Dissent Sherwood: This wasn't a mutual mistake—both parties were in the dark on one attribute: whether the cow would breed. The plaintiff thought that it would, and defendant thought that it wouldn't and the plaintiff shouldn't be penalized just because it turned out he was right.
Aluminum Co. Of America v. Essex Group, 499 F.Supp. 53 (W.D.Pa.1980): A contract can be rescinded even if the other party is indifferent to the effects of a mutual mistake.
Beachcomber Coins, Inc. v. Boskett, 166 N.J.Super. 442, 400 A.2d 78 (1979): Plaintiff, a retail dealer in coins, purchased a coin from defendant, a part-time coin dealer, for $500. Defendant had purchased the coin for $450, and both thought the coin to be genuine. After the purchse, plaintiff found the coin to be a counterfeit. Held The contract can be rescinded because of a mutual mistake regarding an "essential fact." Restatement § 502 says that contracts can't be rescinded simply because both were in doubt regarding a fact, but in this case both parties mistakenly believed the coin to be genuine. Held The fact that plaintiff negligently failed to discover the mistake initially does not preclude recission, because the parties can be returned to the status quo.
Lenawee County Bd. of Health v. Messerly, 417 Mich. 17, 331 N.W.2d 203 (1982): Plaintiff bought an apartment for $25,500 believing it could be used for rental income, but soon after the sale health authorities condemned the building because of sewage problems and enjoined habitation, giving the property a negative value. Held There is a better formula than the distinction between "running to value" and "touching the substance of the consideration" as found in Sherwood v. Walker: whether a mistaken belief relates to a basic assumption of the parties upon which the contract is made and materially affects the agreed performance, but not relieving a party who has assumed the risk of loss in connection with the mistake.
Smith v. Zimbalist, 2 Cal.App.2d 324, 38 P.2d 170 (1934): Zimbalist, a famous violinist, visited the house of Smith, a collector of rare violins, and found what Zimbalist described to be a "Stradivarius" and a "Guarnerius." Smith said he would take $8,000 for both. They turned out to be cheap imitations. Held The contract stands because both parties were mistaken as to the "identify of the subject matter", and Zimbalist is the one who labeled the violins in the first place.
Gartner v. Eikill, 319 N.W.2d 397 (Minn.1982): Held The contract can be rescinded because each party thought the property valuable for commercial use. Even though the purchaser could have went to City Hall and checked on zoning, he wasn't negligent because he reasonably relied on the representation of the seller.
Elsinore Union Elementary School Dist. v. Kastorff, Supreme Court of California, 1960, 54 Cal.2d 380, 6 Cal.Rptr. 1, 353 P.2d 713: Defendant contrator was getting ready to submit his bid to the plaintiff school at the last minute when a lower plumbing bid came in. Defendant had made a sheet with a column on the left for subcontract bids and a column on the right carrying over the accepted ones to total. Erroneously thinking the right column already including a plumbing bid, he subtracted the difference between plumbing prices. The total therefore included no allowance for plumbing. The school accepted his bid, the lowest, and asked if it was correct; he conferred with his clerk in the hall and reported that it was. The day after his bid was accepted, defendant informed the school board of the mistake, but it voted to hold him to the amount. Held The contract may be rescinded because of a clerical error. The amount given without plumbing costs was unintended by the the defendant and unexpected by the plaintiff, as the plaintiff expected the bid to include plumbing. Held The defendant's error was not through negligence, even though he conferred in the hall and replied that that the figure was correct, because he had not yet had time to go examine his paperwork.
S.T.S. Transport Serv., Inc. v. Volvo White Truck Corp., 766 F.2d 1089 (7th Cir.1985): Usually the courts allow recission for clerical or mathematical errors appearing under reasonable care, because they are difficult to prevent and no social purpose or incentive is effected by enforcing such terms.
White v. Berrenda Mesa Water Dist., 7 Cal.App.3d 894, 87 Cal.Rptr. 338 (1970): White gave a bid of $427,890 for constructing a flood control reserve after making test drills and finding 10% hard rock. However, the entire area to be excavated extended well beyond that limited area and was composed of almost 50% hard rock. The next lowest bid was for $721,851. Held White's error, a negligent mix of fact and judgment, should allow his bid to be cancelled. The system should not allow bids to be withdrawn lightly, but the court should prevent abuses.
Hinson v. Jefferson, Supreme Court of North Carolina, 1975, 287 N.C. 422, 215 S.E.2d 102: Plaintiff purchased land 200 feet by 300 feet, and both parties understood the purpose of the purpose was to construct a residence there, as the deed gave restrictions on the type of residence. Before construction health officials discovered that the area was subject to flooding and denied plaintiff a deed for a septic system, making the property worthless for the intended use. Held A contract can be rescinded through break of implied warranty when the object in question is not fit for the intended purpose, and that shortcoming was not known by either party and could not have been discovered through a reasonable inspection. This is an exception to caveat emptor. Although previous mutual mistake cases were really "embryo implied warranty cases," the circumstances go beyond a mere mistake to address the implied usability of the object for some purpose.
Cook v. Salishan Properties, Inc., 279 Or. 333, 569 P.2d 1033 (1977): The plaintiff had purchased a long-term lease only to find the land suffered from soil erosion. Held Unlike the reasoning in Hinson v. Jefferson, raw land does not have a breach of implied warranty when neither party is at fault and the land could have been inspected before the purchase—otherwise, it would without reason punish the seller. The purchaser's necessary reliance on the seller is not as great as with a purchase of a home.
Johnson v. Healy, Supreme Court of Connecticut, 1978, 176 Conn. 97, 405 A.2d 54: The plaintiff bought a one-family house from its builder, who said that "there was nothing wrong with it." Over the next few years, damages was done to the sewage system because the foundation was unstable. This unstability dated back to an improper fill placed there before the defendant purchased the lot. Held A defendant is liabile even for an innocent misrepresentation, extending the developing warranty liability and consistent with the trend of limiting caveat emptor. Held The damages should be the cost of the repairs.
Cushman v. Kirby, Supreme Court of Vermont, 1987, 148 Vt. 571, 536 A.2d 550: The Cushmans bought a house from the Kirbys. At the second time they looked at the house, they saw a water treatment system in the basement and asked about the water. Mrs. Kirby said that the water was fine, just a little hard. Mr. Kirby was silent. It turns out the water was sulphur water (different from hard water, which contains calcium but doesn't smell or taste bad), which smelled and tasted terrible. Treatment would only bring it to a tolerable level of drinking, so the Cushmans paid $5,000 to be connected to city water. Held Mrs. Kirby made a fraudulent misrepresentation because she gave the impression that she had made a full disclosure when she did not. Held Mr. Kirby made a fraudulent misrepresentation because he was silent when Mrs. Kirby spoke her misrepresentation, and he has a seller had a duty to the buyers. Held The jury is allowed to assign damages for the price of hooking up to city water, as the remedy for fraudulent misrepresentation is the amount that would be needed to bring the plaintiff to the level they expected had there been no fraud.
Eytan v. Back, 374 A.2d 879 (D.C.App.1977): Plaintiffs went into a shop and paid $50 for each of three paintings they thought looked old. They turned out not to be original 19th century paintings, but reproductions placed in old frames. Held The shopkeeper had no legal duty to tell them the paintings were reproductions, because the low price should have put them on notice of that fact.
Taylor v. Caldwell, King's Bench, 1863, 3 Best & S. 826: Plaintiffs contracted to have use of The Surrey Gardens and Music Hall for four days for giving four grand concerts. After the contract but before the specified dates, the music hall burned down through no fault of either party. Held The defendant is excused from performance, because the contract contained an implicit condition of the continued existence of the concert halls, and defendants performance thereafter became impossible by the music hall being destroyed.
Roberts v. Lynn Ice Co., 187 Mass. 402, 73 N.E. 523 (1905): Plaintiff Robert made a contract with defendant to allow use of his ice house for over three years, but the ice house burned down before the term was finished. Robert sued for the remaining rents. Held The defendant owes the rents because the agreement was a lease, making Lynn effective owner even to the exclusion of Roberts. If the agreement had merely been a license, defendant would not owe for the nonexistent ice house.
Harrison v. Conlan, 92 Mass. 85 (1865): Plaintiff had contracted with a priest to play the organ, and the priest died and the church closed. Plaintiff sued for the entire $50. Held The contract effectively ended at the priest's death because the priest directed the worship services, making the organist's services dependant on the priest.
Tompkins v. Dudley, Court of Appeals of New York, 1862, 25 N.Y. 272: Plaintiff trustees of a school district sued Chambers, who had promised to build a school house, for the money they had advanced him. Chambers had promised to have the building finished by 1 October 1857, but by then he had about $60 worth of work left, including some painting and some window hanging. On 5 October 1857 the schoolhouse burned down, before acceptance by the plaintiffs and before delivery of the key. Held The plaintiff is liable for the structure. When someone contracts to perform, they are not liable if an unforeseeable catastrophe makes performance impossible, unless, as is here, they unconditionally agree to perform by a certain date. The liability should lie on the person who had taken responsibility for it. [But wasn't the contract breached on 1 October, and therefore the contract was over and the defendant owed the school district $60?]
Garman v. Hoover, 95 Pa.Super. 203 (1928): Plaintiffs agreed to build a house for defendants for $8,300, and the partially completed house burned down after $5,600 in progress payments had been made. Defendants had an insurance policy for $8,000 on the house and collected $5,609.10. Plaintiffs spent $7,968.59 building another house, and sued for the contract price without deducting the $5,600 progress payments. Held The defendant should deduct the progress payments, as they were not payments for successive stages but instead advance payments for the completed house. Held The plaintiff doesn't get any of the insurance proceeds—if the plaintiff wanted insurance proceeds, the plaintiff could have taken out insurance.
Carroll v. Bowersock, Supreme Court of Kansas, 1917, 100 Kan. 270, 164 P. 143: Plaintiff contracted to put in a new reinforced concrete floor in defendants warehouse. After the plaintiff removed the old floor, put in concrete footings, built wooden forms for buildling a concrete support, and installed reinforcing rods, the warehouse burned down without fault to either party. Held The plaintiff is due payment for the work according to the contract that benefitted the defendant—restitution—which includes cutting the old floor away and the completed concrete footings. The plaintiff cannot recover parts or labor for construction of the columns or forms, because these were temporary structures that did not give a benefit to the defendant. Dissent The reinforcing rods were part of the building and should be recovered for, too.
Olsson v. Moore, 590 N.E.2d 160 (Ind.Ct.App. 1992): The Moores answered an advertisement to buy Olsson's house and land. They wanted rennovations so, with the Moores' permission, they did extensive rennovations. They kept bargaining and, after the sale of the Moores' house closed, the house burned down. Held The Moores are due the restitution for the amount of work they put into the house. Although there was no contract for the work, they worked with the Olssons' permission and conveyed value to the Olssens; on the day of the fire, the Olssons still owned the house.
