1. Do you agree or disagree with the decision in the Lambert case (p. 323, textbook). Explain by making EXPLICIT reference to any of the principles of Contract Law (say which one(s) you are using) that are in the Chapter. Please refer to at least some principles, and cite the page number that they are on, in order to receive a satisfactory score. Lambert v. Barron 974 So.2d 198 (La. Ct. App. 2008) Donald Lambert and Don Barron were friends. They had a long-standing professional relationship based on their service together on the Louisiana State Board of Licensed Contractors from the 1980s. Lambert had been chairman of the state board, and had established his experience in resolving construction disputes. Barron is a commercial construction contractor doing business in Farmerville, Louisiana. In 1998, Barron's business began experiencing financial strain because five of his construction projects became mired in various difficulties. Barron and Lambert talked by phone during the summer of 1998 about Barron's personal problems and financial difficulties, and Lambert was concerned about his friend's depressed mental state. On November 11, 1998, Lambert flew from New Orleans to Farmerville to meet with Barron. Prior to Lambert's flight, Barron's employee had faxed and overnighted copies of various construction contracts and correspondence relating to Barron's problematic construction projects for Lambert to review. Lambert contends that, while standing on the airport runway before he boarded the plane for his return trip home that day, he and Barron contracted for Lambert to provide consulting services for Barron. Lambert told Barron at that time that he customarily charged his clients $3,100 per month, and the minimum term for his services was one year. He also charged 10 percent of any amount recouped by his clients in settlement. In late 2000, Lambert billed Barron for a $34,100 balance owed on the alleged oral contract. Lambert's letter dated October 30, 2000, requested payment and stated, \"I have preformed [sic] my service for you and I must request that you pay me the balance due me of $34,100.\" Two weeks later, Barron wrote Lambert back: I received your bill last week and was very shocked. I do not know where you are coming from, and what you have done to think you deserve any kind of pay. I sent the plane down for you to come up and look over some paperwork and later we sent you some documents for you to take a look at. For your service for a full day and the one to three hours it may have taken, I was planning to pay you $2,000.00 and thought that would be around $150.00 an hour. My people knew you had been here so they paid the $3,100.00 invoice you sent. Then awhile later you called about money and I told you that we had paid you plenty and would not pay you any more. I remember you showing me a long list of people that paid you $3,100.00 a month. I did not tell you I wanted to be on that list. I have not called for any advice since then. All my calls have been to return your call. Lambert sued Barron for breach of contract. The trial court dismissed Lambert's case, and Lambert appealed. Caraway, Judge This case involves the disputed formation of a contract for consulting services. A contract is an agreement by the parties whereby obligations are created. A contract is bilateral when the parties obligate themselves reciprocally, so that the obligation of each party is correlative to the obligation of the other. Unless the law prescribes a certain formality for the intended contract, offer and acceptance may be made orally, in writing, or by action or inaction that under the circumstances is clearly indicative of consent. The trial court's ruling credited Barron's testimony that he never orally accepted Lambert's offer for consulting services under the proposed one-year arrangement with $3,100 per month payments. There was no writing reflecting the parties' consent. Nevertheless, the trial court's task was also to review Barron's alleged acceptance of the agreement from the implications of his actions or inaction. In this regard, Civil Code Article 1942 provides: \"When, because of special circumstances, the offeree's silence leads the offeror reasonably to believe that a contract has been formed, the offer is deemed accepted.\" This case involves the special setting of parties with a prior friendship and the aid and advice freely given between friends that existed before Lambert first broached the subject of a consulting contract. In Chaisson v. Chaisson, this court found in a similar setting that an oral loan agreement had been reached between parents and their son. The son admittedly had understood his parents' intent for a loan for college expenses, but denied his acceptance of the loan agreement. Nevertheless, the son's actions in receiving the benefits of the loan proceeds in that setting and his subsequent partial payments on the loan were enough for this court to affirm the lower court's factual determination of a binding contract. A family setting or close friendship requires the finder-of-fact to determine the offeree's acceptance of an onerous contract and the offeror's reasonable belief that a contract has been formed, thus overcoming the competing implications of a benefit extended by one to a friend for a gratuitous reason without obtaining any advantage in return. Page 324 From our review of the testimony of the two men, we also conclude that there was no clear agreement given by Barron on November 11, 1998, as Lambert boarded the plane to return to New Orleans. Absent a direct oral or written acceptance by Barron, Lambert's proof of the [supposed] contract rests on his receipt of certain documentation of Barron's troubled construction projects and invoices for consulting fees sent to Barron. The bulk of the documentation regarding Barron's five construction projects was forwarded to Lambert days before the Farmerville meeting. Lambert's review of the details of those construction contracts and Barron's problems with the projects would have been performed in preparation for the Farmerville meeting without any contract binding his friend. More importantly, Barron provided Lambert that documentation without any indication that his friend's review of the projects would require compensation. After Lambert expressed at the Farmerville airport his offer and desire for a consulting contract, some further documentation was provided to him between April and August 1999. These were transmitted by fax to Lambert without any request