Cases
65 canonical contracts cases, organized by module and by chapter.
By module & chapter
I · Foundations
- Hawkins v. McGee Damages for breach of a doctor's express warranty of a medical result are measured by the difference between the value of the hand as warranted (a perfect hand) and the value of the hand as it actually is, plus any incidental losses; not by the patient's pain and suffering.
- Pappas v. Bever A statement of present intention to act in the future is not a promise; the language of intent does not become a binding commitment merely because the speaker later behaves as if it were.
- Steinberg v. Chicago Medical School A contract may be formed through a sequence of acts when one party invites performance, the other performs, and the conduct objectively manifests assent; the offeror's undisclosed intent is immaterial.
II · Mutual Assent
- Lucy v. Zehmer The mental assent of the parties is not requisite for the formation of a contract; the law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. A secret joking intent is no defense when a reasonable person would believe the words and conduct manifested a serious bargain.
- Raffles v. Wichelhaus Where two parties attach materially different meanings to a critical term and neither has reason to know of the other's meaning, no contract is formed for want of mutual assent.
- Drennan v. Star Paving Co. A subcontractor's bid that a general contractor reasonably relies upon in submitting its prime bid becomes binding under R2d § 87(2) / R2d § 90. The subcontractor cannot revoke after the general contractor has used the bid, even though the prime contract has not yet been awarded.
- Lefkowitz v. Great Minneapolis Surplus Store An advertisement is an offer when it is clear, definite, and explicit, and leaves nothing open for negotiation. A seller cannot impose new conditions of acceptance after the offer has been accepted by performance.
- Leonard v. Pepsico, Inc. An advertisement does not constitute an offer where no objective, reasonable person could understand it to be a serious expression of willingness to enter a bargain. Obvious humor, exaggeration, and commercial context can defeat any reasonable inference of an offer.
- ProCD, Inc. v. Zeidenberg Shrinkwrap license terms enclosed inside a software box are enforceable where the buyer has notice that the product is sold subject to license terms and an opportunity to return the product for a refund after reviewing them. Acceptance is by retention of the product after the terms are presented, not by purchase at the register.
- Specht v. Netscape Communications Corp. A consumer's clicking of a download button is not an assent to license terms that appear only on a separate, scroll-down page below the button. Where the existence and terms of an offer are not reasonably conspicuous, a user's conduct cannot constitute acceptance of those terms.
- Smaligo v. Fireman's Fund Insurance Co. An offer is rejected by conduct inconsistent with acceptance. Demanding arbitration after an offer of settlement amounts to a rejection because it is inconsistent with the conclusion that the offer has been accepted.
- Yaros v. Trustees of University of Pennsylvania Where the parties bargain face to face or by telephone, an offer ordinarily lapses at the end of the conversation unless a contrary intention is indicated. A contrary intention may be shown by express words or by the circumstances, such as the delivery of a written offer or an expectation that some action will be taken before acceptance. Where no time limit is stated, the offer remains open for a reasonable time, determined as a question of fact from all the circumstances.
- Flender Corp. v. Tippins International, Inc. Under UCC § 2-207, when an offer and acceptance contain conflicting terms on the same subject, both conflicting terms drop out and default rules supply the gap. Forum-selection clauses that disagree are knocked out; jurisdiction is governed by background law.
- State Department of Transportation v. Providence & Worcester Railroad Co. An acceptance is not rendered counter-offer by terms that are immaterial or that the offer itself permits. Changes that do not alter the substance of the bargain or impose new burdens on the offeror leave acceptance effective.
III · Consideration
- Hamer v. Sidway Forbearance from the exercise of a legal right is sufficient consideration, even if the promisor receives no economic benefit. Consideration looks to the promisee's detriment as much as to the promisor's gain.
- Pennsy Supply, Inc. v. American Ash Recycling Corp. A promisor's avoidance of a cost or burden can be consideration. When a promisee accepts a 'free' material at the promisor's invitation, and the promisor thereby escapes a disposal obligation, the transaction is a bargain, not a conditional gift.
