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kastely 3e 00 fmt auto3 07.08.2005 11:34 AM Page i Contracting Law kastely 3e 00 fmt auto3 07.08.2005 11:34 AM Page ii Carolina Academic Press Law Casebook Series Advisory Board ❦ Gary J. Simson, Chairman Cornell Law School Raj K. Bhala University of Kansas School of Law John C. Coffee, Jr. Columbia University School of Law Randall Coyne University of Oklahoma Law Center John S. Dzienkowski University of Texas School of Law Paul Finkelman University of Tulsa College of Law Robert M. Jarvis Shepard Broad Law Center Nova Southeastern University Vincent R. Johnson St. Mary’s University School of Law Michael A. Olivas University of Houston Law Center Kenneth Port William Mitchell College of Law Michael P. Scharf Case Western Reserve University Law School Peter M. Shane Moritz College of Law The Ohio State University Emily L. Sherwin Cornell Law School John F. Sutton, Jr. Emeritus, University of Texas School of Law David B. Wexler University of Arizona College of Law kastely 3e 00 fmt auto3 07.08.2005 11:34 AM Page iii Contracting Law third edition Amy Kastely Deborah Waire Post Sharon Kang Hom Carolina Academic Press Durham, North Carolina kastely 3e 00 fmt auto3 07.08.2005 11:34 AM Page iv Copyright © 1996, 2000, 2005 Amy Hilsman Kastely, Deborah Waire Post, and Sharon Kang Hom All Rights Reserved ISBN 1-594601-402 LCCN 2005930382 Carolina Academic Press 700 Kent Street Durham, NC 27701 Telephone (919) 489-7486 Fax (919) 493-5668 Printed in the United States of America kastely 3e 00 fmt auto3 07.08.2005 11:34 AM Page v Contents Personal Acknowledgments xv Acknowledgments xvii Table of Cases xxi Other Texts xxv Chapter One Introduction to Contract Law 3 A. The Study of Contract Law 3 Note—On the History of Contract Law 5 H.J. Coolidge vs. Pua‘aiki and Kea 11 Note—Anatomy of a Judicial Decision 14 B. Three Principles of Contract Law 25 1. The Bargain Principle 26 Kirksey v. Kirksey 28 O. Henry (William Sydney Porter), The Gift of the Magi 29 Notes 32 John Elemans, The Gift Economy 33 Note—On Markets and Market Ideologies 35 Bargain and the Market 36 Note—Neo-Classical Economics and Contract Law 36 2. Reliance: Trust, Responsibility, Injury 39 Laurie Kuribayashi, Freeway Poem 40 Notes 41 Andrew Ricketts v. Katie Scothorn 42 Notes 45 3. Restitution: Unjust Enrichment and the Duty to Right Other Wrongs 46 Alasdair MacIntyre, A Disquieting Suggestion 47 Notes 49 Executor of the Estate of Enoch F. Sceva v. Fanny True 49 Notes 54 Howard E. Bailey v. Richard E. West 56 Enid Bagnold, National Velvet 60 Notes 62 Lyle Dews v. Halliburton Industries, Inc. 63 Chapter Two Contract Formation 67 A. Difference and Meaning in Communication 67 1. The Objective Theory of Interpretation 68 Charles R. Embry v. Hargadine, McKittrick Dry Goods Company 68 Notes 72 v kastely 3e 00 fmt auto3 07.08.2005 11:34 AM Page vi vi CONTENTS Arthur Miller, The Death of a Salesman 72 United Steelworkers of America, Local 1330 v. United States Steel 74 Notes 77 Sue Doro, Blue Collar Goodbyes 79 In the Matter of the Estate of Virgil A. Steffes, Deceased Mary Lou Brooks v. Terry V. Steffes, Personal Representative 80 Note—On Informal Contracts and the Objective Theory 91 Patricia J. Williams, Alchemical Notes: Reconstructing Ideals from Deconstructed Rights 95 2. An Alternative Theory of Interpretation: The Doctrine of Misunderstanding 97 Konic International Corporation v. Spokane Computer Services, Inc. 98 Bud Abbott & Lou Costello, Who’s on First? 101 Herlinda Marie Acedo v. State of Arizona, Department of Public Welfare 104 Note—On Revocation of Consent to Adoption 108 Ahmad Izadi v. Machado (Gus) Ford, Inc. 110 Notes 114 B. Offer and Acceptance: The Mechanics of Contract Formation 114 Note—On the Polarity of the Offer-Acceptance Model 115 Michael M. Normile and Wawie Kurniawan v. Hazel Elizabeth Miller 116 1. Was There an Offer? 119 J. W. Southworth v. Joseph C. Oliver and Arlene G. Oliver 120 Notes 127 John D.R. Leonard v. Pepsico, Inc. 128 Note—On Interpretation and Context 139 2. The Assent Invited: Acceptance 140 Panhandle Eastern Pipe Line Co. v. Nowlin Smith, Jr. 140 The Manner of Acceptance 143 Beard Implement Co. v. Krusa 143 Theodore B. Russell v. Texas Co. 148 Note 150 Jennifer Harms v. Northland Ford Dealers and Moccasin Creek Country Club 150 3. The Content of an Acceptance 153 Flender Corporation v. Tippins International, Inc. 154 Step-Saver Data Systems, Inc. v. Wyse Technology and The Software Link, Inc. 160 William S. Klocek v. Gateway, Inc., et al. 169 Note—On Termination of an Offer and the Power to Accept 175 4. Revocation of the Offer Prior to Acceptance 175 George Dickinson v. John Dodds 176 State of