Comparative Contract Law
American and European
Gregory E. Maggs
Professor of Law
Senior Associate Dean for Academic Affairs
George Washington University Law School
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MATERIALS PREPARED FOR THE
Augsburg Summer Program
in European and International Economic Law
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Assignment for first class:
Please read pages 1-18.
Class schedule (1 July - 16 July):
Wednesdays from 14.00-16.00 (2:00-4:00 p.m.)
Thursdays from 8.00-11.00 (8:00-11:00 a.m.)

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Table of Contents
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Section 1.
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1-1.
American Contract Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1-2.
European Contract Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1-3.
Comparing Contract Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1-4.
Mandatory Rules and Default Rules . . . . . . . . . . . . . . . . . . . . . . . . 7
Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Usinor Industeel v. Leeco Steel Products, Inc. . . . . . . . . . . . . . . 8
Section 2.
Gratuitous Promises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2-1.
American Contract Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2-2.
European Contract Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2-3.
Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Mills v. Wyman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Feinberg v. Pfeiffer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
In Re Estate of Danz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.
Promises Not Evidenced by a Signed Writing . . . . . . . . 29
3-1.
The “Statue of Frauds” in American Contract Law . . . . . . . . . . . 29
New York State General Obligations Law § 5-701 . . . . . . . . . 29
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3-2.
Requirements of a Writing under European Contract Law . . . . . . 30
Gray International, Inc. v. Degussa, A.G. . . . . . . . . . . . . . . . . 31
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Merex A.G. v. Fairchild Weston Systems, Inc. . . . . . . . . . . . . . 34
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.
Offer and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4-1.
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4-2.
What is an Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
iii

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TABLE OF CONTENTS
Lefkowitz v. Great Minneapolis Surplus Store, Inc. . . . . . . . . 41
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Naiditch v. Banque De Gestion Privee-Sib . . . . . . . . . . . . . . . 44
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4-3.
Revocation of Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Dickinson v. Dodds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
4-4.
Rejection and Acceptance of Offers . . . . . . . . . . . . . . . . . . . . . . . 53
Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Norse Petroleum A/S V. LVO International, Inc. . . . . . . . . . . . 54
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
4-5.
Time When Acceptance of an Offer is Effective . . . . . . . . . . . . . 59
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
4-6.
Lapse of Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
4-7.
Acceptances with Additional or Different Terms . . . . . . . . . . . . . 61
Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
AFP Imaging Corporation v. Philips . . . . . . . . . . . . . . . . . . . . 63
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
4-8.
Liability for Failed Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Racine & Laramie, Ltd. v. California Dept. of Parks . . . . . . . 72
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 5.
Terms of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
5-1.
Implied in Fact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Weiss v. La Suisse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Oracle Corporation v. Falotti . . . . . . . . . . . . . . . . . . . . . . . . . 83
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
5-2.
Modification of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Alaska Packers’ Ass’n v. Domenico . . . . . . . . . . . . . . . . . . . . . 91
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
In re Express One International Inc. . . . . . . . . . . . . . . . . . . . . 95
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Section 6.
Incorrect Information or Mistaken Assumptions . . . . 102
6-1.
American and European Principles . . . . . . . . . . . . . . . . . . . . . . . 102
Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Swinton v. Whitinsville Savings Bank . . . . . . . . . . . . . . . . . . . 105

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TABLE OF CONTENTS
v
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Sherwood v. Walker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Lony v E.I. Dupont De Nemours & Co., Inc. . . . . . . . . . . . . . 110
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Minebea Co., Ltd. v. Papst . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Nessi v. Sudovest Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 115
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Section 7.
Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
7-1.
Expectation Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Zapata Hermanos Sucesores v. Hearthside Baking Co. . . . . . 120
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
7-2.
Proof of Expectation Damages . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
7-3.
Limitations on Expectation Damages . . . . . . . . . . . . . . . . . . . . . 125
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Rockingham County v. Luten Bridge Co. . . . . . . . . . . . . . . . . 126
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
7-4.
Reliance Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
7-5.
Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
7-6.
Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
McKinnon v. Benedict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
7-7.
Punitive Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Hingis v. Tacchini . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Vergiette v. Samara . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

