Chapter 3

Additional Theories for Enforcing Promises

In Chapter 2, we studied the principal theory for enforcing promises, namely the bargain theory of consideration. This chapter covers three additional theories for enforcing promises, promissory estoppel, unjust enrichment, and warranties. Each of these theories allows the court to enforce promises or obligations that contract law would not necessarily enforce under a bargained-for exchange theory. These statements are not very meaningful in the abstract (but I had to write an introduction), so let’s get to the material. After reading this chapter, you will have a more complete picture of the legal enforcement of promises and obligations. Part A deals with promissory estoppel, Part B takes up unjust enrichment, and Part C treats warranties.

A. PROMISSORY ESTOPPEL

1.Development of the Doctrine

You have learned that a promise is legally enforceable if the promisee supplies consideration in return for the promise. A gift promise, on the other hand, is not enforceable. But very early on, courts began to squirm over cases where a gift promise had induced a promisee to rely. Shouldn’t the law protect these promisees if their reliance was reasonable and provable? In an early case, Kirksey v. Kirksey, for example, a brother-in-law invited his sister-in-law to move to his land after his brother died.¹ The brother-in-law promised to give his widowed sister-in-law “a place to raise her family.”² At some expense, she left the land she was planning to purchase, and moved to her brother-in-law’s land. After two years, the brother-in-law asked her to leave. The sister-in-law sought to have her brother-in-law’s promise enforced. The court held that the brother-in-law’s promise was “a mere gratuity” and refused to enforce the promise.³ But the judge who wrote the opinion volunteered in dicta that the law should enforce the promise because the promise induced the sister-in-law to rely, resulting in “loss and inconvenience” to her. In fact, the judge went so far as to urge that this detriment was “a sufficient consideration to support the promise * * *.”⁴

Obviously, the judge’s language went too far by suggesting that the sister-in-law’s reliance constituted consideration. Nothing in the facts suggested that the brother-in-law had any other motive than to make a gift, with the sister-in-law’s travel to the land a necessary condition to receive the gift.⁵ By calling the move consideration, the judge was manipulating doctrine (using it when it doesn’t really apply) and trying to achieve a just result. The cost of such a strategy, of course, is to introduce confusion into the law. Does promise enforcement require real consideration or doesn’t it?

As time passed, courts became more willing to hold in favor of relying promisees, but often in a manner that did bend and stretch the doctrine of consideration. So, for example, courts began to enforce promises made to charities, often focusing on the charity’s reliance on the promise, and insisting that the reliance proved the promise to be “abundantly supported” by consideration.⁶ In addition, courts of equity applied equitable exceptions to the requirement of consideration. For example, equity holds that a promise of a gift of land is enforceable if the promise induces the promisee to improve the land.⁷ Although such non-bargain situations demonstrated courts’ focus on the promisee’s detrimental reliance, still courts could not completely divorce themselves from the language of consideration. For example, the same court that declared a gift promise of land enforceable because the promisee relied and made improvements also claimed that the promisee’s reliance “constitute[d] in equity, a consideration for the promise * * *.”⁸

In 1932, the ALI encapsulated a new theory for enforcing promises in section 90 of its Restatement of Contracts. The section was based on the growing number of reliance cases in the courts. Samuel Williston, the chief reporter, found the “binding thread” in these cases to be “justifiable reliance of the promisee.”⁹ The formulation of a distinct theory of obligation clarified the law while, at the same time, expanded promissory liability. The section reads in full:

PROMISE REASONABLY INDUCING DEFINITE

AND SUBSTANTIAL ACTION

A promise which the promisor should reasonably expect to induce action or forebearance of a definite and substantial character on the part of the promisee and which does induce such action or forebearance is binding if injustice can be avoided only by enforcement of the promise.

2.Section 90 in the Second Restatement

Section 90(1) of the second Restatement, adopted by the ALI in 1981, contains a few changes:

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.

You can see that the Restatement (Second) drops the requirement that reliance be “of a definite and substantial character.” However, it retains the “injustice” requirement, and we shall see that there is little injustice in refusing to enforce a promise if the reliance was not definite and substantial.¹⁰ The second Restatement’s version of section 90 also provides that the “remedy granted for breach may be limited as justice requires.” You will see in Chapter 5 that courts have interpreted this language to allow damages based on either the extent of a promisee’s detrimental reliance or the value of the promise.¹¹ Section 90(2) drops the requirement of reliance for the enforcement of promises to charities or promises that are part of a marriage settlement.¹²

Section 90 of both Restatements, usually referred to by those in the know as “promissory estoppel” (the promisor is literally “stopped” from claiming the absence of consideration¹³), contains several important elements. Let’s refine your understanding of these elements with a discussion of each.

a.Promise

First, there must be a promise. One court (in another setting) aptly defined a promise as follows: “[A] promise is an assurance, in whatever form of expression given, that a thing will or will not be done.”¹⁴ Many courts declare that the promise must be “clear and definite.”¹⁵ Issues pertaining to this standard often arise in the employment setting. A statement that employment is “permanent” usually does not satisfy this standard.¹⁶ Courts have more difficulty when a terminated employee claims that her employer’s practice was to dismiss employees only for good cause and that this practice constitutes a “clear and definite” promise to her.¹⁷ In a setting more pertinent to you now (assuming you are a student), a court stated that a university promised a student to grant her a degree if she completed the requirements of her program.¹⁸

In some cases, courts may have been too willing to assume the absence of factual issues on whether an employer made a promise and to grant summary judgment in favor of the employer. For example, in Corradi v. Soclof,¹⁹ an employee claimed that the president of the company told her that he had “big plans” for her.²⁰ Later, after reading a newspaper advertisement seeking someone for her position (not a good day for the employee), the employee confronted her supervisor by asking whether she should look for a new job. The supervisor responded negatively. In fact, he “advised her that her job was secure and that there was no need for her to look for other employment.”²¹

Despite the employee’s allegations, the court affirmed the trial court’s grant of summary judgment against the employee. The court held that the “big plans” statement was not a “specific promise of continued employment.”²² Further, the court thought that the supervisor’s representation that the employee’s job was “secure” was “conclusory” and did not constitute a promise of employment for a “specific period of time.”²³ But the combined statements of the president and supervisor probably should have been enough for the court to deny summary judgment. Arguably, a factual issue remained over whether the employee could reasonably believe that the employer made a definite promise of continued employment for a reasonable time.²⁴

Dickens v. Equifax Services, Inc.²⁵ is another case that tests the patience of those who support a liberal interpretation of the “promise” requirement of promissory estoppel. Dickens, an employee of Equifax in Phoenix, alleged that his supervisor made the following promises about his prospective employment with Equifax in Denver:

(1) he would continue to have a career with Equifax until age sixty-five, (2) he would be promoted if he moved to Denver, (3) he would receive annual pay increases and annual bonuses, (4) the amount of his bonus would compensate for his loss of his wife’s income, (5) he would be a manager in Denver, (6) he would be taken care of by the company, and (7) he would remain employed by the company.²⁶

Dickens claimed that he relied on these promises and moved to Denver. Alas, Equifax terminated Dickens on January 5, 1993, his fifty-fifth birthday, after offering him an inferior position, which he refused. (Before you start to seethe at Equifax’s cruelty, you should also know that his pension vested on his birthday under Equifax’s retirement plan.)

Despite Dicken’s allegations, the Tenth Circuit affirmed a summary judgment in favor of Equifax. The court stated that the supervisor’s statements “were not sufficiently definite to be legally enforceable promises for purposes of establishing promissory estoppel.”²⁷ Further, the statements were “vague assurances or unsupported predictions, and as such, were not statements upon which Mr. Dickens could reasonably rely.”²⁸

Yikes! The statements alleged by Dickens seem pretty definite to me.²⁹ At any rate, not all courts have been so parsimonious about what constitutes a promise for promissory estoppel purposes. For example, some courts relax the “clear and definite promise” requirement when persuaded that a party has reasonably relied on a less than clear assurance.³⁰

Courts must distinguish a promise from a mere present intention, such as “I intend to keep the business open.”³¹ If the business fails, the party who stated this intention should not be liable on the basis of promissory estoppel because the party never promised that the business would stay open. In addition, a party who makes a conditional promise should not be liable if the condition is not satisfied. For example, if an employer promises its employees to continue running its business if it is profitable, the promisor can abandon the business if it is not profitable, without sustaining liability based on promissory estoppel.³²

b.Promisor’s Reasonable Expectations

The second element of promissory estoppel is that the promisor must “reasonably expect [the promise] to induce action or forbearance.”³³ Although the rule focuses on what a promisor reasonably should expect, many courts translate the requirement into an inquiry about the reasonableness of the promisee’s reliance.³⁴ This makes sense, in most cases, because a promisor ordinarily should not expect unreasonable actions on the part of the promisee. If an employer promises an employee six months employment, the employer should not reasonably expect the employee to do something rash, such as sign a ten-year lease on her apartment. Similarly, a sophisticated lessor of commercial real estate should not reasonably expect a prospective lessee to rely on the lessor’s vague promises to close the deal.³⁵

c.Inducement of Action or Forbearance

Further, the promise must actually “induce” action or forbearance.³⁶ In other words, the promisee must act because of the promise. Suppose Nephew learns that if he continues to smoke cigarettes he will damage his heart. Nephew therefore quits smoking. Later, unaware of Nephew’s new resolve, Uncle promises Nephew $1000 if he quits smoking. Uncle’s promise did not induce nephew’s action and is not enforceable under promissory estoppel.³⁷

Sometimes a court will focus on whether the reliance was a detriment to the promisee. For example, in reliance on a promise of an endowed professorship, a professor alleged that he “engaged in scholarly activities at a voracious pace” and did “extraordinarily more work than he had ever done or will ever do.” The court held that these allegations were not actionable under promissory estoppel.³⁸ The court reasoned that our professor “boosted” his scholarly reputation, which was no detriment at all.³⁹

Despite promissory estoppel’s origins as a theory to compensate a party for detrimental reliance, some theorists report that promissory estoppel cases actually do not require reliance. For example, one study reported that courts enforce any promise made “in furtherance of an economic activity” regardless of whether a party relied on the promise.⁴⁰ Another study posited that courts enforce “serious” promises regardless of whether the promisee relied on them.⁴¹ These articles caused a stir in the secondary literature on promissory estoppel.⁴² However, my study of promissory estoppel cases decided in the mid-1990s reports the continued importance of reliance in judicial decisions.⁴³ The following language in opinions is typical in its emphasis on the importance of reliance, although it goes too far in dispensing with the need for a real promise:

The evil to be rectified through promissory estoppel is not the breach of the promise, but the harm that results from the promisor’s inducement and the promisee’s actions in reliance. The fact that a promise is indefinite, incomplete or even incapable of enforcement according to its terms, does not mean that no redress should be possible for the damage that directly flows from the promisee’s reliance on the promise.⁴⁴

I recently followed-up my earlier study, but much less systematically (sorry). No surprise, reliance is still the heart of promissory estoppel. Typical language in more recent opinions supports this conclusion: “Detrimental reliance is an indispensable element of a promissory estoppel claim . . . and a failure to adequately plead that element requires dismissal.”⁴⁵ “The vital principle is that who by his language or conduct leads another to do what he would not otherwise have done shall not subject such person to loss or injury by disappointing the expectations upon which he acted.”⁴⁶

d.Injustice

Section 90 states that a promise is binding “if injustice can be avoided only by enforcement of the promise.”⁴⁷ Obviously, courts enjoy lots of discretion under an “injustice” standard. Some courts characterize the injustice issue as a “policy decision.”⁴⁸ For example, one court enforced a newspaper’s promise to preserve a source’s anonymity because of the “importance of honoring promises of confidentiality” and the “resultant harm” to the source that resulted from the broken promise.⁴⁹ In another case, the court declined to enforce a promise of long-term employment because enforcement might undermine “the employer’s discretion and independent judgment in employment decisions.”⁵⁰ The Restatement (Second) of Contracts supports such results by noting that the “injustice” inquiry should include relevant “policies.”⁵¹

Another policy issue that often arises in promissory estoppel cases is whether a promisee who quits her current job in reliance on the promise of a prospective employer offering “at will” employment can recover for breach of that promise. At will employment constitutes a job without a guaranteed duration, meaning that the employer can terminate the employee at any time. Employers can argue that there is no injustice in refusing to enforce a promise of at will employment, even if it induces an employee to leave a job, because the employee is taking the risk that the new job won’t last.⁵² This argument has not been very successful. One court stated, for example, that the employee “had a right to assume he would be given a good faith opportunity to perform his duties to the satisfaction of [the employer] once he was on the job.”⁵³

Some courts raise the “injustice” prong of promissory estoppel to substantiate a decision against applying promissory estoppel made on other grounds. Suppose, for example, an employer tells an employee that her employment probably will be renewed when her term ends. Subsequently, the employer changes the job description so that the employee no longer is qualified for the job and the employer does not renew her. It is hard to say that there is an injustice done to the employee by refusing to apply promissory estoppel because the employer did not make a promise. On comparable facts, courts have used all of their ammunition and found that there was no promise and no injustice.⁵⁴ This approach also follows the Restatement (Second), which notes the role of both the reasonableness of reliance and the formality of the promise in adjudicating the injustice element.⁵⁵

We have already mentioned that the Restatement (Second) dropped the requirement that reliance must be “definite and substantial.”⁵⁶ The “injustice” requirement captures this element too because it is hard to think of a case where there would be injustice in refusing to enforce a promise that induced indefinite and insubstantial reliance.⁵⁷ If you promise to mow Alice’s lawn on Saturday morning, which induces her to go shopping at that time (to avoid the noise of the mower), I doubt that any court would entertain Alice’s promissory estoppel claim if you don’t show up.