Lincoln Welding Works v. Ramirez, 98 Nev. 342, 647 P.2d 381 (1982): General contractor defendant for a sewage-lagoon project subcontracted to the plaintiff for sheet-piling work for $54,000. The contract obligated the subcontract to bear the risk of the entire project until accepted by the district. The plaintiff completed the work and was paid. A month later, but before aceptance by the district, a flood damaged a large part of the work, so the defendant asked the plaintiff to fix the problems. When the defendant asked for $19,000 for the additional work, the plaintiff claimed that extended work was incorporated into the original contract. Held The defendant does not have to pay for the additional work, because it was done as part of the original contract, under which the plaintiff promised to do all work to the satisfaction of the owner, contractor, and architect.
United States Fid. & Guar. Co. v. Parsons, 147 Miss. 335, 112 So. 469 (1927): A fire destroyed an almost-completed house. The contract had said that the owner must maintain insurance, but the owner did not. Held The risk of loss is still on the contractor. The fact that the contract held the owner to maintian insurance is one more reason to hold the owner contemplated a completed building.
Lucenti v. Cayuga Apartments, Inc., 48 N.Y.2d 530, 423 N.Y.S.2d 886, 399 N.E.2d 918 (1979): Under the Uniform Risk Act a vendor had contracted to sell land and two buildings for $108,000. Before title or possession was transferred, a building was destroyed by fire. The vendor suggested that the vendee take the proceeds of the vendor's expected insurance to rebuild, but vendee refused. After the vendor received $45,000, the vendor attempted to return the vendee's $1,000 deposit, saying that the vendee had cancelled the contract. Held There should be specfic performance, and the vendor owes from the insurance money $20,000 for the value of the building and $7,500 for the cost of removing its remains.
Louisville & Nashville R.R. Co. v. Crowe, 156 Ky. 27, 160 S.W. 759 (1913): Plaintiff gave railway a strip of land through his farm in return for annual rail passes between Kentucky and Tennessee for the rest of his life. When the Supreme Court outlawed such passes, the railroad would only give plaintiff some free trips between lines and denied further liability. Held The equitable thing to do would not be to give the land back, because of public interest reasons, but to require the railroad to pay the plaintiff for the value of the annual tickets, taking into account the rides the plaintiff has already taken.
The Isle of Mull, 278 F. 131 (4th Cir.1921): The Isles Steamship Co., a British corporation, charted the steamship The Isle of Mull for five years to plaintiff for GBP 1350/month. The British government assumed control of the steamship for the war, and paid the owner around GBP 2361/month. Is the plaintiff owed the difference? Held No, when the government took control of the vessel, the contract was "wholly discharged," and the owner gets the profit just as the owner would have had to live with any loss.
Kel Kim Corp. v. Central Markets, Inc., Court of Appeals of New York, 1987, 70 N.Y.2d 900, 524 N.Y.S.2d 384, 519 N.E.2d 295: Plaintiff Kel Kim leased a supermarket from defendants for 10 years with two 5-year renewal options. The contrat said that Kel Kim would maintain $500,000 single-person insurance and $1 million per-accident insurance. The contract contained a force majeure clause that excused performance "by reason of labor disputes, inability to procure materials, failure of utility service, restrictive governmental laws or regulations, riots, insurrection, war, adverse weather, war, Acts of God, or other similar causes beyond the control of such party ...." The insurance carrier gave Kel Kim notice that it wouldn't renew insurance coverage, and Kel Kim was unable to find alternate insurance. Defendants gave notice of default and ordered Kel Kim to vacate the premises within 30 days. Should Kel Kim be excused from performance because of impossibility? Held No, impossibility is a narrow defense regarding the destruction of the object of the contract. Kel Kim should have made allowance to find insurance. Should Kel Kim be excused from perforamce because of force majeure? Held No, force majeure clauses should be narrowly interpreted, and losing insurance is substantially different than the kinds day-to-day commercial operations listed.
Bunge Corp. v. Recker, United States Court of Appeals, Eighth Circuit, 1975, 519 F.2d 449: Farmer Recker made an agreement, one of a series of agreements, with the plaintiff for 10,000 bushels of No. 2 yellow soybeans for $3.35/bushel. The contract was for any soybeans, as long as they were grown in the continental US. Severe winter weather struck Missouri, and in January, when the market price for beans were $4.98, plaintiff visited defendant and saw that the beans in the field could not be harvested. Plaintiff extended the deadline until April, at which time the price of beans was up to $5.50. Held The farmer cannot claim a UCC 2-613 act of God defense, becuase the contract was for any old beans, not the particular ones damaged in the field. Held The defendant might be able to reduce damages by fixing the breach date in January and using the lower bean market price, claiming that the plaintiff had extended the due date in bad faith under UCC 2-613, but the defendant would have to raise that defense and it would have to be tried—the damages cannot be reduced if the bad faith defense has not been raised and tried.
Snipes Mountain Co. v. Benz Bros. & Co., 162 Wash. 334, 298 P. 714 (1931): Plaintiff grower contracted to sell 100 tons of potatoes, it being understood that they were being grown by the grower. Natural causes caused a small yield, and plaintiff could only deliver 64 tons. The plaintiff sued for payment of the 64 tons, and defendant counterclaimed for damages for the undelivered 36 tons. Held The plaintiff is excused from producing the 36 tons, because there was an implied condition in the contract that the plaintiff would be able to produce all 100 tons. As this was understood by both parties, the contract can be modified to specify, "potatoes grown on the followin described premises."
Whitman v. Anglum, 92 Conn. 392, 103 A. 114 (1918): Plaintiff milk peddler Whitman contracted with Anglum to buy from Anglum 175 quarts of milk per day. Whitman was to pick up the milk from Anglum. If Whitman didn't take the milk, Whitman was to pay ayway. If Anglum didn't produce, Anglum was to have been liable. Connecticut's commissioner of animals quarantined Anglum's cattle, and even Anglum himself was not allowed to leave the farm. The cows were then killed to prevent the spread of foot and mouth disease. Held Anglum is still liable, because this was an "absolute and unconditional undertaking" to deliver milk daily. Even if the contract had Whitman coming to get the milk, which he couldn't do because of the quarantine, the delivery could have been performed "substantially if not literally" by getting milk from elsewhere.
Mineral Park Land Co. v. Howard, 172 Cal. 289, 156 P. 458 (1916): Defendants were building a bridge across a ravine for public authorities, and contracted with plaintiff to haul all the gravel and earth needed for the bridge from plaintiff's land in the ravine. After defendants had removed about half the quantity they needed, they procured the other half from another supplier because the rest lay below water level and would have cost 10 to 12 times the normal cost to get it out. Held The defendant is excused from performing because of impossibility, which is the same as "not practicable" here. Impossibility can apply to a substantially unexpected cost, but not performance that would simply be more expensive than anticipated or would entail a loss.
American Trading & Prod. Corp. v. Shell Int'l Marine, Ltd., United States Court of Appeals, Second Circuit, 1972, 453 F.2d 939: Defendant Shell charted an American Trading vessel to transport cargo from Texas to India for ~$400,000, which was calculated based on the American Tanker Rate Schedule (ATRS) for transport through the Suez Canal. Because of war the Suez Canal was closed, forcing the vessel to navigate the Cape of Good Hope, arriving in India 30 days late and taking a trip twice as many miles. American Trading sued defendant for an extra ~$130,000. Held The closing of the Suez Canal does not provide an excuse of impossibility, because the contract did not stipulate an exclusive route, and the price calculation at most indicated that the Suez Canal was the most probable route. Held There is no excuse of commercial impractibility (Restatement of Contracts § 454 (1932)), because the extra costs incurred were only 1/3 of the total price. The alternate route was well recognized. Moreover, the captain was alerted to instability in the region far enough in advance to have diverted and avoided some expenses.
Maple Farms, Inc. v. City School Dist., 76 Misc.2d 1080, 352 N.Y.S.2d 784 (1974): Plaintiff milk seller had for years sold milk to school districts and for years the price of raw milk had been mandated by the U.S. Department of Agriculture. The Department mandated a 20% increase, which would have caused plaintiff to lose over $7,000 if forced to perform. Held Even if the price increase was related to unanticipated grain-crop failures and large amounts of American grain sold to Russia, any business person could have anticipated a price increase. Prices fluctuate, and the price had risen 9.5% the year before.
Mishara Constr. Co. v. Transit-Mixed Concrete Corp., 365 Mass. 122, 310 N.E.2d 363 (1974): Mishara, a contractor, contracted with subcontractor Transit to deliver cement when Mishara wanted it. Because of a picket line, Transit didn't deliver contract and Mishara bought it elsewhere. Mishara sued for the cover damages, and wanted the just to instruct that Transit "was required to comply with the contract regardless of picket lines, strikes, or labor difficulties." Held Sometimes picket lines present commercial impractibility, sometimes they are only inconveniences. Sometimes they are foreseen, other times they are a surprise. It depends on the circumstances.
Krell v. Henry, Court of Appeal, 1903, [1903] 2 K.B. 740: Plaintiff Krell advertised a room with windows perfect for viewing the King's procession, and defendant Henry came and looked at the room and asked the housekeeper about it. In letters, Henry agreed to rent the room for GBP 75 for two days (not the nights). The King fell ill and did not process, so Krell sued for the GBP 50 balance and Henry counter-claimed for his GBP 25 deposit. Held If it appears that a contract depended on the existence of something, the contract shall be considered to have an implied contract regarding the existence of the thing. Allowing parole evidence to be introduced, it's clear that the King's procession was the foundation of the contract, even though the letters making up the contract didn't state that. The criteria are: 1) The thing was the foundation of the contract. 2) The thing was prevented. 3) The event preventing the thing was unforeseen.
Lloyd v. Murphy, Supreme Court of California, 1944, 25 Cal.2d 48, 153 P.2d 47: On August 4, 1941, plaintiffs leased to defendant for five years land on which to sell new automobiles, do repairs, and sell gasoline. In early 1942 the government ordered a hold on new car sales, then allowed limited sales using a system of priorities. Defendant, who continued selling new cars elsewhere, breached the contract claiming commercial frustration, in which "Performance remains possible but the expected value of performance to the party seeking to be excused has been destroyed by a fortuitous event, which supervenes to cause an actual but not literal failure of consideration...." Held There was no commercial frustration. 1) The risk of the frustrating event must be reasonably unforeseeable (as the purpose of a contract is to give a businessman some certainty), but here the risk of war and the government's previous actions made new car sale restrictions foreseeable. 2) The value of the lease has not been destroyed, because the sale of automobiles have not been made impossible, only restricted. Defendant, after all, continues to sell automobiles on other property.