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Section 1
INTRODUCTION
1-1. AMERICAN CONTRACT LAW
In the United States, a contract is typically defined as a “promise or set of
promises for the breach of which the law gives a remedy, or the performance
of which the law in some way recognizes as a duty.” Restatement (Second)
of the Law of Contracts § 1. Accordingly, whenever a plaintiff sues a defen-
dant for breach of contract, the plaintiff claims that the defendant made a
promise and did not keep it. The plaintiff then may ask the court to enforce
the promise, either by ordering the defendant to do what the defendant prom-
ised or more commonly by requiring the defendant to pay the plaintiff money
as compensation for the breach.
Courts will not enforce all promises. For example, they will not enforce
promises made by children or persons with diminished mental capacity.
Similarly, they will not enforce promises induced by certain misrepresenta-
tions or fraud. They also will not enforce some promises unless certain for-
malities have been met.
When sued by a plaintiff for breach of contract, a defendant often presents
legal arguments for why the court should not enforce a promise. These argu-
ments are typically called “defenses.” Because the plaintiff has only one
legal claim (i.e., the defendant did not keep a promise), but the defendant has
many potential defenses, much of the study of contract law concerns argu-
ments for why promises are not enforceable.
The United States Constitution divides governmental power between the
national federal government and the 50 states. The federal government has
exclusive power to regulate certain subjects, like immigration and foreign
relations, but shares with the states the power to regulate other subjects.
Partly for historical reasons and partly because of limitations in the Constitu-
tion, the federal government largely has left the subject of contracts to the
states. As a result, most contract law is state law rather than federal law.
Each state in the United States has the power to adopt different legal rules
governing contracts. Accordingly, the law of contracts is not uniform in
America. For example, contract law in California may differ in some respects
1

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2
§ 1. INTRODUCTION
from contract law in New York. Fortunately, differences are few, and most
of these differences are not very significant.
For historic reasons, most contract law is not found in statutes or legisla-
tion. Instead, at least outside of specialized areas of the law, when courts
decide contract cases, they mostly rely on earlier decisions in similar cases.
The earlier decisions are called “precedents” and they make up the “common
law” of contracts. In addition to relying on prior American decisions, courts
in the United States often rely on prominent historical cases from England
from the 19th century and before.
Although American courts generally follow earlier decisions, they often
confront new issues for which there is no precedent. Accordingly, judges
have some power to create new legal rules, and develop new legal doctrines.
This power may seem odd because usually elected legislatures create laws in
democratic countries. The process, however, is so firmly rooted in the Amer-
ican legal system that it generally is not questioned.
Because contract law is mostly based on cases rather than statutes, Ameri-
can law students learn contracts principally by reading cases. And the skill
of reading and understanding cases is very important for practicing American
lawyers. For this reason, these materials contain numerous judicial decisions.
“Restatements” of the Law of Contracts
Lawyers and judges often consult treatises and other secondary works for
summaries and analyses of common law contract law doctrines. Perhaps the
most important secondary sources are the Restatement of the Law of Con-
tracts (1932) and Restatement (Second) of the Law of Contracts (1982).
These treatises were prepared by a nonprofit organization called the Ameri-
can Law Institute (“ALI”), whose members include a diverse group of promi-
nent lawyers, judges, and law professors. They have no legal force. How-
ever, because of their distinguished authorship, judges have relied on the
Restatements as persuasive authority in over 30,000 reported cases. No other
secondary source can claim so much influence on the courts. As a result, the
Restatements offer a good place to start when researching any common law
contracts question. See Gregory Maggs, Ipse Dixit: The Restatement (Sec-
ond) of Contracts and the Modern Development of Contract Law, 66 Geo.
Wash. L. Rev. 508 (1998).
The Restatement (Second) of the Law of Contracts contains 385 sections.
These sections each state a rule or set of rules and then have comments ex-
plaining the rule and giving illustrations. Every section contains a “Re-
porter’s Note.” These notes typically list cases that support or, in some in-
stances, contradict the section’s rules, comments, and illustrations. As you
will see, these materials quote many of Restatement provisions when summa-
rizing the typical rules of American contract law.

