Supp. To § 1.19 Express and Implied Contracts

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(A) The following cases cite this section or its predecessor, § 18:

(1) A & B Construction, Inc. v. Atlas Roofing & Skylight Co., 867 F. Supp. 100 (D.R.I. 1994) . A contractor sought indemnification from a subcontractor for settlement proceeds it paid to an injured employee of the subcontractor, on theories of express indemnity, indemnity implied-in-fact and indemnity implied-in-law. The court rejected the implied-in-fact theory. Under Rhode Island law, indemnity contracts must be clearly and unequivocally expressed. Hence, the court concluded, there is no basis for implying contractual indemnity where the parties' intent is unclear, where the parties had the opportunity and ability to expressly so provide and did not, and where implying contractual indemnity would have the effect of circumventing the legislative intent expressed in the Rhode Island Workers' Compensation Act. This case is also noted in § 1.20.

(2) Sopko v. Estate of Roccamonte, 346 N.J. Super. 107, 787 A.2d 198 (2001) . The plaintiff made a claim against the estate of the deceased, who, though married to another, lived with her and orally promised to ''take care of her.'' The court held that a palimony claim that is not based on a relationship proscribed by law or on a promise to marry can be enforced under an express or implied contract theory. The opinion includes an extensive quote from Corbin § 1.19 recognizing that contractual duties are created by promissory expressions as to which there is no difference between express and implied contracts since a promissory expression may be found in words or other signs or symbols.

On appeal ( Sopko v. Slackman (In re Estate of Roccamonte), 174 N.J. 381, 808 A.2d 838 (2002)) , the Supreme Court of New Jersey addressed the issue of whether a promise to support another for life is enforceable against the promisor's estate. Citing the Restatement (Second) of Contracts, § 262, comment b, the court found that such a promise is as enforceable as any other promise, except for a contract for personal services. The court explained the personal services exception is designed to preclude an action against one's estate for a personal service contract that is excused upon the death of the person providing the service. That exception did not apply here since Arthur had not promised to perform personal services. He promised to provide financial security to Mary. The case was remanded to determine the appropriate level of support required to enforce Arthur Roccamonte's promise.

(3) Mill-Bern Assocs., Inc. v. Dallas Semiconductor Corp., 2002 Mass. Super. LEXIS 181 (Mass. Super. Ct. June 13, 2002) . Mill-Bern was a manufacturer's representative for the defendant manufacturer pursuant to a series of written contracts, the most recent of which was executed in 1994. The agreement was effective for one year but was renewable for an additional year in the manufacturer's sole discretion upon written notice to Mill-Bern, and, unless so renewed, it automatically terminated upon expiration of the term. The manufacturer could also terminate the agreement for any reason upon thirty days' written notice though Mill-Bern would be entitled to commissions for sales accepted by the manufacturer prior to the termination date. Though the manufacturer did not provide written notice of its intent to renew the agreement at the end of its term and the parties entered into no other written agreement, Mill-Bern acted as the manufacturer's representative for the next three years. The manufacturer interviewed other representatives during 1997, but Mill-Bern was assured throughout the year by the manufacturer's sales manager that its position was not in jeopardy. Mill-Bern's owner admitted his belief that the manufacturer was not precluded from interviewing other representatives. In late 1997, the sales manager began expressing dissatisfaction with Mill-Bern's performance. In 1998, four years from the date the manufacturer signed the 1994 agreement, it provided Mill-Bern with written notification of its intent not to renew the parties' agreement. Mill-Bern brought an action alleging, inter alia, a breach of promise based on promissory estoppel and a breach of the implied covenant of good faith and fair dealing.

Mill-Bern's promissory estoppel claim failed as it was unable to establish the elements of a promise, reliance, or harm. There was no evidence that the manufacturer had promised to continue the relationship for any period of time. Its sales manager simply made statements indicating its intent to continue the relationship at a time when he was already dissatisfied with Mill-Bern's performance but had not yet decided to terminate the relationship. As to its allegations of reliance and harm, Mill-Bern simply made unsupported allegations that it ''refrained from seeking other lines.'' As to Mill-Bern's claim of a breach of the implied covenant of good faith, the court held that the covenant does not exist independent of an underlying contract since such a claim is, in substance, a claim for breach of contract. Here, evidence was adduced to support a finding that there was a contract. A trier of fact could find that the parties had impliedly agreed to a series of renewals.

