Final Outline 

Friday, September 23, 2022  6:12 PM 

I. INTRODUCTION TO THE LAW OF CONTRACTS  

• Restatement (2 nd) of Contracts § 1 – Contract Defined 
“A contract is a promise or a set of promises for the breach of which the law gives a remedy,
or the performance of which the law in some way recognizes as a duty.”  
• Restatement (2 nd) of Contracts § 2 – Promise; Promisor; Promisee; Beneficiary 
(1) A promise is a manifestation of intention to act or refrain from acting in a specified way,
so made as to justify a promisee in understanding that a commitment has been made.  
(2) The person making the intention is the promisor. 
(3) The person to whom the manifestation is addressed in the promisee.  
(4) Where performance will benefit a person other than the promisee, that person is the
beneficiary. 
• Restatement (2 nd) of Contracts § 4 – How a Promise May Be Made 
“A promise may be stated in words either oral or written, or may be inferred wholly or partly
from conduct.”  
• Duty of Good Faith: every contract imposes upon a party a duty of good faith and fair dealing
in its performance and its enforcement.  
A. CONSIDERATION  
1. Promise or Performance Bargained for in Exchange  
• (1) To constitute consideration, a performance or a return promise must be bargained
for.  
• (2) A performance or return promise is bargained for if it is sought by the promisor in
exchange for his promise and is given by the promisee in exchange for that promise.  
• Adequacy of Consideration; Mutuality of Obligation  
Restatement (2 nd) of Contracts § 79 
If the requirement of consideration is met, there is no additional requirement of:  
(a) A gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to
the promisee; or  
(b) Equivalence in the values exchanged; or  
(c) Mutuality of obligation 
• Gratuitous Promise: gratuitous promises are not legally binding/enforceable 
○ not a bargained for exchange, therefore lacks consideration  
Restatement (2nd) of Contracts § 71 - Performance 
The performance may consist of: 
(a) an act other than a promise, or  
(b) a forbearance, or  
(c) the creation, modification, or destruction of a legal relation.   
Restatement (2 nd) of Contracts § 72 
Except as stated in sections 73 and 74, any performance which is bargained for is
consideration  
• “Past” or “Moral” Consideration 
• General Rule—Not Sufficient Consideration! 
○ If something was already given or performed before the promise was made, it will not
satisfy the “bargain” requirement. The courts reason that it was not given in exchange
for the promise when made. 
○ Exception: (See Mills v. Wyman) 
• Settlement of Claims  
Restatement (2 nd) of Contracts § 74 – Settlement of Claims 
(1) Forbearance to assert or the surrender of a claim or defense which proves to be invalid is
not consideration unless: 
 (a) the claim or defense is in fact doubtful because of uncertainty as to the facts or the law,
or  
(b) the forbearing or surrendering party believes that the claim or defense may be fairly
determined to be valid.   
2. What Constitutes Bargain  
• Restatement 71 (Requirement of Exchange)  
○ (1) To constitute consideration, a performance or return promise must be bargained for 
▪ it is enough that one party manifests an intention to induce the other’s response
and to be induced by it and that the other responds in accordance with the
inducement  
• Restatement 72 – any performance which is bargained for is consideration  
• Restatement 79 – if the requirement of consideration is met, there is no additional requirement
that the bargain be fair and equivalent  
3. Promises as Consideration  
Restatement (2 nd) of Contracts § 75 – Exchange of Promise for Promise 
• “[A] promise which is bargained for is consideration if, but only if, the promised performance
would be consideration.”  
Restatement (2 nd) of Contracts § 2(1)  
• “A promise is a manifestation of intention to act or refrain from acting in a specified way, so
made as to justify a promisee in understanding that a commitment has been made.”  
Illusory Promises  
• “Words of promise which by their terms make performance entirely optional with the
‘promisor’ do not constitute a promise.” 
(Restatement (Second) of Contracts § 77 comment a.) 
