Contracts

What are examples of a performance? (3)

An act, a forbearance or any modification of a legal relation.

Nudum Pactum

An agreement unenforceable as a contract because there is no consideration.

Relational Contract Theory

Assurance provided by personal relationships and trust.

UCC on Auctions - Rule on Reserve

Auction is with reserve unless explicitly stated otherwise.

3rd Quiz - A prepays B. B runs into unanticipated circumstances, asks for more money. A agrees then doesn't pay. Rule?

Because A prepaid the rules on modification do not apply since A has already performed his promise and has no other obligation.

2nd Quiz - Bob and Restaurant and Bums, why consideration and not in Kirksey? Why + What.

Because we can clearly see why Bob made the promise and what he wanted. Bog wanted to bums out of the park so was bribing them to leave.

Restitution will be denied when

Benefits are thrust upon someone.

Auction - Rules on Bidder withdrawing

Bidder can always withdraw offer if does so before close of auction.

Ex ante theory

Bolsters trust by giving parties the right incentives.

Concept of Reliance (Why Reliance?)

Breach can hurt the promisee who is relying on the promise.

Unjust Enrichment

Breach leads one party to gain and another to lose.

Ex post theory

Breaching party should be made to pay for the breach.

Sullivan (Nose Job) - Pain and suffering or mental anguish? (Questions to ask)

Can psychological and/or physical injury be expected to figure in the recovery?

Omni - land feasibility - why not illusory? and therefore

Conditional promise was not illusory because satisfaction clause required purchaser to act in good faith. Therefore Omni had no free way out.

Indiana Beer Distributing and written statement saying no liability and can be terminated anytime - UC rule on obligation

Conduct by both parties can show existence of contractual obligation even if writing says otherwise.

Eleanor Thomas v. Samuel Thomas - Rule on Consideration - Widow

Consideration doesn't have to be the only motive or even the major motive.

Angel v. Murray - Garbage Collector Rule on Consideration with Modification (2)

Consideration not required for modification when contract not fully performed by either side, modification is fair and equitable due to unanticipated circumstances to both parties when contract made.

Whiskey Case - Rule

Contract is not binding when one party has unfettered discretion to not fulfill it and there is lack of mutuality.

Cohen - Snitch case - Why not a contract and how can it be enforced?

Court does not want to use contract law to enforce professional ethical obligations, can be enforced through Promissory Estoppel

Injunctive Relief

Court requiring a party to do or not do a specific act.

Stare Decisis

Courts follow holdings of earlier judicial decisions.

Feld - Levy - Breadcrumbs - Why to trial?

Defendant stopped making breadcrumbs because it wasn't economically feasible but never cancelled the contract. Plaintiff was relying on the contract. There was a cancellation clause. Whether defendant's stoppage was done in good faith is a question of fact.

How is bad faith tested in output/requirements contracts? Standard for producer? 1 rule + 4 examples - Think Breadcrumbs

Defendant was expected to continue to perform in good faith and could cease only in good faith. Bankruptcy would be valid. Less profit not valid. Even no profit not valid because had other businesses. Losses in continuing had to be more than trivial.

How does UCC 2-209(1) change emphasis

Emphasis goes from consideration for contract to good faith.

Formalist interpretation

Emphasize plain meaning of contracts.

Contract

Enforceable promise where there is a pledge of behavior and a commitment to something is understood by the promisee. Most of the time an exchange is also needed.

Bolin Farms (2)

Forward selling contracts shift risk from grower to buyer and no excuse by reason of changed circumstances.

Considerations when applying Contract Law (3)

General principles, social purposes, practical consequences.

Output and Requirements - Quantity Unreasonably Disproportionate - Generally

Generally this is a ceiling and not a floor. Can go down more easily than it can go up.

Disgorgement

Giving up of profits.

Injured Mechanic case

Giving up the legal right to sue was consideration.

Good faith definition with Negotiable Instruments (Checks)

Good faith means honesty and observance of reasonable commercial standards

Haigh v. Brooks - Goods/Credit/Brooks/Lees Why consideration?

Haigh giving up the writing to Brooks was sufficient consideration because it was induced by Brooks promise to pay the money.

Remedial question regarding best efforts output

How much would the person have sold if best efforts were followed.

Remedial question regarding best efforts requirement

How they bought elsewhere is what is considered what they required.

Standard on Detriment for Promissory Estoppel

If Promisor could have reasonably the detriment to be incurred on strength of his promise.

Lucy/Zehmer - Virginia Bar case - Ruling when Zehmer said he was joking

If Zehmer said he was just joking it does not matter if a reasonable person would have understood it as serious and then relied on it as such.

