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Corbin on Contracts

Copyright 2007, Matthew Bender & Company, Inc., a member of the LexisNexis Group.

PART I FORMATION OF CONTRACTS

TOPIC A OFFER AND ACCEPTANCE

CHAPTER 4 INDEFINITENESS AND MISTAKE IN EXPRESSION

1-4 Corbin on Contracts § 4.6

§ 4.6 Uncertainty of Subject Matter to Be Exchanged for Price; Requirements and Output Contracts

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It is not always the price in money that is left uncertain in an agreement, sometimes it is that for which the price is to be paid. If no method is agreed upon for rendering this subject matter sufficiently definite for enforcement, the agreement must nearly always fail of legal effect.n1 It is not customary for courts to fill the gap by finding that a ''reasonable'' amount of goods or land or labor has been agreed upon as the exchange for the money. It should not be said, however, that such a finding may not be just and true in some cases.n2

If the agreement expresses the subject matter of exchange in such a way that it can be identified or definitely determined by the court, it is enough for enforcement. If a method of identification and determination is agreed upon, such that its application produces a reasonable degree of definiteness, the same is true.n3 If for $15,000, paid or promised, A promises to convey to B any motor car in A's stock, there is a valid contract. Of course, it is a condition precedent to A's duty of immediate transfer that B shall make a selection. The uncertainty will be removed by the method agreed upon, that is, the exercise of B's power of selection.n4

The fact that one of the parties is given an option does not make an agreement too uncertain for validity; it merely makes it necessary that the holder of the option shall exercise the power before asking enforcement by a court. It is to be observed that in cases like the foregoing, in which B has an unlimited option of buying or not buying, B has made no promise whatever. It is only by the exercise of the power of choice that B eventually makes a promise that can be enforced, the contract then becoming bilateral in a new respect. But this fact does not invalidate the original agreement. If B has given some other sufficient consideration for A's promise, that promise is an enforceable contract according to its express terms.

An agreement for construction work may be sufficiently definite even though it provides that building materials shall be those ordinarily used.n5 Indeed, this is true even though no materials are specified in any form.n6 Often, a contract for construction of a road, a crossing, a bridge, or a building will not be unenforceable, even though the exact place for such construction is not specified.n7 It may be clear that the place is, within certain limits, left to the option of one of the parties. In other cases, the location may so greatly affect the cost or value of performance that the parties did not intend to be bound until further expression of agreement. If one contracts to produce a definite result, the promisor is none the less bound because the means of producing that result are left to one's own discretion.n8

Requirements and Output Contracts

A promise by A, for a sufficient consideration, to deliver to B all the coal that B needs to run a factory for a year, is not invalid even though this leaves to B the option of not running the factory at all or of running it at such a rate as B honestly believes it is most beneficial to run it.n9 Contracts for the sale of the ''entire output'' of a mine, factory, farm, or other business are not too indefinite for enforcement, even though the producer has a freedom of choice in determining that output.n10 Because of the frequency of litigation about the meaning and effect of contracts that measure the quantity of goods by the requirements of the buyer or the output of the seller, such contracts are explicitly validated and regulated by the Uniform Commercial Code. Section 2-306 provides:

(1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.

(2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.

This provision removes lingering historical doubts about the validity of contracts of this type.n11 The historical notion that estimates are merely statements of opinion has been abolished in this context. Insistence on unneeded goods by a buyer is not in good faith.n12 Despite what appears to be the plain meaning of the provision, it has generally been held that the requirements buyer may, with impunity, diminish requirements even if the reductions are disproportionate to the normal prior requirements or to any stated estimate, provided the buyer is in good faith.n13 Despite the fact that a requirement or output contract is a form of exclusive dealing, the courts seem to have ignored the ''best efforts'' obligation of U.C.C. § 2-306(2), as applied to these kinds of contracts.n14