(See Wood v. Lucy, Lady Duff-Gordon case brief)  
 
A. RELIANCE AND PROMISSORY ESTOPPEL  
Restatement (Second) § 90 – Promise Reasonably Inducing Action or Forbearance  
(1) A promise that should be reasonably expected to induce action on the part of the promisee
AND does induce such action is binding if injustice can be avoided only by enforcement  
○ “promissory estoppel” 
○ does not prevent the defendant from claiming lack of consideration but reliance, in a
form, becomes a replacement for consideration  
(2) A charitable subscription is binding under (1) without proof of actual inducement  
• Development of Reliance as a Basis for Enforcement  
○ Detrimental reliance: It would cut up the doctrine of consideration by the roots, if a
promisee could make a gratuitous promise binding by subsequently acting in reliance
on it  
• Elements of Promissory Estoppel  
○ The principle that a promise made without consideration may nonetheless be enforced
to prevent injustice if the promisor should have reasonably expected the promisee to
rely on the promise and if the promisee did actually rely on the promise to his or her
detriment  
○ A promises B not to foreclose, for a specified time, a mortgage which A holds on B’s
land. B thereafter makes improvements on the land. A’s promise is binding and may be
enforced by denial of foreclosure before the time has elapsed  
Equitable Estoppel  
○ A defensive doctrine preventing one party from taking unfair advantage of another
when, through false language or conduct, the person to be estopped has induced
another person to act in a certain way, with the result that the other person has been
injured in some way  
○ A owns Blackacre. By a mistake in a survey he fails to include within his fence a small
field that he erroneously believes to belong to his neighbor B. B, who is uncertain of his
boundaries, asks A whether the field belongs to A. In mistaken reliance upon the
survey, A replies that it does not. Relying upon this statement, B cuts and disposes of
the trees upon it. B is not liable to A for these acts  
 Charitable Subscriptions 
• Allegheny College v. National Chautauqua County Bank 
○ Mary Johnston promises to give college $5,000 after her death 
○ $1,000 paid while she was alive 
○ "The gift shall be known as the Mary Yates Johnston memorial fund" 
• Judge Cardozo: "Consideration for Johnston’s promise can be found in the return promise by
the college to set up the memorial fund: “The college could not accept the money and hold
itself free thereafter from personal responsibility to give effect to the condition.” 
○ Charitable donations are exempt from consideration! 
A. RESTITUTION AS AN ALTERNATIVE BASIS FOR RECOVERY  
○ Liability in restitution derives from the receipt of a benefit whose retention without
payment would result in the unjust enrichment of the defendant at the expense of the
claimant  
○ The "officious intermeddler" 
○ No liability in restitution “for an unrequested benefit voluntarily conferred  
• Quasi-contract  
○ A promise to pay all or part of an antecedent contractual or quasi-contractual
indebtedness owed by the promissor is binding if the indebtedness is still
enforceable or would be except for the effect of a statute of limitations."
(Restatement (Second) of Contracts § 82) 
Restatement (2 nd) of Contracts § 82 – Promise to Pay Indebtedness 
○ (2) The following facts operate as such a promise unless other facts indicate a
different intention: 
○ (a) A voluntary acknowledgment to the obligee, admitting the present existence of
the antecedent indebtedness; or 
○ (b) A voluntary transfer of money, a negotiable instrument, or other thing by the
obligor to the obligee, made as interest on or part payment of or collateral security
for the antecedent indebtedness; or 
○ (c) A statement to the obligee that the statute of limitations will not be pleaded as a
defense. 
Restatement (2 nd) of Contracts § 85 – Promise to Perform a Voidable Duty 
• [A] promise to perform all or part of an antecedent contract of the promisor, previously
voidable by him, but not avoided prior to the making of the promise, is binding. 
B. MORAL OBLIGATION  
○ When someone makes a promise to compensate another party for a benefit that has
already been received because of a sense of moral obligation  
○ In general, promises based on moral consideration are not enforceable.  
○ if one party gets the benefit of the contract before the contract is made, he cannot have a
legal obligation to perform the terms of the agreement, because he already has the
benefit. In this case, he has no legal obligation, but may feel he has a moral obligation.
(See Mills v. Wyman (1825) case brief)  
C. CONTRACT FORMATION  
D. ASSENT  
"Agreement to a transaction is present when both parties have manifested assent to it:
agreement by both parties, must be proven objectively, often established by showing an offer
and acceptance." 
E. OFFER  
• Restatement (2 nd) of Contracts § 24 
"An offer is the manifestation of willingness to enter into a bargain, so made as to justify
another person in understanding that his assent to that bargain is invited and will conclude
it."  
Preliminary Negotiations  
• Restatement (2 nd) of Contracts § 26 
“A manifestation of willingness to enter into a bargain is not an offer if the person to whom it
is addressed knows or has reason to know that the person making it does not intend to
conclude a bargain until he has made a further manifestation of assent.” 
• Advertisements – fur coat case. (Lefkowitz) "It is of course possible to make an offer by an
advertisement directed to the general public but there must ordinarily be some language of
 commitment or some invitation to take action without further communication." 
○ "It is possible to make an offer by an advertisement directed to the general public, but
there MUST ordinarily be some language of commitment or some invitation to impose
new or arbitrary conditions not contained in the published offer." 
F. ACCEPTANCE  
• General Rule: silence alone is NOT acceptance – however, there are exceptions (performance) 
• Form of Acceptance Invited: 
(1) An offer may invite or require acceptance to be made by an affirmative answer in words,
or by performing or refraining from performing a specified act or may empower the offeree to
make a selection of terms of his acceptance.  
(2) Unless otherwise indicated by the language or the circumstances, an offer invites
acceptance in any manner and by any medium reasonable in the circumstances.  
