Does party entering into agreement have authority to do so?

Promissory Estoppel. change in position due to reliance on D’s Promise

Download 321.5 Kb.
Size321.5 Kb.
1   2   3   4   5

Promissory Estoppel. change in position due to reliance on D’s Promise

Classical doctrine. condition to a gift. Kirksey v. Kirksey. 23

PE only for donative promises, no commercial dealings. should use K. Baird v. Gimbel. 23

Modern Theory

  1. Strained Contract – future detrimental reliance as C. Allegheny College. 23

  2. R2d § 90. Promise Reasonably Inducing Action or Forbearance. Katz v. Danny Dare. 23
Universal Computer v. Medical Services. reasonableness of reliance on agent. 23

Remedy. reliance damages – status quo ante, not expectation. out of pocket expenditures due to Promise. 23

Policies/Purpose of Promissory Estoppel. charitable contributions. not likely in commercial or commodities trans. 23

Authority question superimposed over all types of claims against corporate entities. In corporate cases, parties entering into contract as agents of other parties must have authority for corporation to be held liable.

  • Actual authority is real authority; principal leads agent to believe agent has authority.

  • Apparent authority is not real; words or actions of principal leads third party to believe agent has authority; still generates liability


Offer + Acceptance + Consideration [+ Statute of Frauds]

Two Types

  1. Unilateral

  1. Common law doctrine

  2. Bishop v. Eaton (1894)

  • Both acceptance and consideration are found in performance. If no performance, no legal obligation is formed. Neither party bound.

  • Offeree has further duty (condition subsequent) to provide notice of performance, otherwise Offeror has no means of finding out when obligation due.

  • Notice of performance effective upon deposit.

  1. UCC 2-206(2) Offer and Acceptance in Formation of Contract

Where the beginning of a requested performance is a reasonable mode of acceptance an Offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.

  1. Bilateral

Exchange of Promise for a Promise. Both parties bound.

  • Bias in common law and Restatement is to find bilateral contract, unless very clear that parties intended unilateral contract. When parties need to be able to plan and expend resources over course of many months, expectation that transaction is more likely to be bilateral because neither party would just want other to walk away.

  • Conditional bilateral contract secures unilateral contract with Promise to perform and Offeror’s obligation due only on performance of a condition subsequent

  1. Elements

  2. Offer

Defined in Rest. 2d Contracts § 24.

Offer is a manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.

  1. Preliminary Negotiations do not constitute an Offer.

Rest. 2d Contracts § 26.

A manifestation of willingness to enter into a bargain is not an Offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.

Lonergan v. Scolnick (1954)

  • Form letter describing single plot of land not an Offer because may occasion multiple “Acceptances”; land is unique, unlike widgets. Some further manifestation of assent by “Offeror” was necessary.

  1. Offeror is Master of the Offer – Rest. 2d Contracts § 60

Acceptance of Offer Which States Place, Time, or Manner of Acceptance

If an offer prescribes the place, time or manner of acceptance its terms in this respect must be complied with in order to create a contract. If an offer merely suggests a permitted place, time or manner or acceptance, another method of acceptance is not precluded.

  • Offeror is lower-cost risk bearer

  • Offeror can set additional terms for Acceptance to avoid risk

  1. Certainty Rest. 2d Contracts §33

  1. Even though manifestation of intention is intended to be understood as an Offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain.

  2. The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.

(3) The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an Offer or an Acceptance.

  1. Revocability

  1. Classical Contract Doctrine

Revocation effective upon receipt from reliable source.

  • Henthorn v. Fraser (1892)

  • Revocation of Offer received before Acceptance but after Acceptance mailed Revocation crossing Acceptance in the Mail.

  • Offeror must be considered as continuously making Offer until he has brought it to the knowledge of the person to whom it was made that it was withdrawn.

Offer fully revocable until accepted.
  • Petterson v. Pattberg (1928)

  • Offeree comes to pay off mortgage but Offeror has already sold mortgage, effectively revoked before performance completed.

  • § 45 seeks to correct this kind of injustice.

R2d § 43. Indirect Communication of Revocation.

An offeree’s power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect.

  • Normile v. Miller.

R2d § 36. Methods of Termination of the Power of Acceptance.