This treatise is quoted in Pace Corp. v. Jackson. n15 For an executed consideration (Jackson's transfer of stock), Pace promised ''to supply Jackson for any business he may become interested in outside of Bexar County with cigarettes on a cash basis at cost'' for a stated period. Pace was a corporation engaged in the cigarette vending machine business and had a direct line of credit with the major cigarette manufacturers that enabled it to buy cigarettes at a price lower than they could be obtained from intermediate wholesalers. Jackson established a business, selling cigarettes both through vending machines and at wholesale. After filling one order as agreed, Pace refused to fill Jackson's next order and repudiated the contract for indefiniteness and lack of mutuality. ''The first uncertain element was the quantity of cigarettes to be sold. The second uncertain element lay in the fact that there were more than a dozen different brands of cigarettes available, many manufactured in different styles (regular or king size) and commanding differing prices, and the brands and styles were not stipulated in the contract but were left optional with the respondent.'' This was merely a ''requirements'' contract, the buyer being given for a sufficient executed consideration the option to determine amounts and brands and styles, so long as the orders were in good faith. Each order, the exercise of the option, would make certain each of the elements that the contract left for the buyer to determine in the future. This was not unreasonable or unfair to Pace. Jackson did not promise to order a single carton, but for whatever brand or style or amount Jackson ordered Pace would receive the actual cost thereof in cash. Pace would make no profit on the order, but it had received all of Jackson's stock, stock that Jackson would not have given up for the stated price per share except for the additional promise of Pace to supply at cost all the cigarettes that Jackson's subsequent business might require.

Legal Topics:

For related research and practice materials, see the following legal topics:

Commercial Law (UCC)Sales (Article 2)Contract TermsGap-Filler ProvisionsOutput, Exclusive & Requirements AgreementsContracts LawFormationDefinite TermsContracts LawTypes of ContractsOutput & Requirements Contracts

FOOTNOTES:

(n1)Footnote 1.

U.S. - King Lumber Co. v. National Bank of Summers, 286 F. 906 (4th Cir.1923) , contract to erect a building with no plans or specifications.

Fla. - Truly Nolen, Inc. v. Atlas Moving & Storage Warehouses, Inc., 125 So.2d 903 (Fla.App.1961) , cert. dismissed, 137 So.2d 568 , lease of wall space for an ''advertising sign,'' size and character wholly indefinite.

Ga. - Peachtree Medical Bldg., Inc. v. Keel, 107 Ga.App. 438, 130 S.E.2d 530 (1963) , indefiniteness as to the building as to which plaintiff was to act as a contractor.

Idaho - Snoderly v. Bower, 30 Idaho 484, 166 P. 265 (1917) , hay to be measured by ''government rule,'' when there were several such rules.

Mo. - Southwest Drayage Co. v. Crawford Moving Vans, Inc., 377 S.W.2d 293 (Mo.1964) , joint venture to bid on government moving job omitted which job would be bid and how much bid would be.

Mont. - Price v. Stipek, 39 Mont. 426, 104 P. 195 (1909) , goods ordered on a list without saying how many of each.

Wis. - Factor v. Peabody Tailoring System, 177 Wis. 238, 187 N.W. 984 (1922) , agreement to deliver tailor-made suit or overcoat for $50 without specifying any material.

''If this alleged contract was intended as an agreement 'to do a particular thing,' no man, from the documents, can ascertain the thing. It purports to concern the purchase and sale of a house, but whether the house is of one room or one hundred, whether it is built of straw or stone, whether it stands on a lot or a section, whether it is located in Denver or Dublin, are mere matters for conjecture. Not only are these essentials unsettled, but no hint of a method of settlement can be gleaned from the writing.'' Greater Service Homebuilders' Inv. Ass'n v. Albright, 88 Colo. 146, 293 P. 345 (1930) .

A contract is not made too indefinite for specific enforcement by the fact that it provides for the conveyance of a tract described by metes and bounds, with the exception of 60 acres to be ''designated by the buyer prior to taking title to the land'' and giving to the seller ''a right of way of 25 feet to the excepted land.'' Before filing his petition, however, the buyer must validly designate the 60 acre tract to be excepted. E.M. Loews, Inc. v. Deutschmann, 337 Mass. 42, 147 N.E.2d 832 (1958) . See also note herein under § 165; § 505.