• In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to
perform what the offer requests or by rendering the performance, as the offeree chooses  
• Where an offer invites an offeree to accept by rendering a performance, no notification is
necessary to make such an acceptance effective unless the offer requests such a notification  
• Except as stated in § 69 or where the offer manifests a contrary intention, it is essential to an
acceptance by promise either that the offeree exercise reasonable diligence to notify the
offeror of acceptance or that the offeror receive the acceptance seasonably  
• If an offer prescribes the place, time or manner of acceptance its terms in this respect must be
complied with in order to create a contract. If an offer merely suggests a permitted place, time
or manner of acceptance, another method of acceptance is not precluded  
• Restatement (Second) of Contracts § 63 – Time When Acceptance Takes Effect 
Unless the offer provides otherwise, 
(a) an acceptance made in a manner and by a medium invited by an offer is operative and
completes the manifestation of mutual assent as soon as put out of the offeree’s possession,
without regard to whether it ever reaches the offeror; but 
(b) an acceptance under an option contract is not operative until received by the offeror. 
• Acceptance by Silence  
(1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in
the following cases only:  
(a) Where an offeree takes the benefit of the offered services with reasonable opportunity to
reject them and reason to know that they were offered with the expectation of compensation.  
(b) Where the offeror has stated or given the offeree reason to understand that assent may be
manifested by silence or inaction, and the offeree in remaining silent and inactive intends to
accept the offer.  
(c) Where because of previous dealings or otherwise, it is reasonable that the offeree should
notify the offeror if he does not intend to accept  
• Where an offer invites an offeree to accept by rendering a performance, NO notification of
acceptance is needed – performance of action is enough! 
• Termination of the Power of Acceptance  
(1) An offeree’s power of acceptance may be terminated by  
(a) rejection or counter-offer by the offeree, or  
(b) lapse of time, or  
(c) revocation by the offeror, or  
(d) death or incapacity of the offeror or offeree.  
(2) In addition, an offeree’s power of acceptance is terminated by the non-occurrence of any
condition of acceptance under the terms of the offer. 
• Restatement (2 nd) of Contracts § 41 - Lapse of Time 
(1) An offeree’s power of acceptance is terminated at the time specified in the offer, or, if no time is
specified, at the end of a reasonable time. 
(2) What is a reasonable time is a question of fact, depending on all the circumstances existing
when the offer and attempted acceptance are made. 
• Restatement (Second) of Contracts § 42 – Revocation by Communication 
"An offeree’s power of acceptance is terminated when the offeree receives from the offeror a
manifestation of an intention not to enter into the proposed contract." 
• Restatement (Second) of Contracts § 43 – Indirect Communication 
 "An offeree’s power of acceptance is terminated when the offeror takes definite action inconsistent
with an intention to enter into the proposed contract and the offeree acquires reliable information to
that effect." 
• Restatement (Second) of Contracts § 48 
"An offeree’s power of acceptance is terminated when the offeree or offeror dies or is deprived of
legal capacity to enter into the proposed contract." 
Rejection of an Offer  
• Restatement (Second) of Contracts § 38 
(1) An offeree’s power of acceptance is terminated by his rejection of the offer, unless the offeror
has manifested a contrary intention. 
(2) A manifestation of intent not to accept an offer is a rejection unless the offeree manifests an
intention to take it under further advisement. 
 
Counter-Offers 
• Restatement (Second) of Contracts § 39 
(1) A counter-offer is an offer made by an offeree to his offeror relating to the same matter as the
original offer and proposing a substituted bargain differing from that proposed by the original
offer. 
(2) An offeree’s power of acceptance is terminated by his making of a counter-offer, unless the
offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention
of the offeree. 
 
Option Contracts 
• Restatement (Second) of Contracts § 45 – Option Contract Created by Part Performance 
(1) Where an offer invites an offeree to accept by rendering a performance and does not invite a
promissory acceptance, an option contract is created when the offeree tenders or begins the invited
performance or tenders a beginning of it. 
(2) The offeror’s duty of performance under any option contract so created is conditional on
completion or tender of the invited performance in accordance with the terms of the offer. 
• Mirror-Image Rule: Acceptance must be the "mirror-image" of the offer; thus, they must accept it
as is. 
• The Second Restatement of Contracts requires an acceptance to be a “mirror image” of the
offer, or an unconditional assent to the exact same terms as the offer; any change to the terms
of the offer is considered a counteroffer that rejects and terminates the original offer. 
• Mailbox Rule: Acceptance is effective when sent, not when received.  
• In general, acceptance is effective upon dispatch even if never reached by the offeror 
○ EXCEPTION – for option contracts which are only operative upon receipt 
○ Revocation is only accepted upon receipt  
• If terms of acceptance (time, place, manner) specified, then offeree must comply with them in order
to create a contract   
Revocability and Reliance 
○ Promissory estoppel is inapplicable to a bargain promise seeking a promise in return,
even if the promise occasioned reliance by the promisee.  