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§ 1. INTRODUCTION
3
Uniform Commercial Code (U.C.C.)
Although the common law continues to govern many aspects of contracts,
state legislatures have replaced some of its rules by statute. One of the most
important legislative enactments is the Uniform Commercial Code (U.C.C.).
The U.C.C. is a model statute, drafted in part by the ALI and in part by the
Uniform Law Commission (formerly known as the National Conference of
Commissioners on Uniform State Laws). The U.C.C. contains rules govern-
ing contracts for the sale and lease of goods, negotiable instruments, the
check collection process, funds transfers, letters of credit, bulk transfers,
documents of title, investment securities, and securities interests in personal
property.
Every state legislature and many federal territories have enacted all or part
of this model law. As a result, much of the commercial law in the United
States, while still a matter of state law, has become codified and uniform
throughout the country. Again, as you will see, these materials also refer to
the U.C.C. in various places.1
Convention on the International Sale of Goods
The United Nations Convention on Contracts for the International Sale of
Goods (CISG), 19 I.L.M. 668 (1980), is a multilateral treaty ratified by the
United States and most of the countries in Europe. Its purpose is to provide
a uniform set of rules for international sales contracts, much like the U.C.C.
establishes a uniform set of rules for domestic sales of goods in the United
States.
The CISG applies to contracts for the sale of goods between private par-
ties if the parties to the contract have their place of business in two different
countries, and both of the countries have ratified CISG. For example, it
would govern a contract between an American company and a German com-
pany for the sale of automobile parts. The CISG does not apply to contracts
for the sale of “goods bought for personal, family, or household use.”
The rules in the CISG differ from the general American rules of contract
law in several respects. The CISG, for example, contains no statute of frauds
or parol evidence rule, it adheres to the mirror image rule for offer and accep-
tance rather than the special rules now found in the U.C.C., and it makes
specific performance a generally available remedy. Because the United
States ratified the CISG as a treaty, see S. Doc. No. 9, 98th Cong., 1st Sess.
23 (1983), 52 Fed. Reg. 6264 (1987), the CISG has the status of federal law.
Both state and federal courts therefore must apply it to cases within its scope.
1. In 2003, the ALI and the Uniform Law
revised article and passage in the future seems
Commission published a controversial revi-
unlikely. So these materials will address the
sion of article 2 on contracts for the sale of
pre-2003 version of article 2.
goods. No state legislatures have adopted the

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4
§ 1. INTRODUCTION
The CISG is very important. American businesses buy or sell about $1
trillion worth of goods annually companies who have their place of business
in countries that have adopted the CISG. But these materials do not address
the CISG in depth. Instead, they focus on differences between domestic
American and European contract law; as a result of the CISG, in contracts for
the international sales of goods, American contract law is unified with Euro-
pean contract law.
Notes
1. Why might it be useful or important to have a “uniform” (i.e., identical)
law governing commercial subjects in each of the 50 states in the United
States?
2. Can you think of a reason that each state had to enact its own version
of the Uniform Commercial Code instead of having the federal government
of the United States enact a federal statute that would apply in all states?
3. In addition to facilitating uniformity, what are some advantages of
codifying commercial law in a statute rather than leaving it to the common
law? Are there any disadvantages?
1-2. EUROPEAN CONTRACT LAW
Europe does not have a single law of contracts. On the contrary, every
European nation has its own code or codes which govern contracts. The law
in Germany thus may differ from the law in France. In addition, even within
one country, different rules may apply to different kinds of contracts. For
example, Germany, like the United States, applies different rules to contracts
for the sale of goods, to contracts for services, and various other classes of
contracts. See Basil S. Markesinis, The German Law of Contract: A Compar-
ative Treatise 144-146 (2d ed. 2006).
The German Federal Ministry of Justice has posted an English translation
of the German Civil Code (Bürgerliches Gesetzbuch or BGB) on the Internet.
To see for yourself what the Code looks like, take a few moments to visit this
website: http://www.gesetze-im-internet.de/englisch_bgb/index.html. Book
1 of the German Civil Code is the “General Part.” As its name suggests, it
contains general provisions applicable to many civil law subjects. Some of
these general provisions relate to contracts. For example, sections 104-113
address capacity to enter into contracts and sections 145-163 address offer
and acceptance, contract interpretation, and conditions. Book 2 of the Ger-
man Civil Code has specific provisions concerning legal “obligations.” It
contains some general rules of contract law and it also includes many specific
rules governing particular kind of contracts. For example, sections 474-479
address the purchase of consumer goods, section 535-579 concern leases, and

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