Weyerhaeuser Real Estate Co. v. Stoneway Concrete, Inc., 96 Wash.2d 558, 637 P.2d 647 (1981): Plaintiff leased mineral rights to Stoneway for nine years to strip mining of sand and gravel. The contract said that payment would be made even if Stoneway didn't get any minerals from the land, and required a one-year notice before termination even if getting minerals from the land became uneconomical. Both parties expected up to a two-year wait to obtain permits, but because of an unexpected public outcry over the environmental effects of strip mining the permits were not granted after five years. Held Stoneway may break the lease because there was frustration of purpose. While both parties expected a slight delay, it was totally unexpected that permits would be impossible to obtain. Dissent It doesn't make sense to say that it's expected that permits be difficult to obtain, yet say that it's unexpected that permits would be impossible to obtain.
Chase Precast Corp. v. John J. Paonessa Co., Supreme Judicial Court of Massachusetts, 1991, 409 Mass. 371, 566 N.E.2d 603: The Commonwealth, throught the deparatment of public works, hired Paonessa to install concrete barriers in place of a grass median. Paonessa contracted with Chase to supply the concrete barriers. The department-Chase contract contained a standard provision allowing the department to eliminate portions of work it found unnecessary. The Paonessa contract held no such provision. After a public outcry against the project, Paonessa stopped work and frustration of purpose (commercial impractibility) in which "a party's principal purpose is substantially frustrated without his fault" by the the occurrence of csome event removing a basic assumption on which the contract was made, under Restatement (Second) of Contracts § 265 (1981). Chase sued. Held Paonessa is relieved of further performance because the circumstances were unforeseen and Paonessa didn't take on the risk of a reduction in the quantity of barriers. Even though there was no clause in the Chase contract removing assumption of risk from Paonessa, Chase had supplied barriers before and knew about the standard clause as was in the department's contract, and about the "Unit Price Philosophy" in the construction industry which only the quantity of work actually accepted is paid for.
Glaholm v. Hays, 2 Mann & Granger 257 (1841): A vessel was chartered to leave England on February 4 and go to Trieste, pick up some cargo, sail to England to get paid for the freight. The shipowner sued the freighters for refusing to accept the vessel, but the freighters pointed out the ship hadn't left on February 4. Held It makes more sense here to view the February 4 stipulation as a condition precedent to performance rather than a promise with damages as a remedy. Both parties were aware that the success of the venture dependend upon the commencement of the voyage on time.
Howard v. Federal Crop Ins. Corp., United States Court of Appeals, Fourth Circuit, 1976, 540 F.2d 695: The Howards allege that their tobacco crop was damaged by heavy rains. Before inspection by the insurance company, the plaintiffs plowed under the tobacco crops. The insurance agreement stated in 5(b) that it is a condition precendent to payment that the plaintiff establish the production of the crop and that the crop was damaged. In 5(f) it read that the crops shall not be destroyed until the insurance company makes an inspection. Held Section 5(f) does not on its fact make not plowing under crops a condition precedent to payment. It doesn't say that payment will be withheld if crops are destroyed. The two clauses don't purport to state the same kind of thing using different words, as might "condition precedent" and "warrant". It is undecided whether 5(f) was inserted because, if the crops were destroyed, proof would be impossible or simply more difficult—it is simply decided that 5(f) doesn't necessarily make not plowing under crops a condition precedent to payment.
Merrit Hill Vineyards, Inc. v. Windy Heights Vineyard, Inc., 61 N.Y.2d 106, 472 N.Y.S.2d 592, 460 N.E.2d 1077 (1984): Plaintiff purchaser of a house found out that defendants had failed to secure a title insurance policy and a FHA mortgage confirmation statement. Plaintiff sued for return of deposit and for damages for defendant's failure to perform. Held The securing of the two items were conditions precedent to the formation of the contract, as they were under a section entitled "Conditions Precedent to Purchaser's Obligation to Close." Held Plaintiff is due only the return of the deposit, not further damages, because failure to fulfill a condition precedent is not a breach of contract subjecting the defendant to damages.
Gray v. Gardner, Supreme Judicial Court of Massachusetts, 1821, 17 Mass. 188: An agreement with whaling oil traders promised to pay the traders $5198.87 for a past shipment, but that if future shipments were more than the previous year, that obligation would be void. The ship Lady Adams neared Nantucket carrying oil, but had not arrived at the dock and drop anchor by the end of the specified period, so plaintiff sued for payment of the amount, as the shipments had not arrived to surpass those of the previous year. Held A ship at see, even if in sight, has not arrived, and so this condition that would relieve the defendant of an obligation did not occur.
Parsons v. Bristol Dev. Co., Supreme Court of California, 1965, 62 Cal.2d 861, 44 Cal.Rptr. 767, 402 P.2d 839: Bristol hired plaintiff to architect and construct a building. The agreement in 4(b) stipulated that phase two of the project would be conditioned on Bristol's obtaining a loan. The agreement also said in 4(d) that if any work was abandoned or suspended, the architect would be paid for services rendered. Bristol thought the loan was going to go through and told the plaintiff to continue with phase two, paying plaintiff 25% in advance as the contract required, and then the loan fell through and Bristol stopped the project. Held The plaintiff is not due damages over the 25% already paid, because securing the loan was a condition precedent to the second phase. Held Section 4(d) does not provide an alternate source of payment, it only provides an acceleration of payment—it assumes the loan has been obtained, as is references the terms in 4(b). Held The condition precedent is valid, even though the condition related to the defendant, because Bristol tried to obtain the loan in good faith. Held Plaintiff cannot be paid under collateral estoppel, because Bristol never claimed that the funds had been obtained, it simply told plaintiff to go ahead with phase two. Held There is no evidence that Bristol breached its duty to give plaintiff notice when the funds did not come through, and if there were such evidence, there is no evidence that plaintiff was harmed by any such delay.
Seldeen v. Canby, 259 Md. 526, 270 A.2d 485 (1970): Held When one party conditions performance on something being available, there is an obligation on that party to act to attempt to get that object.
Mascioni v. I.B. Miller, Inc., Court of Appeals of New York, 1933, 261 N.Y. 1, 184 N.E. 473: Plaintiffs worked as a subcontractor under defendants, who were were working for the owner. The contract said that "Payments [are] to be made [to the plaintiffs] as received from the Owner." The owner didn't pay defendants, so they didn't pay plaintiffs. The trial judge allowed parole evidence that showed the plaintiffs expressly assummed the risk they might never be paid. Did the clause create a condition precedent to payment, or merely fix the time of payment to coincide with owner payments, thereby creating a unconditional obligation to pay plaintiffs? Held The clause should be interpreted as a condition precedent, because the trial judge through the parole evidence showed that, while the defendants originally held the risk of lack of owner payment, they transferred that risk to the plaintiff through this clause. (As this construction is possible with the given text, it's not necessary to decide whether the text unambiguously stated one way or another.)
Ewell v. Landing, 199 Md. 68, 85 A.2d 475 (1952): Landing loaned cash to Payne, who promised to repay him when he had "sold his timber." Payne died and it is wasn't proved whether Payne had sold his timber. Held The intention of the parties is that Payne unconditionally owed Landing money in return, and the selling of the timber was simply a convenient event to which to bind the time of repayment.
Amies v. Wesnofske, 255 N.Y. 156, 174 N.E. 436 (1931): The Wesnofskes hired Amies and Hines, real estate brokers, to find a buyer for a house, promising them half on signing of a contract and half on closing. The plaintiffs found buyers, but after signing the contract the buyers couldn't get the finance they wanted and backed out of the sale. Plaintiffs sued for the other half. Held Signing was a condition precedent to payment of the other half, and the words "when" and "after" should be construed to mean "if." Held If the seller would have actively prevented the sale, they would have destroyed the condition precedent, but here they were neutral so the condition precedent stands.
Royal-Globe Ins. Co. v. Craven, Supreme Judicial Court of Massachusetts, 1992, 411 Mass. 629, 585 N.E.2d 315: Craven's insurance policy contained a 24-hour notice requirement for hit-and-run accidents, and required that she "promptly" report accidents. Craven had an accident and didn't report it until four months later, three months after she was released from intensive care. Held Even if Craven is released from the 24-hour-requirement because she was disabled, that only tolls the requirement, and does not remove it, so that after her disability she is still required to promptly report the accident. Held Royal-Globe is not estopped from denying her liability because of failure of notice by its initially processing her claim, because estoppel only occurs when the estopped party induces the other party to perform some action. Here Craven had already performed the action of not submitting the claim on time before Royal-Globe's actions occured. Held Royal-Globe is not liable for Craven's accident, because her notice was not prompt as required by the agreement.
Semmes v. Hartford Ins. Co., 80 U.S. (13 Wall.) 158 (1871): Plaintiff suffered a loss by fire and brought a suit to his fire insurance company six years later. The plaintiff claimed that the 12-month limitation on bringing an action imposed by the contract should be suspended because of the civil war, but the lower court said that the limitation was like a statute of limitations, and the disability of war only suspended the obligation temporarily, and because the period before the war and after the war adds up to over 12 months, the plaintiff cannot bring the action. Held A contract requirement doesn't come from the same legal source as a statute of limitations, and it isn't subject to the same restrictions. Limitations in a contract don't open and close during disabilities, creating an accumulation of time. The war made compliance with the contract impossible, completely removing the bar to the plaintiff's recovery.
Monteiro v. American Home Assurance Co., 177 Conn. 281, 416 A.2d 1189 (1979): Plaintiff filed an insurance claim two years after a fire on a contract with a 12-month limitation. Plaintiff requested that the limitation be suspended because his attorney was mentally ill during those 12 months. Held although a contract for service is subject to an implied legal condition that the party be physically able to perform, but the attorney was not a party to the contract.
New York Life Ins. Co. v. Statham, 93 U.S. (3 Otto) 24 (1876): Life insurance policies were subject to cancellation for non-payment of premiums, but the government after the start of the Civil War outlawed payments between North and South. Held Plaintiff was prevented by the government from paying through no fault of the insured, so restitution is due of the premiums paid minus the benefits enjoyed.
Gilbert v. Globe & Rutgers Fire Ins. Co., Supreme Court of Oregon, 1919, 91 Or. 59, 174 P. 1161, 178 P. 358: Defendant insurance company told plaintiff that it would be paying for fire damage that occurred in 1912, but after a year the insurance company made clear that it was not going to pay. The plaintiff brought an action in 1916. The insurance agreement said that actions must be filed within 12 months. Held The insurance company does not have to pay. The insurance company was estopped from invoking the limitation clause while they were claiming to pay the amount, but after the plaintiff was aware they insurance company was not going to pay, the estoppel was removed and the plaintiff did not bring the suit within 12 months after that. Did the defendant waive the limitation by its promise to pay, and is the limitation permanently removed because of the waiver? Held No; there is a difference between a waiver and an estoppel. A waiver is a voluntary giving up of a right, while here estoppel is a condition where a party's own actions by law prevent them from doing something, and estoppel can be removed here upon notification. Does Semmes v. Hartford Ins. Co. indicate that, once a clause is removed, it is removed for good? Held No, Semmes was about an impossibility that arose out of the control of either party, not an estoppel as is the case here.
