3. Introduction
• Did the parties form an agreement?
• This deals with the law of offer and
acceptance
• There can be no true contract unless the
actions and words of the traders manifest a
mutual, objective assent to be bound by the
terms of an agreement
4. Introduction
• Impact of ambiguity of language or mistake of the
traders as potentially precluding the formation of the
agreement
5. Steps
• Step 1: Can you find an offer?
• Step 2: If you can find an offer in the fact pattern, at
the time acceptance was attempted, was the offer
still outstanding (life of offer)?
• Step 3: If you find an offer and it was still open for
acceptance at the time it was the object of the
attempted acceptance, was there a defective
acceptance?
6. Major Truths About Law of Contracts
• Courts favor the reconstruction of events which
occur w/in the negotiation process so as to
conclude that a contract has been formed
(positive bias in favor of K formation)
• Technique for achieving positive reconstruction of
events is the objective theory of contract
formation: Ct. reviews words and actions of the
traders and evaluates them through the eyes of
the reasonable person. It is what a reasonable
person would have believed that alone has legal
significance
7. Step 1
• Step 1: Can you find an offer?
– Look for a stipulation that an offer is outstanding
– If offer is n/ stipulated, you must find an objective
manifestation of a present intention to form a
present contract
– That manifestation must have been
communicated to the other party
8. Three Elements to Every Offer
• Three elements to every offer
– Intent: There must be an objective manifestation to
form a present contract right here and right now
– Content: Offeror must set forth the essential terms of
her proposal or else a reviewing court and offeree
would never know what to accept or to enforce
– Communication: Communication of that intention
and those terms to a person in the fact pattern who is
intended by the offeror as the offeree
9. Intent
• State of mind Qs: Objective test: We don’t ask
Dr. Bear subjectively whether he thought
there was an offer – he has a $25K motive to
say “yes.” Instead, would a reasonable
prudent person situated as was Dr. Bear
understand that a person grabbing you and
shaking you would be making an offer?
10. Intent
• Preliminary negotiations: These questions call
on you to decide whether at the point one of
the parties thinks he has formed a contract,
the actual discussions had merely been a
discussion of possible future business
(preliminary negotiations) or whether the
parties had just done present business
(exchanged offer and acceptance)
11. Intent
• Is there a potential agreement? Has he accepted a
present offer or merely reacted enthusiastically to a
preliminary negotiation?
• How do you make the distinction? Apply objective
theory of contract formation. Place great emphasis
on facts. Look at setting – we are told this was a
business letter – that’s a neutral fact. People
negotiate and extend offer and acceptance by letter.
What if this same statement was made at a cocktail
party – far less likely that a court would find offer.
12. Intent
• Tip: If you are judging a particular
communication, the closer that
communication comes to spelling out all of
the essential terms of the proposed
agreement so that the only thing left for the
other party to do is to say, “I accept,” then the
more likely it is that a party that was that
specific as to the essential terms was
manifesting a present offer
13. Content
• Offeror must set forth the essential terms
expressly or w/in range of permissible
implication
– Identify parties to proposed K,
– Identify the subject matter of proposed exchange
– Time for performance, and
– Price
14. Content
• Under CL, a communication that lacked any of
these terms was too indefinite to constitute
an offer. The trend of modern decisions is to
favor reconstruction of events that happened
at formation stage so as to conclude that a
contract has been formed
15. Content
• CL reform: If in the fact pattern there is total
silence by traders w/ respect to one of the
essential terms of the bargain, ct. will attempt
to salvage transaction by treating the parties’
mutual, total silence as an objective
manifestation of consent to trade on a
reasonable term
16. Content
• What is a reasonable term? If these parties
have done business before, a reasonable term
would be inferred from their prior history. This
is called course of performance. Takes
precedent over general market custom in
determining what would be the reasonable
term for these two traders.
17. Content
• If these two parties have never done business
before, court would attempt to find a
commercially reasonable term in customs and
mores of market place
18. Content
• There must be total silence – key to cl. If parties were
subtle in addressing a disputed term but did so in an
ambiguous or half-hearted manner, then at CL no
court could imply a reasonable term b/c that would
be making a bargain other than the one the parties
sought to fashion
19. Content
• UCC: If both traders are merchants and goods are the
subject of their attempted exchange, code permits
flexibility in settling essential terms. First, merchant
traders can adopt term setting machinery that will fix
the content of an essential term in the future. If the
manufacturing seller agrees to abide by the same
trade journal’s quotation, the parties have formed a
contract today – 11/17 – though neither of them
know the price term. Their agreement to term
setting machinery is sufficient to give them a
contractual relationship as of the exchange of offer
and acceptance.
20. Content
• Under UCC, on 11/17, buyer can approach seller, give
all the essential terms, accept price, and then say,
“you and I will agree on price in second week of
Jan.,” If the seller consents, their agreement to agree
in the future w/ respect to filling in an essential term
is binding.
21. Content
• What happens if trade journal suspends publication
in late Dec.? Or what if buyer becomes disillusioned
and doesn’t agree to any price that seller assents to?
Does that defeat contract formation? No, in both
instances, the contract was formed on 11/17 and
nothing can be done subsequently to defeat
formation. If trade publication suspends w/o fault of
either party, ct. will imply a reasonable term to
salvage bargain
22. Communication
• Communication of that intention and those terms to
a person in the fact pattern who is intended by the
offeror as the offeree
23. Step 2
• If you find an offer at time acceptance was
attempted, was the offer still outstanding?
24. Step 2
• An offeror is in complete control of the terms
upon which she creates the power of acceptance
• If she specifies that her offer is to expire on a
certain date or on the occasion of any specified
event, the power of acceptance is explicitly
limited by those terms no matter how
unreasonable.
• No contract may ever be created after the point
fixed in time by the offeror for the expiration of
that offer
25. Step 2
• What if the offeror says nothing concerning the life
of the offer? This will test your understanding of the
basic elements of contract construction that fix the
life of the offer in the absence of it being set by the
offeror
26. Step 2
• Offer expiring under its terms: Lapse of time. Offers,
like people, die of old age. If the offer sets no
expiration date by implication of law, it is open for
acceptance for a reasonable time only. Never assume
that, “it’s open for a reasonable time.” Use facts to
flesh out what you think the reasonable time would
be.
27. Step 2
• If John offers to sell you a carload of ripe bananas in
an unrefrigerated railroad car in CA on 7/15 and says
nothing about the life of the offer, it’s probably open
for only one minute.