The court relied on Corbin's view that continued performance after expiration of an express contract supports an inference of renewal for a similar period, or an implied agreement to continue the relationship on an at-will basis. Under a renewal, the manufacturer had a right to terminate the agreement at any time upon thirty days' written notice. The manufacturer terminated the agreement with only twelve days' notice; Mill-Bern, however, did not base its claim on the failure to provide the required notice. Even if it had, it would not have prevailed since it demonstrated no damages based upon the shorter notice it received. To prevail, it would have to show that the defendant failed to pay commissions to which the plaintiff was entitled and, in failing to do so, acted in bad faith. No evidence supported this contention.

(4) Devine & Devine Food Brokers, Inc. v. Wampler Foods, Inc., 313 F.3d 616 (1st Cir. 2002) . The plaintiff food broker alleged that the defendant poultry manufacturer owed it a severance penalty pursuant to the terms of a brokerage contract between the plaintiff and the original obligee which the plaintiff claimed the defendant assumed when it purchased the assets of the obligee. The court rejected the plaintiff's claim that the defendant assumed the obligations under an implied contract. Citing Corbin, the court found the defendant did not manifest the requisite assent to assume the contract. Although the defendant did select the plaintiff as a broker, it was adamant that it was not obligated under the prior contract and that their new agreement superseded all others. This case is also cited at § 2.8.

(5) Wrench LLC v. Taco Bell Corp., 2003 U.S. Dist. LEXIS 7607 (W.D. Mich. May 1, 2003) . The plaintiff alleged that the defendant Taco Bell requested that the plaintiff submit certain advertising ideas, and the plaintiff then submitted such ideas based on the understanding that it would paid. The plaintiff was not paid and brought actions in contract and tort. The defendant argued that the plaintiff's tort claims should be dismissed because they arose out of the same duty created by the alleged contractual relationship. The defendant moved for summary judgment. Citing Corbin, the court held that if a legal duty could not have been enforced in the absence of the contract, a tort action based upon breach of that contractual duty may not be maintained. While a party's actions may give rise to both contract and tort claims, the tort claim must be based on a breach of duty separate and apart from the breach of contract claim. The court rejected the plaintiff's argument that this distinction is limited to negligence-based torts rather than property-based torts such as conversion as alleged in this case. The court explained that tort obligations are imposed by law independent of obligations created by promises. The court dismissed all claims other than the breach of contract claims.

(6) Iovanella v. Locascio, 2003 U.S. Dist. LEXIS 23011 (S.D.N.Y. Dec. 17, 2003) . The plaintiff owned a seat and membership on the New York Cotton Exchange. While retaining ownership of the seat, he transferred the membership to Klein, who agreed to facilitate leasing the membership to others. Klein transferred the membership to the defendant's cousin who, operating at the direction of the defendant, signed a lease agreement to expire at the end of one year. The lease stated that it could not be assigned or in any way transferred. Eight months later, without the plaintiff's knowledge, the cousin sold the membership to the defendant. Notwithstanding the expiration date in the lease, the parties continued to perform. Two years later, the defendant sold the lease to another party for $84,000 without the plaintiff's knowledge. The plaintiff sought to recover the $84,000 as the value of the membership at the time it was sold. The court cited Corbin in determining that the parties' act of continuing to perform beyond the one-year time period was sufficient to support a finding that the parties had intended to extend the terms of the agreement for another year. Thus, the lease agreement, including the prohibition against assignment or transfer, remained in effect at the time the defendant sold the lease for $84,000. The court held that the plaintiff was entitled to damages in that amount, not simply because it was the amount for which the defendant had sold the membership, but because it was consistent with the value of the membership as evidenced by other membership sales before and after the sale by the defendant.

(7) Waite Dev., Inc. v. City of Milton, 866 So. 2d 153 (Fla. Dist. Ct. App. 2004) . This case is fully discussed at § 1.18 and cited at § 1.20 (where an agreement is arrived at by words, oral or written, the contract is said to be ''express'').