for specific services. The faxed documents primarily concerned correspondence from Barron's attorney to Barron reflecting the scheduling of mediation and arbitration hearings. Significantly, Barron's attorney never consulted Lambert, and Lambert never responded in writing to Barron regarding any substance concerning the status of the construction project disputes during that time. Moreover, Barron never used the principal subject matter of Lambert's expertise, arbitration, to resolve disputed construction project issues during the year following the alleged oral contract. From our review of this evidence, we find that the trial court could determine that no tacit acceptance of Lambert's offer for services was made by Barron. Particularly lacking from the record is evidence of any substantive business benefit realized by Barron from his consultant friend. The trial court ultimately held that the parties' relationship was that of a \"friend helping a friend,\" such that Lambert could not have reasonably believed that a contract had been formed. For the reasons expressed above, the trial court's determination that no contract was formed between the parties is affirmed. Affirmed in favor of Barron. Question is as follows: 1. Do you agree or disagree with the decision in the Lambert case (p. 323, textbook). Explain by making EXPLICIT reference to any of the principles of Contract Law (say which one(s) you are using) that are in the Chapter. Please refer to at least some principles, and cite the page number that they are on, in order to receive a satisfactory score. Unit 5 Lecture Unit Topic : Introduction to Contracts Reading Read Chapter 9 Lecture The Overall Framework Contracts are promises that will be enforced by the Courts. Not all promises are contracts, some are just negotiations that never went anywhere and others are simply statements that were not intended to form the basis of a Contract. In order for the Courts to determine that what the parties agreed to was a contract there have to have been certain events that transpired and certain elements that exist namely: an Offer and an Acceptance; Consideration (something of value flowing between the parties); Consent of the parties; and, Capacity, or legal ability, to enter into a Contract. Additionally, the Contract cannot involve something that is against the law, and usually (but not always) the Contract must be in writing. Types and Characteristics of Contracts The Text uses the heading \"Basic Elements of a Contract\" (page 322). I would prefer if you simply take the information under this heading and think of it as mentioning features of legally enforceable agreements that might contain any or all of theses features. For example, using the terminology in the Text, it is possible, if the Contract is lengthy enough, to have a Bilateral Contract, that is Valid, has Express and Implied terms, and is Executory. In other words, a Contract is not necessarily one thing or another one it comes to many of these features. The \"Legal Umbrella\" for Contracts A Contract is either governed by the \"Common Law\" or by a Statutory framework. The Common Law is created by the Courts; that is, judges deciding cases create a framework of decisions known as legal precedents. When these are put together from over the years (centuries, in fact), we have a \"body of law\" that lawyers can refer to when they are drafting (writing) contracts or when they are analyzing a problem involving a contract. The cases provide guidance as to what is likely to be enforceable and what is not. When the Legislature(s) pass a law that governs contracts it is called Statutory Law because the Law is put into the form of a Statute. The Uniform Commercial Code (\"UCC\") is such a Statute. It applies to Contracts that involve the Sale of Goods. The Audio Visual Artistry v. Tanzer case (page 327) shows the interplay between the Common Law and the UCC. Figure 2 (page 329) illustrates when Common Law and when UCC principles are used. Non-Contract Obligations \"Obligations\" is another term for contractual duties or legally enforceable promises. Sometimes there is a series of events and there does not appear to be a Contract. However, when looking at all the circumstances it is obvious that someone has derived a benefit and someone has \"lost out\". When this happens the Courts can fall back on either one of two main principles: quasi-contract or promissory estoppel and The Courts enforce contractual obligations against the party that derived the benefit and didn't give any value for it. TEXT BOOK CHAPTER 9 INTRODUCTION TO CONTRACTS The 2013 catalog that Gigantic State University (GSU) sent to prospective students described a meritbased scholarship called the \"Eagle Scholarship.\" The catalog stated that GSU offers the Eagle Scholarship to all incoming students who are in the top 10 percent of their high school classes and have SAT scores of 1250 or above. Paul, a prospective student, read the 2013 catalog that GSU sent to him. Money was tight for Paul, so he paid particular attention to the part of the catalog that described financial aid. He read about the Eagle Scholarship and realized that he qualified for it. Paul picked GSU over other schools in large part because of the Eagle Scholarship. He applied to GSU and GSU admitted him. Before his freshman orientation, Paul called GSU and checked to be sure that he met the requirements of the Eagle Scholarship. A GSU representative informed him that he did. When Paul arrived at GSU for freshman orientation, however, he received a copy of the 2014 catalog and learned that the qualifications for the Eagle Scholarship had changed and that he no longer qualified. The Nature of Contracts The law of contracts deals with the enforcement of promises. It is important to realize from the outset of your study of contracts that not every promise is legally enforceable.