• On the other hand, what if the offer is for diamonds
and offeror says nothing about life of offer? This offer
would be open for a long time. The subject matter
(i.e., diamonds) is n/ perishable and the price is n/
volatile – this is how you analyze what is a
“reasonable time”
28. Step 2
• Operation of law
– Death or destruction of subject matter terminates
the offer by operation of law. John offers to sell
you his home for $80K. Fire destroys residence.
John’s offer to sell is revoked by operation of law.
Same thing happens if there is death or insanity or
illegal incapacity of the offeror or the offeree –
offer is terminated, revoked by operation of law
29. Step 2
– Intervening illegality of the proposed subject
matter: If subsequent to communication of offer,
but prior to acceptance, the government
intervenes and declares proposed bargain illegal,
the offer to perform it is revoked by operation of
law
30. Step 2
• Termination by rejection: You offer to sell John your
car for $10K. John says, “no.” John’s rejection as a
matter of law terminates your offer. John, after
spotting you shining your Porsche, can n/ form a
contract by coming back to you on his hands and
knees and begging, “I meant to say, yes!”
• Ten seconds after John said, “no,” there was no
longer anything left for him to accept. Offer died a
brutal death at hands of John’s rejection
31. Step 2
• Revocation by offeror: Even though offeror expressly
states that he will keep the offer open (one week to
think about buying my home), an offer is still
inherently revocable at any time prior to acceptance.
As unfair as this might be, it’s the law.
32. Step 2
• Can you get around this rule that an offer is
inherently revocable at any time prior to acceptance
even though the offeror gave you one week to think
about buying his home? Yes.
33. Step 2
• Three Exceptions:
• First, purchase an option over offeror’s offer to
sell you his home for $80K. For example, “I’ll pay
you $ 500 if you will stay by that commitment to
give me a week to think about it.”
• An option is always a contract w/ its own offer,
acceptance, and its own separate consideration
(though nominal). If you have formed an option,
the offeror’s offer to sell you his house is
irrevocable under the terms of that option. This is
a creature of cl
34. Step 2
• Second, terminate offeror’s power of revocation
under estoppel. If offeror told you that you had a
week to consider his proposal, and you changed your
position in foreseeable reliance on that statement,
courts would rule that offeror is estopped from
revoking his offer given your foreseeable detrimental
reliance. Creature of common law.
35. Step 2
• Third, merchant’s firm offer (creature of UCC): Only
the offeror has to be a merchant. The offeree need
n/ be a merchant.
• If goods are the subject matter of the attempted
exchange, then an offer which is in a signed writing
by a merchant trader is irrevocable according to its
terms.
36. Step 2
• If it says, “you have 30 days,” then you have 30 days.
There need not be an option or evidence of
detrimental reliance. Code makes merchant’s written
offer w/ representation of stability enforceable under
its terms for up to 90 days.
• Offeror doesn’t have to name a date, but be sure
that (1) the offeror is a merchant, (2) that goods are
the subject matter of the transaction, and (3) that
there is a signed writing.
37. Step 3
• If you have found an offer and it is still outstanding,
ask whether there was a defective acceptance
38. Step 3
• There are no magic words for acceptance
• Acceptance must amount to a present
unconditional, unequivocal assent to each and
every term of the offer
• If the response of the offeree bears that
quality, at what moment in time is the
contract formed?
39. Step 3
• Mailbox rule: If parties are operating at a distance
and communicating w/ one another, when does the
offeree form the contract?
40. Step 3
• The contract is formed w/ the dispatch of the offeree’s
acceptance if it is communicated in a commercially
reasonable manner – a manner that is at least as fast and
reliable as the one utilized by the offeror.
• Under the “modern version” of the mailbox rule or
depositor acceptance rule, a contract is formed the
moment the offeror places her acceptance in the mailbox
even though the offeror is unaware of it. The offeror is
still bound though he doesn’t know that formation has
occurred. All risk of delay, misdirection or nondelivery is
born by the offeror under the depositor acceptance rule!
41. Step 3
• What happens if the offeree unconditionally and
unequivocally assents to every term but doesn’t use
a commercially reasonable channel of
communication? A contract can still be formed but it
will be formed only upon receipt by the offeror and
in the meantime the offer remains inherently
revocable at any time prior to acceptance.
42. Step 3
• CL Rejection/counter-offer rule: Major problem
under common law is a rule that was developed
more than a century ago. If the offeree responds to
an offer in any way that involves tampering w/ the
terms proposed by the offeror, as a matter of law n/
only is there no contract, but the original offer is
eviscerated. Called “rejection, counter-offer rule.” It’s
a huge barrier to contract formation
43. Step 3
• CL gave offeree a narrow window of opportunity. If
offer created in the offeree the power to form a
contract, in order to exercise that power, he has to
make an effective acceptance.
• At CL, an effective acceptance was referred to as the
mirror image of the offer. Any attempt by offeree to
disrupt the terms of the offer was fatal to
acceptance—counter offer rule
44. Step 3
• Example: (1) “I offer you my home at 500 Smith Street for
$100K, 15 year mortgage at 11%.” This is a present offer.
• (2) Offeree responds, “Will give $90K, cash.”
• (3) Owner replies, “cannot reduce price.”
• (4) Offeree says, “I accept.”
• Analysis: If this is an offer, (2) is n/ an acceptance because it’s
not the mirror image of the offer. What’s worse, it’s regarded
as a rejection, counter offer. The offer is dead on arrival. If
there had never been communication number three, there is
nothing that the offeree could do to form a contract other
than becoming the source of a counter offer. But there was
communication number 3: “Cannot reduce price.”
45. Step 3
• Number 3 is an objective re-manifestation on the
part of the homeowner of a continued willingness
notwithstanding the rejection counter offer to trade
on the initial terms. It goes back and refers factually
and incorporates by reference everything that was
included in communication number one.
• And here comes number 4: Exactly what was favored
by common law. No ifs, ands or buts about it: mirror-
imaged acceptance: “I accept.” Here is how to
analyze this hypo: (1) offer, (2) rejection, (3) counter-
offer and revival of offer, and (4) mirror-imaged
acceptance
46. Step 3
• Are there any other limitations on the mirror-image
rule other than looking for the lucky presence of a
revival by the original offeror? Yes
47. Step 3
• Exception 1: A mere request by the offeree to the
offeror that the offeror consider different terms
which makes it clear that the offeree is n/ rejecting
the offeror’s offer obviously does n/ form a contract.
At the same time, it does n/ automatically trigger the
rejection-counteroffer rule.
