Most Important Contracts Cases to Know

Contracts is the most rule-codified 1L course. Almost every case you read has been distilled into a section of the Restatement (Second) of Contracts or Article 2 of the UCC. Your professor grades the rule, not the case name. So the right unit of study is a pair: the case plus the authority it became.

That means your notes for Hadley v. Baxendale should read "foreseeability limit on consequential damages — Restatement (Second) of Contracts § 351; UCC § 2-715(2)(a)," not a paragraph about a broken crankshaft. The facts matter only as an analogy engine: on an exam, you recognize the pattern, then apply the section.

One structural warning. Casebooks are not uniform. A Farnsworth or Knapp course will emphasize different cases than a Barnett course, and a professor who teaches from the UCC first will assign Article 2 cases your friend at another school never sees. The list below is the overlap — the cases that appear in nearly every American Contracts syllabus.

Start with the objective theory of assent. Lucy v. Zehmer, 84 S.E.2d 516 (Va. 1954), holds that a contract signed on a restaurant check is enforceable if the outward manifestations reasonably indicated assent, whatever the drunken seller secretly intended. Pair it with Leonard v. PepsiCo, Inc., 88 F. Supp. 2d 116 (S.D.N.Y. 1999), aff'd, 210 F.3d 88 (2d Cir. 2000), where the objective standard cut the other way — no reasonable person believed the Harrier jet ad was serious.

For offer doctrine, Lefkowitz v. Great Minneapolis Surplus Store, 86 N.W.2d 689 (Minn. 1957), is the classic: advertisements are usually invitations to deal, but an ad that is clear, definite, and leaves nothing open for negotiation is an offer. Carlill v. Carbolic Smoke Ball Co., [1893] 1 Q.B. 256 (Eng. C.A.), is the unilateral-contract counterpart — performance is acceptance, and notice is excused.

On acceptance and the battle of the forms, know that UCC § 2-207 displaced the common-law mirror image rule. ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996), and Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir. 1997), enforce terms inside the box; Step-Saver Data Systems, Inc. v. Wyse Technology, 939 F.2d 91 (3d Cir. 1991), and Klocek v. Gateway, Inc., 104 F. Supp. 2d 1332 (D. Kan. 2000), reject that approach. If your professor teaches this split, say explicitly which line of authority you are following.

Hamer v. Sidway, 27 N.E. 256 (N.Y. 1891), establishes that forbearance from a legal right — the nephew giving up drinking and smoking — is consideration; benefit to the promisor is not required. Kirksey v. Kirksey, 8 Ala. 131 (1845), is the negative example: a conditional gift is not a bargain. Batsakis v. Demotsis, 226 S.W.2d 673 (Tex. Civ. App. 1949), holds courts do not police adequacy of consideration.

For past consideration and moral obligation, run Mills v. Wyman, 20 Mass. (3 Pick.) 207 (1825), against Webb v. McGowin, 168 So. 196 (Ala. Ct. App. 1935). Mills states the rule; Webb is the material-benefit exception now reflected in Restatement (Second) § 86. On the preexisting duty rule and modification, Alaska Packers' Ass'n v. Domenico, 117 F. 99 (9th Cir. 1902), is the anchor — and note that UCC § 2-209(1) abolishes the consideration requirement for modifications of goods contracts.

Promissory estoppel runs from Ricketts v. Scothorn, 77 N.W. 365 (Neb. 1898), through Feinberg v. Pfeiffer Co., 322 S.W.2d 163 (Mo. Ct. App. 1959), to Restatement (Second) § 90. In the construction-bid setting, James Baird Co. v. Gimbel Bros., 64 F.2d 344 (2d Cir. 1933) (Hand, J.), and Drennan v. Star Paving Co., 333 P.2d 757 (Cal. 1958) (Traynor, J.), reach opposite results on whether a subcontractor's bid is irrevocable; Drennan is the majority view and is codified at Restatement (Second) § 87(2). Hoffman v. Red Owl Stores, Inc., 133 N.W.2d 267 (Wis. 1965), extends reliance to failed negotiations — a minority position, but a favorite exam trap.

Raffles v. Wichelhaus, 159 Eng. Rep. 375 (Ex. 1864) — the two ships Peerless — gives you latent ambiguity and mutual misunderstanding, now Restatement (Second) § 20. Frigaliment Importing Co. v. B.N.S. International Sales Corp., 190 F. Supp. 116 (S.D.N.Y. 1960), is the definitive demonstration of interpretive hierarchy: dictionary meaning, trade usage, course of dealing, and the burden of proof deciding a genuinely ambiguous term.

