Environmental Engineering Chapter 9 Homework Answer The Court Does Not Award Expectation

Unlock access to all the studying documents.

View Full Document

Chapter 9

INTRODUCTION TO CONTRACTS

Suggested Additional Assignments

Research: The Contracts Around Us

Students should locate and read one or more of the contracts they have entered into in the past year—an

apartment lease, a university-housing residency agreement, a mobile phone service agreement, terms of

Drafting: A Letter of Intent

Businesspeople use letters of intent frequently, although lawyers often urge otherwise. Have students

Chapter Overview

Chapter Theme

Contracts make business matters more predictable and are integral to the day-to-day business and

personal life. Understanding how contracts are formed, the rules of contract law, and remedies the law

has created to address harm that can result when formal contract rules don’t apply enables greater control

over one’s life.

A valid offer creates a power in the offeree to create a contract by agreeing to its terms. The law

Quote of the Day

“The whole duty of government is to prevent crime and to preserve contracts.” –Lord Melbourne

(1779-1848), British prime minister.

Approaching Contract Law

People make promises every day. The law will enforce some but not others. Why? What distinguishes a

promise the law will enforce—a contract—from a promise the law will not enforce? One way for

students to begin to understand the differences between unenforceable promises and contracts is to pose

2 Unit 2 Contracts and the UCC

is that so? This promise involves offer and acceptance (“would you like to go to this party with me on

Saturday night? I’ll meet you at your apartment at 10:30.” “Sure! That would be great!”), consideration

(each party promises to do something he or she is not otherwise obligated to do, and each gives his or her

promise in exchange for the other’s promise), contractual capacity (make the parties over the age of 18 to

dispense with this issue), and a legal purpose. Why can’t the disappointed student file a breach of

contract lawsuit as soon as the courts open on Monday?

Certainly one reason the law would not enforce this promise is that while there is offer and acceptance;

Elements of a Contract

For a contract to be enforceable, these key characteristics must be present.

• Offer

• Acceptance

Types of Contracts

In a bilateral contract, both parties make a promise.. When the bargain is a promise for a promise, it is a

bilateral agreement. In a unilateral contract, one party makes a promise that the other party can accept

only by actually doing something.

A contract is executory when it has been made, but one or more parties has not yet fulfilled its

obligations. The moment the parties strike their bargain, they have an executory bilateral express contract.

A contract is executed when all parties have fulfilled their obligations.

A valid contract is one that satisfies all of the law’s requirements. It has no problems in any of the seven

Chapter 9 Introduction to Contracts 3

Mr. W. Fireworks, Inc. v. Ozuna

Facts: Mr. W sells fireworks. Under Texas law, retailers may only sell fireworks to the public during the

two weeks immediately before the Fourth of July and during two weeks immediately before New Year’s

Day. And so, fireworks sellers like Mr. W tend to lease property.

Mr. W leased a portion of Ozuna’s land. The lease contract contained two key terms:

A longstanding San Antonio city ordinance bans the sale of fireworks inside city limits, and also within

5,000 feet of city limits. Like all growing cities, San Antonio sometimes annexes new land, and its city

limits change. One annexation caused the Ozuna property to fall within 5,000 feet of the new city limit,

and it became illegal to sell fireworks from the property. Mr.W stopped selling fireworks and paying rent

on Ozuna’s land.

Two years later, San Antonio’s border shifted again. This time, the city disannexed some property and

it.

Mr. W seeks to selectively enforce one portion of a void lease that it finds advantageous. The company

shows no desire to pay rent, or to live up to any other parts of the lease.

When the city’s boundary changed again, my client was free to lease his property to any seller of

fireworks he wished.

Argument for Mr. W: Your honor, my client paid for several things when he leased Ozuna’s land. He

was buying more than the right to sell fireworks; he was also paying for exclusive rights. The fact that

NOTE: The court held that the agreement was in fact void, and that Ozuna was free to lease

the land to another fireworks seller.

Question: When did the lease become void?

4 Unit 2 Contracts and the UCC

Question: Contracts requiring an illegal act will be held?

Question: What is the effect of the lease becoming void?

Express and Implied Contracts

In an express contract, the two parties explicitly state all important terms of their agreement. The vast

majority of contracts are express contracts. Some express contracts are oral, and some are written. In an

implied contract, the words and conduct of the parties indicate that they intended an agreement.