48. Step 3
• Example: “I will give serious thought to your offer to
purchase your home for $100K on a 15 year
mortgage. In the meantime, would you consider an
immediate transaction of $90K in cash?”
• This does n/ form a contract, but at the same time it
does n/ trigger a rejection/counteroffer. Therefore, it
leaves open the possibility that the offeree could
have a change in heart one hour later, call up the
offeror, and accept the offer. In this scenario, the
offer would still be alive!
49. Step 3
• Exception 2: Merely making explicit that which was
contained in an offer or attached to the offer by
operation of law does n/ trigger rejection-counter-
offer rule. This arises in the case of a merchant seller
where an implied warranty of merchantability has
already been attached to the offer. If there is no
disclaimer, it is already a part of the K and the
offeree has merely made explicit a term implied in
the K by operation of law.
50. Step 3
• Compare UCC: If goods are the subject matter of the
attempted exchange and both parties are merchants,
then what is the fate of the terms that are articulated
by the offeree in the course of an attempted
acceptance?
• Setting the scene: Offeree accepts offer and then
goes on to add terms of her own. At common law,
this would trigger rejection-counter-offer rule which
insists on mirror image.
51. Step 3
• Under UCC, there will always be a K. The only issue is
the fate of the terms originating w/ the offeree.
There is no more drastic a difference between life
under the UCC for merchants and the old cl.
52. Step 3
• First, there must be an acceptance—offeree
must have attempted an acceptance. If
offeree does n/ wish to accept offeror’s terms
but is willing to do business on his own terms,
offeree should make an explicit rejection-
counteroffer. Neither an offeree nor an offeror
has to be forced into playing this game.
53. Step 3
• For example, if an offeror wants to make certain that,
as a merchant, she will never be bound to any terms
other than those in her offer, she should make an
iron-clad, “take it or leave it” offer.
• If an offeree attempts to accept an iron-clad offer
while tampering w/ its terms, he’s taken the bait
hook, line, and sinker. Why? He’s bound to a contract
that contains only the terms of the ironclad offer.
54. Step 3
• Moral of the story. Beware of the offeror who
does n/ protect herself w/ an ironclad offer
and an offeree who surreptitiously does n/
make a rejection-counteroffer but who tries to
accept while changing certain terms of the
proposed business deal. Though fatal under cl,
there will always be a K under A II section 207
55. Step 3
• Only issue is the fate of the terms originating
w/ the offeree. This rises and falls on whether
the terms originating w/ the offeree are
consistent or inconsistent w/ the offer.
56. Step 3
• Consequence of consistency: If the terms
proposed by the offeree are consistent w/ the
terms of the offer, a contract is immediately
formed. The terms of the K are the terms of
the offer as modified by the consistent
additional terms proposed by the offeree
UNLESS the offeror speaks out and promptly
rejects the offeree’s consistent additional
terms.
57. Step 3
• Breaking it down: Offeror is in catbird seat,
but if offeree accepts w/ consistent additional
terms and offeror does n/ promptly speak out
and reject them, a K that contains the terms
from the offer as supplemented by the
acceptance has been formed under the Code.
58. Step 3
• What if the terms proposed by the offeree are
inconsistent? A contract is immediately
formed, but it contains only the terms of the
original offer.
59. Step 3
• Breaking it down: Inconsistent terms proposed
by the offeree do n/ become a part of the
contract unless the offeror expressly speaks
out and assents to them.
60. Step 3
• How do you know whether the terms in the
fact pattern are consistent or inconsistent?
• Start out w/ offer – look at impact of the
terms on that offer.
61. Step 3
• Economic impact: If the terms proposed by offeree
significantly shift the economic advantage of the proposed
transaction, they are inconsistent.
• Risk allocation: What if the terms proposed by offeree do n/
alter the economics of the transaction, but they dramatically
shift the incidence of loss? If the terms proposed by the
offeree significantly re-allocate risk from the allocation of risk
contained in the offer, the terms are inconsistent.
• Per se rule: If any term of the acceptance would impair a
remedy that would otherwise be available in event of breach
of that contract, the term is inconsistent. Ex. Offeree who
accepts and then attempts to assert an arbitration clause in
lieu of a litigation term – that is not consistent
62. Step 3
• Bilateral in nature
– Parties – A and B – form agreement by exchange
of promises
– A promise standing against a promise forms an
agreement
63. Step 3
• Unilateral formation
– A – offeror – holds forth a promise. Acceptance on
the part of the offeree takes the form of doing a
specific act
64. Step 3
–How do you accept an offer to bargain in
the unilateral mode? Only by total
completion of the requested act. What
about the rule that an offer is inherently
revocable any time before acceptance?
–W/ just two weeks left, Andy could say, “I
revoke.” There must be some protection for
Brad. It is indecent what Andy has done.
Two rules designed to protect Brad!
65. Step 3
• Rule 1: Rule of construction: Whenever possible, Court
will construe the offer as inviting formation in the
bilateral mode – by acceptance in giving promise. This
is the statutory rule under the UCC. An offer to
purchase goods may be accepted either by the seller’s
prompt shipment of conforming goods (form bargain in
the unilateral mode) or the promise to promptly ship
them (forming a K in the bilateral mode). But at cl, if
Andy clearly states that he desires formation in the
unilateral mode, this rule of construction wouldn’t be
helpful to Brad b/c he never said, “I promise.” He never
tried to form bargain bilaterally.
66. Step 3
• Rule 2: Supplementary rule: Once the offeree
begins substantial performance of the requested
act, he does n/ form the K but he does cut off the
power of the offeror to revoke so as to give the
offeree a reasonable opportunity to complete
that which he has begun. If Brad had pulled all
but two weeds, he would clearly have
substantially performed, and the offeror would
have been prevented by cl rule from revoking the
offer giving Brad a reasonable opportunity to
complete his work.
67. Step 3
• Note: Offeree is under no obligation to go
forward and to complete the requested act.
The offeree who starts the act of performance
is never obliged to finish it. There is only one
way that the law permits the parties to be
bound by merely exchanging promises and
that’s to form a K in the bilateral mode.
68. Ambiguity & Mistake
• In appropriate circumstances, they can
preclude the formation of an agreement
70. Ambiguity
– Latent: Hidden ambiguity
• If it effects an essential term of the bargain,
precludes the formation of an agreement
• If at the formation stage of the bargain, neither
trader recognizes that a term which is used to
describe one of the essential terms is
reasonably susceptible of more than one
meaning, and each party has subjectively
attached a different meaning to that term, their
bargain is flawed by a fatal latent, hidden
ambiguity.