(If every promise were enforceable, this chapter could end here!) We have all made and broken promises without fear of being sued. If you promise to take a friend out to dinner and then fail to do so, you would be shocked to be sued for breach of contract. What separates such promises from legally enforceable contracts? The law of contracts sorts out what promises are enforceable, to what extent, and how they will be enforced. Page 321 A contract is a legally enforceable promise or set of promises. In other words, when promises have the status of contract, the contracting party harmed by a breach of the contract is entitled to obtain legal remedies against the breaching party. The Functions of Contracts Contracts give us the ability to enter into agreements with others with confidence that we may call on the lawnot merely the good faith of the other partyto make sure that those agreements will be honored. Within limitations that you will study later, contracting lets us create a type of private lawthe terms of the agreements we makethat governs our dealings with others. Contracts facilitate the planning that is necessary in a modern, industrialized society. Who would invest in a business if she could not rely on the fact that the builders and suppliers of the facilities and equipment, the suppliers of the raw materials necessary to manufacture products, and the customers who agree to purchase those products would all honor their commitments? How could we make loans, sell goods on credit, or rent property unless loan agreements, conditional sales agreements, and leases were backed by the force of the law? Contract, then, is necessary to the world as we know it. Like that world, its particulars tend to change over time, while its general characteristics remain largely stable. The Evolution of Contract Law The idea of contract is ancient. Thousands of years ago, Egyptians and Mesopotamians recognized devices resembling contracts; by the 15th century, the common law courts of England had developed a variety of theories to justify enforcing certain promises. Contract law did not, however, assume major importance in our legal system until the 19th century, when the Industrial Revolution created the necessity for greater private planning and certainty in commercial transactions. The central principle of contract law that emerged from this period was freedom of contract. Freedom of contract is the idea that contracts should be enforced because they are the products of the free wills of their creators, who should, within broad limits, be free to determine the extent of their obligations. The proper role of the courts in such a system of contract was to enforce these freely made bargains but otherwise to adopt a hands-off stance. The freedom to make good deals carried with it the risk of making bad deals. As long as a person voluntarily entered a contract, it would generally be enforced against him, even if the result was grossly unfair. And since equal bargaining power tended to be assumed, the courts were usually unwilling to hear defenses based on unequal bargaining power. This judicial posture allowed the courts to create a pure contract law consisting of precise, clear, and technical rules that were capable of general, almost mechanical, application. Such a law of contract met the needs of the marketplace by affording the predictable and consistent results necessary to facilitate private planning. The emergence of large business organizations after the Civil War produced obvious disparities of bargaining power in many contract situations, however. These large organizations found it more efficient to standardize their numerous transactions by employing standard form contracts, which also could be used to exploit their greater bargaining power by dictating the terms of their agreements. Contract law evolved to reflect these changes in social reality. During the 20th century, there was a dramatic increase in government regulation of private contractual relationships. Think of all the statutes governing the terms of what were once purely private contractual relationships. Legislatures commonly dictate many of the basic terms of insurance contracts. Employment contracts are governed by a host of laws concerning maximum hours worked, minimum wages paid, employer liability for on-the-job injuries, unemployment compensation, and retirement benefits. The purpose of much of this regulation has been to protect persons who lack sufficient bargaining power to protect themselves. Courts also became increasingly concerned with creating contract rules that produce fair results. The precise, technical rules that characterized traditional common law gave way to permit some broader, imprecise standards such as good faith, injustice, reasonableness, and unconscionability. Despite the increased attention to fairness in contract law, the agreement between the parties is still the heart of every contract. The Methods of Contracting Many students reading about contract law for the first time may have the idea that contracts must be in writing to be enforceable. Generally speaking, that is not true. There are some situations in which the law requires certain kinds of contracts to be evidenced by a writing to be enforced. The most common examples of those situations are covered in Chapter 16. Unless the law specifically requires a certain kind of contract to be in writing, an oral contract that can be proven is as legally enforceable as a written one. (Of course, having a written contract may often be desirable even when a writing is not mandatory.) Contracts can be and are made in many ways. When most of us imagine a contract, we envision two parties bargaining for a deal, drafting a contract on paper, and signing it or shaking hands. Some contracts are negotiated and formed in that way. Far more common today, both online and offline, is the use of standardized form contracts. Such contracts are preprinted by one party and presented to the other party for signing. In most situations, the party who drafts and presents the standardized contract is the one with greater bargaining power and/or sophistication in the transaction. Frequently, the terms of standardized contracts are nonnegotiable. Such contracts have the advantage of providing an efficient method of standardizing common transactions. On the other hand, they present the dangers that the party who signs the contract will not know what he is agreeing to and that the party who drafts and presents the contract will take advantage of his bargaining power to include terms that are oppressive or abnormal in that kind of transaction. Page 322 Basic Elements of a Contract Over the years, the law has developed a number of requirements that a set of promises must meet before they are treated as a contract. To qualify as a contract, a set of promises must be based on a voluntary agreement, which is made up of an offer and an acceptance of that offer. In addition, there usually must be consideration to support each party's promise. The contract must be between parties who have capacity to contract, and the objective and performance of the contract must