Contracts

Consideration - Bargained for Exchange

1) promisor makes a promise to induce the promisee to perform and 2) the promisee is induced to perform because of the promise made by the promisor

exceptions to acceptance by silence

1. Reason to understand 2. Benefit of Service - Opportunity to reject - Knew or should known payment expected 3. Prior Conduct 4. Dominion - B receives and keeps items.

Duration of Acceptance

1. Rejection (ENDS) 2. Counter-offer (ENDS) 3. Lapse of Time (ENDS) 4. Revocation before acceptance. (ENDS) - Indirect (Finds out from another buyer) 5. Death of either party

Objective Theory of Contracts

A theory that says the intent to contract is judged by the reasonable person standard and not by the subjective intent of the parties.

Apfel v Prudential-Bache Securities, Inc

An idea as consideration does not have to be novel, but it does have to have value.

Foreseeability of Contracf

An injured party may recover damages for a breach of contract that reasonably may be considered as arising naturally from the breach as well as those damages for breach that it may reasonably be supposed the parties contemplated at the time they made the contract.

Quasi Contract

An obligation or contract imposed by law (a court), in the absence of an agreement, to prevent the unjust enrichment of one party. - Was contract vague? - Was contract legal? - Impossibility of purpose? - Was plaintiff material breached?

Wood v. Lucy, Lady Duff-Gordon

D's endorsements help sell fashion and to reap the benefits, entered into an exclusive agreement with Pl. Pl had exclusive right to use her endorsement, subject to her approval. D would get 1/2 of profits. There is an implied promise from Pl that he will use reasonable efforts to bring in profits- he has to give D monthly accounts and to take out appropriate copyrights. Implied good faith.

Hamer v. Sidway

Facts: A man promised his nephew that if he stopped drinking, smoking, and gambling until he was 21 that he would pay him $5000. When the nephew completed this agreement the uncle told him that he would hold onto the money and let it collect interest. When the uncle died Sidway, the executor to the uncles estate woudl not pay the money to Hamer, who now own the claim to the money, under the fact that he did not have consideration. Issue: Is forbearance on the part of a promise sufficient consideration to support a contract?. Forbearance is sufficient for consideration!

Levine v. Blumenthal

Facts: Blumenthal (D) obtained a two year lease for commercial space from Levine (P) Blumenthal told Levine before the end of the first year that it would be impossible for him to pay the increased rate and Levine allowed him to continue to lease the space at the lower rate until business improved. Levine brought this lawsuit to recover the rent Black letter law: Modification of an executory contract requires new consideration, however insignificant.

Hawkins v. McGee (HAIRY HAND CASE)

Compensation will be the difference between the value of the hand as promised and the value of the hand as it ended up. Expectancy Formula

Angel v. Murray

Garbage collector no consideration. Modifications to contracts made (1) voluntarily and fairly by both parties, (2) before the original action was completed, (3) in light of unforeseen events, and (4) not under coercion or duress, do not necessarily need additional consideration and can be found legal.Modern view on amendment in Restatement § 89: A promise modifying a duty under a contract not fully performed on either side is binding (a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or (b) to the extent provided by statute; or (c) to the extent that justice requires enforcement in view of material change of position in reliance on the promise (detrimental reliance)

Mills v. Wyman

If there is no preexisting obligation to form the basis for an effective promise, there is no bargain. Promise was made following benefit conferred to dying son. Father never paid expenses P voluntarily offered. Past consideration = No consideration

Default Rules

In absence of explicit rules of a contract The court may fill the gap Parties may alter terms by mutual consent Terms altered in writing

Disgorgement

In legal usage, the forced giving up of profits made through illegal activity, most commonly insider trading.

Omni Group, Inc. v Seattle-First National Bank

In this case, Omni's (P) acceptance of the feasibility report was not left to its unfettered discretion. Therefore, the promise was not illusory; it supplied sufficient consideration for the Clarks' (D) promise to sell, and a valid contract was formed.

Browning v. Johnson

Is a promise that has induced detriment as part of a unilateral contract supported by sufficient consideration such that the contract must be enforced, regardless of whether the consideration is "adequate?" - YES! P sues D for return payment to get out of 1st contract to buy practice. Release of claim is sufficient consideration.

Pennsy Supply, Inc. v. American Ash Recycling Corp.

Issue: Can there be consideration where the promise induces detriment and the detriment induces the promise? YES AggRite given away to avoid disposal fee was the bargain.