- Conrad v. Fields Promissory estoppel requires a clear and definite promise, foreseeable reliance, actual reliance to the promisee's detriment, and injustice that can only be avoided by enforcement. Tuition for a course of study undertaken in reliance is a recoverable detriment.
- Hoffman v. Red Owl Stores, Inc. Promissory estoppel under R2d § 90 reaches promises made during contract negotiations, not only finalized promises. Where one party makes promises that induce reasonable reliance during negotiations, and the deal then falls through because the promisor changes terms, the relying party may recover reliance damages.
- Otten v. Otten Promissory estoppel under R2d § 90 requires that the promisor should reasonably have foreseen the precise action the promisee took in reliance. A promise will not be enforced merely because some detrimental reliance occurred; the reliance must be the kind of action the promisor could and should have anticipated. Where the alleged reliance is unforeseeable or unconnected to the promise, the estoppel claim fails.
- Ricketts v. Scothorn A gratuitous promise that induces foreseeable, substantial action in reliance becomes enforceable to the extent justice requires. Reliance can supply what bargain does not.
- Drake v. Bell Where a benefit has been conferred under circumstances showing an expectation of payment, and the recipient promises to pay after receiving the benefit, the promise is enforceable. Mistake in the identity of the benefited party does not defeat recovery when the actual recipient knowingly accepts and promises.
- Mills v. Wyman A moral obligation alone is not sufficient consideration to support a promise. A promise to pay for benefits already conferred to a third person (here, an adult son) is unenforceable for want of consideration.
- Webb v. McGowin Where the promisee has materially benefited the promisor by an act done at risk to the promisee, a subsequent promise to pay for that benefit is enforceable; moral obligation can support such a promise when accompanied by a material benefit previously received.
IV · Defenses
- McIntosh v. Murphy Promissory estoppel can take an oral contract out of the Statute of Frauds where the promisee has reasonably and foreseeably relied to substantial detriment, and injustice can be avoided only by enforcement.
- Sterling v. Taylor A memorandum sufficient under the Statute of Frauds need only state the essential terms with reasonable certainty; extrinsic evidence may resolve ambiguity in those terms, but it may not supply or contradict essential terms missing from the writing.
- DePrince v. Starboard Cruise Services, Inc. Unilateral mistake supports rescission where (1) the mistake goes to a material term, (2) enforcement would be unconscionable, (3) the mistake did not result from inexcusable lack of care, and (4) the other party can be returned to status quo. A buyer's knowledge or silence in the face of an obvious error can defeat enforcement.
- Sherwood v. Walker A mutual mistake going to the substance of the thing bargained for, not merely to its quality, renders the contract voidable. Where both parties believed a cow to be barren and she proved fertile, the mistake went to the very nature of the bargained-for animal.
- Wood v. Boynton Mutual mistake as to the value, but not the identity, of the subject matter does not justify rescission. A sale stands when both parties were ignorant of the true nature of the thing and neither bore a duty to investigate.
- Barrer v. Women's National Bank Innocent material misrepresentation makes a contract voidable under R2d §§ 159 and 162 if the recipient was justified in relying on it. Intent to deceive is not required; materiality plus justifiable reliance is the test. The party seeking rescission must show that the misrepresentation was an assertion not in accord with the facts, that it was material, and that reliance was justified.
- Hill v. Jones A seller of residential real estate has a duty to disclose facts materially affecting the value of the property which are known or accessible only to the seller and which the buyer could not reasonably discover. Concealment or nondisclosure of such facts is a misrepresentation that may make the contract voidable.
- Quebodeaux v. Quebodeaux Duress rendering a contract voidable requires three elements: an involuntary act by the victim, no reasonable alternative to the act, and circumstances induced by the other party. Threats that exploit a power imbalance and leave no realistic option satisfy the test.
- Williams v. Walker-Thomas Furniture Co. A contract or clause is unconscionable, and unenforceable, where there is an absence of meaningful choice on the part of one party combined with contract terms that are unreasonably favorable to the other. Procedural unconscionability and substantive unconscionability are both required.
- Webster Street Partnership, Ltd. v. Sheridan A contract entered into by a minor is voidable. The minor may disaffirm within a reasonable time after reaching majority. Necessaries are an exception, but housing is not a necessary where the minor could live with parents able and willing to provide for him.
