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.