Gilbert Frank Corp. v. Federal Ins. Co., 70 N.Y.2d 966, 525 N.Y.S.2d 793, 520 N.E.2d 512 (1988): Held Insurance company is not estopped from invoking 12-month limitation, because its offer to settle the claim (which defendant rejected) did not lull the plaintiff into thinking that the limitation was not in force. Besides, the offer was made after the end of the limitations period, so there was nothing the plaintiff could have relied that would create estoppel.
Doctorman v. Schroeder, 92 N.J.Eq. 676, 114 A. 810 (1921): A contract declared that "time is of the essence," and said that $1500 would be made on 19 December or payments would be forfeited and the agreement nullified. On that date vendee could only pay $500, so the vendor agreed to extend the deadline to 2:30pm on 20 December if the payment would be made in cash. Vendee arrived with the $1000 in cash at 3:00pm. Held Both parties agreed to the specified the deadline, so there's no reason not to uphold it, even if the vendee was late by only minutes.
Sahadi v. Continental Illinois Nat'l Bank & Trust Co. of Chicago, 706 F.2d 193 (7th Cir.1983): A bank argued that no materiality analysis be conducted because the contract expressly stated that a payment must be made on or before a certain date. Held A "condition" and whether something is "material" are really the same thing. It must be determined if payment on the certain date really is a condition, and such a determination cannot be made mechanistically.
Porter v. Harrington, Supreme Judicial Court of Massachusetts, 1928, 262 Mass. 203, 159 N.E. 530: Plaintiff contracted to buy two lots for $60 up front and $10 per month until the balance was paid off. The contract stated that time was of the essence and that if prompt payment was not made, everything would be forfeited at "liquidated damages." One lot was paid for after three years. The year after that plaintiff made no payments, then for the next three years plaintiff made $60 in installments, another $60 in installments, and then $40 in one lump sum. The next year, when plaintiff tried to pay $30, the defendant said that defendant had "excercised the option" and closed the account, even though the plaintiff was ready to pay the entire amount in full. Held The plaintiff is allowed to continue the contract. The contract should normally be upheld as to its provisions for lack of prompt payment, but a contract must go out of its way if it wants to prevent a waiver by one party. In this instance, the defendant's continued acceptance of late payments lulled the plaintiff into thinking that the plaintiff could pay late, and it would be unconscionable to forfeit all of plaintiff's rights with no warning.
Bead Chain Mfg. Co. v. Saxton Products, 183 Conn. 266, 439 A.2d 314 (1981): Held Under the UCC, a buyer's delay in rejecting and notifying seller of late deliveries waived the time-essence clause that and obligated the buyer to accept the late deliveries.
Clark v. West, Court of Appeals of New York, 1908, 193 N.Y. 349, 86 N.E. 1: The defendant hired plaintiff to write three law books, and made a contract that said that plaintiff would be paid $2 per page for each book, and and extra $4 per page if the plaintiff abstained from alcohol. After completion of the books, defendant refused to pay the extra $4 because plaintiff had not completely abstained from alcohol, but plaintiff alleged that defendant had waived this part of the contract. Are the two prices, $2 and $4, consideration for writing the book and consideration for abstaining from alcohol, which would mean that the consideration could not be waived; or is abstaining from alcohol a condition precedent to fulfilling the contract, which can be waived? Held The condition of abstaining from alcohol can be waived by the defendant. The subject of the contract was writing books, not abstaining from alcohol, and abstaining from alcohol was just to ensure timely and quality deliverables; as such it can be waived. The contract shows that the agreed upon worth of the work was $2 per page. Held By accepting the first book and paying $2 per page, knowing plaintiff had not completely abstained from alcohol, but telling plaintiff that the full amount would be paid even though plaintiff had not strictly abstained, the defendant effectively waived its rights to the condition precedent of abstaining from alcohol.
Schultz v. Los Angeles Dons, Inc., 107 Cal.App.2d 718, 238 P.2d 73 (1951): A football player's contract said that he would not be dismissed in event of an injury if the injury was reported in writing to the Club within 10 days. The plaintiff was injured and Club doctors examined the player, reported to the Club, which reported the information to its insurance company. The Club tried to terminate the plaintiff's contract, paying him only $500 of $8,000, because of his failure to provide written notice as stated in the contract. Held The purpose of the notice was to make sure the defendant was aware of any injury so that doctors could attend to it, and so that it could be reported to the insurance company. By having doctors examine the patient, accepting a status report from the doctors, and sending a report to the insurance company, the Club waived its right to terminate the contract because of failure to give written notice of injury. For the player to actually give a written notice to the Club under the circumstances would have been a redundant, "idle act."
Inman v. Clyde Hall Drilling Co., Supreme Court of Alaska, 1962, 369 P.2d 498: Inman was employed by defendant until they terminated his employement. His employment contract had said that he must notify the company within 30 days for any claims, and that he must not file suit before six months from the notice. The contract further said that this was a condition precedent to any recovery. Inman filed a suit for wrongful termination less than a month later. Did plaintiff's lawsuit provide enough notice to the defendant? Held No, the contract plainly says that the notice must be made six months before filing a suit. Is the condition precedent void as against public policy? Held No; although the courts should not enforce decisions that result in unfairness, there is no evidence that what the parties agreed to are unreasonable—there's not even any indication of why such a requirement was made. Both parties knew and understood the condition. Isn't non-compliance with the contract something that the defendant must raise as a defense during the trial, and not really a condition precedent (even though the defendant calls it that) that must be satisfied before the trial? Held No, both parties agreed that this would be a condition precedent to recovery that plaintiff must meet, not an affirmative defense the defendant must raise. If the defendant breached the contract, doesn't that excuse the plaintiff from the condition precedent provision? Held No, if the defendant breached one part of the contract it doesn't relieve a condition in another part of the contract precedent to recovery by the plaintiff.
Aetna Cas. & Sur. Co. v. Murphy, Supreme Court of Connecticut, 1988, 206 Conn. 409, 538 A.2d 219: Murphy was a third-party plaintiff dentist who impleaded third-party defendant Chubb Group insurance company. Chubb moved for summary judgment on the grounds that Murphy had failed to comply with the reasonably timely notice provision in the insurance agreement by waiting two years before reporting that he was being sued by Aetna for the way he dismantled his office when terminating a lease with Hopmeadow Professional Center. Held If the insurer suffered no material prejudice from the delay, the noncompliance with the condition of timely notice can be excused because it is not a material part of the contract. This is only true if: 1) This was a contract of adhesion; 2) Literal enforcement would result in forfeiture, relieving Chubb from any obligation; and 3) There might be something short of forfeiture that could protect Chubb's interest. Held Summary judgment against Murphy is appropriate. The burden of proving the insurance company was not materially prejudiced is on the insured seeking to be excused, and Murphy has not met that burden.
Grenier v. Compratt Constr. Co., Supreme Court of Connecticut, 1983, 189 Conn. 144, 454 A.2d 1289: Plaintiffs Grenier entered into a settlement agreement under which they would complete blasting work on roads by June 30 and receive $25,500. The contract required a certificate of occupancy to be acquired from the city engineer. The plaintiffs completed the roads by that date, the city engineer did not normally issue such certificates so on July 10 the assistant city attorney authorized the building inspector to issue such a certificate. The contract had a liquidated damages clause that allowed escalating "penalties." Held The plaintiffs are excused from getting the certificate, not because of substantial performance, but because getting the certificate was impractical—alternately, the independent party was acting in bad faith—and the certificate was not material to the contract: the subject of the contract was building roads, not getting certificates. Held The liquidated damage clause is not invalidated just because it uses the word "penalty" or because it contained escalating damages.
Loyal Erectors, Inc. v. Hamilton & Son, Inc., 312 A.2d 748 (Me.1973): Progress payments are for protection of the builder, and a retainage fund contingent upon expert approval is for the protection of the owner.
Second Nat'l Bank. v. Pan-American Bridge Co., 183 F. 391 (6th Cir.1910): Held The condition precedent that the architect issue a certificate of acceptance of the contractor's work can be set aside by a showing of bad faith by the architect—not merely from a showing of conformity of the work and/or "unreasonably and unfairly" withholding the certificate.
Maurer v. School Dist. No. 1, 186 Mich. 223, 152 N.W. 999 (1915): Held Plaintiffs were not at fault for the architect not issuing a certificate of acceptance, because the architect withheld the certificate because of a delay, and the contract only allowed the architect to withhold the certificate because of noncompletion of the work.
Nolan v. Whitney, Court of Appeals of New York, 1882, 88 N.Y. 648: Nolan contracted to do mason work for the two buildings in Brooklyn, and was paid installments. The last payment was not made because the architect withheld approvale; Nolan had substantially conformed to the contract in good faith, but the architect withheld approval for trivial defects. Held Nolan can recover the unpaid payment. Nolan is entitled to recover for substantial conformance unless barred by the disapproval of the architect. The architect's refusal to approve the work, which was subsantially conforming, was unreasonable, and hence dispenses with the necessity of the approval.
Van Iderstine Co. v. Barnet Leather Co., 242 N.Y. 425, 152 N.E. 250 (1926).: Plaintiff contracted to sell vealskins to defendant, to be approved by a third party Jules Star & Co. Star rejected 6,000 skins. Held Plaintiff can only recover if the third party withholds a certificate dishonestly and in bad faith. Unlike construction projects, in which non-approval still leaves value conferred to the other party, in this case no value was conferred to the defendant. Substantial performance is therefore not appropriate—the plaintiff can resell the goods, which were not special order, at market price.
Fursmidt v. Hotel Abbey Holding Corp., Supreme Court of New York, Appellate Division, 1960, 10 A.D.2d 447, 200 N.Y.S.2d 256: Plaintiff and his father, who had been providing valet and laundry service at the Hotel Abbey for many years, contracted to do so for three more years at $325/month. The plaintiffs, according to the contract, had to meet with the approval of the defendant, "who shall be the sole judge of the sufficiency and propriety of the services." Defendant discharged plaintiffs and got laundry service from a third party at $250/month. The trial court held that the defendant's dissatisfaction had to be unreasonable. Held For there not to be a breach of contract, the defendant's dissatisfaction must only have been bona fide, not necessarily reasonable. This particular type of satisfaction agreement regards "satisfaction" as "fancy, taste, sensibility or judgment," not "operative fitness, utility or marketability." The agreement provided that defendant have strict control over almost every aspect of the plaintiff's activities, and the primary purpose of the arrangement was ensuring the satisfaction of guests, giving rise to a subjective standard of protecting and enhancing the good will of the hotel.
Haymore v. Levinson, 8 Utah 2d 66, 328 P.2d 307 (1958): Plaintiff sold a partially finished house to defendants, who put $3,000 in escrow but refused to give the final payment unless a specific list of items were performed. Held The plaintiffs must be given the final amount, less $261 for as the total value of minor deficiencies. Building contracts regard "operative fitness, mechanical utility or structural completion," not "taste, fancy or sensibility," and approval may not be withheld without without reasonable justification.
