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Rutgers University, Newark School of Law
Tractenberg, Paul

Professor Tractenberg
Fall 2005
a. Lucy v. Zehmer (Virgina 1954)
i. Facts: P says that he and D entered into a contract for the sale of land. P says they were serious, but D says he was only joking. P wants specific performance.
ii. Issue: Was there a contract, and is it enforceable.
iii. Holding: The contract was in good faith and specific performance was awarded. The private intentions of Δ are irrelevant, only the manifested acts.
b. Delchi Carrier SpA v. Rotorex Corp. (2nd Circuit 1995)
i. Facts: P, an Italian company, contracted for goods with D with a letter of credit. The goods upon arrival were not to spec and P wasn’t able to use them. P covered with extra expense.
ii. Issue: Under the CISG may P recover for nonconforming goods?
iii. Holding: P was entitled to lost profits and foreseeable consequential damages. P was not entitled to damages for modifications necessary for cover.
c. 4 Elements of a Contracts Cause of Action:
i. Contract exists
ii. Plaintiff performed
iii. Defendant breached
iv. Damage to Plaintiff based on defendant’s breach

a. Definitions:
i. Contract Defined – (Restatement 2d §1): A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.
ii. Consideration: The inducement of a contract, something of value given in return for a performance or a promise of performance, for the purpose of forming a contract. This is a required element in the formation of a contract.
iii. Illusory Promise: A promise so indefinite that it cannot be enforced or which, by virtue of provisions or conditions contained in the promise itself, is one whose fulfillment is optional on the part of the promisor. Not adequate for consideration.
b. The Bargain Approach:
i. A bargain is an exchange of promises, acts, or both, in which each party views what she gives as the price of what she gets. This may include not only promises and acts, but also promises to forebear and actual forbearance from performing acts one is legally entitled to perform.
ii. The parties should be of relatively the same sophistication, resources, etc. Bargaining process should be substantial, balanced, and reasonable.
c. Kinds of Promises that Raise Consideration Issues:
i. Bargain promises;
ii. Promises involving accord and satisfaction;
iii. Promises to waive conditions;
iv. Unrelied-upon donative promises;
v. Relied-upon donative promises; and
vi. Promises based on past moral consideration
d. Exceptions – Bargains that Are Not Consideration:
i. Restatement 2d §76(1): There are several types of cases in which bargains or apparent bargains do not constitute consideration (or “lack consideration”) and are therefore unenforceable. These cases fall into 4 major categories:
1. Nominal Consideration – transactions that are bargains in form but not in function
2. Promises to surrender or forebear from asserting a legal claim that is unreasonable or is neither reasonable nor held in good faith
3. Apparent bargains involving an illusory promise (Restatement 2d §77 Comment (a))
4. Bargains in which one party promises to do only what she is already legally obliged to do.
e. Restatement 2d §71:
i. To constitute consideration, a performance or a return promise must be bargained for.
ii. A performance or return promise is bargained fo

o discontinue producing that grade of oil. Giving up a right is adequate consideration.
iv. Output Contracts:
1. One party agrees to sell to another party all that they produce of a certain product.
v. Requirements Contracts:
1. One party agrees to purchase all that they require of a certain product from another party.
g. Options Contracts:
i. UCC §2-205 – Firm Offers: An offer by a merchant which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the stated time. Must be signed.
ii. Restatement 2d §87 – Option Contract:
1. An offer is binding as an option contract if it
a. Is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or
b. Is made irrevocable by statute.
2. An offer which the offeror should reasonable expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.
iii. Board of Control of Eastern Michigan University v. Burgess (Michigan 1973) p. 49
Facts: P entered a contract with D for a nominal fee for the option to purchase D’s land. P never actually tendered D the money. When P tried to execute the option, D refused.