I. Introduction to Contracts
Contract disputes will be governed by Common Law or UCC. Additional counsel can be sought from the Restatement on Contracts and standard treatises. It is important to first consider whether a contract is for a sale of goods: if so, the Uniform Commercial Code will govern. The language of the UCC will be interpreted by the court.
Contract: 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.
Objective Theory of Contract: A contract, has, strictly speaking, nothing to do with the personal, or individual intent of the parties. A contract is an obligation attached by the mere force of law to certain acts of the parties, usually words, which ordinarily accompany and represent a known intent. If, however, it were proved by twenty bishops that either party when he used the words intended something else than the usual meaning which the law imposes on them, he would still be held, unless there was some mutual mistake or something else of the sort.” (Hotchkiss)
Expectation Interest: the interest of a nonbreaching party in being put in the position that would have resulted if the contract had been performed (Black’s)
Reliance Interest: The interest of a nonbreaching party in being put in the position that would have resulted if the contract had not been made, including out-of-pocket costs
Restitution Interest: A nonbreaching party’s interest in preventing the breaching party from retaining the benefit received under contract and thus being unjustly enriched
Lucy v. Zehmer
Zehmer discussed selling farm to Lucy, made offer for $50k, Zehmer accepted, wrote agreement on back of check, said he had agreed to sell property. Zehmer refused, offer had been in jest.
Whether there was an enforceable contract.
Contract was in good faith, specific performance awarded
Law only recognizes expressions of intention between parties, not private reservations or thoughts.
NIPSCO v. Carbon County Coal
NIPSCO/C4 sign agreement to buy coal with escalator clause, contract price had risen, market price was below contract price, regulatory body denied permission to increase consumer prices, NIPSCO invokes force majeure clause, frustration, and impracticability.
Whether NIPSCO’s obligations are suspended by force majeure, or doctrines of frustration or impossibility. Also whether C4 is entitled to specific performance.
Force Majeure clause is irrelevant, since NIPSCO assumed risk when it entered contract. Impracticability cannot be claimed by a buyer, and Indiana law did not recognize frustration. Specific performance would be improper because people of Hanna, WY (mine) have no legal interest in the contract. Damages awarded.
Objective theory of contracts: objective meaning is what counts, not subjective, force majeure does not allow one to pass on normal risk assumed in a contract. Impracticability and frustration do not apply to risk allocation.
II. Bargain Theory of Contracts – Consideration
a) Overview and Restatement/Codes
Executory contract is one in which neither party has yet performed on the contract. In the words of contract law, the consideration for each promise is the other’s promise. Without consideration, an executory contract is unenforceable. Most contracts contain bargained-for, reciprocal provisions, constituting consideration. Common law inclines toward viewing any promise as void unless there is consideration for it to be performed.
(1) To constitute consideration, a performance or a return promise must be bargained for
(2) A performance or a return promise is bargained for if it is sought by the promisor 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
A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performances unless each of the alternative performances would have been consideration if it alone had been bargained for
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 promisee; or
(b) equivalence in the values exchanged; or
(c) mutuality of obligation
An offer is binding as an option contract if it is in writing and signed by the offeror, recites a purported consideration for making the offer, and proposes an exchange on fair terms within a reasonable time
(1) If a party’s manifestation of assent is induced by an improper threat by the other party that leave the victim no reasonable alternative, the contract is voidable by the victim.
(2) If a party’s manifestation of assent is induced by one who is not a party to the transaction the contract is voidable by the victim unless the other party to the transaction in good faith and without reason to know of the duress either gives value or relies materially on the transaction.
(1) a term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded
Formal Contract: A contract under seal that was enforceable chiefly because of how it was made (archaic)
Bargain Theory of Consideration: The theory that a promise or performance that is bargained for in exchange for a promise is consideration for that promise
Consideration: The inducement of contract, something of value given in return for a performance or a promise of performance by another, for the purpose of forming a contract. This is a required element in the formation of a contract.