Breslow v. Gotham Securities Corp., 77 Misc.2d 721, 354 N.Y.S.2d 550 (N.Y.Civ.Ct.1974): Defendant contracted with plaintiff attorney, but after finishing the SEC Regulation A public stock offering was complete, the defendant would not pay the full amount to the plaintiff because the quality of service did not measure up to that of previous attorneys. Held Dissatisfaction of the defendant has no bearing in the face of performance, as because such contracts are in the category of operative fitness or utility, not personal satisfcation.
Morin Bldg. Prods. Co. v. Baystone Constr., Inc., 717 F.2d 413 (7th Cir.1983): Held "[T]he reasonable person standard is employed when the contract involves commercial quality, operative fitness, or mechanical utility which other knowledgeable persons can judge.... The standard of good faith is employed when the contract involves personal aesthetics or fancy."
Nichols v. Raynbred, Court of King's Bench, 1615, Hobart, 88
Kingston v. Preston, Court of King's Bench, 1773, 2 Doug. 689: Plaintiff contracted with defendant to work for him for a year and a half, then he would go into partnership with the defendant's nephew, defendant would go out of business, plaintiff would give security of GBP 250 per month until it reached GBP 4000, and would take over the defendant's business. Plaintiff worked the said amount of time, and then sued the defendant for not turning over the business. Held Lord Mansfield: The plaintiff must first give the defendant the security. There are three types of agreements: 1) mutual and independent, 2) are conditions and independent, and 3) mutual conditions to be performed at the same time. Here the giving of the security was a condition precedent to the defendant handing over the business.
Price v. Van Lint, Supreme Court of New Mexico, 1941, 46 N.M. 58, 120 P.2d 611: Defendant promised to loan plaintiff Price $1500 by February 1, 1940 to build on land, and the plaintiff in return promised to provide a mortgage to the defendant as security. Defendant placed $134 in plaintiff's account so that plaintiff could buy the land, and both parties knew that the money would have to go to Amsterdam and it would take a while for the deed to get back. Defendant told other lenders that defendant would lend the money, so they provided lumber. Defendant decided not to lend the money, so plaintiff was delayed in finishing the building and opening it as a nightclub. Were the plaintiff's promise to provide a mortgage and the defendant's promise to lend the money independent, and thus there can be no recovery, or dependant, in which case the defendant must loan the money even without the mortgage. Held The loans were independant, and the defendant owes damages for breach for not providing the loan in time. Mutual promises by default should be considered dependent unless language indicates otherwise. But where there are mutual promises to pay money or to provide some act, and the time of performance of one occurs or could occur after the other, they are independent. Here both parties knew that it was likely the deed wouldn't get back from Amsterdam in time to have the mortage be given to the plaintiff before the loan was given, so the promises are independent. Held Plaintiff must pay the $35 cost of the attorney presiding over the substitute loan to plaintiff, but not the $46 from the outrageously 60% high-interest loan not anticipated by the parties. The defendant likewise couldn't hvae anticipated the extra $21.30 for roofing materials in installments because of the absence of the lended money. The $5/day loss in profits is speculative and should not be allowed, but the $62.50 in rent lost can be corraborated.
Conley v. Pitney Bowles, United States Court of Appeals, Eighth Circuit, 1994, 34 F.3d 714: Conley, who worked for Pitney Bowles, was injured in an automobile accident. For benefits under the Employee Retirement Income Security Act (ERISA), his employment contract required Conley to exhaust administrative remedies before suing for denial of disability benefits. The contract also required a written notice of any denial to be sent to Conley, explaining the exhaustion requirement. The Pitney Bowles letter to Conley did not explain the exhaustion requirement. Is the letter containing an exhaustion requirement a condition precedent to Conley following the exhaustion requirements? Held Yes. When a contract contains multilateral conditions and one is to occur in time before the other, the first is a condition precendent to the other. Does public policy require Conley to exhaust the administrative remedies nonetheless? Held No, the freedom to contract is a more important public policy. Should Conley be held to have been constructively aware of the requirement through the employee handbook? Held Not as far as the summary judgment goes. Dissent This holding holds form over substance. Conley gave the letter and handbook to his attorney, and in this case the attorney dropped the ball.
Bell v. Elder, 782 P.2d 545 (UtahCt.App.1989): The Bells contracted to purchase land, and the contract said that the seller would supply water, and that the Bells would pay a hookup and installation fee. The seller did not supply water, so the Bells sued the seller for the downpayment even though the Bells had not paid the feeds. Held The Bells may not sue for breach, because they themselves have not performed. As no time was specified for either act, the acts are concurrent promises and a party may not sue for breach by the other party when the first party has not performed.
Ziehen v. Smith, Court of Appeals of New York, 1896, 148 N.Y. 558, 42 N.E. 1080: Plaintiff contracted to buy land from defendant. Plaintiff would give $3500 on 15 September 1892 and defendant would give plaintiff the mortgage. There was another mortgage on the property of which neither knew on the day of performance, but that later came to light. Plaintiff sued defendant for not being able to hand over the mortgage. Held The plaintiff cannot maintain an action because, for this concurrent promise, the plaintiff did not perform or demand performance of the other party. This requirement would not be in effect if it were obvious that the other party could not perform on that day, but here neither party knew of the other mortgage on the day of performance.
Neves v. Wright, 638 P.2d 1195 (Utah 1981): Held A buyer may not unilaterally rescind a contract just because they found out that the buyer did not have title on the day of the contract formation without inquiry into the specifics of the situation, such as whether the buyer would be able to acquire the title.
Cohen v. Kranz, Court of Appeals of New York, 1963, 12 N.Y.2d 242, 238 N.Y.S.2d 928, 189 N.E.2d 473: Plaintiff contracted to buy defendant's house for $40,000 and put $4,000 down. Closing was to occur on 15 November but got pushed back to 15 December. On 30 November plaintiff's attorney wrote the defendant that plaintiff had discovered defects in the title (which turned out to be no certificate for the swimming pool and a problem with a fence, but this wasn't stated) and demanded a refund of the deposit. On the closing day, 15 December, plaintiff demanded a refund but didn't get one. Held Plaintiff may not recover the deposit because, by not providing specific information on the defects of the title so that the defendant could remedy it, the plaintiff anticipatorily breached the contract. Defendant was not in breach because plaintiff did not tender performance and did not demand performance on the part of the plaintiff. A defendant will be automatically in default with an incurable title, but with a curable title the plaintiff must tender and demand performance. Held Defendant may recover damages for the decline in value of the house before its sale because of the anticipatory breach of the plaintiff. The defendant need not have cured the title by that time because, with the anticipatory breach by the plaintiff, such an action would have been useless.
Caporale v. Rubine, 92 N.J.L. 463, 105 A. 226 (1918): Caporale and Rubine contracted to exchange lands, with deeds to be exchanged on 1 May 1917 and titles to be exchanged in 1926. Rubine sold his land to someone else because Caporale had a bad title. Caporale sued for damages. Held Caporale is relieved from duty because Rubine was not able to perform, and Caporale was not yet required to have a good title. Held Caporale may not recover damages because he was not "able and ready to perform", as he could not have conveyed a good title.
Beecher v. Conradt, Court of Appeals of New York, 1855, 13 N.Y. 108: Plaintiff contracted to convey land to the defendant, who would pay five installments to the defendant. On the fifth and final installment, the plaintiff sued the defendant for failure to pay, but plaintiff provided no proof that plaintiff was ready and able to convey the land to plaintiff. Plaintiff claimed to have the right to sue on individual installments without showing willingness to convey the land. Held Although originally the plaintiff could sue for individual installments, because this is the last installment due it is as if the plaintiff is suing for the entire amount. Therefore, the defendant must pay all to get the deed, and the plaintiff must convey the land before recovering the unpaid amount from a suit.
Osborne v. Bullins, Supreme Court of Mississippi, 1989, 549 So.2d 1337: Osborne, a Ph.D. in political science, sought out Bullins, who had a seventh grade education, to buy Bullins Food Mart from Bullins. After finding he could not obtain funding, Osborne tried to back out. The contract said that if one party could not perform, the $500 earnest money would be refunded to the buyer. The court below held that the land should be transferred to Osborne, that the deed be be deposited with the clerk of the court to be conveyed to Osborne upon payment, that Osborne owe Bullins for the price of the land, and that Buillins get a vendor's lien on the land and have all the other rights of a creditor. Held The clause does not relieve Osborne of performance because it doesn't say that the contract is voided if one party cannot perform. Although this may sound odd, if the contract meant to void itself upon nonperformance, it would normally have allowed the seller to keep the earnest money as damages. Held Specific performance is proper, even though this is not a right and is usually invoked for a buyer of land, because really it's not specific performance—it's just a money judgment against the buyer. Normally the burden would be on the seller to find another buyer and then recover the difference in sale price from the buyer. Here the fair solution is to put that burden on the buyer rather than the seller to find an alternate buyer.
Trachtenburg v. Sibarco Stations, Inc., 477 Pa. 517, 384 A.2d 1209 (1978): Held A judgment can be in law and still be equitable. The vender must transfer the deed to the land before getting a judgment in their favor.
Stewart v. Newbury, Court of Appeals of New York, 1917, 220 N.Y. 379, 115 N.E. 984: Stewart gave an estimate for building a concrete mill building for Newbury, but there is dispute over when payments were to be made: defendants Newbury claim that the usual method of 85% every 30 days was to be used, but plaintiff denies this. Over a month later, after plaintiff had completed only the first floor, plaintiff sent defendants a bill which defendants declined to pay because they claimed the work was not to specification. Plaintiff then abandoned the job. The judge gave jury instructions that if there was no agreement as to payment times, payment should have been made at reasonable times and the plaintiff would be justified for abandoning the work. Held The plaintiff was not justified in abandoning the work, because if there is no agreement on payment times on a contract for work, the work must be substantially completed before payment can be demanded.
Kelly Constr. Co. v. Hackensack Brick Co., 91 N.J.L. 585, 103 A. 417 (1918): Plaintiff had a contract to build a school, so plaintiff contracted with defendant Hackensack to supply bricks during the entire construction, but the contract did not indicate when payment would be made. After several deliveries, plaintiff did not pay defendant so defendant stopped supplying bricks. Plaintiff covered from the market, and sued defendant for the difference. Held Summary judgment for plaintiff. Even though the Uniform Sales Act says that delivery of goods and payment should be concurrent unless otherwise agreed, these were installment deliveries and thus part of a whole delivery, and payment is not due until the entire delivery is completed. [UCC § 2-307 says that if circumstances give either party the right to demand or deliver in lots, payment can be demanded in lots.]