  1. An offeree’s power of acceptance may be terminated by

  1. rejection or counter-offer by the offeree, or

  2. lapse of time, or

  3. revocation by the offeror, or

  4. death or incapacity of the offeror or offeree.

(2) In addition, an offeree’s power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms of the offer.

  1. Revocability - Limitations on:

  1. for Unilateral K

Rest. 2d Contracts § 45

Option Contract Created by Part Performance or Tender

  1. Where an Offer invites an Offeree to accept by rendering a performance and does not invite a promissory Acceptance, an option contract is created when the Offeree tenders or begins the invited performance or tenders a beginning of it.

  2. The Offeror’s duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the Offer.

  • Offer held open if some consideration has been received. Depends on when court finds beginning of performance, and what kind of performance Offeror wants/expects.

  • Decision not to revoke Offer (creating an option) has value – not given away without consideration.

  • Courts not bound to follow Restatement, do not like to imply Option. More common defense is to find Bilateral Contract.

  1. Rest. 2d Contracts § 87 Option Contract

  1. An Offer is binding as an option contract if it

  1. is in writing and signed by the Offeror, recites a purported consideration for the making of the Offer, and proposes an exchange on fair terms within a reasonable time; or

  2. is made irrevocable by statute.

  1. An Offer which the Offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the Offeree before Acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.

  • Drennan (1958)

Rest. 2d §87(2) embodies court’s use of Promissory Estoppel theory to establish option contract and hold offer open. Reasonable reliance that results in foreseeable change in position constitutes separate consideration for option contract. Promise made with knowledge and intent that other party would act on Promise before Acceptance.

  1. Firm Offer

  • Purpose of Firm Offer: facilitates planning; encourages and speeds acceptance; allows merchants not to create option K or renegotiate

UCC §2-205 - sale of goods

An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months [Comment 3: unless supported by consideration]; but any such term of assurance on a form supplied by the Offeree must by separately signed by the Offeror.

UCC §2-105(1) - goods

Goods means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities and things in action.

UCC §2-104(1) merchant

Merchant means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.

N.Y. Gen. Oblig. Law §5-1109 - transactions other than sale of goods

Except as otherwise provided in § 2-205 of the UCC with respect to an offer by a merchant to buy or sell goods, when an offer to enter into a contract is made in a writing signed by the offeror, or by his agent, which states that the offer is irrevocable during a period set forth or until a time fixed, the offer shall not be revocable during such period or until such time because of the absence of consideration for the assurance of irrevocability. When such a writing states that the offer is irrevocable but does not state any period of time of irrevocability, it shall be construed to state that the offer is irrevocable for a reasonable time.

  • Mid-South Packers, Inc. v. Shoney’s (1985)

  • Court found no requirements contract under §2-306 because no obligation from Shoney’s to purchase exclusively from Mid-South

  • Mid-South’s proposal was firm offer under §2-205. Each purchase order from Shoney’s constituted acceptance and separate contract for the amount stated by Shoney’s at price required by Mid-South, including price increase after offer became revocable after 3 months had passed.

  • Shoney’s orders and payments at new price were manifestation of acceptance that induced performance by Mid-South and so could not be withdrawn later.


Defined in Rest. 2d Contracts §50

  1. Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.

  2. Acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by a performance which operates as a return promise.

  3. Acceptance by a promise requires that the offeree complete every act essential to the making of the promise.

  1. Manifestation of Assent

  1. Signature and Unilateral Mistake

signature only one manifestation, not always necessary; commencement of operations would indicate papers purely ministerial; depends on industry-standard practice

  • Absent fraud, duress or mutual mistake, one having the capacity to understand a written document who reads and signs it, or without reading it or having it read to him, signs it, is bound by his signature in law

  • Ray v. Eurice Bros.

  • Series of negotiations, exchange of drafts particular to transaction

  • Style of doing business different from Ray (informal handshake deal vs. painstaking detail)

  • Eurices presumed to be more sophisticated b/c repeat players, experienced, easier to bear costs over number of contracts, build certain amount of liability exposure into contracts - deterrence

  • St. Landry Loan v. Avie

  • Bank had already performed so Skinner held to perform

  • Banks pick and chose loan customers based on credit requirements

  • Would raise transactions costs to place burden on bank to explain K to Skinner

  • Bank has to be aware of illiteracy in order for burden to be shifted

  • Illiteracy at issue, not simply lack of sophistication

  1. Acceptance by Silence or Exercise of Dominion

Rest. 2d Contracts § 69

(1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following cases only:

  1. Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation.