Exclusivity and the rule addage

If contract is exclusive then there is also a best efforts in addition to in good faith requirement unless stipulated to non best efforts.

UCC - 2-209(1) Rule on Modification/Consideration - If blank then blank as long as blank and sometimes blank

If contract is sale of goods then there is no need for consideration as long as there is good faith and sometimes a demonstrable reason for modification

When is a performance or a return promise bargained for?

If it is sought and given by promisor in exchange for the promise and by promisee in exchange for that promise.

Consideration regardless of detriment/benefit

If the promisee, in return for the promise, does anything legal which he is not bound to do, or refrains from doing anything which he has a right to do, whether there is any actual loss or detriment to him or actual benefit to the promisor or not.

Buy property for cheap and then find all this oil, unjust enrichment? Rule

If value is received by virtue of legitimate contract then there is no unjust enrichment.

Difference Alaska Packers and Angel/Murray (Rhode Island) in outcomes

In Alaska Packers the employees put the company under coercion/duress.

Private Autonomy

Individuals can effect changes in their legal relations.

Embry/Hargadine (employer wants a renewal of contract) has quick convo with boss - Ruling

Internal intention of both parties does not matter, if reasonable person would have understood Hargadine to be renewing employment then it was binding.

Best efforts standard

It is an objective standard and means reasonably best efforts

Why consideration? (3)

It is presumedly welfare-enhancing, allows us not to enforce gratuitous promises, replaces the seal.

Common Law is _________ made:

Judge

Principles of Realists (7)

Law is moving and judicially created, its purpose and effect matter, society is moving faster than law, refrain from biases, rules do not describe what happens, decisions influenced by hidden rationale, narrow categories of cases.

Contextualist interpretation

Look at evidence of the circumstances that gave rise to the writing.

Rationale for Preexisting Duty Rule

Deters parties from using coercion and duress to get more money.

Dissatisfied Entertainer - Questions to Ask re: modification (3 + 1 qualifier)

Did either side fully perform contract? Were circumstances unanticipated by both parties? Was it fair and equitable, meaning in good faith and not by duress/coercion?

Holmesian Formula (I was wrong on it in class)

Did the promise induce the detriment and did the detriment induce the promise

Accord and Satisfaction how to receive one and still not have claim settled (2)

Didn't receive it at correct address and told other where to send it OR paid it back within 90 days of receiving it.

Allegheny College and Courts finding

Donation was made on condition that scholarship be set up in donor's name and established for specific cause. This was sufficient consideration to make promise binding.

Congregation - Rabbi suing dead man's estate for Promissory Estoppel - Why not? (2)

1, Congregation did not sufficiently rely for there to be a detriment but 2, there was no injustice.

Consideration consists of:

A benefit to the promisor or a detriment to the promisee.

Zeiher/Walker - Whiskey Case - Rule on Contract and how lacking

A contract lacking mutuality of obligation between the parties is unenforceable. If one party has a free way out the contract is lacking mutuality and unenforceable.

Formation of a contract requirements (2)

A manifestation of mutual assent to the exchange and a consideration.

Promise for benefit received - rule

A promise to compensate for a benefit previously received is binding to the extent necessary to prevent injustice, but its not binding if it was just a gift OR there was no unjust enrichment OR the value of compensation is disproportionate to the benefit.

Levine - Blumenthal - Rule on Preexisting Duty and Consideration

A promise to do what the promisor is already legally bound to do is an unreal consideration.

Levine - Blumenthal - Rule on requirements of subsequent agreement

A subsequent agreement, to impose the obligation of a contract, must rest upon a new and independent consideration.

Output and Requirements Contract - What does it mean?

Means output or requirements that happen in good faith except that no quantity unreasonably disproportionate to any estimate OR in the absence of estimate to any otherwise comparable prior numbers can be demanded.

UCC 2-306(1) on output/requirement contracts

Means such actual output/requirements in good faith, except that no unreasonably disproportionate to any stated estimate or if no stated estimate then it is any normal or otherwise comparable prior output/requirements.

Reasons sellers don't want ads to be offers (3)

Mistakes/Typos shouldn't be binding, Quantities may run out or may not want to disclose how many they have, Want to be able to only sell to certain target audience.

Webb McGowin - Lumber Mill - Saving guy's life and hurting own - Court's rule

Moral obligation was enough for consideration when combined with the material benefit of having one's life saved.

Illusory Promises are

Never adequate consideration

Consideration vs. Seal

New dividing line between enforceable and unenforceable.

2nd Quiz - Joe & Mother - Leaving for War and Mom taking care of kid - Consideration

No because mom agreeing to take care of the kid was not a promise bargaining for Joe enlisting, Mom was trying to prevent Joe enlisting, therefore her promise was gratuitous.

