Contracts - Cases

Front 1

Lockner v. New York
(a question of committment)

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1900 to mid 1930s was pinnacle of Classical Contract Theory. Courts struck down state statutes regulating contractual matters such as min. wage and max hrs. They said it was an unconstitutional interference with individual freedom of contract rights under the due process clause of 14th Amendment. This elevated liberty of contract to the status of fundamental propert right. This slowly waned waned as courts developed limitations of freedom to contract to promote fairness, public policy and public good. (bakery hrs case)

Front 2

King v. Trustees of Boston University
(a question of committment)

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King's memoirs at BU

Front 3

Congregation Kadimah Toras-Moshe v. Deleo
(a question of committment)

Back 3

TBD

Front 4

Lucy v. Zehmer
(objective theory)

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-Suit to compel specific performance of land purchase contract claimed by defendant vendors to have been entered into as joke
-The Supreme Court of Appeals, Buchanan, J., held that evidence showed that contract represented serious business transaction and good faith sale and purchase of farm, that no unusual circumstances existed in its making, and that purchasers were entitled to specific performance.

Front 5

Leonard v. Pepsico
(objective theory: adds)

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-Television commercial viewer, who submitted 700,000 product “points” or their cash equivalent to soft drink manufacturer, sued to enforce alleged contractual commitment of manufacturer or provide fighter jet aircraft in return. Manufacturer moved for summary judgment
- held that: (1) commercial was advertisement not constituting any offer; (2) commercial was not akin to “reward,” which could result in contract through unilateral action of offeree; (3) there was no offer to which objective offeree could respond, as commercial was made in “jest;” (4) additional discovery would not be allowed; (5) there was no contract satisfying requirements of New York statute of frauds; and (6) viewer did not state claim of fraud under New York law.

Front 6

Owens v. Tunison
(testing the offer)

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-Plaintiff charges that defendant agreed in writing to sell him the Bradley block and lot, situated in Bucksport, for a stated price in cash, that he later refused to perfect the sale, and that plaintiff, always willing and ready to pay the price, has suffered loss on account of defendant's unjust refusal to sell, and claims damages
- In General - Statement, in response to inquiry, that sale of property would not be possible except for stated sum, held not offer of sale.

Front 7

International Filter v. Conroe Gin
(conditional acceptance)

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-International Filter Co. (P) offered to provide a water softener and filter to Conroe Gin, Ice, & Light (D) for $1,230. The offer called for prompt acceptance and would become a binding contract upon acceptance by Conroe Gin and subsequent approval by an executive of International Filter.
D accepted the offer and Engle, P’s president, approved and signed the proposal. P then acknowledged the order but did not specifically inform D that Engel had approved of the agreement and given his endorsement.
D rescinded its acceptance two weeks later and P sued to compel performance of the contract. D asserted that a binding contract had not formed because it had not been informed of Engel’s approval. The trial court entered judgment for D and P appealed. The court of appeals affirmed.

-1) No. Notice of acceptance or approval of an offer is not necessary to create a valid contract if the offer indicates that notification is not required. 2) Yes. The offeror can control the manner of acceptance of an offer.

Front 8

Mailbox Rule

Back 8

The mailbox rule or the postal acceptance rule is a term of common law contracts which determines when a contract has been formed where the parties are communicating via the mail. The basic thrust of the rule is that an acceptance of an offer that is sent before a revocation of the offer is received. However, if a communication is sent rejecting the offer, and a later communication is sent accepting the contract, then the first one to be received by the offeror will prevail.

Front 9

Day v. Caton
(silence as acceptance)

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In an action to recover the value of one half of a party wall erected by the plaintiff partly on his estate and partly on that of the defendant, the jury may, in the absence of an express agreement as to payment on the defendant's part, infer ?? promise to pa?? if the plaintiff undertook and completed the wall with the expectation*514 that the defendant would pay him for it, and the defendant had reason to know that the plaintiff was so acting with that expectation, and allowed him so to act without objection.

