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Ray v. William G. Eurice & Bros, Inc., 93 A. 2d 272 (1952)

Case Name: Ray v. William G. Eurice & Bros, Inc.
Plaintiff: Calvin T. Ray and Katherine S. J. Ray
Defendant: William G. Eurice & Bros, Inc.
Citation: Maryland Court of Appeals; 201 Md. 115, 93 A. 2d 272 (1952)

 

Key Facts: Ray selected William G. Eurice & Bros, Inc. as the builder of a new home on a vacant lot owned by the plaintiff. Multiple meetings occurred between the plaintiff and the defendant in which they reviewed and edited the plans to build the home. A contract was submitted by the defendant to the plaintiff; however, the plaintiff did not accept this contract and had his attorney create a new contract. This new contract was submitted to the defendant and was signed by the defendant in the presence of the plaintiff. Copies of the new contract were also signed by the defendant at the bank which was providing the loan to the plaintiff for the home. Once construction was to begin on the home, the defendant claimed to have never seen the plaintiff’s contract and would not proceed in building the house with the specifications in the current contract.

Procedural History: The plaintiff brought an action against the defendant, in the Circuit Court for Baltimore County, for a complete breach of a written contract to build a house. The Circuit Court ruled in favor of the defendant and the plaintiffs appealed.

Issue: Whether a breach of contract exists if one party did not intend to agree to the contract yet signed the contract and had ample opportunity and ability to understand the contract.

Holding: The Maryland Court of Appeals found that the defendant did breach the written contract.

Reasoning: The Court believed that Eurice had the capacity to understand the written contract because of his experience in building homes. Ray was not a home builder but had extreme attention to detail due to his background as an aeronautical engineer. Therefore, there was no type of fraud or duress or unfair bargaining power. Furthermore, no mutual mistake can be proven for although Eurice may not have intended to agree to the specifications, his signature (on multiple copies of the same contract) shows that he had ample opportunity to read and understand what he was agreeing to.

Judgment: The court awarded the plaintiff the cost in excess of the contract price that would be incurred by the owner in have the home built; the sum o f$5,993.40.

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Quake Construction, Inc. v. American Airlines, Inc., 141 Ill. 2d 281 (1990)

Case Name: Quake Construction, Inc. v. American Airlines, Inc.
Plaintiff: Quake Construction, Inc.
Defendant: American Airlines, Inc. and Jones Brothers Construction Corporation
Citation: 141 Ill.2d 281 (1990)


Issue: Whether the letter of intent from the defendant is an enforceable contract.

Key Facts: The defendant received an invitation to bid on a project and submitted a bid to the defendant. The defendant notified the plaintiff that it had been awarded the contract for the project and asked for the license numbers of the subcontractors it intended to use. The plaintiff told the defendant that he could not use the license numbers until he received a signed subcontract agreement. The defendant informed Quake that he would shortly receive a written contract but to induce Quake to enter into agreements with its subcontractors, Jones sent Quake a letter of intent. At a preconstruction meeting, Jones told Quake, the subcontractors, and government officials that Quake was the GC for the project. Immediately following the meeting, American Airlines informed Quake that their involvement was terminated.

 Procedural History: The trial court granted the defendant’s motion to dismiss but the Court of Appeals reversed the decision.

Holding: The letter of intent may be regarded as a contract in its own right: a contract to engage in negotiations. The letter of intent was ambiguous to the parties’ intent to be bound.

Judgment: The court remanded it back to the trial court to review more evidence, in addition to the LOI, on the parties’ intent.

Rule: The fact that parties contemplate that a formal agreement will eventually be executed does not necessarily render prior agreements mere negotiations, where it is clear that the ultimate contract will be substantially based upon the same terms as the previous document. (Common Law)

 

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Normile v. Miller, 326 S.E.2d 11 (1985)

Case Name: Normile v Miller
Plaintiffs: Normile and Kurniawan
Defendant: Hazel Miller
Citation: 313 N.C. 98, 326 S.E.2d 11 (1985)


Key Facts:

Defendant listed real estate for sale with a local realtor. On the same day, a real estate broker, Richard Byer, showed the property to the plaintiffs who were prospective purchasers. Byer helped plaintiffs prepare a written offer to purchase the property. The offer was countered with various terms of the original offer amended. The plaintiff did not immediately accept or reject the offer and did not like all of the terms described in the counteroffer. Byer testified that Normile did not have $500 for earnest money deposit, which was one of the requirements of the defendant’s counteroffer, and thought that the plaintiff had rejected the counteroffer. The following day, plaintiff Segal signed an offer to purchase with terms very similar to those contained in defendant’s counteroffer to plaintiff Normile and Kurniawan. This offer was accepted by defendant (through the same agent), without any changes. Later that same day, the defendant revoked her counteroffer to plaintiff as the agent commented, “You snooze, you lose; the property has been sold.” Prior to the end of that same day, plaintiffs Normile and Kurniawan initialed the offer to purchase form containing defendant’s counteroffer and delivered the form to the defendant’s realtor, along with the earnest money deposit of $500.

