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 W EST’S LAW SCHOOL
ADVISORY BOARD
___________

JESSE H. CHOPER
Professor of Law and Dean Emeritus,
University of California, Berkeley

JOSHUA DRESSLER
Professor of Law, Michael E. Moritz College of Law,
The Ohio State University

YALE KAMISAR
Professor of Law Emeritus, University of San Diego
Professor of Law Emeritus, University of Michigan

MARY KAY KANE

Professor of Law, Chancellor and Dean Emeritus,
University of California,
Hastings College of the Law

LARRY D. KRAMER
President, William and Flora Hewlett Foundation

JONATHAN R. MACEY
Professor of Law, Yale Law School

ARTHUR R. MILLER
University Professor, New York University
Formerly Bruce Bromley Professor of Law, Harvard University

GRANT S. NELSON
Professor of Law, Pepperdine University
Professor of Law Emeritus, University of California, Los Angeles

A. BENJAMIN SPENCER
Professor of Law,
Washington & Lee University School of Law

JAMES J. WHITE
Professor of Law, University of Michigan
 I

PRINCIPLES OF CONTRACT LAW

Third Edition

by

Robert A. Hillman
Edwin H. Woodruff Professor of Law
Cornell Law School

CONCISE HORNBOOK SERIES®

Mat #41484468
 II

The publisher is not engaged in rendering legal or other professional advice, and this publication is not a substitute
for the advice of an attorney. If you require legal or other expert advice, you should seek the services of a
competent attorney or other professional.
Concise Hornbook Series and Westlaw are trademarks registered in the U.S. Patent and Trademark Office.
© West, a Thomson business, 2004
© 2009 Thomson Reuters
© 2014 LEG, Inc. d/b/a West Academic
444 Cedar Street, Suite 700
St. Paul, MN 55101
1-877-888-1330
West, West Academic Publishing, and West Academic are trademarks of West Publishing Corporation, used under
license.
Printed in the United States of America
ISBN: 978–0–314–28894–3
 III

For the members of the Bob Hillman and His Assorted Followers Club with much
love and appreciation
 V

Preface to the Third Edition

___________

The prefaces to the first and second editions (on the following pages) set forth my goals,
organization, and the scope of this book. In this third edition, I have added new discussions of
accord and satisfaction and arbitration and have supplemented the material on, among other things,
duty to disclose, fault in contract law, liquidated damages, restitution, and unconscionability. I
have also added cases to the footnotes throughout the book that have arisen since the publication of
the second edition. These cases illustrate how the core concepts and principles of contract law
discussed in the text remain crucial today. As with the second edition, I have tried to catch typos
and have clarified some obtuse language to make this third edition as clear as possible.
Many thanks to my research assistants Phil Mercadante, Michael Milazzo, Damien Rose, and
Kirk Sigmon for their excellent contributions to this third edition.
Worth repeating is my confidence that you will enjoy your contracts course and, hopefully, this
book. (To determine whether I have just made an express warranty, please see Chapter 3, Part C of
this book.)

Robert A. Hillman
Ithaca, New York
August 2013
VII
 Preface to the Second Edition
___________

My goals, organization, and the scope of this book remain the same as in the first edition. In
fact, lots of text remains intact. So carefully peruse the Preface to the first edition if you want to
know what this book is all about.
Why write a second edition, you probably are wondering, in light of the first paragraph above.
Well, for one thing, I have edited and revised several sections of the book, mainly to keep up with
how changes in technology have influenced contract law. For another, I have supplemented the
footnotes with recent cases, including quotations from the cases (as in the first edition). I added
cases, not so you will get bogged down reading the footnotes (there are still only a few textual
footnotes), but to help you capture how recent decisions treat the core concepts discussed in text
and to aid you in your research of recent contract law. Finally, I have caught the typos and cleaned
up some obtuse language (I hope) that students using the first edition have enjoyed telling me about.
Many thanks to Daniel Forester, Juan Soto, and Mireille Zuckerman for their excellent research
work on this second edition.
I am confident that you will enjoy your contracts course. Hopefully, you will enjoy this book.
Good luck!