be legal. (See Figure 1). Each of the elements of a contract will be discussed individually in subsequent chapters. Basic Contract Concepts and Types Bilateral and Unilateral Contracts Contracts traditionally have been classified as unilateral or bilateral, depending upon whether one party has made a promise or both parties have done so. In unilateral contracts, only one party makes a promise. For example, Perks Caf issues \"frequent buyer\" cards to its customers, and stamps the cards each time a customer buys a cup of coffee. Perks promises to give any customer a free cup of coffee if the customer buys 10 cups of coffee and has his \"frequent buyer\" card stamped 10 times. In this case, Perks has made an offer for a unilateral contract, a contract that will be created with a customer only if and when the customer buys 10 cups of coffee and has his card stamped ten times. In a bilateral contract, by contrast, both parties exchange promises and the contract is formed as soon as the promises are exchanged. For example, if Perks Caf promises to pay Willowtown Mall $1,000 a month if Willowtown Mall will promise to lease a kiosk in the mall to Perks for the holiday season, Perks has made an offer for a bilateral contract because it is offering a promise in exchange for a promise. If Willowtown Mall makes the requested promise, a bilateral contract is formed at that pointeven before the parties begin performing any of the acts that they have promised to do. Page 325 Valid, Unenforceable, Voidable, and Void Contracts A valid contract is one that meets all of the legal requirements for a binding contract. Valid contracts are, therefore, enforceable in court. An unenforceable contract is one that meets the basic legal requirements for a contract but may not be enforceable because of some other legal rule. You will learn about an example of this in Chapter 16, which discusses the statute of frauds, a rule that requires certain kinds of contracts to be evidenced by a writing. If a contract is one of those for which the statute of frauds requires a writing, but no writing is made, the contract is said to be unenforceable. Another example of an unenforceable contract is an otherwise valid contract whose enforcement is barred by the applicable contract statute of limitations. Voidable contracts are those in which harmed parties have the legal right to cancel their obligations under the contract. For example, a contract that is induced by fraud or duress is voidable (cancelable) at the election of the victimized party. Other situations in which contracts are voidable are discussed in Chapters 13 and 14. The important feature of a voidable contract is that the injured party has the right to cancel the contract if he chooses. That right belongs only to the harmed party, and if he does not cancel the contract, it can be enforced by either party. Void contracts are agreements that create no legal obligations and for which no remedy will be given. Contracts to commit crimes, such as \"hit\" contracts, are classic examples of void contracts. Illegal contracts are discussed in Chapter 15. Express and Implied Contracts In an express contract, the parties have directly stated the terms of their contract orally or in writing at the time the contract was formed. However, the mutual agreement necessary to create a contract may also be demonstrated by the conduct of the parties. When the surrounding facts and circumstances indicate that an agreement has in fact been reached, an implied contract (also called a contract implied in fact) has been created. When you go to a doctor for treatment, for example, you do not ordinarily state the terms of your agreement in advance, although it is clear that you do, in fact, have an agreement. A court would infer a promise by your doctor to use reasonable care and skill in treating you and a return promise on your part to pay a reasonable fee for her services. For further discussion of implied contracts, see Symons v. Heaton, which appears later in the chapter. Executed and Executory Contracts A contract is executed when all of the parties have fully performed their contractual duties. It is executory until such duties have been fully performed. Any contract may be described using one or more of the above terms. For example, Eurocars, Inc., orders five new Mercedes-Benz 500 SLs from Mercedes. Mercedes sends Eurocars its standard acknowledgment form accepting the order. The parties have a valid, express, bilateral contract that will be executory until Mercedes delivers the cars and Eurocars pays for them. LO9- 3 Distinguish the applicability of the common law of contracts and Article 2 of the Uniform Commercial Code, and identify one which governs a given contract. Sources of Law Governing Contracts Two bodies of lawArticle 2 of the Uniform Commercial Code and the common law of contractsgovern contracts today. The Uniform Commercial Code, or UCC, is statutory law in every state. The common law of contracts is court-made law that, like all court-made law, is in a constant state of evolution. Determining what body of law applies to a contract problem is a very important first step in analyzing that problem. The Uniform Commercial Code: Origin and Purposes The UCC was created by the American Law Institute and the National Conference of Commissioners on Uniform State Laws. All of the states have adopted it except Louisiana, which has adopted only part of the Code. The drafters of the Code had several purposes in mind, the most obvious of which was to establish a uniform set of rules to govern commercial transactions, which are often conducted across state lines.1 Page 326 CYBERLAW IN ACTION Currently, many courts are using the Uniform Commercial Code in cases involving disputes over software and other information contracts. However, the UCC was designed to deal with sales of goods and may not sufficiently address the concerns that parties have when making contracts to create or distribute information. During the 1990s, contract scholars, representatives of the affected information industries, consumer groups, and others worked as a drafting committee of the National Conference of Commissioners on Uniform State Laws to draft a uniform law that would be tailored to \"information contracts.