Contracts Outline

CONTRACTS FEINMAN SPRING 2012

I. Restatement §17: Requirement of a Bargain- The formation of a contract requires a bargain in which there is a manifestation of mutual assent to exchange and a consideration

a. Manifestation of mutual assent

b. Consideration- Bargained for exchange

c. Unilateral Contract- Promisor makes promise and the promissee performs

d. Bilateral Contract- Mutual promises

e. Alternatives

i. Promissory Estoppel

ii. Unjust Enrichment

2.1 Consideration (128-30, 42-43)

II. Restatement

a. Restatement §71: Requirement of Exchange; Types of Exchange….. BARGAINED FOR

1. To constitute consideration, a performance or a return promise must be bargained for

2. A Performance or return promise 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

– Performance Defined

– An act other than a promise;

– A forbearance (must be a result of the bargain, not merely a condition); or

– The creation, modification, or destruction of a legal relationship

b. Restatement §79: Adequacy of Consideration; Mutuality of Obligation

i. If the requirement of consideration is met, there is no additional requirement of:

a. A gain, advantage, or benefit to the promisor or a loss, disadvantage or detriment to the promise

b. Equivalence in values exchanged

c. Mutuality of obligation

(pg 144)

ii. Comment C— Adequacy Doctrine— Courts won’t look into adequacy of consideration b/c parties are better able to evaluate their circumstances; Gross inadequacy may be relevant for capacity or fraud

iii. Comment D— Nominality Doctrine— Disparity in value may mean nominal/r sham pretense

III. Cases:

a. Hamer v Sidway (42)- Benefit-detriment theory, Adequacy (§79)

i. Facts: Uncle promises to give $5,000 to his nephew on his 21st Birthday if the nephew refrains from vices until his 21st Birthday. The nephew complied. Uncle held the money with interest until Nephew was mature enough, but the Uncle died. Estate refuses to pay b/c no consideration.

ii. Issue: Does the forbearance from an activity constitute consideration making a promise for that forbearance enforceable even if the forbearance is a benefit to the promisee?

iii. Holding: A waiver or forbearance of a legal right at the request of another party is sufficient consideration for the promise.

iv. Reasoning: The court will not ask if the consideration actually benefited the promisee or was of substantial value to anyone. The consideration does not have to benefit the promisor to constitute consideration. It is enough that the promisee forborne some legal right he had to make it consideration.

v. Take Away: Consideration as benefit/detriment

b. Kirksey v Kirksey (128)- Bargained for v. Gift

i. Facts: P (Widowed sister in-law w/ children) lived on public land under a lease. D advised P to sell her land and move to live near him 60 miles away. D put P in a comfortable house and gave her land to cultivate for 2 years, then moved her to an uncomfortable house in the woods… then evicted her.

ii. Issue: Does her action of leaving her land and moving to the brother in law constitute consideration?

iii. Holding: Her actions do not constitute consideration thus making the promise a promise for a gift, which is not enforceable.

iv. Reasoning: There was no bargain; you can live here if you want! D did not require P to give up land to receive the gift. Her giving up her land was not required for her to get the benefits of the promise. Her moving to him is not consideration (though it may be reliance) just a requirement to actually getting the benefits of the contract.

v. Class: Necessary is a difficult test… consider benefit to promisor!

vi. TAKE AWAYS- Gratuitous promise and necessary to reveive the promise versus consideration

c. Williston’s Tramp (129)- Gift, (benefit as evidence)

i. Scenario- Benevolent man tell s a tramp to go around to corner and buy a coat on his credit

ii. This is Not consideration, it is merely for the purpose of enabling the promissee to receive a gift

iii. Whether the forbearance will benefit the promisor is evidence of consideration

d. St. Peter v Pioneer Theatre (43)- Unilateral K

i. Facts: Banknight drawing at theater. P went to claim prize; they said her husband won. One second too late because Theater dimmed lights. He goes into claim the prize but the Theatre refuses to pay because he was too late to claim the prize.

ii. Issue: Does the mere writing of a name down on a list constitute consideration for a promise to pay money if that name is drawn?

iii. Holding: The court held that it was not a lottery and that it was a unilateral contract and that going to claim the prize was consideration.

iv. Reasoning: The consideration was the remaining in close proximity of the theater to claim your prize. (Bargained for exchange!!)It was not a lottery because the consideration was not monetary. Unilateral contracts are accepted by performance.

v. Take Away: Bargained for agreement

i. Consideration does not need to be something of value:

a. 1. Something not obligated to do (or not do),

b. 2. What promisor sought.

2.2 The Trouble with Consideration: Substantive vs. Formal Legal Instruments (130-147)

Consideration (like Seal) is binary. If consideration were a mere legal formality, $1 would be binding.

a. The claim or defense is in fact doubtful because of uncertainty as to facts or the law, or

b. The forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid

Restatement §79: Adequacy of Consideration; Mutuality of Obligation

i. If the requirement of consideration is met, there is no additional requirement of:

a. A gain, advantage, or benefit to the promisor or a loss, disadvantage or detriment to the promise

b. Equivalence in values exchanged

c. Mutuality of obligation

(pg 144)

ii. Comment C— Adequacy Doctrine— Courts won’t look into adequacy of consideration b/c parties are better able to evaluate their circumstances; Gross inadequacy may be relevant for capacity or fraud

iii. Comment D— Nominality Doctrine— Disparity in value may mean nominal/r sham pretense

e. In Re Greene (Nominal Consideration- pretence to appear as a bargain) (130)

i. Facts: Bankrupt man and claimant had an affair. Alleged promise to marry. They break up and write an instrument under a seal stating that he will pay hey $1000/month during their joint lives, $100K life insurance, and four years rent. Consideration= $1 and other good and valuable consideration. He paid for 2ish years. P is suing for breach of K.

ii. Issue: Was there any consideration apart from the past cohabitation

iii