71. Ambiguity
• There can be no K b/c there is no basis to
favor the subjective reasonable interpretation
of the buyer to the very different subjective –
but equally reasonable interpretation being
given the term by the seller. If judge has no
rational basis to intervene, no remedy is
available. If latent ambiguity affects an
essential term, it precludes formation of a K
72. Ambiguity
– Patent: Obvious ambiguity
• If it effects an essential term of the bargain, precludes
the formation of an agreement
• At the formation stage, the traders are guilty of being
sloppy (i.e., they frame one of the essential terms of
the agreement in language that is susceptible to more
than one reasonable meaning). Ambiguity is obvious.
Yet, neither party takes the opportunity to clarify their
particular understanding. If parties are equally guilty of
failing to clarify an obvious ambiguous verbal
discrepancy in their bargain, there can be no K b/c
there is no rational basis to prefer the interpretation of
the negligent seller to the different interpretation of
the equally negligent buyer
73. Ambiguity
• But what if one of the parties is free of fault b/c
as to him the ambiguity was hidden while the
other party is guilty of fault b/c as to him, the
ambiguity was obvious? Now the judge has a
reasonable basis to conclude that there was a
contract – to protect the interests of the
innocent party. The court gives the ambiguous
language the subjective definition intended by
the innocent party, and tells the other poor
slob that he is S.O.L. b/c he was at fault
74. Mistake
• The problem here is not that the words or acts
of the parties are ambiguous but that they
don’t convey the actual intention of one or
both of the traders.
75. Mistake
• Fact pattern one: B/c they were uttered by
one or both of the traders in the course of
their own personal mistakes (i.e., mistakes of
the traders themselves)
76. Mistake
• Mutual mistake fact patterns: A and B share a
common mistake
– At formation stage of bargain, both traders are
mistaken. A, owner of a canvas, promises to sell it
for $1M, each acting under the impression that it
is a work of Picasso. Both parties are mistaken –
the work is a forgery. Parties are morally innocent
but a fundamental factual assumption is
inconsistent w/ reality.
77. Mistake
– What is the impact of a mutual mistake upon the
terms of the agreement? Is it a contract? Probably,
yes. Each party has a remedy in equity of
rescission. Either the buyer or the seller can rely
upon the “after arising” discovery as a means to
refuse to perform on the buyer’s promise to pay
the $1M
78. Mistake
– First distinction: First look at the gravity of the
mistake in terms of its importance to the bargain.
If mistake goes to the heart of the transaction (i.e.
essence of exchange) this is the type of mistake
that warrants complete relief.
79. Mistake
– What happens if the mistake doesn’t go to the
essence of the exchange? Assume both parties are
mistaken: A promises canvas and B promises $1M,
each assuming Picasso painted it in ’31 but it turns
out – upon appraisal – to be the work of the
master in ‘32. What is the result of this mistake?
Nothing. This mistake goes to a collateral quality,
n/ the essence of the exchange and parties are n/
allowed to cancel or rescind Ks for mistakes that
don’t have that vital quality.
80. Mistake
– Second distinction: Where are the parties the
moment they discover they are mistaken? Before
there can be a remedy of cancellation, K must still
be executory in nature. Meaning the parties must
exchange promises to buy and sell the canvas, but
neither party has yet performed. What happens if
the seller delivers the canvas, the buyer pays the
money, and a year later the canvas is discovered
to be a forgery? Relief is unlikely. Courts don’t like
to rewrite history. Only willing to give relief if
bargain is executory and the mutual mistake goes
to its essence.
81. Mistake
• Unilateral mistake fact patterns: Blunder of
only one of the traders (A is mistaken, B is not)
– Only one of the traders is mistaken. Make
distinction btwn:
• Mechanical miscalculations
• Errors in business judgment
82. Mistake
• Mechanical miscalculations
– May provide grounds to relieve mistaken party.
Depends entirely upon SOM of the other trader –
the non-mistaken party – and whether she has
formed a commercially reasonable expectation.
83. Mistake
–How do you identify a mechanical
miscalculation (MM)? A MM involves a
bargain that I did n/ intend to make on
these terms. My intention was betrayed by
some error in math (mathematical
miscalculation) or a failure to read the fine
print. Test is whether the bargain made is
the bargain intended.
84. Mistake
–Can you raise it as a defense? Depends
entirely on state of mind of other party and
whether he has formed a commercially
reasonable expectation. If the other party
did n/ subjectively know that I made a
miscalculation and as a reasonable person
would have had no grounds to suspect it,
then I have no basis for a defense. I must
eat the deal.
85. Mistake
–But if the other party is n/ innocent, and
recognizes that this was an offer too good
to be true, then there is no K. Even under
objective standard, you cannot pounce
upon what you recognize to be the
mechanical miscalculation of another
trader. If he belatedly discovers his
mathematical error, he may invoke in equity
cancellation or rescission to get out of K
86. Mistake
–If A makes a mechanical error and B forms a
commercially reasonable expectation, A is
bound. But if B has no commercially
reasonable expectation b/c he knew or
should have suspected the error, A has a
defense
87. Mistake
• Errors in business judgment
– Courts are not sympathetic towards blundering
party and under no circumstances will they afford
that party any relief.
– Errors in business judgment are what makes the
capitalistic system work.
– Although offeror knew that he was taking offeree
for a hellacious ride, the offeree has no defense.
88. Mistake
• Fact pattern two: Where the intention of the
traders was betrayed b/c of some third party
making an error in communicating the terms
of the bargain.
89. Mistake
• Here, the offeror knew what he wanted to say,
but a TP selected as an intermediary in the
transaction made a mistake in the
transmission (i.e., dropped a “zero” off of the
price tag).
90. Mistake
• Rules are identical to those applied to
mechanical miscalculations. If I selected
Western Union as the offeror, and if the
message that Western Union delivers dropped
a zero from what I had written in the dispatch
paper, whether the K is predicated upon your
acceptance of the telegram that you receive
depends upon whether you had a
commercially reasonable expectation.
91. Mistake
• If you neither knew nor as a reasonable
person had grounds for suspecting that there
was an error in the transmission, there is no K.
• But if you knew that this was an offer too
good to be true, you have no such expectation
and I have a defense. Also, I have a cause of
action against Western Union.