\" Internet access contracts and software licenses are two familiar examples of information contracts. These efforts resulted in a proposed statute called the Uniform Computer Information Transactions Act, or UCITA. Several UCITA positions notably those dealing with shrinkwrap and clickwrap licenseshave been quite controversial, and at the time of this writing, very few states have adopted UCITA in full as part of their state law. In addition to promoting uniformity, the drafters of the Code sought to create a body of rules that would realistically and fairly solve the common problems occurring in everyday commercial transactions. Finally, the drafters tried to formulate rules that would promote fair dealing and higher standards in the marketplace. The UCC contains nine articles, most of which are discussed in detail in Parts 4, 6, and 7 of this book. The most important Code article for our present purposes is Article 2, which deals with the sale of goods. The UCC has changed and is in the process of continuing to change in response to changes in technology and business transactions. In some instances, the creation of new bodies of uniform law have been thought necessary to govern transactions that are similar to but different in significant ways from the sale of goods. For example, as leasing became a more common way of executing and financing transactions in goods, a separate UCC article, Article 2A, was developed to govern the lease of goods. Roughly one-third of the states have adopted Article 2A. Application of Article 2 Article 2 expressly applies only to contracts for the sale of goods [2-102] (the numbers in brackets refer to specific Code sections). The essence of the definition of goods in the UCC [1-105] is that goods are tangible, movable personal property. So, contracts for the sale of such items as motor vehicles, books, appliances, and clothing are covered by Article 2. Application of the Common Law of Contracts Article 2 of the UCC applies to contracts for the sale of goods, but it does not apply to contracts for the sale of real estate or intangibles such as stocks and bonds, because those kinds of property do not constitute goods. Article 2 also does not apply to service contracts. Contracts for the sale of real estate, services, and intangibles are governed by the common law of contracts. Law Governing \"Hybrid\" Contracts Many contracts involve a hybrid of both goods and services. As indicated in Audio Visual Artistry v. Tanzer, which follows shortly, courts normally determine whether Article 2 applies to such a contract by asking which aspectgoods or services predominates in the contract. Is the major purpose or thrust of the agreement the rendering of a service, or is it the sale of goods, with any services involved being merely incidental to that sale? This means that contracts calling for services that involve significant elements of personal skill or judgment in addition to goods probably are not governed by Article 2. Relationship of the UCC and the Common Law of Contracts Two important qualifications must be made concerning the application of Code contract principles. First, the Code does not change all of the traditional contract rules. Where no specific Code rule exists, traditional contract law rules apply to contracts for the sale of goods (see Figure 2). Second, and ultimately far more important, courts have demonstrated a significant tendency to apply Code contract concepts by analogy to some contracts that are not technically covered by Article 2. For example, the Code concepts of good faith dealing and unconscionability have enjoyed wide application in cases that are technically outside the scope of Article 2. Thus, the Code is an important influence in shaping the evolution of contract law in general. A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. Thus, the elements of promissory estoppel are a promise that the promisor should foresee is likely to induce reliance, reliance on the promise by the promisee, and injustice as a result of that reliance. (See Figure 3.) If the plaintiff accomplishes the difficult task of establishing each of these elements, the plaintiff will obtain appropriate legal relief despite the lack of an enforceable contract. The Symons case, which appeared earlier in the chapter, includes discussion of promissory estoppel. Aceves v. U.S. Bank, which follows shortly, provides a further example of promissory estoppel's operation. When you consider the elements noted above, it becomes obvious that promissory estoppel is fundamentally different from traditional contract principles. Contract is traditionally thought of as protecting agreements or bargains. Promissory estoppel, on the other hand, protects reliance. Early promissory estoppel cases applied the doctrine only to gift promises such as the one made by the grandfather in the earlier example. As subsequent chapters demonstrate, however, promissory estoppel is now used by courts, in appropriate cases, to prevent offerors from revoking their offers, to enforce indefinite promises, and to enforce oral promises that would ordinarily have to be in writing. Figure 3Contract and Noncontract Theories of Recovery Theory Key Concept Remedy Contract Voluntary agreement Enforce promise Quasi-Contract Unjust enrichment Reasonable value of services Promissory Estoppel Foreseeable reliance Enforce promise reliance losses or recover Aceves v. U.S. Bank 120 Cal. Rptr. 3d 507 (Cal. Ct. App. 2011) Claudia Aceves obtained a loan from Option One Mortgage Corporation in 2006 to buy a house. The loan was evidenced by a note secured by a deed of trust on Aceves's house. The loan was for $845,000 at an initial rate of 6.35 percent. After two years, the rate became adjustable. The term of the loan was 30 years. Aceves's initial monthly payments were $4,857.09. In 2008, Option One transferred its interest in Aceves's deed of trust to U.S. Bank. In January 2008, Aceves could no longer afford the monthly payments on the loan. In March 2008, she received a notice that the bank planned to foreclose on her house. She filed for bankruptcy protection under Chapter 7of the Bankruptcy Code, which imposed an automatic stay on the foreclosure proceedings. Aceves contacted U.S. Bank and was told that once her loan was out of bankruptcy, the bank \"would work with her on a mortgage reinstatement and loan modification.\" Aceves intended to convert her Chapter 7bankruptcy case to a Chapter 13 case. (Chapter 7 bankruptcy permits a debtor to discharge unpaid debts, but a debtor who discharges an unpaid home loan cannot keep the home. Chapter 13 bankruptcy, however, allows a homeowner in default to reinstate the original loan payments, pay the arrearages over time, avoid foreclosure, and retain the home.) Aceves hoped to rely on the resources of her husband to save her home under Chapter 13. U.S. Bank filed a motion in the bankruptcy court to lift the stay so that it could proceed with foreclosure. The company servicing Aceves's loan, American Home, contacted her lawyer to ask to speak with her directly to \"explore Loss Mitigation possibilities.