CORBIN ON CONTRACTS, Vol. 1, Rel. 20S2

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2  See, e.g., Patrick S. Atiyah, Promises, Morals and Law (1981); Grant Gilmore, The Death of Contract (1974).

3  Lon L. Fuller and William R. Perdue, The Reliance Interest in Contract Damages: 1, 46 Yale L.J. 52, 59–62 (1936).

4  Discussed in Vol. 9, Ch. 49.

5  Discussed in Vol. 11, Ch. 55.

6  See, e.g., Adams v. Waddell, 543 P.2d 215 (Alaska 1975).

7  Brown Brothers Electr. Contractors, Inc. v. Beam Constr. Co., 41 N.Y.2d 397, 393 N.Y.S.2d 350, 361 N.E.2d 999 (1977).

8  Darner Motor Sales, Inc. v. Universal Underwriters Ins. Co., 140 Ariz. 383, 682 P.2d 388 (1984); C & J Fertilizer, Inc. v. Allied Mutual Ins. Co., 227 N.W.2d 169 (Iowa 1975); Estrin Constr. Co., Inc. v. Aetna Cas. & Sur. Co., 612 S.W.2d 413 (Mo. App. 1981).

9  Tantleff v. Truscelli, 110 A.D.2d 240, 493 N.Y.S.2d 979 (2d Dept.1985), aff’d, 69 N.Y.2d 769, 513 N.Y.S.2d 113, 505 N.E.2d 623.

1  See Raoul Berger, From Hostage to Contract, 35 Ill. L. Rev. 154 (1940).

2  See Wesley N. Hohfeld, Fundamental Legal Conceptions as Applied in Judicial Reasoning (1919) and Arthur L. Corbin’s Foreword to the 1964 and later reprints of Hohfeld’s work.

3  “Contracts are private, voluntary allocations by which two or more parties distribute specific entitlements and obligations.” Johnson v. Scandia Assocs., 717 N.E.2d 24, 29 (Ind. 1999) (citing §§ 1.2 and 1.3, 1993 ed.). “A contract expresses the legal relationship between parties manifested by their assent and which organized society recognizes as giving remedies to the holder of a right against the bearer of a legal obligation.” New Welton Homes v. Eckman, 830 N.E.2d 32, 34–35 (Ind. 2005) (citing §§ 1.2 and 1.3, 1993 ed.).

1  Compare the following definitions. “The most popular description of a contract that can be given is also the most exact one; namely, that it is a promise or set of promises which the law will enforce. The specific mark of a contract is the creation of a right, not to a thing, but to another man’s conduct in the future.” “Every agreement and promise enforceable by law is a contract.” Gustavus A. Wald’s Pollock, Contracts (3d Ed.) pp. 1, 2.

2  The uncertainties of language (especially of legal terms) and the illusion that words have an “objective” meaning all their own, independent of any person who uses them to express his thoughts, are most obvious and most damaging in the field of “interpretation” of contracts. Far more dispute and litigation are concerned with “interpretation” than with any other subject of contract law; and the degree of uniformity in judicial results is probably the lowest.

3  Baehr v. Penn-O-Tex Oil Corp., 258 Minn. 533, 104 N.W.2d 661 (1960) (citing this section from a prior edition of this treatise).

4  Definitions substantially like this are very commonly stated in judicial opinions.

5  For an elegant demonstration that one kind of contractual liability is not dependent on promise, see Randy Barnett, Squaring Undisclosed Agency Law with Contract Theory, 75 Cal. L. Rev. 1969 (1987). For another illustration, see the final paragraph of § 2.31 of this treatise.

6  Learned Hand, Foreword to Samuel Williston, Life and Law: An Autobiography, at viii (1940).

7  U.C.C. § 1-201(b)(12).

8  U.C.C. § 1-201(b)(3).

9  Ian R. Macneil, The New Social Contract 4 (1980). Macneil’s definition in full is that contract means “the relations among parties to the process of projecting exchange into the future.” This definition does indicate the important role of contract as an instrument for planning future action. The point in the text is that contract also affects past actions; e.g., conveyances already made.