Tipton v. Feitner, Court of Appeals of New York, 1859, 20 N.Y. 423: Plaintiff contracted to sell hogs to defendant, the first batch of dressed hogs in possession of the plaintiff to delivered immediately for one price, and a second batch of live hogs at another price to be delivered later after they arrived to plaintiff. The batch of dressed hogs arrived to defendant, but defendant did not pay for them so the plaintiff sold the live hogs to another party. Was the delivery of the live hogs a condition precedent to payment for the dressed hogs that already arrived? Held No; the defendant owes the plaintiff for the price of the delivered dressed hogs. There was no language indicating either way in the contract, but there was also no indication that the plaintiff was extending credit to the defendant. Although this was part of one transaction, the two species of objects were different in type, different in price, and had different delivery dates. Held The plaintiff may have been in default on the second shipment at the time this action commenced, but for this the defendant can have a second action or subtract that amount from the award against the defendant. The defendant is still obliged to pay for the first shipment.
Oshinsky v. Lorraine Mfg. Co., United States Court of Appeals, Second Circuit, 1911, 187 F. 120: Plaintiff manufacturer sued buyer for payment, but defendant claimed the goods were not delivered on time. The contract specified that the goods be delivered "at the specified dates: ... Stock: Nov. 15". The stock (remaining goods) were delivered a day late. Held For defendant. The contract is specific as to the date of delivery, and as the trial court ruled time is of the essence (a contract for the sale and delivery of goods), delivery must be on that date and none other.
Ramirez v. Autosport, 88 N.J. 277, 440 A.2d 1345 (1982): UCC § 2-601 carries forth the "perfect tender" (as opposed to "substantial conformance") rule, but mitigates its harshness by balancing the interests of buyer and seller.
Prescott & Co. v. J.B. Powles & Co., Supreme Court of Washington, 1920, 113 Wash. 177, 193 P. 680: The buyer contracted for 300 crates of Australian onions to be shipped to San Francisco in March. The buyer wired to cancel the order, but the wire didn't arrive before the ship set sail. There was only one ship leaving each month, and at the last minute the US government required that wheat related to the war be shipped on the vessel, leaving only enough room for 240 crates of onions. The buyer refused delivery because the complete order was not filled. Can the seller be excused for not completely filling the order by the specified time because the US government took over part of the ship? Held No. Plaintiff sued for full performance on the contract and rules are rules.
Beck & Pauli Lithographing Co. v. Colorado Milling & Elevator Co., 52 F. 700 (8th Cir. 1892): Defendant ordered lithographic printings to be delivered in 1889, entailing preparations of sketchings on stones over a period of two or three months. The plaintiff shipped the products by rail; four boxes did not arrive until 1 January 1890, and one did not arrive until 4 January 1890. Held The buyer may not refuse the shipment. Unlike an executory contract for sale of goods, "this was a contract for artistic skill and labor" the products of which could not be transferred to another buyer. As such, absent some explicit clause in the contract making timeliness a condition presedent, time is not of the essence. If there is any injury to the buyer, the buyer may sue for damages.
Bartus v. Riccardi, City Court of Utica,'Oneida County, New York, 1967, 55 Misc.2d 3, 284 N.Y.S.2d 222: Defendant contracted to buy a Model A-660 hearing aid from plaintiff, a franchisee of Acousticon. Model A-660 had been discontinued, so plaintiff provided a newer, improved Model A-665. Defendant didn't like the hearing aid and returned it, finding out that the newer model had been substituted. Acousticon offered to either provide a new Model A-665 or the older Model A-660, but by this time the defendant didn't want to purchase a hearing aid at all, and claimed that under UCC §§ 2-601 and 2-602(2)(c) he had the right to reject the shipment because of lack of perfect tender. Furthermore, even if he did accept the product, he may subsequently refuse it under § 2-608(l)(b) because of the seller's assurances. Held The defendant may not refuse the product. UCC § 2-508 allows a seller to cure a non-conforming delivery before the contract deadline, and if the original product was reasonably expected to meet the requirements (as was the case here with the new, improved model), the seller may cure the non-conforming delivery even after the deadline.
Oddo v. General Motors Corp., 22 U.C.C.Rep. 1147 (N.Y.Sup.Ct.1977): Plaintiff purchased a new car and, after driving 17 miles, the electrical system burst into flames. The dealer refused to take back the car, saying that it was only liable to replace the electrical system which was under warranty. Held The buyer may rescind the deal. UCC 2-601 allows the courts to consider cases like these unconscionable to only hold the seller to the warranty, as they car had barely been driven and the plaintiff reasonably expected the car to perform safely, thus shaking the confidence of the buyer. A warranty cannot repair shaken confidence.
Worldwide RV Sales & Service v. Brooks, 534 N.E.2d 1132 (Ind.Ct.App. 1989): Plaintiff put money down on a motor home, specifying that it should have two air conditioners, one in the front and one in the back. When plaintiff went to pick up the motor home, it only had one air conditioner in the center. The defendant offered to take out the air conditioner, leaving a hole, and put in two air conditioners as had originally been requested. Held The buyer may reject the item and get a refund under UCC 2-601. Held The seller cannot claim UCC § 2-508 because the seller did not make a "conforming delivery" or substitute a a "conforming tender."
Fortin v. Ox-Bow Marina, Inc., 408 Mass. 310, 557 N.E.2d 1157 (1990): Plaintiffs Fortins tried to revoke their acceptance of a boat four months after purchasing it and after using it for several outings during the summer, and sued for a refund of the purchase price and other incidental costs. The engine had overheated twice and there were problems with the pump and electrical equipment, among othe problems. The defendant replaced the engine, but the plaintiffs later revoked acceptance anyway. Held The plaintiffs may revoke the purchase, even after a delay in notification, because they were in constant communication with the defendant trying to rectify the problem, and the UCC doesn't penalize people for working with the seller to try to reach accommodations to minimize losses.
Plante v. Jacobs, Supreme Court of Wisconsin, 1960, 10 Wis.2d 567, 103 N.W.2d 296: Plaintiff contracted to build a house for defendant Jacobs. When the house was completed, there were numerous little defects and a wall between the kitchen and the living room that made the living room about one foot smaller. Was there substantial performance so that the plaintiff recover on the contract, or must the plaintiff recover on quantum meruit? Held There was substantial performance so that the plaintiff may recover on the contract. Substantial performance, unless the contract makes every detail the essence of the contract, is less than perfection. Here the stock floor plan did not detail the construction, and there were no blueprints. Should damages be diminished value, cost of replacement, or should the defects be separated out? Held If it doesn't result in confusion, the small defects to which low repair costs can be assigned should be separated out for cost of replacement, while the items the replacement of which would cause economic waste should be assigned their diminished values. Here the costs of repairing plaster cracks, repairing the patio, and reconstructing the patio wall do not incur economic waste and should be assigned the cost of replacement. Moving the wall between the kitchen and the living room would cause economic waste, so it should be assigned diminished value, and there happens to be no diminished value to the house in this case, even though it's not what the defendants wanted. [This resaults in the strange outcome that, the larger the defect, the less recovery, because if moving the wall had cost less the plaintiffs would have had to pay for it, but because the defect is so large here the diminished value rather than the cost of repair rule is used.]
Jacob & Youngs v. Kent, 230 N.Y. 239, 129 N.E. 889 (1921): After living in a house for over a year, defendant discovered that the pipes installed in the walls by plaintiff were not made by Reading. The plaintiff had inadvertently made this mistake, defendant's architect hadn't even noticed the difference, and the quality of the pipes were the same. Held There was substantial performance because the mistake was "unintentional and trivial." Parties may specify that performance of every term must be a precedent to recovery, but if there is silence the law is slow to impose a huge burden for a small defect.
Reynolds v. Armstead, 166 Colo. 372, 443 P.2d 990 (1968): Plaintiff contracted to apply a brick veneer matching the color of the other bricks of the defendant's house. The bricks didn't match, but the structure was sound. Held There was not substantial performance, but under quantum meruit the plaintiff is given ~$500 for the value of the work, and defendant is awarded ~$250 in damages because of the lack of performing fully.
Glazer v. Schwartz, 276 Mass. 54, 176 N.E. 613 (1931): Plaintiff had contracted to build a house and garage for $14,700 and had been paid $13,000. The plaintiff substantially performed but not fully, by willfully not supplying certain materials. Held In Massachusetts, there can be no recovery on the contract without complete performance. There can be no recovery under quantum meruit with a willful breach. Plaintiff may therefore recover nothing, and must pay for not supplying the materials.
Ficara v. Belleau, 331 Mass. 80, 117 N.E.2d 287 (1954): After contracting to install a heating and cooling system for $6200 and receiving $4200, the contractor willfully abandoned work. The owner got the work finished by paying another contractor $2361. Held The plaintiff gets only $361, even in light of willful breach, because the plaintiff should be made whole and no more.
Hadden v. Consolidated Edison Co. of New York, 34 N.Y.2d 88, 356 N.Y.S.2d 249, 312 N.E.2d 445 (1974): Hadden had worked for Edison for over 40 years, and was receiving a pension. After learning that Hadden had recently received secret payments from contractors doing business with Edison, the company tried to cancel pension payments. Held The pension payments must be reinstated. Using the idea of substantial performance from construction contracts, Hadden's years of work for Edison is not negated by a few years of impropriety. Hadden's willful breach is only one consideration to take into account.
Worcester Heritage Society, Inc. v, Trussell, Court of Appeals of Massachusetts, 1991, 31 Mass.App.Ct. 343, 577 N.E.2d 1009: Trussell contracted to restore the exterior of a house for the Society, and the contract said that time was of essence for conveyance of the property. The work took longer than expected, and Trussel was still trying to finish painting the outside of the house, although he had made significant progress. Trussell had ran into money problems, but hopefully that would be rectified by his settling an estate. The Society tried to rescind the contract. Held As Trussell was still trying to finish the work and was making steady progress, the contract could not be rescinded. Even though Trussell breached the contract, his conduct didn't try to abrogate the contract or to go to its essence. The time-of-essence clause referred to closing and conveyance, which happened on time. The Society could always get another contractor to do the work and charge Trussell, but it may not rescind the contract.
Tichnor Bros. v. Evans, 92 Vt. 278, 102 A. 1031 (1918): Seller sold postcards to seller and agreed not to sell postcards elsewhere. Buyer refused to pay, claiming seller sold cards elsewhere. Held Selling cards elsewhere did not go to the essence of the contract and was an independent promise, so buyer isn't relieved from the obligations of the contract.
Riess v. Murchison, 503 F.2d 999 (9th Cir.1974): Held If a buyer of land agrees to farm the land, the seller later sues, and the court determines substantial performance, the buyer must continue performance or be subject to another suit for complete breach.