\" Relying on the bank's promise to work with her to reinstate and modify the loan, Aceves did not oppose the motion to lift the bankruptcy stay. She also decided not to seek bankruptcy relief under Chapter 13. The bankruptcy court lifted the stay. On December 9, 2008, even though no one from the bank had contacted Aceves to discuss the reinstatement and modification of the loan, U.S. Bank scheduled Aceves's home for public auction in one month's time. Aceves sent documents to American Home and was told that a \"negotiator\" would contact her. The day before Aceves's home was due to be sold, the negotiator contacted Aceves's lawyer and stated that the new balance on the loan would be $965,026.22, that the new monthly payment would be more than $7,200, and that a $6,500 deposit was due immediately. The negotiator refused to put any of those terms in writing. Aceves did not accept the offer. Page 335 On January 9, 2009, Aceves's home was sold at a trustee's sale to U.S. Bank. The bank served Aceves with a three-day notice to vacate and instituted eviction proceedings against Aceves and her husband. Aceves filed suit against U.S. Bank on several legal theories, including promissory estoppel. She asserted that the bank never intended to work with her to reinstate and modify the loan, and that it promised to do so only to persuade Aceves to forego bankruptcy proceedings, so that the bank could proceed to foreclose on her house. U.S. Bank filed a demurrer. After the trial court ruled in favor of U.S. Bank, Aceves appealed. Pallano, Presiding Judge We conclude that Aceves stated a claim for promissory estoppel. The elements of a promissory estoppel claim are (1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) the reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance. 1. Clear and Unambiguous Promise A promise is an indispensable element of the doctrine of promissory estoppel. The promise must be clear and unambiguous in its terms. U.S. Bank agreed to work with Aceves on a mortgage reinstatement and loan modification if she no longer pursued relief in the bankruptcy court. This is a clear and unambiguous promise. It indicates that U.S. Bank would not foreclose on Aceves's home without first engaging in negotiations with her to reinstate and modify the loan on mutually agreeable terms. Aceves's claim rests on whether U.S. Bank engaged in the promised negotiations. The bank either did or did not negotiate. U.S. Bank asserts that it offered Aceves a loan modification, referring to the offer it made the day before the auction. That assertion, however, is of no avail. Aceves's promissory estoppel claim is not based on a promise to make a unilateral offer but on a promise to negotiate in an attempt to reach a mutually agreeable loan modification. And, even assuming this case involved a mere promise to make a unilateral offer, we cannot say the bank's offer satisfied such a promise in light of the offer's terms and the circumstances under which it was made. 2. Reliance on the Promise Aceves relied on U.S. Bank's promise by declining to convert her Chapter 7 bankruptcy proceeding to a Chapter 13 proceeding, by not relying on her husband's financial assistance in developing a Chapter 13 plan, and by not opposing U.S. Bank's motion to lift the bankruptcy stay. 3. Reasonable and Foreseeable Reliance We conclude Aceves reasonably relied on U.S. Bank's promise; U.S. Bank expected her to so rely; and it was foreseeable she would do so. U.S. Bank promised to work with Aceves to reinstate and modifythe loan. That would have been more beneficial to Aceves than the relief she could have obtained under Chapter 13. By promising to work with Aceves to modify the loan in addition to reinstating it, U.S. Bank presented Aceves with a compelling reason to opt for negotiations with the bank instead of seeking bankruptcy relief. 4. Detriment U.S. Bank makes no attempt to hide its disdain for the protections offered homeowners by Chapter 13, referring disparagingly to Aceves's bankruptcy case as \"bad faith.\" But \"Chapter 13's greatest significance for debtors is its use as a weapon to avoid foreclosure on their homes. . . . Loss of homes hurts not only the individual homeowner but also the family, the neighborhood, and the community at large. . . . A Chapter 13 bankruptcy offers the debtor an opportunity to cure a mortgage delinquency over timein essence, it is a statutorily mandated payment plan but one that requires the debtor to pay precisely the amount she would have had to pay the lender outside of bankruptcy.\" DeJarnatt, Once Is Not Enough: Preserving Consumers' Rights to Bankruptcy Protection, Ind. L.J. 455 (Spring 1999). We mention just a few of the rights Aceves sacrificed by deciding to forego a Chapter 13 proceeding. She also had a \"reasonable time\"a maximum of five yearsto make up the arrearages. And, by complying with a bankruptcy plan, Aceves could have prevented U.S. Bank from foreclosing on the property. Aceves should be allowed to pursue [this claim.] Reversed in favor of Aceves on her promissory estoppel claim. Ethics in Action The idea that contracts should be enforced because they are voluntary agreements can obviously be justified on ethical grounds. But what about quasi-contract and promissory estoppel? What ethical justifications can you give for departing from the notion of voluntary agreement in quasi-contract and promissory estoppel cases? Page 336 Problems and Problem Cases 1.Pass took his single-engine Piper airplane to Shelby Aviation for inspection and service. The bulk of Shelby Aviation's business was service-oriented. The invoice prepared by Shelby Aviation refers to the plane being brought in for \"repair\" and \"100-hour inspection.