○ An offer for exchange is not meant to become a promise until a consideration has been
received, either a counter-promise or whatever is stipulated. 
Precontractual Liability 
• A Claim in Restitution: if during the course of negotiations one party has conferred a benefit on the
other, the recipient may be required to restore the benefit (or its value) 
○ Example: a prospective buyer of land who made a down payment during negotiations that fail
to result in a contract is entitled to repayment.  
▪ Claimants seeking recovery for services performed during negotiations rarely succeed! 
Even when successful, a restitution claim leaves the claimant uncompensated for reliance costs that
produced no benefit to the other party.  
○ Exception: Misrepresentation! "A negotiating party may not with impunity misrepresent its
intention to come to terms, and liability for misrepresentation includes reliance losses." 
▪ Very rare for there to be situation where a party had a motive for making such a
misrepresentation 
Definiteness 
(1) Even though a manifestation of intention is intended to be understood as an offer, it cannot be
accepted so as to form a contract unless the terms of the contract are reasonably certain.  
 (2) The terms of a contract are reasonably certain if they provide a basis for determining the
existence of a breach and for giving an appropriate remedy. 
(3) The fact that one or more terms of a proposed bargain are left open or uncertain may show that
a manifestation of intention is not intended to understood as an offer or as an acceptance.  
• The requirement of definiteness serves TWO basic functions: 
(1) In order for the court to determine whether or not a contract has been broken, it must first know
with some certainty what the terms of the contract are.  
(2) In calculating the damages that will put a promisee in the position it would have been in had the
promise been performed, a court must be able to determine with some precision what the promise
was.  
When deciding whether an agreement is sufficiently definite, a court may piece together terms from
preliminary negotiations, prior communication, government regulations, etc.  
○ Terms such as good faith and reasonable efforts are regarded as sufficiently definite if their
content can be determined by reference to some external standard 
Statues of Frauds – FOR ORAL CONTRACTS 
○ Affirmative defense to breach of contract! 
Statues of Frauds 
○ Whether oral contracts are enforceable is almost entirely governed by statues 
○ If a contract falls within the SOF and is not sufficiently written – NOT enforceable 
○ SOF is an affirmative defense to breach of contract that must be raised by the defendant,
or it's lost for good 
1)     A contract by an executor or administrator of an estate to answer for a duty of the
descendant (Executor-Admin Provision) 
a.     Executor or administrator of an estate assume personal liability to a creditor of the
decedent for a debt or obligation incurred by the decedent before death. The executor
promises the creditor that if the estate does not have the funds to pay the debt, the
executor will pay it. The statue only applies to debts that decedent incurred not to new
debts incurred by the estate. 
2)     A contract to answer for the debt of another (Suretyship Provision) 
a.     A surety is a person who promises the creditor to pay another person’s debt, so that
if the other person fails to pay the debt, the surety is obliged to pay it. (Sometimes
referred as guaranty) 
b.     For the statue of frauds to apply to the suretyship, the surety’s obligation to pay must
be secondary to the debtor’s obligation, and the suretyship’s duty to pay the debt must
be conditional on the debtor’s default. Cannot be primarily liability on the debt or join
debtor 
○ Surety: jointly and severally liable with the principle. Not every promisor who
takes on another's debt is a surety! 
○ Guarantor: agrees to fulfill principals obligations only after the principal has failed
to do so 
○ Suretyship Clause: requires that contracts where one person agrees to answer for
the debt of another must be in writing.  Why? Because suretyship contracts tend to
be one-sided and there is no benefit to guarantor, so it is hard to tell if they
intended it. 
○ Under the “main purpose doctrine”, a suretyship agreement is taken out of the
Statute of Frauds if the promisor has made the agreement for his own purpose,
rather than for the benefit of the original debtor.  
○ Statute of frauds is inapplicable where the guarantor receives a direct benefit from
the agreement and does not merely act as a surety. 
• Langman v. Alumni Association: Langman and Stowe gave some land to
the Alumni Association through a deed that provided for the Association to
assume any debts on the property.  RULE: a grantee of a deed who assumes
an existing mortgage is not a surety because he or she does not make a
promise to the mortgagee to pay the debt of another, but instead promises
the grantor to pay to the mortgagee the debt the grantee owes to the
grantor.  
3)     A contract made upon consideration of marriage (Marriage Provision) 
a.     It relates to a contract in consideration of marriage in which the prospective spouses
agree to a marriage settlement or to financial arrangements relating to the marriage.
 Statue applies only to prenuptial contracts motivated by the impending marriage. 
4)     A contract for the sale of an interest land (Land Contract Provision) 
○ Examples: contract to transfer a right of way, leases, mortgages  
5)   Contract not performed within 1 year (One Year Provision) 
○  A contract that is not to be performed within one year of its making must be in writing 
○ The year runs from the time of contracting to the time for completed performance, and
the performance need not take more than 1 solid year to complete 
○ Only applies to contracts INCAPABLE of being performed in less than a year. 