3.Expansion of Promissory Estoppel

Although most, if not all, of the cases that inspired Williston to draft section 90 involved gift promises, courts soon expanded the theory by applying it in cases where a bargain was unenforceable because of some defense available to the promisor. For example, in Wheeler v. White,⁵⁸ the court enforced White’s promise to procure or make a loan so that Wheeler could develop his property, after Wheeler relied by tearing down an existing building and preparing the property for new construction. The elaborate contract between the parties was unenforceable because they failed to agree on key terms, including the interest rate of the loan (they only agreed on a ceiling rate). Nevertheless the court enforced White’s promise on the ground of promissory estoppel. Another court enforced Aretha Franklin’s promise to appear in a Broadway musical even though she and the producer had contemplated, but had not yet signed, a final agreement.⁵⁹ The court failed to give Franklin’s defense of no signed contract any r-e-s-p-e-c-t and applied promissory estoppel because she had informed the producer she would perform and showed enthusiasm for the project. In addition, Franklin should have known that the producer would commit to major expenditures before she would be available to sign the contract.

In perhaps the leading case on the expansion of promissory estoppel into the realm of bargained-for transactions, a grocery store chain called Red Owl Stores represented to Joseph Hoffman and his wife that it would grant them a Red Owl franchise for $18,000.⁶⁰ During prolonged negotiations, Red Owl kept “upping the ante” by asking for more money and additional commitments from Hoffman and his family. Red Owl’s representations induced the Hoffmans to sell the fixtures and inventory of their grocery store, buy and then sell their bakery building, and commit to a new building lot, all in preparation for becoming a Red Owl franchisee. The parties never completed the deal because Red Owl kept changing the terms, and the Hoffmans did not get their franchise. After the deal fell apart, the Hoffmans sued Red Owl for damages suffered in relying on Red Owl’s representations. The trial court prepared a special verdict form for the jury based on the theory of promissory estoppel and the jury awarded Hoffman money damages. On appeal, the court affirmed, holding that Red Owl’s “promissory representations” induced the Hoffmans to rely to their detriment. The case therefore established promissory estoppel as a very powerful doctrine. Under promissory estoppel, a party can be liable for representations made during negotiations prior to the culmination of a contract.

As you might guess, a “powerful doctrine” creates controversy. Some writers worry that the Red Owl opinion is unhelpful because it does not explain the boundaries of liability for precontractual reliance:

Scott has referred to [Red Owl] as an unfortunate case that, because of the attention that it has received, has retarded thinking about the precise limits of a rule allowing recovery for precontractual reliance. We agree that because the court does not explain why Lukowitz’s statement about the $18,000 should be considered a promise rather than a mere opinion or enthusiastic encouragement, the opinion does not help explain the limits on precontractual reliance.⁶¹

However, I have resisted this concern (but you decide who is right):

The facts recited by the court portray an unequal bargaining relationship in which the stronger party, Red Owl, a large established business, through its agents, repeatedly made assurances that Hoffman[ ], the operator with his wife of a local bakery for about five years, would get a franchise. In fact, the court referred to Red Owl’s communications as “assurances” at least five times in the course of the opinion. Red Owl’s communications certainly contained conditions—buying and then selling a grocery business, selling their bakery business and building, purchasing an option on a lot—but Hoffman[ ] met all of them, even as Red Owl continuously upped the monetary ante. Moreover, the jury found and the court affirmed that Hoffman[ ] was reasonable in relying on Red Owl’s agent, Lukowitz, for relaying messages from the home office. Certainly on grounds of justice there is room for legal doctrine to protect the weaker relying party under these circumstances—whether we call it promissory or, even better, equitable estoppel.⁶²

At any rate, writers began to emphasize the importance of promissory estoppel after witnessing its expansion in cases such as Hoffman.⁶³ One scholar claimed that “the principle of section 90 * * * has become perhaps the most radical and expansive development of this century in the law of promissory liability.”⁶⁴ Further, theorists predicted that promissory estoppel would “swallow up” the bargain theory of contract and become the dominant theory for enforcing promises.⁶⁵ The theory has not been very successful in the courts, however, with many claims brought but few plaintiffs successful.⁶⁶ What went wrong? Perhaps claimants on the whole bring weak claims because promissory estoppel is not usually a plaintiff’s primary theory of recovery. Perhaps most claimants simply “tack on” a promissory estoppel claim in a lawsuit brought on a breach of contract or other theory.⁶⁷

Here’s an example of a weak promissory estoppel claim that went nowhere.⁶⁸ Landowner, a real estate developer, and Wal-Mart negotiated for the lease of real property to Wal-Mart to build a store. The parties signed a “Letter of Intent,” which stated in part: “This lease proposal is intended only as an outline of the major provisions of a proposed lease, * * * and as such, whether or not countersigned, is non-binding. Neither party shall have any obligation to the other with respect to this proposal * * * until a mutually acceptable lease agreement is fully executed and delivered by both parties.” If that wasn’t enough, the letter of intent added that “[t]he provisions of this proposal are subject to withdrawal and modification by either party at any time for any reason.” Although the parties produced several draft leases, they never agreed to or signed a “mutually acceptable lease agreement.” The deal fell through, but not before the landowner allegedly expended “millions of dollars,” including purchasing additional acreage to accommodate Wal-Mart’s need for a larger parcel. The landowner claimed that it had relied on the oral statements of Wal-Mart’s agents, including that “the deal was important to Wal-Mart Stores to obtain affirmative action goals,” that it was “critical that the deal be completed,” and that a “closing would occur in a few weeks.”

The court first dismissed the landowner’s breach of contract claim, calling the letter of intent an unenforceable agreement to agree⁶⁹ and noting that the alleged subsequent promises were unenforceable under the Statute of Frauds. However, the landowner also pursued a promissory estoppel claim. The court granted summary judgment to Wal-Mart on this claim, reasoning in part that landowner’s reliance was unreasonable in light of the express language of the letter of intent (which distinguishes the case from Hoffman, where there was no formal preliminary agreement). The vagueness and indefiniteness of the alleged promises also motivated the court, which found that the promises actually amounted only to expressions of future intentions.

Another explanation for the lack of success of promissory estoppel is that courts may be reluctant to apply the theory in exchange settings because it subverts important doctrines of contract law that bar enforcement. For example, the court in Wheeler v. White applied promissory estoppel after finding that the contract requiring White to make Wheeler a loan was too indefinite to enforce.⁷⁰ But if the contract is unenforceable because the parties left too many gaps, why should a court subvert the policy behind this decision by enforcing White’s promise on promissory estoppel grounds? One response is that the Wheeler court held that Wheeler’s recovery would be limited to “reliance damages measured by the detriment sustained.”⁷¹ Thus, because of the contract’s indefiniteness, Wheeler could not recover expectancy damages for breach of contract, a measure likely to be greater than reliance damages. (We introduced the difference between these measures of damages in Chapter 1, and we will take them up in full in Chapter 5.⁷²) The problem with this justification for promissory estoppel is that some courts have awarded expectancy damages to successful promissory estoppel claimants.⁷³

Promissory estoppel is usually not available when an enforceable contract governs a relationship. In such a context, promissory estoppel “becomes * * * gratuitous duplication or, worse, circumvention of carefully designed rules of contract law.”⁷⁴

B. UNJUST ENRICHMENT

The theory of unjust enrichment has many alternative names, such as quantum meruit, restitution, quasi-contract, and contract implied in law. There are technical and historical differences among these principles,⁷⁵ but at bottom they all refer largely to the following: When a party confers a benefit on another party and it would be unjust for the recipient to retain the benefit without paying for it, the law imposes an obligation on the recipient to pay or return the benefit.⁷⁶ As one court has said, an action for recovery based upon unjust enrichment “is based upon the universally recognized moral principle that one who has received a benefit has a duty to make restitution when to retain such benefit would be unjust.”⁷⁷ The obligation arises in several settings related to exchange transactions, but as you can see from the above quotation, the theory is not based on an agreement between the parties, but on the justice of requiring one party to disgorge a benefit received from the other party.⁷⁸

1.Unenforceable Agreements

Unjust enrichment applies when one party to an agreement confers a benefit, but the agreement is unenforceable for some reason, including because it is incomplete or was not written down. Chapter 1 offers the following example: You and your neighbor, Alice, agree that you will care for her lawn in return for compensation, but you fail to specify how often you will work, the amount of compensation, or the duration of the arrangement. Courts cannot enforce this agreement because it is too uncertain—you left too many gaps for your arrangement to constitute an enforceable contract.⁷⁹ However, suppose you have already worked for Alice for three days. You have conferred a benefit on Alice that would be unjust for her to keep without compensation. Courts apply the theory of unjust enrichment in this context and allow you to recover the fair market value of your services.⁸⁰

Several defenses bar unjust enrichment claims for unenforceable agreements (some of these defenses apply to other unjust enrichment contexts as well). We now turn to these.

a.Keeping the Benefit Is Not Unjust

One defense to an unjust enrichment claim is that the party claiming relief conferred the benefit as a gift.⁸¹ In such situations, of course, it would be hard to claim that retaining the benefit is unjust. For example, if you offered to mow Alice’s lawn as a favor while she is on vacation, she is enriched by your services, but not unjustly.

Generally, courts assume that family members or people in other close relationships intend to confer benefits on each other gratuitously.⁸² However, evidence that a family member or a person in a close relationship conferred a benefit pursuant to an unenforceable agreement rebuts the assumption.⁸³ For example, you could rebut the argument that you mowed Alice’s lawn as a gift by proving that you had made an agreement with her that she would pay you (assume again that the agreement is unenforceable for lack of certainty). Of course, this approach is somewhat inconsistent with the idea that the agreement is too uncertain to enforce.⁸⁴ On the other hand, the agreement is unenforceable because of its uncertainty, not because anyone suspects that the parties never made such an agreement. The agreement is therefore reliable evidence that you did not mow Alice’s lawn as a gift.

Suppose, however, that an agreement is unenforceable for lack of a writing. For example, you agree to mow Alice’s lawn each week for two years for $50 per week. (We will see in Chapter 4 that certain agreements, including those for a duration of more than one year, must be in writing to be enforceable.⁸⁵) You mow the lawn once and Alice does not pay you. Assume you can’t sue for breach of contract. Can you bring an unjust enrichment action and offer evidence of your oral two-year agreement to show that you did not mow the lawn as a gift?⁸⁶ The purpose of the legal requirement of a writing is to bar false claims of an oral contract. Sure, in my hypo you did make the oral agreement. But what about all those deadbeats out there who make false claims of oral agreements? Allowing you to testify that you made an oral agreement thwarts the general purpose of the writing requirement.⁸⁷ Nevertheless, courts can justify allowing the testimony because the remedies for breach of contract and unjust enrichment are generally different. This remedial difference arguably preserves a role for the writing requirement: It serves to deny an expectancy recovery to a party who confers a benefit under an unenforceable oral agreement. Such a party can only recover the value of his services.

b.No Benefit

Needless to say, another issue in unjust enrichment cases is what constitutes a benefit.⁸⁸ The issue often arises in cases where a party requests services, but then doesn’t use them. You ask an architect to draw plans for an addition on your house, but then you don’t build the addition. You orally agree to purchase a house after the seller makes several requested alterations. Then you do not purchase the house.⁸⁹ You hire an oil exploration company to look for oil on your land, but the company doesn’t find oil.⁹⁰ Suppose in each of these examples that the agreement is unenforceable because it is too uncertain.⁹¹ Are you nevertheless liable to these service providers on the basis of unjust enrichment?

