ISSUES that will/ will not/ or might be on exam
I. Introduction to Course
i.
= actual the contract would have had at time
performed (not hopes)
ii.
EX: Lost
profits
iii.
Cant give expectation for doctor because medicine
not an exact science and doctors cant promise success
iv.
Here you wouldn’t get anything back that was part
of the contract (such as first two operation costs) you would only get the
value of what you expected to have at the conclusion of the contract.
i.
Example:
pain and suffering
ii.
You would get the $ back from first two ops because
you relied on the promise of a good nose
RULE: Restatement 71 page 55 Promise plus
consideration
The performance of return
promise may be given to the promiser or to some other person. It may be given
by the promise or by some other person
A.
Rule mostly tends to be consideration or nothing
B. RULE: TWO QUESTIONS OF CONSIDERATION!
1. The promisor must by his promise be inducing or prompting the promisee to fulfill contract AND
2. Was
hope of getting her to perform prompting the promise?(Kirksey)
a. The
promisor must be trying to get something out of the arrangement.
b. There
must be a condition of the bargain; No condition then no consideration
Hypo: Father and daughter estranged and father wants to meet. His says: If you come to lunch then I will give you a ring.
Good because the condition = she come to lunch and father had reason (was induced to make the promise to repair the relationship)
Hypo: peace of mind of the promisor is good enough
Hypo: Can a brothers
mere desire for contact with his nephews be necessary consid.? The court must find a bona fide benefit.
Hypo: Rich man tells
man to follow his directions to store and get himself an outfit on his account,
but changes his mind before bum arrives at store. Not enforceable b/c rich man gets no benefit.
The performance must be
1. Sought by the promisor, and
2. Given by the promisee in exchange for the promise
1. Each party must suffer a detriment or a benefit
2. Each the promisors promise and the promises promise or performance must be inducing the other, but the promisor’s promise must be induced and made because of the detriment or performance the promise requests of the promisee.
3. Gain or advantage to the promisor is not needed, in order for consideration to be present, the promisor must only get what he bargained for.
1. Hypo: Al promised Buster that is he stopped smoking, Al would give Buster his skis. Thus Buster is suffering a detriment and forbearing smoking and Al suffers the detriment of giving the skis. There is an exchange.
4. Detriment = yielding of a legal right
a. Can be the form of an immediate act (doing or giving something)
b. Forbearance (refraining from something)
c. Partial or complete abandonment of an intangible right
d. Can also be any of the previous three to do in the future
5. The detriment cannot be only a condition to a gift.
1. Hypo: If you walk over to my car, I will give you my skis. (This performance is not inducing the promisor to make the promise!)
6. There does not have to be an equivalent in the number of promises and performances provided by each party.
a. Two exceptions:
i. Consideration unfair due to dishonest, fraud or honest mistake
ii. Consideration given for a promise has so small a value that it is considered a gift (nominal value)
The pledge
must prompt the promisee to act in a certain way, and the performance of the
promise must be the inducement (reason) for the promisor’s pledge.
1. Does
the promisor have a reason for making the promise, is he getting something?
2. The
something does not have to be tangible, and the court refuses to measure the
benefit of the promisor’s inducement.
1. Hypo: Uncle promises nephew $, if nephew refrains
from smoking, drinking. The nephew is
giving up a legal right and thus suffering a detriment.
a. Thus
the promise prompted the nephew to act in a certain way AND the performance
induced the uncle to make the promise
RESTATEMENT
81- the degree of how much the promisor is benefited does not matter. Consideration must simply be a motive.
ii.
1. The fact that what is bargained for does not
of itself induce the making of a promise does not prevent it from being
consideration for the promise
iii.
2. The fact a promise does not itself induce a
performance or return promise does not prevent the performance or return
promise for being consideration – Ex Bogigian
E.
Rule:
1. A
promise is unenforceable if not bargained for.
2. Each
party must agree upon the benefit and detriments
a. Was there a bargain that would yield a benefit to the promisor?
1. Hypo: Wife signs release of judgment and husband says this is consideration but court says no because wife did not know and thus did not agree to the fact that this was to be her benefit and detriment.
F.