Robert A. Hillman
Ithaca, New York
August 2009
IX
 Preface to the First Edition
___________

I have written this book to help students understand and apply the greatest of law subjects,
namely contract law. But it is not a substitute for hard work. I strongly recommend that you read
and study the cases in your casebook, take feverish notes in class, and synthesize the material in
your own outline of the course. You should use this book to review concepts, to clarify issues that
give you trouble even after all your diligent work, and to help you understand how everything fits
together. The book should also prepare you well for contracts questions on the bar exam (so keep
it in good shape).
To get a feel for the nature and scope of this book, please take a look at Chapter 1, which is an
introduction. Here I simply want to list some of the book’s attributes that will facilitate your
understanding of contract law:
1. I have tried to explain concepts clearly and concisely. The writing is informal, and I even
have attempted to be humorous at times (you, of course, will be the judge of whether I succeeded).
2. The book contains numerous examples and illustrations of rules and principles. Often, I
have taken the liberty of assigning you a role in a problem, on the theory that you will be most
interested and attentive if you can envision having something at stake. (For example, Chapter 1
asks whether you have any legal rights to a 2001 Ferrari after you see an advertisement in the
newspaper listing the car for sale for $30,000 and you call the owner and say you want to buy the
car.)
3. For ease of reading and understanding, the book omits annoying textual footnotes that often
confuse the reader or make issues more difficult and complex than necessary. Instead, the footnotes
cite cases, articles, and treatises, with most including short quotations to substantiate positions
taken in the text. But for a straightforward explanation of rules and principles, you don’t have to
look at the footnotes at all.
4. The book contains lots of cross references in case you want to review concepts that are
building blocks for the current material you are reading.

5. The book covers all of the major issues of contract law and discusses in text most of the
leading contracts cases that appear widely in the various contracts casebooks.
6. The book covers timely issues such as amended Article 2 of the Uniform Commercial Code
and electronic contracting.
Many people helped me in this endeavor. Thanks to April Anderson, Phil Cummins, Imri
Eisner, Eric Franklin, Courtney Herz, Heather Hillman, Jessica Hillman, Emily Paavola, Brad
Wilson, and Nathaniel Yale for excellent research assistance, extensive work on the footnotes, and
editorial suggestions. Thanks also to Professor James Henderson for reading early chapters, and
Karen Wilson for her general assistance. As always, Betsy Hillman supplied encouragement and
support.
Enough Said. Hope you enjoy contract law and this book!
 Robert A. Hillman
Ithaca, New York
January 15, 2004
XXI
PRINCIPLES OF CONTRACT LAW

Third Edition
XIII
 Table of Contents
___________

PREFACE TO THE THIRD EDITION

PREFACE TO THE SECOND EDITION
PREFACE TO THE FIRST EDITION

Chapter 1. Introduction
A. Scope of This Book
B. Sources of Contract Law
C. Contract Lawyers’ Various Roles
D. Conclusion

Chapter 2. Bargain Theory for Enforcing Promises and the Requirement of an Agreement
A. The Bargain Theory of Consideration
1. Bargained-for Exchange versus Gift Promise
2. The Promisor’s Motive
3. What Must Be Extracted
4. Forbearance to Sue as Consideration
5. The Policies Behind Enforcing Bargained-for Exchanges
6. Adequacy of Consideration
7. Mutuality of Obligation and Illusory Promises
8. Preexisting Duty Doctrine and Accord and Satisfaction
9. Promise for Benefit Received
10. Summary
B. The Requirement of an Agreement
1. The Objective Test of Assent
2. Offer and Acceptance
a. Offer
b. Acceptance
3. The Offeror Has the Power to Prescribe the Terms of the Offer
4. Offers for Unilateral and Bilateral Contracts
5. Duration of Offers
a. Rejection or Counter-Offer
b. Lapse of Time
c. Revocation
d. Bars to Revocation—Option Contracts
e. Bars to Revocation—Beginning Performance of Unilateral Contracts

XIV

f. Bars to Revocation—Offers for Bilateral Contracts

6. Bargaining at a Distance
 a. Communication via the Mail or Telegram (The Old Stuff)
b. Electronic Offer and Acceptance
7. Limitations of Agreement Law
a. The Legal Significance of Business Draft Agreements
b. The Requirement of Certainty in Business Agreements
c. Form Contracts between Sellers and Buyers of Goods
d. Rolling Contracts

Chapter 3. Additional Theories for Enforcing Promises

A. Promissory Estoppel
1. Development of the Doctrine
2. Section 90 in the Second Restatement
a. Promise
b. Promisor’s Reasonable Expectations
c. Inducement of Action or Forbearance
d. Injustice
3. Expansion of Promissory Estoppel
B. Unjust Enrichment
1. Unenforceable Agreements
a. Keeping the Benefit Is Not Unjust
b. No Benefit
2. Breach of an Enforceable Contract
a. Injured Parties May Recover under Unjust Enrichment
b. Breaching Parties May Recover under Unjust Enrichment
3. Conferral of a Benefit in the Absence of a Contract
a. Business Relationships
b. Personal Relationships
C. Warranties
1. Express Warranty
2. The Implied Warranty of Merchantability
3. The Implied Warranty of Fitness for a Particular Purpose
4. Disclaimers
a. Disclaiming Express Warranties
b. Disclaiming Implied Warranties
5. Article 2 Amendments
6. Caveat

XV

Chapter 4. The Statute of Frauds

A. Background
B. Does the Statute of Frauds Apply?
C. Does a Writing Satisfy the Statute of Frauds?
1. The Nature of the Writing
 2. Who Must Sign
3. Electronic Contracts
D. Does an Exception to the Writing Requirement Apply?
E. Does Another Theory Apply?