Front 10

Hobbs v. Massasoit Whip Co
(silence as acceptance)

Back 10

-This is an action for the price of eel skins sent by the plaintiff to the defendant, and kept by the defendant some months, until they were destroyed. It must be taken that the plaintiff received no notice that the defendants declined to accept the skins.
-The proposition stands on the general principle that conduct which imports acceptance or assent is acceptance or assent, in the view of the law, whatever may have been the actual state of mind of the party,-a principle sometimes lost sight of in the cases

Front 11

Dickenson v. Dodds
(termination of the power of acceptance)

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Facts: On Wednesday, June 10, 1874 Dodds (D) sent Dickinson (P) a memorandum in which he agreed to sell a specified piece of land for 800 pounds with the offer held open until 9AM the following Friday. Dickinson alleged that he had decided to accept Dodds’ offer on Thursday morning but did not contact him immediately because he thought he had until Friday morning to accept. On Thursday afternoon Dickinson learned that Dodds had offered or agreed to sell the land to a third party. Dickinson wrote a note accepting the offer and delivered it to his home, leaving it with his mother-in-law who neglected to give the note to Dodds. On Friday morning before the original deadline to accept the offer, both Dickinson and his agent gave Dodds a written acceptance of the offer. Dodds stated that he had already sold the land to another party the previous day
Holding: : No. An open offer to sell terminates when the offeree learns that the offeror has already agreed to sell to someone else (no meeting of minds)

Front 12

Step-Saver Data Systems, Inc. v. WYSE Technology
(termination of the power or acceptance: box top license)

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Facts: This is how the transactions between P (SS) and D (TSL) took place:
1st: SS would call TSL and place an order.
2nd: TSL would promise on the telephone to ship the goods promptly.
3rd: SS would send a purchase order with details of items to be purchased, their price, and shipping and payment terms.
4th: TSL would ship the order along with an invoice containing terms identical to SS’s purchase order.
On the boxes containing the programs were additional terms which stated that:
1. customer has nontransferable license to use the program
2. no express and implied warranties except for a warranty that the disks contained in the box are free from defects.
3. Opening of the package indicates SS’s acceptance of these terms. If SS does not agree with these terms, it has 15 days to return the package unopened and refund will be issued.
As soon as SS began marketing the system which used defendant’s program, it started facing problems and some of SS’ customers brought lawsuits against it. S

Front 13

Ionics, Inc. v. Elmwood Sensors, Inc (last shot doctrine)

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Facts: Elmwood is a thermostat manufacturer & Ionics makes water dispensers. Elmwood is going to sell to Ionics. Ionics & Elmwood send each other fine print forms. Ionics form came 1st and said that Elmwood has to give a full warranty; Elmwood’s response said warranty is limited to what is stated in the last acknowledgement form.
Holding: The court said that 2-207(3) applied where you use the conduct of both parties to recognize the existence of a contract and in such a case you apply the terms from the writings on which the parties agree. You apply 2-207(3) in this case because Elmwood’s response materially alters the contract and objection was given in Ionics’ first form. Court also says that Elmwood’s reasoning would gut 2-207 and send us back to the last shot doctrine.

Significance: This case is an explicit rejection of the last-shot doctrine under the UCC, especially in cases where there are competing forms. Must look at what both sides actually agreed to and fill in with the default rul

Front 14

Filanto, S.P.A. v. Chilewich International Corp.
(termination of the power of acceptance)

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Facts: Italian footwear manufacturer brought action against New York export-import firm, alleging breach of contract. On firm's motion to stay action pending arbitration and manufacturer's motion to enjoin arbitration or that arbitration be held in Southern District of New York, rather than in Russia.
Holding: The District Court, Brieant, Chief Judge, held that: (1) question of whether manufacturer and firm agreed to arbitrate their disputes was governed by chapter of Federal Arbitration Act comprising Convention on Recognition and Enforcement of Foreign Arbitral Awards and its implementing legislation, rather than by New York law; (2) general principles of contract law relevant to action did not include Uniform Commercial Code but, rather, federal law of contracts to be applied was found in United Nations Convention on Contracts for International Sale of Goods; (3) record established that manufacturer and firm had agreed to arbitrate dispute through incorporation of arbitration provision in firm's contract

Front 15

Petterson v. Pattberg (pre-acceptance reliance)

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Facts: Petterson owned some real estate in Brooklyn that he mortgaged to Pattberg. Pattberg offered to sell the mortgage at a discount of $780 to Petterson if he made his next quarterly payment and then paid the remainder of the mortgage by a certain date. Petterson made the quarterly payment, then came to make the payment of the balance of the mortgage. At that time, Pattberg told Petterson that he had already sold the mortgage. Petterson had also signed a contract to sell the mortgage. Petterson sued for the $780 and won at trial. Pattberg appealed up to the Court of Appeals of New York
Issue: At the time of payment, had the offeror assumed any conditional but binding obligation? What act was the defendant requesting as consideration for his performance?