??? RULE: THE PROMISOR MUST BE AWARE OF THE BENEFIT. Thus this rule will serve to protect those
who don’t know they are making a promise. (Bogigian)
G. THIRD PARTY RULE: If there is a third party, ask the same elements: (third party okay restatement 71)
1. What prompted the promisor to make the promise?
2. Is the performance being rendered from inducement?
1. Hypo: A wants B to wash car for which A will pay C:
a. A will benefit from the clean car
b. C gets $$ for washing (performing)
c. B merely a third party
d. VALID AND CONSIDERATION!
H. PAST PERFORMANCE RULE: NO consideration for a performance already done in the past.
a. Because then, the promise would not be induced by performance beacsue it has already been done.
1. Hypo: Parents had a baby and named him August. A week later grandpa promised that is they named him August he would give them $5,000. = NO consideration
2. X-lover promises to care for his x-mistress for her past years of co habitation. The co-habitation has already occurred, thus cannot be inducing the promise
RULE: If the promisee suffered the detriment before the promise was made, it cannot be said the detriment was exchanged for the promise
I.
GRATITUTIOUS GIFT RULE: No
consideration is the consideration alleged is obviously a sham or a cover to
appear as consideration but cannot be reasonably conceived as inducing the
promisor when he made his promise.
a. This
type of gift allows only nominal detriment by the promisee
1. Ex: $1.00
1. Hypo:
Mistress pays x-lover one dollar for his promise to care for her for the
rest of her life. (no inducement, this detriment by the mistress cannot
conceivably be the inducing reason for the x-lovers promise = a gift
2. Hypo: grandpa
promises you 17 million in return for cookies.
HE must sincerely be induced to give the 17 mill for the cookies, thus
thus would normally be considered a gift and only nominal consideration. (The court, however finds ways around this
through promissory estopple)
3. Hypo: I
promise to give you my book. The
promisee feels bad and then promises to give me his coin collection. = no consideration because each promise is
not induced by the performance of the other. The promises are made
independently and = gifts
J. INVALID CLAIM RULE AND Restatement 74 and Fiege v. Boheme
Restatement 74
1. Forbearance to assert or the surrender of
a claim or defense which proves to be invalid is not consideration UNLESS
a. The claim or defense is doubtful because
of the uncertainty of the facts or the uncertainty of the law
b. The forbearing or surrendering party
believes the claim or defense may fairly be determined to be valid.
2. The execution of a written instrument
surrendering a claim or defense by one who is under no duty to execute it is
consideration, if the execution of the written instrument is bargained for,
even though he is not asserting the claim or defense and believes that no valid
claim exists.
3. EXPLANATION: Fiege v. Boehm
Girl was
pregnant and boy made promise to pay child support as long as she would forgo
her claim to file criminal charges against him for bastardy proceedings (child
support). The father allegedgly
acknowledged he was the father, but claims now they never had sex. Aside from the claim (that he is father) he
did promise to pay for expenses and stipulates to this fact, in return for her
not instigating bastardy proceedings.
Even
though the claim turned out to be invlaid (the child was proven not to be his
child)
He is
obligated to pay because
1. He promised to do so, and
2. She genuinely believed he was the father
and thus forwent he right to instigate child support proceedings
Had she not really known the
claim to be invalid, there would have been no consideration.
RULE: When a claim (that one claims is
consideration because they forwent their right to assert the claim) is invalid
we must put it through a two- question test:
1.
The claim is now
doubtful or proved to be invalid
(and
thus its power of being consideration is called into question and the
enforceability of the contract at stake)
2.
When made part of the contract, (as the
promisee’s detriment) the claim must have in good faith been though to be a
valid claim.
K. PRE-EXISTING DUTY RULE:
A detriment by the
promisee is necessary, thus is the promisee is already obliged or required to
do something, there is no detriment and thus no consideration
1. Hypo:
Al and Buster make binding promise to give Buster skis if Buster pays Al
$100. Al realizes, however, he ,made a
mistake and undercharged for the skis and asks Buster for an extra $50. Buster feels is he does not agree, he will be
taking advantage of Al and agrees. = NO
consideration for the $50 because Al already has a duty to deliver the skis for
$100.