Chapter 5. Remedies
A. Remedies for Breach of Contract
1. Expectancy Damages—Introduction
2. Methods of Measuring Expectancy Damages
3. Expectancy Damages—General Damages and Consequential Damages
4. Expectancy Damages in Various Contexts
a. Construction Contracts
b. Employment and Other Services Contracts
c. Sales of Goods
d. Sale of Real Property
e. Summary of Limitations on Expectancy Damages as Illustrated by the Various Contexts
5. Reliance Recoveries for Breach of Contract in lieu of Expectancy Damages
a. Reliance Damages Defined
b. More Hurdles to Reliance Recoveries
c. Fixed Overhead
d. More Theories for Awarding Reliance Damages
6. Liquidated Damages
7. Emotional Distress and Punitive Damages
a. Emotional Distress Damages
b. Punitive Damages
8. Specific Performance
B. Remedies for Promissory Estoppel
1. Introduction
2. Judicial Decisions
C. Remedies for Unjust Enrichment

Chapter 6. Policing Contracts

A. Duress
B. Fraudulent and Other Misrepresentation, Fraudulent Concealment, and Tortious Breach of
Contract
1. Innocent, Negligent, and Fraudulent Misrepresentation
a. Innocent Misrepresentation

XVI

b. Negligent Misrepresentation
c. Fraudulent Misrepresentation
2. Fraudulent Concealment
3. Tortious Breach of Contract
C. Public Policy
1. Exculpatory Clauses
2. Covenants Not to Compete
3. Illegal Contracts
D. Unconscionability
1. Procedural Unconscionability
2. Substantive Unconscionability
E. Special Problems of Standard Form Contracts
1. Paper Standard Forms
2. Rolling Contracts
3. Electronic Standard Forms

Chapter 7. The Parol Evidence Rule and Contract Interpretation

A. Parol Evidence Rule
1. Collateral Contract Exception
2. Ambiguity Exception
3. Proof of Fraud, Duress, or Mistake
4. Parol Evidence and Promissory Estoppel
5. UCC Section 2–202
6. Conclusion
B. Contract Interpretation
1. Objective Contract Interpretation
a. Purposive Interpretation
b. Usage of Trade, Course of Dealing, and Course of Performance
c. Other Rules of Interpretation
2. Exceptions to the Objective Interpretation of Contracts
a. Restatement (Second) Section 201
b. Misunderstanding
3. Rules of Gap Filling
a. What the Parties Would Have Done
b. Creating Incentives
c. Fairness Concerns
4. Good-Faith Performance
a. Overreaching Interpretation
b. Failing to Cooperate
c. Good Faith’s Additional Functions

XVII

Chapter 8. Conditions and Breach

A. Terminology of Conditions and Breach
B. Express Conditions
1. Creation of an Express Condition
2. The Content of an Express Condition
 3. Avoiding Express Conditions
a. Impossibility
b. Waiver
c. Forfeiture
4. Condition Subsequent
C. Implied Conditions
1. Order of Performance
2. Quality of Performance
a. Substantial Performance
b. Material Breach
c. Divisible Contracts
d. Uniform Commercial Code
D. Anticipatory Repudiation

Chapter 9. Grounds for Excusing Performance

A. Mistake
1. Mutual
2. Material
3. Mistake
B. Impossibility of Performance
1. Objective Impossibility
a. Express Risk Allocation
b. Implied-in-Fact Risk Allocation
c. Implied-in-Law Risk Allocation
d. The Restatement (Second) and the Uniform Commercial Code
2. Subjective Impossibility
C. Impracticability of Performance
1. Impracticability
2. Basic Assumption
D. Frustration of Purpose
E. Remedies after a Finding of Excuse
1. Judicial Approach
2. Judicial Reformation after an Unanticipated Event

Chapter 10. Third Parties

A. Third-Party Beneficiaries
1. Introduction
2. Creditor Beneficiaries
3. Donee Beneficiaries
4. Restatement (Second) Approach

XVIII

5. Defenses
 6. Third Parties under the UCC
B. Assignment of Rights and Delegation of Duties
1. Introduction
2. Assignment of Rights
a. The Obligor’s Defenses and Claims
3. Delegation of Duties
a. Does an Obligee Have to Accept the Delegatee’s Performance?
b. Can the Obligee Enforce Its Rights Against the Delegatee?
c. Does the Obligee Have a Right Against the Delegator Even After the Delegation?
INDEX
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