Students often find implied contracts difficult to understand, perhaps because the other paired terms

You Be the Judge: DeMasse v ITT Corporation1

Facts: Roger DeMasse and five others had been hourly employees-at-will at ITT Corporation for many

years. ITT issued an employee handbook, which it revised four times over two decades. The first four

editions of the handbook stated that within each job classification, any layoffs would be made in reverse

order of seniority. The fifth handbook made two important changes. First, the document stated that the

handbook did not guarantee continued employment. Second, the handbook stated that “ITT reserves the

right to amend, modify or cancel this handbook, as well as any or all of the various policies [or rules]

Additional Case: Britt v. Chestnut Hill College2

Facts: Joseph Britt, a detective, enrolled in a Master’s Degree program at Chestnut Hill College in

Pennsylvania. Chestnut Hill promised students credit for life experience. The college promised Britt

important credits for his life experience if he enrolled, and after he did enroll, the school awarded the

promised credits.

Chapter 9 Introduction to Contracts 5

Britt took a one-week required course entitled “Gender Stereotyping,” taught by Professor Klee. As part

of a classroom exercise, Klee directed another student, who Britt claimed was a “known” homosexual, to

Britt sued. The trial court dismissed his contract claim, essentially ruling that a college had an absolute

right to award and revoke credits as it saw fit. Britt appealed.

Issue: Did Britt have an implied contractual right to receive credits from the college for life experience?

Holding: Judgment for the college reversed. The court reinstated Britt’s contract claim. In the words of

the court:

The economic reality is that colleges and universities are competing to attract non-traditional age students

and many of those institutions have designed programs to cater to them. Through advertising and

recruitment campaigns, an increasing number of colleges and universities are inducing students who wish

to return to school with flexible schedules, evening and weekend classes, and academic credit for life

experience. Students, in turn, attracted by these options, may seek to apply to a particular institution and

Question: What should Britt argue to convince the court of his implied contract claim?

Answer: The college made a deal and should be forced to stick to it. This college, like many, is

Question: What should the college argue to refute Britt’s claim?

Answer: This is not a business deal. All we have here is an unhappy college student. If Britt wins

on the contract issue, can he also sue to have his grade of “C” raised to an “A”? Can all students file

General Question: Has your college, or that of a friend, made any promises that it has failed to

keep? In your view, did the promises create a contract? Was the contract express or implied?

6 Unit 2 Contracts and the UCC

Promissory Estoppel and Quasi-Contract

Courts created promissory estoppel and quasi-contract as “fall–back” remedies for cases in which the

plaintiff cannot prove a valid contract with the defendant. They are not equivalent to a claim of breach of

Promissory Estoppel

Even when there is no contract, a plaintiff may use promissory estoppel to enforce the defendant’s

promise if he can show that:

Additional Case: Norton v. Hoyt3

Facts: Gail Norton met Russell Hoyt when Norton, who was single, worked as an elementary school

teacher. Hoyt told her he was also single, and they began an affair. She later learned that he was married,

but he assured her he was getting a divorce, and they continued their relationship.

Six years later, Hoyt, who was rich, convinced Norton to quit her job so that they could travel

Norton sued, claiming promissory estoppel. Hoyt moved for summary judgment. In ruling on the

motion, the court assumed that Norton’s allegations were true.

Issue: Was Norton entitled to support, based on promissory estoppel?

Holding: Summary judgment for Hoyt. Excerpts from the court’s opinion:

Even viewed most favorably to the Plaintiff, the record fails to reveal a clear, unconditional, and

unambiguous promise. Plaintiff’s vacillations have not helped her cause. First, she claimed that Hoyt

promised to divorce his wife, marry her and provide lifetime support to her. Then she changed her mind

Question: The trial court granted Hoyt’s motion for summary judgment. If Hoyt had not won the

motion for summary judgment, would Norton have won her promissory estoppel claim?

Chapter 9 Introduction to Contracts 7

Answer: No. Denial of Hoyt’s motion for summary judgment would have allowed Norton to present

her case to the trier of fact (a jury or the judge in a bench trial), which would then rule on her claim.

Question: What is the purpose of promissory estoppel?

Question: What does “estoppel” mean?

Answer: Estoppel is a word used only by lawyers, and perhaps also by those who regularly complete

Question: What promise of Hoyt’s was Norton trying to enforce?

Answer: One of the problems with Norton’s claim was that she was not attempting to enforce a clear

support.

Question: But Hoyt did promise Norton a number of things over the years and Norton relied on them

by staying in the relationship. Why isn’t that enough to constitute promissory estoppel?

Answer: Proving promissory estoppel requires more than proving there were promises. In addition

Question: What does that mean—“avoiding injustice to the plaintiff?”

Answer: It means it must have been reasonable for the plaintiff to rely on the promise, and that it is

Question: What remedy does a court order to a successful plaintiff in a promissory estoppel case?