In Francois v. Alexius, 82 So.2d 113 (La.App.1955) , appeal transferred, 226 La. 978, 77 So.2d 734 , an exchange of lands was agreed on, 4 acres to be selected by mutual agreement out of one tract in exchange for a specific second parcel of land. This was unenforceable for uncertainty of subject matter, but the parties later agreed upon a specific 4 acres and thus validated their contract. The court's opinion is involved with interpretation of a statute dealing with ''potestative'' conditions, a statute that is confusing in its terms and definitions. Compare it with Illusory Promises, and see § 149.

In Stekoll Petroleum Co. v. Hamilton, 152 Tex. 182, 255 S.W.2d 187 (1953) , an option to acquire ''leases on 4,000 of the 5,000 acre block No. 2 ... said 4,000 acres to be selected by Buyer leaving Sellers 1,000 acres equitably checker-boarded ...'' without any definite mode indicated, was held too indefinite for enforcement.

(n2)Footnote 2. An agreement to support a person is not too indefinite. The court or jury can determine in each case what performance is reasonably necessary for support.

Ala. - Limbaugh v. Boaz, 16 Ala.App. 411, 78 So. 421 (1918) , contract by lessor to furnish supplies for lessee and his family.

Colo. - Henderson v. Spratlen, 44 Colo. 278, 98 P. 14 (1908) .

N.D. - Coykendall v. Kellogg, 50 N.D. 857, 198 N.W. 472 (1924) .

Or. -This section is quoted in Klimek v. Perisich, 231 Or. 71, 371 P.2d 956 (1962) . The parties agreed upon a maximum price for the remodeling of a house, but the nature and extent of the remodeling were left for future determination.

A contract to put a barge ''in good repair'' is not too uncertain and indefinite. Ollinger & Bruce Dry Dock Co. v. James Gibbony & Co., 202 Ala. 516, 81 So. 18 (1919) .

An agreement to furnish two hundred pieces of tricotine at $3.02 per yard, provided further that the buyer should have the ''privilege to confirm more of the above if the seller can get more.'' This was held to create a binding option in the buyer, to buy as much as he might choose to order, conditioned only on the seller's ability to get the goods. This was so held, even though there was no definite word as to quantity, time, or price. The buyer promptly ordered as much more as the seller could procure. With the buyer's assent, the seller procured 500 pieces and actually delivered only sixteen. Heyman Cohen & Sons v. M. Lurie Woolen Co., 232 N.Y. 112, 133 N.E. 370 (1921) .

A promise by a lessee to drill a gas well ''at a location agreed upon by the parties'' is not too indefinite for enforcement. There is a duty to assent to some reasonable location. Golston v. Bartlett, 112 S.W.2d 1077 (Tex.Civ.App.1938) , writ dismissed w.o.j.

(n3)Footnote 3. A contract is not made too indefinite by the fact that it provides for an amount described as ''approximately'' so many, or a definitely stated amount ''more or less.''

Mass. - Nickel v. Zeitz, 258 Mass. 282, 154 N.E. 769 (1927) .

Mo. - Browning v. North Missouri Cent. R. Co., 188 S.W. 143 (Mo.1916) .

Compare George W. Wilcox, Inc. v. Shell Eastern Petroleum Products, Inc., 283 Mass. 383, 186 N.E. 562 (1933) .

The same is true where a quantity is specified as a total, the buyer or the seller having the privilege of dividing it up into various sorts or sizes with variations from a base price according to a list of differentials.

U.S. - American Sugar Ref. Co. v. Colvin Atwell & Co., 286 F. 685 (W.D.Pa.1923) .

Pa. - Franklin Sugar Ref. Co. v. Howell, 274 Pa. 190, 118 A. 109 (1922) .

A promise to pay all the debts of a person deceased is not too uncertain. The beneficiaries are made certain by the proper establishment of their claims. Planters' Warehouse & Com. Co. v. Barnes, 229 Ala. 572, 159 So. 63 (1934) .