Unsurprisingly, courts have answered this question in the affirmative on the theory that, in each case, you requested the services.⁹² Therefore, even if you chose not to accept the benefit, or the services prove fruitless, you have benefitted to the extent of the fair market value of the services rendered. Some writers believe that you didn’t really receive a benefit in these cases, and that the true ground for recovery is justifiable reliance.⁹³ Some courts appear to agree.⁹⁴

Before we leave the “no benefit” issue, I should point out that a benefit that is foisted on a party (imposed on a party without his or her consent) is usually considered no benefit at all or at least not a benefit that triggers unjust enrichment. So, for example, you cannot establish a midnight house painting service and paint houses without their owners’ consent while they sleep and then expect to recover from them on unjust enrichment grounds. We take up the issue of foisting later in this book in several distinct situations.⁹⁵

2.Breach of an Enforceable Contract

Unjust enrichment issues also arise after a breach of an enforceable contract. The injured (non-breaching) party may seek a recovery under the theory of unjust enrichment instead of breach of contract. If a breaching party has conferred a benefit on the injured party that exceeds the injured party’s damages, the breaching party may make an unjust enrichment claim. In each of these situations, the unjust enrichment theory is often called “restitution,” because the party who has received the benefit must return it or its money equivalent to the other party.

a.Injured Parties May Recover Under Unjust Enrichment

After a breach of contract, the injured party can sue either for breach of contract or for unjust enrichment.⁹⁶ Obviously, the injured party will proceed on whichever theory affords a greater recovery. Therefore, when the fair value of an injured party’s performance is greater than the contract price of that performance, the injured party will use unjust enrichment. For example, suppose an employee agrees to perform services for one year for $4000 per month. After the first month, the employer wrongfully fires the employee before paying him. The fair market value of the services rendered by the employee for that month was $8000. Assuming that the employee can obtain another comparable job for the rest of the year, the employee will have contract damages only for the first month of $4000. But the employee can instead elect to recover on the ground of unjust enrichment—the employee has conferred a benefit on the employer of $8000 that would be unjust for the employer to keep.⁹⁷

Courts justify using unjust enrichment to allow an injured party to recover more than the contract rate by arguing that the law should not allow the party who repudiated the contract to then use the contract as a shield to insulate her from liability for the actual benefit she received.⁹⁸ But not every court or writer agrees with this policy. Some who champion freedom of contract believe that the parties’ own contractual measurements of value should limit recovery regardless of breach: “[T]he parties’ own allocation of the market or other risks should be upset, if at all, by substantive doctrine and not by whether one chooses the label ‘quantum meruit’ or ‘common count’ on the one hand, or ‘reliance damages’ on the other.”⁹⁹ These commentators suspect that a desire to punish the nasty contract breaker may be the real motivation when courts allow the injured party to recover greater damages under unjust enrichment.¹⁰⁰ Some courts have agreed with the commentators and hold that the contract price is a ceiling on recovery for unjust enrichment.¹⁰¹

Some of the courts barring recovery over the contract rate have created specific exceptions to the injured party’s right to claim unjust enrichment after a breach of contract. Perhaps the most prominent exception is that “[t]he remedy of restitution in money is not available to one who has fully performed his part of a contract, if the only part of the agreed exchange for such performance that has not been rendered by the defendant is a [certain] sum of money * * *.”¹⁰² For example, if you agree to landscape Alice’s yard for $500 and you complete the work, you cannot elect unjust enrichment if Alice does not pay, even if the fair value of your work is greater than $500. You have “fully performed” and all that is left is for Alice to pay you a certain amount, namely $500.

b.Breaching Parties May Recover Under Unjust Enrichment

Not only may an injured party pursue a recovery based on unjust enrichment, a breaching party may as well, although this avenue for breaching parties is even more controversial. Why should a party who breached a contract be able to sue for unjust enrichment?

In the leading case of Britton v. Turner,¹⁰³ the court sought to answer this question. An employer hired an employee to work for one year for the bountiful sum of $120, but the employee quit without good cause after nine-and-one-half months (this case had nothing to do with that awful Kim Basinger movie called “9 1/2 Weeks”). The employee sought to recover for the work he had performed. The trial court charged the jury that the breaching employee could recover the reasonable value of his labor and the jury awarded the employee $95.

On appeal, the employer contested the judge’s charge to the jury, but the Supreme Court of New Hampshire affirmed. It set forth several reasons for allowing the employee to recover under unjust enrichment. First, the court pointed out that barring a recovery would penalize an employee who tried, but failed, to complete his contract, because the longer he worked before breaching the greater his harm.¹⁰⁴ Second, because the employment contract was “day to day,” the court presumed that the employer had accepted and should pay for each day of the employee’s work, notwithstanding the employee’s failure to complete the whole contract: “[T]he party for whom the labor is done in truth stipulates to receive it from day to day, as it is performed, and although the other may not eventually do all he has contracted to do, there has been, necessarily, an acceptance of what has been done in pursuance of the contract * * *.”¹⁰⁵ Third, the court asserted that the “general understanding of the community” is that an employer should compensate an employee for work performed even if the employee does not complete the contract term.¹⁰⁶ Fourth, the court pointed out that the parties did not expressly agree to deny the employee compensation unless he completed the term, even though they easily could have done so.¹⁰⁷ (Modern state labor laws generally forbid such a strategy, however.¹⁰⁸) Fifth, the court worried that denying a recovery would create an incentive for employers to create unfavorable conditions near the end of an employee’s term, with the hope that the conditions will persuade the employee to quit and lose all compensation.¹⁰⁹

Some of the Britton court’s arguments for granting a recovery to the breaching employee are better than others. For example, the final argument, concerning employers’ incentives, ignores the likelihood that an employer who created unfavorable conditions would, by doing so, materially breach the contract first and owe the employee damages. Further, it is not always the case that an employer receives a benefit in each day’s work of a long-term employment contract. For example, suppose during the first six to nine months the employer provided extensive training to the employee that would pay off only at the end of the term. Despite these qualms, contract law generally has accepted the Britton approach.¹¹⁰ Among its more persuasive arguments is the “general understanding of the community” that employees should be paid for their efforts even if they cannot complete their term.

Unlike when an injured party recovers based on unjust enrichment, the contract price is a ceiling on a breaching party’s recovery.¹¹¹ The employee in Britton cannot recover more than the contract rate of $10 per month, even if the market value of the work were a greater sum. Obviously, any other approach would create an incentive for parties to breach their contract when the other party was paying them less than fair market value for their goods or services. In addition, the breaching party is liable for any damages caused by breaching the contract. If the employer in Britton had to pay a substitute employee an extra $50 to do the remaining work, for example, the employee could only recover $45 ($95 minus $50). If the damages are greater than the benefit conferred on the employer, the employee cannot recover on the basis of unjust enrichment and the employee will be liable for damages for breach of contract.¹¹²

3.Conferral of a Benefit in the Absence of a Contract

A party who confers a benefit without a contract may also recover under unjust enrichment. The theory applies, however, only when the party conferring the benefit did not intend to make a gift,¹¹³ the benefit was not forced on the recipient,¹¹⁴ and justice requires the party receiving the benefit to pay for it.¹¹⁵ The last requirement, of course, grants courts lots of discretion. One way in which the “justice” issue arises concerns whether the party receiving the benefit reasonably should understand that the party conferring the benefit expects to be paid.¹¹⁶ There would be no injustice in denying an unjust enrichment claim if the party receiving a benefit reasonably thought he received a gift. Courts resolve this question by focusing on the nature of the parties’ relationship—whether it is a business or personal relationship—and the type of benefit conferred. Let’s look more closely at these issues.

a.Business Relationships

Suppose a business person performs a service that is profitable for other parties, but the parties did not discuss compensation. For example, Elmer Electrician, introduces a business acquaintance, Irwin Investor, to Dom Developer, another business acquaintance. Elmer knows that Dom is seeking investment capital for a real estate project. Elmer helps Irwin and Dom’s negotiations move along by arranging meetings and serving as a go-between. Irwin and Dom ask Elmer what he expects for his efforts and Elmer tells them that he hopes to do the electrical work on the project. Irwin and Dom ultimately put together a lucrative business deal, but Elmer retires from his job as an electrician before construction begins. Irwin and Dom hire another electrician for the electrical work. Is Elmer nonetheless entitled to a finders’ fee for bringing Irwin and Dom together?¹¹⁷ Let’s try another hypo. Suppose Elmer, in retirement, manages a piece of Dom’s property (including collecting rents and maintaining and improving the property), without discussing any compensation. Is Elmer entitled to compensation for this service?¹¹⁸

Unjust enrichment law provides answers to both hypotheticals, taking into account whether Elmer conferred a benefit on Dom (and Irwin in the first hypo), whether Elmer intended to confer a gift, whether the benefit was foisted, and whether a reasonable person receiving such a benefit would expect to pay for it.¹¹⁹ For example, although Elmer knew Dom and Irwin, Elmer’s services were in a business context and Elmer expected a return on his services in the form of an electrical contract. And Dom and Irwin happily accepted Elmer’s services likely knowing that Elmer expected a return. So far so good for Elmer. His services were not a gift, nor were they foisted on Dom and Irwin. However, Elmer did not request a finders’ fee and told Irwin and Dom he expected only electrical work. Irwin and Dom therefore did not reasonably expect to pay Elmer a finder’s fee and, therefore, Elmer cannot recover under the theory of unjust enrichment.¹²⁰ (Elmer can argue that Irwin and Dom should have realized that if, for some reason, Elmer did not get the electrical work, he would expect to be paid in another way for his efforts. But at least one court faced with similar facts did not accept this argument.¹²¹) In the second fact pattern, Elmer has a good unjust enrichment claim against Dom for the value of his managerial services, even though the two are friends. This benefit was not the kind that is usually a gift. Even good friends don’t usually manage each other’s businesses for free, so Dom reasonably should expect to pay.¹²²

Before we leave Elmer’s travails, we should note that he has another theory to pursue in both scenarios sketched above. When the unjust enrichment theory is applied to disputes such as Elmer’s, the theory is also called “contract implied-in-law” or “quasi-contract.” This is because Irwin and Dom’s obligation (or Dom’s in the second hypo) does not arise because of a real contract between the parties.¹²³ The theory is grounded in the idea that Elmer conferred a benefit that would be unjust for the recipients to keep without paying for it.¹²⁴ But Elmer can also claim that Irwin and Dom (or Dom in the second hypo) broke a “contract implied-in-fact,” which, as the name denotes, is a real contract.¹²⁵ The parties form this type of contract not by expressly agreeing to perform, either orally or in writing, but by manifesting their intentions to enter a contract through their conduct. As a “real” contract, an implied-in-fact contract must satisfy all of the contract requisites that we are learning in this book (so keep reading!).

Did the parties enter an implied-in-fact contract with respect to either of the services Elmer performed? Elmer told Irwin and Dom he expected to gain by doing the electrical work, not by earning a finder’s fee. Therefore the evidence does not support an implied-in-fact contract claim for a finders’ fee.¹²⁶ On the other hand, Elmer’s management work for Dom was not the kind ordinarily done gratuitously by a friend. Accordingly, Elmer has a strong implied-in-fact contract claim in the second hypo.¹²⁷

Although unjust enrichment and implied-in-fact contract yield the same result as to liability in the Elmer problems above, this will not always be the case. For example, if Elmer mistakenly paid Dom some money that he meant to pay Irwin, Elmer could recover the money on unjust enrichment grounds, but he could not recover on the basis of implied-in-fact contract. In this hypo, the circumstances do not support an implication that Elmer paid the money to Dom as part of a real contract.¹²⁸ However, Elmer did confer a benefit on Dom and justice requires Dom to return it. (But if Dom reasonably believed he was entitled to Elmer’s money and detrimentally relied by spending it, Elmer could not recover from Dom.¹²⁹)

Before we leave unjust enrichment in business settings, I want to mention the problem of the over-exuberant entrepreneur. Suppose Alice is in the swimming pool construction business. Alice knows you are on a trip to _______ (fill in the blank here and daydream about the fabulous place you select, but not for more than two minutes). Alice, eager for her business to be successful, proceeds to construct a pool in your yard while you are away. She sends you a bill upon your return. The pool increases the market value of your house and is aesthetically pleasing. Still, the law of unjust enrichment does not require you to pay Alice because she forced the benefit on you without your consent.¹³⁰ Needless to say, the law should not and does not encourage this kind of entrepreneurship.

b.Personal Relationships

Unjust enrichment claims also arise in the context of personal relationships, such as between unmarried people who live together. After a breakup, one party may seek compensation on unjust enrichment grounds in order to share in the wealth accumulated during the relationship.¹³¹ For example, one party may have taken care of children, performed housekeeping services, helped out in a business, and cooked meals, giving the other party more time to make money. Courts have recognized unjust enrichment claims in such contexts, especially when the parties have behaved as if they were married.¹³² Courts reason that if the parties had been married, the claimant would have been entitled to share in the marital estate.¹³³ When both act as if they are married, the party receiving the benefit reasonably should understand that the other party expects to share in the wealth of the relationship.¹³⁴

C. WARRANTIES

Contract law enforces warranties made by sellers, lessors, and others concerning the quality of performance. When you purchase or rent a residence, the seller or lessor may make a warranty of habitability. When you purchase an air conditioner from Sears, it may make an express warranty with respect to the quality of the air conditioner, may warrant that the appliance is fit for its ordinary purpose, and may warrant that it is fit for a particular purpose.

Warranty law is a huge, complex, and largely statutory subject. Most contracts courses leave much of the material for other courses. So I will simply give you a brief introduction to the UCC sale-of-goods provisions that create warranties with respect to the quality of goods. Our discussion will include three sections of the UCC. UCC section 2–313 governs express warranties, which arise from statements or conduct of the seller. UCC section 2–314 deals with the implied warranty of merchantability, and section 2–315 involves the implied warranty of fitness for a particular purpose. Implied warranties arise “by operation of law,” meaning that these warranties do not depend on anything the seller says or does. The implied warranties are therefore similar to unjust enrichment in the sense that they are not consensual in nature.

Before you get too happy about all this potential warranty protection for that faulty computer you just purchased, you should know that the UCC allows sellers to disclaim (contract out of) most warranties. We’ll consider this topic too.

1.Express Warranty

UCC section 2–313 provides:

Express Warranties by Affirmation, Promise, Description, Sample.

(1)Express warranties by the seller are created as follows:

(a)Any affirmation of fact or promise made 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.