\" In servicing the plane, Shelby Aviation replaced both rear wing attach point brackets. With the cost of labor separated from the cost of the materials, the percentage of the invoice attributable to materials was 37 percent. Subsequently, Pass and his wife left Plant City, Florida, in the plane, bound for Clarksville, Tennessee. Somewhere over Alabama, the couple flew into turbulence. Pass lost control of the plane and it crashed to the ground in Alabama, killing the Passes. The Passes' estates filed a breach of warranty action under the Uniform Commercial Code against Shelby Aviation. They claimed that the rear wing attach point brackets that had been sold and installed by Shelby Aviation were defective because they lacked the bolts necessary to secure them to the plane. According to their complaint, Shelby Aviation employees failed to provide and install the bolts. The complaint further alleged that the missing bolts caused a failure of both wings of the plane to withstand the torque applied to an aircraft during turbulence, leading to Pass's loss of control of the plane and ultimately causing the crash. Shelby Aviation filed a motion to dismiss, arguing that its contract with Pass had been primarily for the sale of services, rather than goods, so that the transaction was not covered by Article 2 of the Uniform Commercial Code. Was Shelby Aviation correct? 2.Clarence Jackson went to the Snack Plus convenience store in Hamden, Connecticut, and bought a Connecticut Lotto \"Quick Pick\" ticket for the drawing of October 13, 1995. On the back of the ticket were various provisions, including the admonition that \"Prize must be claimed within one year from the drawing date. Determination of winners subject to DOSR rules and regulations.\" It also stated instructions for claiming the prize by presentment to any online agent or to \"Lottery Claims\" in Newington, Connecticut. The drawing was held on October 13, and the winning sixnumber combination was announced. One of the six-number combinations on Jackson's Lotto ticket matched the six-number combination drawn in the October 13 drawing, for a prize of $5.8 million dollars. Jackson only learned of the match 15 minutes before the one-year deadline. Instead of claiming his prize online, Jackson waited several more days until after the Columbus Day holiday to present his ticket in person at the Lottery Claims Center because he was under the impression that it had to be presented there. The Connecticut Lottery Corporation (CLC) denied Jackson's claim because the one-year presentment period had elapsed. Did contract law give Jackson the right to claim the prize under these circumstances? 3.Holt worked as a manager for Home Depot from January 1995 to July 1999. Throughout those years, Home Depot assured employees through statements in the employee handbook and other means of communication that if they took advantage of the company's open-door procedure to complain to management about their supervisors, they would not be penalized. In March 1999, Home Depot moved Holt and his family to Connecticut so he could manage a new distribution center in Bloomfield. Soon after he started there, he began to have difficulties and disagreements with his immediate supervisor. In June, he contacted a senior manager regarding his problems with her. On July 3, he called Home Depot's Impact Line to ask that forms be sent to him so he could make a formal complaint. On July 9, Home Depot terminated Holt's employment. Holt sued Home Depot, claiming promissory estoppel. The jury awarded Holt $470,000 in damages. Home Depot challenged the verdict, claiming that the jury could not reasonably find the elements of promissory estoppel. Did Home Depot win? 4.Piece of America (POA) hired Gray Loon Marketing to design and publish its website. Gray Loon finished the site in December 2003 at a final cost of about $8,500. Once the website was running to POA's satisfaction, it paid Gray Loon in full during the first quarter of 2004. In April 2004, POA requested that Gray Loon make several changes, some of which required major programming work. Gray Loon immediately began the requested alterations. Gray Loon subsequently sent POA a bill for $5,224.50. POA's representative stated he did not have any issues with the invoice, but POA needed time to obtain additional funds. During this period, Gray Loon was also charging POA $75 a month for hosting the site. Once Gray Loon published the modified website, it remained available from July to September 2004. Gray Loon filed suit against POA and its principals for nonpayment. Did the UCC apply to this contract? 5.Chow arranged through a travel agent to fly from Indianapolis to Singapore on June 27, 1986. Singapore Airlines gave him a round-trip ticket that included a TWA flight to Los Angeles. Shortly before the trip, Chow's flight was rerouted so that he had to fly to St. Louis first and then to San Francisco. During the St. Louis stopover, the flight developed engine trouble, causing a substantial delay. TWA personnel assured Chow that if he missed his connecting flight, TWA would arrange for him to take the next Singapore flight out of San Francisco. After the engine problem was fixed, TWA delayed the flight's departure an additional two hours to board additional passengers. Chow was again assured that if he missed his scheduled flight, TWA would make arrangements for him. Chow missed his Singapore flight by minutes, and was housed overnight at TWA's expense in San Francisco after once more being assured that TWA would make arrangements to get him on the next Singapore flight. When he called Singapore Airlines the next morning to see whether TWA had made him a reservation, Chow was told that no arrangements had been made. When he contacted TWA, he was told that TWA would make the arrangements immediately. After waiting several hours, Chow learned that TWA still had not made the arrangements. He also was told that TWA could no longer help him. Because Singapore Airlines no longer had economy class seats available, Chow had to buy a business class seat at an additional cost of $928. When he filed suit against TWA for that amount, TWA argued that the Conditions of Contract printed on Chow's ticket disclaimed any liability for failure to make connections. Did Chow have a valid claim against TWA? 6.Houston repeatedly promised his daughter, Allyson, that he would pay one-half of the costs for Allyson to attend a private, historically AfricanAmerican college or university. Relying on this promise, Allyson applied to and was accepted into Clark Atlanta University. Houston reiterated this promise after Allyson's acceptance and specifically agreed to pay one-half of the costs of her tuition, room, board, books, and other expenses at Clark (less certain scholarship, work study, and grant monies). Allyson relied on this reiterated promise and, forgoing opportunities to apply to and enroll in other colleges or universities of significantly less cost, enrolled in Clark. Houston nevertheless refused to honor his commitment. Allyson sued her father alleging promissory estoppel. Did she have a good promissory estoppel claim? 