Answer: The court does not award expectation damages—“the benefit of the bargain”—which are

Question: So even if Norton had won her promissory estoppel claim, the court would not have

ordered Hoyt to support her financially?

Answer: Probably not.

Quasi-Contract

Even when there is no contract, a court may use quasi-contract to compensate a plaintiff who can show

that:

• The plaintiff gave some benefit to the defendant

Additional Case: Novak v. Credit Bureau Collection Service 4

Facts: David Novak suffered a brain aneurysm and was unconscious. An ambulance took him to Saint

Regional Medical Center, where doctors successfully operated. Novak remained in the hospital for two

months and then was discharged.

4 877 N.E.2d 1253, Ind.App., 2007.

8 Unit 2 Contracts and the UCC

Issue: Was the credit bureau entitled to damages based on quasi-contract?

Holding: Yes, judgment for the credit bureau affirmed. According to the court, Novak relies on earlier

cases which state the person must impliedly or expressly request the benefits. The court disagrees and

relies on Galloway v. Methodist Hospital where the court held:

In response, the trial court correctly held:

A person who has supplied things or services to another, although acting without the other’s

knowledge or consent, is entitled to restitution therefore from the other if:

a. he acted [in an official capacity] and with intent to charge therefore, and

Here, a benefit was rendered to Novak to prevent serious bodily injury, thus in fairness the credit bureau

must be compensated to prevent unjust enrichment.

Question: In this case, Novak never agreed to the services. Isn’t one element of a contract that there

must be an agreement; an offer and acceptance?

Question: The court laid out some specific reasons why people like the Medical Center should be

paid under these circumstances. Can you think of any non-legal reason why the decision makes

sense?

Answer: There are several public policy reasons why this decision makes sense. First, it is fair: this

Sources of Contract Law

Common Law

We have seen the evolution of contract law from the twelfth century to the present. Express and implied

Uniform Commercial Code

Unit 3 of the text addresses commercial transactions, with Chapters 19-22 covering Article 2, contracts

for the sale of goods, in some detail. References to the UCC in Unit 2, Contracts, primarily point out

Chapter 9 Introduction to Contracts 9

Additional Case: Fallsview Glatt Kosher Caterers, Inc. v. Rosenfeld5

Facts: During the Jewish holidays, Fallsview Glatt Kosher Caterers organized programs at Kutcher’s

Country Club, where it provided all accommodations, food and entertainment. Fallsview sued Willie

Issue: Was the agreement one for the sale of goods, requiring a writing, or for services, enforceable with

no writing?

Holding: Rosenfeld’s motion to dismiss to denied. Mr. Rosenfeld contends that the “predominant

purpose” and “main objective” of the agreement alleged by Fallsview was the “service of Kosher food,”

customers to subscribe to such ‘Programs’.”

However, a review of the characteristics of Fallsview’s daily activities program leads the Court to

conclude that the “essence” of the family and communal “experience” is defined primarily by “services”

and not by “goods”.

Question: What was the basis for the Caterer’s claim?

Question: On what law was the Caterer’s claim based?

Question: Then why does this court’s opinion discuss the UCC?

Question: Why does he argue that?

Question: When a contract involves both goods and services, how does a court typically determine

whether the UCC applies?

Answer: Most courts use the predominant purpose test: that is, if the predominant purpose of the

Question: On what basis does Rosenfeld claim that this contract is governed by the UCC?

Answer: He argues the contract was primarily for the plaintiff to provide Kosher food in connection

Question: What did the court decide here—was the predominant purpose of the contract for goods or

services?

Question: Why?

5 2005 WL 53623 Civil Court, City of New York, 2005

10 Unit 2 Contracts and the UCC

Question: Does it rely on anything else?

Answer: The court also notes that under the UCC “quantity is even more important than price” but

Question: What is the result of this decision?

The Agreement

Meeting of the Minds

Agreements that have a problem in any of the key areas do not amount to valid contracts

Parties can form a contract only if they have a meeting of the minds. For this to happen, one side must

make an offer and the other must make an acceptance.

Offer

As the text notes, an offer is an act or statement that proposes definite terms and permits the other party to

create a contract by accepting those terms. Sometimes we forget that by making a valid offer, we give

David Mears and 184 other employees entered. Mears’s slogan, “At the Top and Still Climbing,” was

the winner. One company officer told Mears that he had won the two cars, while another one said that the

cars were just a joke. Ultimately, Nationwide informed Mears that the prizes were never meant seriously.

The company did, however, use his slogan for its convention, and banners, booklets, and balloons all

echoed with his phrase.

Question: Was this a bilateral or unilateral contract?

Answer: Unilateral.

Question: How can you tell?

Question: Did Nationwide intend this offer to be taken seriously?