In Bowles v. Babcock & Wilcox Co., 209 Ga. 858, 76 S.E.2d 703 (1953) an option contract for the purchase of a tract of land was not too indefinite for specific enforcement because it provided that one of the boundaries was to be the line of a highway to be fixed later by public authority. The price was $4,000 per acre to be determined by accurate survey after the line was fixed.

An express contract to supply labor and materials for ''approximately $900 or $1000'' will not support a judgment for $1,454. Muir Bros. Co. v. Sawyer Const. Co., 328 Mass. 413, 104 N.E.2d 160 (1952).

A written option contract provided for the purchase of an interest in an oil lease, including 4,000 acres out of a 5,000 acre tract, to be selected by the purchaser in a ''checkerboard'' pattern. This was not fatal to validity. The purchaser was bound to make a selection. There was not a mere contract to make a contract. Hamilton v. Stekoll Petroleum Co., 1 O.&G.R. 1362, 250 S.W.2d 645 (Tex.Civ.App.1952) , rev'd, 152 Tex. 182, 255 S.W.2d 187 (1953) .

For a doubtful case involving ''more or less'', see Green v. K.S. Webster & Sons, 77 Idaho 281, 291 P.2d 864, 58 A.L.R.2d 371 (1955) , noted herein under § 542.

In Byrne v. Shell Oil Co., 295 F.2d 797 (7th Cir.1961) , the plaintiff developed a design for an ''animated motor oil window display'' and forbore to submit it to Shell's competitors in reliance on Shell's oral promise to purchase its ''requirements'' for a year at a reasonable price, with a minimum of 1000 displays, the ''requirements'' to be determined by the number that Shell's dealers (some 23,000 in number) might order. The court held that this agreement was not too indefinite for enforcement, that Shell was bound to ascertain by good faith effort how many the dealers would order, and that the evidence as to the amount of damages was not too uncertain. Shell had prevented performance by informing its dealers that a different display had been adopted.

In McKinley v. Lagae, 207 Cal.App.2d 284, 24 Cal.Rptr. 454 (1962) , a contract for the sale of a ranch, in the form of a Deposit Receipt and Escrow Instructions, described the property as follows: ''The Chimney Rock Ranch with all appurtenances; Real Property and personal property as declared in sale as on property at this moment... A complete inventory will be included in sale.'' This was held not to be too uncertain as to the personal property for enforcement, even though no inventory was ever completed. The defendant purchaser prevented the completion of the inventory by repudiation of the contract.

An agreement ''substantially'' to charge $6500 ''or nearly so'' for landscaping was held not to be invalid in Janzen v. Phillips, 73 Wash.2d 174, 437 P.2d 189 (1968) , citing this note.

(n4)Footnote 4.

Ark. -The exact case here put is illustrated by Dolly Parker Motors, Inc. v. Stinson, 220 Ark. 28, 245 S.W.2d 820 (1952) . Damages for buyer's refusal to make a selection would be the smallest profit that seller would make on any of the cars. Cf. U.C.C. § 2-311.

Nev. - Delaney v. Shellabarger, 76 Nev. 341, 353 P.2d 903 (1960) , contract to convey to purchaser any 520-acre tract which he might choose out of a larger tract of 3,518.91 acres.

Cf. U.S.- Nebraska Aircraft Corp. v. Varney, 282 Fed. 608 (8th Cir.1922) , a doubtful decision.

In Langer v. Lemke, 78 N.D. 383, 49 N.W.2d 641 (1951) , the agreement was for the sale of a number of acres to be selected by the buyer out of a larger tract. The number of acres could be determined by the value of the shares of stock to be given in exchange, at a stated price per acre. A method for determining the specific acres to be conveyed, but giving the buyer some freedom of choice. The terms were held not too indefinite.

A contract for the sale of land is not too indefinite for enforcement if it provides for conveyance of a stated portion of a larger tract that is clearly described, the specific portion to be selected by the purchaser. A purchaser who repudiates may be ordered to make his selection, and on his refusal the court may appoint commissioners to make it. Calder v. Third Judicial Dist. Court, 2 Utah 2d 309, 273 P.2d 168, 46 A.L.R.2d 887 (1954) .