92. Adopting a Writing (PER)
• Facts must tell you that
– Parties have formed an agreement,
– That they reduced the agreement to a written
expression,
– That the parties are now litigating the terms of
that agreement,
– One of the parties seeks to bring in evidence of
some term that is n/ found w/in the four corners
of the writing they created
94. Adopting a Writing (PER)
• Systematic approach to response
– First, make sure all of the facts previously
discussed exist (A and B have formed a K, reduced
it to writing, they are in litigation, and that
someone’s trying to come in w/ evidence of a
term of that agreement that is n/ in that writing)
95. Adopting a Writing (PER)
• Second, is there an integrated writing?
–PER protects only an integrated writing
–Intent of the parties: Both parties must
have intended the written instrument as
the full and final expression of the terms of
their agreement
–If they did n/ create the writing w/ that
intent, it is n/ integrated and the PER has no
application
96. Adopting a Writing (PER)
–Step 1: Who decides whether the writing is
integrated? The trial judge. PER is a rule of
substantive law. It has nothing to do w/
evidence, but whether the evidence is
legally competent
97. Adopting a Writing (PER)
• Third, judge looks at evidence that other party
is bringing in. She asks herself, “Is that
evidence parole evidence?”
–What makes evidence parole evidence is n/
whether it is written or oral; it has nothing
to do w/ the form of the evidence but w/
the time
98. Adopting a Writing (PER)
–PE is any evidence – whether written or oral
– of any promise, representation or
understanding between the parties who
have formed the integration which was
arrived at prior to or contemporaneous w/
the formation of the integrated writing.
–Look to time origin of the extrinsic
evidence!
99. Adopting a Writing (PER)
–What if the evidence is that a day after A
and B formed an integrated writing, they
added a term? N/ parole evidence. Instead,
it’s evidence of a subsequent modification,
n/ governed by parole evidence rule
–Who decides whether evidence is parole in
nature? The trial judge
100. Adopting a Writing (PER)
• Fourth, if the judge rules that there was an
integrated writing, and that the evidence your
client is trying to introduce is parole evidence,
then the next question is what impact does
the parole evidence have on the integrated
writing?
101. Adopting a Writing (PER)
–Rule: You may n/ use parole evidence to
contradict, vary, or add to the terms of an
integrated writing
102. Adopting a Writing (PER)
–Q: What happens if the evidence doesn’t
have one of these three forbidden traits?
For example, it explains an ambiguity or it
defines a term. Evidence may freely be
admitted b/c it has no forbidden impact.
Only variation, contradiction, and addition
is forbidden parole evidence.
–Trial judge makes this determination
103. Adopting a Writing (PER)
–If judge determines that the evidence is
presented in the veil of an integrated
writing, that it’s parole in nature, that it has
one of the three forbidden traits, the jury
will never know about it. Evidence will be
excluded unless proponent of evidence can
bring it in
104. Adopting a Writing (PER)
• Fifth, exceptions. PE may be admitted
notwithstanding the fact that it varies,
contradicts, or adds. There are three
exceptions:
105. Adopting a Writing (PER)
• # 1: Proof of fraud: Whatever interest society
has in the convenience of having the deal in
writing, it has a greater interest in ferreting
out an individual guilty of fraud. You may
always use parole evidence to prove fraud
106. Adopting a Writing (PER)
• # 2: May use parole evidence on a theory of
partial integration. Party who seeks to get
evidence before jury claims that, on the day
the K was formed, the parties formed a single
K, but they intended this writing to cover
some and n/ all of the terms of that single
agreement. If judge finds this credible, then
she allows evidence to go to the jury on a
theory that it was only partially integrated.
107. Adopting a Writing (PER)
• Two tests that judge must follow in making
this determination:
108. Adopting a Writing (PER)
–Conservative: Four corners test. Judge
allows evidence to come in only if the
writing looks incomplete on its face. Only
then can the proponent introduce evidence
of alleged further additional terms
109. Adopting a Writing (PER)
–Liberal view: If the party who is offering can
supply the judge w/ any credible
explanation as to why the parties left this
term out of the writing, then it might be
admissible even though the writing on its
face appears to be complete and has no
obvious omissions (CA). Scholars argue that
this is eroding the PER.
110. Adopting a Writing (PER)
• # 3: Collateral agreement: Most dangerous
exception. On the day the parties entered the
bargain, they formed n/ one but two
agreements. One agreement is reduced to a
formal integrated writing. Lawyer wants to
prove to jury the terms of the second –
collateral agreement. This all but swallows up
the rule!
111. Adopting a Writing (PER)
• Steps that judge must follow:
–First, judge must determine that the alleged
second agreement is of far lesser
importance than the subject matter
described in the admitted integrated
writing
112. Adopting a Writing (PER)
–Second, no term of the alleged collateral
agreement can contradict any term of the
integrated writing. If the integrated writing
says, “this contains all of the obligations of
the seller,” then buyer would be unable to
establish by a collateral agreement that the
seller had one last obligation
113. Adopting a Writing (PER)
–Third, the subject matter of these two
agreements must bear some similarities so
as to make it rational that the parties would
have considered them as two separate
agreements rather than being part and
parcel of a single business deal
–Who makes this decision? The judge
114. Step 2
• If you conclude that traders formed an
agreement, is that private bargain a K?
–Private parties form private agreements
–A K is a legal status
115. Step 2
• Whether a K exists depends upon two elements:
• The presence of valuable consideration –
bargained for legal detriment on both sides of the
exchange, and
– Two elements: It must be (1) bargained for and
(2) there must be legal detriment
• Absence of defenses that would preclude
formation – real defenses
– This issue organizes material on defenses to
enforcement – personal defenses that render
obligation of one of the parties null and void
116. Step 2
• The presence of valuable consideration –
bargained for legal detriment on both sides of
the exchange
• Four step approach toward issue-spotting
117. Step 2
• As you look at the fact pattern, ask yourself
whether there is a bargain
– At formation stage, offeror and offeree must have
consciously exchanged promises w/ a view toward
altering their legal rights and liabilities. Bargain is
synonymous with exchange.
– Donative transaction (including gifts) is n/a K b/c there
is no element of bargain
– Past consideration is n/ valuable b/c it lacks element
of bargain
– Moral obligation is n/ valuable b/c there is no element
of bargain
118. Step 2
• If “yes,” look to the terms of the bargain. Do
each of the exchanged promises or acts
involve “bargained for” legal detriment to the
pr/or or actor? (cut right to the chase to
determine if there is valuable consideration)
119. Step 2
• Legal detriment defined:
–(1) Bargained for promise to perform any
act which, but for this bargain, “I am not
legally obligated to perform,” OR
–(2) Bargained for promise to forbear from
pursuing a course of conduct which, but for
this bargain, “I am legally privileged to
pursue”
120. Step 2
• It is the bargained for change in legal position
and n/ any element of economic benefit that
imparts value to valuable consideration
121. Step 2
• Courts use three terms:
–Want of consideration
–Failure of consideration
–Inadequacy of consideration
122. Want of Consideration
• Defense to formation of a K. Involves proof at
formation stage of the offer and acceptance
that the other party incurred no legal
detriment. The party who gave a valuable
promise has an absolute defense against being
held liable to perform the K: “There was no
consideration so no K!”