Restatement
73: Performance of a legal duty owed to
a promisor which is neither doubtful nor the subject of honest dispute is NOT
consideration; BUT a similar performance is consideration if it differs from
what was required by the duty in a way which reflects more than a pretense of a
bargain.
2. Hypo: If a creditor promises to accept only a portion of what is owed to him in return for the debtor not filing bankruptency (and thus being protected and the creditor will receive nothing) this will be sufficient consideration as long as it is expressly stated.
3. Hypo: If the contract presents questions which are unresolved, then changing a part of a contract (such as adjusting rent) in return for clarifying the part of the contract no clear = good consideration.
L. PRE
EXISTING DUTY TO A THIRD PARTY:
1. A has a duty to B through a contract with good
consideration, and A promises the same duty to C for another benefit (another
performance by C.) Thus B and C are both performing some detriment or benefit
to A in return for the same duty imposed upon A. No consideration between A and C because A
already owed this duty to B.
MODIFICATION TO CONTRACT RULE: The courts insist (the UCC has an exception where
modification can be made as long as it passes the good faith test) that some
new detriment be found for modifications in contracts to be valid.
RULE: This is to prevent coerced modification
2. Hypo:
Fishermen taken out to sea having agreed to contract for $5 per day, but
once out to sea during the short season, the fishermen refuse to work unless
their pay is increased. Foreman agrees
to increase pay. = no consideration because the men had a pre existing legal
duty to perform their work under the contract.
3. Third
party Hypo: Third party offers to pay the fishermen ten percent over what their
contract calls for. This is
consideration because the third party’s benefit is the promisee’s forbearance
not to breach the contract between him and his employer. The third party is thus buying the agreement
not to breach the contract with employer.
RULE: A promisor and promisee can promise to rescind the contract in return for the promise not to perform.
RULE: When a transfer occurs consideration is not required and will be considered a gift because the transfer has intent and delivery.
4. Hypo: If the
foreman had paid the new salary and then challenged its validity he would have
not been able to get the money back because a transfer has already taken
place. The foreman must refuse to pay.
M. EXCEPTION
TO PRE- EXISTING DUTY RULE:
UCC RULE sale of goods
|
Restatement 89 Exception:
Services |
|
An agreement to modify a
contract needs no consideration to be binding, the modification must
only meet the GOOD FAITH RULE: 1. Must have a legit commercial reason 2. The other party must voluntarily agree |
A promise modifying a duty
under a contract not fully performed on either side is binding 1. If the modification is fair and equitable
in view of circumstances not anticipated by the parties when the contract was
made, or 2. To the extent provided by statute, or 3. To the extent that justice requires
enforcement in view of material change of position in reliance on the
promise. |
1. Restatement
89 element #1 RULE:
a.
The promise must be made
before the contract is fully performed, and
b.
The circumstances
prompting the change must have been unanticipated, and
c.
The modification must be
fair and equitable
1. Hypo: A is hit by higher prices that increase his raw material prices and he wished to raise his price he charges B for the product. = Modification not enforceable because increase in raw material prices foreseeable, plus the fact that B entered into a contract that fixed prices probably for the very purpose to protect him from price increases. BUT there is a difference between an expected increase and a drastic and unexpected increase.
N.
MUTUALITY OF OBLIGATION- problem occurs where
the promisor claims there was no consideration because the promisee was not
bound to perform.
Both parties must
be bound or neither is bound
Unilateral
Contract v. Multilateral Contract:
Unilateral- A reward obligation
where the promisor will pay IF something happens
(Multilateral- promise for a promise)
(Restatement
confusing)
A promise
or apparent promise is not consideration if by its terms the pomisor or
proported promisor reserves a choice or alternative promises UNLESS:
1.
Each of the alternative
performances would have been consideration if it alone had been bargained for
2. One of the alternative performances would have been consideration and there is or appears to the oarties to be the substantial possibility that before the promisor exercises his choice events may eliminate the alternatives which would not have been consideration
Restatement explained:
O.
Illusory
Promise can occur in two situations
1. One
of the parties cannot have unlimited discretion so that, really, nothing is
promised.