Wholesale Sand & Gravel, Inc. v. Decker, Supreme Judicial Court of Maine, 1993, 630 A.2d 710: Decker hired Wholesale to install gravel driveway with payment to be given in 90 days. Wholesale thought it had 90 days to complete the work, but said it would complete the work in a week. The land was muddier than expected, and a bulldozer got stuck, so Wholesale decided to wait for things to dry. Decker called twice, and both times Wholesale said they would "get right on it." Finally Decker said gave Wholesale one more chance, but Wholesale didn't show up the next day as promised, 45 days into the contract. Held The reasonable amount of time of completion was 60 days, but Wholesale aniticpatorily breached the contract because its words or conduct showed a refusal or inability to perform that was definite, unequivocal, and absolute. Dissent Although there was a disagreement about the amount of time allowed to perform, there was no unequivocal words or actions showing a refusal or inability perform, and they hadn't even reached the 60 days the court found was a reasonable amount of time.
K & G Constr. Co. v. Harris, Court of Appeals of Maryland, 1960, 223 Md. 305, 164 A.2d 451: The subcontractor contracted to do earth moving for plaintiff contractor in a "workmanlike manner", with time of the essence. Plaintiff was to pay progress payments to defendant. The defendant would carry insurance. The defendant's bulldozer operator struck the edge of plaintiff's house and caused damage amounting to twice one monthly payment. Plaintiff let defendant continue work, but when defendant did not pay for damage, plaintiff did not pay progress payments, so defendant stopped work altogether. Plaintiff got the work done elsewhere for $450 more. The court held the defendant owed for the damage, and the defendent paid that. Held Defendant owes the $450 for the difference in cost as it totally breached the contract. The promises to do the work and to pay progress payments were dependent. When defendant did the damage there was a breach, and when plaintiff let work continue, plaintiff considered the breach partial. When defendant stopped work, that was a total breach, allowing the plaintiff to get the work done elsewhere. Did having insurance mean that defendant didn't have to pay for the damage? Held No, the insurance company denied liability and having insurance doesn't allow the defendant to perform the work negligently.
Stanley Gudyka Sales Co. v. Lacy Forest Products Co., 915 F.2d 273 (7th Cir. 1990): Lacy hired Gudyka to sell wood products and split the commission. When Gudyka owed Lacy $3,000 in commissions, Lacy cancelled the contract even though Lacy owned Gudyka $46,000 in commissions. Held Lacy may not use this breach to avoid contractual obligations, because the breach was not proportional to the need and therefore insignificant. Lacy could have used the self-help method of deducting the amount from commission payments. Held Because Lacy knew how much was owed, Lacy was obligated to give notice to Gudyka.

This case is easy, it's not sleazy, it just make me a little queezy
That the name "Lacy" sounds so much like "Lady Lucy", or "Ludy Lacy," or something else crazy
But it's a simple case, a sad, sniffle, self-help chase for commissions
For the wood that Gudyka should o' sold if it could
Hathaway v. Sabin, Supreme Court of Vermont, 1891, 63 Vt. 527, 22 A. 633: There was a contract for plaintiff to entertain in an opera house. Defendant was to provide the opera house and pay plaintiff $75 after the entertainment. There was a snow storm and at 10:00am defendant decided not to turn on heating for the opera house, even though this process didn't need to commence until 4:00pm. Held Defendant owes plaintiff $75 because by not providing the opera house the defendant prevented plaintiff from fulfilling the plaintiff's duty. Held The defendant is not excused because the snowstorm made plaintiff's performance impossible, because plaintiffs were able to make a train and arrive in town in time anyway. Defendant guessed wrong. As defendant made the decision in the morning, long before the deadline, the defendant probably didn't want to have the concert because there would be no audience, not because there would be no entertainment. Held There's no dispute to give to a jury. The plaintiffs upheld all of their end of the bargain, so the defendant owes them $75.
Turntables, Inc. v. Gestetner, 52 A.D.2d 776, 382 N.Y.S.2d 798 (1976): Seller promised to sell buyer goods on credit, but then seller became suspicious of buyer's ability to pay and did not ship the products. Buyer sued to recover damages. Held Under UCC § 2-609, the seller has protection if there were reasonable grounds for suspecting the buyer could not pay. Here others had reported that the buyer would not pay, and the buyer had several bills. It turns out that the "Fifth Avenue Showroom" was a telephone answering service, the Island Park factory was owned by someone else and the buyer owned nothing there. The seller did not breach because the buyer gave no assurances and purported to cancel the contract.
Norcon Power Partners v. Niagara Mohawk Power Corp., 110 F.3d 6 (2d Cir. 1997): Some are concerned that the UCC § 2-609 allowances to ask for assurances might not really solve problems, and just prolong the dispute because the parties.
Trapkus v. Edstrom's Inc., 140 Ill.App.3d 720, 489 N.E.2d 340 (1986): If all the parts of a contract are interdependent and common to one another and to the consideration, the contract is indivisible. If the contract is divided up into units or installments so that each past performance is a rough compensation for past performance by the other party, the contract is divisible. This doesn't mean that all contracts with installments are divisible—hinges on the intent of the parties: if the parties would have thought about it, would they be satisfied to exchange the part performance, regardless of what would happen later?
Cherwell-Ralli, Inc. v. Rytman Grain Co., Supreme Court of Connecticut, 1980, 180 Conn. 714, 433 A.2d 984: Cherwell contracted to sell Rytman meal in installments, with shipments based upon weekly requests and payments 10 days afterwards. They buyer was almost always behind in payments, but the buyer kept sending shipments. After almost a year, the buyer was concerned the seller's plant might close, so the buyer sought and got assurances and paid for more shipments. Then a driver not employed by the seller told the buyer this would be his last shipment, so the buyer stopped payment on the check and asked for assurances from the buyer. The buyer went out of business because of excess of inventory, and sued the buyer for nonpayment; the buyer counter-sued for stopping installments. Held The seller may cancel the contract of future installments "if the buyer's conduct is sufficiently egregious" as to "constitute substantial impairment of the value of the whole contract" thereby breaching the contract. Held The seller was not required to provide assurance, as the buyer's fears were unfounded, a fact the court determined. The buyer had just received assurances and the truck driver was not a reliable source of information.
Greguhn v. Mutual of Omaha Ins. Co., Supreme Court of Utah, 1969, 23 Utah 2d 214, 461 P.2d 285: Greguhn had worked as a mason for almost 30 years. One day a scaffold fell beneath Greguhn, but he survived by holding onto the wall with one hand and to the scaffold with the other until help came. Soon his back started hurting, and his doctor discovered that he had for many years had a condition known as "spondylolisthesis" and the fall had put pressure on his nerves and he could not return to work as a mason. His insurance company notified him that they would stop payments because of his preexising condition. The jury found that the defendant had repudiated the contract, and awarded the plaintiff a lump sum for future payments based upon his life expectancy. Held The lump sum for future installments is inappropriate for a contract with installments based solely on repudiation. If the defendant fails to pay in the future, plaintiff can bring another action and the court can create whatever remedy is appropriate. The plaintiff also might recover or die. Dissent This is not just a delay in payment but a complete repudiation of the contract, which should allow the plaintiff to recover for the whole contract. There is no need to prove continued disability, as plaintiff's disability is total and permanent. This is a suit of damages (and therefore expectancy), not a suit for specific performance. Public policy should keep the plaintiff from having to come back and relitigate future breaches.
Caporali v. Washington National Ins. Co., 102 Wis.2d 669, 307 N.W.2d 218 (1981): On facts similar to Greguhn v. Mutual of Omaha Ins. Co., Held the plaintiff is awarded future monthly installments with interest payable as they become due, with the caveat that noncompliance would result in a lump sum payment or similar equitable remedy.
Huffman v. Martin, 226 Ky. 137, 10 S.W.2d 636 (1928): Defendants bought a house for $7,000, paying $3,000 down with the balance on a note payable in 10 years. After three years defendants abandoned the house, move to another state, and communicated that they planned to pay no more. Held If a contract is purely executory on the part of one party, there can be no anticipatory breach that would allow the other to sue before the due date of the obligation. [The contract should have contained an acceleration of payments upon breach clause.]
Reigart v. Fisher, Court of Appeals of Maryland, 1925, 149 Md. 336, 131 A. 568: The Fischers contracted to sell defendant Rigart about seven acres of land, but after discovering that there was only 4.764 acres Reigart asked for his money back and the Fishers sued for specific performance. Held Specific performance is appropriate. Any misrepresentation of a material term—one that may reasonably be supposed had it been known would have prevented the contract from taking place—would relieve the defendant from all duties. Here, however, there is evidence that the defendant didn't care about the specific amount of land, but just wanted a place to live and liked what he saw. Held The contract cannot be voided because of changing conditions. If the contract was beneficial to begin with, changing conditions won't relieve the defendant of duties.
Keating v. Price, 58 Md. 532 (1882): Land conveyed happend to have a few feet less of waterfront on a creek and along a road than represented. Held The vendee is not obligated to accept the property, as vendee intended and communicated to the vendor that vendee intended to use the land for a cannery and needed access to the creek and to the road, so this term was material.
Bartlett v. Department of Transf., 40 Md.App. 47, 388 A.2d 930 (1978): Vendor sold to defendant a parcel of land at a price based upon its acreage, and both saw it be staked out. Later it was determined that there was more land than staked out, so vendor sued to rescind the contract. Held The contract should not be rescinded because the mutual mistake was not material, but the price should be adjusted to take into account the extra acres. The parties contracted for a plot of land, not a specific acreage, and if they had know about the different acreage they would still have performed the contract, they would simply have adjusted the price.
Lawrence v. Fox, Court of Appeals of New York, 1859, 20 N.Y. 268: Holly owed plaintiff. Holly loaned money to defendant and defendant promised to pay plaintiff. Plaintiff sued defendant . Held Holly's loan to defendant is consideration for defendant to pay plaintiff. Held A promise to pay a third party is just as valid as if the defendant was keeping the money in trust. Held Once defendant promised to pay plaintiff, Holly could not have discharged defendant from that obligation. Dissent The defendant had no obligation to plaintiff because of lack of privity. This is not like a trust, in which the agent has in trust a specific thing to convey. Here the Holly could have decided that the defendant should pay Holly, or Holly might pay the defendant, and in both cases the defendant would be relieved from duty.
Seaver v. Ransom, Court of Appeals of New York, 1918, 224 N.Y. 233, 120 N.E. 639: Mrs. Beman had a will which said that Mr. Beman would get use of the house and plaintiff niece would receive $1,000. Mrs. Beman wanted the house to go to the niece, so Mr. Beman said that he would put even more in his will for the niece. Plaintiff sued for $6,000 after Mr. Beman died without putting her in his will. Held This can't be a trust, because Mr. Beman only got use of the property, not ownership of the actual property. Held The plaintiff should get the $6,000. New York allows parties to make a contract for the benefit of a third party, and allows the third party to sue on it, in cases of 1) some pecuniary obligation such as a debt, 2) close family relationship, 3) public contracts such as a municipality, and 4) where the benefit runs directly to the third party. This holding can be sustained either by considering the close aunt-niece relationship upholding an action for specific performance, or as damages on contract on the grounds that the promise to pay the niece was consideration for use of the house.