Equitable Estoppel

a legal principle that precludes a person from claiming a right or benefit that might otherwise have existed because that person made a false representation to a person who relied on it to his or her detriment.

implied in fact

a legally enforceable agreement inferred from the circumstances and conduct of the parties - Mutual Agreement - Intent To Promise - Reason to understand - Benefit Deferred - Prior Conduct - Acceptance By Dominion

Demurrer

a pleading to dismiss the adverse party's pleading for not stating a cause of action or a defense

Ex post

after the fact Damaged provide - Enforcement if Breach - But lead to injustice.

ex ante

before the fact Damages provide - Assurances - Predictable Outcomes

Mutuality of Obligation

both parties must have created obligations to the other in their respective promises. Bi-lateral Contract

Consequential Losses

losses considered a result of direct loss • Follows ordinary course of events • Results from special circumstances that breaching party should know.

Restitution Damages

meant to compensate the plaintiff for the value of benefit provided the defendant.

Hadley v Baxendale

Loss must be reasonably foreseeable at the time the contract was entered into. The scope of damages are those which are natural or contemplated; two limbs to remoteness test: 1. Imputed knowledge, natural course of things 2. Actual knowledge, resonable contemplation of both parties . The crankshaft broke in the C's mill. He engaged the services of D to deliver the crankshaft to the place where it was to be repaired and to subsequently return it after it had been repaired. Due to neglect of the D, the crankshaft was returned 7 days late. C was unable to use the mill during this time and claimed for loss of profit

Joe Webb v Floyd and McGowan

Moral obligation is sufficient when the promisor has received a material benefit. P diverted object from possibly killing D. D made promise to pay bi-weekly to D for rest of life. Following D death estate refused.

Rehm-Zeiher Co. v F.G. Walker Co.

Mutuality of Obligation. The words "any unforeseen reason" in K allowed one party to perform entirely at its discretion. A K that gives no certainty & excuses a party to the K from performing at its own discretion, is not binding on either party and not enforceable

Second Restatement of Torts

Notes that if performance is bargained for, there is consideration, and that if the consideration requirement is met, there is no additional requirement that there be an equivalence in the values exchanged.

Unjust Enrichment

Occurs when one party has undeservedly or unjustly secured a benefit at the other party's expense.

Sullivan v. O'Connor

Pain and suffering and emotional distress that flow naturally from a breach are compensable contract damages under either an expectancy or reliance measure. Suit for bad nose job. Lost malpractice won contract.

Bailey v. West

Sale of horse/Boarded by 3rd party: Obligation in both implied and express Ks is in intention of the parties. This is not an implied-in-fact K. (Also not a quasi)

Cohen v. Cowles Media

The First Amendment does not protect members of the press from generally applicable laws, such as the doctrine of "promissory estoppel" (breaking a promise).

Freedom of Contract

the freedom to negotiate the terms of a contract

Law of Agency and Contracts

the general principle that allows an employee to enter into contracts on the employer's behalf

Promissory Estoppel

the legal enforcement of an otherwise unenforceable contract due to a party's detrimental reliance on the contract ▪ Legal Relationship - Some form of legal relationship must exist, or be anticipated to exist, between the parties, such as a contractual relationship. ▪ Promise - It must be shown that a promise was made between the parties to the action that led the injured party to assume that some sort of action was to be taken. Such a promise must be reasonably reliable, or believable. ▪ Reliance - It must be shown that the injured party relied on the promise that was made, and took some action based on that promise. ▪ Detriment - The party that relied upon the promise must have suffered some sort of detriment or loss, which puts him in a worse position than when he started. ▪ Unconscionability - In must be shown that it was unfair for the promisor to break his promise to the promisee.

Executory Promise

unperformed obligation

mutual agreement

when all parties agree to the terms of the contract

McMichael v. Price

This K did not lack mutuality. The P did not have a "free way out," or some ability to escape future liability. Every contract has imposed upon it a duty of Good Faith..

Gratuitous Contract

A contract is this when one party obligates himself towards another for the benefit of the latter, without obtaining any advantage in return.

Alaska Packers' Association v. Domenico

A contract modification is not enforceable without new consideration. Pre-existing duty rule

Unconscionability

A defense that may allow a party to potentially avoid a contract on the grounds that she suffered a grossly unfair burden that shocks the objective conscience. One party takes advantages due to unequal bargaining power, disadvantage, ignorance, inability to understand, trauma, physical infirmity. Ora Williams v Walker Thomas - Taking back furniture from all loans

Compensatory Damages

A monetary award equivalent to the actual value of injuries or damage sustained by the aggrieved party. Had the contract BEEN performed damages.