  2. Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer.

  3. Where because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he does not intend to accept.

(2) An offeree who does any act inconsistent with the offeror’s ownership of offered property is bound in accordance with the offered terms unless they are manifestly unreasonable. But if the act is wrongful as against the offeror it is an acceptance only if ratified by him.
(3) Rest. 2d §27 Existence of Contract Where Written Memorial is Contemplated

Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof; but the circumstances may show that the agreements are preliminary negotiations.

Comment c: Among the circumstances which may be helpful in determining whether a contract has been concluded are the following:

  • the extent to which express agreement has been reached on all the terms to be included,

  • whether the contract is of a type usually put in writing,

  • whether it needs a formal writing for its full expression,

  • whether it has few or many details,

  • whether the amount involved is large or small,

  • whether if is a common or unusual contract,

  • whether a standard form of contract is widely used in similar transactions, and

  • whether either party takes any action in preparation for performance during the negotiations.

  1. UCC §2-204 Formation in General

  1. A contract for sale of goods may be made in any manner sufficient to show agreement [Comment: oral, written or otherwise], including conduct by both parties which recognizes the existence of such a contract. [but if falls under Statute of Frauds, needs signed writing]

  2. An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined. [Comment: actions of parties indicate binding obligation has been undertaken]

  1. UCC 2-206 Offer and Acceptance in Formation of Contract

  1. Unless otherwise unambiguously indicated by the language or circumstances

  1. an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;

  2. an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.

(2) Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.

  1. Mailbox rule

Rest. 2d Contracts §63

Unless the offer provides otherwise,

  1. an acceptance made in a manner and by a medium invited by an offer is operative and completes the manifestation of mutual assent as soon as put out of the offeree’s possession, without regard to whether it ever reaches the offeror; but

  2. an acceptance under an option contract is not operative until received by the offeror.

  • Henthorn v. Fraser (1892)

  • Mode of communication of Acceptance does not have to match mode of communication of Offer.

  • Where circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the Acceptance of an Offer, the Acceptance is complete as soon as it is posted.

Acceptance effective upon deposit placed in mode of communication reasonably expected to reach Offeror.

  • Issue: what is reliable mode of communication today?

  • Burden of loss here placed on Offeror because, as master of Offer, could have set additional terms re Acceptance and avoided risk.

  • Closes deal more quickly

  1. Battle of the Forms

Buyer’s and Seller’s forms do not agree, and do not constitute K unless performance.

If there is performance, find acceptance (UCC §2-204 and Rest. 2d § 69(2)).

Purpose of Forms

  • lower transaction costs – limit number of terms that need to be determined and agreed to

  • documentary evidence – clarification of terms

  • recordkeeping/internal control for audit and inventory

  • discipline of sales force and standardize closing deals through unvarying set of terms dictated by company

  1. Classical doctrine

(i) Mirror image rule
Rest. 2d Contracts §58

Necessity of Acceptance Complying with Terms of Offer

An acceptance must comply with the requirements of the offer as to the promise to be made or the performance to be rendered.

Rest. 2d Contracts §59

Purported Acceptance which Adds Qualifications

A reply to an Offer which purports to accept it but is conditional on the Offeror’s assent to terms additional to or different from those Offered is not an Acceptance but is a Counter-Offer.

Counter-Offer – Rest. 2d Contracts § 39

  1. A counter-offer is an offer made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer.

  2. An offeree’s power of acceptance is terminated by his making of a counter-offer, unless the offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention of the offeree.

  • Normile v. Miller (1985)

Acceptance must mirror Offer; if not, constitutes counter-Offer which rejects and terminates original Offer. Original Offer then no longer has any legal force, so Offeror not stuck in option situation.
(ii) Last shot rule

  • Additional terms must be material to constitute new offer; otherwise just repeat of prior offer.

  • Acceptance by performance allowed last document (counter-offer) to govern transaction.