(b)Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.

(c)Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.

(2)It is not necessary to the creation of an express warranty that the seller use formal words such as ‘warrant’ or ‘guarantee’ or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller’s opinion or commendation of the goods does not create a warranty.

A few issues dominate judicial treatment of the creation of express warranties. The first issue involves understanding how sections 2–313(1)(a) and 2–313(2) work together. How do we decide whether a statement by the seller is an “affirmation of fact or promise” or “merely the seller’s opinion or commendation of the goods?”¹³⁵ Courts sometimes refer to a seller’s opinion as “puffing” or “sales talk,”¹³⁶ and this description sheds light on the distinction the section is trying to make. Section 2–313 enforces real commitments by the seller, but attempts to exclude the kind of sales chatter that would not induce reliance among reasonable people, who would realize that a sales pitch cannot form the basis of a lawsuit. This distinction is not always easy to make. For example, the label on a cosmetic product that stated, “100% natural mineral advanced protection,” according to one court, is just puffing, but the same court found that “100% natural mineral hydrating defense” survived a motion to dismiss.¹³⁷ Still, the task for courts here is similar to the general test for determining the legal significance of communications between parties: What would a reasonable person believe about what the seller said or did?¹³⁸

Several factors can help us decide what a reasonable buyer would believe about whether a statement constitutes a warranty or a sales pitch. For example, is the statement specific or vague?¹³⁹ “This is a great used car” is so general and vague that a reasonable person would understand that the seller is just trying to sell the old clunker. A representation that a helmet was “one of the best,” “great,” and “top rated,” would not create an express warranty, but a statement that the helmet “could protect us completely” could do so.¹⁴⁰ Another factor is whether a statement is verifiable.¹⁴¹ A reasonable person would believe that the assurance, “this car gets 32 miles per gallon on the open road” is more than sales jabber because it relates to a particular fact that can be checked.¹⁴² A third factor is whether a statement is definitive, meaning that it makes a commitment.¹⁴³ For example, a reasonable person would hardly think that a seller intends to make a commitment when he says, “I think you’ll love this car.”¹⁴⁴ A fourth factor is whether a statement is oral or in writing.¹⁴⁵ Writings command more attention and, therefore, a reasonable person may take more stock in a writing.¹⁴⁶

The second express-warranty issue involves the nature of descriptions that become warranties under section 2–313(1)(b). Suppose you purchase an air conditioner at Sears. You open the carton at home only to find an electric fan and instructions to aim the fan at a large block of ice. Suppose further that none of the documentation refers to any warranties, but the salesperson told you an air conditioner was in the carton. “Air conditioner” is a generic title that courts should treat as a description express warranty. In light of the salesperson’s representation, a reasonable person would believe that he was buying a machine with a condenser and freon, and all that other good stuff.¹⁴⁷ But a reasonable person would not believe that a cereal box of “Crunchberries” contains real fruit.¹⁴⁸

The third issue involves the “basis of the bargain” requirement of section 2–313(1)(a), (b) and (c). For example, even if the seller makes a statement that constitutes an affirmation, promise, or description, the statement is an express warranty only if it is a “basis of the bargain.” So, what does this strange term mean? Comment 3 to section 2–313 suggests that every seller statement that meets the other conditions for creating an express warranty is presumed to be a basis of the bargain unless the seller proves otherwise.¹⁴⁹ The comment adds that “no particular reliance on such statements need be shown in order to weave them into the fabric of the agreement.”¹⁵⁰ So how does a seller show that a statement is not a “basis of the bargain?” In fact, because of the lack of clear direction from comment 3 and the inherent ambiguity of the term “basis of the bargain,” courts have not been consistent in deciding whether the seller must show that the buyer has not relied on the statement.¹⁵¹

Perhaps the most helpful approach to “basis of the bargain” would be to follow the “mixed motives” idea of bargained-for-exchange theory and the interpretation strategy of agreement law.¹⁵² Recall that, for a court to find consideration to support a promise, only one of the promisor’s motives must be to extract something from the other party.¹⁵³ Similarly, the promisee may have many motives for performing or returning a promise, only one of which must be induced by the promisor.¹⁵⁴ Perhaps a statement is a basis of the bargain so long as the seller’s utterance is at least “one of the inducements for the purchase of the product.”¹⁵⁵ Further, the test should be whether, as a result of the statement, a reasonable buyer would be induced and whether the buyer actually was induced.¹⁵⁶

The fourth issue involving express warranties deals with samples and models that create express warranties under section 2–313(1)(c). According to comment 6, a sample is “actually drawn from the bulk of goods which is the subject matter of the sale * * *.” A model is not drawn from the goods, but is something the seller offers for inspection.¹⁵⁷ A sample creates a stronger presumption that it is a “basis of the bargain” than a model.¹⁵⁸ A seller should be able to avoid creating an express warranty under this subsection by clearly telling the buyer that she is showing him an item for illustrative purposes only, and that the goods sold may be different.¹⁵⁹

2.The Implied Warranty of Merchantability

UCC section 2–314 states in part:

(1)Unless excluded or modified, * * * a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. * * *

(2)Goods to be merchantable must be at least such as * * *

(c)are fit for the ordinary purposes for which such goods are used * * *.

Several additional factors in section 2–314(2) help define merchantability,¹⁶⁰ but courts have focused on whether the goods are fit for their ordinary purpose. Before turning to the meaning of fitness, notice that the merchantability warranty arises only if the seller is a merchant. A merchant is “a person who deals in good of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction * * *.”¹⁶¹ If you are a thriving Wall Street lawyer (be careful, the job isn’t for everyone) and you sell your old piano to Alice, she has no merchantability warranty protection because you don’t “deal” in pianos. People who “deal” in goods, for example, sell their inventory to consumers and other buyers.¹⁶² People who have “knowledge or skill peculiar” to the goods include craftspeople such as “electricians, plumbers, carpenters, [and] boat builders * * *.”¹⁶³

What does it take for goods to be fit for their ordinary purpose? To some extent, the answer is obvious. For example, “[i]t is well recognized, both as a matter of law and common sense, that ‘a merchantable vehicle * * * requires more than the mere capability of just getting from point A to point B.’ ”¹⁶⁴ Equally important are the vehicle’s safety, operability, and mileage range. So gear shift defects that cause “rollaway” accidents would not be merchantable.¹⁶⁵ Similarly, an air conditioner has to cool air. A piano has to make music (at least if the right person plays it).

Many of the disputes between buyers and sellers involve goods that injure a buyer, either in person or in the pocketbook, even though the goods are quite ordinary. For example, fish chowder ordinarily contains bones, so a person who chokes on a bone would not have a cause of action for breach of the merchantability warranty.¹⁶⁶ Fish chowder that contains a lizard’s head, on the other hand, would not be merchantable.

3.The Implied Warranty of Fitness for a Particular Purpose

UCC section 2–315 states:

Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there is unless excluded or modified * * * an implied warranty that the goods shall be fit for such purpose.

This implied warranty focuses on the time of contracting. A fitness warranty arises if, at that time, the seller has reason to know that the buyer wanted the goods for a particular purpose and the buyer relied on the seller’s expertise to “select or furnish” the goods.¹⁶⁷ Suppose you go to a bicycle store and tell the salesperson that you are about to embark on a cross-country bike trip for six weeks. You ask him to recommend a suitable bike for the trip. The salesperson, who never rode a bike in his life, picks out a heavy mountain bike with only three gears, which is not very practical for long-distance road riding. If you rely on the seller’s selection of the bike and your reliance is reasonable, you have rights under section 2–315.¹⁶⁸

But was your reliance reasonable? Perhaps a reasonable person who was going to ride cross country would be aware that a heavy mountain bike would be inappropriate for the trip. Perhaps a reasonable person would know that the salesperson is a novice. If either is true, you did not reasonably rely on the seller.¹⁶⁹ At any rate, you can see that, unlike section 2–314’s implied warranty of merchantability, reliance is the key here.¹⁷⁰ Another difference between the two implied warranties is that goods can be merchantable (fit for their ordinary purpose), but not fit for a particular purpose. The heavy mountain bike may be just dandy for riding up mountains, and therefore merchantable, but unfit for your cross-country road trip.

4.Disclaimers

UCC section 2–316 deals with “exclusion or modification of warranties.” (Remember, I told you there was going to be some bad news.) The section provides in full:

(1)Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this Article on parol or extrinsic evidence (Section 2–202) negation or limitation is inoperative to the extent that such construction is unreasonable.

(2)Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that “There are no warranties which extend beyond the description on the face hereof.”

(3)Notwithstanding subsection (2)

(a)unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like “as is,” “with all faults” or other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty; and

(b)when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and

(c)an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.

a.Disclaiming Express Warranties

Section 2–316(1) governs the exclusion or modification of express warranties. The section constitutes a small victory for buyers. Although it directs courts to try to construe language creating and nullifying express warranties consistently, the section codifies the idea that the seller is responsible for any inconsistencies between statements that cannot be resolved. If the contract states that a used car will get 36 miles per gallon, but also disclaims all warranties, section 2–316(1) directs courts to construe the ambiguity created by the contradiction against the seller. The express warranty of 36 miles per gallon should survive.¹⁷¹ The American Law Institute’s Principles of the Law of Software Contracts, which, as the name suggests, applies to contracts for the transfer of software, bars enforcement of an express warranty disclaimer if the software user reasonably would not expect the disclaimer. The theory of the software principles is that the admonition in UCC section 2–316(1) to try to find “consistency” between express warranties and their disclaimers is confusing because language creating and disclaiming warranties can never be “consistent.”¹⁷²

Notice that section 2–316(1) includes a reference to section 2–202, the parol evidence rule. This reference creates an exception to the rule that inconsistencies go against the seller. We consider the parol evidence rule in awesome detail in Chapter 7 of this book.¹⁷³ For now understand that the rule is supposed to protect parties who rely on their written contracts from false allegations of prior promises or agreements that contradict the writing. In the context of warranty disclaimers, the problem arises when a buyer alleges that the seller made an oral express warranty (“this car will get 36 miles per gallon on the open road”), but the written contract either disclaims all warranties or specifically warrants lower gas mileage. If the parol evidence rule of section 2–202 did not supplement section 2–316(1), the buyer would be able to offer evidence of the 36 mile-per-hour statement and, if the trier of fact believed the evidence, it would create an express warranty that contradicts the writing. However, section 2–202 bars admission of the evidence. Under the UCC, the buyer cannot even prove that the seller made the statement.

If the last paragraph doesn’t make much sense to you now, please read the materials on the parol evidence rule and then reread the paragraph. If you read the parol evidence material and still don’t understand the above, at least you will know how to spell parol.

b.Disclaiming Implied Warranties

Getting rid of implied warranties is easy for sellers. To disclaim the implied warranty of merchantability, the seller must mention the term merchantability by name, and, if in writing, the disclaimer must be conspicuous (stand out).¹⁷⁴ The seller can disclaim an implied warranty of fitness for a particular purpose in a conspicuous writing, but in this case the seller does not have to use the magic words “fitness for a particular purpose.”¹⁷⁵

You are an attentive reader, and you just thought you learned how sellers can disclaim implied warranties. Well, you did, sort of. Read section 2–316(3), however. The preamble to section 2–316(3) says “[n]otwithstanding subsection (2),” which means that subsection 3 is about to reveal some exceptions to subsection (2). Generally, under section 2–316(3)(a), a seller can disclaim all implied warranties by including language such as “as is,” “with all faults,” or the like. The seller doesn’t have to mention merchantability or disclaim conspicuously after all.

Sections 2–316(3)(b) and (3)(c) constitute additional disclaimers based on the buyer’s inspection (or refusal to inspect) the goods, and based on “course of dealing, or course of performance, or usage of trade” respectively. Courts often use the latter sources of evidence to reveal the meaning of a contract, and we study them further in Chapter 7.¹⁷⁶ For now you need only grasp the general idea: If, for example, the seller and buyer had made several contracts over the years with the understanding that the seller was selling “as is,” their next deal will be “as is” too unless the parties expressly negate this previous “course of dealing.”

5.Caveat

Please understand that proving the existence of a warranty and the absence of an effective disclaimer does not mean that the buyer is ever going to see any compensation. The buyer must also prove that the goods did not comply with the warranty, that the buyer was injured because of the defect, that the buyer suffered provable damages, and that no other affirmative defenses (such as the statute of limitations, the lack of privity, or the lack of notice) apply.¹⁷⁷ You can pursue all of these issues in an upper class commercial law course.

¹Kirksey v. Kirksey, 8 Ala. 131 (1845).

²Id. at 131.

³Id.

⁴Id.

⁵See, e.g., Affiliated Enters. v. Waller, 5 A.2d 257, 260 (Del. Super. Ct. 1939) (“ ‘If a benevolent man says to a tramp,—‘If you go around the corner to the clothing shop there, you may purchase an overcoat on my credit,’ no reasonable person would understand that the short walk was requested as the consideration for the promise, but that in the event of the tramp going to the shop the promisor would make him a gift.’ ”) (citing 1 Samuel Williston & George J. Thompson, A Treatise on the Law of Contracts § 112 (Rev. Ed. 1936)); Dorman v. Publix-Saenger-Sparks Theatres, Inc., 184 So. 886, 889 (Fla. 1938); Chapter 2, Section (A)(1).