▪ Contract to make payments on debt over period of 5 years – not covered (could
be performed in 1 year if you won the lottery) 
▪ Employment contracts – covered. 
▪ Contract to work for 11 months starting 2 months from date – covered. 
▪ Contract to not work for competitors for 5 years – not covered because candidate
could die in 3 months, then would have performed in less than 1 year. 
If contract falls within SOF, it must be in signed writing to be enforceable 
For writing to satisfy SOF, it must have 4 things: 
1. Identify the parties to the contract; 
2. Show these parties made a contract; 
3. Set forth nature of the contract, including indication of what the parties contracted
about; 
4. State essential terms of contract 
Exceptions to the Statute of Frauds 
○ Most rooted in reliance 
○ Part-Performance Exception 
○ "Where oral agreement not under the SOF has been performed to extent that makes it
inequitable to deny, court may remove from the SOF and decree special performance" 
○ Used in contracts for the sale of interests in real property 
▪ Example: Often a seller lets a buyer start improving the property under contract
even before titled has been passed, which can create a problem if the seller thinks
better of the deal. In contrast, a buyer who has started paying for the property
presumably does not do so out of the desire to make the owner a handsome gift.  
○ Estoppel Exception (promissory estoppel defense to SOF) 
○ Breached against party can invoke estoppel only if it had relied on a misrepresentation
by the breaching party  
▪ Must be promise that can be relied on ---> there was reliance ---> there was a
detriment suffered 
Policing the Bargain 
○ 3 basic types of policing concerns 
1. The status of the party seeking relief from a promise 
○ Status-based policing measures disqualify certain classes of persons from
committing themselves by contracts. Minors, married women, and the mentally
infirm have been among the historic classes.  
2. The behavior of parties during the bargaining promise 
○ What sorts of pressure and duress ought the law take into account when refusing
to enforce a promise 
3. The substance of the resulting bargain 
○ While courts will not inquire into the adequacy of the consideration, the law has
introduced a variety of judicial and legislative policing measures that treat largely
lopsided/unfair bargains with disfavor.  
○ Voidable Contracts (Restatement 7): A voidable contract is one where one or more parties
have the power, by a manifestation of election to do so, to avoid the legal relations created by
the contract, or by ratification of the contract to extinguish the power of avoidance. 
The Infancy Doctrine: Unless a statute provides otherwise, a natural person has the capacity
to incur only voidable contractual duties until the beginning of the day before the person's
18 th birthday.  
 ○ All contracts made with minors are voidable (I.e., they can choose to 'avoid' the
contract, and thus not be bound by its terms). If you contract with a minor, you do so at
your own peril!  
Mental Illness or Defect 
1. A person incurs only voidable contractual duties by entering into a transaction if by
person of mental illness or defect 
a. He is unable to understand in a reasonable manner the nature and consequences
of the transaction, or 
b. He is unable to act in a reasonable manner in relation to the transaction and the
other party has reason to know of his condition. 
2. Where the contract is made on fair terms and the other party is without knowledge of
the mental illness or defect, the power of avoidance under Subsection (1) terminates to
the extent that the contract has been so performed in whole or in part or the
circumstances have no changed that avoidance would be unjust. In such a case, a court
may grant relief as justice requires.  
• Undue Influence 
(1) Undue influence is unfair persuasion of a party who is under the dominion of the
person exercising the persuasion or who by virtue of the relation between them is
justified in assuming that that person will not act in manner inconsistent with his
welfare. 
(2) If a party’s manifestation of assent is induced by undue influence by the other party,
the contract is voidable by the victim. 
Duress, Modification, & Attempted Modification 
No advantage should be gained through gross unfairness in the process of bargaining 
▪ The 3 forms of overreaching condemned in classical equity are (1) duress; (2) fraud;
and (3) mistake. When a contract is found to result from one of these, the victim can
rescind or avoid it! 
○ Duress:  
▪ (1) If a party's manifestation of assent is induced by an improper threat by the
other party that leaves the victim no reasonable alternative, the contract is
voidable by the victim.  
▪ (2) If a party's manifestation of assent is induced by one who is not a party to the
transaction, the contract is voidable by the victim unless the other party to the
transaction in good faith and without reason to know of the duress either gives
value or relies materially on the transaction.   
○ Fraud: Fraud is any intentional misrepresentation of a material fact, made knowingly
and made with the intent that the other person will rely on the fact. 
▪ In contract fraud, a material misrepresentation is a false statement that has
substantial effects on the formation of the contract. 
○ Mistake: A mistake in contract law is when one or both parties have a false belief about
a contract. A mistake might be a misunderstanding about terms, laws, or information
relevant to a binding contract. If a party can prove their false belief has legitimate
mistake grounds, the contract would become void.  