Rule: The offeror is the master of the offer and can revoke at any time prior to acceptance.

Analysis: The majority finds that the offer was withdrawn, and notice was given that the offer could no longer continue, before acceptance.

Front 16

Davis v. Jacoby
(pre-acceptance reliance)

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Facts: Facts: Blanche Whitehead and her husband Rupert enjoyed a close relationship with their niece Caro Davis (P). The Whitehead’s suffered health and financial difficulties and Rupert asked P to come to California to help take care of Blanche and assist Rupert with his business affairs. One week after P agreed Rupert committed suicide. In return for P’s assistance she had been promised an inheritance. P moved to California to care for Blanche. Upon Blanche’s death P learned that Rupert had left his entire estate to two nephews.
P sued Rupert’s estate, asserting that her agreement with Rupert had created a contractual obligation for him to make a will and bequest his estate to her and that she was entitled to quasi-specific performance. P appealed the trial court’s ruling in favor of the estate that no contract had been formed because Rupert had made a unilateral offer that could only have been accepted via performance.
Issue: What type of offer is presumed to have been made where the offer is

Front 17

James Baird Co. v. Gimbel Bros., Inc.
(pre-acceptance reliance)

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Facts: Gimbel Brothers (D) sent subcontractor bids to approximately 20 to 30 contractors, offering to supply all of the linoleum for the construction of a building for the Pennsylvania Department of Highways. In preparing the bid Gimbel Brothers underestimated the size of the project by 50% and therefore mistakenly quoted a price that was only half the necessary amount. Contractor James Baird Co. (P) received the offer and used the quoted price to submit a bid on the main contract. Later the same day Gimbel realized the mistake and retracted the bid by telegraph and quoted a new price approximately twice that of the original. James Baird did not receive the retraction until after submitting the bid on the main contract and was awarded the main contract two days later.
James Baird formally accepted Gimbel Brothers’ offer two days after receiving Gimbel Brothers’ withdrawal of the offer. Gimbel Brothers refused to recognize the existence of a contract and James Baird sued for damages. The trial court ente

Front 18

Drennan v. Star Paving Company
(pre-acceptance reliance)

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Facts: Star Paving (D) submitted a subcontractor bid to Drennan (P), a general contractor, for a public school construction project. Drennan used Star Paving’s bid of $7,100.00 to prepare his final bid and was awarded the contract. The next day Star Paving informed Drennan that it had underestimated the cost of the project and refused to do the work for less than $15,000. Drennan hired another subcontractor to do the work for $11,000 and sued Star Paving for the difference between $11,000 and $7,100. The trial court entered judgment for Drennan, holding that Star Paving had made an offer and that Drennan had relied upon that offer when listing Star Paving as the subcontractor. Star Paving appealed.
-Disposition: Affirmed; Judgment for Drennan.
Notes: Promissory estoppel must only be used if there is no consideration. Drennan effectively overruled James Baird Co. v. Gimbel Bros. Inc. and is the seminal case for the modern approach to applying promissory estoppel in the context of subcontractor bidding dis

Front 19

Berryman v. Kmoch
(pre-acceptance reliance)

Back 19

Facts: Berryman (P) gave Kmoch (D) a 120 day option to purchase certain real estate in exchange for “$10 and other valuable consideration”. The $10 was never paid. P asked to be released from the option agreement and later sold the land to another party. D discovered that P had sold the land when he made arrangements to exercise his option to purchase the land.
-Issues: 1) Must an option contract be supported by consideration? 2) Is promissory estoppel applicable to option contracts?
Holding and Rule: 1) An option contract must be supported by consideration. 2) Promissory estoppel is applicable to option contracts.
-Disposition: Affirmed.
Notes: Promissory estoppel can apply in cases where the promisee’s reliance would reasonably be expected – such as paying for an appraisal or obtaining a loan. In this case it did not apply because the promisee spent time and expense to try to find other investors.