123. Want of Consideration
• If, at day parties exchange promises, promise
that B has given has no quality of legal
detriment, A has the defense of want of
consideration. In other words, A’s promise was
legally valuable, B’s was not
124. Want of Consideration
• Legal detriment in a bilateral bargain
– Look to each of the promises. Ask: Did A’s promise
involve the promise to do any act which, but for
the attempted bargain w/ B, A was n/ legally
obligated to perform? If so, A’s promise is valuable
consideration
125. Want of Consideration
–Did B bring valuable consideration to this
bargain? Did B promise A that she would do
any act, which but for the bargain w/ A, she
was n/ legally obligated to perform? If yes,
she also incurred bargain for legal
detriment. In that case, we have an
executory bilateral K staring us in the face
126. Want of Consideration
• Legal detriment in a unilateral bargain
–Jack (Off/or) promises his neighbor (Ned), a
teenage boy, $25 to cut his lawn. Ned can’t
accept by promising, he can only accept by
doing the requested act. If Ned performs
the requested act and brings about
acceptance of Jack’s offer, is there a K?
127. Want of Consideration
–Analysis: Did Ned perform a “bargained for”
act which, but for the attempted formation
of a K w/ Jack, Ned was n/ legally obligated
to perform? Yes, Ned had no legal
obligation to mow Jack’s lawn. His act has
quality of legal detriment. Jack’s promise
has the obligation of legal detriment. But
for bargain w/ Ned, Jack had no obligation
to pay him $25.
128. Want of Consideration
• Economic adequacy irrelevant
–Legal detriment can be shown where the
party who brings valuable consideration to
exchange is n/ only not injured, but he may
end up advantaged!
129. Want of Consideration
–Hypothetical # 1: Matilda makes the
following offer to her nephew, Sam: If you
will take a summer job and save $ 500, I will
take you to the summer home in France
when you graduate from H.S. Assume Sam
gets a summer job and saves $500. Does he
have a contractual claim to have his aunt
take him to France?
130. Want of Consideration
– First, did Matilda make an offer? She either made
an offer of a bargain or she just made a donative
declaration.
131. Want of Consideration
– Second, assuming proposal was construed as offer to
bargain, Sam would have brought legal detriment to
exchange b/c children have no legal obligation to
work. The act of working is an act which but for the
bargain w/ his aunt, he was n/ legally obligated to
perform. Nor do children have any obligation to save –
i.e., the act of conserving something in a bank
account. Sam would have brought legal detriment
even though he was n/ injured in any sense. He
benefited in the old-fashioned way: by becoming
familiar w/ work. He benefited in an economic sense:
he has $500 in bank account and a contractual right to
go to France.
132. Want of Consideration
–Hypothetical # 2: Uncle Bob makes the
following offer to his nephew, Bill: If you will
promise and keep your promise n/ to smoke
and n/ to drink between now and your 21st
birthday, I will write you a check for $5K. Bill
makes promise thus bargaining in bilateral
mode.
133. Want of Consideration
– Test: Did Bill bring bargained for legal detriment to
exchange? (1) Bill promised that he would n/ drink
between now and the day he reaches legal
majority. Is that legal detriment? No, it is n/ a
promise to forbear from a course of conduct
which but for the bargain w/ Uncle Bob, Bill had
no legal right to pursue. A minor has no legal right
to consume alcoholic beverages. (2) What about
Bill’s promise that he wouldn’t smoke for the
balance of minority? It’s illegal for a minor to
purchase cigarettes. However, it is n/ illegal for a
minor to consume such things.
134. Want of Consideration
–RULE: So long as any element of a proposed
exchange carries the quality of bargained
for legal detriment, it is sufficient to bind
the entire promissory obligation of the
other party.
135. Want of Consideration
– (3) What about Bill’s argument that he restricted
his freedom of association for the balance of
minority? This has a quality of legal detriment.
– What result: Uncle isn’t liable for 1/3 of $5K, he’s
liable for $5K. COURTS ARE NOT INTERESTED IN
ECONOMICS OF EXHANGE. Rationale: Parties
should be free to make their own bargains.
136. Want of Consideration
• Exceptions to rule that courts are
disinterested in economics of exchange
137. Want of Consideration
– Transactions that involve abuse of socially
protected relationship
• Fiduciary relationship: If bargain between A and
B has the characteristic of a fiduciary
relationship, courts insist that there be more
than merely legal detriment. They will
scrutinize the pragmatic advantage of the
exchange in order to decide whether it was a
bargain fair in its terms. A fid. relationship is a
formal relationship of trust and responsibility
(example, lawyer – client)
138. Want of Consideration
• Confidential relationships: Chief
characteristics are trust, independence,
and influence. If A and B have a
confidential relationship, law will look
beyond issue of legal detriment on both
sides of exchange and scrutinize it for
fairness of terms
139. Want of Consideration
– Promises rendered non-valuable b/c one of the
parties has n/ incurred legal detriment in the
course of the bargained-for exchange. This is
known as the illusory promise
• If, at the formation stage, one of the parties
does n/ incur legal detriment b/c he retains an
unfettered election to perform or n/, his
promise is illusory
140. Want of Consideration
• Full performance as cure for missing
consideration
• If there is want of consideration in the
fact pattern, examine facts to see if there
is any subsequent performance on the
part of the individual who gave the
illusory promise which would cure it and
result in the formation of a K
141. Want of Consideration
• Hypo: Buyer writes to seller: “If I decide
to order 10,000 barrels of oil, you
promise to (1) accept the order, (2) ship
w/in one week, and (3) grant a 20%
discount off of then list prices.” Seller
accepts deal. Is there a deal?
142. Want of Consideration
• Analysis: No. Seller has the defense of want
of consideration. Promises made by
wholesale seller are legally valuable. But
what did the buyer do? N/ a darn thing!
Buyer gave an illusory promise. Moment
before buyer sent letter, he was perfectly
free to order goods from this seller or n/,
and moment after the letter was delivered,
buyer had the same measure of freedom.