The argument is that is one party
does not have to perform and is not bound, the other party is not bound by
consideration.
Hypo: Buster promises to buy skis for $100, and Al
promises to sell to Buster, unless Al changes his mind = illusory promise
2. If
the promise is based upon a condition that cannot occur
Illusory promise and IMPLIED Best Effort rule: When a promise is illusory, contains a loophole allowing a party out with no performance or detriment, their promise to perform carries the implied promise to use their best efforts, and thus through this implied promise there exists consideration
1. Hypo: Al and buster agree that Buster will buy Al’s skis next week for $100 if Buster can secure a loan by then. This promise is illusory on its face because Buster is really under no obligation to act to secure the loan. This is where the IMPLIED promise of Buster to use his best efforts to get the loan in time.
a. If he uses his best efforts but still does not get a loan, there is no contract and no breach.
b. If he does not use best efforts, there is a breach in the implied promise to do so and Buster would be liable for the breach
Hypo: Lucy, a fashion designer, hired a Wood who was to exclusively work for Lucy and find for her endorsements for which he would receive half the profits. Lucy breached when she herself contracted with Sears to endorse. Wood said under contract he was the only one who could find the clients, and thus he was entitled to half the profits. Lucy said she was not in breach because there was no contract due to the fact Wood was under no obligation to perform. (the contract was illusory) The court disagreed and said the exclusive agency by which Wood was employed IMPLIED and obliged him to use his best efforts to perform, thus there was consideration, thus there was a contract, and thus Lucy was in breach.
P. EXCLUSIVE AGENCY IMPLIED BEST EFFORT RULE: When one is employed under another under exclusive agency, the best effort promise is implied and thus there is consideration.
a.
Output and
Requirements contracts: the parties have left the quantity of goods
open ended on the understanding that the quantity to be supplied under the
contract will be determined either by the buyers requirements or by the sellers
output.
b.
Output contract- seller wishes to dispose of its full production in one
transaction and the buyer is confident that it can use all the seller can
supply.
c.
Requirement
Contract- seller is confident it can
satisfy the buyers needs and buyer is unsure of its exact needs and wished to
avoid the risk of ordering a specified quantity which may turn out to be short
or excessive.
d. Thus either contract could be considered illusive because the buyer could require zero or the seller could produce zero.
RULE:
Even when not expressly stated the EXCLUSIVE DEALING
OBLIGATION implies the sellers or buyers to use best efforts and good faith
with a reasonable expectation test:
When a contract measures seller’s output or a buyer’s
requirements:
3.
These outputs or
requirements are those that would occur in good faith
4.
The quantity tendered
or demanded may not be disproportionate to any estimate stated in the contract,
or if no estimate was stated,
5.
The quantity tendered
must be comparable to any normal or otherwise comparable output or requirement
Thus the
party setting the output or requirement is held to a subjective honest standard
AND an objective standard as what would be considered in the commercial
context.
RULE: The outputs and requirements are limited by a reasonable ceiling but are not limited by a reasonable floor, AS LONG AS THE DEMAND FOR ZERO OR THE OUTPUT MADE AT ZERO QUANTITY IS MADE IN GOOD FAITH.
3. Hypo: Baker stops making bread crumbs (stops outputting) because the company is experiencing profit loss. Thus their output goes to zero. Not ok and breach of their implied promise to use best efforts under UCCà
RULE: Factors such as profit loss not enough to constitute an output of zero and shut down before end of contract. This is not enough.
1.
When it is a condition
of an obligor’s duty that he be satisfied with respect to the obligee’s
performance or with respect to something else, and it is practical to determine
whether a reasonable person in the position of the obligor would be satisfied.
2. Again, here the implied promise to carry out the condition is the consideration needed.
Hypo: A buyer who had signed a contract to buy a
piece of property did not have to ultimately purchase the property if he found
the report to be unsatisfactory. The
sellers said this made the contract illusory and thus rescinded the offer on
the basis the contract had no consideration.