The Pre-Existing Duty Rule 
○ "Performance of a legal duty owed to a promisor which is neither doubtful nor the
subject of honest dispute is not consideration." 
Avoiding the Pre-Existing Duty Rule – Recission & Modification 
○ Recission: "A recession followed shortly afterwards by a new agreement in regard to
the same subject-matter would create the legal obligations provided in the subsequent
agreement – enforceable contract! 
○ Modification: Substituted Agreement: situation where an existing contract is
terminated by consent of both parties and a new one is executed in its place –
enforceable contract! 
Misrepresentation, Concealment, & Non-Disclosure 
○ A misrepresentation is an assertion that is not in accord with the facts (Restatement 159).  
▪ A misrepresentation is material if it would be likely to induce a reasonable person to
manifest his assent, or if the maker knows that it would be likely to induce the recipient
to do so. 
▪ If a party’s manifestation of assent is induced by either a fraudulent or a material
misrepresentation by the other party upon which the recipient is justified in relying, the
contract is voidable by the recipient. 
 ○ Concealment is an action intended or known to be likely to prevent another from learning a
fact is equivalent to an assertion that the fact does not exist. (Restatement 160) 
○ Concealment and nondisclosure are varieties of misrepresentation, which is both a ground for
rescinding a contract and the predicate for a tort action.  
○ The plaintiff must establish that the defendant made the misrepresentation knowing it to
be false, or at least with reckless disregard for its truth.  
▪ A party to a contract may void the contract even if the other party obtained its
assent by an innocent misrepresentation, I.e., one that the party making it believed
to be true.  
○ The misrepresentation must be a material one and one of fact 
▪ The complainant must show not mere reliance, but justifiable reliance!  
• Base Line Rule: There is NO liability for non-disclosure! 
○ A person’s non-disclosure of a fact known to him is equivalent to an assertion that the fact
does not exist in the following cases only: 
▪ Where he knows that disclosure of the fact is necessary to prevent some previous
assertion from being a misrepresentation or from being fraudulent or material. 
▪ Where the other person is entitled to know the fact because of a relation of trust and
confidence between them.  
○ Only exception: if parties are in confidential relationship 
▪ However, there may be state statutory laws that do require disclosure.  
○ A seller may not be held liable for the mere failure to disclose a defect in the property of
which he is aware and of which the buyer is unaware. HOWEVER, if a seller knows of a
defect and tries to conceal it (such as putting wallpaper over a crack), this is equivlant to a  
Mistake (a belief that is not accord with the facts) 
○ Where the parties have in fact attached different meaning to their language, an objective
standard should determine which meaning will prevail.  
▪ Don't jump to mistake because parties value things different! (doesn't mean there's
a mistake just because of differing views of worth/value) 
Mutual Mistake: where both parties to the contract are mistaken as to the same basic
assumption.  
○ Mistaken beliefs and misunderstandings concerning material aspects of an agreement
may undermine assent and the very basis of the contract.  
▪ But even when a belief, contrary to fact, does not defeat formation of a contract,
courts will sometimes allow a party to avoid performance of a contract through the
doctrine of mistake.  
Restatement 152 – When Mistake of Both Parties Makes Contract Voidable 
(1) Where a mistake of both parties at the time a contract was made as to basic assumption on
which the contract was made has a material effect on the agreed exchange of performances,
the contract voidable by the adversely affected party unless he bears the risk of the mistake
under the rule stated in 154.  
(2) In determining whether the mistake has a material effect on the agreed exchange of
performances, account is taken of any relief by way of reformation, restitution, or otherwise.  
Restatement 153 – When Mistake of One Party Makes a Contract Voidable 
Where a mistake of one party at the time a contract was made as to a basic assumption on
which he made the contract has a material effect on the agreed exchange of performances that
is adverse to him, the contract is voidable by him if he does not bear the risk of mistake under
the rule stated in 154 , and  
a. The effect of the mistake is such that enforcement of the contract would be
unconscionable, or 
b. The other party had reason to know of the mistake or his fault caused the mistake 
Restatement 154 – When a Party Bears the Risk of a Mistake 
A party bears the risk of a mistake when 
a. The risk is allocated to him by agreement of the parties, or 
b. He is aware, at the time the contract is made, that he has only limited knowledge with
respect to the facts to which the mistake relates but treats his limited knowledge as
sufficient, or 
c. The risk is allocated to him by the court on the ground that it is reasonable in the
circumstances to do so  
• Adequacy of Damages 
 ○ Specific performance or an injunction will not be ordered if damages would be adequate to
protect the expectation interest of the injured party. 
○ The adequacy of the damage remedy for failure to render one part of the performance due
does not preclude specific performance or injunction as to the contract as a whole. 