  • Common-law courts normally favored Seller, and found Buyer’s Purchase Order constituted Offer and Seller’s Order Acknowledgment Form constituted Counter-Offer which allowed Seller to revoke at any time until goods received and accepted by Buyer and to rely on its Counter-Offer to govern transaction and so transfer risk onto Buyer

Poel v. Brunswick (NY, 1915)

  • Court found that (Buyer) Brunswick’s additional provision that offer was conditional upon receipt of order being promptly acknowledged by (Seller) Poel was substantial condition, and Brunswick was not bound until (Seller) Poel had signified assent to terms in Offer

  • Because offer was made subject to additional provision “it is not for the court to say that it is immaterial.” Boilerplate has meaning to company, because there was a conscious decision to include in form at some point in time.

(2) UCC §2-207 Additional Terms in Acceptance of Confirmation (“First Shot Rule” in response to Mirror Image and Last Shot Rules)

  1. A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

  1. The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

  1. the offer expressly limits acceptance to the terms of the offer;

  2. they materially alter it [Comment 4: surprise or hardship test. examples: negation of standard warranties; Comment 5: not force majeure, or limitation of remedy in reasonable manner]; or

  3. notification of objection to them has already been given or is given within a reasonable time after notice of them is received. [Comment 6: If no answer received within reasonable time, then fair and commercially sound to assume their inclusion has been assented to. Where clauses conflict, each party assumed to object to conflicting clause and clauses do not become part of contract.]

  1. Knockout rule”: Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree [Comment 6: where clauses conflict, each party assumed to object to conflicting clause and clauses do not become part of contract, per sub (2)], together with any supplementary terms incorporated under any other provisions of this Act.

  • Brown Machine v. Hercules (MI, 1989)

Offer and acceptance(s) followed by performance: Contract exists, but what are its terms?

  • Hercules purchase order, with blue box boilerplate expressly limited acceptance to terms of offer, constituted Offer.

  • Brown Machine’s acceptance including additional indemnification clause did not make acceptance expressly conditional to additional terms §2-207(1), so indemnification clause not included and Hercules’ offer was accepted.

  • Hercules’ letter expressing assent to all manufacture specs. except one did not constitute assent to additional terms in Brown Machine’s acceptance, because indemnification clause would materially alter agreement (§2-207(2)(b)) in that it would shift all of the risk onto other party. Value of clause reflected in price of goods under contract, acts like insurance with premiums factored into (or out of) price.

  • Court looks for express assent to additional terms to avoid return to last shot rule.

  • Dale Horning v. Falconer Glass (S.D.Ind., 1990)

Oral agreement followed by confirmation (UCC drafters chose to grant confirms, which are often superfluous, legal status of acceptance/counter-offer; better to view confirmation not as counter-offer but as acceptance with additional terms).

  • Falconer’s confirm of phone agreement included limitation of remedy clause (permitted under §2-719) limiting consequential damages (defined under §2-715) incurred by AGM arising from penalties and finished building costs due to Falconer’s defective glass.

  • Court noted that limitation of remedy clause in acceptance was “not underlined, bold-faced, or set forth in capital letters.”

  • In evaluating element of “surprise,” court invokes course of dealing and usage of trade. §2-207 implies objective test, assumes parties do not read additional terms so are not subjectively aware. Custom of commercial glass industry for supplier to help buyer pay consequential damages when due to supplier’s defective product, but Court found no surprise in supplier’s attempt to limit damages. If not customary, law usually places burden on party seeking to make a change.

  • Despite fact that permitted under §2-719, Court found hardship in Falconer’s attempt to limit AGM’s right to damages. Shift in liability should be negotiated, would materially alter agreement.

  • Court goes to town on boilerplate: Merely inserting boilerplate provisions into standard forms is not the end-all way to deal with the UCC. Despite UCC’s rejection of mirror-image rule, the best and in some instances the only way to get a preferable term into a contract is to actually propose the term and reach a meeting of the minds on the issue. . . Contrary to popular belief, §2-207 does not always condone nor justify the battle of the forms.

  • What if surprise and no hardship? Highly unlikely that court would award damages only for surprise.

UCC §2-715 Buyer’s Incidental and Consequential Damages (unless limited in contract)

  1. Incidental damages resulting from the seller’s breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonably expense incident to the delay or other breach.

  2. Consequential damages resulting from the seller’s breach include

  1. any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and

  2. injury to person or property proximately resulting from any breach of warranty.