⁶Ryerss v. Presbyterian Congregation of Blossburg, 33 Pa. 114, 117 (1859) (“Where a party encourages a congregation, in the manner and to the extent [defendant] did, to go on and build a church in a specified locality, promising a subscription or gift of $100, and recognising and repeating that promise under such circumstances as are detailed in the evidence—and they go on, within a reasonable time, and build a church in substantial conformity with the understanding and intention of the promissor, it is in vain for him afterwards to deny the contract, its consideration, or its obligatory force.”).

⁷Seavey v. Drake, 62 N.H. 393, 394 (1882) (“[E]quity protects a parol gift of land equally with a parol agreement to sell it, if accompanied by possession, and the donee has made valuable improvements upon the property induced by the promise to give it.”).

⁸Id.

⁹Explanatory Notes in Restatement (First) of Contracts, 245–50 (limited ed. 1928) (comments of Williston).

¹⁰See infra note 54, and accompanying text.

¹¹See Chapter 5, Section (B).

¹²Restatement (Second) of Contracts § 90(2) (1981) (“A charitable subscription or a marriage settlement is binding * * * without proof that the promise induced action or forbearance.”).

¹³See, e.g., Wheeler v. White, 398 S.W.2d 93, 96 (Tex. 1965) (“The function of the doctrine of promissory estoppel is, under our view, defensive in that it estops a promisor from denying the enforceability of the promise.”); see also Comeau v. Mt. Carmel Med. Ctr., Inc., 869 F. Supp. 858, 863 (D. Kan. 1994) (“Promissory estoppel is a doctrine by which courts view performance in reasonable reliance on a promise as sufficient to create a legally binding contract where a contract otherwise lacks consideration.”).

¹⁴Baehr v. Penn-O-Tex Oil Corp., 104 N.W.2d 661, 664–65 (Minn. 1960); see also Restatement (Second) of Contracts § 2.

¹⁵See Cohen v. Cowles Media Co., 479 N.W.2d 387, 391 (Minn. 1992) (en banc), remanded on reh’g 481 N.W.2d 840 (Minn.1992); see also Landan v. Wal-Mart Real Estate Bus. Trust, 2016 WL 5253329 (W.D. Pa. 2016) (promise cannot be broad, vague, or aspirational); E. Allan Farnsworth, Contracts 95 (4th ed. 2004) (citing cases).

¹⁶See, e.g., Fox v. T-H Cont’l Ltd. P’ship, 78 F.3d 409, 414 (8th Cir. 1996) (“[Employer] characterized the director of sales position as ‘permanent.’ This statement does not constitute a clear and definite promise of continued employment terminable only for cause.”).

¹⁷Compare Burns v. Brinkley, 933 F. Supp. 528, 533 (E.D.N.C. 1996) (“Nor would a custom or practice of terminating employees only for good cause somehow alter the at-will nature of an employment relationship.”) with Eisenberg v. Alameda Newspapers, Inc., 88 Cal.Rptr.2d 802, 824 (Cal. Ct. App. 1999) (“In determining the existence of such a promise of termination only for cause, we look to the entire relationship of the parties, including * * * the personnel policies and practices of the employer * * *.”).

¹⁸See, e.g., Zinter v. Univ. of Minn., 799 N.W.2d 243, 246 n.1 (Minn. Ct. App. 2011) (student did not satisfy those requirements).

¹⁹1995 WL 322311 (Ohio Ct. App. 1995). I discuss Corradi and the next case analyzed in text, Dickens, in Robert A. Hillman, The Unfulfilled Promise of Promissory Estoppel in the Employment Setting, 31 Rutgers L. J. 1, 13–14 (1999) .

²⁰Corradi, 1995 WL 322311, at *1.

²¹Id.

²²Id. at *5–6.

²³Id. at *6.

²⁴Fed. R. Civ. P. 56(c) sets forth the summary judgment rule:

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law * * *.

See Crawford v. Metropolitan Gov’t, 129 S. Ct. 846, 850 n.1 (2009) (“Because this case arises out of the District Court’s grant of summary judgment for Metro, ‘we are required to view all facts and draw all reasonable inferences in favor of the nonmoving party, [Crawford].’ ”) (quoting Brosseau v. Haugen, 543 U.S. 194, 195 n.2 (2004)).

²⁵83 F.3d 431 (10th Cir. 1996) (unpublished table decision).

²⁶Id. at *5.

²⁷Id. at *6.

²⁸Id.

²⁹Compare Silcott v. Rio Linda Chem. Co., 1996 WL 303679, at *2 (Ohio Ct. App. 1996) (“In the absence of an employer’s assent to a definite term of employment, statements manifesting praise for an employee’s performance which lead to a ‘personal but objectively unfounded sense of job security’ are insufficient to alter the nature of the employment relationship.”) (quoting Weiper v. W.A. Hill & Assocs., 661 N.E.2d 796, 799 (Ohio Ct. App. 1995)).

³⁰Neiss v. Ehlers, 899 P.2d 700, 707 (Or. Ct. App. 1995) (“The fact that a promise is indefinite, incomplete or even incapable of enforcement according to its own terms, does not mean that no redress should be possible for the damage that directly flows from the promisee’s reliance on the promise.”); Hellbaum v. Burwell and Morford, 463 P.2d 225, 229 (Wash. Ct. App. 1969) (“The doctrine of promissory estoppel has been applied to render enforceable a gratuitous or somewhat indefinite promise to obtain insurance.”).

³¹See Baehr v. Penn-O-Tex Oil Corp., 104 N.W.2d 661 (Minn. 1960) (oil company’s agent’s expressed intention to pay lessee’s rent did not constitute a promise to pay the rent).

³²Local 1330, United Steel Workers v. United States Steel Corp., 631 F.2d 1264, 1277 (6th Cir. 1980) (“ ‘The condition precedent of the alleged contract and promise—profitability of the Youngstown facilities—was never fulfilled, and the actions in contract and for detrimental reliance cannot be found for plaintiffs.’ ”) (quoting United Steel Workers of Am., Local No. 1330 v. United States Steel Corp., 492 F. Supp. 1 (N.D. Ohio 1980)); see also Watson v. City of Salem, 934 F. Supp. 643, 661 (D.N.J. 1995) (“[t]he promise made to Plaintiff was clearly conditional and contingent, as opposed to clear and definite * * *.”).

³³Restatement (Second) of Contracts § 90; see, e.g., Aceves v. U.S. Bank, N.A., 192 Cal. App. 4th 218, 227, 120 Cal. Rptr. 3d 507, 515 (Cal. Ct. App. 2011), as modified (Feb. 9, 2011).

³⁴See, e.g., City of Geneseo v. Utilities Plus, 533 F.3d 608, 617 (8th Cir. 2008) (“[Plaintiff] must set forth evidence demonstrating both actual and reasonable reliance.”); Landan v. Wal-Mart Real Estate Bus. Trust, 2016 WL 5253329 (W.D. Pa. 2016) (same); McKenny v. John V. Carr & Son, Inc., 922 F. Supp. 967, 980 (D. Vt. 1996) (“Plaintiff must show that his reliance on the promise was reasonable.”); McDonald’s Corp. v. Miller, 1994 WL 507822, at *10 (D.N.J.1994) (“[Plaintiff] could not, as a matter of law, reasonably rely on these conditional ‘promises’ of a franchise award.”).

³⁵See, e.g., Landan v. Wal-Mart Real Estate Bus. Trust, 2016 WL 5253329 (W.D. Pa. 2016).

³⁶Restatement (Second) of Contracts § 90; see also see, e.g., Aceves v. U.S. Bank, N.A., 192 Cal. App. 4th 218, 228, 120 Cal. Rptr. 3d 507, 515 (Cal. Ct. App. 2011), as modified (Feb. 9, 2011) (“Aceves relied on U.S. Bank’s promise * * * by not relying on her husband’s financial assistance in developing a chapter 13 plan * * *.”); B & W Glass, Inc. v. Weather Shield Mfg., Inc., 968 F.2d 19 (10th Cir.1992) (“[Defendant’s agent] gave the [plaintiffs] a quote of $101,725 for this project without including any exceptions, or modifications, in the quote. Given these facts, it was reasonable for the [plaintiffs] to rely on the quote. Any assumptions which the [plaintiff] made were induced by the actions which [defendant’s agent] took.”).

³⁷See McKenny, 922 F. Supp. at 980 (employee failed to offer evidence that a promise of “just cause employment” induced him to sell his stock to his employer); Alden v. Presley, 637 S.W.2d 862 (Tenn. 1982) (Elvis Presley’s estate not liable to the plaintiff who claimed that she relied on “the King’s” promise to pay off the plaintiff’s mortgage when plaintiff knew at the time she relied that the King’s estate would not pay off the mortgage).

³⁸Ndubizu v. Drexel Univ., 768 F. Supp. 2d 796, 798 (E.D. Pa. 2011).

³⁹Id. at 801.

⁴⁰Daniel A. Farber and John H. Matheson, Beyond Promissory Estoppel: Contract Law and the “Invisible Handshake,” 52 U. Chi. L. Rev. 903, 905 (1985).

⁴¹Edward Yorio and Steve Thel, The Promissory Basis of Section 90, 101 Yale L.J. 111, 111 (“Judges actually enforce promises rather than protect reliance in Section 90 cases.”).

⁴²See, e.g., James Gordley, Enforcing Promises, 83 Cal. L. Rev. 547, 569 (1995) (“Farber and Matheson suggested, and Yorio and Thel have recently confirmed, that most often the promisee recovers under the doctrine [of promissory estoppel] without proving he changed his position in reliance on the promise. Indeed, sometimes he recovers when it is fairly clear his position did not change.”); Randy E. Barnett, The Death of Reliance, 46 J. Legal. Educ. 518, 522 (1996).

⁴³See Robert A. Hillman, Questioning the “New Consensus” on Promissory Estoppel: An Empirical and Theoretical Study, 98 Colum. L. Rev. 580 (1998).

⁴⁴Neiss v. Ehlers, 899 P.2d 700, 707 (Or. Ct. App. 1995).

⁴⁵Schroeder v. Pinterest, Inc., 17 N.Y.S.3d 678, 694 (N.Y. App. Div. 2015) (“The complaint merely states, in conclusory fashion, that plaintiffs ‘reasonably relied on Cohen’s promise,’ but does not explain how they purportedly relied. Indeed, there are no facts pleaded showing that plaintiffs did something, or refrained from doing something, in reliance on Cohen’s email.”).

⁴⁶Faulks v. Wells Fargo & Co., 231 F. Supp. 3d 387, 404 (N.D. Cal. 2017) (quoting Garcia v. World Sav., FSB, 183 Cal. App. 4th 1031, 1041–43 (2010)). And further, “logically, injury is required; without injury there would be no injustice in not enforcing the promise.” Oliveira v. Sugarman, 152 A.3d 728, 746 (Md. 2017) (quoting Joseph M. Perillo, Contracts § 6.1 (7th ed. 2014)).

⁴⁷Restatement (Second) of Contracts § 90.

⁴⁸Cohen v. Cowles Media Co., 479 N.W.2d 387, 391 (Minn. 1992) (en banc) (“[T]his is a legal question for the court, as it involves a policy decision.”), remanded on reh’g 481 N.W.2d 840 (Minn. 1992).

⁴⁹Cohen, 479 N.W.2d at 392; see also Ruzicka v. Conde Nast Publ’ns, Inc., 999 F.2d 1319, 1323 (8th Cir. 1993) (promise involved “matters of utmost privacy”).

⁵⁰Spanier v. TCF Bank Sav., 495 N.W.2d 18, 20 (Minn. Ct. App. 1993).

⁵¹Restatement (Second) of Contracts § 90, cmt. b.

⁵²Cf. Grouse v. Group Health Plan, Inc., 306 N.W.2d 114, 116 (Minn. 1981) (en banc) (“The parties focus their arguments on whether an employment contract which is terminable at will can give rise to an action for damages if anticipatorily repudiated. [Employer] contends that recognition of a cause of action on these facts would result in the anomalous rule that an employee who is told not to report to work the day before he is scheduled to begin has a remedy while an employee who is discharged after the first day does not.”).

⁵³Grouse, 306 N.W.2d at 116; see also Goff-Hamel v. Obstetricians & Gynecologists, P.C., 588 N.W.2d 798, 801 (Neb. 1999) (applying promissory estoppel in overturning trial court’s conclusion “that since Goff-Hamel was to be employed at will, her employment could be terminated at any time, including before she began working”); cf. Sharon v. Yellow Freight Sys., Inc., 872 F. Supp. 839, 848 (D. Kan. 1994), aff’d, 107 F.3d 21 (10th Cir. 1997).

⁵⁴See, e.g., Faimon v. Winona State Univ., 540 N.W.2d 879, 884 (Minn. Ct. App. 1995) (“[P]romise to appellant was one that a benefit would probably be given and that it would probably be given to appellant. We can find no precedent for application of the doctrine of promissory estoppel to enforce a promise with benefits as uncertain as these, and we conclude that this is not the kind of commitment calling for special judicial action in the name of avoiding injustice.”); see also Landan v. Wal-Mart Real Estate Bus. Trust, 2016 WL 5253329, *15 (W.D. Pa. 2016) (no injustice “when a party relies on its own business judgment”); Silberman v. Roethe, 218 N.W.2d 723, 730 (Wis. 1974) (no injustice in failing to enforce an informal implied promise).