○  Specific performance or an injunction will not be refused merely because there is a remedy
for breach other than damages 
○ In determining whether the remedy in damages would be adequate, the following
circumstances are significant: 
(a) the difficulty of proving damages with reasonable certainty, 
(b) the difficulty of procuring a suitable substitute performance by means of money
awarded as damages, and 
(c) the likelihood that an award of damages could not be collected. 
Contracts of Adhesion  
○ An adhesion contract exists if the parties are of such disproportionate bargaining power that
the party of weaker bargaining strength could not have negotiated for variations in the terms
of the adhesion contract. 
○ Adhesion contracts are generally in the form of a standardized contract form that is
entirely prepared and offered by the party of superior bargaining strength to consumers
of goods and services.  
▪ Adhesion contracts are commonly used for matters involving insurance, leases,
deeds, mortgages, automobile purchases, and other forms of consumer credit. 
▪ Thus, party that enters into these types of contracts (usually consumers) are bound
to a "take it or leave it" basis.  
• Assumed that all parties know/presumably know the embedded clauses (I.e.,
the "boilerplate" or fine print) 
○ In cases of contracts of adhesion, the court is concerned whether a party can reasonably be
held to have seen, understood, and assented to its unfavorable terms and be bound by them.  
○ Courts may look at the doctrine of reasonable expectations to determine whether to
strike down an adhesion contract.  
○ The doctrine of reasonable expectations states that a party who adheres to the other
party’s standard terms does not assent to the terms if the other party has reason to
believe that the adhering party would not have accepted the agreement if he had known
that the agreement contained the particular term. 
○ In other words, people are bound by terms a reasonable person would expect to be in
the contract.  
○ Fairness/equity of a contract is considered when the contract is formed, not how it "ends up"
(Tuckwiller case) 
○ Exculpatory Clauses in leases are valid 
○ Could be of the benefit to both parties 
▪ Could get homeowners insurance policy that covers negligence/injuries, cheaper
than paying higher/more rent 
○ Contracts that seek to relieve someone from their own negligence are generally enforced
UNLESS: 
1. It would be against the settled public policy of the state to do so, or 
2. There is something in social relationship of parties militating against upholding the
agreement 
 
• Unconscionable Contract (DON'T USE!!!) 
○ If a contract or term thereof is unconscionable at the time the contract is made a court may
refuse to enforce the contract, or may enforce the remainder of the contract without the
unconscionable term, or may so limit the application of any unconscionable term so as to
avoid any unconscionable result. 
Remedies for Breach 
○ Substitutional Relief: awarding money damages to be paid to the aggrieved promisee 
○ Specific Relief: court orders a party to actually perform its promise as closely as possible 
○ Monetary damages are somehow inadequate to fix the harm. 
▪ Most commonly ordered in cases involving real property (land) and rare chattels
due to their uniqueness that cannot be replicated/replaced. 
○ Expectation Damages/Interest: sum of money that will, to the extent money can, put the
promisee in the same position they would have been if the promise was performed.  
 ○ Simply put: It intends to put the non-breaching party in as good of a position as if the
breaching party fully performed their contractual duties 
○ Reliance Damages/Interest: awarded for the purpose of putting the promisee in the position he
would have been in had the promise not been made in the first place.  
○ Reimbursing the P his out-of-pocket loss caused by reliance on the contract (or even the
prospect of a contract), thus putting P in as good a position as he would have been in
had he never made the contract.  
○ Restitution Damages/Interest: where one party has provided a benefit to the other party and it
is awarded to repay the party providing the benefit the reasonable value of the benefit he
gave.  
○ Restitution simply requires that, in the event of breach, the promisor must give back
anything the promisee gave the promisor in exchange for the promise. If you paid a
doctor a $300 deposit fee, then the doctor would pay back the $300. 
○ In order to be eligible for restitution relief, the aggrieved party must have “conferred a
benefit on the other party by way of part performance or reliance 
○ To receive restitution, the party seeking restitution must already have rendered partial
performance. A breaching party is entitled to “restitution for any benefit that he has
conferred by way of part performance or reliance in excess of the loss that he has
caused by his own breach. 
• How to Calculate Damages  
• Expectation Damages: (Actual Money Spent) + (Expected Profit) - (Payments Received) 
• Reliance Damages: (Actual Money Spent) - (Payments Already Received) 
• Restitution Damages: (Value of benefit conferred is given back) 
○ Example: A business owner who owns some land contracts with an architecture to build
an office space on the plot of land he owns. The original agreement is $100,000 to be
paid to the architecture upon completion. The contractor was expected to spend 80,000
on the project however. The architect ends up spending about 10,500 out of his pocket
for materials. About a third way through the completion of the project, the business
owner decides he no longer wants to continue building the space. The land originally
was worth 75,000. With the partially completed structure the land was now worth
90,000.  
○ Expectation Damages:  $10,500 (actual money spent) + $20,000 (expected profit) - 0
(payments already received) = $30,500 (expectation damages given!) 