UCC §2-719 Contractual Modification or Limitation of Remedy

  1. Subject to the provisions of subsections (2) and (3) of this section and of the preceding section on liquidation and limitation of damages,

  1. the agreement may provide for remedies in addition to or in substitution for those provided in this Article and may limits or alter the measure of damages recoverable under this Article, as by limiting the buyer’s remedies to return of the goods and repayment of the price or to repair and replacement of non-conforming goods or parts; and

  2. resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.

  1. Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this Act.

  2. Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.

  1. Consideration

Not every Promise is legally enforceable; purely gratuitous Promise or gift which requires no consideration is not enforceable.

  1. Benefit-Detriment test

To be legally enforceable, a Promise must confer benefit upon the Promisor or detriment upon the Promisee.

Hamer v. Sidway (1891)

  • uncle Promises nephew $5000 if nephew stops smoking, drinking gambling until age 21; court found legally enforceable obligation because nephew’s forbearance of rights was sufficient detriment

  • difficult when family members are parties; so close to gift transaction

  1. Bargained-for Exchange

Rest. 2d Contracts §71

  1. To constitute consideration, a performance or a return Promise must be bargained for.

  2. A performance or return Promise is bargained for if it is sought by the Promisor in exchange for his Promise and is given by the Promisee in exchange for that Promise.

  3. The performance may consist of

  1. an act other than a promise, or

  2. a forbearance, or

  3. the creation, modification, or destruction of a legal relation.

(4) The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person.

  • Baehr v. Penn-o-Tex (1960)

  • Baehr claimed that its forbearance from bringing suit constituted consideration in return for P’s Promise to pay rent as assignee of leases

  • court found no consideration because parties did not negotiate for implied consideration

  1. Adequacy of Consideration

Rest. 2d Contracts §79

If the requirement of consideration is met, there is no additional requirement of

  1. a gain, advantage, or benefit to the Promisor or a loss, disadvantage, or detriment to the Promisee; or

[However, courts usually still apply Benefit-Detriment test to find consideration.]

  1. equivalence in the values exchanged; or

  2. “mutuality of obligation.”

  • Batsakis v. Demotsis (1949)

  • Not for court to evaluate adequacy of consideration, does not have to be fair or equivalent, as long as some form of consideration is present and bargained for by parties.

  • To do so would violate autonomy of parties and destroy predictability of whether contract would be enforceable.

  • However, gross inadequacy may be indication of fraud, misrepresentation or duress.

Rest. 2d Contracts §77 Illusory Promise

A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performances unless

  1. each of the alternative performances would have been consideration if it alone had been bargained for; or

  2. one of the alternative performances would have been consideration and there is or appears to the parties to be a substantial possibility that before the promisor exercises his choice events may eliminate the alternatives which would not have been consideration.

  • Mid-South Packers, Inc. v. Shoney’s (1985)

Common law viewed Requirements K as illusory promise (Rest. 2d § 77), not mutual obligation (see Comment 2), too indefinite.

  1. Past services do not constitute consideration

  • Plowman v. Indian Refining (1937)

Court found no consideration in employees’ long and faithful services in the past for present pension payments.

  1. Condition to a gift does not constitute consideration

  • Plowman v. Indian Refining (1937)

Court found no consideration in requiring employees to come to office to pick up pension checks. Like asking tramp to walk around corner to pick up a free coat – not price of gift.

  1. Motive or Moral obligation is not legally enforceable consideration

  • Plowman v. Indian Refining (1937)

Court found no consideration in company’s desire to provide for welfare of employees.

Unlike Monge, where moral obligation existed in framework of agreement but not in substance of agreement.

Issue: whose morality would govern?
However, parties’ secret motives for entering into contract do not nullify bargained-for consideration.

Rest. 2d Contracts §81

Consideration as Motive or Inducing Cause

  1. The fact that what is bargained for does not of itself induce the making of Promise does not prevent it from being consideration of the Promise.

  2. The fact that a Promise does not of itself induce a performance or return Promise does not prevent the performance or return Promise from being consideration for the Promise.

Statute of Frauds

Additional element of enforceability required for certain types of contracts.

Statute of Frauds claim is a defense against finding enforceable contract.