Question: If Nationwide didn’t intend it to be taken seriously then why did the jury find that Mears’

accepted it and created a contract?

Answer: There is a difference between subjective intent and objective intent. Subjective intent is

Chapter 9 Introduction to Contracts 11

Question: Aren’t the terms of this offer fairly vague?

jury decided in favor of Mears.

Question: What is a judgment n.o.v.?

Question: What happened on appeal?

Answer: The court of appeals reversed the judgment n.o.v. and reinstated the jury’s verdict awarding

$60,000 to Mears.

Question: What lesson should we draw from this example?

Statements That Usually Do Not Amount to Offers

An invitation to bargain is not an offer. A price quote is generally not an offer. An advertisement is

generally not an offer. One thing invitations to bargain and price quotes have in common is that if they

were offers, then the offeror would almost invariably be unable to perform if everyone who received the

Placing an item up for auction is not an offer, it is merely a request for an offer. The bids are the

offers. Most auctions are with reserve, meaning that the items for sale have a minimum price. The law

Landmark Case: Carlill v Carbolic Smoke Ball Company 6

Facts: In the early 1890s, English citizens greatly feared the Russian Flu. The Carbolic Smoke Ball

Company ran a newspaper ad that contained two key passages:

“£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the

The product was a ball that contained carbolic acid. Users would inhale vapors from the ball through a

long tube.

The trial court agreed, awarding Carlill the money. The company appealed.

Issues: Did the advertisement amount to an offer? If so, was the offer accepted?

Excerpts from Lord Justice Lindley‘s Decision:

6 1 QB 256 Court of Appeal, 1892

12 Unit 2 Contracts and the UCC

The first observation I will make is that we are dealing with an express promise to pay £100 in certain

events. Read the advertisement how you will, and twist it about as you will, here is a distinct promise

expressed in language which is perfectly unmistakable.

We, therefore, find here all the elements which are necessary to form a binding contract enforceable in

point of law.

It appears to me, therefore, that the defendants must perform their promise, and, if they have been so

unwary as to expose themselves to a great many actions, so much the worse for them. Appeal dismissed.

Question: Why was this advertisement considered an offer?

Answer: In the ad, the Carbolic Smoke Ball Company made a very specific promise to pay £100 to

Question: How could the Carbolic Smoke Ball Company have avoided this problem?

Letters of Intent. Letters of Intent pose a different problem. A letter of intent is between two parties and

does not raise the problem of multiple acceptances discussed above. The concern is that if negotiations

break down one party will treat the letter of intent as a binding agreement and seek its enforcement.

Additional Case: You Be the Judge: Cochran v. Norkunas7

Facts: Eileen Norkunas owned a home in Baltimore, Maryland. The Groves and the Cochrans expressed

an interest in buying the house. The two couples drafted a handwritten letter, stating:

Letter of Intent

We, Rebecca Cochran, Robert Cochran, Hope Grove and Robert Grove, Buyers-offer to buy 835

7 398 Md.1, 919 A.2d 700, Court of Appeals of Maryland, 2007.

Chapter 9 Introduction to Contracts 13

A standard form Maryland Realtors contract will be delivered to Seller within 48 hours. Seller to

They buyers and their broker signed the Letter. Norkunas accepted the buyers’ check for $5,000 but

never deposited it. A few days later, the agent sent Norkunas a package of documents including a

“Residential Contract for Sale.” Norkunas signed the contract but never returned it to the buyers. A week

later, Norkunas informed the buyers that she would not sell the property and took the property off the

market.

The buyers sued claiming the letter of intent entitled then to the house. The trial court gave

summary judgment for the buyers, but an intermediary appellate court reversed holding that the letter of

sent to her.

According to the court a letter of intent is a preliminary agreement. Although some letters of

intent are signed with the belief that they are letters of commitment and, assuming this belief is shared by

the parties, the letter is a memorial of a contract. In other cases, the parties may not intend to be bound

until a further writing is completed.

Here, the buyers argue that the letter of intent is an enforceable contract because it was formed by

The clear language of the letter demonstrates that the parties did not intend the letter to constitute a

binding agreement for the purchase and sale of Norkunas’ property.

Question: The parties agreed to a letter of intent with the purchase price, payment terms, and

contingency clauses. Why wasn’t that enough to create a binding agreement?

Answer: The letter of intent left also stated that a contract would follow in the future. The court

intend for the letter of intent to be a binding agreement to buy the property

Question: Why did they go to the trouble of writing and signing a letter of intent if it had no legal

effect?

Answer: The letter of intent captured the state of their negotiations, showing where the parties

Question: You say the letter of intent is often important for business people. Do lawyers like to use

them, too?