Contracts I Outline
Elon University School of Law
Part 1 – Basis for Enforcing Promises
1. Enforcing Promises: An introduction
– Contracts – Restatement § 1 – “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.” – A legally binding, enforceable promise
– In contracts – one promises that he will either perform or pay you the damages for the nonperformance.
– Promise- Restatement § 2 – “A manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.”
1) Verbal – written contract 2) Oral – spoken contract 3) does not have to use words
– In contract law a person is only liable for what they agreed to be bound by.
Difference btw. Contracts and Torts.
Ø Hawkins vs. McGee Hand to receive skin graft from burn; Doctor expresses quick recovery and guarantees to make the hand perfect
Reasonable to assume that the given result would be obtained and the information was meant to be taken that it was a promise.
“Even the doctor of average integrity would not give a promise of that caliber.”
Ø Bayliner Marine Corp v. Crow Boat does not run at the promised speed as believed by the plaintiff
Crow loses because this was not a breach of contract since the sellers stated facts about the boat from the “prop matrixes” and the flyer were only talking about his model of a boat but with diff. specs. – this was not the actual boat that Crow bought.
o Courts language – “the affirmation must relate to the goods and become part of the basis of the bargain.”
2. Remedying Breach
– Two ways Courts remedy a breach – 1) Relief – from promises. 2) Put the promisee in the position it would have been in if the promise was performed
– Efficient Breach – one of the parties decides it is economically reasonable to breach the contract.
1. Substitutional – generally preferred ( Money Damages)
a. Expectation: being put in as good a position as he would have been had the contract been performed
b. Reliance: being put in as good a position as he would have been had the contract not been made
c. Restitution: having restored any benefit that he has conferred on the other party
2. Specific Performance- the party must render the performance promised ( Restatement § 359 – this “will not be ordered if damages would be adequate to protect the expectation interest of the injured party”)
Ø United States Naval Institute v. Charter Communications, Inc. Breach of Contract for Early book Hunt for Red October Shipment. Naval Claims the early sale of softback books cause hardback book sales decline.
Expectation Measure – party is awarded whatever they would have made had there not been a breach.
Awarded lost book sales, but not Berkley’s Profits – no punitive damages in contracts – only damages for non-performance
Ø Sullivan v. O'Connor Plastic Surgeon does not fix the nose as promised
Her expectancy was the difference between what was promised and what was received. (the Not ugly vs. Uglier) Her reliance would have only been the difference in the Ugly and the Uglier. Put me back in the position I was in before the contract. May calculate pain and suffering.
She was not given expectancy because she waived her right to have this given. – She would have been entitled to it otherwise.
Ø White v. Benkowski Water use contract btw. Neighbors / White pays Benkowski for water usage rights form his home
Judgment is limited to compensatory damages – No punitive damages allowed in contracts.
3. Consideration as a Basis for Enforcement
a. Fundamentals of Consideration
· Both parties must give up something.
· One sided bargains are not contracts.
· Gifts are not contracts.
Restatement of Consideration:
To constitute consideration, a performance or a return promise must be bargained for
· To be bargained for
o It must be sought by the promisor in exchange for his promise and
o Is given by the promisee in exchange for that promise.
Hypo: I promise $30 if you promise to cut my grass. – promise for a promise – bilateral / promise for performance – unilateral
Consideration – A detriment is suffered by one person in exchange for a benefit.
Test: one party gets a benefit but has to suffer a detriment…in exchange for the other party's suffers a detriment for the other party's benefit.
o In a consideration there is a rule that the disparate values of the contract can't be taken into consideration.
2 Essential properties of contract law
· There must be an inducement to the consideration ( If both parties don't intend to enter into the contract we don't have one)
· The intent cannot be looked at.
Ø Hammer v. Sidway Promise from Uncle to give Nephew 5,000 if he does not drink, smoke, etc. until he is 21
It is enough that something is promised, done, forborne, or suffered by the party whom the promise is made as consideration for the promise made to him.
According to this court, consideration in this case was he gave up his right to smoke, drink, ect. The uncle does not actually have to get something as long as the other party gives up something. Judgment for Plaintiff – to receive 5,000 after uncle’s death.
Ø Note 4 page 38 – The Peppercorn Example
I promise to sell you my car for a peppercorn – this constituted consideration under the Restatement, First § 84; however,
In the second hypo, there is no consideration – the rule is the exact opposite in the Restatement, Second – A wishes to give $1,000 to B but is advised that a gratuitous promise is not binding so B promises A a book that is worth less than $1 for the $1,000 in return, both accept; however there is no consideration.
Ø Fiege v. Boehm Bastardy Case – supposed father (in good faith) of the baby promises mother (Boehm) he will pay her support if she will not file criminal bastardy proceedings against him. He finds out he is not the father and stops paying – saying no enforceable contract. Mothers sues.
Rule: For there to be a valid consideration, the claimant must believe in good faith that the claim is valid and the belief must be reasonable according to the reasonable person standpoint. If one knows there is no foundation either in law or fact for a charge against someone – than forbearance to institute proceedings is not sufficient consideration.
Since he could have been the father and the mother believed this in good faith, she was genuinely giving up something.
Ø GHHHddddfHHypo – If I threat to sue you for hitting my car and you did not hit it and if I promise not to sue you if you pay me such money and you agree. There is no
ave up his right to fire for reasonable time
Ø Problem pg 66 Sherriff offered reward for capture of outlaw – man capture and sues for reward that he was unaware of .
HELD: No contract. Capturer was not induced to get the reward because he was unaware of it.
Restatement Sec. 51. Unless the offeror manifests a contrary intention, an offeree who learns of an offer after he has rendered part of the performance requested by the offer may accept by completing the requested perfomance.
· Therefore if the capturer learns of the reward on the way in and it induces him to continue to perform than there is consideration. – However, this is only if he were induced.
Ø Page 67 Problem – Brewery offers $25,000 for catching Diamond Jim III – Their offer did not induce him to go fishing that day. However, his knowledge of the fish prize partially induced him – the Brewery wanted to see people go fishing not bring in the tag. – and they paid him.
Section 81 Restatement – The fact that a promise does not of itself induce a performance or return promise does not prevent the performance or return promise from being consideration for the promise [Valid contract – prize winner must pay taxes on the money.] d. Promises as Consideration
Unilateral Contracts: promisor seeks performance in exchange for a promise
Bilateral Contacts: those in which both parties make a promise
Restatement 75: A promise which is bargained for is consideration if, but only if, the promised performance would be consideration.
Ø Strong v. Sheffield Wife promised to sign onto husbands note to creditor for creditors promise that he would not collect the debt unless he wanted to. “needed to” could be the same thing. Wife later refuses to pay arguing no consideration.
Issue: Whether or not collecting a debt unless “I want to” is a promise that creates a duty to the promisor?
Holding: There was no agreement to forebear the collection for any fixed or reasonable time. No consideration in the promises.
Ø Problem Page 71 – W gave up her right to receive further divorce payments in return for H making a will to deed the farm to their son.
Husband reserved a right to sell a portion of the farm if he needed the money. – Does this make his promise illusory?
HELD: promise not illusory because H had a duty to perform and only sell portion if according to the good faith he needed the money.
Ø Mattei (Developer ) v. Hopper (Seller) – Developer contracts to buy property contingent upon arranging satisfactory leases. After the offer was accepted Developer back out.
ISSUE: Whether a satisfaction clause imposes a duty upon the party whose promise is contingent upon the satisfaction clause?
RULE: There is a duty upon the Developer to act in good faith in satisfying the leases.