Contracts Outline

Harvey
Contracts
Spring 2010

CONTRACTS

I. INTRODUCTION:

A. WHAT IS A CONTRACT:

Contract: promise or set of promises for breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.

Law Governing Contracts:
(1) Common Law
(2) UCC (sale of goods)

B. TYPES OF CONTRACTS:

1. Types of Contracts:
(1) Express Contract – formed by language, oral or written
(2) Implied Contract – formed by manifestations of assent, i.e. conduct
(3) Quasi-Contract – not contracts – constructed by the courts to avoid unjust
enrichment by permitting the P to bring an action in restitution to recover the amount
of the benefit conferred on the D.

2. Types of Contracts as to Acceptance:
(1) Bilateral Contracts – exchange of mutual promises
(a) Hypothetical: Sidney promises to sell Blackacre to Bertram for $6,000, and
Bertram promises to purchase Blackacre at that price.
(2) Unilateral Contracts – acceptance by performance
(a) Offer requested performance rather than a promise.
(b) Offeror-promisor would promise to pay upon the completion of the requested
act by the promisee.
(c) Hypothetical: Susan promises to pay Charles $5 if he will deliver a textbook to
Rick. Charles is not obligated to deliver the book, but if he does in fact deliver
it, Susan is obligated to pay him the $5.

Test to Differentiate Between Bilateral/Unilateral: At the time the contract is formed, each party has a right and a duty (bilateral) or one party has a right and the other party only has a duty (unilateral).

C. COURSE OF ACTION:

Casefile 1.0: A contract can be enforceable notwithstanding the fact that it is not in writing or is not orally expressed, provided that there is a course of action that would lead a reasonable person to understand an agreement has been reached.

Question: Whether or not a person who claims that there was a contract was reasonable in assuming the actions done were manifesting an agreement between the parties in the form of whatever contract they want the court to enforce?

D. CONDUCT OF PARTIES:

Casefile 2.0: Conduct of parties as they are reasonably interpreted will be capable of creating an enforceable contract whether or not that was the actual subjective intent of the person engaging in that conduct. Does not matter what intent was, what matters is reasonable interpretation of outward manifestation of what seemed reasonably to be your intent.

II. ENFORCEMENT VARIABLES:

A. CONSIDERATION:

Restatement Second of Contracts §71:
(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.
(3) The performance may consist of
(a) an act other than a promise, or
(b) a forbearance, or
(c) the creation, modification, or destruction of a legal relation
(4) The performance or return promise may be given to the promisor or to some other
person. IT may be given by the promisee or by some other person.

Casefile 3.0: Enforceable promise ONLY if there is consideration
(1) Promisee provides consideration of promise for the promisor

Valuable Consideration: bargained-for change in legal position between the parties

Elements of Consideration:
(1) Bargained-for exchange
(2) Legal value
**Must constitute a benefit to the promisor or a detriment to the promisee.

Bargained-for Exchange: Requires that the promise induce the detriment and the detriment induce the promise.

Consideration:
(1) Benefit to the promisor
(a) Does not need to provide a benefit to be consideration.
(b) If there is a benefit to the promisor = consideration
(2) Detriment to promisee
(a) Significant detriment = consideration

Hypothetical: I work for you under a three-year employment contract. If I agree to terminate that contract before the three-year mark, you will give me a severance package. This makes consideration because it confers a benefit on the employer (promisor) because the boss wants you no longer working there and by giving up my legal right to work there, I get a benefit as well.

B. MATERIAL BENEFIT RULE:

Restatement Second of Contracts §86:
(1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice.
(2) A promise is not binding under Subsection (1)
(a) if the promisee conferred the benefit as a gift or for other reasons the promisor
has not been unjustly enriched; or
(b) to the extent that its value is disproportionate to the benefit

Material Benefit Rule: Where the promisors have received something from the promisee of value in the form of money or other material benefits under such circumstances as to create a moral obligation to pay for what they received, and later promise to do so there is consideration for such promise.

Hypothetical: A gives emergency care to B’s adult son while the son is sick and without funds far from home. B subsequently promises to reimburse A for his expenses. The promise is not binding under this section. (Mills v. Wyman)

Hypothetical: A saves B’s life in an emergency and is totally and permanently disabled in so doing. One month later B promises to pay A $15 every two weeks for the rest of A’s life, and B makes the payments for eight years until he dies. The promise is binding. (Webb v. McGowin)

Hypothetical: A finds B’s escaped bull and feeds and cares for it. B’s subsequent promise to pay reasonable compensation to A is binding. (Boothe v. Fitzpatrick)

C. PROMISSORY ESTOPPEL

Restatement Second of Contracts §90: 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 by enforcement of the promise.

Promissory Estoppel Requires:
(1) The detriment suffered in reliance on the promise was substantial in an economic
sense.
(2) The substantial loss to the promisee acting in reliance was or should have been
foreseeable by the promisor.
(3) The promisee must have acted reasonably in justifiable reliance on the promise made.

Hypothetical: A promises B to pay him an annuity during B’s life. B thereupon resigns a profitable employment as A expected that he might. B receives the annuity for some years, in the meantime becoming disqualified from again obtaining good employment. A’s promise is binding.

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