Contracts Outline

Contracts Outline
1. Consideration
A. General RuleàA bargain constitutes consideration.
                1. performance or return promise is bargained for or mutual assent (§ 71, 1)                                                                         a. Requirements of a Bargain? (§71,2àTwo way street)
                                                1. sought by the promisor in exchange for his promise
                                                2. given by the promisee in exchange for that promise
                                                3. Examples:
a. Kirksey v. Kirkseyà “Sister Antillico” promisor did not seek promise or performance from promisee. No two way street, so No bargain, therefore no consideration (May win on reliance)
b. Million Dollar Swipeà Promotion is consideration for contract. 2-way street because she gave casino info about her gambling habits in return for a spin of the wheel. They were seeking her information.
c. Lunchtime at Tiffany’s-Dad was not acting gratuitiously, he really was seeking a visit with the daughter. She went to get the ring, and would not have gone otherwise. Bargain because of two way street. He was seeking her to perform.
                                b. What is performance? (§71, 3)
                                                1. an act other than a promise
                                                2. forebearance
a. Hamer v. Sidway (1891)àCourt enforced promise because the nephew forbeared from “bad things” , forbearance of legal rights resulted in consideration.
                b. Fiege v. Boham (bastard case, § 74)
1. forbearance based on reasonable belief (and good faith) which turned out to be invalid is still enforceable
3. the creation, modification, or destruction of a legal relation
                                c. What is a promise? (§2, 1)à objective theory
1. Objective Theory- 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. 
2. promisor-the person manifesting the intention (§2, 2)
3. promisee- the person who the manifestation is addressed(§2, 3)
                                d. Adequacy of Consideration (§79)
                                                1. If the requirements of consideration is met, there is no additional require. of:
                                                                a. benefit or detriment
                                                                b. equivalence in values exchanged
                                                                                1. Gross disparity as evidence-examples: My BMW for $.35
 for a phone call,to make a million is consideration or Ill 5 §71
no consideration because it is a mere pretense.
                                                                                2. Unconscionability-if disparity is so great as to be
 unconscionable.
3. Equitable Remedies-adequacy will be considered for remedies
                                                                c. mutuality of obligation-both parties
                                e. Actions in the Pastà not typically consideration because of lack of bargaining and no
promise inducement
                                                1. Feinberg v. Pfeifferà no consideration, because he said “because of your past
 service” because the action was in the past and there was no return promise. No
 forebearance on her part. She doesn’t have any obligation to them in the future. (HOWEVER, see Reliance)
2. Mills v. Wymanà no considerationà RULEàA mere verbal promise,
without any consideration, cannot be enforced by action, is universal in its
application ,and cannot be departed from to suit particular cases in which a
refusal to perform such a promise would be disgraceful. (see Moral Obligation)
f. Employment Agreementsà
1.  In an “at-will” employment situation, forebearance of not firing someone constitutes consideration for a non-compete contract if the employee works for a sufficient period of time to enjoy the benefits of continued employment.
a. CAB v. Ingramà A non-compete agreement after commencement of employment is supported by consideration as is such a clause signed at any time where sufficient post agreement employment continues.
2. non-compete clauses are enforceable without consideration if signed before or up to a short time after employment.
3. Employee Handbooksà an employee’s continued performance of his duties despite freedom to quit constitutes an acceptance of the bank’s offer and affords the necessary consideration for that offer.
a. Employers can change from a dismissal for cause to an at-will discharge as long as reasonable notice is given.
g. Rewards à If someone captures a prisoner and there is a reward offered, can they collect if…
1. Partial Performance- they caught the guy and found out about the reward before they turned him in? (§51) YES
a.Unless the offeror manifests a contrary intention, an offerree who learns of an offer after he has rendered part of the performance requested by the offer may accept by completing the requested performance. (See Illustration 1)
2. Past Performance- If he finds out about the reward after he captured and turned in the prisoner (§71, 2) NO
a. if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.
3. Motive- If he turned him in because he was a friend and wanted to save him from mob violence. (§81, 2) YES
a. The gact 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.
b. Rockfish problem (page 66) guy would get prize because he caught the fish, even though he wasn’t fishing to win the prize. (§81, 2)
 
B. Exception
1. Gratuitous Promises-gift on condition is not a promise
a.   Nominal Consideration-consideration that is so insignificant as to bear no relationship to the value of what is being exchanged. It has the form of a bargain, but lacks the substance.
1. MAJORITY- 2d § 71, Illustration 5à Consideration is nominal, so there is not consideration
2. MINORITY- is enforceable under Restatement First
2. Moral Obligation-(§86)
a. promise made in recognition of a benefit previously received is binding to the extent necessary to prevent injustice.
b. a promise is not binding IF:
                1. the benefit was a gift
                2. the extent value is disproportionate to the benefit
c. Examples
                1. Webb v. McGowinà Plaintiff performed action that benefited Defendant,
then defendant made promise in recognition of the benefit received, and the injustice is great enough to make consideration and force McGowin to pay under moral obligation. 
2.       Mills v. Wymanà Moral Obligation cannot be enforced against a third
party unless it is the parent of a minor child.
3.       Moral Obligation Testà Court’s conviction that the promisor ought to do the thing, plus the promisor’s own admission of his obligation, may tilt the scales in favor of enforcement where neither standing alone would be sufficient.
3. Illusory Promises- both are bound, or nobody is bound. Form of a promise, but no substance.
a. General Ruleàif by its terms the performance of the promise is entirely optional by the promisor(nothing he has said limits his future options), the promisor reserves a choice of alternative performances unless each of the alternative performances would have been consideration if they had been bargained for OR if one of the performances would (§77)
b. See §77, Illustration 4à A agrees to sell and B to buy between 400 and 600 tons of fertilizer in installments as ordered by B, A reserving the right to terminate the agreement at any time without notice. B’s promise is without consideration.
c. Satisfaction Clauses:
1. Mattei v. Hopper (1958) In a situation where the buyer can pull out if they are not satisfied, there is consideration because the buyer must act in good faith to find leases. The seller must allow for that satisfaction to occur(there is a promise on both sides).
                                a. Tennis match illustration
b. subjective testà good faith because it does depend on his satisfaction and ability to secure leases…satisfaction can not be objectively ascertained.
                                d. Requirements Clauses:
1. Eastern v. Gulfà Gulf can not get out of providing Eastern fuel because they signed a requirements contract and were acting in good faith in buying a similar quantity of oil relative to their historical demand.
a. U.C.C. 2-306(1)- A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output requirements may be tendered or demanded.
2. Wood v. Lady Duff- They had an implied promise that Wood would use his best efforts to promote Lady Duff was a promise to use reasonable efforts to bring profits into existence. If he didn’t promote her he wouldn’t get paid.
a. U.C.C. 2-306(2)- A lawful agreement by either a seller or buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use the best efforts to supply the goods and by the buyer to use best efforts to promote their sale.
                                                3. Termination Clauses
a. Coke v. Orange Crush- if a party can terminate a contract at any time with no notice, promise is illusory.
b. BUT, if a contract is entered and acted on for a while and the parties are performing as if there is a contract, U.C.C. 2-309(3)- An agreement dispensing with notification or limiting the time for the seeking of a substitute arrangement, is, of course, valid under this subsection unless the results of putting it into operation would be the unconscionable state of affairs.
                                e. gratuitous promises- a promise made in recognition of past performance
1. Tallas- gratuitous promises are not enforced by conside