Professor Rice
Contract Law
Fall 2011
Liberty University
I. Bases for Enforcement
Restatement 1: Contract – A promise or set of promises for which law gives remedy for breach, or the performance of which law recognizes as a duty.
A. Promise
Hawkins v. McGee
· A solicits B to perform surgery. B finally assents because A “guaranteed” a “perfect” hand. The surgery did not produce a perfect hand.
o Rule Statement: Mere words can create a promise and therefore a binding contract between two parties.
o Restatement 2 –
§ Promise – A promise is a manifestation of intention to act or refrain from acting to relay to promise an understanding that a commitment has been made.
§ Promisee – To whom the manifestation of intention is directed
§ Promisor – The person manifesting the intention
§ Beneficiary – Anybody to whom the performance will benefit other than promise
a) Consideration as Bases for Enforcement
Terms:
· Quid pro quo – bargain for exchange (what the promisee gave the promisor)
· Assumpsit – when promises seeks recovery for damages for physical injury to person/property due to contract
· Misfeasance – promisor performs task in manner inconsistent with contract leading to detriment of promisee
· Nonfeasance – when promisor had not done anything in pursuance of contract, and promisee must have suffered detriment by reliance
· Unilateral Contracts – only one party makes a contract (bilateral = both parties make promise)
o A asks B to cut down a tree for 200, but Barney never promises to cut down a tree. This is a unilateral contract because only one side contracted
· Reciprocal Inducement – A’s attempt to induce anything from B in exchange for A’s promise
· Mutuality of Obligation – whether economic value of promise equivalent to that accepted by promise
· Conditional promise – performance will become due only if condition occurs…event must occur before promisor must perform
· Right-duty relationship – unilateral – right/duty on one side / bilateral –right/duty on both sides
Five Types of Contracts:
· Family Contracts
· Employment Agreements
· Contracts For Sale of Goods
· Real Estate Transactions
· Construction Contracts
**Courts do not enforce gratuitous promises as general rule
Hamer v. Sidway
· A promises B $5000 to refrain from drinking and gambling until 21 years old. A performs forbearance and B writes A acknowledging the agreement. B keeps money for A to earn interest, and when B dies, A’s estate does not want to give A promised money.
o Rule Statement: The restriction or forbearance of lawful rights as inducement for the promise provides sufficient grounds for consideration.
o Restatement 71 – a) To constitute consideration, a performance or return promise must be bargained for
§ B) a performance or return promise is bargained for if it is sought by promisor in exchange for his promise and given by the promisee in exchange for that promise
§ C) Performance may consist of:
· A) an act other than a promise; OR
· B) forbearance; OR
· C) creation, modification, or destruction of a legal relationship
§ D) The forbearance or return promise may be given to the promisor or third party. It may be given by promisee or third party.
o Restatement 79 – If the requirements of consideration are met, there is no further requirement to prove (although fraud and gross unequivalence are factors):
§ A) a gain, advantage or benefit to promisor or a loss, detriment, or disadvantage to promisee
§ B) equivalence in values exchanged
§ C) Mutuality of Obligation
o Restatement 81 – The fact that what is bargained for does not in itself induce the making of a promise (OR performance or return pro
avels to his house, he will provide residence for B. B accepts, and two years later A kicks out B. B sues for breach of offer. A wins as his offer was a conditional gratuitous offer.
o Rule Statement: When an offer is made gratuitously and there is no bargain involved, there is no consideration.
o Restatement 24: Offer – Manifestation of willingness to enter into a bargain, so that a person understands that his assent is invited and will conclude it.
Lake Land Emp. Group of Akron v. Columber (Employment Agreements)
· A (at-will employee), employed by B for three years prior, consented to and signed non-competition agreement. Ten years later, A initiated his own business within radius of B in which violated non-comp. agreement. B sued A for breach of contract and won on grounds of B’s forbearance from firing A from employment.
o Rule Statement: Forbearance to act, i.e. fire an at-will employee, provides sufficient consideration for contract signed by employee even though his status remained identical after signing (A gained nothing, but B forbore from firing A).
· An employer may unilaterally alter terms of employment for existing employees without notification for promotion of environment conducive to collective productivity.
· Reward – an offer that requires acceptance and completion
o Restatement 51 – Unless the offeror manifests 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 performance.