(n5)Footnote 5.

N.Y. - Singer v. Henry Disston & Sons, 178 A.D. 108, 165 N.Y.S. 94 (1917) .

(n6)Footnote 6.

Ga. - Farkas v. S. Cohn & Son, 19 Ga.App. 472, 91 S.E. 892 (1917) , a new glass front for a building.

Mass. - Jones v. Parker, 163 Mass. 564, 40 N.E. 1044 (1895) .

N.Y. - Lawrence v. Saratoga Lake R. Co., 36 Hun. 467 (N.Y.1885) , specific enforcement of contract for a bridge and a ''neat station.''

In spite of the truth of the above statement in the text, it must be borne in mind that in negotiations for building construction the parties do not often intend to be bound at all until they have expressed agreement upon elaborate plans and specifications, including time, place, labor, kind and quantity of materials. See, for example, Nave v. McGrane, 19 Idaho 111, 113 P. 82 (1910) . All that is being said above is that parties may make an enforceable contract without making so many specifications, if they clearly express an intention so to be bound. In Tobin v. Union News Co., 18 A.D.2d 243, 239 N.Y.S.2d 22 (1963) , aff'd, 13 N.Y.2d 1155, 247 N.Y.S.2d 385, 196 N.E.2d 735 , the lease of a restaurant provided that the second floor of the building should be altered by the lessee within one year from existing living quarters to banquet and restaurant facilities. The court reversed the decision below and held that the provision was not too indefinite and uncertain for enforcement. It said: ''The language of the clause is neither meaningless or ambiguous... The specifics of implementing the intention of the parties are absent but the liability is present.'' Parol evidence to do this implementing was admissible, so long as it did not contradict what was written. ''All the circumstances leading to its execution may be shown for the purpose of elucidation....''

(n7)Footnote 7.

Ky. - Chesapeake & O. Ry. Co. v. Herringer, 158 Ky. 267, 164 S.W. 948 (1914) , private crossing.

N.Y. - Lawrence v. Saratoga Lake R. Co., supra.

(n8)Footnote 8. In Strakosch v. Connecticut Trust & Safe Deposit Co., 96 Conn. 471, 114 A. 660 (1921) it was held that the mere fact that the promisor retained the privilege of determining the method of carrying out a promise to make provision for the plaintiff so as to secure for her an assured income of $2,500 to $3,000 a year, did not make the promise too indefinite for enforcement.

A contract to supply an aged person with a home, support and care for life is not made invalid by the fact that the exact location and the means of support are not specified, that the promisee was 91 years old, or that successful performance of such a contract requires ''patience, adaptability and accord on all sides.'' Podkowicz v. Slowineski, 41 N.J.Super. 474, 125 A.2d 427 (1956) , aff'd, 44 N.J.Super. 149, 129 A.2d 885 , certif. denied, 25 N.J. 43, 134 A.2d 539 .

See Bettancourt v. Gilroy Theatre Co., 120 Cal.App.2d 364, 261 P.2d 351 (1953) , contract to build a ''First Class Theatre''; and Bohman v. Berg, 54 Cal.2d 787, 8 Cal.Rptr. 441, 356 P.2d 185 (1960) , contract to construct a ''land yacht'' out of a motor bus, with specified items, noted in § 4.1 and § 4.7.

This section is quoted in Southern Land, Timber & Pulp Corp. v. Davis & Floyd Engineers, Inc., 109 Ga.App. 191, 135 S.E.2d 454 (1964) , in holding that a general supervisory engineering contract was not too vague to support a suit for breach.

(n9)Footnote 9.

Cal. - Fisher v. Parsons, 213 Cal.App.2d 829, 29 Cal.Rptr. 210 (1963) . A tenant orally agreed to lease from the plaintiff all the office space that the tenant might need in its business. The plaintiff, owner of the building, promised to provide such space to the extent that it should be available. This was not too indefinite for enforcement against the tenant, who committed a breach by vacating the floors and refusing to pay rent. See also § 156.