Procedural History:
Plantiffs Normile and Kurniawan appealed to the Court of Appeals after the trial court denied their motion for summary judgment. The Court of Appeals unanimously affirmed the trial court and plaintiffs appealed to the Supreme Court of North Carolina.

Separate actions were filed by plaintiff-appellants and appellee seeking specific performance. Plaintiff Segal (the third party purchaser) was granted a motion for consolidation of trials. Plaintiff Segal was awarded summary judgment by the trial court and the defendant was ordered to perform the contract to convey the property to Segal.

Issue:
If a seller rejects a prospective purchaser’s offer to purchase but makes a counteroffer that is not accepted by the prospective purchaser, does the prospective purchaser have the power to accept after he receives notice that the counteroffer has been revoked?

Holding:
No, the prospective purchaser does not have the power to accept a counteroffer after he receives notice that the counteroffer has been revoked.

Reasoning:

There was no “meeting of the minds” between plaintiff-appellants and defendant since the parties failed to assent to the same thing in the same sense. The defendant’s counteroffer did not manifest any intent to accept the terms of the original offer, unless and until the original offeror accepted the terms of the defendant’s counteroffer.  A “qualified acceptance” constitutes a counter-offer and has the same effect as a rejection.

Nowhere in the counteroffer is there language to the effect that Defendant Miller “agrees to sell to the purchasers” if they accept by a certain date (no option contract). Also, the time-for-acceptance provision from the plaintiff-appellants’ original offer did not become part of the terms of the counter-offer. Therefore, the court concluded that the defendant made no promise or agreement to hold her offer open and was able to accept the third party’s offer.

 

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Lonergan v Scolnick, 276 P.2d 8 (1954)

Case Name: Lonergan v Scolnick
Plaintiff: Lonergan
Defendant: Scolnick
Citation: California District Court of Appeal; 129 Cal. App. 2d 179, 276 P.2d 8 (1954)


Key Facts: Correspondence was sent and received between the plaintiff and defendant regarding a property that defendant was selling and plaintiff was interested in purchasing. Plaintiff wrote to the defendant what of his “rock bottom price of $2,500 cash” and where the property could be found while stating that “This is a form letter.” Defendant expressed interest in the property and recommended the use of an escrow agent. Plaintiff wrote that the escrow agent would be “O.K.” but that the plaintiff would have to decide fast because he anticipated selling the property with the next week or so. The defendant sold the property to a third party for $2,500 five days before the plaintiff opened an escrow account.

Procedural History: It was found that the plaintiff and defendant did not enter into a contract and that the defendant is entitled to judgment against the plaintiff. The trial court held that the plaintiff could not recover because he did not make a timely acceptance, not because the defendant didn’t make an offer. The plaintiff appealed to the higher court.

Issue: Does written communication between a buyer and a seller of final price, description of the property, and logistics of payment constitute an offer?

Holding: The lower court’s judgment was affirmed.

Reasoning: There can be no contract unless the minds of the parties have met and mutually agreed upon some specific thing. Based on the correspondence, the court found it evident that the negotiations between the defendant and the plaintiff were purely preliminary and that no offer was ever made by the defendant. The correspondence indicated that that defendant was trying to discover if the plaintiff was interested and did not intend to make a definite offer to the plaintiff. From the final letter from the defendant, it shows that he expected to have a buyer in the next week or so and that the defendant intended to sell to the first-comer, and was reserving the right to do so.

In accordance with Section 25 of the Restatement of the Law on Contracts:
“If from a promise,…the person to whom the promise is addressed knows or has reason to know that the person making it does not intend it as an expression of his fixed purpose until he has given a further expression of assent, he has not made an offer.”

Judgment: The defendant is entitled to judgment against the plaintiff.