(8) Sanford Housing Authority v. Perkins Propane, Inc., 2004 Me. Super. LEXIS 203 (Sept. 14, 2004) . In 1987, Sanford Housing Authority entered into a three-year contract with Perkins Propane for the latter to supply propane. The contract required the supplier to provide all equipment necessary for propane storage and delivery. Perkins paid for the on-site equipment that had been installed by Sanford Housing Authority's previous contractor. Eventually, Perkins replaced the equipment with its own at a cost in excess of $34,000. After the expiration of the three-year contract, the Housing Authority continued to use Perkins as its supplier until, in 2003, the Housing Authority invited bids on the propane contract. Perkins decided not to submit a bid, but claimed that under the terms of its 1987 contract, the Housing Authority was required to pay the purchase price of the equipment Perkins had installed, i.e., the terms of the parties' 1987 written three-year agreement governed their relationship even into the year 2003, despite not having executed amendments to it. The Court cited Corbin for the proposition that when parties proceed with performance after expiration of the time set forth in an expressed contract, a court may infer that they have agreed to renew the contract for another similar period. The Court explained that by continuing to do business together after the expiration of a contract, the parties impliedly agreed that their rights and obligations should continue to be measured as provided in the old contract. Therefore, with no evidence to the contrary, a court could reasonably infer that the parties intended, and their course of conduct suggested, that the 1987 contract continued to govern their relationship under a contract implied-in-fact into the year 2003. The Court further concluded that there were two different reasonable interpretations of the contract language in question. The Authority contended that communicating to new bidders and passing on to them the cost of Perkins' equipment was optional. Perkins' interpretation, on the other hand, was that the Authority must supply, and that bidders must include the cost of the equipment in their bid. Since both interpretations were reasonable, the contractual language was ambiguous, precluding the entry of summary judgment.

(9) Bunting vs. Citizens Financial Group, Inc., 2006 Del. Super. LEXIS 118 (2006) . Bunting, an acting branch manager of a retail branch of defendant's bank, was fired for violating the bank's written notary policy when she notarized a customer's signature on a mortgage but did not see the customer actually sign it. The practice of notarizing documents as Bunting did was both widespread and condoned by Bunting's supervisor and the supervisor's supervisor who participated in a conference call in which the decision to fire Bunting was made. Bunting claimed she was wrongfully terminated because, among other things, her conduct and the bank's constituted a bargained-for-exchange whereby she notarized documents in violation of the written policy for the benefit of the bank and its customers in exchange for the bank's promise not to fire her for doing so. The court explained that Bunting did not unilaterally decide to violate the written notary policy for her benefit but was directed to do so by her supervisors and others at the branch. The bank benefitted because it was able to keep its customer satisfied. ''Both Bunting and [the bank] did something that they were not otherwise obligated to do. Bunting performed a task that was not properly a part of her job. [The bank] gave up its right to fire Bunting for violating the written notary policy.'' The court cited Corbin for the proposition that conduct such as this constitutes a bargained-for-exchange. Accordingly, a jury ''certainly could find that Bunting and [the bank] entered into a contract modifying her employment-at-will status to provide that in exchange for Bunting notarizing documents in violation of the written notary policy, [the bank] would not fire her for doing so.'' Accordingly, the court denied the bank's motion for summary judgment to dismiss Bunting's wrongful termination claim.

(B) The following cases are noteworthy:

(1) The Equity Group, Ltd. v. Painewebber Inc., 839 F. Supp. 930 (D.D.C. 1993) , aff'd, 48 F.3d 1285 . The Equity Group sued Painewebber for breach of an oral contract, when without prior notice Painewebber informed The Equity Group that it would not use its services to market three offerings. The Equity Group argued that each time Painewebber had consulted it regarding an offering in the past, Painewebber used it as a wholesaler, that prior agreements were not immediately formalized, and that the terms of each agreement were similar.

Under District of Columbia law, in the absence of direct evidence of an express contract a court may imply a contract from the course of the parties' performance, when a reasonable person would view the acts and conduct of the parties as evidencing the existence of a contract. The court concluded that a reasonable person would not believe that the discussions between The Equity Group and Painewebber manifested an intent to be bound, and granted Painewebber's motion for summary judgment.