V · Interpretation
- Frigaliment Importing Co. v. B.N.S. International Sales Corp. The party asserting a narrower meaning for an ambiguous term bears the burden of proving that meaning by the preponderance of the evidence; trade usage, dictionary definitions, regulatory definitions, and course of dealing inform but do not by themselves resolve the ambiguity.
- In re Motors Liquidation Co. Where a contract's plain text leaves a term ambiguous, courts apply intrinsic interpretive canons such as noscitur a sociis (a word is known by its companions) to construe related terms together. A term used in series with another carries the connotation of its neighbors.
- Nanakuli Paving & Rock Co. v. Shell Oil Co. Under the UCC, trade usage and course of performance may be used to explain or supplement express terms unless the express terms cannot reasonably be construed to be consistent with them. A trade practice of 'price protection' may inform a posted-price contract for asphalt.
- Wood v. Lucy, Lady Duff-Gordon An exclusive agency agreement carries an implied promise by the agent to use reasonable efforts to bring profits and revenues into existence. The whole writing may be instinct with an obligation, imperfectly expressed, sufficient to support a contract.
- Gianni v. R. Russell & Co. Where the parties have adopted a writing as the final expression of their agreement on a subject, prior or contemporaneous oral agreements on the same subject are merged into the writing and cannot be proved to add to or vary its terms.
- Mitchill v. Lath An alleged oral collateral agreement is barred by the parol evidence rule unless (1) it is collateral in form, (2) it does not contradict express or implied provisions of the written contract, and (3) it is one that the parties would not ordinarily be expected to embody in the writing. Where the writing on its face is a full and complete agreement, the collateral oral promise will not be enforced if a reasonable person would have expected it to appear in the writing.
- Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging Co. Extrinsic evidence is admissible to prove a meaning to which the language of a written contract is reasonably susceptible, even where the writing appears unambiguous on its face. The plain-meaning rule does not preclude consideration of context that bears on what the parties intended their words to mean.
- UAW-GM Human Resource Center v. KSL Recreation Corp. A merger clause is strong, often conclusive, evidence that the writing is a complete integration of the parties' agreement. Once integration is established, the parol evidence rule bars evidence of prior or contemporaneous agreements that contradict or supplement the writing, including 'collateral' oral promises on the same subject.
- Carlson v. General Motors Corp. A limitation of remedies and disclaimer of implied warranties may be unconscionable under UCC § 2-302 when applied to consumer goods with inherent defects known to the seller. The unconscionability inquiry is factual; summary disposition is improper when the seller's knowledge and the impact on consumers raise triable issues.
- Daughtrey v. Ashe Under UCC § 2-313, a seller's description of goods made part of the basis of the bargain creates an express warranty. The buyer need not show reliance; once the description is part of the bargain, the warranty attaches.
VI · Performance & Breach
- Kingston v. Preston Covenants in a contract are mutual and dependent where the performance of one is in the nature of a condition precedent to the performance of the other. Where dependent covenants exist, a party need not perform until the other has performed or tendered performance.
- Morrison v. Bare A condition is not the same as a promise. The non-occurrence of a condition discharges the duty that the condition qualifies but is not itself a breach. A buyer to whom a condition has failed cannot insist on a renegotiated price; the buyer's options are to walk away or to waive the condition and proceed.
- Jacob & Youngs, Inc. v. Kent Substantial performance of an entire contract satisfies the constructive condition of exchange and entitles the performer to the contract price less damages for the deficiency. Where the breach is trivial and innocent, damages are measured by diminution in value rather than the cost of completion, particularly where completion would involve economic waste.
- Khiterer v. Bell Substantial performance allows a party who has rendered performance with only minor, unintentional deviations to recover the contract price, subject to a deduction for damages. Where the deviation is not substantial, the remedy is the difference in value between what was promised and what was delivered, not the cost of replacement. Where the difference in value is negligible, the non-breaching party recovers only nominal damages, even though a breach is proven.
- Hochster v. De La Tour A renunciation of a contract before the time fixed for performance is itself a breach. The injured party may sue immediately on the repudiation; she is not required to wait for the performance date and is free to arrange substitute transactions in the interval.
