What is the Meaning and Function of “Contract?”
Legal Enforcement of Promises
· Elements
o Commitment of some kind. Promise
o Legal enforcement
§ If the promisee (who receives the promise) can get a court to award damages against the promisor
§ Not all promises are legally enforceable
§ To have a contract you need a promise, but just because you have a promise does not mean you have a contract
Hawkins v. McGee
· Doctor: “I guarantee patient will return to work in 4 days”
o Not denied by doctor, but he argues no reasonable man would understand this to be a contract. An expressions of the doctor’s beliefs/expectations
o Used these words to entice father to consent to the surgery on the patient (son)
· Court holds damages = difference between value of perfect hand (which was guaranteed) and value of hand as is
o Tort damages are focused on compensation for damages proximately caused by defendant
o Distinguished: tort remedy gets the victim back to the original position. Contract damages put the aggrieved party in the position he would be in if the contract was fully preformed
· What was the effect of the words of the contract? Casual, caused consent
More on Promises
· Promisee has a reliance interest if it has changed its position to its detriment I reliance on the promise
· Promisee has a restitution interest if it has not only relied on the promise but has conferred a benefit on the promisor
· A promise made without consideration is unenforceable even in derogation of a moral duty Mills v. Wyman
o Exceptions ??
o a promise to pay a debt that is no longer enforceable due to statute of limitations
o a promise by an adult to perform a duty imposed by a promise that the adult made as a minor and could have avoided on that ground
Two Categories of no consideration
· Those in which the promisor was not seeking to induce action by the promisee
o The promisee had already taken the action at the time the promise was made (past consideration). Example : Feinberg v. Pfeiffer Co.
o The Promisee took action at the same time as or after the promise was made, but the promisor had not sought to induce that action when making the promise (unsolicited action)
§ If the promise was gratuitous, subsequent action does not make it enforceable
§ Subsequent action that differs from that sought by the promisor does not make the promise enforceable even if the promise was not gratuitous
· The promisor did seek to induce the action taken by the promisee, but the action that the promisee took was not taken in response to the promise
Exchange as the Basis for Enforcement: Deal or Gift?
· Assumpsit à common law action grew out of cases in which the promisee sought to recover damages for physical injury to person or property on the basis of consensual undertaking
· Something is bargained for “if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise”
o Presence of a bargain is a question of fact
o There must be reciprocity
o The promise and the consideration must be in “the relation of reciprocal conventional inducement for each to her” otherwise phrased, “the promise and the consideration must purport to be the motive for each other”
· The goal of testing if consideration exists is to see if the contract is a voluntary exchange.
Hamer v. Sidway
· What does a deal look like?
o “It is enough that something is promised, done, forbore, or suffered by the party to whom the promise is made as consideration for the promise to him” pg. 29
o The consideration is what the promisee pays
§ Was the promisee’s price in this case a payment or a benefit?
§ Def. àThe promisor’s ½ of the deal was to make the nephew a better man. The Uncle didn’t benefit from the nephew’s forbearance other than the altruistic glow “I’ve done good for you” feeling. That cannot be consideration or every donor/gift relationship becomes contractual
· Was this a contract or a gift?
o What’s the quid pro quo if it is a contract?
Fiege v. Boehm
· Although he is not the father, what is the consideration she gave bargained to not would not sue him for bastardy
· Restatement (d) Contracts 74
o Forbearance to assert tor the surrender of a claim or defense which proves to be invalid is not consideration unless
§ The claim is in fact doubtful of uncertainty as to the facts or the law; or
§ The forbearing or surrendering party believes that the claim or defense may fairly be determined to be valid
The Importance and Unimportance of Promises.
Promises as Value
· Contract for real estate are characterized less by immediacy and more by formality
· What makes a promise valuable as consideration?
o A promise itself can be consideration for a promise
o Why is a promise for promise exchange more commercially significant than a one way promise in return for performance?
§ Distinction between promise as value and delivered performance as value
Mattei v. Hopper
· Illusory promises
· If a promise is conditional on an even that is entirely within the promisor’s control is illusory
· The implied duty of good faith and reasonable efforts can give substance to an apparently illusory contract
· the buyers promise to close if he is satisfied with the leases is not illusionary
o Two types of satisfaction clauses
§ Functional matters ruled by
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o A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only be enforcement of the promise
· Three categories of reliance
o Gratuitous promises to convey land
§ Courts enforced such promises if the promisee had relied by moving onto the land and making improvements
o Gratuitous promises made by bailees in connection with gratuitous bailments
o Promises to make gifts to charitable institutions (charitable subscriptions)
· Remedy in promisory estoppel
o Compensate to the extent of reliance
o If we’re going to enforce contract because of reliance than why use consideration?
Restitution
· No promise required. “Quasi Contract”
· Defense: If I was enriched (which I wasn’t) it was your fault. You’re the fool
· As a matter of policy we want to subsidize exchange activity because we all benefit. Social gain where there is no promise but a benefit is conferred is a good argument for unjust enrichment
· Restitution is the description of the equitable remedy. aka unjust enrichment
· Benefit must be conferred with an intention to charge
· When you have a powerful reason to assume the person wants the service (medical emergency) restitution is supported. Exigency/high transaction cost excuse making of a bargain
· Restitution is biased toward bargaining
o Will not get restitution if you were too lazy to bargain, or thrust unwanted service
· Material Benefit Rule (Webb v. McGowin)
· Some enrichment is not unjust (Callano v. Oakwood Park Homes Corp. pg. 108)
· a person who has been unjustly enriched at the expense of another is required to make restitution
o The person claiming restitution must have conferred a benefit of some kind on the other party
§ May be for services including forbearance
o To recover under restitution
§ The benefit may not have been conferred “officiously”
· Interference in the affairs of others that is not justified by the circumstances
§ Benefit may not have been conferred “gratuitously”