Advise seller to refuse on the basis of want
of consideration.
143. Want of Consideration
• Rule: Full performance of the terms of an
illusory promise cures the want of
consideration and produces contractual
liability. If proposal was made on 11/20 and on
12/5 Buyer sends Seller an order for 10,000
barrels of motor oil, that would create K
liability. However, the date of formation would
n/ be 11/20 when they exchanged
communications because on that date there
was no K – it was merely an illusory
undertaking.
144. Want of Consideration
• But on 12/5, when there was full
performance, Seller can’t backpedal by
saying, “I shouldn’t have to ship goods
b/c Buyer didn’t have to order them.”
Very simply, Buyer did. “The order is on
your desk, now ship the goods!”
145. Want of Consideration
• What about part performance of an
illusory promise? While full performance
cures, part performance never does.
Suppose Buyer sends Seller an order for
5,000 barrels of oil. Does that cure the
want of consideration? No. Seller was n/
obligated to perform unless he got the
benefit of his bargain, which was that he
would receive an order for 10,000
barrels.
146. Want of Consideration
–Implication of a legally valuable promise to
overcome the fundamental flaw in the
bargain at the formation stage
• Sweeping reform
147. Want of Consideration
• Wood v. Lady Duff Gordon: A formal written agreement
was entered into in which Lady Duff made Wood her
exclusive agent for one year to market her seal of
fashion approval in North America. By the terms of the
agreement, Wood promised three things: (1) to split
any profits that he made 50/50; (2) to account to Lady
Duff once a quarter for any profits; and (3) to protect
the integrity of Lady Duff’s seal of fashion approval w/
necessary copyright protection. Lady Duff signed
agreement in NY. Wood breached agreement w/ Lady
Duff by selling her seal of fashion approval and keeping
the profits. Lady Duff brought a suit against Wood
seeking an accounting
148. Want of Consideration
• Argument: Wood raised defense of want of
consideration. Wood didn’t promise Lady Duff
anything – he gave an illusory undertaking: (1)
he promised to split the profits 50/50 but he
never promised there would be any profits; (2)
he promised to account for profits quarterly
but if he didn’t make any profits, there would
be no obligation to account; and (3) he
promised to protect as was necessary Lady
Duff’s seal of fashion w/ patent registration but
if he didn’t sell anything it would never be
necessary.
149. Want of Consideration
• Analysis: Ct. examined agreement and
declared that it was a business deal; that
it was clear that on the day the parties
met and signed the writing that they had
a mutual business objective. Both parties
implicitly promised they would exert
“best efforts to accomplish that business
objective” and the alleged want of
consideration vanishes
150. Want of Consideration
• UCC legislates this result: In every transaction
for the sale of goods, there is a legislatively
imposed covenant of good faith dealing
between the merchants: “I will deal w/ you in
good faith seeking to bring about the
commercial objective of our relationship.”
Want of consideration under UCC is virtually
non-existent for merchants and if it arises in a
common law fact pattern, you can rely upon
the Lady Duff Gordon case and subsequent
performance.
151. Want of Consideration
–Promises rendered non-valuable b/c one of
the parties has n/ incurred legal detriment
in the course of the bargained for exchange
– Problems of pre-existing duty
152. Want of Consideration
• Example: Student enrolled in a Barbri
course approaches Instructor after class
and says, “I’ll offer you $100 if you
promise to show up tomorrow and give
another lecture on K law.” If Student
were to make such an offer, his promise
of $100 would n/ be binding.
153. Want of Consideration
• Analysis: The defect goes back to the very
definition of valuable consideration. Did
Instructor promise to do an act which, but for
the bargain w/ Student, he was n/ legally
obligated to perform? No, Instructor is already
contractually obligated under agreement
between himself and Barbri to give three,
three-hour lectures on K law. Student is an
intended TPB of that K. Instructor’s promise has
no element of legal detriment b/c he has
merely re-stated the tenor of an existing legal
obligation.
154. Want of Consideration
– How can you circumvent the problem of
preexisting duty? Four solutions CL and UCC have
attempted:
• # 1: Any alteration in tenor of existing duty overcomes
defense of want of consideration and brings Instructor
w/in rule of legal detriment.
– If Instructor were to change the tenor of his existing
duty – no matter how insignificant the change
might be (i.e., by promising to show up 30 seconds
earlier than the time called for under his K w/
Barbri, or by staying 15 seconds later, he would
have incurred legal detriment).
155. Want of Consideration
–Suppose A and B have a K and A fears that B
will refuse to perform on the day that he is
obligated to perform unless A pays B more
money. If B promises to do his contractual
duty, but only if he is paid an additional $5K,
A can promise B an additional $5K but B
won’t be able to enforce it b/c A has the
defense of want of consideration. But if
there is any alteration in the tenor of B’s
duty, the want of consideration defense is
overcome.
156. Want of Consideration
–Here’s what it comes down to. There
are two different kinds of contractors
who are extorting things from their Ks:
those who are intelligent enough to
make a small change in their
preexisting duty. They win! And those
who are n/ smart enough to do that.
They lose!
157. Want of Consideration
• # 2: Even if there is no change in the tenor of
the preexisting duty, if B encounters problems
that were neither foreseen or foreseeable at
the formation stage that substantially
interfered with or burdened B’s performance, B
might have an equity of rescission. If, in these
circumstances, A offers B $5K more if he will
tough it out in the face of this adversity and
perform, A’s promise is binding on the theory
that B has given up the right to invoke the
equity of rescission. This is a moral doctrine.
158. Want of Consideration
• # 3: Accord and satisfaction supporting
obligation of A to pay $5K more. B must
raise a dispute w/ A over whether he was
in fact bound to perform. If B raises such
a dispute in good faith, then that dispute
could potentially become a self-help
remedy called accord and satisfaction.
159. Want of Consideration
• There are three steps:
– Step 1: Good faith bona fide dispute
– Step 2: Accord: Agreement between A and B
resolving their dispute
– Step 3: Satisfaction: Carries out terms of accord
which puts an end to dispute and puts an end to
original terms of K. If there is an element of
compromise between the parties’ positions in the
accord, and each party goes forward and carries out
the terms of the accord, A’s payment of $5K and B’s
performance of the duties A wanted is called
“satisfaction.” A is prohibited from litigating the
issue of whether B was entitled to money
160. Want of Consideration
• # 4: UCC approach: Good faith
modification. Code is interested in reason
why B won’t perform. If B, in good faith,
tells A that he can’t perform unless A is
willing to pay $5K more, A is n/ obligated
to make that payment or the promise (A
can say, “I’ll see you in court”). But if A
promises the money, his promise is
binding.