- Hornell Brewing Co. v. Spry Under UCC § 2-609, a party who has reasonable grounds for insecurity about the other party's performance may demand adequate assurance of due performance. A single adequate assurance does not permanently exhaust the right to demand further assurance if a new change of circumstances creates fresh grounds for insecurity. What constitutes adequate assurance and whether grounds for insecurity are reasonable are both commercially determined standards.
- McCloskey & Co. v. Minweld Steel Co. An anticipatory repudiation requires a definite, unequivocal, and absolute refusal to perform. A request for help in securing materials, or an expression of doubt about ability to perform, is not itself a repudiation and does not authorize the other party to treat the contract as breached.
- Adbar, L.C. v. New Beginnings C-Star Frustration of purpose excuses a party's performance only when an event that was not reasonably foreseeable by either party at the time of contracting destroys or nearly destroys the value of the performance or the purpose of the contract. If the frustrating event was reasonably foreseeable, the party who failed to provide for it in the contract is deemed to have assumed the risk of its occurrence. Partial difficulty or the mere possibility that purpose may be frustrated is not sufficient; the destruction of purpose must be total or near-total.
- Krell v. Henry Where the principal purpose of a contract is frustrated by a supervening event not the fault of either party and not within the risks the parties allocated, performance is excused. Frustration of purpose differs from impossibility: performance remains possible, but its value has evaporated.
- Taylor v. Caldwell Where the continued existence of a specific thing essential to performance is implicitly assumed by the parties, the destruction of that thing without fault of either party discharges both from performance. This is the doctrine of impossibility by supervening destruction of the subject matter.
- Transatlantic Financing Corp. v. United States Commercial impracticability requires (1) a supervening event, (2) the non-occurrence of which was a basic assumption of the contract, and (3) the event made performance impracticable without the affected party's fault. Increased cost alone is not enough; the increase must transform the bargain into one fundamentally different from that contemplated.
- Alaska Packers' Association v. Domenico A modification of an existing contract demanding additional compensation for the same performance is unenforceable for lack of consideration (pre-existing duty rule) and, where coerced by the obligor's leverage over a counterparty with no realistic alternative, is also voidable as the product of duress.
- Angel v. Murray A modification of an executory contract is enforceable without new consideration where (1) the modification was made before performance was complete on either side, (2) the parties voluntarily agreed, (3) the modification is fair and equitable in view of unanticipated circumstances, and (4) it does not run against statute or public policy. (Restatement (Second) § 89.)
- Birdsall v. Saucier An accord is a contract between a creditor and a debtor for the settlement of a claim by some performance other than that which is due. When the accord is performed, there is satisfaction, and the original obligation is extinguished. A creditor who accepts something other than a lesser sum of money in satisfaction of a liquidated debt — including the assignment of a third-party note — may create a valid accord and satisfaction if the parties intended the new arrangement as full satisfaction of the original obligation. Subsequent regret does not revive the extinguished debt.
VII · Remedies & Third Parties
- Hadley v. Baxendale Damages for breach of contract are recoverable for losses (1) arising naturally, that is, according to the usual course of things, from the breach itself, or (2) such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of its breach. Special damages not within either branch are not recoverable.
- Lake River Corp. v. Carborundum Co. A liquidated-damages clause is enforceable only if the harm to be caused by the breach was difficult to estimate at the time of contracting and the amount fixed is a reasonable forecast of just compensation. A clause that operates as a penalty: designed to deter breach rather than compensate the non-breaching party: is unenforceable, even between sophisticated commercial parties.
- Peevyhouse v. Garland Coal & Mining Co. When a breach of contract involves a defective or incomplete performance and the cost of completing the performance is disproportionate to the resulting increase in the value of the property, damages are measured by the diminution in value rather than the cost of completion. The proportionality principle limits cost-of-completion damages.
- Rockingham County v. Luten Bridge Co. A party that receives notice of cancellation may not continue performance and thereby pile up damages. The non-breaching party's duty to mitigate begins on receipt of repudiation; expenses incurred after that point are not recoverable.