10  To recognize this role is not to deify it. The primary goal of contract law is to effectuate the parties’ expectations. See § 1.1. In recognizing the role of the law in contract, this treatise does not participate in any political effort to undercut the primacy of the parties’ voluntary undertakings. See Steven J. Burton & Eric G. Andersen, The World of a Contract, 75 Iowa L. Rev. 861 (1990).

11  For a great exploration of these issues, see Morris v. St. John Nat’l Bank (In re Haberman), 516 F.3d 1207 (10th Cir. 2008). To secure a bank loan, debtors granted the bank a security interest in their Pontiac TransAm. The value of the TransAm, however, was less than the amount of the loan. A year later, the debtors filed for Chapter 7 Bankruptcy and claimed the TransAm as exempt from the bankruptcy estate. The Trustee discovered that the bank failed to perfect its security interest in the TransAm, and seeking to protect the bankruptcy estate’s interest, filed an adversary action against the bank and the debtors to avoid the security interest. At the conclusion of the adversary proceeding, the bankruptcy court determined that the Trustee was entitled to avoid the bank’s lien, but the question arose whether the Trustee should recoup from the bank the value of the lien itself as of the date of the debtors’ bankruptcy filing or the full amount of the loan as of the same date? The bankruptcy court held that a Trustee who avoids a lien takes for the bankruptcy estate only the value of the lien itself rather than the full amount of the loan. On appeal, the court cited § 1.3, 1993 ed., of this treatise and noted that “a fully effective exchange … without including any enforceable promise [of future performance] by either party creates numerous legal relations [that] are customarily described as property relations and not as contractual relations. This is because there are relations not merely between the new parties themselves, but between … all … persons who as a society recognize the transfer of a property interest.” The person-to-person contractual right embodied in a promise to pay some amount in the future is thus distinct and independent from the present property right created and recognized by society when one is given an interest in such property such as a lien. The court noted that other circuits have held that, while the benefit of an avoided security interest belonged to the estate under 11 U.S.C.S. § 551, the bank whose lien was avoided nonetheless retained its interest in a contract with the debtor—even though that contract, in the form of a subordination agreement, was part of the same transaction and ancillary to the avoided security interest. Further citing this § 1.3, the court explained that %E2%80%9Ctransfers of land or chattels, may be accompanied by contractual duties as part of the same transaction. … There is both a contract and a conveyance [or transfer].” The court noted that the debtor’s contractual promise to make future loan payments to the bank was neither a lien nor any other transfer of an interest in property. Indeed, had the debtors defaulted on their loan prior to bankruptcy, the only property the bank could have claimed, assuming a perfected security interest, was the TransAm, and then only up to the value of the loan. Given that the TransAm happened to be worth less than the loan balance, the bank would have been left with a mere unsecured contractual promise for the difference. While Congress provided in Section 551 that the Trustee may take from the estate the value of the bank’s security interest in the TransAm, the power to take “liens” and “transfers” does not also embrace a right to deprive the bank of a separate contractual right to be repaid for its debt above and beyond the value of the security interest. The court determined that the Trustee was mistaken when he asserted that he became the creditor upon avoidance and ascended to all the rights thereof. Instead, he received only the bundle of rights given him by Congress in the Bankruptcy Code. Thus, a bankruptcy trustee who successfully avoids a lien preserves for the bankruptcy estate the value of the avoided lien but does not automatically assume other rights the original lien holder may have had against the debtors.

1  For example the Hague Convention for the Pacific Settlement of International Disputes of 1899 invited certain non-signatory States to adhere to it and “[f]or this purpose must make known their adhesion to the Contracting Powers by a written notification addressed to the Netherlands Government and communicated by it to all other Contracting Parties.” This and similar treaties are quoted in 5 Green H. Hackworth, Digest of International Law 79 (1943). A State Department critic of the term, wrote in a memorandum, “Adhesion smacks of the gum-bottle.” Id. at 75.

2  Since there is no possibility of negotiating, and since human experience counsels that the legal risk of using popular websites to procure goods or services is largely non-existent, there is no incentive to even read the terms that govern the sites. United States Supreme Court Justice John Roberts “admitted he doesn’t usually read the computer jargon that is a condition of accessing websites … .” Debra Cassens Weiss, Chief Justice Roberts Admits He Doesn’t Read the Computer Fine Print, ABA Journal (10/20/2009), http://www.abajournal.com/news/article/chief_justice_roberts_admits_he_doesnt_read_the_computer_fine_print/ (last visited May 7, 2018). Some thorny issues regarding on-line contracting are explored in § 2.12.