Washington v. Richard Lee Wheeler 179 Note—On Revocation of Offers 182 Note—On Offers “Becoming Irrevocable,”“Irrevocable Offers,” and “Contracts,” Including “Option Contracts” 183 Karl Llewellyn, Our Case-Law of Contract: Offer and Acceptance 184 Drennan v. Star Paving Company 185 C. Complicating Assent: “Indefinite” Agreements 189 kastely 3e 00 fmt auto3 07.08.2005 11:34 AM Page vii CONTENTS vii George A. Varney v. Isaac E. Ditmars 189 Cobble Hill Nursing Home, Inc. v. Henry and Warren Corp. 193 Mary Gordon, Final Payments 198 Oglebay Norton Co. v. Armco, Inc. 199 D. A Brief History of Jurisprudence 205 Bailey Kuklin & Jeffrey W. Stempel, Foundations of the Law 205 Critical Jurisprudence—Selected Readings 221 Chapter Three Consideration 223 A. The Consideration Doctrine 223 1. Origins of the Consideration Doctrine 224 The Early View of Consideration 224 The Classical Reformulation 225 The Reinterpretation of Consideration as One among Many 226 An Emerging Use of Consideration as a Tool for Implementing Fairness and a Variety of Other Public Policies 229 2. “A Return Promise or Performance” 231 a. Any Promise, Regardless of Its “Value”: “Courts Will Not Inquire into the Adequacy of Consideration” 231 Hamer v. Sidway 232 Note—Consideration and the Market 234 Myrna Greenfield, Alternative Trade: Giving Coffee a New Flavor 237 b. The “Pre-Existing Duty Rule”—A First Look 241 Angela White v. Village of Homewood and Village of Homewood Fire and Police Commission 242 Profile: Engine Company Number Three All-Women Firefighting Crew in San Diego 245 c. Sometimes a Statement May Sound Like a Promise, but Really Isn’t One: “Illusory Promises” and “Mutuality of Obligation” 247 Agnes Maszewski v. John Piskadlo 250 John Prine, Hello in There 253 Ethel Lawrence, Individually and As Next Friend of Jessica Lawrence, a Minor, and Douglas J. Lawrence v. Ingham County Health Department Family Planning/Pre-Natal Clinic, and A. Breck, M.D., William C. Carley, M.D., L. Sanborn, M.D., D. Holden, M.D., A. 254 Note—On Sovereign Immunity and Public Health Care 260 Paulette Childress White, Getting the Facts of Life 261 3. The Consideration Must Be “Bargained-For” 267 a. Bargained-For Means That the Promise Was “Induced By” the Return Promise or Performance and Vice-Versa 268 b. A Distinction: Bargained versus Gift with a Condition 268 Langer v. Superior Steel Corporation 268 Note 271 c. Don’t Tell Me It’s Bargained-For!—“Nominal Consideration Is Not Sufficient” 272 In re Greene 272 kastely 3e 00 fmt auto3 07.08.2005 11:34 AM Page viii viii CONTENTS Notes 275 4. “Public Policy” and “Disfavored” Contract Terms 275 Jerry M. Worley v. Wyoming Bottling Company, Inc., d/b/a Coca-Cola of Casper 276 Note—On the At-Will Employment Doctrine 279 Richard E. Freeman v. The Duluth Clinic, Ltd. 283 Chapter Four Alternatives to the Bargain Model: Promises Reasonably Relied Upon, Promises Made in Recognition of a Past Benefit, and Other Promises Enforceable without Consideration 289 A. Promises Reasonably Relied Upon: Restatement (Second), Section 90 289 1. The Promise 290 John Steinbeck, The Grapes of Wrath 291 State Bank of Standish v. Robert N. and Kathleen Curry 297 Note—On Farming in the United States 308 Notes 310 Joseph Hoffman v. Red Owl Stores, Inc. 310 Note 316 Gillian K. Hadfield, Problematic Relations: Franchising and the Law of Incomplete Contracts 317 Note 326 Note 327 Dayton Malleable Clears $5 Million Capital Outlay 327 Abbington v. Dayton Malleable, Inc. 327 Notes 332 Barbara Kingsolver, Why I Am a Danger to the Public 338 2. Expected and Reasonable Reliance: Action or Forbearance by the Promisee or a Third Person 341 Jo Laverne Alden v. Elvis Presley 341 Elvis Presley and Vera Matson, Love Me Tender 345 Guy Kinoshita v. Canadian Pacific Airlines, Ltd. and D.W. Merrell Ronald K. Nakashima v. Canadian Pacific Airlines, Ltd. and D.W. Merrell 346 B. Promises Made in Recognition of Past Benefits 351 Mills v. Wyman 352 Note—On the “Moral Consideration Doctrine” 355 Joe Webb v. Floyd McGowin 355 Note 358 Lena Harrington v. Lee Walter Taylor 358 Notes 359 Realty Associates of Sedona v. Valley National Bank of Arizona, Transamerica Title Insurance Company, and Katherine L. Peterson 360 Notes 364 C. Review of Bases of Liability in Contract and Restitution 365 William Edwin Van Brunt III v. Robert Rauschenberg 365 Chapter Five Restrictions on the Power to Contract 373 A. Illegality and Violation of Public Policy 374 Note 374 kastely 3e 00 fmt auto3 07.08.2005 11:34 AM Page ix CONTENTS ix Margaret Atwood, The Handmaid’s Tale 375 In the Matter of Baby “M” (A Pseudonym for an Actual Person) 377 Notes 388 Note 390 A.C. v. C.B. 391 B. Statute of Frauds 396 Metz Beverage Company v.