- Bauer v. Sawyer A covenant not to compete ancillary to a professional partnership agreement is enforceable by injunction if the restraint is reasonable in time and territory, does not injure the public, and is necessary to protect a legitimate interest of the promisee. The existence of a liquidated damages or forfeiture clause in the same agreement does not bar injunctive relief; the two remedies are not mutually exclusive.
- Van Wagner Advertising Corp. v. S & M Enterprises Specific performance of a contract is not compelled merely because the subject matter is physically unique. A court denies specific performance when monetary damages can compensate the injured party with reasonable certainty and when compelling performance would impose a disproportionate burden on the breaching party. Uniqueness in the sense of physical difference does not, by itself, justify equitable relief; the operative question is whether the injured party can be adequately compensated in money.
- Lawrence v. Fox Where one party makes a promise to another for the benefit of a third person, that third person may enforce the promise even though he is not a party to the contract and gave no consideration for the promise. The third-party creditor beneficiary has a direct right of action against the promisor.
- Sovereign Bank v. BJ's Wholesale Club, Inc. A party benefiting incidentally from a contract designed to operate within a private regulatory system has no right to enforce the contract as an intended third-party beneficiary. Where the contract and the surrounding regulations channel enforcement through specified internal mechanisms, the third party is at most an incidental beneficiary.
Alphabetical
- Adbar, L.C. v. New Beginnings C-Star
- Alaska Packers' Association v. Domenico
- Angel v. Murray
- Barrer v. Women's National Bank
- Bauer v. Sawyer
- Birdsall v. Saucier
- Carlson v. General Motors Corp.
- Conrad v. Fields
- Daughtrey v. Ashe
- DePrince v. Starboard Cruise Services, Inc.
- Drake v. Bell
- Drennan v. Star Paving Co.
- Flender Corp. v. Tippins International, Inc.
- Frigaliment Importing Co. v. B.N.S. International Sales Corp.
- Gianni v. R. Russell & Co.
- Hadley v. Baxendale
- Hamer v. Sidway
- Hawkins v. McGee
- Hill v. Jones
- Hochster v. De La Tour
- Hoffman v. Red Owl Stores, Inc.
- Hornell Brewing Co. v. Spry
- In re Motors Liquidation Co.
- Jacob & Youngs, Inc. v. Kent
- Khiterer v. Bell
- Kingston v. Preston
- Krell v. Henry
- Lake River Corp. v. Carborundum Co.
- Lawrence v. Fox
- Lefkowitz v. Great Minneapolis Surplus Store
- Leonard v. Pepsico, Inc.
- Lucy v. Zehmer
- McCloskey & Co. v. Minweld Steel Co.
- McIntosh v. Murphy
- Mills v. Wyman
- Mitchill v. Lath
- Morrison v. Bare
- Nanakuli Paving & Rock Co. v. Shell Oil Co.
- Otten v. Otten
- Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging Co.
- Pappas v. Bever
- Peevyhouse v. Garland Coal & Mining Co.
- Pennsy Supply, Inc. v. American Ash Recycling Corp.
- ProCD, Inc. v. Zeidenberg
- Quebodeaux v. Quebodeaux
- Raffles v. Wichelhaus
- Ricketts v. Scothorn
- Rockingham County v. Luten Bridge Co.
- Sherwood v. Walker
- Smaligo v. Fireman's Fund Insurance Co.
- Sovereign Bank v. BJ's Wholesale Club, Inc.
- Specht v. Netscape Communications Corp.
- State Department of Transportation v. Providence & Worcester Railroad Co.
- Steinberg v. Chicago Medical School
- Sterling v. Taylor
- Taylor v. Caldwell
- Transatlantic Financing Corp. v. United States
- UAW-GM Human Resource Center v. KSL Recreation Corp.
- Van Wagner Advertising Corp. v. S & M Enterprises
- Webb v. McGowin
- Webster Street Partnership, Ltd. v. Sheridan
- Williams v. Walker-Thomas Furniture Co.
- Wood v. Boynton
- Wood v. Lucy, Lady Duff-Gordon
- Yaros v. Trustees of University of Pennsylvania