3  Arthur Leff, Contract as a Thing, 19 Am. L. Rev. 131, 143 (1970).

4  See Sharon Steel Corp. v. Chase Manhattan Bank, N.A., 691 F.2d 1039 (2d Cir. 1982).

5  Judge Frank Easterbrook openly wondered: “But what’s wrong with a contract of adhesion anyway?” United States v. Hare, 269 F.3d 859, 862 (7th Cir. 2001).

6  See Higgins vs. The Superior Court of Los Angeles County, 140 Cal. App. 4th 1238, 45 Cal. Rptr. 3d 293 (2006). The parents of five siblings died in 2004, and they were taken in by church acquaintances, the Leomiti family. The defendants approached the Leomitis about featuring the siblings in the realty-based television show called “Extreme Makeover,” which is designed to find needy and deserving families who live in a home that does not serve their needs. The program radically improves the home by demolishing and rebuilding it. The siblings entered into contracts with the television defendants containing an arbitration provision. Following the production and airing of the television program, the Leomitis informed the siblings that the home belonged to the Leomitis, and the Leomitis ultimately forced the siblings to leave. The television defendants advised the siblings that they could not help them. The siblings filed an action against the television defendants and the Leomitis based on, among other things, misrepresentation and breach of contract. The television defendants petitioned to compel arbitration, but the court held that the arbitration provision was unconscionable. The court explained that a contract of adhesion is a standardized contract imposed and drafted by the party of superior bargaining strength and gives the other party only the opportunity to adhere to the contract or reject it. Citing this treatise, § 1.4, 1993 ed., the court explained that adhesion contracts are routine in modern day commerce, and that they are worthy of neither praise nor condemnation. Though the siblings read the contract, the court found the arbitration provision to be procedurally unconscionable. The provision appeared in one paragraph near the end of a lengthy, single-spaced document. The entire document was drafted by the television defendants, who knew that the siblings were young and unsophisticated and had recently lost both parents. The television defendants made no effort to highlight the presence of the arbitration provision. It was one of twelve paragraphs in a section entitled “Miscellaneous.” Unlike other provisions in the contract, no text in the arbitration provision was conspicuously printed. The court also found that the provision was substantively unconscionable, that is, unfairly one-sided. The arbitration provision required only that the siblings submit their claims to arbitration. It allowed the television defendants the right to seek injunctive or other equitable relief in court. Only the siblings were barred from seeking appellate review of the arbitrator’s decision, and costs were to be borne equally by both parties. The arbitration provision was deemed to be unconscionable and, therefore, unenforceable.

7  See, e.g., the cross-collateral clause in Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (D.C. Cir. 1965). The proposed contract was adhered to by a single welfare-mother.

8  See Carl Felsenfeld and Alan Siegel, Writing Contracts in Plain English (1981).

9  Eric Zacks, Contracting Blame, 15 U. Pa. J. Bus. L. 169 (2012).

10  See Friedrich Kessler, Contracts of Adhesion-Some Thoughts About Freedom of Contract, 43 Colum. L. Rev. 629, 631–632 (1943).

1  An example of a recognizance in a criminal case is to be found in State of Maine v. Chandler, 79 Me. 172, 8 A. 553 (1887). The court said: “It is an obligation of record founded upon contract, and entered into by the recognizors upon certain conditions, upon the breach of which the recognizance became forfeited, and an absolute debt of record, in the nature of a judgment, was created, and upon which scire facias properly lies for the recovery of the forfeiture.”

2  See 18 U.S.C.A. § 3142(b).

3  Concerning recognizances the Restatement of Contracts (Second) § 6 cmt. c (Am. Law Inst. 1981), states: “A recognizance is an acknowledgment in court by the recognizor that he is bound to make a certain payment unless a specified condition is performed. They are in use chiefly to secure, first, the attendance in court at a future day of the recognizor, or, second, the prosecution of an action, or, third, the payment of bail.” A bail bond is not ordinarily a recognizance. State v. McGuire, 42 Minn. 27, 43 N.W. 687 (1889); People v. Barrett, 202 Ill. 287, 67 N.E. 23 (1903). A recognizance entered into by an infant has been held to be enforceable. State v. Weatherwax, 12 Kan. 463 (1874). There is a definition of recognizance in Miller v. Cross, 73 Conn. 538, 540, 48 A. 213, 214 (1901).