However, the court ruled the personal satisfaction clause is subject to
the promisor’s good faith. The promisor
is entitled to rescind the offer to buy, however, it must be based upon his
good faith dissatisfaction with the report given. THUS the standard used is an objective
standard of a reasonable person to be satisfied or dissatisfied with the report
Rule: When adhering to a condition based upon the promisors satisfaction, there is an inescapable duty to exercise the discretion honestly and in good faith
OBJECTIVE
REASONABLE STANDARD: When determining if the promisor
has exercised his good faith the standard
of satisfaction will be that of a reasonable person.
Thus if the reasonable buyer would be satisfied with the land = the
buyer must take the land. UNLESS: The
subject is subjective such as a painting, then you go merely on good faith.
III. Restitution- PROMISE NOT MADE
**** What is the difference between
this casue of action where there is no promise and §86****
Is there a difference?
Does a contract implied in law also
require that the person whom the benefit was given make a promise for the cause
of action to even exist?
If the person
receiving the benefit does not ever promise to repay the benefactor will there
still be a cause of action where there is unjust enrichment?***
A. Restitution- Designed to prevent unjust enrichment
B. This is not restitution the remedy, it is the cause of action to restore something suffering from unjust enrichment of another by the actors benefit conferred.
1. Quasi Contract (contract implied on law)- an obligation imposed by law for the purpose of bringing about justice and equity
2. A promise is never made nor is it implied in fact
3. This is a non- contractual obligation treated as if it were a contract.
C. RULE: One who, without intent to act gratitutiously, conferes a benefit upon another is entitled to restitution if:
1. He affords the other to decline the opportunity or has reasonable excuse for failing to do so. (life or death situation)
2. The actor performs for the other a duty imposed upon him by law if the other refuses to receive the benefit
D. Contract implied in law (quasi) v. Contract implied in fact
1. RULE:
Contract implied in law-
a. Defendant
received a benefit
b. There
is appreciation or knowledge by defendant of the benefit
c. The
circumstances would make it unjust for the defendant to retain the benefit
without paying for it
d. Recovery
= defendants gain or the value of the PL’s services
1. Hypo: Man cares for another’s child were the other
had a legal duty to care for the child, and thus owes thje actor for this
benefit although there was never a promise made and the benefit has already
been conferred
2. Contract implied in fact (not what we are talking about here)
a. The defendant REQUESTED PL to perform the work
b. PL expected the PL to compensate him
c. Defendant knew or should have known the PL expected compensation
d. Recovery = amount parties intended in contract price
1.
Hypo:
Bring clothes into dry cleaners and put clothes on counter and leave. It is implied by the facts you will pay
for the clothes to be cleaned
E.
Restatement 86 Past
benefit conferred:
1.
A promise made
in recognition of a benefit previously received by the promisor from the
promisee is binding to the extent necessary to prevent injustice
2.
A promise is NOT binding
if:
a.
The promisor conferred
the benefit as a gift or the promisor has not been unjustly enriched
b. The value subsequently promised is disproportionate to the benefit received
MAKE COPY BLUM CHART PAGE 212 and 231
F. Two requirements for this type of action
1. Defendant has been enriched in some way
2. The enrichment is unjust for the defendant to keep
1. Benefit is conferred
2. The benefit must be of value to the defendant
3. The benefit must be retained by the defendant
4. There is inequitability of defendant retaining it for free
1. Hypo: $500 bill is blown into the car window and owner of the $ makes a claim for his money back. Thus would the person who found the money blown into her car be able to keep the money? NO
a. Although there is no contract to return the money, it would be unjust under the circumstances to return the money
b. Look at the elements:
i. $50 is a benefit to me
ii. $50 has value to me
iii. I intend to keep it
iv. It would be inequitable to keep the money
1. The
status of the benefactor may overcome the presumption that a benefit is
conferred as a gift.
a. Ex: When a doctor renders medical care we don’t regard those as gifts, we regard them as services for a fee
b. One in a professional capacity rendering his professional service.
2. The
extent of the benefit can overcome the presumption the benefit is a gift
a. Arduous, dangerous, or expensive
b. We say the benefactor has gone so far we would imply to compensate him for going to such an extent by accepting
a. Ex: one comes in an emergency and saves your house because power lines threatened to fall on it and burn it. He then asks for 1,000. (His cost to save your house) The event was likely.
i. &n