○ Reliance Damages: $10,500 (actual money spent) - $0 (payments already received) =
$10,500 (reliance damages given!) 
○ Restitution Damages: The land was originally worth $75,000, with the partially
completed building the land is now worth $90,000. Thus, the land increased in value by
$15,000 (a benefit for the business/land owner). Thus, the restitution damages would be
$15,000 (value added/benefit conferred - restitution damages given!)  
Damage = (a) loss in value + (b) other loss - ( c) cost & loss avoided  
• Measuring expectation damages:  
○ Loss in value = value P should have received under the contract minus the value P did
receive under the contract  
○ Other loss = incidental cost (general damage, i.e. getting a replacement item) +
consequential cost  (: The defendant must have been able to foresee, when making the
contract, that a breach by it might cause damages of the kind the plaintiff seeks to
recover.) 
○ Cost avoided = value P saves by not having to perform any further (total estimate
expense  is 90k, but you only spent 20k. You saved 70k) 
○ Loss avoided = P recovers by salvaging resources that would have been used to
perform under the contract  
• There are NO punitive damages in contract law- only compensatory damages! 
• The Concept of Efficient Breach 
○ A promisor will exercise an "option" to breach and pay exception damages instead of
performing only when it is economically efficient to do so.  
• Limitations of Damages – 3 General Limits 
1. Avoidability/Mitigation: damages are not recoverable for loss that the injured party could
have avoided without undue risk, burden, or humiliation.  
○ Duty of the victim of the breach to take reasonable steps to limit the accrual of
damages  
○ Breaching party who refuses to mitigate will not be able to recover full expectation
damages. 
○ They can only recover expectation MINUS what would have been saved had they
mitigated. (see Rockingham County v. Luten Bridge case) 
 2. Foreseeability: limits the award to those damages that are reasonably foreseeable to the
promisor, which will sometimes imply limits on the recovery of sentimental value and
damages for emotional distress.  
• Promisor is only liable for damages foreseen or which could have been reasonably
foreseen (by both parties) at the time when the agreement was made 
• If special circumstances are present, and are unknown to breaching party (MUST
COMMUNICATE SPECIAL CIRCUMSTANCES), that party is only liable for amount of
injury he could foresee to arise generally. (see Hadley v. Baxendale case) 
3. Certainty: restricts a party's recover to only those damages that can be proven sufficient
certainty.  
○ Lost Profits (not recoverable): No expectancy damages: Losses are too speculative 
○ Expenses prior to contract (not recoverable): Can‘t rely on a promise which hasn‘t yet
been made (see Fera v. Village Plaza case) 
▪ Restatement 352: "Damages are not recoverable for loss beyond an amount that
the evidence permits to be established with reasonable certainty." 
• Cost of Completion and Diminished Value 
○ Parties seeking a remedy following partial or defective performance must overcome the
preliminary hurdle of showing that the nonconforming performance justifies the remedy
sought. The issue is usually resolved under the substantial performance doctrine.  
○ After working through substantial performance and breach, a court turns to the matter of
relief, which in construction or building contracts often entails a choice between the
difference in market value of the expected and received performances on one hand, and the
cost of completing or remedying the nonconforming performance on the other hand.  
• An aggrieved promisee is NOT allowed to recover loss that could have reasonably avoided.  
○ If you get told to stop working and you continue to work/"finish" the contract, you will not be
better off. There is no recovery for additional costs incurred thereafter 
▪ You would get damages for whatever put in (materials) at the time told to stop and
profit on the entire job (see Jacobs & Youngs v. Kent case) 
• Unforeseeability 
(1) Damages are not recoverable for loss that the party in breach did not have reason to foresee as a
probable result of the breach when the contract was made. 
(2) Loss may be foreseeable as a possible result of a breach because it follows from the breach 
(a) in the ordinary course of events, or 
(b) as a result of special circumstances, beyond the ordinary course of events, that the party in
breach had reason to know. 
(3)  A court may limit damages for foreseeable loss by excluding recovery for loss of profits, by
allowing recovery only for loss incurred in reliance, or otherwise if it concludes that in the
circumstances justice so requires in order to avoid disproportionate compensation. 
• Alternatives to Loss in Value of Performance (Restatement 348) 
○ If a breach results in defective or unfinished construction and the loss in value to the injured
party is not proved with sufficient certainty, he may recover damages based on: 
(a) the diminution in the market price of the property caused by the breach, or 
(b) the reasonable cost of completing performance or of remedying the defects if that cost is
not clearly disproportionate to the probable loss in value to him. 
• Liquidated Damages and Penalties 
○ Parties to a contract may, as part of their agreement, set a predetermined amount of damages
as liquidated damages in the event of a breach; such a liquidated damages provision will only
be enforced by a court if the amount is reasonable in light of the anticipated or actual loss
caused by the breach 
▪ However, a term fixing unreasonably large liquidated damages is unenforceable on
  grounds of public policy as a penalty.