1  “It was resolved that in all cases when the deed is voidable, and so remains at the time of the pleading (as if an infant seals and delivers a deed, or a man of full age by duress) in these and the like cases, the obligor cannot plead non est factum, for it is his deed at the time of the action brought.%E2%80%9D Whelpdale’s Case (1605) 5 Coke, 119a.

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4  Both parties might be infants. See Hurwitz v. Barr, 193 A.2d 360 (D.C. App. 1963) (sale of motor scooter). Absent such an independent ground for avoidance, only the protected party may disaffirm. Taylor Distributing Co., Inc. v. Haines, 31 Wash. App. 360, 641 P.2d 1204 (1982).

5  The Restatement of Contracts (Second) § 7 (Am. Law Inst. 1981) provides: “A voidable contract is one where one or more parties thereto have the power, by a manifestation of election to do so, to avoid the legal relations created by the contract; or by ratification of the contract to extinguish the power of avoidance.”

6  This treatise deals with duress in § 28.2 to § 28.8; undue influence in § 28.9 to § 28.12; misrepresentation and non-disclosure in § 28.13 to § 28.25; mistake in § 28.26 to § 28.54; and unconscionability in § 29.1 to § 29.7, as well as various other sections, such as the chapters dealing with arbitration agreements.

7  Restatement (Second) of Contracts § 85 (1981) (Am. Law Inst. 1981).

8  See Gurfein v. Werbelovsky, 97 Conn. 703, 118 A. 32 (1922).

9  See Residential Capital, LLC v. Premier Trust Deed Servs., Inc., 2003 Cal. App. Unpub. LEXIS 4729 (Cal. Ct. App. 2003). The plaintiff’s high bid was accepted at a nonjudicial foreclosure sale conducted under the power of sale in a trust deed encumbering residential real property. After the sale, however, the defendant trustee notified the plaintiff that the deed would not be delivered because the trustee had learned that the trustor and beneficiary had agreed to postpone the sale pursuant to a forbearance agreement and payment plan. The plaintiff accepted a refund of the price without waiving its right to sue, which it then pursued in a breach of contract claim for loss of bargain damages of $34,150.90, the difference between its bid price and the value of the property. The trial court held that the sale to the plaintiff was void since the trustee could not deliver the deed after discovering the forbearance agreement between the trustor and beneficiary. On appeal, the plaintiff relied on this treatise, § 1.7, 1993 ed., in claiming that the contract was voidable rather than void, and only the plaintiff as the innocent party could choose to avoid it. The court concluded that a two-party contract analysis was inapt where other parties such as the trustor and beneficiary were affected. Moreover, nonjudicial foreclosure sales were subject to comprehensive statutory regulation, which was not based on contract principles. The court held that since the deed had not been transferred, the statute limited the plaintiff’s claim to restitution—the return of the bid price—which the plaintiff had received from the trustee.

1  Accord, Restatement (Second) of Contracts § 7 cmt 1 (1981) (Am. Law Inst. 1981). On the varying uses of the term “void,” see Abraham J. Levin, The Varying Meaning and Legal Effect of the Word “Void,” 32 Mich.L.Rev. 1088 (1933).

2  Golden Pisces, Inc. v. Fred Wahl Marine Construction, Inc., 495 F.3d 1078 (9th Cir. 2007) (“void” contract “is not a contract at all,” the absence of an effective manifestation of assent precludes recognition of a contract).

3  Sphere Drake Ins. Ltd. v. Clarendon Nat’l Ins. Co., 263 F.3d 26 (2d Cir. 2001) (citing § 1.7, 1993 ed., of this treatise for this proposition).

1  Frederick Pollock, Principles of Contract *608.

2  The definition of the Restatement of Contracts (Second) § 8 (Am. Law Inst. 1981) is as follows: “An unenforceable contract is one for the breach of which neither the remedy of damages nor the remedy of specific performance is available, but which is recognized in some other way as creating a duty of performance, though there has been no ratification.”