⁵⁵Restatement (Second) of Contracts § 90, cmt. b.

⁵⁶See supra note 10, and accompanying text.

⁵⁷See supra note 48, and accompanying text.

⁵⁸398 S.W.2d 93 (Tex. 1965).

⁵⁹Elvin Assocs. v. Franklin, 735 F. Supp. 1177 (S.D.N.Y. 1990).

⁶⁰Hoffman v. Red Owl Stores, 133 N.W.2d 267 (Wis. 1965).

⁶¹William C. Whitford & Stewart Macaulay, The Rest of the Story, 61 Hastings L. J. 801, 854–55 (2010) (footnote omitted).

⁶²Robert A. Hillman, Precedent in Contract Cases and the Importance(?) of the Whole Story, 87 Temple L. Rev. 759, 765–766 (2015) (footnotes omitted).

⁶³Charles L. Knapp, Reliance in the Revised Restatement: The Proliferation of Promissory Estoppel, 81 Colum. L. Rev. 52, 53 (1981).

⁶⁴Id. See also Stanley D. Henderson, Promissory Estoppel and Traditional Contract Doctrine, 78 Yale L.J. 343 (1969) (tracing the proliferation of promissory estoppel).

⁶⁵See Grant Gilmore, The Death of Contract 72 (1974).

⁶⁶See generally Hillman, supra note 43.

⁶⁷Id. at 596.

⁶⁸Landan v. Wal-Mart Real Estate Bus. Trust, 2016 WL 5253329 (W.D. Pa. 2016).

⁶⁹For a discussion of agreements to agree, see Chapter 2, Section (B)(7)(a).

⁷⁰Wheeler, 398 S.W.2d at 95 n. 2 (accepting plaintiff’s argument that “if for any reason said contract is not sufficiently specific and definite, then nevertheless defendant is estopped to so claim and to set up any insufficiency because of the defendant’s act in entering into said contract and exhorting plaintiff to clear the premises to make ready for the construction * * *”); see also Kolkman v. Roth, 2002 WL 1429524, at *3 (Iowa Ct. App. 2002), aff’d, 656 N.W.2d 148 (Iowa 2003) (“We agree with plaintiff that there is a fact question as to whether promissory estoppel renders the evidence of the alleged oral contract admissible.”).

⁷¹398 S.W.2d at 97; see also Landan v. Wal-Mart Real Estate Bus. Trust, 2016 WL 5253329 (W.D. Pa. 2016) (discussing whether promissory estoppel should apply if the statute of frauds barred enforcement of an alleged oral agreement).

⁷²See infra Chapter 5, Sections (A)(1) and (B).

⁷³See Hillman, supra note 43, at 601–02.

⁷⁴All-Tech Telecom, Inc. v. Amway Corp., 174 F.3d 862, 869 (7th Cir. 1999); see also id. (“When there is an express contract governing the relationship out of which the promise emerged, and no issue of consideration, there is no gap in the remedial system for promissory estoppel to fill.”); Whistle v. David H. Arrington Oil & Gas Inc., 2009 WL 1529819, at *10 (E.D. Ark. 2009) (“Promissory estoppel is applicable only in the absence of an otherwise enforceable contract.”); LaSalle Nat’l Bank v. Metropolitan Life Ins. Co., 18 F.3d 1371, 1376 (7th Cir. 1994) (“[T]he doctrine of promissory estoppel * * * ‘has never been considered available when the parties have entered into a contract which is binding under contract law * * *.’ ”) (quoting Wagner Excello Foods, Inc. v. Fearn Int’l, Inc., 601 N.E.2d 956, 964 (Ill. App. Ct. 1992)); Wagner v. Reuter, 208 P.3d 1317, 1322 (Wyo. 2009) (“[Promissory estoppel] claims are precluded by the existence of an enforceable contract.”).

⁷⁵ See, e.g., Learning Annex Holdings, LLC v. Rich Global, LLC, 2011 WL 3586138, at *2 (S.D.N.Y. 2011), reconsideration den., 860 F. Supp. 2d 237 (S.D.N.Y. 2012) (discussing quantum meruit and unjust enrichment).

⁷⁶See, e.g., Bloomgarden v. Coyer, 479 F.2d 201, 211 (D.C. Cir. 1973) (“Generally, in order to recover on a quasi-contractual claim, the plaintiff must show that the defendant was unjustly enriched at the plaintiff’s expense, and that the circumstances were such that in good conscience the defendant should make restitution.”); In re DeCecco, 234 B.R. 543, 545 (Bankr. M.D. Fla. 1999) (“[O]ne who benefits another should be rewarded, even absent of a contract, because the recipient of the benefit should not be unjustly enriched.”); see also Andrew Kull, Restitution as a Remedy for Breach of Contract, 67 S. Cal. L. Rev. 1465, 1478 (1994) (“ ‘[R]estitution’ refers to * * * those instances of liability imposed by law to prevent the unjust enrichment of one person at the expense of another.”).

⁷⁷Arjay Inv. Co. v. Kohlmetz, 101 N.W.2d 700, 702 (Wis. 1960) (citing Frederic Campbell Woodward, The Law of Quasi Contracts 8 (1913)). See also Uncle Henry’s Inc. v. Plaut Consulting Co., 399 F.3d 33, 45–46 (1st Cir. 2005) (“To sustain a claim for quantum meruit * * * the claimant must establish that services were provided to the other party by the claimant, that the services were provided with the knowledge and consent of the other party, and that the services were rendered under circumstances that make it reasonable for the claimant to expect payment.”).

⁷⁸See Continental Forest Prods., Inc. v. Chandler Supply Co., 518 P.2d 1201, 1205 (Idaho 1974) (“[T]he essence of a contract implied in law lies in the fact that the defendant has received a benefit which it would be inequitable for him to retain * * *.”); Farmers Nat’l Bank of Bloomsburg v. Albertson, 199 A.2d 486, 489 (Pa. Super. Ct. 1964) (“Where one party has been unjustly enriched at the expense of another, he is required to make restitution. In order to recover, there must be both an enrichment and an injustice resulting if the recovery for the enrichment is denied.”).

⁷⁹See, e.g., Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher, 417 N.E.2d 541 (N.Y. 1981).

⁸⁰Cf. Gay v. Mooney, 50 A. 596, 597 (N.J. Sup. Ct. 1901), aff’d per curiam, 52 A. 1131 (N.J. 1902) (“[T]he service was not a gift, but a sale, and out of that determination the law deduces a right in him who sold the service to be paid its value by him who bought it.”); Kona Tech. Corp. v. Southern Pac. Transp. Co., 225 F.3d 595, 606 (5th Cir. 2000) (“Recovery in quantum meruit will be had when non payment for the services rendered would ‘result in an unjust enrichment to the party benefitted [sic] by the work.’ ”) (quoting City of Ingleside v. Stewart, 554 S.W.2d 939, 942 (Tex. Civ. App. 1977)).

⁸¹Brown v. Brown, 524 A.2d 1184, 1187 (D.C. 1987) (“When * * * there is an applicable presumption that the services were rendered gratuitously—as occurs, for example, in the context of a parent-child relationship—a promise to pay obviously cannot be implied by the mere rendition and acceptance of valuable services.”); see generally Dan B. Dobbs, Handbook on the Law of Remedies § 4.9 (1973).

⁸²Brown, 524 A.2d at 1187; Offord v. Jenner’s Estate, 189 S.W.2d 173, 176 (Mo. Ct. App. 1945) (“Where the close and intimate family relationship exists, there arises the presumption that the services were intended to be gratuitous, and in such a case there can be no recovery * * *.”).

⁸³See, e.g., Gay, 50 A. at 597 (“In order to rebut a presumption that the service was rendered and received as a gratuity, the plaintiff put in evidence tending to show an understanding between himself and the deceased that the latter would devise a certain dwelling house to the plaintiff’s children in return for what he should receive as a member of the family.”).

⁸⁴See Joseph M. Perillo, Restitution in a Contractual Context, 73 Colum. L. Rev 1208, 1215–16 (1973).

⁸⁵See Chapter 4, Section (B).

⁸⁶Perillo, supra note 84, at 1215–16.

⁸⁷See Chapter 4, Section (A).

⁸⁸See, e.g., Blackmon v. Iverson, 324 F. Supp. 602 (E.D. Pa. 2004) (use of the nickname “the Answer” by basketball player Allen Iverson did not unjustly enrich him); Certified Fire Prot. Inc. v. Precision Constr., 283 P.3d 250, 258 (Nev. 2012) (preparatory work conferred no benefit); McIntosh v. Gilley, 753 F. Supp. 2d 46, 63 (D.D.C. 2010) (payment of mortgage on a condominium not unjust enrichment of a party who did not live there and had no legal interest in the condo).

⁸⁹Kearns v. Andree, 139 A. 695 (Conn. 1928).

⁹⁰Willis v. International Oil and Gas Corp. 541 So.2d 332, 334 (La. Ct. App. 1989).

⁹¹See Chapter 7, Section (B)(3).

⁹²Kearns, 139 A. at 698 (“[I]f the work done on the property to adapt it to the desires of the defendant was done under the terms of an oral agreement for the sale of the premises, in good faith, and in the honest belief that the agreement was sufficiently definite to be enforced, the plaintiff is entitled to recover reasonable compensation therefor.”); see also Zirnhelt v. Ransom County, 137 N.W.2d 785, 789 (N.D. 1965) (“A contract is implied where a person performs services, furnishes property, or expends money for another, at such other’s request, and there is no express agreement as to compensation.”).

⁹³See, e.g., John P. Dawson, Restitution Without Enrichment, 61 B.U. L. Rev. 563, 582–83 (1981).

⁹⁴See, e.g., Kearns, 139 A. at 697 (“[A] plaintiff, who cannot bring an action upon a special contract for some reason other than his own fault, is permitted a recovery for the reasonable value of the services which he has performed, without regard to the extent of the benefit conferred upon the other party to the contract.”).

⁹⁵See infra notes 118–120; Chapter 5, Sections (A)(4)(a) and (A)(4)(b). Here’s a case if you can’t wait: Coleman v. Coleman, 949 N.E.2d 860, 869 (Ind. Ct. App. 2011) (“[T]he improvements to the property can only be described as having been ‘officiously’ provided, i.e. without request by the Colemans * * *. Therefore, even if the Colemans were enriched by the improvements, there simply is insufficient evidence that they were unjustly enriched.”).

⁹⁶See, e.g., Petrus Fam. Trust v. Kirk, 415 P.3d 358, 363 (Idaho 2018) (“Rescission and restitution are remedies available in contract law. See, e.g., 26 Williston on Contracts §§ 68:2, 68:3 (4th ed. 2017); Restatement (Third) of Restitution and Unjust Enrichment §§ 37, 38, 39, 54 (2011)”); Hunter v. Vicario, 130 N.Y.S. 625, 628 (App. Div. 1911) (“[P]laintiff may at his option either sue for the breach and recover damages, or abandon the contract altogether, repudiate it because of defendant’s repudiation, and recover under quantum meruit.”); Posner v. Seder, 68 N.E. 335, 335 (Mass. 1903) (“[T]he innocent party may either sue on the contract for damages for the breach, or, if he so elects, he may regard the action of the defendants as indicating a purpose on their part to repudiate the contract, may accept the repudiation, and recover upon a quantum meruit the value of his services * * *.”).

⁹⁷Battaglia v. Clinical Perfusionists, Inc., 658 A.2d 680, 683 (Md. 1995) (“[B]ack wages may be recovered either by claiming the value of the work performed (quantum meruit), or by including the back wages as part of a claim for breach of the express contract.”); Posner, 68 N.E. at 335.

⁹⁸Constantino v. American S/T Achilles, 580 F.2d 121, 125 (4th Cir. 1978) (Winter, J. concurring and dissenting) (“ ‘The defendant cannot refuse to abide by the contract and at the same time claim its protection when the other party is not in default.’ ”) (quoting 12 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 1485 at 312 (3d ed. 1970)).

⁹⁹Robert Childres & Jack Garamella, The Law of Restitution and the Reliance Interest in Contract, 64 Nw. U. L. Rev. 433, 439–40 (1969).

¹⁰⁰Andrew Kull, Restitution as a Remedy for Breach of Contract, 67 S. Cal. L. Rev. 1465, 1482–83 (1994) (“[C]ourts in some circumstances favor a punitive remedy for breach of contract, and that stripping a defendant of the benefits secured by a contract he has failed to perform has seemed to judges, in some circumstances, to be no more than poetic justice.”).

¹⁰¹Plaza Shoe Store, Inc. v. Hermel, Inc., 636 S.W.2d 53, 59–60 (Mo. 1982) (en banc) (“The better rule, undoubtedly, would be to use the contract price as an upper limit or ceiling on the amount the discharged attorney could recover.”); Johnson v. Bovee, 574 P.2d 513, 514 (Colo. Ct. App. 1978) (“We believe using the contract price as a ceiling on restitution is the better-reasoned resolution of this question * * *. It is illogical to allow [plaintiff] to recover the full cost of his services when, if he completed the house, he would be limited to the contract price plus the agreed upon extras.”).