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.
Bilateral Contract: Exchange of a promise for a promise, with each promise serving as consideration for the other
Unilateral Contract: A promise given in exchange for a future act, such as offer of a reward for capture of lost animal (promisor wants an act, not a promise)
Option Contract: An offer that is included in a formal or informal contract, esp. a contractual obligation to keep an offer open for a specified period so that the offeror cannot revoke the offer during that period, provided the option is supported by consideration (Black’s). This rule has been criticized (see R2d§87-1-a)
Employment At Will: Employment that is usually undertaken without a contract and may be terminated at any time, by either the employer or employee without cause
Hamer v. Sidway
Uncle tells nephew that if he refrains from vices until 21, he will give him $5000. Plaintiff is executor of Uncle’s estate, defendant is Nephew’s assignee
Whether contract between nephew and uncle had consideration to be valid
Nephew’s refraining from vices is forbearance that amounts to consideration to make contract enforceable. Court will not ask who will benefit from the consideration, whether it is promisee or third party.
Unilateral contract is promise exchanged for a future act. Consideration need not be a detriment to a party in order to be viewed as such.
Lake Land Employment v. Columber
Columber was employed by LL for 13 years, released, and allegedly formed a corporation that competed with LLEG. Contract signed after employement at will contains no-compete clause
nce or trust by a person, esp. when combined with action based on that dependence or trust
Ricketts v. Scothorn
Plaintiff is executor of the will. Testator promised to pay plaintiff $2000 on demand so she would not have to work.
Whether Ms. Scothorn due balance of proceeds as note said?
Yes. It would be inequitable for payment to be withheld.
While court tries to fit case to Equitable Estoppel, Promissory Estoppel is actually created. Note given with plaintiff agreeing to pursue any conduct.
Cohen v. Cowles Media Co.
Two newspapers report that DFL candidate for governor has been charged with crime, both reveal Plaintiff as source. Plaintiff is then fired from his job
Whether the promise made was enforceable
Yes, but not a contract.
Although there was no contract, promissory estoppel bars defendant from using plaintiff’s name, so damages are due.
Midwest Energy v. Orion Foods
Plaintiff built a gas station/convenience store with hopes to provide defendant’s product. Defendant required modifications done to the design before they could provide it. Plaintiff did so, then defendant never agreed to the deal
Whether the promise was enforceable
Yes. Not a contract.
There was a promise, foreseeable reliance, reliance in fact, and injustice absent enforcement.
IV. Restitution Interest
Restitution can be a cause of action and a measure of damages. Not wholly apt since it suggests restoration to the successful party of some benefit obtained from him. Usually this will be the case where relief is give, but by no means always. There are cases in which the successful party obtains restitution of something he did not have before, for example, a benefit received by the defendant from a third person that justly should go to the plaintiff.
Implied-In-Law Contract (or Quasi-Contract): An obligation created by law for the sake of justice; specif. an obligation imposed by law because of some special relationship between parties or because one of them would otherwise be unjustly enriched. An implied-in-law contract is not actually a contract but instead a remedy that allows the plaintiff to recover a benefit conferred upon the defendant.
Restitution Interest: The interest in getting back to the point the parties would have been at had there been no contract created.
Bailey v. West
Defendant purchased a horse, then discovered it was lame. Defendant took horse to plaintiff’s farm, who boarded the horse and send defendant a bill. Plaintiff sues for restitution since bill was unpaid.
Whether there was a contract and if damages are due for breach.
No contract, so damages not due.
No request for payment made prior to caring for the horse, no contract to do so, therefore no restitution owed. Plaintiff volunteered for the job.
Offer and Acceptance
a) Overview and Restatement/Codes:
An offer is the essential point of contract formation, where an offeree may accept, reject, or make a counteroffer. This may lead to an agreement in principle, where the basis of a contract is accepted, but the specific details of the contract have