In re Greene

A nominal or token consideration does not constitute sufficient consideration.

Mandatory Rules

Terms that cannot be changed in a contract.

res judicata

"The thing has been decided." A claim cannot be retried between the same parties if it has already been legally resolved. One bite at the damages Apple.

Second Restatement of Contracts

1. To constitute consideration, a performance or a return promise must be bargained for. 2. A performance or return promise is bargained for it if is sought by the promisor in exchange for his promise and is given by the promise in exchange for that promise. 3. The performance may consist of: (a) an act other than a promise, or (b) a forbearance, or (c) the creation, modification, or destruction of a legal relation.

First Hawaiian Bank v. Zukerkorn

A bet barred by the SOL can renewed by law with promise.

Mirror Image Rule

A common law rule that requires that the terms of the offeree's acceptance adhere exactly to the terms of the offeror's offer for a valid contract to be formed. Rejected by UCC

Expectancy Formula

Award the P value between the promised result verses the value after operation

Kirksey v. Kirksey

Court found no bargain here and considered the invitation to be a gift. Dissenter felt there was consideration.

Expectation Interest

Designed to put the injured party in the position she would have been in had both sides fully performed their obligations

Restitution Interest

Designed to return to the injured party a benefit that he has conferred on the other party, which it would be unjust to leave with that person.

cross-collateral clause

Designed to spread the liability over all items. Ora Williams v Walker Thomas

Congregation Kadimah Toras-Moshe v. DeLeo

FACTS: Decedent promises $25k to temple. When estate's admin refused to give money, congregation sued, having already incorporate sum into its budget. RULE: An oral promise to donate money is unenforceable. A gratuitous promise to do or give something, without any benefit accruing to the promisor, lacks the element of consideration, and therefore no contract has been entered. Justifiable detrimental reliance may constitute considerion, however, the mere incorporation of $25k into the budget was insufficient to create an estoppel.

Allegheny College v. National Chautauqua County Bank

FACTS: Executor refuses to pay balance of a chartable contribution which Johnston made to Allegheny College but later repudiated. RULE: The acceptance of a charitable subscription by the trustees of the charity implies a promise on their part to execute the work contemplated and to carry out this purpose for which the subscription was made. The doctrine of promissory estoppel has been adopted as the equivalent of consideration in connection with charitable subscriptions. Allegheny by accepting part of the pledge, was required to apply the money as conditioned but it did not have to fufill all conditions until all of the pledge was paid. DISSENT (AJ agrees): Johnston offered the sum as a gift. Even if one strains to find a contract, there was never an acceptance because not all acts wereperformed. Also, the donation was not to take effect until death, but by her death, the offer was withdrawn.

Enforcement of Money Judgements

Plaintiff has 20 years via... - Attachment - Levy - Garnishment - Docking - Operation of Law - Lien on Property - Public Sale of Goods

Private Autonomy

Principle that people have the power to change their relationships relative to a contract.

Pre-existing duty rule

Promise to do something you are already legally obligated to do is not valid consideration Under UCC modifications to contract do not require new consideration.

Ricketts v. Scothorn

Promise: Enforce the grandfather's promise to pay the grand-daughter There is no consideration à the transaction between the two was not "Quit your job in exchange for $2,000." Enforced by Equititable Estoppel: Katie altered her life, by quitting job, with the reliance that the note would be paid on demand. Expectation damages were used in this case—what Katie would have received had the promise been performed. Promissory Estoppel 1. The party to be estopped must be apprised of the facts; 2. He must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel has a right to believe it was so intended; 3. The other party must be ignorant of the true state of facts; and 4. He must rely upon the conduct to his injury

implied promises

Promises that are neither spoken nor written but are implicated by the individuals' actions and performance.

Bolin Farms v. American Cotton Shippers Association

RE: PROMISE: Sanctity of K upheld. RE: IMPRACTICABILITY: Market fluctuations are not risk events and fluctuations are foreseeable.

Thomas v Thomas

Sufficiency of consideration. Wife staying in house after husband's death. Consideration has to be something of value in the eyes of the law. The widows £1 donation to the repairs and upkeep of the house was sufficient although not adequate to make the owners promise binding.

Nominal Consideration

Token amount in a written contract where either the parties cannot or do not wish to state the amount. Not sufficient consideration. In re Greene

Altering Rules

When rules are changed when contract is entered.

Illusory Promise

promise that in fact does not impose any obligation on the promisor, and therefore lacks consideration

Reliance Interest

puts the injured party in the position he would have been in had the parties never entered into a contract