The court does not say why a reasonable person would come to this conclusion, but we can guess. The prior course of dealings between The Equity Group and Painewebber included formalization of the parties' agreement at some stage during their discussions. Hence, according to the plaintiff's very own argument, the parties regarded formalization as necessary to the conclusion of a contract.

(2) Grunseth v. Marriott Corp., 872 F. Supp. 1069 (D.D.C. 1995) , aff'd, 79 F.3d 169 (D.C. Cir.) . A former candidate for governor of Minnesota sued Marriott for releasing to a reporter a copy of his hotel receipt for a night he allegedly spent with a woman. His claim was that he entered into an implied contract with Marriott not to disclose any information to third parties without his express written consent. Grunseth argued that when he had requested billing information or receipts in the past, he was informed by Marriott that it was Marriott's policy to require a written request from the guest prior to furnishing such records. Also, Marriott's legal manual stated that information about the registration of guests shall be kept confidential.

The court granted Marriott's motion for summary judgment, stating that notwithstanding the parties' previous course of dealing, no reasonable person could find that such practice manifested an intent by either party to be bound or to provide plaintiff with a contractual right. The court also concluded that the statement in the legal manual does not establish agreement, since there was no suggestion that Grunseth was aware of the legal manual or its contents.

The result is questionable, and illustrates the hazards of sorting through evidence for the implication of contracts. Surely the court is correct that the mere existence of a ''legal manual'' has no legal significance, and probably for the reason the court offers: Grunseth never knew it. Yet Grunseth did know it was Marriott's policy not to release receipts, because Marriott told him it was, and followed the policy. Grunseth at least ought to have survived summary judgment.

(3) Truform, Inc. v. General Motors Corp., (6th Cir. 2003) . Truform had supplied parts for General Motors automobiles to GM's Buffalo plant since 1973. In 1994, GM sold its Buffalo plant to American Axle (Axle), a component supplier of driveline components to GM. The agreement required Axle to use suppliers chosen by GM. Truform was unaware of the contract between GM and Axle. Axle paid the suppliers on behalf of GM. GM would issue purchase orders to Truform but Axle would pay Truform for the delivered parts. In 1998, Axle became dissatisfied with the quality of Truform's parts and began notifying Truform of ''containment costs,'' i.e., costs it incurred resulting from Truform's poor products. Truform objected to any such containment costs and Axle stopped sending containment cost notices. There was no evidence that GM issued any purchase orders to Truform in 1999. Nonetheless, Axle delivered weekly ''planning schedules'' and ''shipping schedules'' to Truform, which controlled Truform's production and delivery of parts. In mid-1999, Axle learned that GM would no longer require Axle to use Truform as a supplier. Axle, therefore, sought to obtain maximum production from Truform to build its inventory of parts while searching for a new supplier. Axle did not pay Truform's September, October and November 1999 invoices. The district court found an implied-in-fact contract between Truform and Axle. On appeal, Axle argued that no such contract existed since Truform and Axle had separate contracts with GM. The instant court affirmed the decision below. Very simply, it found that Axle ordered parts and Truform delivered them. The evidence clearly indicated a consensual arrangement between the parties.

(4) Hope Acad. of Milford, Inc. v. Fortier, 2004 Conn. Super. LEXIS 993 (Conn. Super. Ct. Apr. 13, 2004) . After their son completed the first semester of his second year at the plaintiff's academy, the defendants withdrew him and refused to pay the remaining tuition for the academic year. In response to the plaintiff's claim for the tuition, the defendants counterclaimed that the plaintiff had breached certain promises concerning curriculum and programs found in oral representations, brochures, a letter, a program of studies document and the plaintiff's website. The defendants argued that the contract included not only the enrollment contract they had signed, but these oral and written expressions as well. The court relied on the general policy that leaves considerable discretion to schools in carrying our their educational policies. Recognizing precedent holding that bulletins, brochures, notices to parents and websites are not part of the contract, the court found an insufficient manifestation of mutual assent to any representations in the additional materials. As to the defendant's allegations of detrimental reliance on the additional representations, the court held that the plaintiff had no reason to expect any reliance on them. At most, the plaintiff made statements concerning expectations in the evolution of the educational policies of the school and did not make definitive promises on which the defendants could have reasonably relied. The court held that the defendants were liable for the unpaid portion of the annual tuition.