Drewen v. Bank of Manhattan, 31 N.J. 110, 155 A.2d 529 (1959): As part of a divorce settlement, husband placed the two children in his will giving them 30% of his estate and promised never to reduce the quality or quantity of their shares. After the wife died, the husband changed the will to give the children life estates instead of outright gifts. After he died, the wife's estate sued even though the remaining son had no problems with the new arrangements. Held The beneficiary son can sue, as can the wife's estate, to enforce the "promises for which valuable consideration has been received."
Pierce Assocs. v. Nemours Foundation, 865 F.2d 530 (3d Cir.1988): A general contractor creates a "buffer zone" between the owner and the subcontractors. There may be a departure from this typical pattern in which a contractor and subcontractor do away with this buffer zone and allow the owner to directly enforce rights against the subcontractor, but this must be spelled out in the contract.
Heyer v. Flaig, Supreme Court of California, 1969, 70 Cal.2d 223, 74 Cal.Rptr. 225, 449 P.2d 161: Defendant drafted a will for Doris Kilburn, knowing she intended to marry immediately after, leaving everything to her two daughters. Doris married Glen Kilburn a few days later, and six months later she died. Under Probate Code § 70, marrying after a will revokes a will if the new spouse was not included. The daughters sued. Held An attorney drafting a will is liable to intended beneficiaries for any negligence. Duty to third parties is not based upon privity but upon public policy through balancing several factors: the extent to which the transaction was intend to affect the plaintiff, the foreseeablility of harm to the plaintiff, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the conduct and the injury suffered, the moral blame attached to the conduct, and the policy of preventing future harm. Held The statute of limitations is referenced from the death of the testatrix, because 1) the the defendant owed a continuing duty to the testatrix, and 2) no one else intervened to take over that duty up until her death.
Clagett v. Dacy, 47 Md.App. 23, 420 A.2d 1285 (1980): Held An attorney acquires a duty to a third party who is not an employer/client only through contract and only when the third party is a genuine third party beneficiary of the contract. General theories of negligence must still be proved.
Hale v. Groce, 304 Or. 281, 744 P.2d 1289 (1987): Plaintiff sued an attorney who was directed by a client to prepare a testamentary instrument to give a give to the plaintiff, but this provision wasn't included before the client died. The plaintiff brought a suit on both tort negligence and breach of contract theories. Held Negligence and breach of contract are two separate things. This case involved the lack of using professional skill to fulfill objectives, so this is purely a tort claim.
Robson v. Robson, United States District Court, N.D. Illinois, 1981, 514 F.Supp. 99: Birthe sued her father-in-law Ray, Sr., who had made a contract with her husband, Ray, Jr. regarding their 50% shares in P.B. Services, Inc. The contract was that Ray, Jr. would operate the business and Ray, Sr. would get $1,000 per month for life. Upon the death of either, the shares of the company would go to the other and the spouse of the decedant would get $500 per month for five years or until remarriage, whichever came first. Ray, Jr. and Berthe developed marriage problems and were going through a divorce, and two days before Ray, Jr. died he and Ray, Sr. modified the contract to remove any reference to Berthe. Can Birthe, a third-party donee beneficiary sue for her benefits of the contract? Held No. A third-party creditor beneficiary's rights vest immediately, and the original contracting debtor party has no right to modify the contract. In contrast, here the third-party donee beneficiary's rights were contingent upon certain circumstances that had not occurred when the modification took place: the death of Ray, Jr. Because the rights of Birthe, a third-party donee beneficiary, depended on the occurrence of certain events that had not taken place, and because Birthe had not detrimentally relied on the promise, Birthe does not have standing to sue for her rights. But was there sufficient consideration to make the modifications? Held Birthe, not a party to the contract, does not have a right to challenge adequacy of consideration. Anyway, Ray, Jr. benefitted by excluding Birthe from the contract and Ray, Sr. benefitted by not having to pay out the money to Birthe, so there was adequate consideration.
Meyer v. Walker-Smith Grocer Co., 60 Tex.Civ.App. 462, 127 S.W. 1118 (1910): Plaintiff Meyer conveyed real property to defendant in an agreement that defendant would purchase goods from her bankrupt son, E.M. Meyer, at a bankruptcy auction and give them back to him later when he would be able to pay for them. E.M. later made a compromise deal with defendant that released the defendant from the terms of the deal with plaintiff. The plaintiff sued saying that she had rights in the contract and benefitted by seeing that things were done that she wanted in her son's life. Held Once plaintiff makes a contract for the benefit of a third party and it is accepted, the plaintiff has to legal right in that contract because, after all, the third party beneficiary could sue on that contract so the third party has a right to discharge the contract as well.
Rouse v. United States, United States Court of Appeals, District of Columbia Circuit, 1954, 215 F.2d 872: Winston was making payments on a note for a heating system from Associated Contractors, Inc., and when Winston sold the house Rouse agreed to take over the payments. Winston defaulted on the note and the United States, which had guaranteed the loan, sued Rouse. Can Rouse in defense claim that Winston fraudulently represented the condition of the heating plant? Held Yes, because Rouse is only liable to Associated Contractors through Winston, and so he can use Winston's alleged fraud as a defense to Associated Contractors, and he can make this defense to an assignee of Associated Contractors' claim as well. Can Rouse claim that Associated Contractors didn't install the heating system satisfactorily? Held No, Rouse didn't contract to discharge Winston's liability, but only contracted to make payments to Winston's creditor. It's immaterial whether Winston was actually indebted to the creditor—Rouse would have to make the payments even if there was no heating system, if he promised to make the payments.
Langel v. Betz, Court of Appeals of New York, 1928, 250 N.Y. 159, 164 N.E. 890: Plaintiff agreed to sell property to Hurwitz and Hollander, who assigned it to Benedict, who assigned it to defendant Betz. The defendant asked for a two week postponement of performance because the title search was still going on, but after the delay defendant did not show up to perform. Did defendant assignee take over not only rights but also duties, allowing a suit by the plaintiff for nonperformance? Held No. Even though the Restatement says that by default an assignee takes on duties along with rights, the law currently remains that, outside of any explicit transfer of duties, an assignee only agrees to take on rights. Even the request for delay was not an explicit demand to enforce a right, so by that act defendant did not explicitly take on any duties.
Cook v. Lum, Supreme Court of New Jersey, 1893, 55 N.J.L. 373, 26 A. 803: Ellen Green deposited $2,316 with Kase, and in return Kase gave Green a slip of paper with a column of numbers, the total of $2,316, and a date. Green gave the paper to Ellen Cook, and then Green died. Cook sued Kase saying that the paper assigned the deposited money to Cook. Held Judgment for th edefendant. One can legally deliver a gift to another with a donative intention as long as it completely strips the donor of all dominition over the article. In this case an ambiguous piece of paper with a few numbers is not sufficient to provide evidence of a complete conveyance of all rights over the article in question.
Cooke v. Belzer, 413 N.W.2d 623 (Minn.Ct.App.1987): The donor gave the donee an item in return for a dollar, and the donee thought the donee was doing the donor a favor by taking on the tax consequences of the item. Held This was no give. A gift must be voluntary and gratuitous—an exchange with no consideration.
Cochran v. Taylor, Court of Appeals of New York, 1937, 273 N.Y. 172, 7 N.E.2d 89: Defendant gave a signed, sealed offer to Chenault to sell him property if he gave her notice within a certain time period. Defendant told Chenault that she was withdrawing the offer, but Chenault assigned the option to plaintiff, who gave notice to the defendant of his intention to buy. Plaintiff sued defendant when she refused to sell. Held The sealing of the instrument provided a presumption of adequate consideration. Held The contract was assignable, as there was nothing in its terms that required performance specifically be Chenault. Its terms even asserted that the instrument be binding on "assigns".
Lojo Realty Co. v. Isaac G. Johnson's Estate, Inc., 253 N.Y. 579, 171 N.E. 791, (1930): Held An assignee may not get specific performance if the assignee does not tender a bond executed by the assignor.
P/T Ltd. II v. Friendly Mobile Manor, Inc., 79 Md.App. 227, 556 A.2d 694, (Md.Ct.Spec.App.1989): The UCC has a presumption of assignment of duty along with right because most goods are fungible, unlike services which call for the craftsmanship of a particular worker.
Macke Co. v. Pizza of Gaithersburg, Inc., Court of Appeals of Maryland, 1970, 259 Md. 479, 270 A.2d 645: Virginia Coffee Service, Inc. had a contract with pizza shops to lease space for cold drink vending machines. The contract talked about how Virginia would keep the machines in good working order and pay commissions, while Pizza would provide space, water, and electricity. Virginia sold to Macke, and Pizza, which had specifically wanted to work with Virginia and not Macke, tried to terminate the contract. Held Delegation of duties is allowed when there is no express prohibition in the contract and the product (as here) or service in question does not rely on the unique skill or quality of the assignor.
British Waggon Co. v. Lea & Co., 5 [Q.B.D.] 149 (Q.B.Div'l Ct., 1880): Parkgate Waggon Co. leased railroad freight cars to defendants Lea & Co., promising to keep them in repair. Parkgate went into liquidation and assigned rent rights to British Waggon Co. and British promised to keep the cars in repair, but Lea refused to pay saying that Parkgate had voluntarily liquidated and that Lea had no privity with British. Held Entering liquidation didn't stop Parkgate from existing, so it could assign its agreement if it wanted. Held The freight repairs weren't unique to Parkgate, so Lea must continue to make payments if the repairs are being made, even if Parkgate is unable to do the actual repairs.
Crane Ice Cream Co. v. Terminal Freezing & Heating Co., 147 Md. 588, 128 A. 280 (1925): Terminal contracted to sell and Frederick to buy ice. Frederick sold his business to Crane, but Terminal terminated the contract. Held The rights of the contract cannot be assigned to Crane because they were based upon Terminal's knowledge and past experience with Frederick, and involved extending him credit. Terminal didn't know anything about Crane. Furthermore, Frederick also attempted to assign his duties to Crane, and Terminal shouldn't be forced to accept the performance of a stranger.
Allhusen v. Caristo Constr. Corp., Court of Appeals of New York, 1952, 303 N.Y. 446, 103 N;E.2d 891: Defendant, a general contractor, contracted with Kroo to do painting work in New York City schools. The contract had a clause that said that any assignment of interests without the written consent of the defendant would render the contract void. Kroo assigned the payments, not the contract, to Marine Midland Trust Co., who assigned them to plaintiff. Held Payment rights in a contract may be assigned unless there is specific language in a contract denying such a right, as was here, because parties still have a right to contract. Held Usually the breaching of a non-assignment provision would result in damages, but here the language plainly says that such a breach will make the contract void. [UCC 9-318(4) makes any account assignment provision ineffective. In other words, a prohibition against a delegation of duties, unlike a prohibition against a delegation of rights, is effective.]

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