Ill. - Minnesota Lumber Co. v. Whitebreast Coal Co., 160 Ill. 85, 43 N.E. 774 (1895) .

N.Y. - Orange & Rockland Utilities, Inc. v. Amerada Hess Corp., 59 A.D.2d 110, 397 N.Y.S.2d 814, 96 A.L.R.3d 1263 (1977) , requirements of fuel oil to generate electricity.

Okl. - M.W. Kellogg Co. v. Standard Steel Fabricating Co., 189 F.2d 629, 26 A.L.R.2d 1090 (1951) , all the fabricated steel needed for a particular project.

A contract by a pipe line company to buy the gas produced by certain gas wells, to be taken in amounts to be prorated among the wells and limited by the amount needed for distribution among the pipe line's customers is not too indefinite for specific enforcement. Southwest Pipe Line Co. v. Empire Natural Gas Co., 33 F.2d 248, 64 A.L.R. 1229 (10th Cir.1929) .

(n10)Footnote 10.

U.S. - Ramey Lumber Co. v. John Schroeder Lumber Co., 237 Fed. 39 (7th Cir.1916) , cert. denied, 242 U.S. 644 , all lumber seller should ''manufacture or own''.

Cal. - Rosenberg v. Rogers, 44 Cal.App. 196, 186 P. 366 (1919) , fig crop.

Del. - Liberty Brand Canning Co. v. Denby, 30 Del. (7 Boyce) 465, 108 A. 142 (1918) , tomato crop.

Ky. - Ross-Vaughan Tobacco Co. v. Johnson, 182 Ky. 325, 206 S.W. 487 (1918) , tobacco crop.

Mo. - Warren v. Ray County Coal Co., 200 Mo.App. 442, 207 S.W. 883 (1919) , output of coal.

Or. - Propst v. William Hanley Co., 94 Or. 397, 185 P. 766 (1919) , hay crop.

Tex. - Arcola Sugar Mills Co. v. Farmer Hamlett's Co., 220 S.W. 385 (Tex.Civ.App.1920) , writ dismissed w.o.j., syrup output of a mill.

(n11)Footnote 11.

Comment 2 to U.C.C. § 2-306 states: ''Under this Article, a contract for output or requirements is not too indefinite since it is held to mean the actual good faith output or requirements of the particular party. Nor does such a contract lack mutuality of obligation since, under this section, the party who will determine quantity is required to operate his plant or conduct his business in good faith and according to commercial standards of fair dealing in the trade so that his output or requirements will approximate a reasonably foreseeable figure....''

(n12)Footnote 12. Homestake Mining Co. v. Washington Public Power Supply System, 476 F.Supp. 1162 (N.D.Cal.1979) , aff'd per curiam, 652 F.2d 28 (9th Cir.) ; Orange & Rockland Utilities, Inc. v. Amerada Hess Corp., 59 A.D.2d 110, 397 N.Y.S.2d 814, 96 A.L.R.3d 1263 (1977) .

(n13)Footnote 13. Angelica Uniform Group, Inc. v. Ponderosa Systems, Inc., 636 F.2d 232 (8th Cir.1980) ; R.A. Weaver & Associates, Inc. v. Asphalt Constr. Co., Inc., 587 F.2d 1315 (D.C.Cir.1978) ; Wilsonville Concrete Products v. Todd Building Co., 281 Or. 345, 574 P.2d 1112 (1978) .

(n14)Footnote 14. Feld v. Henry S. Levy & Sons, Inc., 37 N.Y.2d 466, 373 N.Y.S.2d 102, 335 N.E.2d 320 (1975) is a case in point. The defendant had contracted to sell its output of bread crumbs to plaintiff. Because of increasing costs, it demanded an increased price which plaintiff refused to pay. Defendant ceased to make bread crumbs. The court ruled that this cessation was permissible if the seller's losses were more than trivial.

(n15)Footnote 15. 155 Tex. 179, 284 S.W.2d 340 (1955), affirming in part, 275 S.W.2d 849 (Tex.Civ.App.).