¹⁰²Oliver v. Campbell, 273 P.2d 15, 20 (Cal. 1954) (citing Restatement (First) of Contracts § 350).

¹⁰³6 N.H. 481 (1834).

¹⁰⁴Id. at 485 (“[T]he party who attempts performance may be placed in a much worse situation than he who wholly disregards his contract, and the other party may receive much more, by the breach of the contract, than the injury which he has sustained by such breach, and more than he could be entitled to were he seeking to recover damages by an action.”).

¹⁰⁵Id. at 498.

¹⁰⁶Id. at 489.

¹⁰⁷Id. at 490 (“It is easy, if parties so choose, to provide by an express agreement that nothing shall be earned, if the laborer leaves his employer without having performed the whole service contemplated * * *.”).

¹⁰⁸See, e.g., N.Y. Labor Law § 191 (McKinney 2002).

¹⁰⁹Britton, 6 N.H. at 490 (“This rule, by binding the employer to pay the value of the service he actually receives, and the laborer to answer in damages where he does not complete the entire contract, will leave no temptation to the former to drive the laborer from his service, near the close of his term, by ill treatment, in order to escape from payment * * *.”).

¹¹⁰Lancellotti v. Thomas, 491 A.2d 117, 119 (Pa. Super. Ct. 1985) (“The party who breaches after almost completely performing should not be more severely penalized than the party who breaches by not acting at all or after only beginning to act.”); Restatement (Second) of Contracts § 374.

¹¹¹Britton, 6 N.H. at 1176 (“The amount * * * for which the employer ought to be charged, where the laborer abandons his contract, is only the reasonable worth, or the amount of advantage he receives upon the whole transaction, and, in estimating the value of the labor, the contract price for the service cannot be exceeded.”); United States for Use of Palmer Constr., Inc. v. Cal State Elec., Inc., 940 F.2d 1260, 1265 (9th Cir. 1991) (“[T]he contract price represents a ceiling on the amount the non-breaching party may be required to pay—in toto.”).

¹¹²Matter of Hallmark Builders, Inc., 64 B.R. 301, 305 (Bankr. M.D. Fla. 1986) (“[Creditors] are entitled to recover $565.00 in damages resulting from breach of contract which represents the amount of damages after computing an offset of the Debtor’s quantum meruit recovery.”).

¹¹³Liautaud v. Liautaud, 221 F.3d 981, 988 (7th Cir. 2000) (“[A] party may not recover damages for unjust enrichment pursuant to a gift relationship.”).

¹¹⁴Johnson Group, Inc. v. Beecham, Inc., 952 F.2d 1005, 1007 (8th Cir. 1991) (“To recover under quantum meruit under Missouri law, a plaintiff must prove it provided services to the defendant at the request or with the acquiescence of the defendant* * *.”); Sayed v. Sayed, 2008 WL 3157456, at *4 (Mich. Ct. App. 2008) (“[P]laintiff was not entitled to recover under an unjust enrichment theory in light of * * * testimony that the money was intended as a gift.”).

¹¹⁵Chadirjian v. Kanian, 123 A.D.2d 596, 598 (N.Y. App. Div. 1986) (“An agreement may be implied under the doctrine of unjust enrichment in order to prevent one person who has obtained a benefit from another without ever entering into a contract with that person from unjustly enriching himself at the other party’s expense.”); see also Confold Pac., Inc. v. Polaris Indus., Inc., 433 F.3d 952, 957 (7th Cir. 2006) (“Firms constantly disseminate information without expectation of payment. It would be ridiculous to think that Confold could simply have mailed its container design to every company in the world that uses containers and then gone around and sued all the companies that used the design. It is different if the design is patented or the recipient agrees not to use it * * *.”).

¹¹⁶Bloomgarden v. Coyer, 479 F.2d 201, 208–09 (D.C. Cir. 1973) (“[T]he party seeking payment must show (1) that the services were carried out under such circumstances as to give the recipient reason to understand (a) that they were performed for him and not for some other person, and (b) that they were not rendered gratuitously, but with the expectation of compensation from the recipient; and (2) that the services were beneficial to the recipient.”); see also Midcoast Aviation, Inc. v. General Elec. Credit Corp., 907 F.2d 732, 740 (7th Cir. 1990) (“Parties who perform services altruistically or gratuitously, with some end other than payment in mind, cannot recover quantum meruit; with no expectation of payment for services rendered, a party can hardly claim that another has been unjustly enriched.”).

¹¹⁷See Bloomgarden, 479 F.2d 201.

¹¹⁸See Sparks v. Gustafson, 750 P.2d 338 (Alaska 1988).

¹¹⁹Bloomgarden, 479 F.2d 201.

¹²⁰See id. at 212, n.66 (“No unfairness results from a denial of compensation to the claimant who had no expectation of personal remuneration at the time of performance.”); but see Steuart Inv. Co. v. The Meyer Group, Ltd., 61 A.3d 1227, 1234–35 (D.C. 2013) (distinguishing Bloomgarden); see also Lirtzman v. Fuqua Indus., Inc., 677 F.2d 548, 553 (7th Cir. 1982) (“[P]laintiff’s services were * * * rendered gratuitously with the expectation of developing future good will with [company].”).

¹²¹Bloomgarden, 479 F.2d at 211 (“Nor is compensation mandated where the services were rendered simply in order to gain a business advantage.”). But see Midcoast Aviation, 907 F.2d at 740 (“But the facts belie [the] contention that [plaintiff] was working for free, that it did not expect payment * * *. The facts show that [plaintiff] expected payment: through extra work if a long-term contract was secured, otherwise, through immediate billing.”).

¹²²Sparks, 750 P.2d at 343 (“[S]ervices that [plaintiff] performed for [his friend’s] estate were not the sort which one would ordinarily expect to receive from a friend as a mere gratuity.”); see also Burton v. McLaughlin, 217 P.2d 566, 570 (Utah 1950) (“If these services were as extensive as we have indicated the evidence shows, then they were not the kind of services that strangers usually give without expecting compensation.”).

¹²³Bloomgarden, 479 F.2d at 208 (“A quasi-contract, on the other hand, is not a contract at all, but a duty thrust under certain conditions upon one party to requite another in order to avoid the former’s unjust enrichment.”).

¹²⁴See Opelika Prod. Credit Ass’n., Inc. v. Lamb, 361 So.2d 95, 99 (Ala. 1978) (“The remedy of quasi-contract is founded upon the familiar principle of avoiding unjust enrichment. Where the plaintiff has suffered a detriment, and the defendant has received a benefit as a result, it is said that justice demands the repayment by the defendant of the plaintiff’s loss.”).

¹²⁵Bloomgarden, 479 F.2d at 208 (“An implied-in-fact contract is a true contract, containing all necessary elements of a binding agreement; it differs from other contracts only in that it has not been committed to writing or stated orally in express terms, but rather is inferred from the conduct of the parties in the milieu in which they dealt.”); see also Roebling v. Anderson, 257 F.2d 615, 619 (D.C. Cir. 1958) (“ ‘Contracts are express when their terms are stated by the parties and are often said to be implied when their terms are not so stated. The distinction is not based on legal effect but on the way in which mutual assent is manifested.’ ”) (quoting 1 Samuel Williston & Walter H. E. Jaeger, A Treatise on the Law of Contracts 8–11 (3d ed. 1957)).

¹²⁶Bloomgarden, 479 F.2d at 112 (“[Plaintiff] had no enforceable claim for recompense because it appeared without dispute that at the time he introduced the parties he did not expect to be personally compensated for so doing.”); see also Brown v. Brown, 524 A.2d 1184, 1189 (D.C. App. 1987) (“[A claimant] should have the burden to demonstrate, by a preponderance of the evidence, the existence of either an express or implied agreement that he or she expected to be paid and that the decedent intended to make payment.”).

¹²⁷Sparks, 750 P.2d 338; see also Sullivan v. William A. Randolph, Inc., 504 F.3d 665, 668 (7th Cir. 2007) (“Actions can speak as loud as words. That is a general principle of contract law * * *. ‘An agreement implied in fact is “founded upon a meeting of minds, which, although not embodied in an express contract, is inferred, as a fact, from conduct of the parties showing, in the light of the surrounding circumstances, their tacit understanding.” ’ ”) (citations omitted).

¹²⁸Gary-Wheaton Bank v. Burt, 433 N.E.2d 315, 323 (Ill. App. Ct. 1982) (“A contract implied in fact arises not by express agreement but by a promissory expression which may be inferred from the facts and circumstances which show an intent to be bound.”).

¹²⁹See, e.g., Ferguson v. Cotler, 382 So.2d 1315, 1316 (Fla. App. 1980) (relief granted to party conferring a benefit by mistake if the other party “has not relied upon the mistake to his detriment”).

¹³⁰Bank of Nova Scotia v. Bloch, 533 F. Supp. 1356, 1362 (D.C. V.I.), aff’d, 707 F.2d 1388 (3d Cir. 1982), and aff’d, Appeal of Bloch, 707 F.2d 1388 (3d Cir. 1982) (“Except in certain circumstances, a person who confers a benefit on another, such as by increasing the net value of property, should not be permitted to require the other to pay therefor, unless the one conferring the benefit had a valid reason for so doing.”); Western Coach Corp. v. Roscoe, 650 P.2d 449, 456 (Ariz. 1982) (“It is well established that a person who has been unjustly enriched at the expense of another is required to make restitution to the other. The principle is applicable, however, only if the person conferring the benefit is not an ‘officious intermeddler.’ ”); see also Dan B. Dobbs, Handbook on the Law of Remedies § 4.9 (1973).

¹³¹See, e.g., Lawlis v. Thompson, 405 N.W.2d 317 (Wis. 1987); Watts v. Watts, 405 N.W.2d 303, 307 (Wis. 1987) (“The plaintiff alleges that during the parties’ relationship, and because of her domestic and business contributions, the business and personal wealth of the couple increased. Furthermore, the plaintiff alleges that she never received any compensation for these contributions to the relationship and that the defendant indicated to the plaintiff both orally and through his conduct that he considered her to be his wife and that she would share equally in the increased wealth.”).

¹³²Watts, 405 N.W.2d at 313 (“According to the plaintiff’s complaint, the parties cohabited for more than twelve years, held joint bank accounts, made joint purchases, filed joint income tax returns, and were listed as husband and wife on other legal documents. Courts have held that such a relationship and ‘joint acts of a financial nature can give rise to an inference that the parties intended to share equally.’ ”) (citing Beal v. Beal, 577 P.2d 507, 510 (Or. 1978)); see also Bright v. Kuehl, 650 N.E.2d 311, 315 (Ind. Ct. App. 1995) (“[U]nmarried couples may raise equitable claims such as implied contract and unjust enrichment following the termination of their relationships where one of the parties attempts to retain an unreasonable amount of the property acquired through the efforts of both.”).

¹³³Watts, 405 N.W.2d at 307 (“[P]laintiff alleges that she never received any compensation for these contributions to the relationship and that the defendant indicated to the plaintiff both orally and through his conduct that he considered her to be his wife and that she would share equally in the increased wealth.”).

¹³⁴Watts, 405 N.W.2d at 313 (“[Plaintiff] alleges that the defendant accepted and retained the benefit of services she provided knowing that she expected to share equally in the wealth accumulated during their relationship.”); see also Carr v. Carr, 576 A.2d 872, 880 (N.J. 1990) (“[U]nmarried cohabitants * * * may acquire rights as a result of enduring, intimate personal relationships founded on mutual trust, dependence, and raised expectations.”).

¹³⁵Keith v. Buchanan, 220 Cal.Rptr. 392, 395 (Dist. Ct. App. 1985) (“In deciding whether a statement made by a seller constitutes an express warranty under this provision, the court * * * must determine whether the seller’s statement constitutes an ‘affirmation of fact or promise’ * * * or whether it is rather ‘merely the seller’s opinion or commendation of the goods’ under section 2313, subdivision (2).”); see also Tracton v. Viva Labs, Inc., 2017 WL 4125053 (S.D. Cal. 2017) (label of coconut oil stated the product is a “healthy addition,” “will boost nutrition,” and provide “many health benefits.” The court held that the plaintiff had adequately pled a breach of express warranty).

¹³⁶Sessa v. Riegle, 427 F. Supp. 760, 765 (E.D. Pa. 1977), aff’d, 568 F.2d 770 (3d Cir. 1978) (“[W]ords to the effect that ‘The horse is sound’ spoken during the telephone conversation between [seller] and [buyer] constitute an opinion or commendation rather than express warranty.”).

¹³⁷Gasser v. Kiss My Face, LLC, 93 U.C.C. Rep. Serv. 2d 1403, 2017 WL 4773426 (N.D. Cal., 2017); see also Sebastian v. Kimberly-Clark Corp., 2017 WL 6497675 (S.D. Cal. 2017) (plaintiff’s claim that Huggies Natural Care Products made an express warranty that it product was “natural, gentle and hypoallergenic” survived a motion to dismiss).

¹³⁸See Chapter 2, Section (B)(1).