(5) Domico v. Downey, 2007 U. S. Dist. LEXIS 52545 (E.D. Pa. 2007) . The plaintiff was a business broker specializing in the sale of restaurant businesses but not any real estate associated with restaurants he listed for sale. Downey agreed to list his business through the plaintiff for 180 days and the plaintiff would receive 10% of the purchase price of the business (not the real estate) under this contract. Though the plaintiff procured a number of prospective purchasers during the 180 day period, no sale was consummated. The plaintiff, however, continued to search for buyers after the 180 days and introduced a dozen or more prospective buyers to Downey over the next two years. Toward the end of this period, the plaintiff wrote a letter to Downey listing six prospective buyers and stated that he expected to receive his 10% commission if one of the buyers he discovered bought the business. Downey did not respond to this letter. The plaintiff later introduced another prospective buyer (Centofanti) to the defendant resulting in a lease purchase agreement including an option that Centofanti later exercised in buying the business from Downey for $1.3 million as well as the real estate for another $1.3 million for a total price of $2.6 million. The plaintiff claimed that Downey owed him 10% of the price of the business ($130,000). Downey argued that his contract with the plaintiff ended after the initial 180 days set forth in the written agreement. The court noted that a broker is not entitled to a commission unless he can show an express or implied contract and further noted that there is no difference between an express and implied contract except in the manner of formation of the contract by words (express) or by conduct (implied). Where parties continue to conduct business after the expiration of their written contract, a court may find an implied-in-fact contract. Downey fully participated in the conduct of discovering a buyer after the 180 days since he would spend hours with such prospective buyers brought to him by the plaintiff. Though Downey did not respond to the subsequent letter of the plaintiff indicating the plaintiff's expectation of receiving the 10% commission as set forth in the written contract, Downey never manifested a different intention. Indeed, his conduct manifested an intention to be bound by the original terms of the written agreement. The court held that Downey was entitled to $130,000, 10% of the gross sales price of the business, consistent with that intention. The plaintiff's original agreement with Centofanti required Centofanti to pay the plaintiff $20,000 upon the completion of a lease purchase agreement with Downey. While Centofanti admitted discussion of such an agreement, he argued that it had never been consummated. The court found this assertion to be contradicted by an addendum to the lease Centofanti signed with Downey which provided a $20,000 credit to Centofanti ''for funds which I [Centofanti] paid to [the plaintiff].'' The court held that the plaintiff was entitled to the $20,000 from Centofanti.

Supplement to Notes in Main Volume

9. D.C.- Vereen v. Clayborne, 623 A.2d 1190 (D.C. App. 1993) (rejecting express and implied-in-fact contract theories of maker of note who argued that he had reduced the outstanding balance by rendering services to payee).

11. U.S.- United Nat'l Ins. Co. v. SST Fitness Corp., 309 F.3d 914 (6th Cir. 2002) . When SST was sued for patent and trademark infringement, its insurer, United National, sent a letter to SST reserving United's rights for recoupment of defense costs and fees where United had no duty to defend. A declaratory judgment held that United had no duty to defend SST in the underlying action. United then sought recovery of $116,706.39 for costs under reservation and $29,633.41 in prejudgment interest. SST argued that it never expressly accepted United's reservation of rights in its letter. The district court found that United was a mere volunteer in paying the costs. The Sixth Circuit reversed and found an implied-in-fact contract between the parties since United had explicitly reserved its right to reimbursement, SST was aware of this offer, and by accepting the payment from United, SST accepted the offer forming the contract. SST argued that its silence should not constitute acceptance. The court held, however, that SST's acceptance of the payment with knowledge of such a clear reservation of reimbursement rights constituted acceptance of United's offer forming the implied-in-fact contract. Citing the Restatement (Second) of Contracts, § 69, the court stated, ''A party cannot accept tendered performance while unilaterally altering the terms on which it is tendered.'' The court emphasized the need for an insurer such as United clearly to reserve its reimbursement rights and to provide the insured with adequate notice of such potential reimbursement. United met these requirements.