7.Hanson Staple Co. and Ole Mexican Foods entered into a contract for the sale of specially manufactured packaging from Hanson to Ole. Hanson then received an e-mail from Ole canceling its purchase order. Alleging that Ole had failed to purchase more than $300,000 worth of the specially manufactured packaging Hanson had produced, Hanson sued Ole for breach of contract. Hanson claimed that because the packaging was customized for Ole, it was not suitable for resale to anyone else. Ole counter-claimed, contending that Hanson had breached the contract by shipping a defective product. Later, Hanson executives and Ole executives negotiated a handwritten \"agreement reached in settlement.\" This agreement provided in part that Ole would \"purchase a minimum of $130,000 worth of current inventory\" from Hanson and that Ole would \"test the remainder of the inventory and . . . purchase additional inventory if it meets quality expectations.\" Hanson filed a motion to enforce the settlement agreement, alleging that Ole had refused to perform. The Georgia trial court ordered Ole to purchase the inventory alluded to in the settlement agreement and held that the purchases would be governed by the Uniform Commercial Code. The court also stated that Ole retained the right to reject the inventory under the UCC if the inventory did not meet the standards of UCC warranties. Hanson appealed to Georgia's intermediate court of appeals. That court reversed after concluding that the trial court erred in applying the UCC to the parties' settlement agreement. Ole appealed to the Supreme Court of Georgia. How did the Supreme Court rule? Was the trial court correct in concluding that the UCC controlled the settlement agreement, or was the intermediate appellate court correct in concluding that the UCC did not apply? 8.On March 21, 2003, Robert Palese bought five Delaware State Lottery tickets from a Delaware liquor store. To select his numbers for the game, Palese used a \"play slip\" that contained five game panels. Each panel had a selection grid bearing numbers 1 through 38. Palese chose six numbers from each grid by manually filling in the grids. After purchasing the tickets, Palese placed them in his pants pocket and returned home. Several days later, he learned that someone had won the March 21 lottery but that the winner had not yet come forward. Palese searched for his tickets to see whether he had chosen the winning numbers, but he was unable to find the tickets. Eventually, he remembered that he had done laundry the same evening he purchased the tickets. He then concluded that the tickets, which had been left in his pants pocket, had probably been destroyed in the wash. Although the tickets were gone, Palese still had the play slip he used when he purchased the tickets. He checked the numbers on the play slip and discovered that the numbers he selected on the play slip's fifth game panel were the winning numbers for the March 21 lottery. Reasoning that the play slip should be sufficient to satisfy the state's Lottery Office that he had selected the winning numbers, Palese informed the office of his predicament. The Lottery Office ultimately took the position that the state's lottery regulations and any contract arising from the purchase of the ticket required that the winning ticket itself be produced in order for the winner to claim the jackpot. Therefore, the Lottery Office denied Palese's claim and transferred the jackpot to the state's General Fund. Palese then sued the Lottery Office on a quasi-contract (unjust enrichment) theory. Did Palese win the case and collect the jackpot amount? Page 338 9.Stephen Gall and his family became ill after drinking contaminated water supplied to their home by the McKeesport Municipal Water Authority. They filed suit against the utility, arguing, among other things, that the utility had breached the UCC implied warranty of merchantability when it sold them contaminated water. Arguing that water was not \"goods\" and that the UCC therefore should not apply, the utility moved to dismiss the Galls' complaint. How did the court rule? 10.In 1994, Schumacher and his wife and their two daughters moved to Finland, Minnesota, to operate a bar and restaurant called the Trestle Inn, which was owned by his parents. Schumacher claimed that his parents induced him to leave his previous job and to make the move by orally agreeing to (1) provide him a job managing the inn for life and (2) leave the business and a large parcel of land to him when his first parent died. Schumacher was given free reign in managing the inn and was allowed to retain all profits of the business, but was not given any salary or wage. While he was operating the inn, Schumacher used his own funds to build a home for his family on his parents' land, install a well, buy equipment for the business, and develop various marketing tools for the business. In 1998, Schumacher suspected that his parents were about to sell the inn and the adjoining property. He brought suit for a restraining order to prevent them from doing so, claiming breach of contract and unjust enrichment, among other claims. In October 1998, the parents notified Schumacher that his employment at the inn and his right to possess the adjoining property were terminated. The parents moved for summary judgment. The trial court held that Schumacher's oral contract claim was invalid because the contract needed to be in writing under applicable Minnesota law. However, did Schumacher have a valid claim for unjust enrichment? Despite the Code's almost national adoption, however, complete uniformity has not been achieved. Many states have varied or amended the Code's language in specific instances, and some Code provisions were drafted in alternative ways, giving the states more than one version of particular Code provisions to choose from. Also, the various state courts have reached different conclusions about the meaning of particular Code sections. 1 2 Arbitration is discussed in more detail in Chapter 2. 3 Chapter 15 discusses unconscionability in detail. 4 See Chapter 1 for a general discussion of the Restatement phenomenon. Speidel, \"Restatement Second: Omitted Terms and Contract Method,\" 67 Cornell L. Rev. 785, 786 (1982). 5 6 Restatement (Second) of Contracts 205 (1981). 7 Restatement (Second) of Contracts 208 (1981). 8 57 Neb. 51, 77 N.W. 365 (1898)