¹³⁹1 James J. White, Robert S. Summers & Robert A. Hillman, Uniform Commercial Code 861–862 (6th ed. 2012); see also Keith, 220 Cal.Rptr. at 395 (“Commentators have noted several factors which tend to indicate an opinion statement. These [include] a lack of specificity in the statement made * * *.”); Snow’s Laundry & Dry Cleaning Co. v. Georgia Power Co., 6 S.E.2d 159, 162 (Ga. Ct. App. 1939) (“For a representation to be construed as a warranty the statement made must be affirmed as a fact; it must be understood by the parties as having that character; it must be positive and unequivocal and not merely a vague, ambiguous and indefinite statement of the seller regarding the property.”).

¹⁴⁰See Wojcik v. Borough of Manville, 2010 WL 322893, at *3 (N.J. Super. Ct. App. Div. 2010); see also Woodard v. Labrada, 2017 WL 3309765 (C.D. Cal. 2017) (product label promised “significant weight loss;” such language was not too general and vague).

¹⁴¹Stearns v. Select Comfort Retail Corp., 2009 WL 1635931, at *16 (N.D. Cal. 2009) (“[T]he statements at issue in the instant case amount to no more than mere puffery because they are generalized assertions and not easily verifiable as fact.”); Boud v. SDNCO, Inc., 54 P.3d 1131, 1135 (Utah 2002) (“To qualify as an affirmation of fact, a statement must be objective in nature, i.e., verifiable or capable of being proven true or false.”).

¹⁴²See, e.g., Raatz v. Dealer Trade Inc., 261 F. Supp 3d 997 (D. Ariz. 2017) (accuracy of odometer a basis of the bargain).

¹⁴³White, Summers & Hillman, supra note 139, at 866–867; see also Whitehorse Marine, Inc. v. Great Lakes Dredge & Dock Co., 751 F. Supp. 106, 108 (E.D. Va. 1990) (“Express warranties are not presumed and will not be inferred from ambiguous, inconclusive, or general discussions. The language employed must indicate a clear intention to enter into a contract of warranty when it is viewed in light of all the facts and circumstances surrounding the transaction.”).

¹⁴⁴Stearns, 2009 WL 1635931, at *11 (“All of the alleged misstatements at issue here are highly subjective. No reasonable consumer would believe that a Sleep Number® bed miraculously would deliver the elusive ‘perfect night’s sleep.’ ”); see also Bologna v. Allstate Ins. Co., 138 F. Supp. 2d 310, 323 (E.D.N.Y. 2001) (“Here, Allstate’s assertion, ‘You’re in good hands with Allstate,’ is general, subjective, and cannot be proven true or false * * *. [Defendant’s] allegation that Allstate’s slogan created an express warranty which Allstate thereafter breached * * * must fall * * *.”).

¹⁴⁵White, Summers & Hillman, supra note 139, at 861–862.

¹⁴⁶See Chapter 2, Section (A)(5), dealing with the role of formalities in the law.

¹⁴⁷See White, Summers & Hillman, supra note 139, at 869.

¹⁴⁸See Sugawara v. Pepsico, Inc., 2009 WL 1439115, at *5 (E.D. Cal. 2009) (“Defendant chose the moniker ‘Crunchberries’ for its brightly colored cereal balls * * *. [T]here is no such fruit growing in the wild or occurring naturally in any part of the world. Furthermore, a reasonable consumer would have understood the Product packaging to expressly warrant only that the Product contained sweetened corn and oat cereal, which it did.”); see also Woodard v. Labrada, 2017 WL 3309765 (C.D. Cal. 2017) (product label promised “significant weight loss;” plaintiff stated a claim for breach of express warranty).

¹⁴⁹UCC § 2–313, cmt. 3 (“In actual practice affirmations of fact made by the seller about the goods during a bargain are regarded as part of the description of those goods * * *.”).

¹⁵⁰Id.; see also Keith, 220 Cal.Rptr. at 397–98 (“It is clear from the new language of this code section that the concept of reliance has been purposefully abandoned.”); Winston Indus., Inc. v. Stuyvesant Ins. Co., 317 So.2d 493, 497 (Ala. Civ. App. 1975) (“As this court perceives it, the determining factor in this case under the newly enacted Uniform Commercial Code is not reliance by the purchaser on the seller’s warranty, but whether it is part of the ‘basis of the bargain.’ ”).

¹⁵¹Keith, 220 Cal.Rptr. at 397 (“Some [commentators] have indicated that [the ‘basis of the bargain’ test shifts the burden of proving non-reliance to the seller, and others have indicated that the code eliminates the concept of reliance altogether.”]); Hobco, Inc. v. Tallahassee Assocs., 807 F.2d 1529, 1533 (11th Cir. 1987) (“Under Florida law, an express warranty may arise only where justifiable reliance upon assertions or affirmations is part of the basis of the bargain.”).

¹⁵²See Chapter 2, Sections (A)(2) and (B)(1).

¹⁵³See Chapter 2, Section (A)(2).

¹⁵⁴Restatement (Second) of Contracts § 81(2).

¹⁵⁵Keith, 220 Cal.Rptr. at 397; see also Allied Fid. Ins. Co. v. Pico, 656 P.2d 849, 850 (Nev. 1983) (“If, however, the resulting bargain does not rest at all on the representations of the seller, those representations cannot be considered as becoming any part of the ‘basis of the bargain’ within the meaning of [the code].”).

¹⁵⁶Broomfield v. Craft Brew Alliance, Inc., 2017 WL 3838453 (N.D. Cal. 2017) (the mailing address for beer was in Kona, Hawaii and the beer packaging contained a map of Hawaii. Although “taken together under the reasonable consumer analysis they may lead consumers to draw inferences that the beer is made in Hawaii, none of the representations constitutes an express promise that formed the basis of the bargain between the parties.”); Austin v. Mitsubishi Elecs. Am., Inc., 966 F. Supp. 506, 516 (E.D. Mich. 1997) (“An express warranty may * * * arise if the statements would lead a reasonable buyer to believe that such statements had been made to induce the bargain.”); see also Chapter 2, Section (B)(1).

The American Law Institute’s Principles of the Law of Software Contracts, which applies to, you guessed it, software transfers, drops the “basis of the bargain” test in favor of a requirement that “a reasonable transferee could rely” on the express warranty. See § 3.02(b) (2010).

¹⁵⁷UCC § 2–313, cmt. 6; White, Summers & Hillman, supra note 139, at 883–889.

¹⁵⁸UCC § 2–313, cmt. 6.

¹⁵⁹Logan Equip. Corp. v. Simon Aerials, Inc., 736 F. Supp. 1188, 1198 (D. Mass. 1990) (“While plaintiff may well have taken the [demonstration of the] Ontario Hydro boomlift as an example of [defendant] SAI’s skill and expertise in the equipment design field, the 42-foot unit cannot have created an express warranty which survived the generation of a new set of agreed-upon specifications for [defendant’s] proposed 80-foot machine.”).

¹⁶⁰UCC § 2–314(2) states in full:

(2)Goods to be merchantable must be at least such as

(a)pass without objection in the trade under the contract description; and

(b)in the case of fungible goods, are of fair average quality within the description; and

(c)are fit for the ordinary purposes for which such goods are used; and

(d)run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and

(e)are adequately contained, packaged, and labeled as the agreement may require; and

(f)conform to the promises or affirmations of fact made on the container or label if any.

¹⁶¹UCC § 2–104(1); see, e.g., Fuller v. Winn-Dixie Montgomery, LLC, 2017 WL 3098104 (S.D. Ala. 2017) (issue of fact as to whether the operator of a grocery store was a merchant of plastic grocery bags that it handed out to customers).

¹⁶²White, Summers & Hillman, supra note 139, at 904

¹⁶³Id.

¹⁶⁴In re FCA US LLC Monostable Electronic Gearshift Litigation, 280 F. Supp. 3d 975, 1015 (E.D. Mich. 2017) (quoting Brand v. Hyundai Motor Am., 226 Cal. App. 4th 1538, 173 Cal. Rptr.3d 454, 460 (2014)).

¹⁶⁵Id.

¹⁶⁶Webster v. Blue Ship Tea Room, Inc., 198 N.E.2d 309, 312 (Mass. 1964) (“[W]e consider that the joys of life in New England include the ready availability of fresh fish chowder. We should be prepared to cope with the hazards of fish bones, the occasional presence of which in chowders is, it seems to us, to be anticipated, and which, in the light of a hallowed tradition, do not impair their fitness or merchantability.”); see also Stewart v. Electrolux Home Products, Inc., 2018 WL 339059 (E.D. Cal. 2018) (stove’s thermostat was broken by the self-cleaning function and “rendered the oven unfit for its ordinary purpose.”); Beck v. FCA US LLC, 273 F. Supp. 3d 735 (E.D. Mich. 2017) (defective gear shift system in a pickup; the vehicle was not merchantable); Hoffman v. Paper Converting Mach. Co., 694 F. Supp. 2d 359 (E.D. Pa. 2010) (printing press merchantable despite injury).

¹⁶⁷Metowski v. Traid Corp., 104 Cal.Rptr. 599, 604 (Ct. App. 1972) (“[I]mplied warranty [of fitness] arises only where the purchaser at the time of contracting intends to use the goods for a particular purpose; the seller at the time of contracting has reason to know of this particular purpose; the buyer relies on the seller’s skill or judgment to select or furnish goods suitable for the particular purpose; and the seller at the time of contracting has reason to know that the buyer is relying on such skill or judgment.”); see also HWH Corp. v. Deltrol Corp., 2009 WL 734710 (N.D. Iowa 2009) (valves for use on recreational vehicles); Wallman v. Kelley, 976 P.2d 330, 334 (Colo. App. 1998) (“Here, the trial court [correctly] found that plaintiff could not have relied on [defendant’s] skill or judgment to select [herbal remedy] JBH because, in her deposition, she unambiguously stated that she had decided to buy [herbal remedy] JBH before she entered [defendant’s] store, and she did not otherwise testify about any representations made by [defendant] that influenced her decision.”).

¹⁶⁸Hirschbach Motor Lines, Inc. v. SmartTruck Undertray Systems, Inc., 2018 WL 283261 (N.D. Iowa 2018) (“[T]he pleadings adequately allege that SmartTruck knew Hirschbach was buying its products for the purpose of improving fuel efficiency and that Hirschbach relied on SmartTruck’s various statements regarding the products’ effectiveness. Under Iowa law, this is sufficient to establish an implied warranty of fitness for a particular purpose.”).

¹⁶⁹Cf. Gumbs v. International Harvester, Inc., 718 F.2d 88, 93, n.6 (3d Cir. 1983) (“The relative state of the knowledge of the two parties about the product is highly relevant, and in the unusual case in which the buyer is more knowledgeable than the seller, the seller may win on the grounds the buyer did not rely.”) (citing James J. White & Robert S. Summers, Handbook of the Law Under the Uniform Commercial Code 360 (2d ed. 1980)).

¹⁷⁰Keith v. Buchanan, 220 Cal.Rptr. 392, 399 (Ct. App. 1985) (“The major question in determining the existence of an implied warranty of fitness for a particular purpose is the reliance by the buyer upon the skill and judgment of the seller to select an article suitable for his needs.”).

¹⁷¹Hartman v. Jensen’s, Inc., 289 S.E.2d 648, 649 (S.C. 1982) (“The trial court found the disclaimer in this case confusing in that the heading, which read ‘TERMS OF WARRANTY’ in bold print, suggested a grant of warranty rather than a disclaimer * * *. [P]lacing alleged disclaimer under the bold heading of ‘Terms of Warranty’ created an ambiguity and was likely to fail to alert the consumer that an exclusion of the warranty was intended.”); see also Honey Creek Stone Co. v. Telsmith, Inc., 2009 WL 6371627 (Pa. Com. Pl. 2009) (“a disclaimer is inoperative when it cannot be construed as consistent with the language of an express warranty”).

¹⁷²See § 3.06(a) of the Principles of the Law of Software Contracts (2010). UCC section 2–316, cmt.1 explains what the drafters were trying to achieve with the “consistency” test: Section 2–316(1) is meant to “protect a buyer from unexpected and unbargained language of disclaimer * * *.” Section 3.06(a) of the software principles follows this comment more directly by applying an expectation test.

¹⁷³See Chapter 7, Section (A).

¹⁷⁴UCC § 2–316(2); see also Myrtle Beach Pipeline Corp. v. Emerson Elec. Co., 843 F. Supp. 1027, 1038 (D. S.C. 1993) (“The court concludes that the various factors to be considered by a court in determining whether a document is conspicuous for purposes of disclaiming an implied warranty pursuant to subsection * * * 2–316(2) include the following: (1) the color of print in which the purported disclaimer appears; (2) the style of print in which the disclaimer is written; (3) the size of the disclaiming language, particularly in relation to other print in the document; (4) the location of the disclaimer in the contract; (5) the appearance of the term ‘merchantability’ with respect to color, style, size, and type of print in the disclaimer clause; and (6) the status of the parties contesting the validity of the disclaimer, namely whether they be consumers or commercially sophisticated entities.”).

¹⁷⁵UCC § 2–316(2).

¹⁷⁶See Chapter 7, Section (B)(1)(b).

¹⁷⁷See generally White, Summers & Hillman, supra note 139, at 845–846. For a discussion of UCC privity issues, see Chapter 10, Section (A)(6) of this book.