1st Quiz - Paul/Dan Piano Moving - Consideration?

No consideration because Dan was not getting anything by Paul coming over to move the piano.

Alaska Packers - Rule - Consideration? - Word used by court

No consideration because the agreement to pay extra money was based on workers promising to perform what they were already obligated to do. Coerced.

Rule - Naming August - Grandfather case

No consideration because the promise of giving 5k didn't induce the act.

Mills/Wyman father of sick dying son promises for benefit already received - rule

No consideration when promise is based only on moral obligation when no consideration was ever present because no preexisting legal obligation.

Sullivan (Nose Job) - Arguments against expectation (3)

No negligence, doctor's gains are much smaller than expectancy recovery, hard to put a value on the conditions.

Hinds - At-Will employment case (Texas) Ruling

No promissory estoppel for at-will contracts because it is not reasonable for employee hired to rely on them.

Malpractice in Sullivan (Nose Job)?

No, because skill and judgment used were reasonable.

Auction - Is putting item up for auction an offer?

No, it is an invitation for offers.

Kirksey - Land Preference - Why not consideration?

Not bargained for and no exchange. It was a gratuity.

Advertisements are generally

Not binding contracts.

When auctioning without reserve - rule

Offer to sell cannot be withdrawn unless no bid is made within a reasonable time.

Unjust Enrichment - elements to enforce (4)

One party confers benefit on another, benefitting party is aware, benefitting party accepts and retains, would be inequitable not to compensate.

What counts as a promise to pay all or part of a prior obligation if its from bankruptcy proceedings? (1)

Only express promise to pay all or part of debt is binding

Enforcing promises by Doctors (Why not (2) / Why (1)

Optimistic statements by doctors can have therapeutic value. Doctors will be frightened into practicing defensive medicine. If not enforced confidence in doctors could be shaken.

Feld - Levy - Breadcrumbs - Rule

Ouputs contract implies agreement to make good faith effort to continue to produce.

Feld - Levy - Breadcrumbs - kind of contract and why?

Output contract because Feld would buy as much as Levy would make.

Webb McGowin - Lumber Mill - Saving guy's life and hurting own - Where does Page disagree with Court?

Page says valid contract because by accepting the money the person forbearing on right to sue.

Mutual Rescission Rule

Parties can always mutually rescind a contract.

Bailey v. West - Horse Grooming - Why was there no contract? (2 + conclusion)

Parties not intended to be bound. Bailey could have negotiated but didn't. Bailey voluntarily groomed horse.

Output Contract

Party sells as much as can make, Buyer buys as much as seller can make.

Behavioral Economists

People do not always behave rationally.

Samuel Thomas v. Eleanor Thomas (Will case giving house to widow) how was it a contract?

Plaintiff paid ground rent and promised upkeep indicating it was a clear agreement and there was consideration.

Law and Economics

Predicts people's behavior through their own self-interests.

Satisfaction of Condition - Rule on Standard + exception

Preferred standard is whether a reasonable person would be satisfied and for some reason if the reasonability is impossible to ascertain courts will go to honesty.

Hamer (Abstain from drinking til __ age) v. Sidway - What was the consideration?

Promise induced him to abandon a legal right.

Promissory estoppel comes in what section

Promise reasonably inducing action or forbearance.

Promissory Estoppel - Elements (3)

Promise where promisor reasonably expects to induce action or forbearance from promisee, does induce such action/forbearance and injustice can be avoided only be enforcing promise

Purpose of expectation re: reliance

Proof of reliance is uncertain and will go uncompensated, expectation can measure reliance.

Expectation interest

Put loser in as good a position as he would have been in had the contract been performed.

Reliance interest

Put loser in as good a position as he would have been in had the contract not been made.

Kind of damages Contract Law never has

Putative Damages

Lessee's Well Case - Oral agreement to reimburse half of well if exercise option on land. Term?

Reimbursement promise was a mere gratuity because promise did not induce any return promise or performance.

Garwood investment - Ohio Case - Why no consideration

Reliance on the promise was not reasonable it was a risk taken by the company.

Reliance for contract to be binding without consideration requires - Think Restatements (2)

Reliance to be foreseeable and reasonable and definitely substantially changes promisee's position from if contract was never made.

Different measures of remedial enforcement

Reliance, Restitution, Expectancy.

What is the only remedy for unjust enrichment?

Restitution

Restitution interest

Restore any benefit losing party conferred to the other party.

Langer re: Different than Kirksey (Retired and asked not to work) What was the consideration?

Retiree gave up legal right to pursue work and compete.