On parol evidence, contrast the traditional four-corners approach with Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging Co., 442 P.2d 641 (Cal. 1968), where Traynor held that extrinsic evidence is admissible to show a writing is reasonably susceptible to a proposed meaning. Masterson v. Sine, 436 P.2d 561 (Cal. 1968), applies the same liberal instinct to whether a writing is fully integrated. For goods, UCC § 2-202 lets in course of performance, course of dealing, and usage of trade even against a complete integration.

Wood v. Lucy, Lady Duff-Gordon, 118 N.E. 214 (N.Y. 1917), is the implied-terms workhorse: Cardozo reads in a promise of reasonable efforts to save an otherwise illusory contract. It now lives in UCC § 2-306(2) and in the general duty of good faith under Restatement (Second) § 205 and UCC § 1-304.

Mutual mistake: Sherwood v. Walker, 33 N.W. 919 (Mich. 1887), the barren cow that was not barren, versus the modern allocation-of-risk approach in Restatement (Second) §§ 152 and 154. Ask who bore the risk of the unknown fact; that question resolves most mistake problems.

Impossibility and frustration: Taylor v. Caldwell, 122 Eng. Rep. 309 (K.B. 1863) (music hall burns), Krell v. Henry, [1903] 2 K.B. 740 (Eng. C.A.) (coronation canceled), and Transatlantic Financing Corp. v. United States, 363 F.2d 312 (D.C. Cir. 1966) (Suez closure was not commercial impracticability). The UCC counterpart is § 2-615.

Unconscionability: Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (D.C. Cir. 1965), supplies the procedural/substantive framework and is codified at UCC § 2-302 and Restatement (Second) § 208. Use it alongside duress cases like Alaska Packers when a party extracted terms through unequal bargaining power.

Remedies is where most Contracts exams end, and where students lose points. Hawkins v. McGee, 146 A. 641 (N.H. 1929) — the hairy hand — sets the expectation baseline: value promised minus value received. Sullivan v. O'Connor, 296 N.E.2d 183 (Mass. 1973), shows the reliance alternative.

Hadley v. Baxendale, 156 Eng. Rep. 145 (Ex. 1854), limits consequential damages to losses arising naturally or within the parties' contemplation at formation. Certainty is the other limit; the lost-profits problem for a new venture is best illustrated by the Kenford litigation in New York over the Buffalo domed stadium.

Cost of completion versus diminution in value is a guaranteed issue. Jacob & Youngs, Inc. v. Kent, 129 N.E. 889 (N.Y. 1921) (Reading pipe), gives diminution in value where the breach is trivial and the cure grossly disproportionate; Groves v. John Wunder Co., 286 N.W. 235 (Minn. 1939), gives cost of completion; Peevyhouse v. Garland Coal & Mining Co., 382 P.2d 109 (Okla. 1962), goes the other way on nearly identical facts. Cite the split, then argue.

Mitigation: Rockingham County v. Luten Bridge Co., 35 F.2d 301 (4th Cir. 1929) (stop building the bridge), and Parker v. Twentieth Century-Fox Film Corp., 474 P.2d 689 (Cal. 1970) (the substitute employment must not be different or inferior). Liquidated damages: Lake River Corp. v. Carborundum Co., 769 F.2d 1284 (7th Cir. 1985) (Posner, J.), applied through Restatement (Second) § 356. Restitution for a breaching party: Britton v. Turner, 6 N.H. 481 (1834). Third-party beneficiaries: Lawrence v. Fox, 20 N.Y. 268 (1859).

Most Contracts exams are closed-universe issue spotters where case names are optional garnish. Lead with the rule, apply it to facts, and use the case only as a comparison: "Like the seller in Lucy, Buyer's outward conduct manifested assent even if she privately joked." One clause is enough. Never write a paragraph of case history.

Where a genuine split exists — cost of completion, shrinkwrap terms, precontractual reliance — name both lines and pick one with a reason. That is the analysis professors reward.

For seminar papers and memos, cite in Bluebook form: case name, reporter volume, reporter, first page, court and year, e.g., Jacob & Youngs, Inc. v. Kent, 129 N.E. 889 (N.Y. 1921). Cite the Restatement as Restatement (Second) of Contracts § 90 (Am. L. Inst. 1981) and the Code as U.C.C. § 2-207. Use id. for immediately preceding authority and the short form (e.g., Jacob & Youngs, 129 N.E. at 891) thereafter.