161. Want of Consideration
• Abolishes need for dispute between
parties or any new element of valuable
consideration supporting A’s concession.
UCC makes A’s agreement to any good
faith demand by B for a modification of
the terms of the original K binding on A
the moment he consents.
162. Want of Consideration
• What is a good faith demand that B can
bring? The good faith the code talks
about is steeped in the morals of the
marketplace. If other merchants in the
same trade or calling would recognize
that there was moral legitimacy in
seeking the modification, then the
modification is being asserted in good
faith.
163. Want of Consideration
• If goods are the subject matter, handle
pre-existing duty problem under UCC by
asking whether there is a good faith
modification of the K
• If subject matter is services, look for one
of three CL solutions to overcome
defense of want of consideration
164. Failure of Consideration
• Personal defense
• Defense to enforcement of “my” K duties
• It is assumed that a K was formed at stage of
offer and acceptance but if A can establish failure
of consideration, then he is n/ liable to perform
his K promises b/c other party (B) is already in
present material breach of his promises.
Consequence of being in present material breach
is that consideration has failed!
165. Inadequacy of Consideration
• Allegation n/ that there was no legal
detriment or that it failed, but that one party
made a stupid bargain
• No defense at all
• IOC is permitted as a defense to subservient
party in a fiduciary or confidential relationship
166. Step 2
• If the answer to the consideration question is
“no” – i.e., one of the parties didn’t incur legal
detriment – is there any substitute for
valuable consideration present in this fact
pattern? Inquiry: Is this a promissory estoppel
fact pattern?
167. Step 2
• If you cannot find legal detriment on the part
of one of the traders, and you cannot imply it,
and the subsequent conduct of the traders
does n/ cure the want of consideration, then
there is no contractual relationship.
• In this case, you would proceed to the third
aspect of the second issue. There may be
liability for breach of a promise on the theory
of promissory estoppel.
168. Step 2
• Promissory estoppel is a significant substitute
for valuable consideration in rendering a
breached promise actionable at law.
169. Step 2
• If P brings his cause of action on a theory of
promissory estoppel (PE), it is n/ a K claim. PE
is a separate, civil law theory of liability for
breach of promise. It is an alternative to a
contractual analysis.
• As a result of a promise that has been
breached, the promisee (person to whom K is
made) alleges that he is now unjustly
impoverished (i.e., worse off than he was
before the promise was made to him).
170. Step 2
• Unlike restitution interest protected in action
of quasi K, to recover on a theory of PE it is
not necessary for P to prove that D has been
unjustly enriched. Instead, P merely must
prove that he was unjustly impoverished. PE
action protects reliance interest of aggrieved
party.
171. Step 2
• Since PE is n/ a K claim, the action is n/
affected by the Statute of Frauds. The fact that
a promise is oral is not a hurdle b/c PE doesn’t
fall w/in SOF.
172. Step 2
• If, in the case of a promise to convey real
estate which is oral, which has induced the
promisee to make alterations of a substantial
and permanent nature to the property, PE
grants a decree of specific performance
quieting title in the pr/ee. In this instance,
there is no reasonable way to measure an
award through the traditional means of
reliance or money damages.
173. Step 2
• Elements
–(1) A promise made by one of the parties to
another individual that has the foreseeable
quality of inducing reliance on the part of
the individual to whom the promise was
made (n/ sufficient to find just a promise,
promise must have had quality of
foreseeable consequence of inducing
reliance)
174. Step 2
–(2) Detrimental reliance by promisee: In
fact, the promise must have induced
reliance on the part of the pr/ee which
could be (1) in the form of actions taken by
pr/ee or (2) actions forborn but these
actions must have been in reasonable
expectation that the promise would be
kept!
176. Step 2
–(4) As a result of that breach and as a result
of reliance, the promisee is worse off
177. Step 2
• If all four elements are satisfied, S 90 requires
a reviewing court to hold the breaching pr/or
bound to the terms of her K at least until the
point necessary to allow the aggrieved party
to recoup his reliance interest.
178. Step 2
• Hypothetical: John is walking down Main St.
when he spots Colonel Sanders. John pours
out this tail of woe and tragedy in life to the
Col. Moved by compassion, the Colonel
promises that he will grant John a KFC
franchise to promote and market. There has
been no bargain – Colonel has simply made a
promise.
179. Step 2
• In reliance upon Colonel’s promise, John – at
his own expense – enrolls in a course in
chicken-ology to learn how to prepare the
product. John and his wife take what little
savings they have from their antique business
and plow it into remodeling an abandoned
building in downtown Atlanta that will
function as the place of business.
180. Step 2
• John converts his spouse and children into
ambassadors of the product: i.e., people who
will eat nothing other than chicken. Colonel
changes his mind and breaches his promise.
181. Step 2
• Analysis: John could n/ bring an action for loss
of bargain for recovery of damages at law.
Why? Because there is no K (i.e., no offer), so
the element of bargain is missing. But Colonel
did make a promise and John is worse off
today than before he met him.
182. Step 2
• Element # 1: Would a reasonable person in the
Colonel’s position have foreseen that in order to
take advantage of his promise, John would have
had to take steps to learn how to prepare the
food? Yes. The steps that John took were
reasonable – w/in realm of what was
foreseeable. John would recover the cost of
tuition at Foul University, any expenses that he
incurred in leaving his home and taking up
temporary residence there. These all shifted as
element of loss to the Colonel.
183. Step 2
• What about the fact that John and wife have sunk
the diminished family fortune into the
construction and remodeling of a chicken palace
in downtown Atlanta? Was that foreseeable to a
reasonable person? Certainly, it would be
foreseeable that some structure would be
required. Assuming that John’s structure was
within the realm of reasonableness, John could
shift incidence of cost to Colonel; but he won’t
get all of the cost, just enough to allow John to
remodel structure for some other economic use.
184. Step 2
• Psychiatric rehabilitation of loved ones
($100K). Was this type of reliance within the
realm of what was reasonably foreseeable?
No.
185. Step 2
• To recover on theory of PE, object of law is n/ to
put John in the position he would have been in
had the promise been kept. Instead, it is the far
more conservative approach of putting John back
in the position he was in before the promise was
made (i.e., the position he was in on the day the
Colonel made the promise). Only protects
reliance costs that were foreseeable as a
consequence of the promise and that were
reasonable on John’s part.