Auction - Bidder's retraction effect on previous bidder

Retraction of highest bidder does not revive the previous highest bid.

Why protect the Expectation interest? (3 answers + 1 principle)

Rewards risk-taking, enables allocating, deters purposeful breach that hurts breached party. Efficient breach is a good thing.

Requirements Contract

Seller sells as much as buyer needs. Buyer buys as much as he needs.

Risks associated with Requirements + Output (2)

Sellers takes risk buyer in good faith reduces what is required, buyer takes risk seller in good faith reduces what it produces.

Lefkowitz rules on enforcement of ad as contract (3)

Specific Quantity, Specific Instructions, No Mistake

Meaning of the objective standard used in determining whether words/actions meant binding contract (3)

Specific language, Subject matter, Relationship

Common Law and Promissory Estoppel are always trumped by...and example

Statutes such as the Uniform Commercial Code.

Generally to enforce charitable subscriptions (2)

There need not be consideration as long as there is reliance.

Sand Company Case - Rule

There was mutuality and the contract was followed through on by the parties so it was binding.

Rationale behind enforcing Contracts without Consideration

There would be cases where gratuitous promises should be enforced for compelling reasons of justice because of substantial detriment induced by promise.

Pennsy - Agg Rite - Disposal costs holding?

Things don't have to be actually bargained for as long as the detriments and benefits can be induced from the promise.

McMichael - Price - Sand Dealer Case - Why a contract

This was a output contract because dealer was required to purchase all he could sell

Samuel Thomas v. Eleanor Thomas (Will case giving house to widow) Rule Bargain/Consideration/Promise/Inducement

Though what is bargained for does not induce the promise, it can still be consideration for the promise.

Consideration - general rule

To constitute consideration, a performance or a return promise must be bargained for

Page prefers calling Quasi-Contracts

Unjust Enrichment

Unilateral Contracts - Example

Usually contracts that can only be accepted through a performance. I will give you this if you do this. Often these are contests or prizes.

Quasi-Contracts - What to look at and what questions to ask

Value and Circumstances. Was contracting impossible? Was there a valid assumption of compensation?

Illusory Bonus case of Insurance Agents - Questions to Ask

Was company required to perform in good faith? Was there conduct after the signed writing on behalf of the parties that indicated an obligation?

Discrimination re: advertising - peaches example

We foresee why sellers want to discriminate. They intend their ads for certain buyers. Don't want their competitors to take advantage of the deal.

People do things for each other all the time, what do we presume?

We presume they are gratuitous and do not require compensation.

Consideration as motive or inducing cause - Bargained + Performed - Think Agg Rite

What bargained for not by itself inducing the promise does not mean it cannot be consideration. Promise not by itself inducing performance/return promise does not mean it cannot be consideration.

Lonergan - Scolnick - Tract of land posted in newspaper - General Rule to apply to other cases that are close

When it's a close call the court is inclined to say no contract/not binding.

When are events/circumstances occurring before promise made sufficient reason for legal enforcement of promise?

When prior legally enforceable obligations only not enforceable because of statute of limitations AND when there are preexisting moral obligations.

Bait & Switch - Definition

When they get you in the door with a product on sale, but once there they try and push you to buy something else.

To constitute consideration

a performance or a return promise must be bargained for

If consideration met then no additional requirement of (3)

benefit or detriment; equivalence in value or mutuality of obligation.

Bargained for - in detail

consideration and promise must have a reciprocal relation of motive

Accord and Satisfaction - UCC Rules on when claim is discharged elements (4)

good faith wrote a check for full satisfaction of claim, claim amount was unliquidated or subject to bona fide dispute, other received the payment, conspicuous statement attached

Bargained for - What is law concerned with and what is enough

law cares about external manifestation rather than the undisclosed mental state, manifests an intention to induce the other's response and to be induced by it and that the other responds in accordance with the inducement.

Condition is not ______ but it is _______ to being a contract

not sufficient, but it is necessary

Good faith in the 2-209(1) Merchant context

observance of reasonable commercial standards of fair dealing in the trade

Forbearance to assert claim or surrender claim when claim invalid is consideration when (2) and how different from Fiege?

the validity of claim is in doubt OR the forbearing party believes it may be valid. No longer needs to be reasonable belief as long as its in good faith.

What counts as a promise to pay all or part of a prior obligation? (4) only 1 required

voluntary acknowledgment admitting the existence of the debt OR voluntary transfer of money, check or other thing made as some kind of payment to debt OR statement that statute of limitations is gonna be waived as defense.

Supplemental agreement - Contract Test

whether there is an additional consideration adequate to support an ordinary contract, and consists of something which the debtor was not legally bound to do or give.