3  The first statute of limitations, passed in the 21st year of James I, provided that the action of debt should not be maintainable after the lapse of six years. In form, this was not applicable to other legal writs; much less was it applicable to a bill in equity.

4  In the case of Weems v. Carter, 30 F.2d 202 (4th Cir. 1929), certain bonds and stocks had been assigned as collateral security for the payment of a promissory negotiable note. The direct enforcement of the note became barred by the statute of limitations; but in spite of this, it was held that the creditor might properly sell the bonds and stocks to secure repayment of the debt. The court wrote:

5  Oral contracts within the statute of frauds may be used to show that services rendered were not rendered gratuitously: Downey v. Guilfoile, 96 Conn. 383, 114 A. 73 (1921); Schempp v. Beardsley, 83 Conn. 34, 75 A. 141 (1910); or as evidence of the reasonable value of the services rendered: Ryan v. Dayton, 25 Conn. 188 (1856); Grantham v. Grantham, 205 N.C. 363, 171 S.E. 331 (1933); Bennett Leasing Co. v. Ellison, 15 Utah 2d 72, 387 P.2d 246, 21 A.L.R.3d 1 (1963).

6  Restatement of Contracts (Second) § 8 cmt. b (Am. Law Inst. 1981).

7  Restatement of Contracts (Second) § 8 cmt. c (Am. Law Inst. 1981).

1  In Fitzpatrick v. Vermont State Treasurer, 144 Vt. 204, 475 A.2d 1074 (1984), the court cited this § 1.9 (1963 ed.) in concluding that the legislature intended the term “special agreement” to mean “special contract.”

2  See Restatement of Contracts (Second) § 3 (Am. Law Inst. 1981).

3  See Sage v. Wilcox, 6 Conn. 81, 85 (1826): “The word, ‘agreement,’ in its popular and usual signification, means no more than concord; the union of two or more minds; or a concurrence of views and intention … . This concord or union of minds, may be lawful or unlawful; with consideration, or without; creating an obligation, or no obligation. Still by the universal understanding of mankind, proved by daily and home conversation it is an agreement; and it is none the less so because it is opposed to law or even to good morals.”

4  Dyer v. Bilaal, 983 A.2d 349 (D.C. App. 2009) (citing § 1.9, 1993 ed.); Shaw v. Buser, 2009 Iowa App. LEXIS 310 (April 22, 2009) (citing § 1.9, 1993 ed.).

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6  U.C.C. § 1-201(b)(3).

7  A noteworthy example of these principles is Allen v. Allen, 903 So. 2d 835 (Ala. Civ. App. 2004). A husband appealed from a divorce judgment, claiming that the trial court erred in adopting “almost verbatim” the terms of an alleged settlement agreement that he executed but supposedly did not understand and that allegedly did not represent the agreement to which he thought he was agreeing. The appellate court rejected these contentions, noting that the husband’s objective manifestation of intent was contrary, as evidenced by the language of the agreement. The court cited this section from a prior edition (§ 9, 1952 ed.) for the explanation that a person “may be ‘bound’ by a contract in ways that he did not intend, foresee, or understand. The juristic effect (the resulting legal relations) of a man’s expressions in word or act may be very different from what he supposed it would be.” The court explained that contract law is premised on an objective rather than a subjective manifestation of intent. When the parties reduce their agreement to a signed writing, the writing becomes the sole expositor of their agreement, absent mistake, fraud or ambiguity. Further, in this instance, the husband began performing certain of the obligations contained in the settlement agreement within days after its execution. This course of performance was inconsistent with his alleged understanding of the settlement agreement. See also, Jones v. Jones, 2014 Ala. Civ. App. LEXIS 1201 (April 7, 2014) (citing Allen v. Allen with approval).

1  This differs from its predecessor, Restatement of Contracts § 4 which omitted from the definition agreements to exchange performances, thereby excluding sales and barters.

2  For illustrations of contracts that involve no exchange of equivalents and no “bargain” see Chapter 10, Contracts Under Seal, and Chapters 8, 9, Informal Contracts Without Assent or Consideration.

3  See Vol. 8, Ch. 38, Aleatory Contracts.