  • Procedural rather than substantive inquiry into enforceability – easier for courts to make

  • Evidentiary weight of signed writing – more likely that parties intended to enter into contract

  • Cautionary function of legal formalities

  • Protect less sophisticated parties; enforced only against party with greater knowledge and bargaining power


  • Does Statute of Frauds apply to this type of contract?

  • If so, is there a signed writing that satisfies Statute of Frauds?

  1. Type of Contracts Covered

UCC §2-201 Formal Requirements; Statute of Frauds

  1. Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. [Comment 6: It need not be signed by both parties but is not sufficient against one who has not signed it. From time of contracting each party should be aware that other’s signing is important.] A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing. [Comment 1: required writing need not include all material terms, only afford a basis for believing that oral evidence rests on real transaction; only term which must appear is quantity term which need not be accurately stated but recovery limited to amount stated; price, time and place of payment or delivery, general quality, or any warranties all may be omitted. Price term can be supplied from price list or “market” price and valuations; if price consists of goods quantity term must be stated.]

  • Cohn v. Fisher (1972) check constitutes sufficient memorandum

  1. Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received. [Comment 3: between merchants, failure to answer takes away SoF defense from party who fails to answer; burden of persuading jury that contract was in fact made orally prior to written confirmation still rests with party seeking to enforce contract]

  2. A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable

  1. if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or

  • Chambers Steel Engraving Corp. v. Tambrands (1990)

  • court did not enforce contract for manufacture and sale of 20 to 30 embossing machines because manufacture of single prototype not “substantial beginning of performance”

  • ideal outcome would be to compensate for prototype, but under UCC all-or-nothing

  1. if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; or

[Comment 7: If the making of a contract is admitted in court, by written pleading or oral statement, no additional writing is necessary. Contract is not conclusively established; admission is only evidential against party against whom contract is sought to be enforced.]

  • Cohn v. Fisher (1972)

admission of contract upholds enforceability

  1. with respect to goods for which payment has been made and accepted or which have been received and accepted (§2-606) [Comment 2: partial performance as substitute for signed writing can validate contract only for those goods accepted or paid for; constitutes unambiguous overt admission by both parties that contract exists; part performance by buyer requires delivery of something acceptable to seller as performance.]

  • Winternitz v. Summit Hills

analogy to §2-201(c)(3) part performance exception to Statute of Frauds not available because plaintiff seeking money damages not equitable relief (e.g., injunction “you must [not] do this”), awarded only when monetary damages deemed inadequate

  • Cohn v. Fisher (1972)

payment and acceptance of check constitutes partial performance; normally limited to extent goods have been paid except when partial payment single, indivisible good
[Comment 4: Failure to satisfy requirements does not render contract void for all purposes (e.g., does not make party receiving goods a trespasser or defends third person who wrongfully induces party to refuse to perform oral contract), but merely prevents enforcement in favor of a party to contract.]

  • Winternitz v. Summit Hills

  • analogy to §2-201(c)(3) part performance exception to Statute of Frauds not available here because plaintiff seeking money damages not equitable relief (e.g., injunction “you must [not] do this”), awarded only when monetary damages deemed inadequate

  • lease renewal for two years with option of renew; draft lease never signed by rent payments (part performance) were begun; lessee’s contract with new buyers of his business contingent on enforcing lease

  • commercial lease – tenants are not fungible so landlord can refuse assignment of lease

  • Court uses tort claim of malicious interference with contract to provide relief, available when other contract derivative of breached contract; in modern business world virtually all contracts have effect on other contracts; court aggressive here in its view of malice

Directory: sites -> default -> files -> upload documents
upload documents -> Always put things in threes (eskridge has ocd) I. Procedural Due Process and Reading a Case
upload documents -> Federalism – The Structure of Government
upload documents -> General Info About Property law
upload documents -> Con law professor Larry Sager Fall 1995 I. U. S. Term limits V. Thornton
upload documents -> Property with Professor Vicki Been
upload documents -> Property Outline – Professor Upham, Spring 2000
upload documents -> Constitutional law outline part I: structure of government judicial review and constitutional interpretation
upload documents -> Complex federal investigations
upload documents -> Foundations: Agency Law Introduction to law of enterprise organizations
upload documents -> Pricing v. Sanctions

Share with your friends:
1   2   3   4   5

The database is protected by copyright © 2020
send message

    Main page