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Pop’s Cones, Inc. v. Resorts International Hotel, Inc., 307 N.J. Super. 461 (1998)

Case Name: Pop’s Cones, Inc. v. Resorts International Hotel, Inc.
Plaintiff/Appellant: Pop’s Cones, Inc. (TCBY franchise)
Defendant/Appellee: Resorts International Hotel, Inc.
Citation: 307 N.J. Super. 461 (1998)


Issue: Whether a prima facie case of promissory estoppels existed when the plaintiff relied to its detriment on the promises of defendant that plaintiff would be permitted to relocate its operation to defendant’s location. More specifically, whether the court should require a “clear and definite promise” or just a promise that a reasonable person would rely on it.

Key Facts: Plaintiff, a TCBY franchisee had a number of discussions with Phoenix the executive director of business development and sales for the defendant about relocating the plaintiff’s business to a space owned by the defendant. The plaintiff also received a proposed form of lease from the defendant’s counsel. Based off these discussions, the plaintiff did not renew its current lease, placed its equipment into temporary storage, retained the services of an attorney to finalize the lease with the defendant, and engaged in planning the relocation to defendant’s property. Furthermore, the plaintiff was not able to reopen its store until July 1996 but did not seek speculative lost profits because the lease had not been fully negotiated.

Procedural History: The lower court granted the defendant summary judgment and dismissed the plaintiff’s complaint.

Holding: Based off the allegations of the plaintiff a prima facie case of promissory estoppel existed. This court relaxed the requirement for a clear and definite promise. The case was remanded so that a jury can decide whether the plaintiff’s reliance upon the defendant’s assurances was reasonable.

Reasoning: Plaintiff was not seeking enforcement of the lease nor speculative lost profits had the lease been successfully negotiated. The plaintiff merely seeks to recoup damages it incurred in reasonably relying to its detriment upon the defendant’s promise. When you afford the plaintiff all favorable inferences, the claim raised a jury question and therefore should not have been summarily dismissed.

A promissory estoppel claim will be justified if the plaintiff satisfies its burden of demonstrating the existence of, or for purposes of summary judgment, a dispute as to a material fact with regard to, four separate elements which include:

(1) a clear and definite promise by the promisor;
(2) the promise must be made with the expectation that the promisee will rely thereon (the promisor did or should have foresaw);
(3) the promisee must in fact reasonably rely on the promise, and
(4) detriment of a definite and substantial nature must be incurred in reliance on the promise.

The promise is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

Judgment: Reversed summary judgment and remanded for further proceedings.

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Drennan v. Star Paving Co., 333 P.2d 757 (1958)

Case Name: Drennan v. Star Paving Co.
Plaintiff/Appellant: Drennan (General Contractor)
Defendant/Appellee: Star Paving Co. (Subcontrator)
Citation: 51 Cal. 2d 409, 333 P.2d 757 (1958)

Issue: Whether plaintiff’s reliance on the defendant’s subcontracting bid made the defendant’s offer irrevocable.

Key Facts: The plaintiff, a general contractor, was receiving bids from subcontractors in order to bid on the Monte Vista School Job. The defendant, a subcontractor, contacted the plaintiff by phone and submitted a bid for the paving work for $7,131.60 which was the lowest bid the plaintiff received for this job. The plaintiff won the contract and promptly informed the defendant in person. The defendant then told the plaintiff that they had made a mistake and would not be able to do the paving work for less than $15,000. Plaintiff then had to engage another paving company to do the work for $10,948.60.

Procedural History: The plaintiff won a judgment to recover damages caused by defendant’s refusal to perform the paving work according to its original bid. Defendant appealed.

Holding: The defendant’s offer was irrevocable.

Reasoning: The defendant had reason to expect that if its bid proved the lowest it would be used by the plaintiff and it induced “action…of a definite and substantial character on the part of the promisee. Merely acting in justifiable reliance on an offer may in some cases serve as sufficient reason for making a promise binding (Restatement (First) 90). The purpose of this section is to make a promise binding even though there was no consideration “in the sense of something that is bargained for and given in exchange.”

Defendant had reason not only to expect plaintiff to rely on its bid but to want him to. Also, the mistake made by the defendant was not apparent to the plaintiff. The general contractor’s actions were reasonable because he was following the general practices of the industry. The subcontractor made the mistake originally and had superior knowledge of paving work.

Note: Justice Traynor is associated with more modern approach of interpretation of contracts.

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Cook v. Coldwell Banker, Frank Laiben Realty Co., 967 S.W.2d 654 (1998)

Case Name: Cook v. Coldwell Banker/Frank Laiben Realty Co.
Plaintiff/Appellee: Mary Ellen Cook
Defendant/Appellant: Coldwell Banker/Frank Laiben Realty Co.
Citation: 967 S.W.2d 654 (1998); Missouri Court of Appeals


Issue: Under unilateral contract theory, did the defendant breach a contract when he revoked an offer that was already substantially performed on by the plaintiff?

Key Facts: At a meeting in March 1991, the defendant announced a bonus program with three levels of payouts, the first of which would be paid out immediately while the second two would be paid out at the end of the year. The year of the program would be January 1, 1991 to December 31, 1991. At the end of April, 1991, plaintiff met the first level and received her first bonus in September, 1991. In September, 1991 plaintiff surpassed had met the highest level of commissions and was told at a meeting in that month that the bonuses would not be paid out until March of the following year. Plaintiff was also told that she would have to be employed with the defendant in March to receive the bonus. Plaintiff accepts another job in January, 1992 and sought payment of her bonus in March, 1992.

Procedural History: In December, 1992 the plaintiff filed an action against defendant for breach of a bonus contract and sought damages. The jury found in favor of the plaintiff and awarded her damages in the amount of $24,748.89. The defendant appealed.

Holding: The plaintiff showed evidence that the defendant offered to pay a bonus at the end of 1991 if she would continue to work for it. The plaintiff stayed through 1991 with an intent to accept the offer. In addition, she sold and listed enough property to qualify for all three bonus levels. The defendant knew of the plaintiff’s performance but only paid the first bonus. Therefore, the defendant breached a unilateral contract.

Reasoning: This contract was determined to be unilateral because performance was based on the wish of the parties. In a unilateral contract, when a promise performs, the contract is enforceable to the extent performed.

Judgment: The Missouri Court of Appeals affirmed the trial court’s judgment and the awarded damages.

The meeting in September represented a revocation of the initial offer.

The Restatement approach (modern rule) the offeree has to show substantial performance. The court should have said substantially begun performance. Instead of just doing nothing or preparing to perform.

Under the modern rule, the offeree has still not made a promise if he decides to back out of the contract after performing half of it.

Tender of performance – the statement of intent and the present ability to perform. Once a tender of performance has been made, the offeror can no longer evoke the offer.

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Batsakis v. Demotsis, 226 S.W.2d 673

Issue: Was the contract invalid due to lack of consideration?

Facts: The parties entered into a contract when they were residents of Greece. Through the contract the plaintiff lent the defendant $25 (in drachmae) and the defendant was to repay the plaintiff $2,000 plus interest. The plaintiff sued the defendant to recover amount. The defendant said there was no consideration because the deal was unfair and she could only receive the money if she would sign that she would pay him $2,000 American money.

Holding: Consideration existed in the form of the drachmae (plaintiff won).

Reasoning: For consideration we do not care about the adequacy or the disparity in differences.

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Disclaimer of Warranties

Disclaimers of Warranties (Section 316 of the Uniform Commercial Code).

Express Warranty

Express warranties are inoperative if the disclaimer cannot be construed as “consistent” with terms in the contract that would create the express warranty. You should the parol evidence to bar any express warranties that were created outside the document:

  • If it is an integrated agreement, then no warranties outside of the agreement are actually enforceable (parol evidence)
  • If it is not an integrated agreement, Apply Article 2, 316:
    • A disclaimer is only ineffective if it conflicts with the warranty
    • Therefore, you can have a disclaimer that limits the warranty but does not conflict it

Implied warranty of merchantability

Can also be disclaimed; however, the disclaimer  has to mention merchantability. Furthermore, if it is in writing, the disclaimer has to be conspicuous (the disclaimer can be oral). In order to disclaim the implied warranty of mechantability, the disclaimer:

  • Cannot just state “all warranties are disclaimed”
  • Does not have to be in writing but must mention warranty of merchantability

Implied warranty of fitness for a particular purpose

Can also be disclaimed; but, the disclaimer must be in writing and must be conspicuous. The written disclaimer does not have to mention fitness. This implied warranty does not require a conspicuousness requirement, but most courts agree that one should be implied to carry out the section’s purpose of avoiding surprise to buyers.

Finally, it is important to note that an “As is” magically disclaims all warranties.

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Express Warranties

Contract law has express warranties and implied warranties. Express Warranty is found in Section 313 of the Uniform Commercial Code. An express warranty is created as follows:

  1. Any affirmation of fact or promise by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise
  2. Any description of the goods which is made a part of the basis of the bargain creates an express warranty that the goods shall conform to the description

To make it easier, you can just remember three elements that are needed to create an express warranty:

  1. Statement regarding quality or description
  1. Fact, promise, or description
  1. Basis of the bargain

 

See also: Disclaimer of Warranties