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Contracts
Rutgers University, Newark School of Law
Chen, Ronald K.

Chen
Contracts Outline
Fall 2016

The Domain of Legally Enforceable Contracts

Introduction
A Contract is a legally enforceable promise
A promise is a manifestation of commitment to do something or not do something in the future
Can be oral or written

Enforceability
Whether it is legally enforceable is dependent on whether bargain for exchange was present except in the case of promissory estoppel
An oral donative promise may not be enforced if it is not in writing or not relied upon. 
Relied upon- must be a tangible benefit, not simply “dashed expectations”
Congregation Kadimah Toras-Moshe v DeLeo:
The decedent made a promise in front of witnesses to donate money to a church, the church relied on those expectations to budget for a storage space. This was just dashed expectations, not detrimental reliance and so they did not have to pay.
Rule: An enforceable contract needs consideration.

Statute of Frauds- UCC2-201
Writings on material terms of contract are necessary if they involve:
Land
Goods valued over $500 (must be signed by party being challenged)
Letterhead can be used as signature and even an official document
By its terms, cannot be completed in one year – does not include contracts that MAY be completed within a year or are POSSIBLE to complete within a year
Marriage
Exceptions: equity, promissory estoppel, part performance
Recovery is in restitution, quantum meruit (unjust enrichment), etc.

Bilateral v Unilateral Contracts
Bilateral Contract
Promise for a promise
Type of assurance as to what can be expected in the future
“I promise to give you money if you promise to take care of your nieces”
Both parties owe future obligation
Unilateral Contract
Promise for performance
in one case, the uncle promises to pay in the future if the nephew does refrain from the vices
The offer invites acceptance by performance
Promise for performance
One party isn't promising to do something, it is just doing that thing
One party is never really bound to do anything
The offeree can never really breach
If the act of acceptance if the execution of performance, and the execution never occurs, there was never a contract to begin with
Not interested in a promise, only performance can validate the contract
Consideration

legal consideration is the voluntary relinquishing of something that you’re not required to give up or doing something you don’t have to do – courts do not inquire into the adequacy of the consideration…detriment to promisee or benefit to promisor.
“warm fuzzy feelings” do not count, consideration must be tangible but courts do not inquire into the value of the benefit
It is not the courts duty to establish benefit to the promisee
A promise must be bargained for AKA it must have consideration – this is how promises are made enforceable by law – however, consideration can’t be abstention from an illegal acts (threatening to kill someone, etc.) – courts will not enforce promise for something illegal

Bargained for Exchange

A promise must be bargained for AKA it must have consideration
The parties promise to do something or forebear on doing something they have a legal right to do
Ex: I promise not to drink (over the age of 21) if you pay $5,000
The forebeared act must be legal.
You can't promise not to do/to do something that is already illegal or not to do something that you are already legally mandated to do
the promise must induce the consideration and the consideration must induce the promise (mutual inducement)
the promise must be sought by the promisor in exchange for his promise and given by the promise in exchange for that promise (you cannot be induced by something you don’t know about)   
In order for promise to be supported by consideration it must be supported by mutual inducement
Hamer v Sidway:
Uncle asks nephew to refrain from drinking, smoking etc, and in exchange he would give him 5000. He refrains, and so the uncle’s estate must pay.
Rule: a typical contract must consist of a bargained-for exchange where the consideration offered by one party (promisee) induces the making of a promise by another party (promisor), and the promisee, having been induced by the promise, gives this consideration. 
Rule: A promise supported by consideration is enforceable
Marmer v Kaufman
Rule: warm fuzzy feelings do not support consideration
Where a promisor receives no benefit from an agreement, and the promisee suffers no legal detriment in exchange for the promisor's promise, there is no consideration to support the promise and render the agreement an enforceable contract
Fischer v Union Trust
Father gives land to incompetent daughter for 1 dollar, court says this is not consideration
“Sham consideration”- consideration does not induce promise
“nominal consideration” does not make a promise enforceable because the parties are basically saying that this was not serious
Batsakis v Demotsis
The court doesn’t inquire into the adequacy of transaction, it just upholds the contracts that are made, so unbalanced consideration can be valid if the other elements of a valid contract are met

Promises Grounded in the Past

Promises grounded in the past are generally not enforceable
Generally, the consideration can’t be bargained for because there was no reciprocal inducement
Mills v. Wyman
Plaintiff cared for defendant’s son while he was sick – after the fact, D found out about the care and offered to compensate P
consideration legit, but promisee (p) couldn’t be induced by $$, he did it for good Samaritan reasons – no bargaining took place
Rule: promises grounded in the past are enforceable where the promisee’s acts conferred some sort of “material benefit” to the promisor
Generally, if the parties would have bargained for the benefit that was conferred, but the

, and the employer has offered those assurances, promissory estoppel ensures that a wrongfully terminated employee is entitled to damages.
Kolkman v Roth
D inherited land from her father. D promised P that he could stay on property until he died. D revoked. Court ruled for P saying that D breached contract.
Promissory estoppel may be applied to circumvent the statute of frauds if detrimental reliance has been established
Billman v VI Equities Corporation
Landlords own property, lease their property to Hilty who assigns lease to KCE  who assigns lease to VIE – VIE sublets tiny part back to KCE – KCE assigns the sublease to Alley – the sublease was invalid, but In 1971, Alley chooses to extend their sublease via letter – landlords never responded, but business conducted as usual under presumption that lease had been extended – Court holds that D’s silence was an implicit promise not to enforce their right to question sublease’s validity – in Promissory Estoppel, facts don’t matter just reliance on the promise

Precontractual Obligation

The fact of contract formation is binary= either you are in a contract or are not there is no in between
Should be no uncertainty as to whether you are bound to a contract and its requirement
Generally, there is no duty from one party to another to make sure the party understands what they have sign/agreed to
A contract that by its terms cannot be enforced within one year must be in writing in order to be enforced

D)Option Contract (firm offer)
An option contract is when one party agrees to enter into transaction and to keep that offer open even though the other party has not yet accepted
So the other party has the option to either accept the contract or walk away
The law enforces option contracts that are not supported by consideration
Can be useful because it gives the other party time to think about whether he wants to engage in it
Section 45 of Restatement
Where an offer invites an offeree to accept by rendering an performance and does not invite a promissory acceptance an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it
The offeror’s duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer